Strategic Education Accelerated Growth as U.S. Business Rebounded
Diluted earnings increased to $1.71 a share as profit growth outpaced revenue.
Strategic Education Inc. (STRA), the education-services provider, returned its U.S. higher-education business to growth as revenue per student increased and enrollment declines moderated. U.S. Higher Education revenue rose 2.3% to $220.5 million after falling 3.8% in the first quarter.
Companywide revenue rose 4.9% to $337.3 million, accelerating from 0.8% growth in the prior quarter. On a constant-currency basis, revenue increased 2.7%, reversing the first quarter’s 1.0% decline, though growth remained below the 3.7% recorded in the fourth quarter of 2024.
Net income rose 15.0% to $37.2 million, and diluted earnings increased to $1.71 a share from $1.37 a year earlier. Operating income climbed 10.3% to $50.5 million, while the operating margin widened to 15.0% from 14.2%.
The U.S. business drove the margin improvement. Its operating income rose 56% to $32.4 million, and its margin expanded to 14.7% from 9.6%. Enrollment declined 0.5%, easing from a 0.8% drop in the first quarter, while healthcare enrollment grew 11% and reached 52% of the segment’s enrollment.
Education Technology Services remained a source of growth, though its pace slowed for a fourth consecutive reported quarter. Revenue increased 15.4% to $42.4 million, compared with growth of 21.0% in the first quarter and 45.6% in the third quarter of 2024. Sophia Learning revenue rose 26.7% as subscriber growth moderated to 32% from 40% in the prior quarter.
Australia and New Zealand revenue increased 7.6% to $74.4 million with help from currency movements and higher revenue per student, but constant-currency revenue fell 2.6% as enrollment declined 5.2%. Segment operating income dropped to $1.0 million from $12.8 million after Strategic Education recorded a $13.9 million reserve tied to an Australian Fair Work Ombudsman compliance matter.
First-half operating cash flow rose 17.9% to $116.6 million, while free cash flow increased 18.8% to $92.4 million. Strategic Education spent $32.8 million repurchasing 420,624 shares during the quarter, down from $40.0 million of buybacks in the first quarter.
The company also launched a Bachelor of Science in Nursing prelicensure program at Capella University, with enrollment beginning in July 2025, extending its push into healthcare as that field accounted for a growing share of U.S. enrollment.