Strategic Education (STRA) Q3 Earnings Beat, Enrollment Rises
Strategic Education, Inc. or SEI STRA, reported impressive results for third-quarter 2023. Its quarterly earnings and revenue topped the respective Zacks Consensus Estimate and increased year over year.
Growth across its three segments, led by continued enrollment growth in U.S. Higher Education (“USHE”), driven significantly by employer-affiliated enrollment, strong growth in Education Technology Services (earlier known as Alternative Learning) and improving performance in Australia/New Zealand (“ANZ”), drove the result.
Shares of STRA gained 3.95% on Nov 2 after its solid earnings performance.
Inside The Headlines
SEI reported adjusted earnings of 97 cents per share, which topped the Zacks Consensus Estimate of 86 cents by 12.8% and rose an impressive 193.9% from the year-ago quarter’s levels.
Strategic Education Inc. Price, Consensus and EPS Surprise
Strategic Education Inc. price-consensus-eps-surprise-chart | Strategic Education Inc. Quote
Total revenues of $285.9 million surpassed the consensus estimate of $281 million by 1.7% and increased 8.7% from the prior-year quarter’s level. On a constant currency basis, revenues increased 9.6% to $288.4 million in the third quarter.
Total enrollment improved 7.7% to 100,827 students.
Segment Details
USHE: This segment comprises Strayer and Capella Universities. Segment revenues increased 8.8% year over year to $201.8 million, backed by solid enrollment and revenue per student.
Student enrollment increased 9.9% from the year-ago quarter’s level to 82,548 students. FlexPath enrollment was 22% of USHE enrollment compared with 21% in the year-ago quarter.
During the quarter, the adjusted operating margin declined 290 basis points (bps) to 5.2% from the prior-year quarter.
Education Technology Services: This segment includes Employer Solutions, Workforce Edge and Sophia Learning. The segment’s quarterly revenues came in at $20.8 million, up 26.7% year over year, backed by growth in Sophia Learning subscriptions and employer-affiliated enrollment.
Sophia Learning’s average total subscribers increased by approximately 38% from the prior-year period’s levels. Employer-affiliated enrollment was 27.8% of USHE enrollment compared with 25.3% in the year-ago period.
Its adjusted operating margin came in at 39.9% in the reported quarter, up 810 bps from a year ago.
ANZ: This segment includes Torrens University, Think Education and Media Design School. The segment's revenues were $63.3 million, up 3.4% year over year due to higher revenue per student. On a constant-currency basis, revenues rose 7.4% year over year, driven by higher revenue per student.
Student enrollment within ANZ declined 1.2% to 18,279 during the reported quarter compared with the prior-year quarter.
Its adjusted operating margin came in at 21.9%, up 730 bps from a year ago.
Operating Highlights
Adjusted operating income was up 167.1% to $32.6 million. The adjusted operating margin of 11.4% expanded a whopping 680 bps from the year-ago quarter.
Adjusted EBITDA in the reported quarter was $49.5 million, up 56.8% from $31.6 million in the prior-year quarter.
Financial Details
As of Sep 30, 2023, STRA recorded cash and cash equivalents of $167.7 million compared with $213.7 million at the 2022-end.
Cash provided by operating activities was $87.2 million in the first nine months of 2023 compared with $124.7 million in the comparable year-ago period.
Capital expenditures were $27.3 million in the first nine months of 2023 compared with $32.5 million a year ago.
Capital expenditures for 2023 are still expected to be approximately $40 million.
Zacks Rank
SEI currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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