Strategic Education(US:STRA)2022-11-05 18:33Financial Data and Key Metrics Changes - Revenue in Q3 2022 was down less than 1% from the prior year, excluding foreign currency fluctuations [8] - The company expects 2022 to be the trough year for revenue and earnings, with substantial increases anticipated in 2023 [19] Business Line Data and Key Metrics Changes - The U.S. Higher Education segment showed significant strength, with inquiries into Strayer and Capella increasing more than 30% from the prior year [8] - Capella's FlexPath program enrollment grew, now comprising approximately 21% of all U.S. higher education enrollments, an increase of 200 basis points from a year ago [10] - The Education Technology Services (ETS) segment grew revenue by 27% in Q3, although operating income remained flat due to ongoing investments [12] Market Data and Key Metrics Changes - The Australia/New Zealand segment experienced a 2% growth in total enrollment and a 1% revenue growth on a constant currency basis [16] - Visa application processing delays continue to impact international student enrollment in Australia/New Zealand, but the company remains optimistic about future growth as these issues are resolved [17] Company Strategy and Development Direction - The company is focused on improving enrollment through corporate partnerships, which have shown significantly higher growth rates compared to non-affiliated enrollments [9] - Investments in ETS are expected to moderate expense growth significantly in 2023, aiming for margins closer to 50% [13] - The launch of SEI's Faculty Action Center at Torrens is anticipated to enhance student satisfaction and retention [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for postsecondary education, even in the face of potential economic downturns [29] - The company does not foresee significant adverse impacts from a recession, provided that labor participation rates remain within a normalized range [32] Other Important Information - The adjusted tax rate for 2022 is expected to be slightly higher, around 31% [35] - The Australian government plans to rescind a waiver for education visa holders in June 2023, which could catalyze a return of international students [46] Q&A Session Summary Question: Insights on U.S. higher education enrollments - Management noted strength across all student types, with FlexPath and nursing programs at Capella being major growth drivers [24][26] Question: Impact of visa application issues on ANZ enrollment - Management indicated significant delays in visa processing, affecting hundreds of interested students, but expects improvements [27][28] Question: Potential impacts of a U.S. recession - Management believes demand for education will remain strong, with only minor impacts expected unless there is a major economic shock [30][32] Question: Modeling inputs for 2023 expectations - Management stated that total enrollment is likely to decline in the mid-single digits for 2022, with expectations for growth in 2023 [34][37] Question: Bad debt trends in the quarter - The increase in bad debt is attributed to a higher proportion of new students, who typically pay at a lower rate [42][44] Question: Regulatory updates and immigration impacts - Management highlighted the upcoming rescindment of the visa waiver in Australia as a positive catalyst for enrollment [46] Question: Effects of labor participation on business metrics - Management indicated that inquiries and applications for new enrollment would likely be adversely impacted by declines in labor participation [48][50]