Strategic Education (STRA) Q3 2026 Earnings Call: Australien belastet Ausblick für 2027

Wichtigste Erkenntnisse

• Der Umsatz im dritten Quartal belief sich auf 320 Millionen US-Dollar und blieb im Jahresvergleich nahezu unverändert. Das operative Ergebnis ging um 2 % auf 50 Millionen US-Dollar zurück, während die operative Marge um 30 Basispunkte auf 15,7 % fiel.
• Der Gewinn je Aktie stieg um 4 % auf 1,69 US-Dollar, begünstigt durch eine geringere Aktienanzahl infolge von Rückkäufen. Der freie Cashflow für die ersten neun Monate legte um 8 % auf 137 Millionen US-Dollar zu.
• Education Technology Services blieb das stärkste Segment: Der Umsatz stieg um 12 % auf 43 Millionen US-Dollar und das operative Ergebnis um 14 % auf 18 Millionen US-Dollar. Der Umsatz von Sophia Learning legte um 20 % zu.
• Die Zahl der Einschreibungen im Segment U.S. Higher Education ging um 1 % zurück, doch die Einschreibungen im Gesundheitswesen wuchsen um 9 % und machten 54 % der Gesamteinschreibungen des Segments aus. Die Verbleiberate der Studierenden erreichte einen Rekordwert von 89,2 %.
• In Australien sanken die Einschreibungen um 9 % und der Umsatz fiel um 7 %, da strengere Visabestimmungen für internationale Studierende die Nachfrage belasteten. Das Unternehmen verbuchte eine nicht zahlungswirksame Wertminderung in Höhe von 134 Millionen US-Dollar auf den australischen Firmenwert und immaterielle Vermögenswerte.
• Das Management erwartet für 2027 einen konsolidierten Umsatz auf dem Niveau von 2026 und plant Wachstumsinvestitionen von rund 50 Millionen US-Dollar, vor allem in den Bereichen ETS, US-Gesundheitswesen und auf dem australischen Inlandsmarkt.

Wichtigste Finanzdaten

Sofern nicht anders angegeben, bezog sich das Management auf bereinigte Ergebnisse auf währungsbereinigter Basis ohne die Wertminderung in Australien in Höhe von 134 Millionen US-Dollar.

Geschäftliche und operative Entwicklung

Education Technology Services

Der Umsatz von Sophia Learning wuchs um 20 % auf 21 Millionen US-Dollar, während die durchschnittliche Gesamtzahl der Abonnenten um 22 % zulegte. Dem Management zufolge lag das Abonnentenwachstum im Direct-to-Consumer-Bereich bereinigt um den Basiseffekt eines großen Unternehmenskunden weiterhin bei fast 20 %.

Workforce Edge schloss das Quartal mit 83 Unternehmensvereinbarungen ab, die rund 4 Millionen Beschäftigte abdecken. Die Einschreibungen über Workforce Edge bei Strayer oder Capella stiegen um 4 % auf etwa 4.000 Studierende.

Das Unternehmen plant, die ETS-Produkt-Roadmap im Jahr 2027 zu beschleunigen. Das Management geht davon aus, dass die Ausgaben ein höheres Umsatzwachstum im Rahmen seines Fünfjahresplans unterstützen, die Marktposition von Sophia sichern und die Neukundengewinnung von Unternehmenskunden bei Workforce Edge stärken werden.

U.S. Higher Education

Ein höherer Umsatz pro Studierendem glich den Rückgang der Einschreibungen um 1 % aus, sodass der Segmentumsatz nahezu unverändert blieb. Die Betriebskosten stiegen um weniger als 1 %, einschließlich fortlaufender Wachstumsinvestitionen.

Der Gesundheitsbereich blieb der wichtigste Wachstumstreiber. Die Einschreibungen stiegen um 9 % und machten 54 % der gesamten Einschreibungen im Segment U.S. Higher Education aus – nach 49 % im Vorjahr. Rund 38 % der Einschreibungen im Gesundheitsbereich erfolgten über Arbeitgeberpartner.

Der Anteil der Studierenden mit Arbeitgeberanbindung erreichte 35 % der gesamten Einschreibungen im Segment U.S. Higher Education, was einem Anstieg um 200 Basispunkte entspricht. Gleichzeitig stieg die Verbleiberate auf ein Allzeithoch von 89,2 %.

