Q4 2023 Strategic Education Inc Earnings Call
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Terese Wilke: I will now turn the call over to Terese Wilke, Director of Investor Relations for Strategic Education. Mrs. Wilke, please go ahead. Thank you. Hello, everyone, and welcome to Strategic Education's conference call, in which we will discuss fourth quarter 2023 results. With us today are Robert Silberman, chairman; Karl McDonnell, President and Chief Executive Officer, and Daniel Jackson, Executive Vice President and Chief Financial Officer.
I will now turn the call over to Teresa Wilkie director of Investor Relations for strategic Education. Mr. Wilkie. Please go ahead.
Terese Wilke: Thank you Hello, everyone and welcome to strategic Education's Conference call in which we will discuss fourth quarter 'twenty twenty-three results.
Terese Wilke: With us today are Robert Silberman Chairman.
Terese Wilke: Karl Mcdonnell President and Chief Executive Officer, and Daniel Jackson, Executive Vice President and Chief Financial Officer.
Terese Wilke: Following today's remarks, we will open the call for questions. Please note that this call may include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements are based on current expectations and are subject to a number of assumptions, uncertainties, and risks that Strategic Education has identified in today's press release that could cause actual results to differ materially. Further information about these and other relevant uncertainties may be found in Strategic Education's most recent annual report on Form 10-K, to be filed. The most recent 10-Q and other filings with the Securities and Exchange Commission, as well as Strategic Education's future 8-Ks, 10-Qs, and 10-Ks. Copies of these filings and the full press release are available for viewing on the website at strategiceducation.com. And now I'd like to turn the call over to Rob. Rob, please go ahead.
Terese Wilke: Following today's remarks, we will open the call for questions.
Terese Wilke: Please note that this call may include forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Terese Wilke: The statements are based on current expectations and are subject to a number of assumptions uncertainties and risks that strategic education has identified in today's press release that could cause actual results to differ materially.
Terese Wilke: Further information about these and other relevant uncertainties, maybe found in strategic Education's. Most recent annual report on Form 10-K to be filed tomorrow.
Terese Wilke: The most recent 10-Q.
Terese Wilke: And other filings with the Securities and Exchange Commission as well as strategic Education's future, eight Ks and Qs and 10-Ks.
Terese Wilke: Copies of these filings and the full press release are available for viewing on the website at strategic education Dot com.
Terese Wilke: Now I'd like to turn the call over to Rob Rob. Please go ahead.
Robert S. Silberman: Thank you, Terese, and good morning, ladies and gentlemen. Before I turn the call over to Karl to report our fourth quarter and full year results, I wanted to make just a couple of high-level comments on our 2023 capital allocation. SEI started the year with $236 million of cash and marketable security and roughly a hundred million dollars of outstanding debt drawn on our bank revolver. During 2023, we generated $159 million in pre-tax cash from operations. We also sold one of our campus properties during the year for roughly $6 million. Out of that $165 million in generated cash, we paid $42 million in taxes, and we invested $37 million in various capital expenditures and growth expenditures. That left us with $86 million in what we refer to as owner's distributable cash, from which we returned $74 million to our owners, comprised of our $2.40 per share annual common dividend, as well as the repurchase of roughly $15 million of our common stock at an average price of around $77 per share. Finally, during the year, we paid down $40 million of our outstanding debt.
Rob: Thank you Tracy and good morning, ladies and gentlemen.
Rob: Before I turn the call over to Carl to report, our fourth quarter and full year results I wanted to make just a couple of high level comments on our 2023 capital allocation.
Speaker Change: Let's see I started the year with $236 million of cash and marketable securities and roughly $100 million of outstanding debt drawn on our bank revolver. During 2023, we generated $159 million in pretax cash from operations and we also sold one of our campus.
Speaker Change: <unk> during the year for roughly $6 million.
Speaker Change: Out of that $165 million and generated cash we paid $42 million in taxes, and we invested $37 million and various capital expenditures and growth expenditures.
Speaker Change: That left us with $86 million in what we referred to as owners' distributable cash from which we returned $74 million to our owners comprised of our $2 40 per share annual common dividend as well as the repurchase roughly $15 million of our common stock at an average.
Speaker Change: Price of around $77 per share.
