Strategic Education(US:STRA)2025-04-24 20:04Enrollment and Retention - In Q1 2025, USHE enrollment increased to 87,854 compared to 87,731 in Q1 2024, reflecting a growth in student numbers [127]. - Trailing 4-quarter student persistence within USHE was 87.2% in Q4 2024, up from 87.0% in Q4 2023, indicating improved retention rates [127]. - Employer-affiliated enrollment as a percentage of USHE enrollment rose to 31.2% in Q1 2025 from 29.2% in Q1 2024, highlighting the effectiveness of employer partnerships [128]. - Total enrollment in the USHE segment increased to 87,854 in Q1 2025, up from 87,731 in Q1 2024, while enrollment in the Australia/New Zealand segment decreased to 20,082 from 20,197 [146]. Financial Performance - Revenue for Q1 2025 was $303.6 million, up from $290.3 million in Q1 2024, representing an increase of 4.5% [145]. - Adjusted income from operations for Q1 2025 was $41.7 million, up from $35.8 million in Q1 2024, representing a 10.9% increase [160]. - Adjusted net income for Q1 2025 was $31.2 million, compared to $26.7 million in Q1 2024, reflecting a 16.8% growth [160]. - Revenues for Q1 2025 were $303.6 million, an increase from $290.3 million in Q1 2024, marking a 4.4% rise [160]. - Operating margin improved to 13.7% in Q1 2025 from 12.4% in Q1 2024 [160]. Costs and Expenses - Income from operations decreased to $39.8 million in Q1 2025 from $41.4 million in Q1 2024, primarily due to higher restructuring costs and operating expenses [152]. - Consolidated instructional and support costs increased to $158.3 million in Q1 2025, but as a percentage of revenues, it decreased to 52.1% from 54.3% in Q1 2024 [147][149]. - General and administration expenses rose to $103.6 million in Q1 2025, with the percentage of revenues increasing to 34.1% from 33.3% in Q1 2024 [150]. - Restructuring costs increased to $1.9 million in Q1 2025 compared to a net benefit of $5.5 million in Q1 2024, primarily due to increased severance and personnel-related expenses [151]. Cash Flow and Dividends - Cash, cash equivalents, and marketable securities totaled $197.6 million as of March 31, 2025, down from $253.6 million a year earlier [163]. - Net cash provided by operating activities decreased to $67.7 million in Q1 2025 from $77.6 million in Q1 2024, a decline of 12.8% [165]. - Net cash used in financing activities increased to $56.1 million in Q1 2025, compared to $18.4 million in Q1 2024, primarily due to $32.0 million in share repurchases [168]. - The Board of Directors declared a quarterly cash dividend of $0.60 per share, totaling $14.8 million in cash dividends paid in Q1 2025 [169]. Revenue Sources and Risks - Approximately 94% of revenues for the three months ended March 31, 2025, consisted of tuition revenue, underscoring the reliance on tuition as a primary revenue source [133]. - Revenues from foreign currencies accounted for 15.9% of consolidated revenues in Q1 2025, exposing the company to foreign currency risk [174]. Education Technology and Programs - The USHE segment provides flexible and affordable programs primarily through Capella University and Strayer University, catering to working adults [127]. - Torrens University offers a range of undergraduate and graduate programs in Australia, focusing on high-demand fields such as business and health [126]. - The Education Technology Services segment is crucial for driving enrollment through employer relationships, which significantly contribute to revenue [128]. - Education Technology Services segment revenue surged by 45.2% to $34.3 million in Q1 2025, driven by new employer partnerships and growth in Sophia Learning subscriptions [146]. Tax and Bad Debt - The effective tax rate for Q1 2025 was 29.2%, down from 31.2% in Q1 2024, with income tax expense decreasing to $12.3 million from $13.4 million [154]. - Bad debt expense was 4.2% of revenue in both Q1 2025 and Q1 2024, with a potential $1.4 million impact on income from operations for a 1% change in the allowance for credit losses [142]. - Bad debt expense as a percentage of revenue remained consistent at 4.2% for both Q1 2025 and Q1 2024 [170].