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Strategic Education, Inc (STRA) Q1 2021 Earnings Call Transcript

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STRA earnings call for the period ending March 31, 2021.

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Strategic Education, Inc (STRA -1.23%)
Q1 2021 Earnings Call
Apr 29, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Strategic Education's First Quarter 2021 Results Conference Call. I will now turn the call over to Terese Wilke, Manager of Investor Relations for Strategic Education. Mrs. Wilke, please go ahead.

Terese Wilke -- Manager of Investor relations

Thank you. Good morning, everyone, and welcome to Strategic Education's conference call, in which we will discuss first quarter 2021 results. With us today are Robert Silberman, Executive Chairman; Karl McDonnell, President and Chief Executive Officer; and Daniel Jackson, Executive Vice President and Chief Financial Officer. Following today's remarks, we will open the call for questions. Please note that this call may include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

The statements are based on current expectations and are subject to a number of assumptions, uncertainties and risks that Strategic Education has identified in today's press release that could cause actual results to differ materially. Further information about these and other relevant uncertainties may be found in Strategic Education's most recent annual report on Form 10-K, the 10-Q to be filed and other filings with the Securities and Exchange Commission as well as Strategic Education's future 8-Ks, 10-Qs and 10-Ks. Copies of these filings and the full press release are available for viewing on the website at strategiceducation.com.

And now I'd like to turn the call over to Rob. Rob, please go ahead.

Robert S. Silberman -- Executive Chairman of the Board

Thank you, Terese, and good morning, ladies and gentlemen. This first quarter earnings report coincides with the 1-year anniversary of the global impact of the coronavirus pandemic. This report also coincides with a point in the calendar at which we have a good view of the first half of the year, and we start to get a sense of the second half. As such, we're going to go into a little more detail this morning than we normally do on both our individual segment results and also on our outlook for the balance of the year. Karl will walk us through both the segment results and the forecast.

Dan has a couple of detailed comments on the Q1 financials, and then I'll make some concluding remarks before we open it up to questions. Karl?

Karl McDonnell -- President and Chief Executive Officer

Thank you, Rob, and good morning, everyone. This morning, as I discuss our first quarter results, in addition to my normal commentary on our operating results, I intend to also provide a more detailed update on Strayer University, whose performance remains challenged as well as to provide a full year financial outlook for the company's consolidated results. This is to assist our owners in better understanding the financial impact of Strayer University's performance as well as to better understand Australia and New Zealand's contributions over the full year given the seasonality of the first quarter. I'll be discussing our results by segment, beginning with our largest segment, U.S. higher education, which is mostly comprised of our two U.S.-based universities, Strayer and Capella. For the first quarter, U.S. higher education revenue decreased $29 million from the prior year, which is a reduction of 11%. The restructuring that we began in the second half of 2020 and which is now largely complete, enabled us to reduce U.S. higher education operating expenses by 10%, generating $20 million of savings. As a result, their segment operating income decreased $9 million from the prior year, which is a reduction of 16%.

Capella's operating income actually increased $2 million for the first quarter, while Strayer's contracted $11 million. Total enrollment within U.S. higher education decreased 7% from the prior year. These declines in our U.S. higher education enrollment and financial results are attributable to the ongoing performance challenges at Strayer University. And this morning, I'd like to describe what we believe is causing these performance challenges as well as what we're doing to improve the results. From a cost standpoint, we see three primary drivers to the current performance challenges. We continue to see the economic hardships created from the COVID-related restrictions and shutdowns for more than the past year on the Strayer student demographic as the largest contributing factor to their declining performance.

As a reminder, over 2/3 of Strayer's new student cohorts are first-time college students, meaning their highest level of education attainment at the time of enrollment is a high school diploma, which during any period of economic distress is the segment of the labor force most adversely impacted. Secondly, we have also begun to see a sizable increase in competitive intensity, which has resulted in advertising inflation, lowering the yield of our marketing investments. Of course, Capella operates in the same competitive environment and aside from serving a more established student than Strayer student demographic, Capella is also greatly advantaged by Flexpath, which has consistently generated 20%-plus growth since being launched. And third, we do see operational challenges for Strayer, whose admissions, enrollment and advising processes were built for and operated within a network of 65 campuses with local presence in the various communities in which we operate.

