Executive Summary

Q3 2025 delivered a quality beat: adjusted diluted EPS rose to $1.64, up 41% YoY, driven by a 39% increase in adjusted operating income and 400 bps adjusted margin expansion on constant currency; ETS grew revenue 46% YoY while USHE margins improved significantly .
Versus S&P Global consensus, STRA posted a material EPS beat and a revenue beat in Q3; Q2 showed an EPS beat with a slight revenue miss, and Q1 was a clean beat on both EPS and revenue (see Estimates Context)*.
Strategic levers: employer-affiliated enrollment hit a record 32.7% of USHE enrollment; healthcare now 49% of USHE enrollment; ETS’ Sophia revenue +42% YoY and Workforce Edge at 80 corporate agreements .
ANZ remains pressured by Australian regulatory limits on international students; domestic enrollment is improving and international caps are guided to increase 3% in 2026, supporting a path back to new student growth in 2026 .
Capital allocation: consistent $0.60 dividend, ~429k shares repurchased ($34m) in Q3 and $94m YTD, with $134m remaining authorization; productivity program targeting ~$100m OpEx savings by end-2027 is a medium-term margin catalyst .

What Went Well and What Went Wrong

What Went Well

ETS surged: revenue +45.6% YoY to $38.3m and operating income +48% to $16.0m; Sophia revenue +42% to $17.8m; ETS margin held at ~41.7% despite a 44% expense increase .
USHE margin inflection: revenue +2.6% YoY to $213.1m; operating income nearly doubled to $22.9m; operating margin expanded 520 bps YoY to 10.7% on lower drops, higher seats per student, and less discounting .
Management confidence and structural levers: “We are very anchored on our notional model… nothing… leads me to believe that we won’t be able to hit the targets” and a company-wide productivity initiative targeting “upwards of $100 million” OpEx savings by end-2027 .

What Went Wrong

ANZ headwinds: revenue -4.7% YoY to $68.6m and operating income down to $12.5m, driven by lower international enrollment and FX; operating margin slipped to 18.2% (constant currency revenue -2.3%) .
RN-to-BSN softness: Capella’s RN-to-BSN program (post-licensure) saw “a little softness” through 2025, despite strong employer-affiliated enrollment .
Bad debt expense ticked up: consolidated bad debt expense rose to 4.7% of revenue vs 4.5% a year ago .

Financial Results

Consolidated Performance (GAAP and Adjusted)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$303.6	$321.5	$319.9
Diluted EPS (GAAP) ($)	$1.24	$1.37	$1.15
Adjusted Diluted EPS ($)	$1.30	$1.52	$1.63
Adjusted Diluted EPS (Constant Currency) ($)	$1.29	$1.54	$1.64
Operating Margin (GAAP) (%)	13.1%	14.2%	11.6%
Adjusted Operating Margin (Constant Currency) (%)	13.6%	15.2%	16.1%
Adjusted EBITDA ($USD Millions)	$60.0	$68.3	$69.6

Actuals vs Consensus (S&P Global)*

Metric	Q1 2025	Q2 2025	Q3 2025
Primary EPS – Actual ($)	1.30	1.52	1.63
Primary EPS – Consensus Mean ($)	0.96	1.43	1.30
EPS Surprise ($)	+0.34	+0.09	+0.33
Revenue – Actual ($USD Millions)	303.6	321.5	319.9
Revenue – Consensus Mean ($USD Millions)	300.7	322.8	314.7
Revenue Surprise ($USD Millions)	+2.9	-1.3	+5.2
EBITDA – Actual ($USD Millions)	52.9	60.5	63.3
EBITDA – Consensus Mean ($USD Millions)	48.7	64.5	61.1
EBITDA Surprise ($USD Millions)	+4.2	-4.0	+2.2
Values retrieved from S&P Global.*

Segment Breakdown (Q3)

Segment	Q3 2024 Revenue ($USD Millions)	Q3 2025 Revenue ($USD Millions)	YoY (%)	Q3 2024 Op Inc ($USD Millions)	Q3 2025 Op Inc ($USD Millions)	YoY (%)
U.S. Higher Education (USHE)	$207.7	$213.1	+2.6%	$11.4	$22.9	+100%+
Australia/New Zealand (ANZ)	$71.9	$68.6	-4.7%	$14.8	$12.5	-15.5%
Education Technology Services (ETS)	$26.3	$38.3	+45.6%	$10.8	$16.0	+48.1%

KPIs and Operating Drivers

KPI	Q3 2024	Q3 2025	Notes
USHE Total Enrollment	86,533	85,640	Slight decline YoY
Employer-Affiliated Enrollment (% of USHE)	29.8%	32.7%	Record high
USHE Healthcare (% of USHE)	46%	49%	Healthcare total enrollment +7% YoY
FlexPath (% of USHE)	24%	24%	Stable
Sophia Learning Revenue ($USD Millions)	$12.5	$17.8	+42% YoY
ETS Operating Margin (%)	41.0%	41.7%	Slightly higher YoY
Workforce Edge Corporate Agreements	—	80	~3.87m employees covered
ANZ Total Enrollment	19,205	18,808	-2.1% YoY
Bad Debt (% of Revenue)	4.5%	4.7%	Slight uptick
Cash + Securities ($USD Millions)	—	$182.6	9/30/25

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share	Q4 2025 payment (Dec 8)	$0.60 (ongoing quarterly)	$0.60 declared for Dec 8, 2025	Maintained
Share Repurchase Authorization Remaining	Through YE 2025	—	$134 million remaining at Q3-end	New update
Productivity Initiative (OpEx savings)	Through YE 2027	—	Targeting ~$100 million savings by end-2027; ~$30 million run-rate already executed	New quantified plan
ANZ International Caps	2026	—	Australian gov’t guidance for +3% cap increase in 2026	Raised capacity outlook
Company Targets (Notional Model)	2026	Investor Day notional framework	Reaffirmed alignment with notional framework	Reaffirmed

