Strategic Education(STRA) - 2025 Q2 - Quarterly Results

Executive Summary Strategic Education, Inc. reported strong second-quarter 2025 results, driven by significant growth in its Education Technology Services segment and the healthcare portfolio within U.S. Higher Education Q2 2025 Performance Highlights Strategic Education, Inc. reported strong second-quarter 2025 results, driven by significant growth in its Education Technology Services segment and the healthcare portfolio within U.S. Higher Education - Education Technology Services (ETS) revenue and operating income increased by approximately 50% year-over-year[1] - Sophia Learning revenue and subscribers grew by 40% year-over-year[1] - U.S. Higher Education's healthcare portfolio total enrollment increased 8% year-over-year[1] Consolidated Financial Results Strategic Education, Inc.'s consolidated financial results for Q2 2025 show revenue growth, improved profitability, and a strong liquidity position Q2 2025 Consolidated Financial Performance Strategic Education, Inc. reported a 2.9% increase in consolidated revenue for Q2 2025, reaching $321.5 million, primarily driven by the Education Technology Services segment Consolidated Income Statement Highlights (Three Months Ended June 30) | Metric | Q2 2024 ($ thousands) | Q2 2025 ($ thousands) | YoY Change (%) | | :----------------------- | :--------------------- | :--------------------- | :------------- | | Revenues | $312,266 | $321,471 | 2.9% | | Income from operations | $41,924 | $45,760 | 9.2% | | Net income | $29,898 | $32,331 | 8.1% | | Diluted EPS | $1.24 | $1.37 | 10.5% | - Diluted weighted average shares outstanding decreased to 23,516,000 in Q2 2025 from 24,179,000 in Q2 2024, contributing to EPS growth[3] Balance Sheet and Cash Flow As of June 30, 2025, the company maintained a strong liquidity position with $165.0 million in cash, cash equivalents, and marketable securities, with no outstanding debt, while cash provided by operations slightly decreased Balance Sheet and Cash Flow Highlights | Metric | Dec 31, 2024 ($ thousands) | Jun 30, 2025 ($ thousands) | YoY Change (6 months) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Cash, cash equivalents, and marketable securities | $184,023 | $164,950 | -10.4% | | Total assets | $2,049,735 | $2,091,523 | 2.0% | | Total liabilities | $387,236 | $424,806 | 9.7% | | Total stockholders' equity | $1,662,499 | $1,666,717 | 0.3% | | Metric | 6 Months Ended Jun 30, 2024 ($ thousands) | 6 Months Ended Jun 30, 2025 ($ thousands) | YoY Change (%) | | :-------------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------- | | Cash provided by operations | $101,935 | $98,864 | -3.0% | | Capital expenditures | $19,928 | $21,151 | 6.1% | | Free cash flow (non-GAAP) | $82,007 | $77,713 | -5.3% | - Consolidated bad debt expense as a percentage of revenue improved to 4.0% in Q2 2025, down from 4.3% in Q2 2024[8] Non-GAAP Consolidated Financial Measures The company provides non-GAAP financial measures, including adjusted income from operations, net income, diluted EPS, EBITDA, and free cash flow, to offer insights into its ongoing operations Adjusted Consolidated Financial Highlights (Three Months Ended June 30) | Metric | Q2 2024 (Non-GAAP, $ thousands) | Q2 2025 (Non-GAAP, $ thousands) | YoY Change (%) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------- | | Adjusted income from operations | $43,919 | $48,543 | 10.5% | | Adjusted operating margin | 14.1% | 15.1% | 1.0 pp | | Adjusted net income | $32,261 | $35,846 | 11.1% | | Adjusted diluted EPS | $1.33 | $1.52 | 14.3% | | Adjusted EBITDA | $63,274 | $68,274 | 7.9% | Adjusted Consolidated Financial Highlights (Constant Currency, Three Months Ended June 30, 2025) | Metric | Q2 2025 (GAAP, $ thousands) | Q2 2025 (Adjusted with Constant Currency, $ thousands) | YoY Change (Constant Currency) | | :-------------------------------------- | :--------------------------- | :------------------------------------------------------ | :----------------------------- | | Revenues | $321,471 | $323,544 | 3.6% | | Income from operations | $45,760 | $49,063 | 17.0% | | Operating margin | 14.2% | 15.2% | 1.1 pp | | Net income | $32,331 | $36,228 | 12.2% | | Diluted EPS | $1.37 | $1.54 | 15.8% | - Free cash flow for the first six months of 2025 was $77.7 million, a decrease from $82.0 million in the same period of 2024[7][31] Segment Performance Highlights Strategic Education, Inc.'s segments show robust growth in Education Technology Services, a slight decline in U.S. Higher Education, and challenges in Australia/New Zealand Education Technology Services (ETS) The Education Technology Services segment demonstrated robust growth in Q2 2025, with significant increases in revenue and operating income, primarily fueled by Sophia Learning and new Workforce Edge employer partnerships ETS Segment Financials (Three Months Ended June 30) | Metric | Q2 2024 ($ thousands) | Q2 2025 ($ thousands) | YoY Change (%) | | :--------------------- | :--------------------- | :--------------------- | :------------- | | Revenue | $24,523 | $36,692 | 49.6% | | Income from operations | $10,034 | $15,028 | 49.8% | | Operating income margin| 40.9% | 41.0% | 0.1 pp | - Sophia Learning average total subscribers increased approximately 40% year-over-year, with Sophia Learning revenue growing 39.8% to $16.4 