Strategic Education (STRA) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Senior Director of Investor Relations – Terese Wilke
• President and Chief Executive Officer – Karl McDonnell
• Executive Vice President and Chief Financial Officer – Daniel Jackson

TAKEAWAYS

• Consolidated Revenue — $325.1 million, representing a 1.6% increase driven by growth in Education Technology Services and higher revenue per student in U.S. Higher Education.
• Adjusted Diluted EPS — $1.69 on a constant currency basis, an increase of 4% from $1.63 in the prior year period.
• ETS Revenue — $42.8 million, growing 11.9% year over year due to expansion in Sophia Learning and higher employer-affiliated enrollment.
• Sophia Learning Performance — Revenue increased 19.8% to $21.3 million, supported by a 22% increase in average total subscribers.
• USHE Enrollment — 84,725 students, a 1.1% decline as growth in employer-affiliated students was offset by lower unaffiliated enrollment.
• Healthcare Portfolio — Enrollment grew 9% year over year and now accounts for 54% of total U.S. Higher Education enrollment.
• ANZ Enrollment — 17,101 students, a 9.1% decline resulting from Australian government restrictions on international student visas.
• Non-cash Impairment — $134.1 million, recorded for the Australia/New Zealand segment due to lowered near-term growth expectations amid regulatory constraints.
• USHE Operating Margin — 10.3%, a decrease from 10.7% in the prior year period as revenue growth was offset by continued investments.
• Student Retention — 89.2% in U.S. Higher Education, marking a new all-time high for the segment.
• Workforce Edge Reach — 83 corporate agreements covering approximately 4 million employees as of Sept. 30, 2026.
• Free Cash Flow — $136.7 million for the first nine months of the year, up 8% from $127 million in the previous year.
• Share Repurchases — $28.5 million utilized to repurchase 347,472 shares in the third quarter, bringing the nine-month total to $101.3 million.
• 2027 Growth Investments — $50 million, targeted at Education Technology Services, U.S. healthcare licensure programs, and the Australian domestic market.
• 2027 Expense Guidance — 2% growth in operating expenses, as approximately $25 million in productivity savings offset half of the planned investment costs.
• Employer-Affiliated Enrollment — 34.7% of U.S. Higher Education enrollment, an increase of 200 basis points from 32.7% last year.
• FlexPath Enrollment — 26% of U.S. Higher Education enrollment, with 73% of these students enrolled in healthcare programs.
• Cash and Liquidity — $138.6 million in cash and marketable securities with no outstanding debt under the revolving credit facility.

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RISKS

• McDonnell stated, “Over the course of this year, the Australian government restrictions on international students have become materially more severe than we anticipated,” noting that visa approvals have declined as much as 80% in some months.
• McDonnell reported that consolidated revenue for 2027 is likely to be flat with current-year levels due to current enrollment trends.
• McDonnell indicated that planned growth investments in 2027 will reduce operating margins at ETS by 300 basis points to 400 basis points.
• McDonnell stated that it appears unlikely full-year 2026 results will fall within the company’s notional outlook due to deteriorating international enrollment in Australia.

SUMMARY

Strategic Education, Inc. (STRA -21.33%) reported third quarter results characterized by growth in its Education Technology Services and U.S. healthcare portfolios, offset by regulatory challenges in its Australian segment. Management announced a plan to increase growth investments by $50 million in 2027 to accelerate product development in high-demand areas. The company recorded a $134.1 million non-cash impairment in the Australia/New Zealand segment as international student visa restrictions proved more severe than expected. Despite these headwinds, the company maintained a debt-free balance sheet and reported that productivity savings would limit operating expense growth to 2% in the coming year.

• Management reported that Torrens University rose to sixth nationally in Australia for undergraduate teaching quality in the 2025 Student Experience Survey.
• CEO McDonnell stated that early demand for the new pre-licensure Bachelor of Science in Nursing and Radiologic Technology programs has exceeded initial assumptions.
• The company plans to open a new campus in Perth, Western Australia, in late 2027 to focus on healthcare, engineering, and construction sectors.
• McDonnell indicated that domestic new student enrollment in Australia grew 9% in both the second and third quarters, now representing nearly 70% of new enrollment in that segment.
• Management expects the decline in unaffiliated undergraduate business enrollment to continue moderating, with a potential return to growth by the end of 2027.
• The company reported that its healthcare enrollment from employer partners reached 38%, supporting a broader strategy to serve the healthcare talent needs of corporate clients.

INDUSTRY GLOSSARY

• FlexPath: A direct-assessment competency-based learning model that allows students to progress through degrees at their own pace.
• Workforce Edge: A platform for employers to manage education benefits and provide employees with access to degree and certificate programs.
• Sophia Learning: An online provider of low-cost, ACE-recommended general education courses for college credit.
• Constant Currency: A non-GAAP financial measure that excludes the impact of foreign exchange rate fluctuations to compare underlying business performance.
• QILT: Quality Indicators for Learning and Teaching, a national survey suite of higher education students in Australia.
• ACE: American Council on Education, an organization that recommends college credit for non-traditional learning experiences.

Full Conference Call Transcript

Operator: Welcome to Strategic Education’s Third Quarter 2026 Results Conference Call. I will now turn the call over to Terese Wilke, Senior Director of Investor Relations for Strategic Education. Mrs. Wilke, please go ahead.

Terese Wilke: Thank you. Hello, everyone, and welcome to Strategic Education’s conference call, in which we will discuss Third Quarter 2026 results. With us today are Karl McDonnell, 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

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