Speaker Change: Finally during the year, we paid down $40 million of our outstanding debt.
Robert S. Silberman: That left SEI at year-end 2023 with $208 million of cash and marketable security, $60 million of debt, and 24 million shares outstanding. We are confident as we enter 2024 that our balance sheet is well positioned to support all of our academic institutions, to fund any upcoming opportunities, as well as to continue to return capital to our shareholders. And with that, Karl, can you walk them through the operating and financial results? Yeah, thank you, Rob. And good morning, everyone.
That left Sci at year end, 2023, with $208 million of cash and marketable securities $60 million of debt and 24 million shares outstanding.
Speaker Change: We are confident as we enter 2024 that our balance sheet is well positioned to support all of our academic institutions to fund any upcoming opportunities as well as to continue to return capital to our shareholders.
Speaker Change: And with that Carl can you walk them through the operating and financial results, Yes. Thank you, Rob and good morning, everyone.
Karl McDonnell: SEI's fourth quarter and full year 2023 financial results that we reported this morning reflect continued momentum across all of our segments. I'd like to start by pointing out that all of my references to our financial results are to our adjusted results and assume constant currency for foreign exchange purposes. For the fourth quarter, our revenue grew 12.5% to $304 million. Our operating expenses grew just 1.6%, which was in line with our expectations.
Carl: <unk> fourth quarter and full year 2023 financial results that we reported this morning.
Carl: <unk> continued momentum across all of our segments.
Carl: I'd like to start by pointing out that all of my references to our financial results are to our adjusted results and assumes constant currency for foreign exchange purposes.
Carl: For the fourth quarter, our revenue grew 12, 5% to $304 million. Our operating expenses grew just one 6% which was in line with our expectations and our operating income more than doubled to $57 million.
Karl McDonnell: And our operating income more than doubled to $57 million. Our operating margin increased 870 basis points. During the quarter, we generated an incremental $30 million of operating income from $34 million of incremental revenue. Our earnings per share also more than doubled from the prior year to $1.70 per share.
Carl: Our operating margin increased 870 basis points.
Carl: During the quarter, we generated an incremental $30 million of operating income from $34 million of incremental revenue.
Carl: Our earnings per share also more than doubled from the prior year to $1 70 per share.
Karl McDonnell: For the full year, our revenue grew 7.4%, our operating expenses grew 4%, which was slightly higher than our initial plan, but was due to much higher enrollment than that plan. Our operating income grew 43% for the full year, and our operating margin increased 280 basis points. Turning now to our segments, U.S. higher education had an exceptional year. Total enrollment in U.S. higher education for the fourth quarter and full year grew 11 and 7 percent, respectively.
Carl: For the full year, our revenue grew seven 4% our operating expenses grew 4%, which was slightly higher than our initial plan, but it was due to much higher enrollment in that plan. Our operating income grew 43% for the full year.
Carl: Our operating margin increased 280 basis points.
Turning now to our segments.
Carl: Higher education had an exceptional year total enrollment in U S higher education for the fourth quarter and full year grew 11, 7% respectively.
Karl McDonnell: Total employer-affiliated enrollment was even stronger. Fourth quarter employer-affiliated enrollment grew 24% from the prior year and 19% for the full year, reflecting continued strength in our corporate partnership. During the fourth quarter, the percentage of total U.S. higher education enrollment coming from our corporate partnerships increased 300 basis points to 28%. For the full year, 70% of our incremental U.S. higher education enrollment came from our corporate partnership. Student retention at U.S. higher education institutions remains stable at approximately 87.4%.
Carl: Total employer affiliated enrollment was even stronger.
Carl: Fourth quarter employer affiliated enrollment grew 24% from the prior year and 19% for the full year, reflecting continued strength in our corporate partnerships during.
Carl: During the fourth quarter the percentage of total U S higher education enrollment coming from our corporate partnerships increased 300 basis points to 28%.
Carl: For the full year, 70% of our incremental U S higher education total enrollment came from our corporate partnerships.
Carl: Student retention.
Carl: Higher education remained stable at approximately 87, 4%.
Karl McDonnell: U.S. higher education revenue grew 9% for the 4th quarter and 6% for the full year, and operating income grew 149% for the 4th quarter and 55% for the full year. Our education, technology, and services segment also had a tremendous year as both SOFIA and Workforce Edge continued to gain market share. ETS revenue for the fourth quarter and full year grew 31% and 26%, respectively. Operating income at ETS increased 119% for the fourth quarter and 51% for the full year.
