Strategic Training, Inc. (NASDAQ:STRA) This autumn 2023 Earnings Convention Name February 29, 2024 10:00 AM ET
Firm Members
Terese Wilke – Director of Investor Relations, Strategic Training
Robert Silberman – Chairman
Karl McDonnell – President and Chief Govt Officer
Daniel Jackson – Govt Vice President and Chief Monetary Officer
Convention Name Members
Jeff Silber – BMO
Jasper Bibb – Truist
Heather Balsky – BofA
Alex Paris – Barrington Analysis
Operator
Welcome to Strategic Training’s Fourth Quarter, 2023 Outcomes Convention Name. After the speaker presentation, there shall be a query and reply session. [Operator Instructions]
I’ll now flip the decision over to Terese Wilke, Director of Investor Relations for Strategic Training. Mrs. Wilke, please go forward.
Terese Wilke
Thanks. Hi there, everybody. And welcome to Strategic Training’s convention name, through which we are going to talk about fourth quarter 2023 outcomes. With us at present are Robert Silberman, Chairman, Karl McDonald, President and Chief Govt Officer; and Daniel Jackson, Govt Vice President and Chief Monetary Officer. Following at present’s remarks, we are going to open the decision for questions.
Please notice that this name could embody forward-looking statements made pursuant to the secure harbor provisions of the Non-public Securities Litigation Reform Act of 1995. The statements are based mostly on present expectations and are topic to various assumptions, uncertainties, and dangers that strategic training has recognized in at present’s press launch that would trigger precise outcomes to vary materially.
Additional details about these and different related uncertainties could also be present in Strategic Training’s most up-to-date Annual Report on kind 10-Okay to be filed, the newest 10-Q and different filings with the Securities and Trade Fee, in addition to Strategic Training’s future 8-Ks, 10-Qs and 10-Ks. Copies of those filings and the total press launch can be found for viewing on the web site at strategiceducation.com.
And now I would like to show the decision over to Rob. Rob, please go forward.
Robert Silberman
Thanks, Terese, and good morning, girls and gents. Earlier than I flip the decision over to Karl to report our fourth quarter and full 12 months outcomes, I needed to make simply a few excessive stage feedback on our 2023 capital allocation. SEI began the 12 months with $236 million of money and marketable securities and roughly $100 million of excellent debt drawn on our financial institution revolver.
Throughout 2023, we generated $159 million in pretax money from operations. We additionally bought one in all our campus properties in the course of the 12 months for roughly $6 million. Out of that $165 million in generated money, we paid $42 million in taxes and we invested $37 million in numerous capital expenditures and progress expenditures.
That left us with $86 million in what we confer with as homeowners distributable money, from which we returned $74 million to our homeowners, comprised of our $2.40 per share annual frequent dividend in addition to the repurchase of roughly $15 million of our frequent inventory at a median value of round $77 per share.
Lastly, in the course of the 12 months we paid down $40 million of our excellent debt. That left SEI at 12 months finish 2023 with $208 million of money and marketable securities, $60 million of debt and $24 million shares excellent. We’re assured as we enter 2024 that our steadiness sheet is nicely positioned to assist all of our tutorial establishments, to fund any upcoming alternatives, in addition to to proceed to return capital to our shareholders.
And with that, Karl, are you able to stroll them by means of the working and monetary outcomes.
Karl McDonnell
Sure. Thanks rob, and good morning, everybody. SEI’s fourth quarter and full 12 months 2023 monetary outcomes that we reported this morning mirror continued momentum throughout all of our segments. I would like to begin by mentioning that each one of my references to our monetary outcomes are to our adjusted outcomes and assume fixed foreign money for international alternate functions.
For the fourth quarter, our income grew 12.5% to $304 million. Our working bills grew simply 1.6%, which was in keeping with our expectations, and our working revenue greater than doubled to $57 million. Our working margin elevated 870 foundation factors. In the course of the quarter, we generated an incremental $30 million of working revenue from $34 million of incremental income. Our earnings per share additionally greater than doubled from the prior 12 months to $1.70 per share.
For the total 12 months, our income grew 7.4%, our working bills grew 4%, which was barely increased than our preliminary plan, however was because of a lot increased enrollment than that plan. Our working revenue grew 43% for the total 12 months and our working margin elevated 280 foundation factors.
Turning now to our segments. U.S. Larger Training had an distinctive 12 months. Whole enrollment in U.S. Larger Training for the fourth quarter and full 12 months grew 11% and seven% respectively. Whole employer affiliated enrollment was even stronger. Fourth quarter employer affiliated enrollment grew 24% from the prior 12 months and 19% for the total 12 months, reflecting continued power in our company partnerships.