Strayer students have taken almost all of their courses online for many years now, but the admissions and enrollment process was handled at the local campus level. Having to abruptly shut that system down and pivot to 100% remote work presented challenges that are certainly fixable, but also have adversely impacted our performance to date. I can say we have begun to see some improvements in Strayer's key performance areas. Most notably, first quarter continuation rate increased 100 basis points from the prior year, which is the first time that that metric has improved on a year-over-year basis since before the pandemic. Also, the percentage of new applicants making the decision to enroll in the university has been steadily, albeit gradually, improving each week since the middle of the fourth quarter of last year.

Strayer's ability to engage with people inquiring into the university, along with new applicants, measured as the total number of hours spent actually speaking with prospective students per week is nearly identical to the same metric at Capella, which has been growing new students. Our strategy to recover Strayer's performance to pre-pandemic levels and return to sustainable growth involve new initiatives aligned to our ongoing strategy of focusing on affordability and corporate partnerships. Within the next couple of weeks, we will be launching a new employer-focused tuition assistant subscription product that enables large employers to greatly expand the reach of their education benefit dollars without having to increase the overall size of the benefit. We will also be launching a new first term and first year student experience, which includes the opportunity for a new student to begin their instruction during any week that is convenient for them versus limiting it to Strayer's existing four academic start dates per year.

We're also implementing new technologies that will substantially improve our team's ability to engage and communicate with our students. And finally, we are reopening campuses and plan to have 15 campuses open over the next month, with plans to reopen most, if not all, by the end of the year. Notwithstanding some of these emerging signs of stabilization and improvement, it is clear to us that Strayer's return to new student growth is not likely to occur before the fourth quarter of this year and could be delayed until the first half of 2022. For the full year 2021, we see total enrollment at U.S. higher education to be down approximately 10%. Turning now to our alternative learning segment, which consists of three primary products: first, Sophia Learning, our direct-to-consumer platform of American Council of Education-certified college level courses, offering consumers an ultra-low-cost way to earn college credit. Sophia's revenue for the first quarter more than doubled from the prior year to $3 million.

Currently, we expect Sophia's full year revenue to exceed $14 million for 2021, which would be a 350% growth rate above the 12 months preceding the pandemic. Beyond this year, we're planning for [CPA] to generate at least $20 million in revenue in 2022 and ultimately building it to a $50 million business. Workforce Edge is our SaaS-based education benefits management platform that enables small, medium and large companies to better manage their tuition assistance plans and provides those companies with access to our proprietary network of SEI and Noodle Partners institutions. Our first priority for Workforce Edge is to gain market traction, and we set a goal to have at least 300,000 total employees having their education benefits managed through Workforce Edge during the course of this year. I'm pleased to say as of now we have already surpassed that full year goal and already have close to 400,000 employees on the platform.

Unlike Workforce Edge's two primary competitors in the space, access and use of the platform is free to the company. Monetization of the platform occurs through enrollments from Workforce Edge in the Strayer and Capella universities. Based on our understanding of education benefit participation rates, it does not seem unreasonable for us to assume, ultimately, we should be able to capture somewhere between 1% and 3% of employees on the platform into enrollments at either Strayer or Capella universities, which again, is why our first year goal has been to sign up as many employer partners as possible, creating a critical mass of employees available to enroll. And lastly, the other main product of alternative learning is our Employer Solutions team, which manages our 900-plus corporate partnerships for Strayer and Capella and works to increase these employer-affiliated enrollments across both universities. And for the first quarter, total employer-affiliated enrollments increased 400 basis points from the prior year.