U S higher education revenue grew 9% for the fourth quarter and 6% for the full year and operating income grew 149% for the fourth quarter and 55% for the full year.
Carl: Our education technology and services segment also had a tremendous year as both Sofia and workforce edge continue to gain market share.
Carl: Revenue for the fourth quarter and full year grew 31, and 26% respectively operating income at Etfs increased 119% for the fourth quarter and 51% for the full year.
Karl McDonnell: Sophia Learning, our direct-to-consumer portal of college-level classes, grew its revenue for the fourth quarter 42% and generated a 50% operating margin, which is up from 22% in the prior year. Average total paid subscribers grew 44% to more than 35,000 paid subscribers. Workforce Edge now has 65 corporate partners who collectively employ just under 1.5 million employees.
Carl: Sophia learning our direct to consumer portal of college level classes grew its revenue for the fourth quarter, 42% and generated a 50% operating margin, which is up from 22% in the prior year.
Carl: Average total paid subscribers grew 44% to more than 35000 paid subscribers.
Carl: Force adds now has 65 corporate partners, who collectively employ just under $1 5 million employees workforce edge enrollments into either strayer or Capella University grew 112% to just under 500 students.
Karl McDonnell: Workforce Edge enrollments into either Strayer or Capelli University grew 112% to just under 1,500 students. Our Australia and New Zealand segment grew at a renewed 20% for the fourth quarter and 6% for the full year using constant currency. All of this growth was the result of significantly higher revenue per student as enrollment was down slightly for the quarter and the full year. As we said throughout last year, we expected our revenue per student to normalize from COVID-era quarters as course load increased in response to a resumption of the Australian requirement for international students to take their courses on campus. This was a big driver of our increase in revenue per student, which grew 23% in the fourth quarter and 10% for the full year. Adjusted operating income increased 53%, and adjusted operating margin increased 510 basis points.
Carl: Our Australia and New Zealand segment grew revenue, 20% for the fourth quarter and 6% for the full year using constant currency.
Carl: All of this growth was the result of significantly higher revenue per student enrollment was down slightly for the quarter and the full year as we as we said throughout last year, we expected our revenue per student to normalize from Covid era quarters as course load increase in response to a resumption of the Australia and requirement for international.
Students to take their courses on campus.
Carl: This was a big driver of our increase in revenue per student, which grew 23% in the fourth quarter and 10% for the full year adjusted operating income increased 53% and adjusted operating margin increased 510 basis points.
Speaker Change: In closing we are very pleased with the results for 2023, and we look forward to a successful 2024 and as always I'd like to thank all of my colleagues within the Sci for your ongoing commitment to our students and learners.
Karl McDonnell: In closing, we are very pleased with the results for 2023, and we look forward to a successful 2024. And, as always, I'd like to thank all of my colleagues within SEI for your ongoing commitment to our students and learners. And with that, Lateef, we'd be happy to take questions. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. If you have not already, to remove yourself from the queue, you may press star 11 again.
Speaker Change: And with that Latif, we'd be happy to take questions.
Latif: Thank you as a reminder to ask a question you will need to press star one on your telephone if you've not already to remove yourself from Mccue you May Press Star one again, please standby, while we compile the Q&A roster.
Latif: Our first question comes from the line of Jeff Silber of BMO. Your question. Please Jess.
Jeffrey Marc Silber: Thank you so much I wanted to first focus on the operating margin expansion and it was obviously very strong for not only the fourth quarter, but for the year.
Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Jeff Silber of BMO. Your question, please, Jeff. Thank you so much.
Jeffrey Marc Silber: Typically in the U S higher education, how sustainable are these gains and what should we be looking for going forward.
Speaker Change: Well, Jeff if you go back to the very beginning of the year just the timing of our investments in 2023 was weighted to the first part of the year. So we expected.
Karl McDonnell: One of the first to focus on operating margin expansion, it was obviously very strong for not only the fourth quarter but for the year, specifically in U.S. higher education. However, how sustainable are these gains and what should we be looking for going forward? Well, Jeff, if you go back to the very beginning of the year, just the timing of our investments in 2023 was weighted to the first part of the year, so we expected very small expense growth in the second half of the year.
