Strategic Education's Q2 2025: Navigating Contradictions in Enrollment, Revenue Growth, and Regulatory Impacts

U.S. Higher Education enrollment projections, strength in Sophia and ETS revenue growth, enrollment trends and growth expectations, regulatory impacts and enrollment expectations in ANZ, and impact of One Big Beautiful Bill are the key contradictions discussed in Strategic Education, Inc.'s latest 2025Q2 earnings call.



Strong Performance in Education Technology Services (ETS) Segment:
- Revenue and operating income for ETS both increased by 50% year-over-year, reaching $37 million and $15 million, respectively.
- Sophia Learning, a direct-to-consumer portal, saw a 40% increase in average and total subscribers and revenue.
- The growth in ETS was driven by strong growth in consumer and employer-affiliated subscribers, as well as strategic corporate partnerships.

U.S. Higher Education Enrollment and Revenue Trends:
- U.S. higher education enrollment decreased by 1%, with a slight increase in revenue per student offsetting half of the enrollment decline.
- Employer-affiliated enrollment increased by 8% and now represents 32% of all U.S. higher education enrollment.
- The decline in unaffiliated enrollment was primarily observed at Strayer University, influenced by natural variability in enrollment cycles.

Australia and New Zealand (ANZ) Segment Challenges and Opportunities:
- ANZ's second quarter total enrollment decreased by 3% due to regulatory restrictions on international student enrollment.
- Revenue increased slightly to $71 million in constant currency, while operating income decreased to $13 million.
- The company remains optimistic about future growth, anticipating a return to enrollment growth in 2026 when international enrollment declines are anniversaried, supported by domestic market growth.

Capital Allocation and Share Repurchase:
- Strategic Education repurchased approximately 325,000 shares during the quarter for a total of $28 million, with 720,000 shares repurchased year-to-date for $60 million.
- There is $169 million remaining on the share repurchase authorization through the end of the year.
- The company continues to prioritize capital allocation and shareholder returns along with regular quarterly dividends.