Thank you. Good morning, everyone, and welcome to Strategic Education’s conference call in which we will discuss second quarter 2022 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, 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 Karl. Karl, please go ahead.

Thank you, Terese, and good morning, everyone. The second quarter results that we reported this morning reflect continued improvement we’re making in returning the company to earnings growth, as we see continued acceleration in the recovery at Strayer University, significant demand strength across all of U.S. higher education and continued strong growth within our Education Technology and Services segment. As such, I can reiterate that we expect our total enrollment to be down in the mid-single digits for the full year, which is an improvement from the down 11% in the first quarter and the down 7% we had in the second quarter. We also expect that all three of our universities will have positive new student growth for the full year 2022. As I said a moment ago, we’ve seen a significant inflection in demand in our U.S. Higher Education segment. Inquiry volume is up more than 20% from the prior year. And within Strayer University, branded related search volume, meaning people searching for Strayer by name, has returned to pre-pandemic levels. Strayer’s recovery is accelerating. During the second quarter, we had year-over-year improvements in both core success and student retention, and we forecast that Strayer’s total enrollment should be growing on a year-over-year basis by the end of this year, which would be roughly one full year faster than we had originally anticipated. Our Education Technology and Services segment had a very solid quarter with each of the three components within ETS having very strong growth. Employer Solutions, which services our nearly 1,000 corporate partnerships in the United States, grew total employer-affiliated enrollments by 10%, and the mix of students from employers grew 410 basis points from last year and is approximately 25% of U.S. Higher Education total enrollments. Workforce Edge, our SaaS-built corporate education benefits management platform, made significant progress over the past year. In the second quarter of 2021, Workforce Edge had 20 corporate partners with a total employee base of approximately 415,000. At the end of the second quarter of this year, we have now more than doubled the number of corporate partners at 45 with a total employee base of more than 1 million. Sophia Learning, our direct-to-consumer platform of ACE-recommended high-quality general education courses, grew their average total subscribers 50% from last year and their revenues 55%, reflecting the partial benefit of a price increase that was introduced in the quarter. Across all of ETS, revenue increased 24% from the prior year. During the quarter, we added a little bit of incremental expense to support their continued strong growth. For the full year, we expect ETS’ operating margin to be approximately 40%, which is net of these incremental investments. Our Australia and New Zealand segment continues to work to normalize our operations there post-pandemic. Total enrollment was up slightly from the prior year, but ANZ revenue declined 10% from the prior year. Roughly half of this decline was attributable to the timing of enrollments in the second quarter with the bulk starting in June, and thus we were able to only recognize a single month of revenue. The balance of the decline is attributable to foreign currency fluctuations. For the full year, we expect ANZ revenue to be flat or slightly down from the prior year, but we do remain confident enrollment will grow as the process for international students entering Australia returns to a normal timeline, which we are beginning to see. In closing, as we’re halfway through the year, we are very pleased with the progress that we’ve made. Our focus is to finish this year strong and begin to show significant earnings growth in 2023. Lastly, I’d like to once again thank my colleagues within SEI for their ongoing commitment and hard work on behalf of our students. And with that, Shannon, we’d be happy to take questions.

Thank you. Our first question comes from Jeff Silber with BMO. Your line is now open.

Thanks so much. It’s great to hear about the improving trends at U.S. Higher Education, specifically at Strayer University. Is there anything specific you can point to in terms of what’s been driving that? And should we expect that to continue going forward? Thanks.

Yes. Sure, Jeff. I’d say the biggest catalyst is getting all of the campuses reopened or predominantly all of the campuses. Strayer’s history is campus-based, clearly, and that had a major adverse impact when we had to close all of them for almost two years. I would say, in addition to getting the campuses reopened, as I said in the prepared remarks, we’ve seen a very significant increase in the demand environment. That seems to be continuing into the back half of the year. So as long as we can maintain the campus footprint being open and if the demand environment stays as strong as it is, we would expect the recovery at Strayer to maintain this V-shaped recovery.

That’s great. And you talked a little bit about the inquiry trends and brand-related search volume. I’m just curious from a marketing expense or a cost per lead, if you can talk about what’s going on there in terms of trends? I’m specifically focused on your U.S. schools.

Well, it’s not just Strayer. Capella-branded search is also at multi-year highs. I’d say the efficiency of the advertising spend is very good on a cost per inquiry basis, we’re probably approaching pre-pandemic levels. I would also say that we had very solid new student growth in U.S. Higher Education, frankly, across all three of our universities, including in Australia in the second quarter. So the demand environment, the efficiency of marketing, the performance of the campuses at Strayer, all of that is performing very strong.

All right. That’s great to hear. If I can stick in one more, I hate to ask a regulatory question. But I know that the Department of Education has been making some progress on revising some of the rules, specifically with 90/10. I know they’re talking about including some of the potentially military and veterans funding, some of the other federal funding in the 90/10 calculation. Can you talk about what your exposure would be if that rule changes if we do include military and veterans funding in that calculation?

Sure. Well, from a planning standpoint, we’re anticipating that it will change. And across both Strayer and Capella, we would not have any exposure.

Thank you. Our next question comes from Tobey Sommer with Truist. Your line is now open.

Hey, good morning. This is actually Jasper Bibb on for Tobey. Thanks for taking our questions. So I just wanted to ask about new enrollment trends in ANZ and how inquiries have trended there specifically. You mentioned kind of getting international students back into the market, what are the roadblocks that are still remaining to making that happen?