Across all of these products, alternative learnings revenue grew 30% to nearly $13 million. Their $6 million of segment level operating income is flat from the prior year as we also invested $3 million of incremental operating expense to further support their 30% revenue growth over the next couple of years. These incremental investments were front-end loaded into the first quarter, and their current expense run rate should stay relatively flat for the balance of the year, resulting in income growth this year and with normalized operating margins in the mid- to high 50% range in the years ahead. Our Australia and New Zealand segment completed its first full quarter of operations under SEI, and during the quarter achieved their first term budgeted enrollment. You may recall we had a slight loss from A&Z in the fourth quarter of last year, which was mostly attributable to the timing of the close from Laureate Education.

The small segment level decline in Q1 operating income is entirely attributable to seasonality, and we fully expect the Australian segment to fully achieve their full year revenue and EBITDA targets of $270 million and USD60 million respectively. The transition of Australia and New Zealand from Laureate Education system's infrastructure and on to SEI platforms remains on track to be completed by the end of the second quarter of this year. And finally, because we want to assist our owners to best understand the impact of a challenging performance situation at Strayer University as well as the other moving pieces of our three segments, we have decided to share our current full year outlook. For the full year 2021, we see the following ranges of performance. Revenue of between $1.165 billion and $1.180 billion. Adjusted EBITDA of between $245 million and $265 million and adjusted earnings per share of between $5.20 and $5.50. And as always, I'd like to express my deep gratitude to our faculty, our administrators and other professionals at SEI for their ongoing commitment to our mission and the success of our students.

And with that, I'd ask Dan to walk through our financials in a little more detail.

Daniel W. Jackson -- Executive Vice President & Chief Financial Officer

Thank you, Karl, and good morning, everyone. Karl has already covered much of the Q1 performance. I'm just going to add a few comments. But first, I wanted to remind everyone that our adjusted results and the outlook that Karl just described are non-GAAP and exclude charges and expenses that are nonrecurring, including merger, acquisition and restructuring costs. Now a couple of notes on the quarter. Our consolidated bad debt declined to 3.7% from 4.2% last year. This was due to relatively flat bad debt in the U.S. and much lower bad debt in Australia and New Zealand, where our tuition payment arrangements generally result in us collecting a larger portion upfront. We expect bad debt for the full year to be in the 4% to 4.5% range. Our adjusted effective tax rate was 29.2% for the quarter. We're still forecasting 29.5% for the full year.

Cash from operations for the quarter was particularly strong due to favorable working capital dynamics in Australia and New Zealand. We received a portion of our Q2 tuition revenue in March. We will likely see some of this benefit reverse toward the end of the year, but continue to project distributable free cash flow for the year to be at or better than our adjusted net income. Our capex was a little lower year-over-year at $12.7 million compared to $14.3 million. This was mostly related to timing, and we continue to expect full year capex in the range of $50 million to $55 million. And finally, we ended the quarter with $274 million of cash, cash equivalents and marketable securities and approximately $210 million of available credit on our $350 million revolver. Rob?

Robert S. Silberman -- Executive Chairman of the Board

Thank you, Dan. So just a couple of final points. First, SEI is a stronger and more financially sound institution today than at any point in its history. After a year of enormous economic disruption, our Australian assets, the Alternative Learning division and Capella University are all performing very well. And even Strayer University, somewhat challenged in terms of enrollment growth, is both financially stable and continues to contribute a healthy operating surplus. Second, because of our financial strength, we can absorb wide variations in student enrollment and revenue at any one entity. Therefore, our primary focus will continue to be on improving the academic outcomes of our students across all of our institutions, which we believe is the only generator of sustainable increases in the per share value of SEI.

And finally, the current strength and stability of SEI is the result of investments the company has made over the last 10 years, including the founding of the Jack Welch Management Institute, our yearly investments in academic technologies, including Flexpath, our 10 times academic program and Strayer Studios, our merger with Capella Education Company, which resulted in more than $70 million in annual operating synergies and finally, our most recent purchase of our Australian and New Zealand assets. These investments have significantly increased SEI's per share revenue, earnings and cash flow over what they would have otherwise been today and have given us the resilience to not just navigate through the coronavirus pandemic, but also the financial resources to fund significant future growth opportunities to continue to improve our academic capabilities and performance and to provide a healthy return of capital to our owners.

And with that, operator, we'd be pleased to answer any questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Jeff Silber with BMO Capital Markets.