In the course of the fourth quarter, the proportion of whole U.S. Larger Training enrollment coming from our company partnerships elevated 300 foundation factors to twenty-eight%. For the total 12 months 70% of our incremental U.S. Larger Training whole enrollment got here from our company partnerships. Pupil retention at U.S. Larger Training remained steady at roughly 87.4%. U.S. Larger Training income grew 9% for the fourth quarter and 6% for the total 12 months and working revenue grew 149% for the fourth quarter and 55% for the total 12 months.
Our Training Expertise and Providers section additionally had an incredible 12 months as each Sophia and Workforce Edge continued to achieve market share. ETS income for the fourth quarter and full 12 months grew 31% and 26%, respectively. Working revenue at ETS elevated 119% for the fourth quarter and 51% for the total 12 months.
Sophia Studying, our direct to client portal of faculty stage courses, grew its income for the fourth quarter 42% and generated a 50% working margin, which is up from 22% within the prior 12 months. Common whole paid subscribers grew 44% to greater than 35,000 paid subscribers.
Workforce Edge now has 65 company companions, who collectively make use of slightly below 1.5 million workers. Workforce Edge enrollments into both Strayer or Capella College grew 112% to simply beneath 1500 college students. Our Australia New Zealand section grew income 20% for the fourth quarter and 6% for the total 12 months utilizing fixed foreign money.
All of this progress was the results of considerably increased income per pupil as enrollment was down barely for the quarter and the total 12 months. As we mentioned all through final 12 months, we anticipated our income per pupil to normalize from COVID period quarters as course load elevated in response to a resumption of the Australian requirement for worldwide college students to take their programs on campus. This was an enormous driver of our enhance in income per pupil, which grew 23% within the fourth quarter and 10% for the total 12 months.
Adjusted working revenue elevated 53% and adjusted working margin elevated 510 foundation factors. In closing, we’re more than happy with the outcomes for 2023, and we look ahead to a profitable 2024. And as at all times, I would prefer to thank all of my colleagues inside SEI in your ongoing dedication to our college students and learners.
And with that, Latif, we might be comfortable to take questions.
Query-and-Reply Session
Operator
Thanks. [Operator Instructions] Our first query comes from the road of Jeff Silber of BMO. Your query, please, Jeff.
Jeff Silber
Thanks a lot. Wished to first concentrate on the working margin enlargement. It was clearly very robust for not solely the fourth quarter, however for the 12 months, particularly in U.S. Larger Training, how sustainable are these features and what ought to we be on the lookout for going ahead?
Karl McDonnell
Effectively, Jeff, for those who return to the very starting of the 12 months, simply the timing of our investments in 2023 was weighted to the primary a part of the 12 months. So we anticipated very small expense progress within the second half of the 12 months. When it comes to form of long run, notionally, as we have mentioned earlier than, we count on on the consolidated stage for our margins to be within the low to mid 20s. That is going to ebb and stream based mostly on explicit investments that we make in any given quarter, any given 12 months, however that is the place we might count on to settle out.
Jeff Silber
Okay, nice. After which focusing simply on the robust enrollment progress throughout all of your properties, are there any particular applications to name out that may have accomplished higher than others?
Karl McDonnell
Truly, it is fairly robust throughout the board, Jeff. I imply, FlexPath continues to do very nicely at Capella. Healthcare could be very robust. As I mentioned in my ready remarks, company is exceptionally robust, and that is true at each Strayer and Capella. So it is actually a really broad-based power proper now.
Jeff Silber
Okay, nice. After which at your investor day in November, I believe you set out a preliminary 2024 outlook. And I am simply questioning for those who can deal with that. Are we nonetheless snug with that? Any modifications, et cetera?
Daniel Jackson
Hey, Jeff, that is Dan. Sure, that mannequin we expect continues to be on monitor.
Jeff Silber
Okay, implausible. All proper, thanks a lot.
Karl McDonnell
Thanks, Jeff.
Operator
Thanks. [Operator Instructions] Our subsequent query comes from the road of Jasper Bibb of Truist. Please go forward, Jasper.
Jasper Bibb
Hey, good morning. Spectacular outcomes right here. Possibly simply following up on the preliminary ’24 outlook. Like, I believe you gave a little bit of element, like a preliminary outlook on the Investor Day concerning the composition of progress between the segments in ’24. So would you say there’s been any change within the mixture of the drivers there? Such as you’d appear to be working a bit forward of the U.S. Larger Ed enrollment goal, whereas ANG would possibly must speed up a little bit bit to get to the three% to 4% enrollment progress you talked about? Thanks.
