On this page of StockholderLetter.com we present the latest annual shareholder letter from Strategic Education, Inc. — ticker symbol STRA. Reading current and past STRA letters to shareholders can bring important insights into the investment thesis.

 •  3/11/2026 Letter Continued (Full PDF)
 •  3/13/2023 STRA Stockholder Letter
 •  3/11/2024 STRA Stockholder Letter
 •  3/10/2025 STRA Stockholder Letter
 •  More "Education & Training Services" Category Stockholder Letters
 •  STRA Benford's Law Stock Score = 85

STRA Shareholder/Stockholder Letter Transcript:

2025 ANNUAL REPORT

Strategic Education, Inc.
Letter to Shareholders 2025
Dear Fellow Shareholders,
In 2025, your company generated $1.27 billion in revenue, $197 million in adjusted operating income, $145
million in adjusted net income, and $6.21 in adjusted earnings per share. During the year Strategic Education,
Inc. (SEI) grew its revenue 4%, while its expenses only increased 1%, leading to a 25% annual increase in both
operating income and earnings per share. We educated over 105,000 students at our three Universities in 2025,
and served an additional 235,000 students through our Education Technology Services segment. Most
importantly, during 2025 our three Universities graduated over 30,000 students with bachelor   s, master   s, or
doctoral degrees. As SEI shareholders, we should all be particularly grateful for that last statistic, because the
academic success of our students will always be the most important generator of long-term returns on our
invested capital.
In reviewing our 2025 results several important themes stand out. First, notwithstanding our very healthy
financial performance, enrollment in all three of our Universities was softer in 2025 than we had planned.
Second, and conversely, the performance of our Education Technology Services segment in 2025 was stronger
than even our own aggressive expectations. Indeed, our non-university operations have now grown to be a very
significant part of SEI   s overall enterprise. Third, 2025 marked a watershed in our adoption of Artificial
Intelligence (A.I.) tools to significantly improve our productivity and the quality of our academic operations.
With very modest capital expenditures we are already seeing significant financial returns. Fourth, based on
that improved productivity, coupled with the strength of our diversified set of educational assets, 2025 was our
third straight year of greater than 25% growth in adjusted earnings per share. Finally, in terms of capital
allocation, in 2025 we were more aggressive than usual in repurchasing our equity shares in the open market.
In this letter I will explore all of these themes, as well as discuss the specific performance in 2025 of our three
business units: US Higher Education, Australia/New Zealand, and Education Technology Services. Finally, as
is our custom, I have included in an appendix to this letter both an excerpt from Strayer University   s 1912
student catalog, as well as an excerpt from my first Letter to Shareholders written in 2001. These two excerpts
have been printed in each of our company annual reports since 2001. While our enterprise is now admittedly
much larger than just Strayer University, I believe both excerpts remain helpful in understanding SEI   s culture,
operating model, and most importantly, our immutable priorities.
Our US Higher Education assets include both Strayer University, a 133-year-old institution serving mostly
undergraduate students, and Capella University, a 33-year-old institution serving mostly graduate students.
Strayer University operates through an extensive physical campus network as well as online, while Capella
University operates solely online. These two Universities educated a combined 86,300 students in 2025, down
slightly from 87,500 in 2024. Our US Higher Education segment generated $868 million in revenue in 2025
(up from $858 million in 2024) and contributed $102 million in adjusted operating earnings (up from $77
million in 2024).
In 2025 our Australia/New Zealand segment, which is made up of Torrens University, Media Design School,
and Think Education, educated roughly 19,200 students, a slight decrease from the previous year. During the
year the segment generated revenue of US $257 million, and operating income contribution of US $36 million.
Within Australia   s Ministry of Education, the governing body of Australia   s higher education sector is the
Tertiary Education Quality and Standards Agency (TEQSA). Similar to the accrediting bodies in the United
States, TEQSA periodically reviews and reregisters all Australian universities to ensure their quality and
compliance with academic standards. I am pleased to report that in 2025 Torrens University successfully
underwent its periodic review, and received the longest possible reregistration of seven years, signaling
TEQSA   s high confidence in Torrens University. Rest assured that we will continue to steward Torrens
University in a way that merits that confidence.
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The 105,000 students we enrolled at our three universities in 2025 was roughly 2,000 less than the prior year.
Of course, we recognize and are comfortable with variability in our student enrollment. Nonetheless, there are
several specific factors I would highlight in analyzing our 2025 enrollment results. At the macro level, in the
United States in 2025 there was a slight deterioration in labor force participation rates, and in employment
confidence surveys, both of which tend to underpin the willingness of prospective working adult students to
return to university. At the more granular level, Capella University experienced some softness in 2025 in its
nursing degrees, which was not too surprising given the very high rates of growth in Capella   s nursing
programs over the last three years. We also rationalized some programs at Strayer University in 2025, both to
better align Strayer with some specific employer demand, as well as to make Strayer   s curricula more relevant
to general changes in the workplace. And finally, enrollment at Torrens University was limited in 2025 by
restrictions which the Australian Government placed on the immigration of foreign students into Australia.
Enrollment at Torrens has historically comprised roughly half domestic Australian students and half
international students. In 2025 Torrens University actually grew its domestic student enrollment, but the caps
on international student visas imposed by the Australian Government during the year specifically limited