Die frühe Nachfrage nach dem Bachelor of Science in Nursing (Pre-Licensure) von Capella und dem Associate of Applied Science in Radiologic Technology von Strayer übertraf die anfänglichen Annahmen des Managements. Das Unternehmen hob zudem das Licensed Practical Nurse Diploma von Strayer und das erweiterte Nurse-Practitioner-Portfolio von Capella hervor.

Australien

Das Management führte den Rückgang der Einschreibungen vollständig auf internationale Studierende zurück. Die Zahl neuer Visaerteilungen verlangsamte sich drastisch und brach in einigen Monaten im Jahresvergleich um bis zu 80 % ein. Eine neue Visabestimmung für internationale Studierende beim Wechsel der Bildungseinrichtung brachte zudem den Onshore-Transfermarkt praktisch zum Erliegen.

Die Inlandsnachfrage erwies sich als widerstandsfähiger. Die inländischen Neueinschreibungen wuchsen sowohl im zweiten als auch im dritten Quartal um 9 % und machten knapp 70 % der australischen Neueinschreibungen aus.

Strategic Education plant, seinen Campus in Adelaide auszubauen, zusätzliche Studiengänge in den Gesundheitswissenschaften einzuführen und Ende 2027 einen Campus in Perth zu eröffnen. Das Management erklärte, das australische Wachstumskapital konzentriere sich auf den Inlandsmarkt, anstatt auf eine Lockerung der internationalen Beschränkungen zu setzen.

Ausblick des Managements

Das Management erklärte, es sei unwahrscheinlich, dass die Ergebnisse für das Gesamtjahr 2026 im Rahmen des indikativen Ausblicks des Unternehmens liegen werden, da sich das Umfeld für internationale Einschreibungen in Australien nach dem ersten Halbjahr verschlechtert habe.

Für 2027 formulierte das Management folgende Erwartungen:

• Der konsolidierte Umsatz wird aller Voraussicht nach auf dem Niveau von 2026 verharren.
• Für ETS wird ein Wachstum erwartet, während U.S. Higher Education, getragen von der Stärke im Gesundheitsbereich, ein geringeres Wachstum verzeichnen könnte.
• Es wird erwartet, dass anhaltende Restriktionen in Australien das Wachstum in anderen Bereichen neutralisieren.
• Die Wachstumsinvestitionen dürften sich voraussichtlich auf insgesamt rund 50 Millionen US-Dollar belaufen.
• Produktivitätssteigerungen aus dem Jahr 2026 dürften fast die Hälfte dieser Ausgaben ausgleichen und das Wachstum der Betriebskosten auf 2 % begrenzen.
• Die Segmentmarge von ETS könnte um rund 300 bis 400 Basispunkte sinken, während bei U.S. Higher Education und Australien geringere Margeneffekte erwartet werden.
• Das Wachstum bei den neuen Studierenden in Australien könnte in der zweiten Jahreshälfte 2027 wieder positiv werden; das Gesamtwachstum bei den Einschreibungen könnte Anfang 2028 folgen.

Das Management zeigte sich zuversichtlich, dass diese Investitionen das Unternehmen ab 2028 wieder zu seinen angestrebten Wachstumsraten zurückführen könnten. Dieser Ausblick hängt von einer anhaltenden Stärke bei ETS, im US-Gesundheitswesen und bei den australischen Inlandseinschreibungen ab.

Risiken und Beobachtungspunkte

• Die internationalen Einschreibungen in Australien bleiben durch langsamere Visaerteilungen und strengere Transferanforderungen beeinträchtigt.
• Zeitpunkt und Ausmaß einer möglichen Lockerung der australischen Restriktionen bleiben ungewiss, und das Management richtet seine inländische Wachstumsstrategie nicht auf ein solches Szenario aus.
• Die für 2027 geplanten Investitionen dürften die Segmentmargen belasten, bevor die erwarteten Wachstumseffekte eintreten.
• Die Einschreibungen von US-Undergraduates ohne Arbeitgeberanbindung stehen weiterhin unter Druck, wenngleich das Management erwartet, dass sich der Rückgang im Laufe des Jahres 2027 abschwächt und bis zum Jahresende möglicherweise eine Stagnation oder wieder ein Wachstum erreicht wird.
• Das Management beobachtet Veränderungen im Suchverhalten von Studieninteressierten im Zusammenhang mit großen Sprachmodellen und Answer-Engine-Optimierung, erklärte jedoch, bislang keine wesentlichen negativen Auswirkungen festgestellt zu haben.