Jeff Silber -- BMO Capital Markets -- Analyst

Thank you so much and appreciate all the details. I wanted to go back to some of the earlier comments where you parsed out some of the issues that are occurring at Strayer University. Specifically focusing on shutting the campuses. I don't think you've called this out beforehand. Is that something that's been happening? Obviously since the campuses have been shut, but you were either not aware of it or didn't discuss it publicly, if you can just give us a little bit more color when exactly you figured out that this was an issue?

Karl McDonnell -- President and Chief Executive Officer

Sure. Good morning, Jeff. It's something that we've been monitoring throughout the past year. We've said all along that we think the single largest factor is just the economic hardships being experienced by the Strayer student demographic, somebody who's a first-time college student, but we also have recognized that we had in admissions and enrollment and advising process that was designed to work at a local level, and that has been significantly interrupted over the last year. So we do believe it's had an impact. I think it's relatively small, but that's why we're focused now that the virus seems to be subsiding, vaccinations are increasing, we're focused on reopening as many campuses as we can between now and the end of the year so that we can resume that local interactivity that we have with students.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay. All right. That's fair enough. You mentioned, again, a smaller impact being competition intensifying. I think you talked more about the impact on advertising cost. But are you seeing -- are you losing share to some of these competitors? Are these new competitors? Or are these just competitors that have been around for a while that are just ramping up their advertising? If you can give us some color there as well, that would be great.

Karl McDonnell -- President and Chief Executive Officer

Sure. It's twofold. So first, I think there's just large advertising inflation across all industries as more and more companies are resuming their normalized advertising budgets. We've seen that across all channels. And then I would say that we're seeing increased competition from all sorts of postsecondary education organizations, traditional competitors that we've seen for the past several years as well as some smaller or regional entities that are now moving into the online space post-pandemic. So it's a combination of just advertising expense inflation, which I think all companies are seeing as well as some increased competition in the postsecondary space.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay. And just to segue off of that, yesterday the President announced the American Families Plan, potentially giving a lot of money to community colleges, HBUCs, et cetera. I know you work with a lot of those organizations. But do you see the influx of funding there being a potential competitive threat for you going forward as well?

Karl McDonnell -- President and Chief Executive Officer

Actually, Jeff, we've been focused on affordability, as you know for many years, and our current thinking is that by integrating tools like Sophia, which we've already done, frankly, at Capella and Strayer which enables a student to earn a significant portion of their general education courses for free. We're actually aligned with the thinking that an ultra-low-cost or even free associates degree is in the best interest of students. It's something that we're working toward. I alluded it to it in my prepared comments, when I said we're going to be implementing a new first year experience for students that involves that type of program to eliminate as much of the cost as we can in the first year for students.

And then if you align that with our strategy that we outlined at Investor Day a little more than a year ago around transferring the other payments from the private sector -- or sorry, from the public sector vis-a-vis Title IV to corporations, ultimately where we're trying to get at Strayer University in particular is that the student, him or herself, would bear almost no cost of the degree, either because we've eliminated the need for tuition through things like Sophia integration for general edge courses and/or we've transferred the responsibility of paying it to a corporation who has a partnership with us.

Jeff Silber -- BMO Capital Markets -- Analyst

Thanks so much, Ill come back with you.

Karl McDonnell -- President and Chief Executive Officer

Thanks, Jeff.

Operator

Our next question comes from Tobey Sommer with Truist Securities.

Tobey Sommer -- Truist Securities -- Analyst

Thank you. With the -- follow-up on one of these recent questions. With respect to emerging competition, new online entrants post-pandemic, it occurs to me that maybe a lot of institutions feel the need to make that transition. So has this played out where you think we've seen that impact? Or is this the tip of the iceberg as sort of everybody who wasn't online shifts to online?

Karl McDonnell -- President and Chief Executive Officer

Well, I think broadly over -- and this was our point of view, even pre-pandemic, we expect and plan that competition will increase. We see the future of education is clearly being digital. So to the extent the majority of institutions weren't able to teach in the online modality, it was only a matter of time in our point of view that they would realize that they had to. The pandemic clearly has caused that realization. And so we are very much looking for ways to continue to have differentiated or advantaged products or programs, which, as I said, Capella is clearly advantaged with Flexpath.

