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Strategic Education (STRA) Q1 Earnings Beat, Stock Down

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Strategic Education, Inc. or SEI (STRA - Free Report) reported mixed first-quarter 2021 results, wherein earnings topped the Zacks Consensus Estimate but revenues missed the same. Despite top-line growth, adjusted earnings declined on a year-over-year basis due to COVID-related challenges. Post the dismal earnings performance, the stock fell 5.6% on Apr 29.

Notably, Strategic Education announced a regular quarterly cash dividend of 60 cents per share of common stock. The dividend will be paid on Jun 7 to shareholders of record as of May 28.

The company expects capital expenditure within $50-$55 million for 2021.

Inside The Headlines

It reported adjusted earnings of $1.53 per share, beating the Zacks Consensus Estimate of $1.49 by 2.7% but decreasing 27.5% from the year-ago quarter.

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

Total revenues of $290.3 million missed the consensus estimate of $301 million by 3.5% but grew 9.4% from the prior-year level. Adjusted revenues, which excluded the impact of a purchase accounting adjustment and foreign currency exchange, grew 9.5% year over year.

Segment Details

SEI currently operates in three reportable segments: U.S. Higher Education or USHE, Alternative Learning and Australia/New Zealand or ANZ.

The U.S. Higher Education segment comprises Strayer University, including the Jack Welch Management Institute and DevMountain, Capella University, and Hackbright Academy. Segment’s revenues fell 11.3% year over year to $226.5 million due to lower first-quarter enrollment and revenue-per-student. Total enrollment declined 7.3% from the year-ago level to 89,482 students. FlexPath enrollment was 17% of USHE enrollment versus 12% in the same period of 2020. The segment’s operating margin contracted 110 basis points (bps) to 21.1% for the quarter.

The Alternative Learning segment includes Employer Solutions, Workforce Edge, Sophia Learning and Digital Enablement Partnerships. The segment’s quarterly revenues came in at $12.5 million, reflecting 27.9% year-over-year growth backed by higher Sophia Learning subscriptions and employer affiliated enrollment.

Employer affiliated enrollment was 20.7% of USHE enrollment compared with 17% in the year-ago period. Its adjusted operating margin came in at 47% for the reported quarter, significantly down from 65.3% a year ago.

The Australia/New Zealand segment includes Torrens University, Think Education and Media Design School. Revenues from the segment totaled $51.3 million and adjusted revenues were $51.5 million, excluding the impact of a purchase accounting adjustment and foreign currency exchange. Loss from operations was $2.9 million and adjusted loss from operations was $0.7 million for the reported period.

Operating Highlights

Adjusted operating margin of 18.2% was down 560 bps from the year-ago figure of 23.8%. Adjusted EBITDA for the reported quarter was $70.6 million, down from $76.5 million in the prior-year period.

Financial Details

As of Mar 31, 2021, it recorded cash and cash equivalents of $238.3 million compared with $187.5 million at 2020-end.

Cash provided by operating activities was $78.8 million in the first three months of 2021 compared with $68.7 million in the comparable year-ago period. Capital expenditures were $12.7 million compared with $14.3 million a year ago.

Zacks Rank

SEI — which shares space with American Public Education, Inc. (APEI - Free Report) , Adtalem Global Education Inc. (ATGE - Free Report) and Lincoln Educational Services Corporation (LINC - Free Report) in the Zacks Schools industry — currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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