Wichtigste Punkte der Analysten-Fragerunde

Das Management rechnet für 2027 mit einem unterm Strich positiven Wachstum bei den Neueinschreibungen im Segment U.S. Higher Education. Zudem erwartet es, dass sich das Segment im Jahresverlauf gestützt auf das Gesundheitswesen und Pre-Licensure-Programme einem Wachstum im mittleren einstelligen Prozentbereich annähern wird.

In Bezug auf Australien erklärte das Management, das Unternehmen könnte einer Normalisierung des internationalen Einschreibungsumfelds näher sein, die aktuelle Investitionsstrategie setze jedoch eher auf inländisches Wachstum als auf regulatorische Erleichterungen.

Hinsichtlich des verlangsamten Abonnentenwachstums von Sophia Learning führte das Management die Veränderung fast ausschließlich auf den Vergleich mit einem großen Unternehmenskunden zurück, der im Vorjahreszeitraum hinzugekommen war. Ohne diesen Kunden lag das Abonnentenwachstum im Direct-to-Consumer-Bereich weiterhin bei fast 20 %.

Das Management erklärte zudem, dass die Immatrikulationsquote (Admission Yield) und die Akquisitionskosten im Verhältnis zum Lifetime Value nahe an Allzeithochs lagen – trotz anhaltender Veränderungen bei der Art und Weise, wie Studieninteressierte nach Colleges und Universitäten suchen.

Vollständiges Transkript der Ergebnis-Telefonkonferenz

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Welcome to Strategic Education's Third Quarter 2026 Results Conference Call. I will now turn the call over to Terese Wilke, Senior Director of Investor Relations for Strategic Education. Mrs. Wilke, please go ahead.

Terese Wilke

Thank you. Hello, everyone, and welcome to Strategic Education's conference call in which we will discuss third quarter 2026 results. With us today are 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 our website at strategiceducation.com.

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

Karl McDonnell

Thank you, Terese, and good morning, everyone. Our third quarter results reflect continued strength in the parts of SEI where we have been investing for growth, Education Technology Service, our broad employer strategy and our U.S. health care portfolio. The strength in these areas, however, was mostly offset in the third quarter by our Australia segment, where the environment has proved more challenging than we expected.

This morning, I'll briefly review the quarter, and then I'll walk through each of our segments. As I do, I'll discuss the opportunities behind our intent to make 2027 a year of increased growth investments. As always, unless I note otherwise, my comments refer to adjusted results on a constant currency basis, and those results exclude the $134 million noncash impairment of goodwill and intangible assets in Australia that we recorded this quarter and which I will discuss with that segment.

Third quarter revenue was $320 million, essentially flat with the prior year. We did hold operating expense growth to less than 1%, resulting in operating income of $50 million, a 2% decrease, and an operating margin of 15.7%, 30 basis points below the prior year. Earnings per share increased 4% to $1.69, reflecting a lower share count from share repurchases. Through the first 9 months of this year, free cash flow increased 8% to $137 million.

Turning now to our segments. Education Technology Services continued its strong performance. Revenue grew 12% to $43 million. Operating income grew 14% to $18 million and operating margin expanded 80 basis points to 42.5%. Sophia Learning average total subscribers grew 22% and revenue grew 20% to $21 million. Workforce Edge ended the quarter with 83 corporate agreements covering approximately 4 million employees, and enrollments from Workforce Edge into Strayer or Capella grew 4% to roughly 4,000 students.

SEI was recently named to Business Insider's 2027 list of Most Innovative Companies, a recognition that reflects much of the work that is being done within ETS. Given the strong demand across ETS and given our desire to accelerate our product road map to serve that demand, our intent is to increase our growth investments in ETS in 2027. These investments will slightly reduce the ETS segment-level operating margin next year, but will also result in higher revenue growth in our current 5-year plan, defend Sophia's market leadership position and strengthen Workforce Edge's ability to sign new corporate clients.

Turning now to U.S. Higher Education. Total U.S. Higher Education enrollment declined 1% to approximately 84,700 students as growth in employer-affiliated enrollment was offset by lower unaffiliated enrollment. Revenue was essentially flat at $214 million as higher revenue per student offset the enrollment decline. Our productivity initiatives continue to hold operating expense growth to less than 1%, including continued investments in growth. Operating income was $22 million, a 4% decline, and an operating margin of approximately 10%. Student retention reached 89.2%, a new all-time high for U.S. Higher Education.

