Strategic Education, Inc.

Welcome to Strategic Education's first quarter 2026 results conference call. I will now turn the call over to Teresa Wilkie, Senior 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 2026 results. With us today are 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 our 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 results reflect meaningful progress across three of our primary strategic objectives, the continued investment and growth of our education technology services division, growing our employer-focused strategy, and further implementing our AI and other productivity-enabling systems. For the first quarter, SEI revenue declined 1% year-over-year, driven by a slight decrease in consolidated enrollment. Based on our current enrollment trends, we expect that the first quarter will be the low point of the year in both absolute revenue and revenue growth. Our productivity initiatives drove a 2% reduction in adjusted operating expenses, resulting in 3% operating income growth and slight margin expansion to 14.3%. Adjusted earnings per share came in at $1.41. Turning now to our segments. Education technology services grew revenue 21% to $42 million, driven by Sophia Learning subscriptions, higher employer-affiliated enrollment, and new Workforce Edge partnerships. Even with a 7% increase in expenses as we continue to invest in the ETS business, ETS operating income grew 42% to $20 million, and a 47% margin. ETS now represents 46% of consolidated operating income. Within ETS, Sophia Learning grew average total subscribers by 40% and revenue by 32% with strong growth in both consumer and employer-affiliated subscribers. Workforce Edge ended the quarter with 82 corporate agreements covering 4 million employees and enrollments from Workforce Edge into either Strayer or Capella University grew 70%, reaching nearly 4,000 students. As you know, expanding this network of corporate partners continues to be among our most important strategic focus areas. Moving to U.S. higher education, employer-affiliated enrollment grew 10% and reached a new all-time high of 34.5% of total U.S. higher education enrollment, an increase of more than 300 basis points from the prior year. Healthcare, which is a key component of our employer strategy, also grew 10%, and healthcare enrollment now represents more than half of all U.S. higher education enrollment. U.S. higher education revenue declined 4% in the quarter, reflecting a slight decline in unaffiliated enrollment, along with somewhat higher discounts and scholarships, which together lowered revenue per student. Our productivity initiatives continue to enable effective cost control with operating expenses down 2%. The segment delivered $26 million of operating income and a 12% margin. U.S. higher education also set a new record for average student retention at 89%. Turning now to Australia and New Zealand. Total enrollment declined 3% in the quarter. Regulatory constraints on international enrollment continue to be a headwind and only partially offset by continued domestic new student growth. We remain focused on maximizing international enrollment within the current caps and on our continued investment in the domestic market. On a constant currency basis, A&Z revenue was down 4%, reflecting the enrollment decline and a slight decrease in revenue per student. Here, too, our productivity initiatives drove a 3% reduction in operating expenses. We reported an operating loss of $2.4 million for the quarter, which, as we've noted before, reflects the normal seasonality of that business. On capital allocation, in addition to our regular quarterly dividend, we repurchased approximately 493,000 shares during the quarter for a total of $40 million. As of the end of the first quarter, we have approximately $200 million remaining on our share repurchase authorization through the end of the year. And finally, as always, I'd like to thank all of my colleagues here at SCI for their ongoing commitment to our students and our employer partners. And with that, Kevin, we'd be happy to take questions.