Strategic Education(STRA) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2020, the company reported a 1% increase in enrollment, a 1% decrease in revenue, a 3% decrease in pretax income, and an 8% decrease in adjusted earnings per share [17][18] - For the full year 2020, the company anticipates a 2% increase in enrollment, flat revenue of $1 billion, a 3% increase in pretax income, and flat earnings per share [18][19] - The company expects to generate approximately $270 million in revenue and $60 million in EBITDA from the Australia/New Zealand segment in 2021, representing 10% growth for each [26] Business Line Data and Key Metrics Changes - Strayer University experienced a 28% decline in new students and a 1% decline in total enrollment, while Capella University saw a 4% increase in both new and total enrollment [15][16] - The company has organized its business into three distinct operating divisions: U.S. Higher Education, Alternative Learning, and Australia/New Zealand [20] Market Data and Key Metrics Changes - The company noted that the overall student enrollment in universities in fall 2020 was down about 2%, indicating a broader trend affecting the market [51] - The company aims to increase employer solutions enrollments from 20% to 30% of the student population in 2021, representing a 50% increase [23] Company Strategy and Development Direction - The company is committed to increasing investments in growth areas, including employer solutions and digital enablement, while also implementing expense rationalization to maintain financial strength [19][20] - The company has a long-term vision to convert 100% of tuition funding from Title IV to private sector funding through employer partnerships [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that Strayer's demand will eventually recover to pre-pandemic levels, particularly as demand for high-quality digital learning increases [31] - The company plans to focus on maintaining high academic quality and successfully integrating the newly acquired Torrens University and related assets [31] Other Important Information - The company has initiated several scholarship programs, which are expected to result in a 2% decrease in revenue per student for the full year 2020 [17] - The company plans to take a restructuring charge of approximately $30 million between Q3 2020 and Q1 2021 [20] Q&A Session Summary Question: What is the tracking of new enrollment trends at Strayer University and Capella University? - Management indicated that new student enrollment trends at both universities are largely in line with Q3 [37] Question: Why did Capella outperform initial expectations? - Management attributed Capella's strong performance to its student body being more established professionally, with a higher percentage of graduate students [38][40] Question: What are the retention trends at both schools? - Strayer experienced a slight decline in retention, while Capella's retention remained stable [41] Question: Can you provide details on the Workforce Edge product? - Workforce Edge is a technology platform that allows corporations to market education benefits to their workforce [42][43] Question: How does Sophia's growth compare to competitors? - Management expects significant growth for Sophia, projecting a 300% increase next year [46] Question: What is the growth trend for corporate programs? - Employer solutions-related enrollments at Capella have been strong, particularly in healthcare, with year-over-year increases exceeding 30% [47] Question: How does Strayer's market share compare to competitors? - Management noted that while Strayer's new student enrollment has declined, overall demand in the market is down due to the pandemic [49][51]