And for Strayer, it's the culmination of everything that I've been saying around having an ultra-low-cost degree, combined with these very deep corporate partnerships, 900-plus. So as Workforce Edge begins to ramp up and has over 400,000 employees, and as those employees start to enroll in the university, we feel that that is going to be a significant differentiator for Strayer. And then both of our institutions would have advantaged sort of places in the space that would be able to insulate them from what we do see as continued increases in competition.

Robert S. Silberman -- Executive Chairman of the Board

First, Karl, you should mention on the qualitative side, Strayer Studios, all of the academic improvements that have been made that we think are going to...

Karl McDonnell -- President and Chief Executive Officer

Yes. Well, our investments in not just studios, but all these other technologies around 10 times instructional model, our faculty action center, those are really designed to help drive academic success and long-term retention. And so we've got things in motion that are designed to differentiate on the front end, if you will, for a prospective new student and then things that are designed to get traction in the classroom so that we get long-term completion rates, retention increased and so forth.

Tobey Sommer -- Truist Securities -- Analyst

Okay. That's helpful. Could you describe on the corporate side, the competitive landscape and what switching costs would look like for a corporate relationship to move from another institution to being -- to looking toward Strategic Education as a partner or vice versa?

Karl McDonnell -- President and Chief Executive Officer

I think this is an area, Tobey, where we really are advantaged, just given the breadth and scale of our assets. We're the only provider that can vertically integrate degree-granting accredited universities with alternative on-ramps like Sophia, and our ability to bundle those and be able to offer a very affordable price point from a tuition standpoint for employers is quite compelling. And I think we've seen that having gone from no employees on Workforce Edge at the start of the year to over 400,000 in the span of a quarter. We actually did have at least one employer that I know of, a relatively large employer, switch from one of our main competitors on to Workforce Edge because, again, it's free to the company to use.

So I'm very confident in our ability to differentiate vis-a-vis corporations of the large education provider. And to my knowledge, SEI is the only organization in the United States that continues to add large Fortune 500 level enterprise level arrangements from an education benefit standpoint. So as I said, it's a major area of investment for us. We plan for that alternative division to grow at least 30% this year, and we're very confident that it will be an important part of our business in the years ahead.

Tobey Sommer -- Truist Securities -- Analyst

Okay. And last question for me. With respect to sort of the ROI calculus that your target student demographic may look at a choice to go back to school, does the potential for a substantial increase in the minimum wage shift that calculation? Or kind of is it influential in any way from your perspective?

Karl McDonnell -- President and Chief Executive Officer

I would doubt it. I think the reality is many of the students at Strayer, in particular, rely on grants and federal aid. And to the extent they're employed and one of our corporate partners, tuition assistance to fund their education, it speaks to our strategy to reduce as low as we can the cost of the degree and to minimize the out-of-pocket expense and hopefully debt for students. But I don't see an increase in a minimum wage being a catalyst in any way for higher levels of enrollment.

Tobey Sommer -- Truist Securities -- Analyst

Thank you for your time.

Karl McDonnell -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Gary Bisbee with Bank of America Securities.

Gary Bisbee -- Bank of America Securities -- Analyst

Hey guys, good morning.

Karl McDonnell -- President and Chief Executive Officer

Good morning, Gary.

Gary Bisbee -- Bank of America Securities -- Analyst

A couple -- let me start with a couple on alternative learning and corporate overall. So first of all, now that you've put this out of its own segment, can you help us understand exactly what's in the revenue? And maybe how does -- if a student is enrolled in one of your two universities through a corporate relationship, like what's the royalty that's paid to this? Or how are the economics split? I'm trying to think through cost structure margins for the new segment.

Daniel W. Jackson -- Executive Vice President & Chief Financial Officer

Gary, this is Dan. First of all, it's about 70% related to employer-affiliated enrollment. And it's essentially a revenue transfer. That's based on the work that the alternative learning group team, Employer Solutions, is doing to generate those agreements and to activate those agreements with employers. And then the rest of it is essentially Sophia. Sophia has been growing by far the most rapidly and is the biggest driver of the growth in that revenue.