million[3] - Workforce Edge expanded to 80 corporate agreements as of June 30, 2025, collectively employing approximately 3,870,000 employees[3] U.S. Higher Education (USHE) The U.S. Higher Education segment experienced a slight revenue decrease due to an overall decline in student enrollment, offset by growth in employer-affiliated enrollment and the healthcare portfolio USHE Segment Financials (Three Months Ended June 30) | Metric | Q2 2024 ($ thousands) | Q2 2025 ($ thousands) | YoY Change (%) | | :--------------------- | :--------------------- | :--------------------- | :------------- | | Revenue | $216,613 | $215,635 | -0.5% | | Income from operations | $19,825 | $20,759 | 4.7% | | Operating income margin| 9.2% | 9.6% | 0.4 pp | - Total student enrollment decreased 0.8% to 86,339, primarily due to a decline in unaffiliated enrollment, which offset growth in employer-affiliated enrollment[10] - Employer affiliated enrollment reached an all-time high of 31.8% of USHE enrollment (up from 29.3% in Q2 2024), and the healthcare portfolio's total enrollment increased 8% year-over-year, comprising 47% of total USHE enrollment[10] Australia/New Zealand (ANZ) The Australia/New Zealand segment saw a decrease in revenue and operating income, mainly due to lower international enrollment resulting from regulatory changes, partially mitigated by domestic enrollment growth ANZ Segment Financials (Three Months Ended June 30) | Metric | Q2 2024 ($ thousands) | Q2 2025 ($ thousands) | YoY Change (%) | | :-------------------------------------- | :--------------------- | :--------------------- | :------------- | | Revenue (GAAP) | $71,130 | $69,144 | -2.8% | | Revenue (Constant Currency) | $71,100 | $71,200 | 0.1% | | Income from operations (GAAP) | $14,060 | $12,756 | -9.3% | | Income from operations (Constant Currency)| $14,100 | $13,300 | -5.7% | | Operating income margin (GAAP) | 19.8% | 18.4% | -1.4 pp | | Operating income margin (Constant Currency)| 19.8% | 18.6% | -1.2 pp | - Student enrollment within ANZ decreased 3.1% to 18,524, primarily due to lower international enrollment caused by regulatory changes in Australia[10] - Domestic enrollment growth is expected to be a bigger driver of future growth, partially offsetting the decline in international enrollment[10] Capital Management and Dividends Strategic Education, Inc. actively manages capital through share repurchases and consistent quarterly cash dividends Share Repurchases Strategic Education, Inc. actively repurchased its common stock during the second quarter and year-to-date, reducing diluted weighted average shares outstanding Common Stock Repurchases | Period | Shares Repurchased | Value ($ millions) | | :----------------------------------- | :----------------- | :------------------ | | Three months ended June 30, 2025 | 325,844 | $28.0 | | Six months ended June 30, 2025 (YTD) | 717,146 | $60.0 | Quarterly Cash Dividend The company declared its regular quarterly cash dividend for common stock Quarterly Cash Dividend Details | Metric | Value | | :-------------- | :---------- | | Dividend per share | $0.60 | | Payment Date | Sep 15, 2025 | | Record Date | Sep 5, 2025 | Company Overview and Disclosures Strategic Education, Inc. provides details on its Q2 2025 conference call, company mission, and essential forward-looking statement disclosures Conference Call Information Strategic Education, Inc. hosted a conference call to discuss its second quarter 2025 results, with webcast and dial-in options available for investors - A conference call was scheduled for July 30, 2025, at 10:00 a.m. (ET) to discuss Q2 2025 results[11] - Access to the live webcast and an earnings release presentation were available via the Investor Relations section of **www.strategiceducation.com**[11](index=11&type=chunk) About Strategic Education, Inc. Strategic Education, Inc. is dedicated to advancing economic mobility through higher education, primarily serving working adult students globally across three core focus areas - The company's mission is to help advance economic mobility through higher education for working adult students globally[12] - Core focus areas include Education Technology Services (Workforce Edge, Sophia Learning), U.S. Higher Education (Capella University, Strayer University), and Australia/New Zealand (Torrens University, Think Education, Media Design School)[12] Forward-Looking Statements This section provides a standard disclosure regarding forward-looking statements, highlighting that such statements are based on current expectations and are subject to various assumptions, uncertainties, and risks - Forward-looking statements are identified by words like "expect," "estimate," "believe," and include all statements not historical facts, covering future financial performance, growth opportunities, plans, strategies, and prospects[13] - Key risks and uncertainties include student enrollment pace, compliance with regulations (Title IV, federal/state laws, accreditation), legislative and governmental actions (Department of Education, Australia/New Zealand), competitive factors, and risks associated with new programs, acquisitions, and general economic conditions[13][15] - The company undertakes no obligation to update or revise forward-looking statements, except as required by law, and advises against undue reliance due to inherent risks[14]