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Strategic Education's (STRA) Q2 Earnings & Revenues Beat

Zacks Equity Research

Strategic Education, Inc. or SEI STRA reported second-quarter 2019 results, wherein earnings and revenues beat the respective Zacks Consensus Estimate. The positive performance was mainly backed by strong top-line numbers across its segments, given higher enrollment.

The company reported adjusted earnings of $1.59 per share, surpassing the Zacks Consensus Estimate of $1.47 by 8.2%. Also, the reported figure increased 82.8% from the year-ago quarter.

Total revenues of $245.1 million surpassed the consensus estimate of $241 million by 1.7%. Notably, the reported figure also jumped 113.8% from the prior-year level.

Segment Details

SEI currently operates in three reportable segments: Strayer (accounting for 52.6% of the total revenues), Capella (45.8%) and Non-Degree Programs (1.6%).

Strayer Segment: The Strayer segment consists of Strayer University, which includes programs offered through the Jack Welch Management Institute.

Strayer University’s revenues grew 13.2% year over year to $128.9 million. Total enrollment also grew 11.5% from the year-ago level to 52,253 students. Enrollment of new students rose 8.5% and that of continuing students increased 12.2% from the year-ago quarter. The segment’s adjusted operating margin also increased 650 basis points (bps) to 19.1% during the quarter.

Capella Segment: The Capella segment consists solely of Capella University.

The segment’s second-quarter revenues came in at $112.2 million, backed by higher enrollment and increasing revenue-per-learner.

Total enrollment at the University grew 1.6% from the year-ago quarter to 38,392 students. New student enrollment also increased 7.8%, with continuing student enrollment growth of 0.5% year over year. The upside was mainly driven by improved performance of FlexPath, which comprises 30% of Capella University’s Bachelors and Master’s degrees total enrollment.

Its adjusted operating margin came in at 18.8% in the reported quarter.

Non-Degree Programs Segment: The Non-Degree Programs segment comprises Hackbright Academy, DevMountain, the New York Code + Design Academy and Sophia.

Revenues from the segment increased to $4 million from the year-ago figure of $0.8 million. Income from operations was $0.3 million (with operating margin of 7.5%) in second-quarter 2019 against a loss from operations of $1.1 million in the year-ago period.

Strategic Education Inc. Price, Consensus and EPS Surprise

Strategic Education Inc. Price, Consensus and EPS Surprise

Strategic Education Inc. price-consensus-eps-surprise-chart | Strategic Education Inc. Quote

Operating Highlights

Adjusted operating margin in the reported quarter was 18.8%, up 730 bps year over year. Adjusted EBITDA also increased a notable 177.7% from a year ago to $60.3 million.

Financial Details

As of Jun 30, 2019, it recorded cash and cash equivalents of $375.5 million compared with $311.7 million at 2018-end.

During the first six months of 2019, the company's cash provided by operating activities was $103.1 million versus $30 million in the comparable year-ago period.

Zacks Rank

SEI, which shares space with Laureate Education Inc. LAUR, Adtalem Global Education Inc. ATGE and American Public Education, Inc. APEI in the Zacks Schools industry, currently carries a Zacks Rank #2 (Buy). You can the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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