Speaker Change: We're a small expense growth in the second half of the year.
Speaker Change: In terms of kind of long term notionally as we've said before we expect that the consolidated level for our margins to be in the low to mid twenties.
Speaker Change: That's going to ebb and flow based on particular investments that we make in any given quarter any given year, but that's where we'd expect it to settle out.
Speaker Change: Okay, Great and then focusing.
Karl McDonnell: In terms of kind of long-term notionally, as we've said before, we expect at the consolidated level for our margins to be in the low to mid 20s. That's going to ebb and flow based on, you know, particular investments that we make in any given quarter, in any given year, but that's where we'd expect to settle out. Okay, great. And then focus just on the strong enrollment growth across all your properties. Are there any specific programs to call out that might have done better than others? Actually, it's pretty strong across the board, Jeff. I mean, FlexPath continues to do very well at Capella.
Speaker Change: The strong enrollment growth across all your properties.
Speaker Change: Are there any specific programs to call out that might've done better than others.
Speaker Change: Actually it's pretty strong across the board, Jeff I mean, Flexpath continues to do very well at Capella healthcare is very strong as I said in my prepared remarks, corporate is exceptionally strong and that's true both strayer and capella. So it's really a very broad base strength right now.
Speaker Change: Okay, Great and then at your Investor Day in November.
Speaker Change: I think you put out a preliminary 2020 for outlook and I'm. Just wondering if you can address that or are we still comfortable with that any changes et cetera.
Speaker Change: Hey, Jeff This is Dan yeah that that model, we think is still.
Dan: It is still on track.
Dan: Okay Fantastic alright, thanks, so much thanks, Jeff.
Karl McDonnell: Healthcare is very strong. As I said in my prepared remarks, corporate is exceptionally strong, and that's true at both Strayer and Capella.
Dan: Thank you again to ask a question. Please press star one one on your Touchtone telephone.
Speaker Change: Our next question.
Speaker Change: Please standby.
Speaker Change: Thank you our next question.
Speaker Change: It comes from the line of Jasper Bibb of Truest. Please go ahead Jasper.
Jasper James Bibb: Hey, good morning impressive results here, maybe just following up on the preliminary 24 outlook like I think you gave a bit of detail.
Daniel W. Jackson: So it's really a very broad-based strength right now. Okay, great. And then at your Investor Day in November, I think you put out a preliminary 2024 outlook. And I'm just wondering if you can address that. Are we still comfortable with that? Any changes, etc. Hey Jeff, this is Dan.
But the preliminary outlook at the Investor day about the composition of growth between the segments and 24.
Jasper James Bibb: So when you say theres been any change in the mix of the drivers there like you'd seem to be running a bit ahead of the U S higher Ed enrollment target while.
Daniel W. Jackson: Yeah, that that model we think is still on track. Fantastic. All right. Thanks so much.
Jasper James Bibb: You might need to accelerate a little bit to get to the.
Jasper James Bibb: 3% to 4% enrollment growth you talked about thanks.
Operator: Thanks, Jeff. Thank you. Again, to ask a question, please press star 11 on your touchtone telephone. All right, next question. Our next question comes from the line of Jasper Bibb of Truist. Please go ahead, Jasper.
Jasper James Bibb: You asked for it's Dan again.
Dan: I'd say at this point.
Dan: The performance across the board is likely and we don't see anything changing from what we what we modeled for Investor day at this point in the year.
Dan: Hey, Jeff This is Rob I. The one thing I want to clarify is what we put out at Investor Day is a model of how our business operates we're not making a prediction on where enrollment will be.
Operator: Hey, good morning. Impressive results here. Maybe just following up on the preliminary 24 outlook, like, I think you gave a bit of detail. Like, a preliminary outlook at the investor day about the composition of growth between the segments in 24. So, would you say there's been any change in the mix of the drivers there? Like, you seem to be running a bit ahead of the curve.
Rob: It is what it is we want our institutions to run at the highest efficiency and we want to attract as many qualified students as we can but the way. The model works as you know is highly operational elaborate if we get more students there'll be no more revenue and more margin expansion and if there's less students there'll be less but we don't predict quarter to quarter where that is.
