Back to top

Image: Bigstock

Strategic Education (STRA) Q3 Earnings Meet, Revenues Miss

Read MoreHide Full Article

Strategic Education, Inc. or SEI (STRA - Free Report) reported third-quarter 2020 results, wherein the company’s earnings met analysts’ expectations but revenues missed the same. On a year-over-year basis, both the metrics declined, thanks to lower enrollment, revenue-per-student and margin at Capella University. Shares of this for-profit education company declined 10% on Nov 5, following the earnings release.

It reported adjusted earnings of $1.18 per share, which met the Zacks Consensus Estimate but decreased 7.8% from the year-ago quarter.

Total revenues of $239 million missed the consensus estimate by 0.9%. Notably, the reported figure also declined 1.1% from the prior-year level.

Strategic Education Inc. Price, Consensus and EPS Surprise

Strategic Education Inc. Price, Consensus and EPS Surprise

Strategic Education Inc. price-consensus-eps-surprise-chart | Strategic Education Inc. Quote

Segment Details

SEI currently operates in two reportable segments: Strayer (accounting for 53.7% of total third-quarter 2020 revenues) and Capella (46.3%).

Strayer University: Strayer University’s revenues grew 1.2% year over year to $128.4 million due to lower enrollment and revenue-per-student. Total enrollment dropped 1% from the year-ago level to 48,774 students. Enrollment of new students declined 28% but that of continuing students rose 6% from the year-ago quarter. Nonetheless, the segment’s quarterly operating margin increased 400 basis points (bps) to 17.8%.

Capella University: The segment’s quarterly revenues came in at $110.6 million, reflecting 1% year-over-year decline due to lower revenue-per-student.

Total enrollment at the university grew 4% from the year-ago quarter to 40,268 students. New and continuing student enrollment both increased 4% year over year. The upside was mainly driven by improved performance of FlexPath, which comprises 40% of Capella University’s Bachelor’s and Master’s degrees total enrollment.

Its operating margin came in at 13.5% for the reported quarter, down 340 bps from the year-ago level.

Operating Highlights

Adjusted operating margin for the reported quarter was 15.8%, up 50 bps year over year. Adjusted EBITDA was $52.4 million for the reported period, up 3.1% year over year.

Financial Details

As of Sep 30, 2020, SEI had cash, cash equivalents, and marketable securities of $738.3 million, up from $525.3 million at second quarter-end and $454.6 million at December 2019-end.

For the third quarter, consolidated bad debt expense as a percentage of revenues was 4.7% compared with 5% a year ago.

Strategic Education also closed the refinancing of its revolving credit facility on Nov 3, 2020 for a total commitment of $350 million for a period of five years, with materially the same terms as under the prior revolving credit facility. The company borrowed $141.8 million on the facility on Nov 3.

Update on Pandemic

SEI is reopening corporate offices in Minneapolis, Minnesota and Herndon, Virginia for a small number of volunteer employees. It has also reopened three campuses in Lithonia and Augusta, Georgia and Arlington, Virginia to assist international students and eventually all students. Meanwhile, it has also started implementing the restructuring plan that includes both voluntary and involuntary employee terminations in order to lower ongoing operating costs to align with the changes in enrollment.

Zacks Rank

SEI — which shares space with Adtalem Global Education Inc. (ATGE - Free Report) , Laureate Education Inc. (LAUR - Free Report) and American Public Education, Inc. (APEI - Free Report) in the Zacks Schools industry — currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>