Group 1 - Strategic Education (STRA) shares increased by 7.9% to close at $84.77, following a trading session with notable volume, contrasting with a 2% loss over the past four weeks [1] - The company is expected to benefit from favorable trends in higher education and career-focused programs, supported by a diversified portfolio that includes IT and health programs, as well as a competency-based learning model [2] - STRA is projected to report quarterly earnings of $1.47 per share, reflecting a year-over-year increase of 15.8%, with revenues anticipated at $323.07 million, up 3.7% from the previous year [3] Group 2 - The consensus EPS estimate for STRA has remained unchanged over the last 30 days, indicating that stock price movements may not continue without trends in earnings estimate revisions [4] - STRA currently holds a Zacks Rank of 3 (Hold), while K12 (LRN), another company in the same industry, closed 4.6% higher at $67.6 and has returned 3.1% over the past month [5] - K12's consensus EPS estimate has increased by 1.4% to $2.33, representing a year-over-year change of 14.8%, and it currently holds a Zacks Rank of 2 (Buy) [6]

Core Insights - Strategic Education reported Q3 CY2025 results that exceeded market expectations, with revenue of $319.9 million, reflecting a 4.6% year-on-year growth and surpassing analyst estimates of $314.5 million by 1.7% [1][5] - The non-GAAP profit was $1.64 per share, which was 25.8% above analysts' consensus estimates of $1.30 [1][5] - The company’s adjusted EBITDA was $69.62 million, achieving a margin of 21.8%, which was a 13.9% beat compared to analyst expectations [5] Revenue and Profitability - The Education Technology and Services segment, particularly Sophia Learning and Workforce Edge, contributed significantly to revenue growth [3][6] - Operating margin remained stable at 11.6%, consistent with the same quarter last year [5] - Domestic student enrollment decreased slightly to 85,640, down by 893 year-on-year [5] Strategic Initiatives - Management emphasized the importance of employer-affiliated enrollments, which increased by approximately 8% year-on-year, now representing 33% of all domestic enrollments [3][6] - The company is targeting up to $100 million in operating expense savings by the end of 2027, with roughly $30 million already realized [6][7] - Future growth is expected to be driven by technology and productivity initiatives, alongside expanding employer partnerships and scaling the Sophia platform [3][6] Challenges and Outlook - The Australia and New Zealand segment faces challenges due to lower international enrollment caused by government-imposed caps and stricter transfer rules [7] - Management anticipates that new student growth will resume in 2026 as these restrictions are lifted, although the near-term outlook remains pressured [7]

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Enrollment Trends - As of Q3 2025, USHE enrollment decreased by 1.0% to 85,640 compared to 86,533 in Q3 2024[152] - Australia/New Zealand enrollment decreased by 2.1% to 18,808 in Q3 2025 compared to 19,205 in Q3 2024[159] - Employer-affiliated enrollment as a percentage of USHE enrollment increased to 32.7% in Q3 2025 from 29.8% in Q3 2024[153] - Trailing 4-quarter student persistence within USHE was 87.8% in Q2 2025, up from 87.0% in Q2 2024[152] Financial Performance - Revenue for Q3 2025 was $319.9 million, a 4.6% increase from $306.0 million in Q3 2024, driven by higher revenue in the ETS segment and USHE segment[173][175] - Net income for Q3 2025 decreased to $26.6 million from $27.7 million in Q3 2024, with diluted earnings per share remaining at $1.15[174][181] - Consolidated revenue increased to $945.0 million for the nine months ended September 30, 2025, up from $908.5 million in the same period in 2024, driven by a 46.8% increase in ETS segment revenue to $109.3 million[182] - Net income increased to $88.7 million for the nine months ended September 30, 2025, compared to $87.3 million in the same period in 2024[189] Segment Performance - USHE segment revenue increased 2.6% to $213.1 million in Q3 2025, while total enrollment decreased 1.0% to 85,640[175] - ANZ segment revenue decreased 4.7% to $68.6 million in Q3 2025, attributed to unfavorable foreign currency exchange impacts and a decrease in enrollment[175] - ETS segment revenue surged 45.6% to $38.3 million in Q3 2025, driven by new employer partnerships and growth in Sophia Learning subscriptions[175] Costs and Expenses - Consolidated instructional and support costs were $162.7 million in Q3 2025, unchanged from Q3 2024, with costs as a percentage of revenues decreasing to 50.9%[176] - General and administration expenses decreased to $105.9 million in Q3 2025, with expenses as a percentage of revenues decreasing to 33.1%[177] - Restructuring costs increased significantly to $14.3 million in Q3 2025 from $0.8 million in Q3 2024, primarily due to severance and asset impairment charges[178] - Consolidated instructional and support costs increased to $487.2 million, but as a percentage of revenues, it decreased to 51.6% from 53.2%[183] Cash Flow and Investments - Net cash provided by operating activities increased to $159.0 million for the nine months ended September 30, 2025, compared to $153.4 million for the same period in 2024[203] - Net cash used in investing activities decreased to $0.5 million for the nine months ended September 30, 2025, from $15.2 million in 2024[204] - Share repurchases increased significantly to $94.3 million during the nine months ended September 30, 2025, compared to $5.0 million in the same period of 2024[206] Foreign Currency Exposure - Revenues from foreign currencies accounted for 19.7% of consolidated revenues for the nine months ended September 30, 2025, exposing the company to foreign currency risk[211] - A hypothetical 10% adverse change in foreign currency exchange rates would have decreased consolidated revenues by approximately $18.6 million for the nine months ended September 30, 2025[211] Strategic Initiatives - The acquisition of Media Design School at Strayer was completed on September 8, 2025, and it will operate as a wholly owned subsidiary of Strayer University[159] - The company continues to invest in strategies to provide affordable education and support student success[155] - The company emphasizes the importance of employer relationships in driving student enrollment and revenue for its education programs[153]