Gary Bisbee -- Bank of America Securities -- Analyst

Okay. And so then if I look at the employer enrollment, you -- in the new segment eight-K the other day, you showed that percentage, and it was in your notes today as well. It looks like you grew enrollment from employer affiliations nicely year-over-year -- actually in the quarter despite the challenges. What -- and it's been growing over time. What's been driving that, say, in the last 12 to 18 months? And I guess how sustainable is that in the current environment? Do you believe those relationships will continue to drive growth as we move through the rest of this year?

Karl McDonnell -- President and Chief Executive Officer

Yes. We do expect that our employer-affiliated enrollments will continue to grow. The growth that you're speaking of over the past couple of quarters has really been mostly healthcare-related partnerships growing at Capella, which has been growing, in some cases, in excess of 20%, 25% year-over-year. Strayer's growth has been less. But importantly, the Strayer employer-affiliated account management team is just now able to return to local field-based activation. So when we have a relationship as we do with a company like Best Buy or CVS as an example, historically, our teams would be out visiting various stores in the regions in which we have campuses and so forth.

That stopped for the better part of the year, but has now started to open back up. And some of the very early metrics, which would include things like new inquiries into the universities or even applications, they're actually up significantly over the prior year. So we're confident the combination of the continued popularity of Flexpath and healthcare, in particular at Capella, and now being able to engage at the local level for the Strayer-related corporate partnerships combined with a growing ecosystem on Workforce Edge, we do think that that's going to continue to drive higher employer-affiliated enrollments in both of our universities.

Gary Bisbee -- Bank of America Securities -- Analyst

And on -- one last one on this topic on the Capella healthcare, tremendous success. And you've been talking about that for a while now, but is that largely like the nursing program you discussed over the last couple of years? Or --

Karl McDonnell -- President and Chief Executive Officer

Yes.

Gary Bisbee -- Bank of America Securities -- Analyst

-- [Indecipherable] than that?

Karl McDonnell -- President and Chief Executive Officer

A large part of it is the Flexpath are in the BSN students that enroll in that program have been finishing in roughly a year. So it's almost a perfect program for a nurse who has clearly a lot of practical knowledge and needs the credential to further his or her career. So that has been the big driver on the Capella side, and we continue to see a lot of strong demand in that program.

Gary Bisbee -- Bank of America Securities -- Analyst

Great. And then just one last one, and I'll turn it over. So the cost saves that you -- the program you started last fall, you said you made great progress into Q1. Is there more to go in terms of Q2 versus Q1? Or is it safe to say that most of those have been achieved? And I guess investments beyond the $3 million this quarter in alternative learning, is there anything materially different you expect in the next couple of quarters on the investment front?

Daniel W. Jackson -- Executive Vice President & Chief Financial Officer

Gary, there are a few more pieces of the restructuring that will have -- at this point, have finished in the second quarter. So we'll still have some incremental savings throughout the rest of the year. And on the investment front, I'll let Karl speak to the specific investments, but there will be additional investments because we're reinvesting some of that savings through the balance of the year.

Karl McDonnell -- President and Chief Executive Officer

Yes. As I said, Gary, the $3 million step-up in alternative learning opex was primarily timed to be in the first quarter. There may be very small incremental investments from here on out. But I would use their Q1 run rate as a good run rate for the rest of the year.

Gary Bisbee -- Bank of America Securities -- Analyst

Great. Thank you.

Karl McDonnell -- President and Chief Executive Officer

Thanks.

Operator

[Operator Instructions] Our next question comes from Greg Pendy with Sidoti.

Greg Pendy -- Sidoti -- Analyst

My question And thanks for all the color on Strayer, but just one kind of question to pose to you. On the struggles at Strayer, how much of it -- I mean, you alluded to the strength in nursing, which is obviously you're capturing through Capella, but how on-point is the curriculum at Strayer with what students are demanding, given the trends seem to be heavily favoring STEM and nursing right now? And is that part of the problem?