Torrens    international student enrollment in 2025 to roughly 80% of its 2024 levels.
In 2026 we will anniversary the international student caps in Australia, and expect nursing enrollment at
Capella to normalize. In addition, at Strayer University we are adding some highly rated curricula in digital
marketing and graphic design from our Media Design School in New Zealand. Strayer University   s Jack Welch
Management Institute continues to impress and was once again in 2025 rated as one of the top ten online MBA
programs globally. Given the quality of the academic offerings at all three of our universities, we are confident
that over the long term our total university enrollment will grow in line with our notional model.
Our Education Technology Services segment, the fastest growing and most profitable part of our enterprise,
had another very strong year in 2025. This segment contains all of our non-university operations and consists
of two main assets: Workforce Edge, a business which structures and manages employer-university
partnerships; and Sophia, our self-paced online academic subscription service. In 2025 the segment grew
revenue 41% to $148 million, while operating income increased 38% to $59 million.
Workforce Edge generates revenue and operating margin for SEI in three different ways. First, by earning a
fee from universities for helping those universities attract students whose tuition is paid by the employers of
those students; second, by earning fees from employer clients for managing their tuition reimbursement
programs; and third, Workforce Edge helps our own Universities (Capella, Strayer, and Torrens) attract
employer-sponsored students. In 2025, Workforce Edge signed four new major corporate clients, and now has
over 2.6 million employees on its platform. It remains poised for significant future growth.
Sophia consists of a catalog of over 70 self-paced online courses. Students can access all these courses for a
subscription price of $99 per month. The courses cover mostly 100-level general education topics and are
designed to replace the large first year survey courses offered at traditional universities. Sophia courses are
designed and graded by subject matter experts and university professors. All Sophia courses have been
recommended by the American Council on Education for transfer credit to accredited universities. Indeed,
Sophia has entered into articulation agreements with over 100 universities which have agreed to accept Sophia
credits for transfer. In just four years of operation, Sophia has grown to over 215,000 discrete paying users as
of year end 2025.
Sophia and Workforce Edge are similar in size, profitability, and growth rates. They also complement each
other, as some Workforce Edge corporate clients require their employees to take Sophia courses first, before
enrolling in any traditional university-level courses. Doing so can both hold down the cost of the employee   s
education as well as improve the employee   s academic success. Together, Workforce Edge and Sophia make
the Education Technology Services segment a very valuable addition to our university network, and we look
forward to the continued contributions from this segment in 2026.
At SEI, as both educators and technologists, we have watched with great interest the accelerating development
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of A.I. tools over the last decade. Indeed, 2025 proved to be a step change in our adoption of some of these
tools into our academic mission, and that adoption generated significant educational and financial benefits
during the year. For some time now we have utilized A.I. capabilities to automate and standardize certain
academic support functions. We have steadily increased the efficacy of our technology tools, such as Irving at
Strayer University, and Ella at Capella University. Some of our A.I. technology suite we have codeveloped
with larger technology companies, and some we have acquired off-the-shelf from those companies.
Importantly, there was an enormous increase in the sophistication and utility of the A.I. tools available to us in
2025. We took advantage of that increased sophistication to significantly improve our productivity during the
year. In fact, we reduced our annual run rate expense base by roughly $30 million, and we expect that we can
replicate this performance for several years into the future.
A.I. is also causing us to rethink and modify many of our course offerings. For decades, all three of our
Universities have been at the forefront of teaching Computer Science and Information Technology. As
academics, our focus at SEI is not just how to use A.I. to improve the productivity of our own enterprise, but
more importantly, to understand the effect that A.I. has on the size and make-up of the workforce in the
economy as a whole, and how that changes what we need to teach. The positive impact of advancements in
A.I. is the ability of institutions to lower costs and increase productivity. However, there is a negative impact
in the reduced employment opportunity in those areas where low cost and highly accurate artificial intelligence
replaces actual human intelligence. In speaking with our employer partners, it is clear that they are experiencing
similar changes as we have in their own workforces, and indeed that these changes are happening across the
economies of the entire developed world. Some economists have used the metaphor of a K shaped economy
to describe this phenomenon, with one part of the workforce (the upward slant of the K) benefiting from the
adoption of A.I., while another part of the workforce (the downward slant of the K) is disrupted and harmed. I
believe this metaphor is important, because it highlights that the fulcrum in the K shaped economy is one   s
educational and technological adaptability to use A.I.
That fulcrum is where SEI excels. We offer academic programs which give our graduates the cognitive skills
to ask the right questions, to think critically about the answers to those questions, and most importantly to
reach correct conclusions when confronted with competing inputs. Our mission at SEI is to make our graduates
effective users of A.I. tools, and not victims of their adoption. With over a century-long track record of
academic success in periods of rapid technological change, we are well positioned to accomplish that mission,
and we look forward to the challenge.
The beauty of SEI   s business model (and our good fortune as its shareholders) is its ability to produce