Financial Data and Key Metrics Changes - On an adjusted constant currency basis, revenue rose 5% from the previous year, with adjusted earnings increasing by 41% to $1.64 compared to $1.16 from the prior year [5][6] - Operating income grew by 39%, and operating expenses increased by less than 1%, resulting in a 400 basis point margin expansion [5][6] Business Line Data and Key Metrics Changes - The Education Technology Services division saw revenue and operating income increase by 46% and 48% year-over-year, reaching $38 million and $16 million, respectively [6] - U.S. higher education revenue grew by 3% from the prior year, driven by higher revenue per student despite a slight decrease in total enrollment [7][9] - The Australia and New Zealand segment experienced a 2% decrease in revenue to $70 million, with operating income declining from $15 million to $13 million [10] Market Data and Key Metrics Changes - Employer-affiliated enrollment in U.S. higher education increased approximately 8% from the prior year, now representing 33% of all U.S. higher education enrollment [7] - The healthcare portfolio within U.S. higher education generated strong total enrollment growth of 7% from the prior year, representing half of all U.S. higher education enrollments [7][8] Company Strategy and Development Direction - The company is focused on leveraging technology to enhance productivity, with an expectation to save upwards of $100 million in operating expenses by the end of 2027 [15][16] - The strategy includes a strong emphasis on employer partnerships and direct-to-consumer offerings, particularly through the Sofia Learning platform [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about new student growth in Australia and New Zealand in 2026, anticipating a return to total enrollment growth by the end of that year [19][27] - The company remains confident in achieving its long-term financial targets, with no current indicators suggesting a deviation from the outlined notional model [20] Other Important Information - The company repurchased approximately 429,000 shares for a total of $34 million during the quarter, with $134 million remaining on its share repurchase authorization [10] Q&A Session Summary Question: What drove the healthy revenue per student gain in the quarter? - Management indicated that lower drop rates and higher course enrollments per student contributed to the revenue per student increase, with expectations for continued benefits [14] Question: Can you provide details on the expense reductions in the U.S.? - Management noted an aggressive productivity initiative aimed at reducing operating expenses, with a run rate of approximately $30 million in reductions already achieved [15][16] Question: How are Strayer and Capella performing relative to each other? - Capella has shown stronger growth, while Strayer has faced challenges primarily due to a reduction in non-affiliated students [18] Question: What is the outlook for the Australia and New Zealand segment? - Management expects new student growth in 2026, with hopes for total enrollment growth by the end of that year [19][27] Question: What is the exposure to military and veteran students amid the government shutdown? - Management stated that there has been no significant impact observed, as the company has very few direct military students [30][31]

N O V E M B E R 2 0 2 5 Forward-looking statements Statements Under the Private Securities Litigation Reform Act of 1995 Statements in this presentation are "forward-looking statements" under the federal securities laws. Such statements may be identified by the use of words such as "expect," "estimate," "assume," "believe," "anticipate," "may," "will," "forecast," "outlook," "plan," "project," "potential" and other similar words, and include all statements that are not historical facts, including with respe ...