Our health care portfolio continues to be the strongest source of growth in U.S. Higher Education. Health care enrollment grew 9% in the quarter and now represents 54% of total U.S. Higher Education enrollment, up from 49% a year ago, an increase of 500 basis points over the last year. Health care is also central to our broad employer strategy. Roughly 38% of our health care enrollment comes from employer partners, and employer-affiliated enrollment overall reached 35% of U.S. Higher Education total enrollment, up 200 basis points from the prior year.

We are now extending that portfolio into licensure-track programs. Earlier this year, Capella enrolled the first cohort in its pre-licensure Bachelor of Science in Nursing program and Strayer enrolled its first students in the new Associate of Applied Science in Radiologic Technology. Early demand for both programs has exceeded our initial assumptions. These 2 programs join Strayer's Licensed Practical Nurse Diploma and Capella's expanded Nurse Practitioner portfolio, all aimed at the health care talent our employer partners increasingly need.

To support that demand, we intend to also increase our growth investments in U.S. health care in 2027 with funding for new programs, clinical faculty, expanded clinical and instructional capacity. This will allow programs like pre-licensure nursing and radiologic technology to grow at the pace their demand supports.

Turning to Australia. Total enrollment declined 9% to approximately 17,100 students and revenue declined 7% to $64 million. The Australian team continued to manage costs well with operating expenses down 4%, and operating income was $10 million compared with $12.5 million in the prior year and an operating margin of approximately 16%.

The decline is entirely a function of international enrollment. Over the course of this year, the Australian government restrictions on international students have become materially more severe than we anticipated. New visa approvals for prospective students have slowed sharply, and in some months, declining as much as 80% versus the prior year. And in addition, the government has effectively closed the onshore transfer market by requiring international students already in Australia to obtain a new visa in order to change institutions. Given this environment, we have lowered our near-term growth expectations for the ANZ segment, which resulted in this quarter's $134 million noncash impairment.

Notwithstanding the headwinds on international enrollment, our domestic enrollment continues to fare well. Domestic new enrollment has grown every quarter this year, including 9% in each of the second and third quarters, and domestic students now represent close to 70% of new enrollment in Australia.

The quality of Torrens' academic experience remains strong and has shown significant improvement over the past year. We were pleased to see Torrens University's performance in the 2025 Quality Indicators for Learning and Teaching Student Experience Survey, the most comprehensive national survey of current higher education students in Australia. Torrens achieved widespread momentum across all undergraduate indicators, including a rise to sixth nationally for undergraduate teaching quality, up significantly from 19th the year before. At the post-graduate level, Torrens continues to lead at the top tier of Australian higher education, ranking in the top 4 nationwide for both skills development and peer engagement alongside a seventh place ranking in post-graduate teaching quality.

This performance against national sector benchmarks reinforces Torrens' value proposition and supports student retention and long-term brand equity in industry-aligned education. The quality of Torrens' academic programs, combined with our own success in growing domestic enrollment gives us confidence to increase our growth investments in Australia's domestic market in 2027. We are expanding our existing Adelaide campus and will launch several new health science programs, and we also plan to open a new campus in Perth in late 2027.

Western Australia is the fastest-growing state in the country with population growth 50% higher than the national average. Greater Perth is projected to add more than 0.5 million residents over the next decade, and its economy is concentrated in the sectors where our new programs are focused, namely health care, engineering, construction and defense. Perth will also position Torrens well for international recruitment from Asia when those constraints ease.

Turning now to an update on our outlook versus our notional model. Given our current forecast for the balance of this year and the fact that the international enrollment environment in Australia deteriorated since the first half of the year, it appears unlikely our full year results will fall inside of our notional outlook. In terms of 2027, given that our forward revenue growth is mostly a product of current year enrollment, we think the most likely outcome for consolidated revenue next year is to be flat with this year.

We expect the cost of the growth investments that I have described this morning to be approximately $50 million in 2027. However, the productivity savings achieved this year will offset nearly half of that, such that year-over-year increase in operating expenses will be limited to just 2%. Given that these incremental investments are targeted to support areas of proven strength at SEI, that is our 2 high-growth, high-margin platform businesses, our U.S. health care portfolio and our domestic market growth in Australia, we have a high degree of confidence in their ability to return the company to its notional growth rates in 2028 and beyond.

Regarding capital allocation, in addition to our regular quarterly dividend, we repurchased approximately 347,000 shares during the quarter for a total of $28.5 million. We ended the quarter with $139 million of cash and marketable securities and no debt. And finally, as always, I'd like to take this opportunity to thank all of my colleagues here at SEI for their ongoing commitment and support to our students and our corporate partners.

