Strategic Education(US:STRA)2023-02-23 00:33Financial Data and Key Metrics Changes - The company's revenue for the full year declined 5.8% to just under $1.1 billion, with a fourth-quarter revenue decline of 1% to $270 million, although the rate of decline improved due to strong enrollment results throughout the year [12][13] - The company ended 2022 with $250 million in cash and marketable securities and $100 million in debt, with 23.9 million shares outstanding [8][9] Business Line Data and Key Metrics Changes - Total enrollment across Strategic Education, Inc. was essentially flat at just under 98,000 students, with a decrease of 80 basis points in the US higher education segment [11] - The US Higher Education segment saw revenue growth of almost 1% in the fourth quarter due to flat enrollment and an increase in revenue per student [14] - The Education, Technology and Services (ETS) segment's revenue increased by 20% to approximately $17 million, although operating income decreased slightly due to continued investments in technology and products [16] Market Data and Key Metrics Changes - Employer affiliated enrollments increased by 17% from the prior year, now comprising more than 24% of total US higher education enrollments, up approximately 350 basis points from the prior year [15] - The Australia/New Zealand segment grew by approximately 4% in the fourth quarter, with revenue essentially flat on a constant currency basis [18] Company Strategy and Development Direction - The company expects enrollment and revenue to be up in the mid-single digits for 2023, with adjustments to the academic calendar at Torrens University to accommodate visa processing delays [20] - The company anticipates that the majority of year-over-year expense growth will occur in the first half of the year, flattening out in the second half, with overall expenses expected to be up no more than 3% from the prior year [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that 2022 would be the trough year for earnings, positioning the balance sheet to support upcoming opportunities and return capital to shareholders [9] - Management noted that demand at Strayer and Capella University is among the strongest seen in several years, returning to pre-pandemic levels [14] Other Important Information - Visa processing issues have improved and are close to returning to pre-pandemic levels, with the Australian government mandating that all international students must be in the country attending classes in person by June [19] - The company does not foresee any material impact from China's recent ban on online foreign university studies, as it has relatively few Chinese students in its international cohort [41] Q&A Session Summary Question: Can you repeat the outlook for 2023? - Management expects revenue to be up in the mid-single digits for the full year, with expenses up no more than 3% [24] Question: Where is the demand coming from in US Higher Education? - Demand is consistently high across both Strayer and Capella, with significant new student growth throughout 2022 [25] Question: How are variable expenses managed with enrollment growth? - The bulk of expenses are fixed, and the current expense base can handle many more students, leading to high marginal contributions from incremental enrollments [35][36] Question: What caused the lower margins in the fourth quarter? - Higher than expected bad debt was noted, typical when new students pay at a lower rate than existing students [37] Question: Are visa processing delays impacting international student enrollment? - There has been some impact, but visa approvals are returning to normal, which is seen as a positive for 2023 [39] Question: Will the recent ban on online studies for Chinese students impact the company? - The company does not expect any material impact from this ruling due to the low percentage of Chinese students in its overall international cohort [41]