Strategic Education(STRA) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The second quarter financial results were in line with expectations, with Australia/New Zealand segment generating $74 million in revenue and $16 million in operating income [7][6] - The alternative learning segment's direct revenue increased by 52% year-over-year to $13 million, with operating income rising 24% to $5.2 million [10][11] - SEI reported nearly $300 million in cash and marketable securities, generating $125 million in cash from operations in the first half of 2021, a 13% increase from the previous year [19] Business Line Data and Key Metrics Changes - Australia/New Zealand segment's integration of Torrens University and others is nearly complete, with expected EBITDA of $60 million despite border closures impacting revenue [8][7] - Capella University saw a 6% growth in total enrollment year-to-date, with FlexPath enrollments increasing by 36% and now comprising 35% of total enrollments [13][14] - Strayer University is working to reverse enrollment declines, with summer academic enrollment showing improvement, although still below expectations [15][16] Market Data and Key Metrics Changes - The Australian borders are expected to remain closed until at least spring 2022, which may negatively impact revenue from international students [8] - The alternative learning segment is gaining traction, with Workforce Edge signing 20 corporate agreements covering over 415,000 employees, exceeding internal goals [12] Company Strategy and Development Direction - The company is focused on reopening campuses to improve enrollment and academic achievement, with plans to open all 65 campuses by October 1 [24][43] - There is a strategy to expand FlexPath programs, with potential applications in Strayer University and Australia/New Zealand [26][28] - The company aims to maintain flat pricing overall, balancing moderate tuition increases with higher corporate enrollments and FlexPath growth [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning Strayer University to growth, citing positive trends in inquiries and applications for new enrollment [40][71] - The company remains focused on cost discipline in the Australia/New Zealand segment, expecting to meet EBITDA guidance despite potential revenue shortfalls [72][74] - Management is optimistic about the recovery trajectory, noting that the current enrollment decline is expected to be short-lived due to a more diverse organizational structure [64] Other Important Information - The company is committed to providing high-quality education and ensuring graduates achieve a substantial return on their educational investments [19] - The Workforce Edge platform is seen as a significant opportunity for future student enrollments, with expectations for scale in 2022 [88] Q&A Session Summary Question: Impact of reopening physical campuses on marketing and enrollment trends - Management noted that campuses that have reopened are performing better than those that remain closed, with expectations for improved enrollment and retention [23][24] Question: Future plans for FlexPath expansion - Management indicated plans to extend FlexPath into doctoral programs and potentially to Strayer University, recognizing its success in driving enrollment growth [26][27] Question: Medium and long-term outlook for pricing - Management expects pricing to remain flat overall, balancing moderate tuition increases with higher corporate enrollments and FlexPath [30] Question: Strayer's enrollment trends and expectations - Management acknowledged that while enrollment is improving, it may take longer than initially expected to return to positive growth, with a focus on reopening campuses [40][41] Question: Australia/New Zealand enrollment challenges - Management explained that the inability of international students to enter Australia is impacting enrollment, but they remain well-positioned to attract domestic students [47][48] Question: Workforce Edge product and its implications - Management clarified that the initial focus is on building scale, with expectations for 1% to 3% of employees on the platform to enroll in SEI institutions in the future [86][88]