Strategic Education(STRA) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a continued improvement in returning to earnings growth, with total enrollment expected to decline in the mid-single digits for the full year, an improvement from down 11% in Q1 and down 7% in Q2 [8][9] - Inquiry volume in the U.S. Higher Education segment increased by over 20% year-over-year, with Strayer University's branded search volume returning to pre-pandemic levels [9][10] - The Education Technology and Services segment saw a revenue increase of 24% from the prior year [14] Business Line Data and Key Metrics Changes - Strayer University experienced year-over-year improvements in core success and student retention, with total enrollment expected to grow year-over-year by the end of the year [10][11] - Employer Solutions within the Education Technology and Services segment grew total employer-affiliated enrollments by 10%, with the mix of students from employers increasing by 410 basis points [12] - Workforce Edge doubled its corporate partners from 20 to 45, with a total employee base growing from approximately 415,000 to over 1 million [13] Market Data and Key Metrics Changes - The Australia and New Zealand segment saw total enrollment increase slightly, but revenue declined by 10% year-over-year, attributed to timing of enrollments and foreign currency fluctuations [16] - The company expects ANZ revenue to be flat or slightly down for the full year, but remains confident in enrollment growth as international student processes normalize [17] Company Strategy and Development Direction - The company aims to finish the year strong and show significant earnings growth in 2023, focusing on improving academic performance and student outcomes [18] - The capital allocation strategy prioritizes reinvesting in high-returning investments, with dividends and share repurchases considered after ensuring sufficient reinvestment [37][46] Management's Comments on Operating Environment and Future Outlook - Management noted that the demand environment for U.S. Higher Education has strengthened significantly, attributed to factors such as campus reopenings and improved employment confidence [22][33] - The company does not expect material adverse impacts from a modest recession, as demand for degrees typically remains strong during business cycles [35] Other Important Information - The company anticipates changes in the Department of Education's 90/10 rule but does not foresee exposure across Strayer and Capella [28] - Foreign exchange rates, particularly the Australian dollar, are expected to impact revenue and earnings, with management noting a historical fluctuation range [48][49] Q&A Session Summary Question: What is driving the improving trends at U.S. Higher Education, specifically at Strayer University? - Management attributed the recovery to campus reopenings and a significant increase in demand [22] Question: Can you discuss marketing expenses and cost per lead trends? - Marketing efficiency is approaching pre-pandemic levels, with solid new student growth across all universities [25][26] Question: What are the roadblocks for international students in ANZ? - Processing delays for visas exceeding 200 days are being addressed, with expectations for growth as these delays clear [31] Question: How does the company expect to perform in a potential recession? - Historically, demand for degrees remains strong during business cycles, with no material adverse impact expected from a modest recession [35] Question: What is the plan for share repurchases going forward? - The board has authorized $200 million for repurchases, with a focus on capital allocation prioritizing student outcomes [46][47]