Strategic Education (STRA) Q3 Earnings Top, USHE Enrollment Down
Strategic Education, Inc. or SEI STRA reported tepid third-quarter 2022 results. Although quarterly earnings and revenues topped their respective Zacks Consensus Estimate, both declined year over year. The downside was caused by lower contributions from USHE and ANZ segments.
Shares of STRA gained 8.88% on Nov 3, after the earnings release.
Karl McDonnell, chief executive officer of SEI, stated, “We are pleased with the continued strengthening of demand in our U.S. Higher Education segment during the third quarter of 2022. Our Education Technology Services segment also produced strong results during the quarter, and notwithstanding continued delays in a return to pre-pandemic student immigration conditions in Australia and New Zealand, we remain confident in the long-term growth potential of the Australia/New Zealand segment.”
Inside The Headlines
SEI reported adjusted earnings of 33 cents per share, which topped the Zacks Consensus Estimate of 25 cents by 8% but declined more than 44% from the year-ago quarter’s levels of 59 cents.
Strategic Education Inc. Price, Consensus and EPS Surprise
Strategic Education Inc. price-consensus-eps-surprise-chart | Strategic Education Inc. Quote
Total revenues of $263.1 million surpassed the consensus estimate of $262 million by 0.5% but declined 2.6% from the prior-year quarter’s level. Total enrolment declined 2.2% to 93,637 students.
Segment Details
SEI currently operates in three reportable segments — U.S. Higher Education or USHE, Education Technology Services (earlier known as Alternative Learning) and Australia/New Zealand or ANZ.
The USHE segment comprises Strayer and Capella Universities. Segment’s revenues fell 3.3% year over year to $185.5 million due to lower enrollment. Student enrollment declined 3.1% from the year-ago quarter’s level to 75,144 students. FlexPath enrollment was 21% of USHE enrollment compared with 19% in the year-ago quarter. During the quarter, the company generated an adjusted operating loss of $1.95 million versus an adjusted operating profit of $5.17 million.
The Education Technology Services segment includes Employer Solutions, Workforce Edge and Sophia Learning. The segment’s quarterly revenues came in at $16.4 million, up 26.9% year over year, backed by growth in Sophia Learning subscriptions and employer-affiliated enrollment. Sophia Learning’s average total subscribers are approximately 33% from the prior-year period’s levels. Employer-affiliated enrollment was 25.3% of USHE enrollment compared with 21.1% in the year-ago period. Its adjusted operating margin came in at 31.8% in the reported quarter, down 820 basis points (bps) from a year ago.
The ANZ segment includes Torrens University, Think Education and Media Design School. Revenues in the segment totaled $61.2 million, down 6.2% year over year but up 0.7% on a constant-currency (cc) basis. The adjusted operating margin was 14.6% in the reported quarter, down 130 bps from the prior-year quarter’s levels. Student enrollment within ANZ was up 1.7% to 18,493 during the reported period.
Operating Highlights
The adjusted operating margin of 4.6% was down 310 bps from the year-ago quarter’s figure. Adjusted EBITDA in the reported quarter was $31.6 million, down 18.1% from $38.6 million in the prior-year quarter.
Financial Details
As of Sep 30, 2022, STRA recorded cash and cash equivalents of $262.8 million compared with $262.9 million at the 2021-end. Also, it had $141.2 million outstanding under its revolving credit facility.
Cash provided by operating activities was $124.7 million in the first nine months of 2022 compared with $80.7 million in the comparable year-ago period. Capital expenditures were $32.5 million compared with $33.6 million a year ago.
Capital expenditures for 2022 are now expected to be approximately $45 million, down from the prior projection of $50 million.
Zacks Rank & Key Picks
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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