Daniel Jackson
Hey, Jasper, it is Dan once more. I would say at this level the efficiency throughout the board is probably going. We do not see something altering from what we modeled for Investor Day at this level within the 12 months.
Robert Silberman
Hey, Jasper, that is Rob. The one factor I wish to make clear is what we put out at Investor Day is a mannequin of how our enterprise operates. We’re not making a prediction on the place enrollment shall be. It’s what it’s. We would like our establishments to run on the highest effectivity and we wish to entice as many certified college students as we will. However the way in which the mannequin works is it is extremely operationally levered. If we get extra college students, there will be extra income and extra margin enlargement. And if there’s much less college students, there will be much less. However we do not predict quarter-to-quarter the place that is going to be. It is robust proper now and we hope it stays so, nevertheless it’s not a predictive mannequin.
Jasper Bibb
Thanks. After which — I positively perceive that. Possibly drilling down into ANZ, I believe in December, Australian authorities introduced some form of, I suppose, tighter Pupil visa qualification guidelines. Sure issues like increased scores on English exams and the like. Do you assume that is going to have any impression in your enrollments at Torrens and will you replace us on the present mixture of home and worldwide enrollments there? Thanks.
Karl McDonnell
Positive. The combo is roughly 50-50 between home and worldwide college students. And our workforce in Australia takes a measured strategy to worldwide recruitment, that means we do not get overly aggressive in making an attempt to recruit college students who do not meet the necessities for an Australia visa. And as such, we would not count on these modifications to adversely impression us.
Jasper Bibb
Bought it. Final query for me. You talked about capital deployment in ’23. Simply curious for those who might body some expectations for this coming 12 months from a money conversion standpoint after which would you be serious about drawing the steadiness on the revolver right down to zero? And the way would form of, I suppose, opportunistic share repurchases match into the image? Thanks.
A – Robert Silberman
Sure, Jasper, the money conversion of the working mannequin I do not assume will change. We are inclined to have a reasonably excessive money conversion of our web revenue. We do wish to, as a precedence, pay down your complete quantity of the revolver draw and most significantly return our monetary composite rating as shortly as doable to the total 3.0. We do intend to proceed to pay our annual frequent dividend. The payout ratio has been relatively excessive the final couple of years whereas the earnings have been depressed. I believe that payout ratio will begin to get again to the roughly one-third that we have tried to assist prior to now.
After which we at all times consider opportunistic share repurchases, it is a value based mostly idea. We measure all of our makes use of of money towards mainly all numerous alternatives. And share repurchases are at all times one thing that is within the combine and it is a query of the place is our inventory buying and selling relative to what we consider the intrinsic worth is. And to do share repurchases, we solely wish to try this at a major low cost to intrinsic worth and so we’ll proceed to take a look at that by means of the 12 months.
Daniel Jackson
Hey Jasper, one factor so as to add on conversion, I believe I’ve informed you and the remainder of the analysts that we goal money conversion or distributable money on the similar stage as adjusted web revenue. We have been a little bit mild on that measure in ’23, due to some unfavorable timing at Australia/New Zealand. Transferring ahead, that is the planning metric now shifting ahead. So I believe it is a good one to plug into your assumptions.
Jasper Bibb
Understood. Thanks for taking the questions.
Operator
Thanks. Our subsequent query comes from the road of Heather Balsky of BofA. Your query please Heather.
Heather Balsky
Hello. Thanks. That is Heather Balsky. I suppose first off, when you concentrate on the outperformance you’ve got seen in enrollment within the quarter and what do you attribute it to, how a lot do you assume is the restoration? How a lot do you assume is form of operationally pushed? And I do know you do not information the quarters, however given form of the place you are exiting the 12 months, how does that make you concentrate on the primary half of subsequent 12 months and the way you are able to do an enrollment? Thanks.
Karl McDonnell
Effectively Heather, clearly the first driver of the outperformance in U.S. Larger Training is our community of a 1000 plus company partnerships. In the event you simply have a look at the expansion charge, whole enrollment progress charge of company affiliated college students versus not, it has been approach forward of our common whole enrollment in U.S. Larger Training all year long. It really accelerated a little bit bit within the again half of the 12 months.
So it is that, it is the truth that, Workforce Edge enrollments doubled on a year-over-year foundation and that is persevering with to mature. In order that’s the first driver. After which along with that, as we have mentioned all year long, it is simply been a really robust demand surroundings for us. So we proceed to see strong demand. So it is a mixture of things, however I would say clearly the first issue is our company partnerships.