And with that, Victor, we'd be happy to take questions.

Operator

[Operator Instructions] Our first question will come from the line of Jeff Silber from BMO Capital Markets.

Fragen und Antworten

Jeffrey Silber

Karl, I really appreciate you giving us some insight into 2027. I was hoping I could just double-click on that a little bit. Is it possible to talk about the different segments? Like, say, overall, you think revenue most likely flat, but could we see growth in ETS offset by declines in the other two? And then from a margin perspective, where do you think you'd have the most impact in terms of declining margins potentially next year?

Karl McDonnell

I think we're going to have -- we're absolutely going to have growth in ETS, Jeff. I suspect we'll have lower growth in U.S. Higher Education, driven by the strength of the health care portfolio that I just described. Overall, that will be offset by the continuation of the restrictions in Australia, although we do expect that with the addition of the Perth campus, the expanded programs in Adelaide, launching several asynchronous online programs throughout Australia, we do expect that new student growth in Australia will be growing year-over-year in the back half of '27.

And just given the headwinds that we've had, it's going to take a few quarters for that to translate into total enrollment growth. So I would expect that probably in the first part of '28. And from a margin standpoint, I would estimate that it could be in the range of 300 to 400 basis points at ETS and a little less than that in U.S. Higher Education and Australia.

Jeffrey Silber

Okay. That's really helpful. I really appreciate that. Moving back to, I guess, the U.S. We had an election earlier this week. I'm not asking you for your crystal ball, but given guys where you're located, you're probably closer to most in terms of what's going on and what potentially could go on. Any changes you're expecting with the changeover in Congress towards Democratic control?

Karl McDonnell

Well, I'd say that in the U.S., we have a high degree of confidence in sort of the regulatory and quality posture of both Strayer and Capella. We try to work constructively with any regulators or members of Congress or the administration regardless of party affiliation, and we look forward to engaging with them once the new Congress is inaugurated in January.

Operator

And our next question will come from the line of Alex Paris from Barrington Research.

Alexander Paris

I too appreciate the granular detail by segment and the look at 2027. I just had a question on unaffiliated enrollment. Obviously, it was down 4%. It's actually an improvement from the second quarter by my math, which -- when it was down 5.5%. But it's been down for 8 consecutive quarters now. And you've consistently said you do anticipate returning to mid-single digits at some point, but it's not an area of focus, I get it. I'm wondering, has there been an impact on the funnel from LLM, AI search and so on? And could that be a contributing factor?

Karl McDonnell

Alex, first of all, on unaffiliated enrollment, that's predominantly undergraduate business. It's an area that's important to us, but it's not one of our main strategic priorities in the way that health care is. You're right that the rate of decline moderated in the third quarter. We expect it to continue to moderate throughout 2027, perhaps even reaching breakeven or growth by the end of 2027.

And then in terms of LLM, it's certainly something that we're watching. But we have -- we've been focused on a quality of demand over quantity of demand for going on 2 years now. So we don't peg rate of increase or decrease in any inquiry volume that we're getting as being most important. We're looking at admission yield and sort of the acquisition cost to lifetime value. And both of those are near all-time highs. Obviously, we want to be relevant and favorably represented in any search medium that people are using, including LLMs. So we have a lot of people that are focused on it. But I can't say that we've really seen any adverse impact from it yet.

Alexander Paris

What are you specifically doing to respond to the changes in the way students look at colleges and universities?

Karl McDonnell

It's a multifunction, multidisciplinary set of initiatives that we have. I don't really want to go into details on this call, but we do have a robust set of things that we're doing that we have a pretty high level of confidence will help position us well, not just in LLMs, but frankly, in any search medium that people may use.

Alexander Paris

Obviously, it's important. But again, just to be clear, you've not really seen any material impact from the AEO as opposed to SEO on unaffiliated enrollment?

Karl McDonnell

Yes. Because -- I mean, put yourself in our position, Alex, it would be next to impossible to ascribe any rate of change to LLM or any other single variable. We're happy with the demand that we're getting. In health care, in particular, it's much stronger than what we expected. The growth of those new programs is far ahead of where we expected them to be by as much as a year perhaps. But we're not ignoring it. We have people that are focused on it. We expect that over time, the evolution will become more apparent. I just would say it's very early, and we haven't been able to ascribe any changes to that specifically.

