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Strategic Education (STRA) Q2 Earnings Lag Estimates, Down Y/Y

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Shares of Strategic Education, Inc. or SEI (STRA - Free Report) gained 3.34% on Jul 27 after it reported second-quarter 2022. Quarterly earnings and revenues missed their respective Zacks Consensus Estimate and declined on a year-over-year basis. The downside was caused by lower contributions from all three segments.

Karl McDonnell, chief executive officer of SEI, stated, “During our second quarter of 2022, demand continued to strengthen in the U.S. within both our U.S. Higher Education and Education Technology Services segments. We remain confident in a return to growth within the Australia/New Zealand segment once international student immigration challenges ease in the region.”

Inside The Headlines

SEI reported adjusted earnings of 85 cents per share, which missed the Zacks Consensus Estimate of 88 cents by 3.4% and declined nearly 46% from the year-ago quarter’s levels.

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 $273.6 million lagged the consensus estimate of $276 million by 0.9% and declined 8.6% from the prior-year quarter’s level. Adjusted revenues fell 9% year over year.

Segment Details

SEI currently operates in three reportable segments — U.S. Higher Education or USHE, Education Technology Services (earlier known as Alternative Learning) and Australia/New Zealand or ANZ.

The USHE segment comprises Strayer and Capella Universities. Segment’s revenues fell 10.5% year over year to $190 million due to lower enrollment and revenue-per-student. Student enrollment declined 8.6% from the year-ago quarter’s level to 76,728 students. FlexPath enrollment was 19% of USHE enrollment compared with 18% in the same period of 2021. The segment’s operating margin contracted significantly to 6.2% from 15.1% a year ago.

The Education Technology Services segment includes Employer Solutions, Workforce Edge and Sophia Learning. The segment’s quarterly revenues came in at $16 million, up 23.9% year over year, backed by growth in Sophia Learning subscriptions and employer-affiliated enrollment. Employer-affiliated enrollment was 24.6% of USHE enrollment compared with 20.5% in the year-ago period. Its operating margin came in at 33.1% for the reported quarter, down from 40.1% a year ago.

The ANZ segment includes Torrens University, Think Education and Media Design School. Revenues in the segment totaled $67.5 million, down 8.8% year over year and 10.5% on an adjusted basis. The adjusted operating margin was 18.2% in the reported quarter, down from 22.6% reported in the prior-year period. Student enrollment within ANZ inched up 0.2% to 18,834 during the reported period.

Operating Highlights

The adjusted operating margin of 10.8% was down 730 basis points from the year-ago quarter’s figure of 18.1%. Adjusted EBITDA in the reported quarter was $47.9 million, down 33.8% from $72.4 million in the prior-year quarter.

Financial Details

As of Jun 30, 2022, STRA recorded cash and cash equivalents of $268.9 million compared with $262.9 million at the 2021-end.

Cash provided by operating activities was $125.8 million in the first half of 2022 compared with $80.7 million in the comparable year-ago period. Capital expenditures were $22.7 million compared with $23.1 million a year ago.

Capital expenditures for 2022 are expected to be approximately $50 million.

Zacks Rank & Key Picks

SEI 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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