Heather Balsky
And is there something we must always hold — something within the surroundings that we must always take into consideration the place you could not proceed this momentum at the least into the primary half of subsequent 12 months? Something within the macro serious about examine, simply something that we is likely to be lacking?
Karl McDonnell
Effectively, clearly I can not speculate into the long run, however what I can say is, we have not seen something at a macro stage or inside our company partnerships that is modified materially.
Robert Silberman
And Heather, the macro statistic that we have a tendency to take a look at that tends to most precisely predict future demand is labor pressure participation charges, which actually is a proxy for employment confidence, which for working adults tends to be a predicate to have the ability to return to high school. And that continues to be pretty robust within the U.S. proper now. However as Karl mentioned, we put the applications collectively, we try to run the colleges as effectively as doable with the best tutorial high quality, after which we’re form of beneficiaries of power of demand, and we’ll simply proceed to be there for that.
Heather Balsky
Useful. After which when you concentrate on Australia enrollment, are you able to simply notice that it is powerful to manage? I do not know the way a lot visibility there may be by way of how they’re managing visas, however any indicators that issues are selecting up? Any modifications within the quarter that have been form of inexperienced shoots round that?
Karl McDonnell
Sure, we noticed a little bit uptick within the again finish of the fourth quarter, in demand, each home and worldwide. We stay very assured within the high quality of Torrens College, the Media Design Faculty in New Zealand. We predict it is a terrific set of belongings. Truly, we intend to make some substantial investments in that enterprise in 2024 to assist their progress, and I am assured that over time the expansion shall be there.
Heather Balsky
That is useful. And really, simply last query, because you talked about these investments by way of the cadence of working bills in the course of the 12 months, something that we must always remember? You talked about how ’23 was first half weighted. Is it related cadence this 12 months? Something totally different?
Karl McDonnell
I would say sarcastically, this 12 months is likely to be the alternative of final 12 months. After we have a look at the calendarization of quite a lot of our investments, we expect they will occur within the second half of the 12 months, except Australia. As I simply mentioned, we intend to make these investments all through 12 months, however we’re nonetheless benefiting within the first a part of this 12 months from the investments we made in ’23. So once we take into consideration exiting ’24, heading into ’25, we now have some investments we all know we will make which can be going to point out up within the third and fourth quarter.
Heather Balsky
Okay, that is useful. Thanks very a lot.
Karl McDonnell
Thanks, Heather.
Operator
Thanks. Our subsequent query comes from the road of Alex Paris of Barrington Analysis. Your line is open, Alex.
Alex Paris
Thanks. And thanks for taking my questions. I simply acquired a few cleanup questions on the segments. Beginning first with U.S. Larger Training. Whole enrollment up 10.5%. I believe you give this within the 10-Okay, however are you able to talk about whole enrollment at Strayer and at Capella?
Karl McDonnell
No, Alex, we’re simply reporting U.S. Larger Ed.
Alex Paris
Okay. Is that often given within the 10-Okay. I appear to recollect.
Daniel Jackson
There’s some element within the 10-Okay which we file later at present. I haven’t got it in entrance of me, however there will be some establishment stage knowledge in there.
Alex Paris
Okay, nice. After which sticking to U.S. Larger Training. New pupil enrollment was up all 4 quarters for every Strayer and Capella. I believe that is the place we stood on the finish of the third quarter?
Karl McDonnell
Sure, we had very robust new pupil progress throughout U.S. Larger Training all 12 months.
Alex Paris
Okay. After which shifting to ANZ, you had simply responded to a query by saying home enrollment, and worldwide enrollment is roughly 50-50. Final quarter, you probably did make a remark about new pupil enrollment in home, which was up 20% year-over-year within the third quarter, whereas worldwide new college students declined barely. I used to be questioning if we will get the identical form of colour on the fourth quarter.
Robert Silberman
The fourth quarter was related. Home new college students have been up, and worldwide was down barely. It positively bounces round Alex, based mostly on the timing of visa approvals. However total, between the 2, we’re properly hedged. We have now two sources of scholars there, and we have got a really long run view as Karl mentioned, the attractiveness of that property. So, we see that on an total foundation, having a better charge of progress sooner or later.
Alex Paris
Wonderful. Effectively, thanks for answering my query, guys. Congrats on the quarter.
Robert Silberman
Thanks, Alex.
Karl McDonnell
Thanks, Alex.
Operator
Thanks. I’d now like to show the convention again to Karl Mcdonnell, for closing remarks. Sir.
Karl McDonnell
Thanks, everybody, for becoming a member of us this morning, and we look ahead to speaking to you once more subsequent quarter.
Operator
This concludes at present’s convention name. Thanks for taking part. You might now disconnect.
