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Strategic Education (STRA) Q2 Earnings Lag, Revenues Top

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Strategic Education, Inc. (STRA - Free Report) or SEI reported second-quarter 2021 results, wherein the company’s earnings missed analyst expectations while revenues surpassed the same. On a year-over-year basis, earnings declined but revenues improved.

Following the earnings announcement, shares of the company jumped nearly 8% on Jul 28.

Chief Executive Officer of SEI, Karl McDonnell, said, "We are pleased with performance at Capella University and in our Alternative Learning and Australia/New Zealand segments and continue to focus on returning Strayer University to growth. Our financial strength provides a solid foundation as we continue to invest in Australia/New Zealand, Alternative Learning, and the success of our Capella and Strayer students."

Inside The Headlines

SEI reported adjusted earnings of $1.55 per share, which marginally missed the Zacks Consensus Estimate of $1.56 per share and decreased 24.8% from the year-ago quarter. The downside was primarily due to the issuance of new shares to facilitate the acquisition of Torrens University and associated assets in Australia and New Zealand.

Total revenues of $299.2 million surpassed the consensus estimate of $299 million by 0.3% and grew 16.9% from the prior-year level. Adjusted revenues, which excluded the impact of a purchase accounting adjustment and foreign currency exchange, grew 16.5% year over year to $298.1 million.

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

The U.S. Higher Education or USHE segment comprises Strayer University, including the Jack Welch Management Institute and DevMountain, Capella University, and Hackbright Academy.

Segment’s revenues fell 14.2% year over year to $212.2 million owing to lower enrollment and revenue-per-student. Total enrollment declined 9.9% from the year-ago level to 83,923 students. FlexPath enrollment was 18% of USHE enrollment versus 12% in the same period of 2020. The segment’s operating margin contracted 870 basis points (bps) to 15.1% 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 $12.9 million, reflecting 52.2% year-over-year growth backed by higher Sophia Learning subscriptions and employer affiliated enrollment. Employer affiliated enrollment was 20.5% of USHE enrollment compared with 17.2% in the year-ago period. Its adjusted operating margin came in at 40.1% for the reported quarter, 970 bps down from 49.8% a year ago.

The Australia/New Zealand or ANZ segment includes Torrens University, Think Education and Media Design School.

Revenues from the segment totaled $74.1 million and adjusted revenues, excluding the impact of a purchase accounting adjustment and foreign currency exchange, were $72.9 million. Adjusted operating income was $16.5 million and 22.6% of adjusted revenue for the reported period.

Operating Highlights

Adjusted operating margin of 18% was down 660 bps from the year-ago figure of 24.6%. Adjusted EBITDA for the reported quarter was $71.9 million, down 7.5% from $77.7 million in the prior-year period.

Financial Details

As of Jun 30, 2021, it had cash and cash equivalents of $261.6 million, up from $187.5 million at 2020-end.

Cash provided by operating activities was $125.8 million in the first six months of 2021 compared with $111.9 million in the comparable year-ago period. Capital expenditures were $23.1 million compared with $25.5 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.