Strategic Education, Inc. (NASDAQ:STRA) 2024 First Quarter Financial Report Transcript April 25, 2024
Strategic Education, Inc.'s profits exceeded expectations. Reported EPS was $1.11, compared to estimate of $0.59. STRA wasn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
operator: Thank you for your patience. Welcome to Strategic Education's Q1 2024 Earnings Conference Call. [Operator Instructions] By the way, today's program is currently being recorded. I will now turn the call over to Terese Wilke, Director of Investor Relations, Strategic Education. Mr. Wilk, please.
Therese Wilke: thank you. Hello everyone. Welcome to the Strategic Education conference call. I'd like to talk about our first quarter 2024 results. Chairman Robert Silverman is also present today. Carl McDonnell, President and Chief Executive Officer. Daniel Jackson Executive Vice President and Chief Financial Officer; Following today's remarks, we will begin the question-and-answer session. Please note that this call may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This statement is based on current expectations and is subject to numerous assumptions, uncertainties and risks that Strategic Education must make. has identified in today's press release the following factors that could cause actual results to differ materially.
Further information regarding these and other related uncertainties can be found in Strategic Education's most recent Annual Report on Form 10-K, upcoming 10-Qs and other filings with the Securities and Exchange Commission, and Strategic Education listed in the future 8-K. 10-Q and 10-K. Copies of these filings and the full press release are available on the website strategyeducation.com. Now I'd like to switch the call to Carl. Karl, go ahead.
Carl McDonnell: Thank you, Therese, and good morning everyone. Our first quarter 2024 results reflect continued strength in all of our segments. And before we begin, I would like to point out, as always, that all financial results I refer to are adjusted results and assume fixed currencies for foreign exchange purposes. First-quarter revenue increased 14% to $292 million. Operating expenses increased by 3%, which was in line with expectations, and operating profit more than quadrupled to $36 million. Operating margin increased 910 basis points. And during the quarter, we generated operating income of $28 million on increased revenue of $36 million.
This marginal contribution of 78% is slightly higher than we would normally expect, at a time when many of the investments planned for this year will take place in the second half of the year to support growth efforts towards 2025. reflects the facts. Earnings per share were $1.11, an increase of over 350%. Now let's move on to segments. U.S. higher education posted another quarter of strong growth, again driven by employer-affiliated enrollment. Total enrollment in U.S. higher education increased by 10% in the first quarter, and employer-related total enrollment more than doubled at 22% year-over-year. This reflects the continued strength of our corporate partnerships. During the quarter, our corporate partnerships as a percentage of total U.S. higher education enrollment increased 300 basis points to 29%.
Student retention in U.S. higher education remains stable at 87%. In the first quarter, U.S. higher education revenue increased 11% year over year, and operating income increased 192%. Our Education, Technology and Services segment also continues to perform well, with both Sophia and Workforce Edge continuing to gain market share. In the first quarter, ETS' revenue increased 30% year over year, and operating income increased 74%. Sophia Learning, our direct-to-consumer portal offering college-level classes, reported first-quarter revenue growth of 45% and operating margin of 51%, up from 44% a year ago. The average total number of paid subscribers increased by 42% to over 39,000. Workforce Edge currently has 68 corporate partners who collectively employ approximately 1.5 million employees.
Workforce Edge enrollment at Strayer University or Capella University increased 62% to approximately 1,600 students. Our Australia and New Zealand division returned to total enrollment growth in the first quarter, with enrollments up 5% year-on-year to 2,197 students. First-quarter revenue increased 19% year-over-year at constant currency due to increased enrollment and revenue per student. The increase in admissions is due to domestic international student admissions, meaning international students who are already in Australia and have re-admitted or transferred to Torrence University during the quarter. The increased course load contributed to his 14% increase in revenue per student. This is due to Australia's reinstatement of requiring international students to take more courses on campus, as previously mentioned.
Excluding currency effects, operating loss for the first quarter was $2.2 million, an improvement from an operating loss of $7.2 million in the prior year. As previously mentioned, ANZ's first quarter earnings are the lowest of the year due to the Australian summer, which means there are relatively few school days during the quarter. On the other hand, expenses are incurred somewhat evenly throughout the year. Finally, we are very pleased with the continued momentum across our business and are committed to success in 2024. I would also like to thank you again for your continued commitment to our students. So, Jonathan, I'm happy to take your questions.
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