Strategic Education, Inc.

Education's fourth quarter 2024 results conference call. I will now turn the call over to Therese Wilke, Senior Director of Investor Relations for Strategic Education. Ms. Wilke, please go ahead.

Thank you. Hello, everyone, and welcome to Strategic Education's conference call in which we will discuss fourth quarter and full year 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 to be filed, the most recent 10-Q, 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. We were very pleased with SEI's 2024 full-year results that we reported this morning, which reflects strong performance consistent with our notional operating model, which we highlighted during our Fall 2023 Investor Day. For the full year, 2024, our revenue increased 8% and operating income increased 26%, generating almost 200 basis points of operating margin expansion. Our adjusted earnings per share grew 31% for the year to $4.87. Our operating performance was strong across all three segments. U.S. higher education grew average total enrollment by 6% in 2024, and employer-affiliated enrollment grew faster, increasing 16% for the full year, reflecting the ongoing strength of our corporate partnership. Student retention in U.S. higher education remained stable at approximately 87%. U.S. higher education revenue increased 5% in 2024, but was down slightly in the fourth quarter due to higher scholarships and the mixed shift of employer-affiliated students. Our ongoing focus on productivity and discipline cost management enabled us to keep expense growth well below revenue growth at US Higher Ed and enabled almost 30% growth in operating income for the full year. Our Australia and New Zealand segment grew average total enrollment 5% for the year. The higher enrollment was driven predominantly by strong continuing student enrollment. Australia and New Zealand segment revenue grew 11% in 2004 on a constant currency basis, driven by enrollment growth and higher revenue per student, which was aided primarily by students taking more courses per term, as well as a small tuition increase. On a constant currency basis, A&Z operating income increased 3% in 2024. We continue to monitor and adapt to the evolving political and regulatory environment in Australia, The previously proposed international student caps were recently replaced with a new regulation that will attempt to govern international student immigration through the use of visa processing speed. Though we believe this change is more favorable than the previously proposed enrollment caps, we're still studying the issue and its potential impact on our A&Z enrollment moving forward. Our education technology services segment had a record year growing revenue by more than 30% to over $100 million and operating income by almost 50%. Sophia Learning, our direct-to-consumer portal, college-level classes exceeded our expectations last year, growing both subscribers and revenue by 35%. Workforce Edge also had a great year, adding another 11 corporate partners for a total of 76, collectively employing more than 3.8 billion employees. In the fourth quarter, the Workforce Edge team launched our largest-ever employer partner, which includes a new or higher-touch employer support model. During the fourth quarter, our operating expenses were higher as a result of several one-time implementation-related costs associated with this new partnership. We also expanded our more-than-decade-old partnership with Best Buy, converting it from a more standard tuition discount program to an all-inclusive Strayer University's Degrees at Work program, which offers eligible employees the opportunity to earn a certificate, master's degree from Strayer University at no cost to the employee. Our network of corporate partners remains one of SEI's major competitive strengths. In fact, More than 70% of the incremental total enrollment that we had in US higher education last year came through our corporate partners. And we expect these partnerships will be a major driver of ETS revenue and income growth over the next five plus years. Lastly, regarding capital allocation in 2024, we generated about $217 million pre-tax cash from operations. We paid $48 million in taxes. and invested $41 million in capital expenditures, leaving us with $128 million of distributable free cash flow. We used this cash and our existing cash balance to return about $75 million to our owners through our $2.40 common dividend and roughly $15 million in share repurchases. We then repaid $61 million balance on our revolver and refinanced a $250 million revolver, leaving us with just under $200 million of cash and marketable securities at the end of 2024. Overall, we were very pleased with our performance in 2024 across the board, and I'd like to take this opportunity to thank all of my colleagues here at SCI for their ongoing commitment and support on behalf of our students. And with that, Cherie, we'd be happy to take questions.