Revenue Growth - Education Technology Services revenue increased by 46% year-over-year (YOY) to $38.3 million, driven by growth in Sophia Learning subscriptions and new Workforce Edge partnerships [3]. - Total revenue for the third quarter of 2025 was $319.9 million, a 4.6% increase from $306.0 million in the same period in 2024 [3]. - Average total subscribers at Sophia Learning increased approximately 42% YOY, with revenue reaching $17.8 million, up from $12.5 million [3]. - U.S. Higher Education segment revenues rose to $213,067 for the three months ended September 30, 2025, compared to $207,709 in 2024, marking a 2.0% increase [21]. - Revenues for Q3 2025 were reported at $319,949,000, reflecting an increase from $305,958,000 in Q3 2024, representing a growth of 4.4% [27]. - Education Technology Services revenues surged to $38,293,000 in Q3 2025, up from $26,301,000 in Q3 2024, representing a growth of 45.7% [27]. Profitability - Adjusted EBITDA rose to $69.6 million, up from $56.2 million for the same period in 2024 [3]. - Adjusted income from operations for Q3 2025 was $51,692,000, up from $37,084,000 in Q3 2024, indicating a significant increase of 39.4% [27]. - The operating margin improved to 16.1% in Q3 2025 compared to 11.6% in Q3 2024 [27]. - Adjusted EBITDA for Q3 2025 reached $69,618,000, compared to $56,236,000 in Q3 2024, marking an increase of 23.7% [28]. - The operating margin for the three months ended September 30, 2025, improved to 16.0%, up from 11.6% in the same period of 2024 [24]. Net Income - Net income for the third quarter was $26.6 million, compared to $27.7 million in the same period in 2024 [3]. - Net income for Q3 2025 was $26,630,000, a decrease from $27,748,000 in Q3 2024, showing a decline of 4.0% [28]. - Adjusted net income for the three months ended September 30, 2025, was $37,749, compared to $27,945 in 2024, indicating a significant increase of 35.2% [24]. Cash Flow and Dividends - Free cash flow for the first nine months of 2025 was $127.0 million, compared to $124.1 million for the same period in 2024 [7]. - The company declared a quarterly cash dividend of $0.60 per share, payable on December 8, 2025 [9]. - The company paid common dividends totaling $43,387 for the nine months ended September 30, 2025, compared to $44,262 in 2024, indicating a decrease of 2.0% [19]. - Free cash flow for the nine months ended September 30, 2025, was $126,993,000, slightly higher than $124,080,000 for the same period in 2024, reflecting a growth of 2.3% [29]. Operational Performance - Income from operations for the U.S. Higher Education segment was $22.9 million, compared to $11.4 million in the same period in 2024, with an operating income margin of 10.7% [10]. - Income from operations for the three months ended September 30, 2025, was $37,042, a slight increase from $36,326 in the same period of 2024, reflecting a growth of 2.0% [21]. - Restructuring costs for Q3 2025 amounted to $14,251,000, compared to $758,000 in Q3 2024, indicating a significant increase due to ongoing restructuring efforts [27]. Assets and Liabilities - Total assets as of December 31, 2024, were $2,049,735, a decrease from $2,111,963 as of September 30, 2025 [18]. - Total liabilities decreased to $387,236 as of December 31, 2024, from $455,860 as of September 30, 2025, showing a reduction of 15.0% [18]. - Cash, cash equivalents, and restricted cash at the end of the period for September 30, 2025, were $160,511, down from $207,621 at the end of the previous period [19]. Shareholder Information - Diluted earnings per share remained unchanged at $1.15, while adjusted diluted earnings per share on a constant currency basis increased to $1.64 from $1.16 [3]. - The weighted average shares outstanding remained constant at 23,209,000 for both Q3 2024 and Q3 2025, ensuring that earnings per share comparisons are consistent [27].

Core Insights - Strategic Education, Inc. has launched Signal Labs in collaboration with LearnLaunch Fund + Accelerator [1] Company Overview - Strategic Education, Inc. is focused on enhancing educational opportunities through innovative initiatives [1] - The partnership with LearnLaunch Fund + Accelerator aims to foster educational technology and innovation [1] Industry Implications - The launch of Signal Labs signifies a growing trend in the education sector towards integrating technology and innovation [1] - This initiative may attract further investments and partnerships within the educational technology landscape [1]

Core Points - Strategic Education, Inc. will host a conference call to discuss its third quarter results on November 6, 2025 at 10:00 a.m. ET [1] - A news release outlining the results will be issued before the market opens on the same day [1] - The conference call will be available via webcast, accessible through the Investor Relations section of the company's website [1]

Core Insights - Ariel Sokol has over twenty years of experience in corporate finance, focusing on both established companies and startups [1] - Sokol founded Kolari Consulting, which specializes in strategy consulting for subscription and edtech businesses [1] - He previously held significant roles at Pearson, including VP of strategy and finance and General Manager of Institutional Business [1] - Sokol has experience as an equity research analyst on Wall Street, covering sectors such as education, software, and media [1] - He has served on the board of a for-profit university, indicating a strong background in the education sector [1]