Daniel W. Jackson: US higher enrollment target while Angie might need to accelerate a little bit to get to the 3 to 4% enrollment growth you talked about. Thanks. Hey, Jasper, it's Dan again.
Gonna be its strong right now and we hope it remains so but its not a predictive model.
Speaker Change: Thanks, and then.
Speaker Change: I understand that.
Speaker Change: Maybe drilling down into it and I think in December Australian government announced some kind of I guess tighter student visa qualification rules certain things like higher scores on English exams, and and the like.
Rob: The performance across the board is like. We don't see anything changing from what we modeled for Investor Day at this point. Hey, Jasper, this is Rob.
Rob: The one thing I want to clarify is that what we put out at Investor Day is a model of how our business operates. We're not making a prediction about where enrollment will be. It is what it is.
Speaker Change: That's going to have any impact on your enrollment at Torrens and can you update us on the current mix of domestic and international enrollments there sure.
Rob: We want our institutions to run at their highest efficiency. We want to attract as many qualified students as we can. But the way the model works is it's highly operationally leveraged.
Speaker Change: Sure.
Speaker Change: The mix is roughly 50 50 between domestic and international students.
Speaker Change: Our our team in Australia takes a measured approach to international recruitment, meaning we don't get overly aggressive in trying to recruit students who don't meet the requirements for an Australia visa and as such we wouldn't expect those changes adversely impacted.
Karl McDonnell: If we get more students, there'll be more revenue and more margin expansion, and if there's less students, there'll be less. But we don't predict quarter to quarter where that's going to be. It's strong right now, and we hope it remains so, but it's not a predictive model. Thanks, and I definitely understand that. Maybe drilling down into the ANZ, I think in December, the Australian government announced some kind of, I guess, tighter student visa qualification rules, certain things like higher scores on English exams and the like.
Speaker Change: Got it last.
Speaker Change: Last question from me you talked about capital deployment in 'twenty three.
Speaker Change: Just curious if you could frame some expectations for this coming year from <unk>.
Speaker Change: Cash conversion standpoint, and then would you be thinking about drawing the balance on our revolver down to zero or and how it kind of I guess opportunistic share repurchases fit into the picture.
Speaker Change: Yes, just for the.
Karl McDonnell: Do you think that's going to have any impact on your enrollment at Torrens? And could you update us on the current mix of domestic and international students there? Thanks. Sure, the mix is roughly 50-50 between domestic and international students. And our team in Australia takes a measured approach to international recruitment, meaning we don't get overly aggressive in trying to recruit students who don't meet the requirements for an Australian visa, and as such, we wouldn't expect those changes to adversely impact them. Transcribed by https://otter.ai.
Speaker Change: That the cash conversion of the operating model I don't think we'll change we tend to have a fairly high cash conversion of art of our net income.
Speaker Change: We do want to add.
Speaker Change: As a priority pay down the entire amount of the revolver draw and most importantly return our financial composite score as quickly as possible to the full 3.0.
Speaker Change: We do intend to continue to pay our annual common dividend.
The payout ratio has been rather high the last couple of years, while the earnings were depressed.
Speaker Change: That payout ratio will start to get back to the roughly one third.
Daniel W. Jackson: Last question for me. You talked about capital deployment in 23. Could you frame some expectations for this coming year from a cash conversion standpoint and then would you be thinking about drawing the balance on a revolver down to zero or not, and and how would kind of, I guess, opportunistic share repurchases fit into the picture? Thanks.
Speaker Change: We've tried.
Speaker Change: Tried to.
Speaker Change: Support in the past.
Speaker Change: And then.
Speaker Change: We always think of opportunistic share repurchases its a price base.
Speaker Change: Concept.
Speaker Change: We measure all of our uses of cash against basically all various opportunities and share repurchases are always something thats in the mix and it's a question of whereas our stock trading relative to what we believe the intrinsic value is and to do share repurchases, we only want to do that at a significant dip.
Daniel W. Jackson: Yes, Jasper. The cash conversion of the operating model I don't think will change. We tend to have a fairly high cash conversion of our net income. We do want to, as a priority, pay down the entire amount of the revolver draw, and most importantly, return our financial composite score as quickly as possible to the full 3.0.
Speaker Change: Count to intrinsic value.