significant value for our students, while at the same time producing robust financial returns. As SEI is a
generator of financial capital, it is incumbent on our management team and board of directors to deploy that
generated capital wisely. To help you keep score, this is how we did it in 2025. SEI began 2025 with $199
million of cash and marketable securities, no debt, and 24 million shares outstanding. During 2025 SEI
generated $247 million of pretax operating cash flow, which was a 14% increase over the prior year. During
the year, we used that cash as follows. First, we paid $49 million in local, state, federal and international taxes.
Next, we invested $44 million in capital expenditures.
This left us with $154 million in owners    distributable cash flow, or $6.57 per share, which was both a healthy
20% increase over the prior year, and compares very favorably to our $6.21 of adjusted earnings per share. We
used $57 million of that cash to pay our $2.40/share annual common dividend, and combined the remaining
$97 million with an additional $43 million from our balance sheet to repurchase a total of $140 million of our
common stock in the open market. We also used an additional $10 million to net settle restricted shares which
vested during the year. Our open market purchases allowed us to reduce SEI share count by 1.7 million shares
(or roughly 7 %), at an average price of $81.30 per share. That capital deployment left us at year end 2025 with
$153 million of cash and marketable securities on our balance sheet, 22.8 million shares outstanding, no debt,
and a US Department of Education financial composite score of 1.9.
Long-term shareholders of SEI will no doubt notice in 2025 a heavier than normal allocation of owner   s capital
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to the repurchase of our own shares, which I believe deserves some explanation. Put simply, we felt in 2025
that the market put our equity on sale, and we were happy to take advantage of the opportunity to be the buyer.
The first use of our capital is always to fully fund our organic internal opportunities to invest in our enterprise.
These opportunities might include new academic courses and program development, incremental marketing
expenditures to build our brand awareness, or expansions of both our physical plant and technology suite. In
2025 we accomplished all of that, and then gave our existing shareholders a 7% bigger share of our enterprise
going forward, at what we perceived to be a very attractive valuation.
As a Board of Directors, our capital allocation priorities in 2026 will remain consistent with our history: first,
fully funding our academic institutions and their various growth opportunities; second, managing our balance
sheet to attain the US Department of Education financial composite score at or near the highest possible level
of 3.0; and third, prudently returning any excess distributable cash to our owners, both with our common
dividend, and if conditions are appropriate, with opportunistic share repurchases. In 2025, the conditions were
very appropriate for share repurchases. In 2026, we shall see. As a Board, we always weigh all uses of capital
against the standard of what will create the highest long-term increase in the per share value of our enterprise.
SEI   s overall performance in 2025 reinforced five basic characteristics about our enterprise and business
model. First, providing high quality post-secondary education creates significant value for its recipients, and
done efficiently, can also create significant value for its providers, generating above average returns on the
financial capital necessary to support its operations.
Second, high quality post-secondary academic institutions are, and more importantly, are perceived to be, a
public good. Additionally, our students benefit from very favorable credit terms to finance their education
through government supported or issued loans. For both of these reasons, our enterprise is highly regulated,
and it is important to manage our operations with that in mind. The regulatory structure may wax and wane
based on the ideological and philosophical bents of the powers that be, but it is always there.
Third, at SEI we benefit from a very strong portfolio of complimentary and mutually supporting educational
assets. That portfolio provides significant scale which allows us to take advantage of best academic practices
to improve student learning outcomes across all of our platforms. It also provides us with the financial strength
to constantly explore new opportunities for innovation, investment, and growth. Unlike a number of
undercapitalized educational institutions, we can take a very long view of both risks and opportunities,
knowing that when one of our assets is challenged for any number of reasons, others of our assets are likely to
be outperforming.
Fourth, based on our 2025 results, we remain on track for the notional economic model we put forth at our
investor day in November 2023. Specifically, that over a five year cycle, we can grow our revenue at a
compounding rate of 4-6%, limit our expense growth to a compounding rate of 2-3%, and therefore compound
our cash flow and earnings metrics over that time frame by approximately 20% per annum.
Fifth, all of these observations pale in significance to the overwhelming reality of our enterprise: nothing
matters unless we at the most basic level accomplish our mission in the classroom. Everything depends on our
students    academic performance. That is how it has been, and how it always will be.
To conclude, on behalf of your entire Board of Directors, I would like to once again thank you for the
opportunity to have been the stewards of your invested capital over the last year. As a board (and shareholders
ourselves) we are very fortunate to have our enterprise led by a seasoned management team with a long track
record of growing and nurturing educational assets. Led by our CEO, Karl McDonnell, who has been with us
since 2005, the average tenure at the company of our senior leaders is nearly 20 years. That collective
experience brings judgment, and a keen eye for both opportunities and risks. We are well served as shareholders
by their leadership.
Karl, Dan Jackson (our CFO), and I all look forward to speaking with you in the upcoming year. We are always
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3/11/2026 Letter Continued (Full PDF)

 

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