Strategic Education, Inc. (NASDAQ:STRA) Q4 2024 Earnings Conference Call February 27, 2025 10:00 AM ET Company Participants Terese Wilke - Senior Director of Investor Relations Karl McDonnell - President and Chief Executive Officer Robert Silberman - Chairman Daniel Jackson - Chief Financial Officer and Chief Administrative Officer Conference Call Participants Jeffrey Silber - BMO Capital Markets Alexander Paris - Barrington Research Jasper Bibb - Truist Securities Operator Welcome to Strategic Education's ...

INVESTOR PRESENTATION FEBRUARY 2025 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, includin ...

Core Insights - Strategic Education reported revenue of $311.46 million for the quarter ended December 2024, reflecting a year-over-year increase of 2.9% [1] - The earnings per share (EPS) for the quarter was $1.27, down from $1.68 in the same quarter last year, with a positive surprise of +6.72% compared to the consensus estimate of $1.19 [1] - The revenue fell short of the Zacks Consensus Estimate by -0.16% [1] Revenue Breakdown - U.S. Higher Education Segment generated $214.33 million, which is -1.5% lower than the average estimate of $219.79 million [4] - Education Technology Services reported revenues of $30.46 million, exceeding the average estimate of $27.04 million, marking a significant year-over-year increase of +39.3% [4] - Australia/New Zealand revenues reached $66.67 million, slightly above the estimated $65.10 million, representing a +5.4% change compared to the previous year [4] Stock Performance - Shares of Strategic Education have returned +0.4% over the past month, outperforming the Zacks S&P 500 composite, which declined by -2.2% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Viewpoint - Strategic Education (STRA) reported quarterly earnings of $1.27 per share, exceeding the Zacks Consensus Estimate of $1.19 per share, but down from $1.68 per share a year ago, indicating a 24.4% year-over-year decline in earnings [1] - The company has consistently surpassed consensus EPS estimates over the last four quarters, showcasing strong performance [2] Financial Performance - For the quarter ended December 2024, Strategic Education posted revenues of $311.46 million, slightly missing the Zacks Consensus Estimate by 0.16%, but up from $302.7 million year-over-year, reflecting a 0.25% increase [2] - The company has exceeded consensus revenue estimates three times in the last four quarters [2] Stock Performance and Outlook - Strategic Education shares have increased approximately 4.8% since the beginning of the year, outperforming the S&P 500's gain of 1.3% [3] - The company's earnings outlook is favorable, with a current consensus EPS estimate of $1.06 for the upcoming quarter and $5.64 for the current fiscal year, with expected revenues of $302.57 million and $1.28 billion respectively [7] Industry Context - The Schools industry, to which Strategic Education belongs, is currently ranked in the top 16% of over 250 Zacks industries, indicating a strong industry performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Strategic Education's stock performance [5][6]

Financial Performance - Revenue increased 7.7% to $1,219.9 million in 2024 compared to $1,132.9 million in 2023[2] - Net income rose to $112.7 million in 2024 from $69.8 million in 2023, representing a 61.4% increase[2] - Adjusted EBITDA for 2024 was $233.8 million, up from $196.5 million in 2023, reflecting an 18.9% growth[2] - Diluted earnings per share increased to $4.67 in 2024 from $2.91 in 2023, marking a 60.5% rise[2] - Net income for the twelve months ended December 31, 2024, rose to $112,684 thousand, a 61.3% increase from $69,791 thousand in 2023[16] - Basic earnings per share for Q4 2024 decreased to $1.08 from $1.67 in Q4 2023, while diluted EPS fell to $1.05 from $1.63[16] - Net income for the three months ended December 31, 2024, was $30,784,000, compared to $39,129,000 in 2023, reflecting a decrease of 21.5%[25] - Operating margin improved from 11.6% in Q4 2023 to 13.0% in Q4 2024, indicating enhanced operational efficiency[25] - The company reported an operating income of $157,276,000 for the twelve months ended December 31, 2024, compared to $155,628,000 in 2023, a growth of 1.1%[28] Revenue Segments - Student enrollment in the U.S. Higher Education segment increased 6.4% in 2024 compared to 2023, reaching 88,860 students[7] - Revenue in the Education Technology Services segment surged 39.3% to $30.5 million in Q4 2024 compared to $21.9 million in Q4 2023[7] - The Australia/New Zealand segment saw a 5.4% revenue increase to $66.7 million in Q4 2024 compared to $63.3 million in Q4 2023[7] - U.S. Higher Education segment revenues for Q4 2024 decreased to $214,332 thousand from $217,551 thousand in Q4 2023[21] - Education Technology Services segment revenues for the twelve months ended December 31, 2024, increased to $104,921 thousand, up 30.4% from $80,453 thousand in 2023[21] - U.S. Higher Education segment revenues for Q4 2023 were $217.6 million, slightly down from $214.3 million in Q4 2024, while the twelve-month revenues increased from $819.0 million to $857.9 million, a growth of 4.7%[31] - Education Technology Services segment revenues for Q4 2023 were $21.9 million, up from $30.5 million in Q4 2024, with twelve-month revenues increasing from $80.5 million to $104.9 million, a growth of 30.3%[31] Cash Flow and Assets - Cash provided by operations in 2024 was $169.3 million, up from $117.1 million in 2023[7] - Cash provided by operating activities for the year ended December 31, 2024, was $169,331 thousand, an increase from $117,119 thousand in 2023[19] - The company reported a net cash used in investing activities of $64,360 thousand for 2024, compared to $48,545 thousand in 2023[19] - Total current assets decreased to $304,943 thousand in 2024 from $329,069 thousand in 2023, primarily due to a decline in cash and cash equivalents[18] - Total liabilities decreased to $387,236 thousand in 2024 from $472,695 thousand in 2023, reflecting a reduction in long-term debt[18] - Total stockholders' equity increased to $1,662,499 thousand in 2024 from $1,652,518 thousand in 2023, indicating a stable financial position[18] Costs and Expenses - Total costs and expenses for Q4 2024 were $271,029,000, down from $248,478,000 in Q4 2023, a reduction of 6.9%[25] - The total costs and expenses for the twelve months ended December 31, 2024, were $1,062,654,000, a slight decrease from $1,064,302,000 in 2023[28] - Consolidated bad debt expense as a percentage of revenue was 4.5% in Q4 2024, up from 3.7% in Q4 2023[8] Strategic Initiatives and Future Outlook - The company anticipates continued growth in revenues and operational improvements in the upcoming quarters[29] - Strategic initiatives include ongoing integration efforts from recent mergers and a focus on expanding educational offerings in international markets[29] - The company is focusing on market expansion and new product development, particularly in the Education Technology Services sector, to drive future growth[31] - The company incurred restructuring costs of $1.0 million in Q4 2023, with total restructuring costs for the twelve months amounting to $16.3 million, indicating ongoing efforts to streamline operations[31]