Speaker Change: And so we will continue to look at that through the year.
Speaker Change: Hey, Jasper one thing to add on conversion.
I think I've told you in the rest of the analysts that we target.
Daniel W. Jackson: We do intend to continue to pay our annual common dividend. You know, the payout ratio has been rather high in the last couple of years while earnings have been depressed. I think that the payout ratio will start to get back to the roughly one-third that we had. TriDiv, www.larryweaver.com, And share repurchases are always, you know, something that's in the mix. And it's a question of, you know, where is our stock trading relative to what we believe the intrinsic value is. And to do share repurchases, we only want to do that at a significant discount to intrinsic value.
Cash conversion, our distributable cash at the same level as adjusted net income we were a little light on that measure in 'twenty three because of some unfavorable timing in Australia and New Zealand.
Speaker Change: Moving forward we should.
Speaker Change: That's the planning metric now moving forward. So I think it's a good one to plug into a into your assumptions.
Speaker Change: Thanks for taking the questions.
Speaker Change: Thank you.
Our next question comes from the line of Heather Bosky Bofa. Your question. Please Heather.
Heather Nicole Balsky: Hi, Thank you Heather about D I.
Heather Nicole Balsky: I guess first off when you think about the outperformance you've seen enrollment in the quarter.
Heather Nicole Balsky: And.
Speaker Change: What do you attribute it to how much do you think is the recovery how much do you think is sort of operationally driven.
Daniel W. Jackson: And so we'll continue to look at that through the year. Hey, Jasper, one thing to add on conversion. I think I've told you and the rest of the analysts that we target cash conversion or distributable cash at the same level as adjusted net income. We were a little light on that measure in 23 because of some unfavorable timing in Australia and New Zealand.
Speaker Change: And I know it.
Speaker Change: You don't guide the quarters, but.
Speaker Change: Given sort of where you're exiting the year, how does that make you think about the first half of next year and.
Speaker Change: How you can do in enrollment.
Speaker Change: Well clearly the primary driver of the outperformance in the U S. Higher education is our network of 1000, plus corporate partnerships. If you just look at the growth rate.
Speaker Change: Total enrollment growth rate of corporate affiliated students versus not.
Daniel W. Jackson: Moving forward, we should, that's the planning metric now moving forward. So I think, The Bulletproof Executive 2013, That's all I have to say. Thanks for asking the questions.
Speaker Change: Ben.
Speaker Change: Way ahead of our average total enrollment in the U S higher education throughout the year actually accelerated a little bit in the back half of the year.
Speaker Change: So it's that it's the fact that workforce edge enrollments doubled on a year over year basis, and that's continuing to mature.
Operator: Thank you. Our next question comes from the line of Heather Balsky of B of A. Your question, please, Heather. Hi, thank you.
Speaker Change: So that's the primary driver.
Karl McDonnell: I guess first off, when you think about the outperformance, you see enrollment in the quarter. And what do you attribute it to? How much do you think is the recovery?
Speaker Change: And then in addition to that as we've said throughout the year. It's just been a very strong demand environment for us. So we can continue to see robust demand.
Karl McDonnell: How much do you think is sort of operationally driven? And I know, you know, you don't guide the quarters, but given sort of where you're exiting the year, how does that make you think about the first half of next year and how you can do enrollment? Well, Heather, clearly the primary driver of the outperformance in US higher education is our network of 1000 plus Corporate Partnerships. If you just look at the growth rate. A total enrollment growth rate of corporate-affiliated students versus not, it's been... It's way ahead of our average total enrollment in U.S. higher education throughout the year, and it actually accelerated a little bit in the back half of the year. So it's that. It's the fact that workforce-edge enrollments doubled on a year-over-year basis, and that's continuing to mature. So that's the primary driver.
Speaker Change: So it's a combination of factors, but I would say clearly the primary factor is our corporate partnerships.
Speaker Change: And is there I mean is there anything we should keep them.
Anything in the environment that we.
Speaker Change: We should think about that where you couldn't continue this momentum at least into the first half of next year anything in the macro thinking about compare.
Speaker Change: The thing that that we might be missing well I mean, obviously I can't speculate into the future, but what I can say, yes, we've we've not seen anything at a macro level or within our corporate partnerships, that's changed materially and Heather the macro statistic that we tend to look at that.