Karl McDonnell -- President and Chief Executive Officer

I don't think so. Again, remember, you're talking about two very different types of students at Capella. Nearly everyone that enrolls, over 70% of students there already have a baccalaureate degree where at Strayer it's the exact opposite. More than 70% of students don't, and they only have a high school education. And by and large, business, specifically a bachelor business administration continues to be the most popular degree for that segment of students. And we're confident that we've got a great curricula. We've got a great program. We've got very differentiated student experience in the course room, with the tools and technologies that we have. What we've said, and we have data to back this up now that they're just very reluctant to enroll, this first-time college student. And we presume that is because of all the distress that they've been under economically.

And when we look at data, that shows that we're still having the same level of conversations, we're still able to talk to students, identical to Capella's metrics, but they're just not enrolling. And it's not a period in which we feel comfortable or confident to necessarily push somebody to enroll because it's certainly not going to be in that student's best interest. It won't be in the best interest of the institution either. And so when Rob says we're able to withstand wide variations in our enrollment, it means that we're comfortable waiting for the student's economic condition to improve enough so that he or she does have the confidence to take on a degree program because it's quite rigorous. Aside from the fact that they may be hesitant, we're doing everything that we can do internally, operationally to remove any other friction that may exist. But ultimately the student has to have the confidence that it's the right time for him or her to enroll, and that has not been the case for the last year.

Robert S. Silberman -- Executive Chairman of the Board

Hey Greg, just one -- this is Rob. One other comment on that that might be helpful from an external standpoint is if you look back over the last 20 years of Strayer University's history, the periods in which enrollment has been challenged at Strayer University have been periods of rapidly declined labor participation rates. And from an economic standpoint -- economic statistics standpoint, if you're looking for an external metric to sort of define when this reluctance or this economic pressure that Karl is describing alleviates some is watch those labor participation rates. As the economy reinflates as we go back to a pre-pandemic kind of mode of operation and not just employment goes up, but employment confidence goes up, that's when I think you'll see the sort of change in attitude that we're comfortable waiting for because it brings us the right kinds of students.

Greg Pendy -- Sidoti -- Analyst

Okay. Then it's fair to say that just that type of student or that degree might be more economically sensitive, I would take it, than other types of degrees?

Robert S. Silberman -- Executive Chairman of the Board

Correct. That's been our experience.

Greg Pendy -- Sidoti -- Analyst

Okay. Okay. And then just one final one. Just as we get familiar with the Australia and New Zealand assets, can you just give us a big picture? It looks like you kept your full year target of $270 million in revenues. Just what's the cadence, how we should be thinking about the cadence, given the seasonality in 1Q?

Daniel W. Jackson -- Executive Vice President & Chief Financial Officer

Yes, Greg, the second and the third quarter are by far the biggest quarters and the biggest contributors to the bottom line. And then the fourth quarter is probably just follows the first quarter. First quarter is always going to be the lowest than the fourth quarter. Second and third are pretty in line with each other.

Greg Pendy -- Sidoti -- Analyst

Perfect. Thanks a lot.

Daniel W. Jackson -- Executive Vice President & Chief Financial Officer

Thank you.

Operator

I'm showing no further questions in queue at this time. I'd like to turn the call back to Rob Silberman for closing remarks.

Robert S. Silberman -- Executive Chairman of the Board

Thank you very much, operator, and thank you all for participating. If you have additional questions, please feel free to call us, and we look forward to talking to you again next quarter.

Operator

[Operator Closing Remarks]

Duration: 37 minutes

Call participants:

Terese Wilke -- Manager of Investor relations

Robert S. Silberman -- Executive Chairman of the Board

Karl McDonnell -- President and Chief Executive Officer

Daniel W. Jackson -- Executive Vice President & Chief Financial Officer

Jeff Silber -- BMO Capital Markets -- Analyst

Tobey Sommer -- Truist Securities -- Analyst

Gary Bisbee -- Bank of America Securities -- Analyst

Greg Pendy -- Sidoti -- Analyst

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Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

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