Strategic Education, Inc. Q4 FY2025 earnings call

• CEO mentioned pleased with fourth quarter and full year 2025 results, results adjusted and reflect constant currency. - Ongoing AI-driven productivity improvements across portfolio resulted in ~$30 million expense reductions, plans to generate at least $70 million more savings by end of 2027, used to fund growth and expand operating margin. - ETS segment strong growth, Sophia Learning and Workforce Edge growing well. - U.S. higher education had record average student retention. - Australian New Zealand segment had productivity gains. - 2025 capital allocation: generated $247 million pretax cash from operations, paid $49 million in taxes, invested $44 million in capital expenditures, had $154 million distributable free cash flow, returned ~$58 million to owners via dividend and ~$140 million in share repurchases, ended year with $153 million cash and marketable securities and no debt

For the fourth quarter, revenue increased 4% from prior year, operating expenses declined 1%, operating income grew 35% with operating margin expanding 390 basis points to 16.9%, EPS $1.75 (up 38%). For full year 2025, revenue increased 4%, operating income increased 25%, operating margin expanded 260 basis points to 15.5%, adjusted EPS $6.21 (up 28%). Education technology services segment (ETS) had fourth quarter revenue growth >40% to nearly $150 million, full year operating income grew 38% to $59 million with margin 40%. Sophia Learning fourth quarter average total subscribers grew 47%, revenue 41%, full year 42% and 40% respectively. Workforce Edge had record year, employer-affiliated enrollment grew 6% in quarter, ended year at 33.5% of U.S. higher education enrollment, new students employer-affiliated mix 40%, healthcare portfolio half of U.S. higher education enrollment and 37% of employer-affiliated enrollment, 80 corporate agreements. U.S. higher education fourth quarter revenue grew 2%, full year 1%, revenue per student grew 6%, operating expenses down 3% in quarter, 2% full year, operating income up 58% quarter, 32% full year, full year average student retention 88%. Australian New Zealand segment total enrollment down 2% in quarter and full year, revenue down 2% quarter, flat full year, operating expenses down 6% quarter, flat full year, operating income up 16% quarter, margin 19% with 290 basis points improvement

• 2026 plans reflect continued performance in line with notional model outlined in 2023 Investor Day. - Notional model calls for revenue CAGR of 4% to 6% and adjusted operating income margins increasing 200 bps per year. - Expect ETS to continue strong growth. - Australia expected to return to total enrollment growth by end of 2026 due to domestic new student growth and international enrollment changes. - U.S. higher education enrollment expected to normalize

• Regulatory constraints on international enrollment in Australian New Zealand segment. - Ban on paying agent fees for onshore transfers may affect volume of international transfers

Q: Jeff Zilber focused on U.S. higher education enrollment trends, asked for color on unaffiliated area and what to do to move enrollment positive again.

A: Declines in U.S. higher education enrollments are exclusively in unaffiliated employer channel, stay focused on marketing and brand strategy, expect performance in line with notional plan.

Q: Alex Paris followed up on U.S. higher education, asked about deliberate measures on unaffiliated side and underpins revenue growth in 2026.

A: Have done operating plans, manage as portfolio, leaning into workforce edge, ETS, employer-affiliated enrollment, notional model calls for revenue CAGR 4%-6% and margin expansion, Australia expected to return to total enrollment growth.

Q: Jasper Bibb followed up on U.S. business non-healthcare part, asked about cost structure management.

A: Taken advantage of lease expiries to reduce campus count, expense reductions from automation efforts, notional model assumes productivity benefit with some reinvestment and margin outperformance