Strategic Education, Inc.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1. Welcome to Strategic Education's second quarter 2022 results conference call. I will now turn the call over to Therese Wilke, Director of Investor Relations for Strategic Education.

Ms. Wilke, please go ahead. Thank you. Good morning, everyone, and welcome to Strategic Education's conference call in which we will discuss second quarter 2022 results. With us today are Robert Silberman, Executive Chairman, Carla 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, 10Q to be filed, and other filings with the Securities and Exchange Commission, as well as strategic education's future 8Ks, 10Qs, and 10Ks. 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. The second quarter results that we reported this morning reflect continued improvement we're making in returning the company to earnings growth. As we see continued acceleration in the recovery at Strayer University, significant demand strength across all of us higher education and continued strong growth within our education technology and services segment. As such, I can really reiterate that we expect our total enrollment to be down in the mid single digits for the full year, which is an improvement from the down 11% in the first quarter and the down 7% we had in the second quarter. We also expect that all three of our universities will have positive new student growth for the full year 2022. As I said a moment ago, we've seen a significant inflection in demand in our US higher education segment. Inquiry volume is up more than 20% from the prior year, and within Strayer University, branded related search volume, meaning people searching for Strayer by name, has returned to pre-pandemic levels. Strayer's recovery is accelerating. During the second quarter, we had year-over-year improvements in both course success and student retention. And we forecast that Strayer's total enrollment should be growing on a year-over-year basis by the end of this year, which would be roughly one full year faster than we had originally anticipated. Our education, technology, and services segment had a very solid quarter, with each of the three components within ETS having very strong growth. Employer Solutions, which services our nearly 1,000 corporate partnerships in the United States, grew total employer-affiliated enrollments by 10%, and the mix of students from employers grew 410 basis points from last year and is approximately 25% of US higher education total enrollments. Workforce Edge, our SAS-built corporate education benefits management platform, made significant progress over the past year. In the second quarter of 2021 workforce edge had 20 corporate partners, with a total employee base of approximately 415,000. At the end of the second quarter of this year, we have now more than doubled the number of corporate partners at 45 with the total employee base of more than 1 million. Sophia learning our direct to consumer platform of ACE recommended high quality general education courses. grew their average total subscribers 50% from last year and their revenues 55%, reflecting the partial benefit of a price increase that was introduced in the quarter. Across all of ETS, revenue increased 24% from the prior year. During the quarter, we added a little bit of incremental expense to support their continued strong growth. For the full year, we expect ETS's operating margin to be approximately 40% which is net of these incremental investments. Our Australia and New Zealand segment continues to work to normalize our operations there post-pandemic. Total enrollment was up slightly from the prior year, but A and Z revenue declined 10% from the prior year. Roughly half of this decline was attributable to the timing of enrollments in the second quarter, with the bulk starting in June, and thus we were able to only recognize a single month of revenue. The balance of the decline is attributable to foreign currency fluctuations. For the full year, we expect ANZ revenue to be flat or slightly down from the prior year. We do remain confident enrollment will grow as the process for international students entering Australia returns to a normal timeline, which we are beginning to see. In closing, as we're halfway through the year, we're very pleased with the progress that we've made. Our focus is to finish this year strong and begin to show significant earnings growth in 2023. Lastly, I'd like to once again thank my colleagues within SEI for their ongoing commitment and hard work on behalf of our students. And with that, Shannon, we'd be happy to take questions.