Sure. Well, approximately half of every new cohort of students in Australia is international. We’ve seen processing delays of visas to enter the country in excess of 200 days. That is starting to quicken. I would say that Torrens University had sizable new student growth in the second quarter, some of the strongest that we’ve seen since the lockdowns in the pandemic. So as that backlog of students or visa applications begins to clear, we would expect the growth to return.

Okay. Got it. And then the demand environment for U.S. Higher Ed strengthened significantly in the last couple of months relative to maybe the first quarter or later last year, what would you attribute that change to?

I think it’s reaching some level close to full employment, giving people confidence that they should be okay taking on the added responsibilities of an education if they have more certainty with their employment picture. As I said, I think it’s the efficiency of our marketing teams to deploy our advertising dollars. Clearly, the fact that branded related search at both Strayer and Capella is at pre-pandemic levels helps us significantly on the Strayer side, as I said, the campus openings have been a major catalyst. I’d say the inflection that we’re seeing in the demand environment really started to take hold in the mid to late first quarter, continued all the way through the second quarter, and we haven’t seen anything that would suggest that it’s abating in the second half of the year.

Just maybe following up on that. So you said reaching full employment seems to be a tailwind at this point, but given some of the macro risks that investors might be contemplating, could you remind us how you expect the business to perform if we go into a recession in the next 12 months?

Well, historically, I think our point of view has been through any business cycle, there’s significant demand to get a degree or said differently, for individuals that don’t have a degree, their ability to feel confident about their ability to sustain a family-paying wage is quite difficult, absent some significant economic shock. So clearly, we have a very significant recession as we had 10 years ago or so, that certainly could have an adverse impact. But anything in a normal business cycle, including a modest recession, we wouldn’t expect to have material adverse impact.

Thanks. Last question for me here, just from a capital deployment perspective. How are you thinking about the dividend? I mean it looks like the payout ratio is going to be maybe 80% or so of your adjusted earnings this year. Do you think you still have the flexibility to reinvest in the business with where the dividend is right now?

Yes, this is Rob. The Board looks at that every quarter. And we tend to think about the dividend payout ratio as regards to the long-term earnings power of the business. The earnings have been reduced significantly over the last couple of years because of the enrollment reduction that happened during the pandemic. But as Karl described, we see that ameliorating and recovering. So we’re not particularly concerned about the dividend as a percent of this year’s adjusted income. And then going forward, our capital allocation strategy always starts with reinvesting as much of the capital as we can back into high-returning investments in the business, which tend to be the ones that improve our students’ academic performance because the lifetime value of the student is so high if the student is succeeding, that’s going to be the greatest return for our shareholders. After that, if we have excess cash, we do want to return it to our owners. And we think a relatively predictable, steady dividend is the first way to do that. And in excess of that, we tend to take advantage of market opportunities when we feel like our stock is trading at a significant discount to its intrinsic value. In those circumstances, we would employ share repurchases.

Appreciate the detail. Thanks for taking the questions, guys.

You bet.

Our next question comes from Alex Paris with Barrington Research. Your line is now open. Alex? Alex, your line is now open. Please check your mute button.

Hello.

Hello.

Yes. It’s Alex. Sorry, I was on mute. So I just wanted to ask a question about share repurchases. I realize you kind of answered that a bit on the last question. It looks like you did $4 million in the first quarter, $21 million in the second quarter, $25 million year-to-date. Remind us what is the authorization and plan for repurchases going forward.

Well, the board authorization was $200 million. It’s been in place for a couple of years now, and our plans going forward are consistent with my answer to the last question, Alex. We look at capital in a cascading list of priorities. The highest priority is investment in our academic outcomes of our students, and then working our way down through a common dividend, and then with cash, which is truly excess to our business above that. In those circumstances where we think stock is trading at a significant discount to intrinsic value, and we tend to measure that value over a very long period of time, we’re happy to return it to owners through share repurchases. So we’ll use that same prism or decision matrix going forward as we have in the past. And that’s the result.

Great. Thank you. And then with regard to foreign exchange rates, I see – I don’t recall if you had made those disclosures in your press release in prior quarters, but there was a negative impact on revenue, a lesser impact on earnings and EPS. How should we be thinking about FX going forward? And the currencies we should be most aware of would be obviously the Australian dollar, right?

Yes, Alex. This is Dan. The Australian dollar is the primary one. The majority of our revenue down there and earnings is from Australia. There’s a little from New Zealand, but those currencies tend to track the same way anyway. And I think as earnings grow and we expect them to grow, the impact of foreign exchange will grow as well. Right now, earnings – as the dollar has strengthened, the U.S. dollar, the earnings have been growing a little bit. And so you see the pickup or the $0.02 drag on EPS. Again, as the earnings grow proportionately, there’ll be a bigger impact, positive or negative, depending on how the dollar trends.

And, Alex, this is Rob. Again, the way we thought about this when we originally did the acquisition is the Australian dollar over decades has fluctuated between about $0.50 and $1 to the U.S. dollar. We really made the acquisition, assuming it’s in the mid to low 70s on average. I think it was $0.72 when we actually did it, and it was down to $0.69 in the last quarter. So there’s a little bit of a drag. But we think over the long run, that’s the kind of the average that we’ll expect, and that it should, in terms of economic value, basically even itself out over time.

Great. That’s very helpful. I appreciate the additional color. Thank you.

You bet.

Thank you. I’m showing no further questions at this time. I’d like to turn the call back over to Karl McDonnell for closing remarks.

Thank you, Shannon. And again, we appreciate everyone’s time. We look forward to chatting with you next quarter.