Strategic Education, Inc.

Welcome to Strategic Education's Third Quarter 2021 Results Conference Call. I will now turn the call over to Therese Wilkie, Director of Investor Relations for Strategic Education. Ms. Wilkie, please go ahead.

Thank you. Good morning, everyone, and welcome to Strategic Education's Conference Call, in which we will discuss Third Quarter 2021 results. With us today are Robert Silberman, Executive Chairman, Carl McDonald, 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. Further information about these and other relevant uncertainties may be found in Strategic Education's most recent Annual Report on Form 10-K, the 10-Q to be filed, 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 Carl. Carl, please go ahead.

Thank you, Therese, and good morning, everyone. This morning we released our third quarter financial results, and rather than go through them in detail, since all the information is actually in the release, I'd instead like to provide our owners with updates on our progress towards our strategic goals. First, our Australia-New Zealand segment continues to perform exceptionally well, notwithstanding the fact that that they have operated with some of the world's most restricted COVID-related lockdown measures anywhere in the world. The integration of these assets onto SEI's infrastructure was completed in the third quarter and without any adverse impacts to students or staff. Our Australian team has been actively working with our US-based team on beginning to implement revenue synergies, such as exporting existing US programs into Torrens University to expand their program portfolio. Currently, we see that these revenue synergies are being worth potentially $50 to $75 million over the next three plus years. The inability of foreign students to travel into Australia will likely have a slight negative impact on our revenue projections for the year, but this will almost be entirely offset with careful expense management such that their full year EBITDA will be in line with our original projection of $60 million. We are encouraged that many of these restrictive lockdown measures are beginning to ease, and we are cautiously optimistic that foreign travel into Australia will be allowed to resume in the early part of 2022. In the United States, our Alternative Learning Unit is on track to meet or exceed all of their objectives for 2021, starting with Sophia Learning. Sorry. Since relaunching Sophia to a monthly paid subscription model in the third quarter of last year, we've added more than 51,000 paid subscribers and are seeing strong month-to-month growth in our subscriber base. Over the past year, more than 64,000 learners have collectively completed more than 190,000 courses and transferred more than 500,000 credit hours to other institutions, thereby dramatically lowering the cost of their degree programs. And we fully expect Sophia to be a meaningful source of revenue and earnings growth for SEI as we continue to invest in its product offering for consumers. Workforce Edge, our SAS-based educational benefits management platform, has gained significant traction in the marketplace after its first six months since launching. We now have 22 corporate agreements who collectively employ more than 430,000 employees on the Workforce Edge platform. The monetization strategy for Workforce Edge is two-pronged. First, and what we believe will be the largest source, is when employees on the platform select to attend either Strayer or Capella University, in which case we collect the tuition dollars. Or second, when an employee on the platform selects to attend a non-SEI-owned partner school, in which case we collect an annual fee for administering the platform. Both of these revenue sources will be quite small this year as we've been focused on building the platform and enrolling corporate partners, but beginning next year we expect several million dollars of revenue and ultimately within the next two to three years to be generating several thousand new students into Strayer or Capella University each year. And finally, our U.S. higher education segment, which primarily consists of Strayer and Capella Universities. At Capella, we continue to see very strong growth in FlexPath, where enrollment grew 18% in the third quarter and now comprises more than 19% of all U.S. higher education enrollments. We also continue to see strong traction in our employer-affiliated enrollments at Capella and, in particular, in healthcare. And turning to Strayer University, where our total enrollment declined in the third quarter, contributing to most of the revenue decline that we had in the U.S. higher education segment. We are, however, encouraged by some of the progress we're seeing within Strayer, including our third consecutive quarter of gains in student success, as well as improvements in student retention. As of today, 46 campuses representing 70% of total campuses have reopened and the administrators, faculty, and staff of Strayer remain as committed as ever to delivering a high quality education while also working to get fully reopened post COVID. And finally, I'd like to thank my SEI colleagues for their ongoing dedication and hard work on behalf of our students. And with that, Thea, we'd be happy to answer questions.