Strategic Education, Inc.

Thank you for standing by and welcome to the Strategic Education's first quarter 2024 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. I will now turn the call over to Therese 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 2024 results. With us today are Robert Silberman, 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. Our first quarter 2024 results reflect continued strength across all of our segments. And before we begin, and as is normally the case, I'd like to start by pointing out that all of my references to our financial results are to our adjusted results, and they assume a constant currency for foreign exchange purposes. For the first quarter, Our revenue grew 14% to $292 million. Our operating expenses grew 3%, which was in line with our expectations, and our operating income grew by more than four times to $36 million. Our operating margin increased 910 basis points, and during the quarter, we generated an incremental $28 million of operating income from $36 million of incremental revenue. That 78% marginal contribution is a bit more than we would normally expect, and it reflects the fact that many of our planned investments this year are timed to occur in the second half of the year to support our growth initiatives for 2025. During the quarter, we generated $1.11 earnings per share, which was more than a 350% increase. Turning now to our segments. U.S. higher education delivered another quarter of strong growth driven once again by employer-affiliated enrollment. Total enrollment in U.S. higher education for the first quarter grew 10% with total employer-affiliated enrollment growing more than double that rate at 22% from the prior year reflecting continued strength in our corporate partnerships. During the quarter The percentage of total U.S. higher education enrollment coming from our corporate partnerships increased 300 basis points to 29%. Student retention at U.S. higher education remained stable at 87%. In the first quarter, U.S. higher education revenue grew 11% and operating income grew 192% from the prior year. Our education, technology, and services segment also continued to see strength with both Sophia and Workforce Edge continuing to gain market share. In the first quarter, ETS revenue grew 30% and operating income increased 74% from the prior year. Sophia Learning, our direct-to-consumer portal of college-level classes, grew its revenue in the first quarter by 45% and generated a 51% operating margin, which is up from 44% in the prior year. Average total paid subscribers grew 42%, to more than 39,000 paid subscribers. Workforce Edge now has 68 corporate partners who collectively employ approximately 1.5 million employees. Workforce Edge enrollments into either Strayer or Capella University grew 62% to approximately 1,600 students. Our Australia New Zealand segment returned to total enrollment growth in the first quarter with enrollment increasing 5% from the prior year to 20,197 students. In the first quarter, revenue on a constant currency basis grew 19% from the prior year, driven by higher enrollment and revenue per student. The higher enrollment was driven by onshore international enrollment, meaning international students already in Australia that either re-enrolled or transferred to Torrens University during the quarter. Increased course load contributed to a 14% increase in revenue per student which as we've previously noted is partly due to the resumption of the Australian requirement for international students to take more courses on campus. On a constant currency basis, loss from operations was $2.2 million in the first quarter, improving from loss from operations of $7.2 million in the prior year. As we've noted before, ANZ first quarter revenue is the low point in the year due to relatively fewer instructional days during the quarter as it's the Australian summer. Our expenses, on the other hand, are encouraged somewhat evenly throughout the year. In closing, we are very pleased with our continued momentum across our business and are working towards a successful 2024. And once again, I'd like to thank all of my colleagues within SEI for your ongoing commitment to our students. And with that, Jonathan, we'd be happy to take questions.