Strategic Education’s first quarter results reflected the ongoing evolution of its business mix, with management attributing growth to a robust performance in its education technology services and expanding employer partnerships in U.S. higher education. CEO Karl McDonnell pointed to a 7% increase in employer-affiliated enrollment, which offset a decline in unaffiliated student numbers, and highlighted the contribution of new corporate clients and the Sofia Learning platform. McDonnell noted that “our corporate partnerships remain very strong, and we suspect that they’ll continue to be a source of strength for us as we add partnerships and deepen our relationships in Workforce Edge.”
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Strategic Education (STRA) Q1 CY2025 Highlights:
- Revenue: $303.6 million vs analyst estimates of $300.7 million (4.6% year-on-year growth, 1% beat)
- Adjusted EPS: $1.30 vs analyst estimates of $0.96 (34.9% beat)
- Adjusted EBITDA: $59.96 million vs analyst estimates of $48.67 million (19.7% margin, 23.2% beat)
- Operating Margin: 13.1%, down from 14.2% in the same quarter last year
- Domestic Students: 87,854, in line with the same quarter last year
- Market Capitalization: $2.01 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Strategic Education’s Q1 Earnings Call
- Jeff Silber (BMO Capital Markets) asked why U.S. enrollment growth lagged peers and if marketing changes were underway; CEO Karl McDonnell said trends reflected cyclical normalization and reaffirmed confidence in a return to mid-single digit growth.
- Jeff Silber (BMO Capital Markets) also inquired about drivers behind strong EPS; McDonnell attributed it to product strength in Sofia, incremental marketing investments, and Workforce Edge client maturity.
- Alex Paris (Barrington Research) requested details on persistence rates; McDonnell reported persistence was stable and noted multi-year gains at Strayer University.
- Alex Paris (Barrington Research) questioned the impact of Australian regulatory changes on international enrollments; McDonnell explained that new verification requirements for transfer students significantly reduced transfer volumes.
- Jasper Bibb (Truist Securities) asked about the domestic/international mix in ANZ and the effect of a large recent employer launch on EPS; McDonnell said the mix is shifting toward domestic, and initial demand from the new employer client was ahead of internal expectations.
Catalysts in Upcoming Quarters
In the coming quarters, our team will be watching (1) the trajectory of unaffiliated U.S. higher education enrollment and sustained growth in employer-affiliated segments, (2) the ongoing ramp of Sofia Learning and Workforce Edge partnerships within education technology, and (3) the impact of regulatory changes on both international and domestic enrollment in Australia and New Zealand. Effective execution on expense management and marketing investments will also be critical markers of progress.
Strategic Education currently trades at $85.95, up from $80.24 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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