Q2 2026 Strategic Education Inc Earnings Call Transcript
Key Points
- Strategic Education Inc (STRA) reported a solid second quarter with revenue up 3% to $330 million and adjusted EPS up 16% to $1.76.
- The ETS division showed strong growth, with revenue up 15% and operating income up 30%, driven by a 32% increase in Sophia Learning subscribers and a 21% rise in Workforce Edge enrollments.
- US Higher Education saw improved profitability, with operating income up 56% and operating margin expanding by 500 basis points to 15%, aided by a 3% reduction in operating expenses.
- Employer-affiliated enrollment reached a new all-time high of 35% of total US Higher Education enrollment, with healthcare enrollment growing 11% to represent 52% of the total.
- Student retention in US Higher Education hit an all-time high of 89%, and the company repurchased $33 million in shares during the quarter.
- Management expressed confidence in achieving 200 basis points of EBIT margin expansion for the year, even including the one-time Australian charge.
- Strategic Education Inc (STRA) took a $13 million one-time charge related to a labor matter in Australia, which negatively impacted operating income and margins.
- Australia and New Zealand enrollment declined 5% and revenue decreased nearly 3% to $67 million, with operating income of only $1 million after the charge.
- The Australian Appeals Court overturned a favorable ruling on grading time compensation, and the company is awaiting a High Court decision, creating uncertainty.
- International student enrollment in Australia is challenged due to slower visa approvals from the Australian government, which could impact future growth.
- Non-healthcare and unaffiliated enrollment in US Higher Education continues to decline, as the company focuses its marketing strategy on employer and healthcare programs.
- Sophia Learning's growth slowed due to the law of large numbers, and the company is investing in academic integrity controls to address negative press about AI use.
Welcome to Strategic Education's second-quarter 2026 results conference call. I will now turn the call over to Terese Wilke, Senior Director of Investor Relations for Strategic Education. Ms. Wilke, please go ahead.
Thank you. Hello, everyone, and welcome to Strategic Education's conference call in which we will discuss second quarter 2026 results. With us today are Karl McDonnell, President and Chief Executive Officer; and Daniel Jackson, Executive Vice President and Chief Financial Officer. 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.
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