Strategic Education, Inc.

like you, simply press star 11 again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, 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 second 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 second quarter 2024 results reflect continued strength across all of our segments. But 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 that they assume constant currency for foreign exchange purposes. For the second quarter, SEI's revenue grew 9% to $313 million. Our operating expenses grew 3%, which was in line with our expectations, and our operating income grew by more than 60% to $44 million. Our operating margin increased 460 basis points. During the quarter, we generated $1.34 earnings per share, which was more than a 60% increase from the prior year. 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 US higher education for the second quarter grew 8%, with total employer-affiliated enrollment growing more than double that rate at 17% from the prior year, again reflecting continued strength in our corporate partnerships. During the quarter, the percentage of total US higher education enrollment coming from our corporate partnerships increased 200 basis points to 29%. Student retention at US higher education remained stable at 86.9%. In the second quarter, U.S. higher education revenue grew 7% and operating income grew 194% from the prior year. Our education technology services segment also continued to see strength with both SOFIA and Workforce Edge continuing to gain market share. In the second quarter, ETS revenue grew 26% and operating income increased 63% from the prior year. Sophia Learning, our direct to consumer portal of college level classes, which is also a key component of many of our strategic corporate partnerships, grew its revenue in the second quarter by 40% and generated a 49% operating margin, which is up from a 46% margin in the prior year. Average total paid subscribers grew 37% to more to 42,000 paid subscribers. During the quarter, ETS added 23 total new corporate partnerships and Workforce Edge now has 71 corporate partners who collectively employ more than 1.5 million employees. Workforce Edge enrollments into either Strayer or Capella University grew 36% to approximately 1,500 students. Given the strong traction within our ETS division, We have decided to increase our investments in the second half of 2024 from our previous plans to support accelerated growth of both SOFIA and Workforce Edge. These investments, combined with other previously planned investments in the rest of our segments, including increased marketing spend in Australia, means that on a full year basis, our operating expenses will be slightly higher than our notional model that we communicated last November. Our Australia New Zealand segment posted another quarter of total enrollment growth, with enrollment increasing 6% from the prior year to just over 19,000 students. In the second quarter, revenue on a constant currency basis grew 10% from the prior year, driven by higher enrollment and revenue per student. The higher enrollment was driven predominantly by strong continuing student enrollment. Increased course load contributed to a 4% increase in revenue per student as we lapped the resumption of the Australian requirement for international students to take more courses on campus. On a constant currency basis, ANZ operating income increased sequentially from an operating loss last quarter to $14 million in the second quarter, growth of 1% from the prior year. I should note that A&Z's second quarter is generally the high point of the year for revenue and expenses with a back-to-school quarter after the Australian summer. In closing, we are very pleased with the strong results across our business and continue to work towards a successful full year, 2024. And once again, I'd like to thank all of my colleagues within SEI for their ongoing commitment to our students. And with that, Jonathan, we'd be happy to take questions.