Alexander Paris

Got you. And then my last question quickly on ANZ. I appreciate you are controlling the controllables, campus expansions, new campuses, a focus on domestic. But is there any light at the end of the tunnel with regulatory? Obviously, this has been going on for a couple of years now. And we thought that there'd be an improvement this year because of the lifting of the caps. But by slow rolling the visas, it's had an even more dramatic effect on international enrollment. Any additional color there would be great.

Karl McDonnell

I was a little surprised, frankly, that the transfer requirement to get a new Visa was implemented. That was not something that we anticipated. It is what it is. Eventually, we're going to get to a new normal, a normalized rate of international enrollment. I think we're much closer to that as opposed to being further away from it. And if we continue to grow domestic growth in the high single digits as we're doing or frankly, even in the low double digits when we add the additional capacity in Adelaide and Perth, eventually, that's going to result in new student growth, which, as I said in my prepared remarks, I think could be in the latter half of next year, leading to total enrollment growth in the first part of '28.

And then if we get an easing of these restrictions, which some people in Australia think will happen over the coming several years, then that will just be added sort of enrollment that we'll get. We're not building a strategy around it. We're accepting it for what it is and building all of our growth capital around the domestic market. And given, as I said, the strong performance of Torrens academically in the federal QILT survey, we think we're well positioned to grow our domestic market share.

Operator

[Operator Instructions] Our next question will come from the line of Jasper Bibb from Truist Securities.

Jasper Bibb

Apologies if I missed it, but I guess I just wanted to understand how you're thinking about EBIT margin expansion in '26 at this point. I guess, for me, it would be helpful if you could kind of frame 4Q expectations so we have the right jumping off point for all the kind of helpful '27 color you gave on the call.

Karl McDonnell

Jasper, yes, it might be a bad connection. I'm not sure I got the full question. I think it was '26 EBIT margin. Was that your question?

Jasper Bibb

Yes, I apologize. I'm switching to speaker phone now. Hopefully, you can hear me better...

Karl McDonnell

That's much better.

Jasper Bibb

I just wanted to understand kind of 4Q expectations so we have the right jumping off point for kind of all the '27 comments you gave earlier on the call.

Daniel Jackson

Jasper, you talking about margin, right?

Jasper Bibb

Yes, margin or, I mean, revenue, if you have it?

Daniel Jackson

Yes. Well, we don't give revenue -- forward-looking revenue, and -- but we have commented on margin, as you know, relative to the notional model of 200 basis points of expansion. Karl just mentioned that we're well off of that at this point. However, as we said last quarter, when you adjust for the FWO reserve we took in the second quarter, we're actually not too far off of the 200 basis points.

Jasper Bibb

Okay. And then I just maybe wanted to -- if we could spend a little bit more time on just kind of what you're seeing in U.S. Higher Ed right now and kind of how that's informing your expectations for '27? Enrollment is down like a little bit, but I think retention is going up. So I would assume new starts in the U.S. might be down more than enrollment right now. I guess, could you just kind of frame what you're seeing in new starts in the U.S. and how that informs your expectations for next year?

Karl McDonnell

Sure. Well, as I said, health care is very strong, growing almost double digits, 9% in the last quarter. It's well over half of our enrollments now. So we're confident that, that's going to continue to grow. And I suspect the growth rate will increase given the strength of the new pre-licensure programs. The undergraduate unaffiliated has been declining. Part of that is just a function that we've been deploying more of our growth capital into health care and not into undergraduate business. As Alex noted, and I confirm that the decline is moderating. We think it will continue to moderate.

So net of everything that we're seeing, I suspect that we're going to have net positive new student enrollment growth in '27. And the division as a whole will sort of mean revert toward mid-single digits as we work our way through the year.

Jasper Bibb

Okay. That makes sense. Maybe last one for me. The subscriptions at Sophia just slowed a little bit from the second quarter. Is that kind of harder comps? Or have you seen any impact on subs growth or retention from kind of the recent changes you made to the platform over the summer?

Karl McDonnell

It's almost entirely a function of anniversarying that large corporate client that we have. If you excluded that corporate client, direct-to-consumer subscription growth is still close to 20% and growing, holding that growth rate. So it's really a function of the anniversarying of that one client that's quite large.

Operator

I'm not showing any further questions at this time. I'd like to turn it back over to Karl McDonnell, CEO, for closing remarks.

Karl McDonnell

Thank you, everybody. We look forward to discussing our fourth quarter results with you in February.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.