Speaker Change: It tends to most accurately predict future demand is labor force participation rates, which really is a proxy for employment confidence, which for working adults tends to be a predicate to be able to go back to school.
Speaker Change: And that remains fairly strong in the U S right now but.
Speaker Change: But.
Speaker Change: As Carl said, we we put the programs together, we try and run the universities as efficiently as possible with the highest academic quality and then were.
Karl McDonnell: And then, in addition to that, as we've said throughout the year, it's just been a very strong demand environment for us. So we continue to see robust demand. So it's a combination of factors, but I'd say clearly the primary factor is our corporate partners. And is there anything we should keep in mind, you know, anything in the environment that, you know, we should think about that, where you couldn't continue this momentum, at least into the first half of next year, anything in the macro thinking about compare, just anything that, you know, we might be missing? Well, I mean, obviously, I can't speculate about the future.
Speaker Change: Sort of beneficiaries of strength of demand and it will just continue to be there for them.
Speaker Change: And then when you think about Australia enrollment can you just realize that.
Speaker Change: It's tough to control that.
Speaker Change: I don't know how much visibility there is in terms of how they're managing does but.
Speaker Change: Any any signs that you can that the.
Speaker Change: Things are picking up any changes in our quarter.
Speaker Change: That were kind of green shoots around that.
Speaker Change: We saw.
Speaker Change: A little uptick in the back end of the fourth quarter in demand both domestic and international.
Speaker Change: We remain very confident in the quality of Torrance University. The media design School in New Zealand.
Speaker Change: We think it's a terrific set of assets actually we intend to make some substantial investments in that business in 2024.
Karl McDonnell: But what I can say is, yeah, we've not seen anything at a macro level or within our corporate partners that's changed materially. And Heather, the macro statistic that we tend to look at that tends to most accurately predict future demand is labor force participation rates, which really is a proxy for employment confidence, which for working adults tends to be a prerequisite to being able to go back to school. And that remains fairly strong in the U.S. right now, but, you know, as Karl said, we put the programs together, we try and run the universities as efficiently as possible with the highest academic quality, and then we're beneficiaries of Strength of Demand. And we'll just continue to be there for them.
Speaker Change: To support their growth and I'm confident that over time.
Speaker Change: Growth will be there.
Speaker Change: That's helpful and actually just one.
Final question, you mentioned that since you mentioned those investments in terms of the cadence of.
Speaker Change: Operating expenses during the year or anything that we should keep in mind you you mentioned, how 'twenty three with first half weighted.
Speaker Change: Is it similar cadence this year or anything different.
Speaker Change: I'd say ironically this year might be.
Speaker Change: Opposite of last year.
Speaker Change: When we look at the calendar they shouldn't have a lot of our investments, we think theyre going to happen in the second half of the year with the exception of Australia as I, just said, we intend to make those investments throughout the year.
Karl McDonnell: And then when you think about Australia enrollment, can you just realize that, you know, It's tough to control; I don't know how much disability there is in terms of how they're managing visas, but any signs that things are picking up, any changes in our quarter that were kind of green shoots around that. Yeah, we saw a little uptick in demand back into the fourth quarter, both domestic and international. We remain very confident in the quality of Torrance University, the Media Design School in New Zealand.
Speaker Change: But we're still benefiting.
Speaker Change: In the first part of this year from the investments we made in 2003. So when we think about exiting 'twenty four heading into 'twenty five we have some investments we know we're going to make that are going to show up in the third and fourth quarter.
Speaker Change: Okay. That's helpful. Thank you very much.
Speaker Change: Thank you Heather.
Speaker Change: Thank you.
Alexander Peter Paris: Our next question comes from the line of Alex Paris Barrington Research. Your line is open to Alex.
Karl McDonnell: We think it's a terrific set of assets. In fact, we intend to make some substantial investments in that business in 2024 to support its growth. And I'm confident that over time the growth will be there. That's helpful. And actually, just a final question, you mentioned that since you mentioned those investments, in terms of the cadence of operating expenses during the year, anything that we should keep in mind, you mentioned how 23 was the first half-weighted. Is it a similar cadence this year? Anything different?
Alexander Peter Paris: Thank you and thanks for taking my questions I, just got a couple of cleanup questions on the segments.