Investors might want to bet on Strategic Education (STRA) , as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.The power of a cha ...

Core Viewpoint - Strategic Education (STRA) has received a Zacks Rank 1 (Strong Buy) upgrade, indicating a positive outlook for the company's earnings and potential stock price increase due to rising earnings estimates [1][4][6]. Earnings Estimates and Revisions - The Zacks Consensus Estimate for Strategic Education for the fiscal year ending December 2024 is projected at $4.79 per share, reflecting a 28.8% increase from the previous year's reported figure [9]. - Over the past three months, the Zacks Consensus Estimate for Strategic Education has risen by 3.2%, indicating a trend of increasing earnings estimates [9]. Zacks Rating System - The Zacks rating system is based solely on a company's earnings picture, tracking EPS estimates from sell-side analysts, which helps in making informed investment decisions [2][3]. - The Zacks Rank system classifies stocks into five groups, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988, showcasing the effectiveness of the system [8]. Market Implications - The upgrade to Zacks Rank 1 positions Strategic Education in the top 5% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [11]. - The correlation between earnings estimate revisions and stock price movements highlights the importance of tracking these revisions for investment decisions [7][5].

Core Viewpoint - The article emphasizes the importance of value investing and highlights Strategic Education (STRA) as a strong value stock based on its Zacks Rank and valuation metrics [2][5]. Group 1: Zacks Rank and Value Scores - STRA has a Zacks Rank of 1 (Strong Buy) and a Value grade of A, indicating it is among the best value stocks currently available [2]. - The Style Scores system can help investors identify stocks with specific traits, particularly in the Value category [2]. Group 2: Valuation Metrics - STRA has a Price-to-Book (P/B) ratio of 1.33, which is significantly lower than the industry average of 3.16, suggesting it may be undervalued [3]. - The P/B ratio for STRA has fluctuated between 1.23 and 1.84 over the past 52 weeks, with a median of 1.42 [3]. - STRA's Price-to-Cash Flow (P/CF) ratio is 13.04, which is attractive compared to the industry average of 43.32, indicating potential undervaluation based on cash flow [4]. - The P/CF ratio for STRA has ranged from 12.04 to 20.81 in the past year, with a median of 15.75 [4]. Group 3: Earnings Outlook - The combination of STRA's strong valuation metrics and positive earnings outlook suggests that it is likely undervalued at present [5].

Core Insights - Zacks Premium offers various tools for investors to enhance their stock market strategies, including daily updates, research reports, and stock screens [1] - The Zacks Style Scores are designed to help investors select stocks with the highest potential to outperform the market within a 30-day timeframe [2] Zacks Style Scores Overview - The Style Scores categorize stocks into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each focusing on different investment strategies [3][4][5][6] - Value Score emphasizes finding undervalued stocks based on financial ratios [3] - Growth Score assesses a company's future growth potential through earnings and sales metrics [4] - Momentum Score identifies trends in stock prices and earnings estimates to optimize entry points [5] - VGM Score combines all three styles to provide a comprehensive evaluation of stocks [6] Zacks Rank and Style Scores Interaction - The Zacks Rank utilizes earnings estimate revisions to facilitate portfolio building, with a historical average annual return of +25.41% for 1 (Strong Buy) stocks since 1988 [7][8] - Stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B are recommended for maximizing return potential [9] - Stocks rated 4 (Sell) or 5 (Strong Sell) should be avoided, even if they have high Style Scores, due to negative earnings outlooks [10] Company Spotlight: Strategic Education, Inc. - Strategic Education, Inc. (STRA) is rated 2 (Buy) on the Zacks Rank and has a VGM Score of A, indicating strong investment potential [11] - The company has a Value Style Score of A, supported by a forward P/E ratio of 16.32, making it attractive to value investors [12] - Recent earnings estimates for fiscal 2024 have been revised upward, with the Zacks Consensus Estimate increasing by $0.03 to $4.79 per share, alongside an average earnings surprise of 40.4% [12]

Shares of Strategic Education (STRA) have gained 3.6% over the past four weeks to close the last trading session at $100.09, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $126.67 indicates a potential upside of 26.6%.The average comprises three short-term price targets ranging from a low of $120 to a high of $135, with a standard deviation of $7.64. While the lowest estimate i ...