Strategic Education, Inc.

Welcome to Strategic Education's third 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 the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I will now turn the call over to Therese Wilke, Senior Director of Investor Relations for Strategic Education. Mrs. Wilke, please go ahead.

Thank you. Hello, everyone, and welcome to Strategic Education's conference call in which we will discuss third 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 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 third quarter 2024 results reflect continued growth across all of our businesses. For the third quarter, SCI's revenue grew 6% to $304 million and operating income grew 13% to $37 million. Our operating margin increased to 12.1%. Expenses in the quarter were slightly lower than we expected due to the timing of expenses and lower than expected bad debt. Adjusted earnings per share were $1.15 during the quarter, an increase of 19% from the prior year. Turning now to our segments, U.S. higher education delivered another quarter of growth driven primarily by our employer-affiliated enrollment. Total enrollment in U.S. higher education grew by 5%, with employer-affiliated enrollment increasing 13% compared to last year, reflecting the ongoing strength of our corporate partnerships. During the quarter, the percentage of U.S. higher education enrollment coming from our corporate partnerships increased by 200 basis points to 30%. Student retention in U.S. higher education remained stable at 87%. In the third quarter, revenue from U.S. higher education grew by 3% while operating income increased by 10% compared to last year. Our Australian New Zealand segment posted another quarter of total enrollment growth, with enrollment increasing 5% from the prior year to more than 19,000 students. In the third quarter, revenue grew 11% on a constant currency basis from the prior year, driven by higher enrollment and revenue per student. The higher enrollment was driven predominantly by strong continuing student enrollment. ANZ's revenue per student increased by 6% due to a higher course load and a one-time benefit from non-refundable student deposits. On a constant currency basis, ANZ's operating income increased by 5% compared to the previous year. We are studying the proposed international student caps in Australia and expect to have a clear understanding of their potential impact if and when they are legislated. In the meantime, we are focused on domestic and other growth opportunities in Australia and New Zealand. Our education technology services segment continues to perform well, growing revenue by 26% and operating income by 30% compared to the prior year. Sophia Learning, our direct-to-consumer portal of college-level classes and a key component of many of our strategic corporate partnerships, increased its revenue by 35% in the third quarter and generated a 49% operating margin. The average number of paid Sophia subscribers grew 33% to more than 45,000. During the quarter, Workforce Edge signed four new partnerships, including one with one of the nation's largest private sector employers and our largest ever corporate partner. As a result, the number of employees on the Workforce Edge platform now exceeds 3.7 million employees. Enrollments in Workforce Edge at Strayer or Capella University increased by 27%, reaching roughly 1,600 students. Lastly, a couple of points on capital allocation. First, during the third quarter, we paid down the remaining $60 million of our outstanding debt associated with the purchase of our Australian assets. And second, we paid $5 million to repurchase approximately 54,000 shares of common stock in the open market under our repurchase program. We now have $235 million of share repurchase authorization remaining through the end of 2025. In closing, we are pleased with the performance across our segments. And we continue to focus on the success of our students and aim for a strong finish to 2024. And once again, I'd like to thank all of my colleagues at SEI for their ongoing commitment to our students. And with that, Gigi, we'd be happy to answer questions.