Strategic Education, Inc.

Welcome to Strategic Energy First Quarter 2023 Results Conference Call. I will now turn the call over to Terese Wilkie, Director of Investor Relations for Strategic Education. Ms. Wilkie, please go ahead.

Thank you. Hello, everyone, and welcome to Strategic Education's conference call in which we will discuss first quarter 2023 results. With us today are Robert Silverman, 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 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. Our first quarter financial results that we reported this morning were basically right in line with our expectations. You may recall that during our last earnings call, we said that a couple of timing-related issues would impact our first quarter results and that we expected our revenue to be roughly flat on a year-over-year basis. and our expenses to be up approximately 5%, and that's exactly where we landed. Our U.S. Higher Education Division grew its total enrollment in the first quarter by 2.3% from the prior year. This is the first enrollment growth since the third quarter of 2020 and is the result of continued strong new student growth at both Capella and Strayer, as well as continued growth in our employer-affiliated enrollments. Total employer-affiliated enrollment grew 13% at Capella, 25% at Strayer, and 17% across all of U.S. higher education, substantially outpacing the growth in our non-employer-affiliated enrollments. These employer enrollments now comprise 26.3% of all U.S. higher education enrollments, which is a 330 basis point gain from 2022. Revenue in U.S. higher education increased just over half of 1% to $197 million. Revenue per student decreased slightly from the prior year, primarily as a result of the ongoing strength in our employer-affiliated enrollments, as I just noted. The overall demand environment in the U.S. continues to be quite strong, and like last year, we are forecasting full-year new student growth at both Strayer and Capella universities. Our education, technology, and services division generated a 25% increase in revenue and a 23% increase in operating income for the first quarter. ETS's operating margin contracted slightly to 31.8% from 32.3% in the prior year as we continue to invest in both Sophia and Workforce Edge. Average Sophia total paid subscribers grew 24% in the first quarter, and SOFIA revenue increased 36%. SEI enrollments from Workforce Edge increased 230% from the prior year to 986 enrollments. In the first quarter, SEI had a total, oh, excuse me, I just made the same point. Our first quarter results in Australia and New Zealand are unfavorably impacted by the previously announced adjustments to the academic calendar at Torrens University which split their total first term enrollment between the first and second quarter. This calendar adjustment is the primary driver of the 8% decrease in revenue on a constant currency basis. And we continue to be encouraged by the steadily improving operating environment in Australia and are looking forward to the second half of the year, which will be the first fully normalized period for international student immigration in Australia since the start of the pandemic in 2020. And finally, I'd like to extend an offer to all of our owners to attend our Investor Day, which will be held on November 7th at the Palace Hotel in New York City. Additional details will become available as we get closer to the date. And with that, Kevin, we'd be happy to take questions.