Alex: Starting first with U S higher education total enrollment up 10, 5% I think you can give us in the 10-K, but can.
Alexander Peter Paris: Can you discuss total enrollment at strayer and Capella.
Speaker Change: No Alex we're just we're just reporting U S higher Ed.
Speaker Change: Okay and does that usually given in the 10-K.
Speaker Change: There is some detail in the 10-K, which we filed later today I don't have it in front of me, but.
Karl McDonnell: I'd say, ironically, this year might be the opposite of last year. When we look at the calendarization of a lot of our investments, we think they're going to happen in the second half of the year, with the exception of Australia. As I just said, we intend to make those investments throughout the year. But we're still benefiting in the first part of this year from the investments we made in 23.
Speaker Change: There will be some institution level data in there.
Okay, Great and then.
Speaker Change: Sticking to the U S higher education, new student enrollment was up all four quarters for each strayer and Capella I think that's where we stood at the end of the third quarter. Yeah. We had a we had very strong new student growth across U S higher education all year.
Speaker Change: Okay, and then moving to N Z you had just responded to a question by saying domestic enrollment in international enrollment is roughly 50 50.
Karl McDonnell: So when we think about exiting 24, heading into 25, we have some investments we know we're going to make that are going to show up in the third and fourth quarters. Okay, that's helpful. Thank you very much. Thank you, Heather. Thank you. Our next question comes from the line of Alex Paris of Barrington Research. Your line is open, Alex.
Speaker Change: Last quarter, you did make a comment about new student enrollment in domestic which was up 20% year over year in the third quarter, while international New students declined slightly I was wondering if we can get the same sort of color on the fourth quarter, the fourth quarter with similar domestic new students.
Operator: Thank you. And thanks for taking my questions. I just got a couple of cleanup questions on the segments, starting first with U.S. higher education, total enrollment of 10.5%. I think you give this in the 10K, but can you discuss total enrollment at Strayer and at Capella? No, Alex, we're just reporting U.S. higher ed. Okay, is that usually given in the 10-K?
Speaker Change: Up in international was down slightly.
Speaker Change: It definitely bounces around Alex based on the timing of visa.
Speaker Change: Approvals.
Speaker Change: But overall between the two.
Speaker Change: Isaly hedged we have two sources of students there.
Speaker Change: And we've.
Speaker Change: We've got a very long term view as Carl said, the attractiveness of that property. So.
Speaker Change: We see that on an overall basis, having a higher rate of growth in the future.
Unknown Executive: I seem to remember. There is some detail in the 10-K which we file later today. I don't have it in front of me, but there will be some institution levels.
Speaker Change: Excellent well thanks for answering my question guys. Congrats on the quarter. Thank you Alex.
Karl McDonnell: Thank you I would now like to turn the conference back to Carl Mcdonald for closing remarks, Sir.
Unknown Executive: Okay, great. And then, sticking to U.S. higher education, new student enrollment was up all four quarters for both Strayer and Capella. I think that's where we stood at the end of the third quarter. Yeah, we had very strong new student growth across U.S. higher education all year. Okay, and then moving to ANZ, you had just responded to a question by saying domestic enrollment and international enrollment are roughly 50-50. Last quarter, you did make a comment about new student enrollment in the United States, which was up 20% year-over-year in the third quarter, while international new students declined slightly. I was wondering if we could get the same sort of color in the fourth quarter. The fourth quarter was similar. Domestic new students were up, and international was down slightly.
Karl McDonnell: Thank you everyone for joining us this morning, and we look forward to talking to you again next quarter.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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Karl McDonnell: It definitely bounces around, Alex, based on the timing of visa approval. But, overall, between the two, we're nicely hitched. We have two sources of students there, and we've got a very long-term view, as Karl said, of the attractiveness of that property. And I see that, on an overall basis, having a higher rate of...
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Rob: Excellent. Well, thanks for answering my question, guys. Congratulations on the quarter. Thank you, Alex. Thank you. I would now like to turn the conference back to Karl McDonnell for his closing remarks, sir. Thank you everyone for joining us this morning, and we look forward to talking to you again next quarter. This concludes today's conference call. Thank you for participating. You may now disconnect. Transcribed by https://otter.ai, The Ultimate Parody Site!
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