Note: STRA did not issue explicit revenue/EBITDA/EPS formal guidance ranges this quarter in filings or on the call .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
Employer Partnerships & Workforce Edge	78 agreements; strong ramp; Best Buy expansion; Sophia-first pathway ahead of plan	80 agreements; onboarding large employer; strong revenue from new partner	80 agreements; ETS operating income now ~1/3 of consolidated; strong employer-affiliated enrollment	Strengthening
ETS Growth (Sophia, margins)	Sophia subs +37%; ETS margin 40.3%; investing to scale	ETS rev +50%, margin ~41%; significant contributor	ETS rev +46%, margin 41.7%; Sophia rev +42%	Sustained high growth
USHE Enrollment/Margin	Slight enrollment up; revenue +0.8%; margin 13.6%; persistence stable	Enrollment -0.8%; rev -0.5%; margin +40 bps	Enrollment -1%; rev +2.6%; op margin +520 bps; revenue/student tailwinds	Improving margin
ANZ Regulatory Environment	Transfer verification rule impacts international; domestic marketing ramp	Domestic mix increasing; anniversary declines in early 2026	Caps to rise 3% in 2026; domestic enrollment improving; new student growth expected in 2026	Gradual improvement outlook
Productivity/AI-driven OpEx	Adjusted OpEx up ~2.9% Q1; planned investments	Disciplined OpEx; margin expansion	Company-wide initiative targeting ~$100m OpEx savings by 2027	Accelerating cost actions
Regulatory (U.S.)	Watching “One Big Beautiful Bill”; limited expected adverse impact	Employer tuition assistance cap increase seen positive; indexing to inflation	No incremental U.S. regulatory negatives flagged; limited shutdown exposure	Neutral-to-positive
Healthcare Programs	Healthcare ~50% of USHE; strong demand	Healthcare total enrollment +8% YoY	Healthcare total enrollment +7% YoY; RN-to-BSN softness	Mixed: portfolio strong, RN-to-BSN softer

Management Commentary

“We continue to advance our efforts to leverage technology, resulting in operating expense growth of less than 1%, operating income growth of 39%, and a 400 basis point margin expansion… Adjusted earnings were $1.64 compared to $1.16 from the prior year, an increase of 41%.”
“Our expectation is that we'll probably be able to save upwards of $100 million in operating expenses by the end of 2027.”
“Employer-affiliated enrollment… increased approximately 8% from the prior year and now represents 33% of all U.S. higher education enrollment, an increase of 290 basis points from the prior year.”
“We are encouraged by… recent guidance from the Australian government that our international caps will increase 3% in 2026.”
“We are very anchored on our notional model… nothing… leads me to believe that we won't be able to hit the targets that we laid out at our investor day.”

Q&A Highlights

USHE revenue per student strength and margin drivers: CFO cited fewer drops, higher seats per student, and lower discounts; management flagged aggressive productivity initiative with six AI/technology categories touching all parts of the organization .
Strayer vs Capella: Capella stronger; Strayer pressured by non-affiliated students; marketing dollars proving more efficient at Capella; USHE team optimizing for overall division growth .
ANZ trajectory: International transfer verification headwinds; expectation for new student growth beginning 1H 2026; total enrollment growth by end-2026 is a stretch but plausible; international caps up 3% in 2026 .
RN-to-BSN program: softness throughout 2025 noted; advantage from employer-affiliated enrollment .
Government shutdown exposure: negligible; limited direct military student presence and major clients (CVS, Best Buy, Dollar General) not materially impacted .

Estimates Context

Q3 2025: EPS beat ($1.63 actual vs $1.30 consensus) and revenue beat ($319.9m vs $314.7m consensus); EBITDA beat ($63.3m vs $61.1m consensus)*.
Q2 2025: EPS beat ($1.52 vs $1.43 consensus), slight revenue miss ($321.5m vs $322.8m), EBITDA miss ($60.5m vs $64.5m)*.
Q1 2025: Clean beats on EPS ($1.30 vs $0.96) and revenue ($303.6m vs $300.7m), EBITDA beat ($52.9m vs $48.7m).
Values retrieved from S&P Global.

Implication: Street likely revises higher on ETS and USHE margin trajectory; ANZ remains a modeling headwind near-term given FX and international constraints, but 2026 domestic/new student growth and cap increase may ameliorate.

Key Takeaways for Investors

Quality beat driven by ETS scale and USHE margin expansion; adjusted EPS up 41% YoY with strong execution and productivity levers—positioning for continued margin improvement .
ETS remains the growth engine (Sophia +42% revenue, ETS +46% revenue); Workforce Edge at 80 agreements broadens funnel; expect ETS mix of operating income to keep rising .
USHE resilience: employer-affiliated enrollment at record levels and higher revenue/student offset enrollment softness; ongoing optimization between Strayer and Capella should support mid-single-digit growth trajectory over time .
ANZ is a 2026 story: domestic strength and regulatory relief (cap +3%) underpin a path to new student growth; near-term FX and international limits keep pressure on margins .
Cost program is a valuation catalyst: ~$100m targeted OpEx savings by 2027, with ~$30m already in motion; expect further operating leverage as initiatives scale .
Capital returns: consistent dividend and active buybacks ($94m YTD; $134m authorization left) provide downside support and signal confidence .
Trading setup: near-term upside bias tied to sustained ETS momentum and USHE margin gains; watch RN-to-BSN softness and ANZ regulatory cadence; any incremental employer partnership wins or AI-driven cost savings disclosures could be stock-positive .

Strategic Education, Inc. (STRA)·Q3 2025 Earnings Summary