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Strategic Education, Inc. Reports Third Quarter 2021 Results

Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended September 30, 2021.

“While conditions in the U.S. Higher Education segment continue to be challenged due primarily to pandemic-related impacts, we are encouraged by strong performance in our Alternative Learning segment, and by the potential for reopening of the Australia borders for international students by the end of the year,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “We remain committed to the success of our students and to our mission to enable economic mobility.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

[Note: Strategic Education’s financial results for any periods ended prior to November 3, 2020 do not include the financial results of the Australia/New Zealand acquisition and are therefore not directly comparable.]

Three Months Ended September 30

  • Revenue increased 13.0% to $270.1 million compared to $239.0 million for the same period in 2020. Adjusted revenue, which is a non-GAAP financial measure and excludes a foreign currency exchange impact, increased 13.3% to $270.7 million compared to $239.0 million for the same period in 2020. For more details on non-GAAP financial measures, refer to the information in the Non-GAAP Financial Measures section of this press release.
  • Income from operations was $7.3 million or 2.7% of revenue, compared to $15.4 million or 6.5% of revenue for the same period in 2020. Adjusted income from operations, which is a non-GAAP financial measure, was $20.8 million in 2021 compared to $37.8 million for the same period in 2020. The adjusted operating income margin, which is a non-GAAP financial measure, was 7.7% compared to 15.8% for the same period in 2020.
  • Net income was $3.9 million in 2021 compared to $11.0 million for the same period in 2020. Adjusted net income, which is a non-GAAP financial measure, was $14.2 million compared to $27.4 million for the same period in 2020.
  • Adjusted EBITDA, which is a non-GAAP financial measure, was $38.7 million compared to $52.4 million for the same period in 2020.
  • Diluted earnings per share was $0.16 compared to $0.47 for the same period in 2020. Adjusted diluted earnings per share, which is a non-GAAP financial measure, decreased to $0.59 from $1.18 for the same period in 2020. Diluted weighted average shares outstanding increased to 24,113,000 from 23,214,000 for the same period in 2020, due primarily to new shares issued to facilitate the acquisition of Torrens University and associated assets in Australia and New Zealand.

U.S. Higher Education Segment Highlights

  • The U.S. Higher Education segment (USHE) is comprised of Strayer University and Capella University.
  • For the third quarter, student enrollment within USHE decreased 12.9% to 77,574 compared to 89,042 for the same period in 2020.
  • For the third quarter, FlexPath enrollment was 19% of USHE enrollment compared to 14% for the same period in 2020.
  • Revenue decreased 16.7% to $191.9 million in the third quarter of 2021 compared to $230.3 million for the same period in 2020, driven by lower third quarter enrollment and lower revenue-per-student.
  • Income from operations decreased to $5.2 million in the third quarter of 2021 from $33.7 million for the same period in 2020. The operating income margin was 2.7%, compared to 14.6% for the same period in 2020.
  • Strayer University has now reopened 46 campuses that had been closed during the COVID-19 pandemic, and the majority of remaining campuses are expected to be reopened by the end of 2021.

Alternative Learning Segment Highlights

  • The Alternative Learning segment is comprised primarily of Employer Solutions, Sophia Learning, and Workforce Edge.
  • For the third quarter, employer affiliated enrollment was 21.1% of USHE enrollment compared to 18.3% for the same period in 2020.
  • As of September 30, 2021, Workforce Edge had a total of 22 corporate agreements, collectively employing approximately 430,000 employees.
  • Revenue increased 48.7% to $13.0 million in the third quarter of 2021 compared to $8.7 million for the same period in 2020, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.
  • Income from operations increased to $5.2 million in the third quarter of 2021 from $4.1 million for the same period in 2020. The operating income margin was 40.0%, compared to 47.2% for the same period in 2020.

Australia/New Zealand Segment Highlights

  • The Australia/New Zealand segment (ANZ) is comprised of Torrens University, Think Education, and Media Design School.
  • For the third quarter, student enrollment within ANZ was 18,188.
  • Revenue was $65.2 million in the third quarter of 2021, and adjusted revenue, which is a non-GAAP financial measure, was $65.9 million.
  • Income from operations was $10.4 million or 15.9% of revenue in the third quarter of 2021, and adjusted income from operations, which is a non-GAAP financial measure, was $10.4 million or 15.8% of adjusted revenue.

BALANCE SHEET AND CASH FLOW

At September 30, 2021, Strategic Education had cash, cash equivalents, and marketable securities of $305.0 million, and $141.6 million outstanding under its revolving credit facility. For the first nine months of 2021, cash provided by operations was $161.2 million compared to $158.8 million for the same period in 2020. Capital expenditures for the first nine months of 2021 were $33.6 million compared to $34.8 million for the same period in 2020. Capital expenditures for 2021 are expected to be between $45 million and $50 million.

For the third quarter of 2021, consolidated bad debt expense as a percentage of revenue was 3.8%, compared to 4.7% of revenue for the same period in 2020.

COMMON STOCK CASH DIVIDEND

Strategic Education announced today that it declared a regular, quarterly cash dividend of $0.60 per share of common stock. This dividend will be paid on December 6, 2021 to shareholders of record as of November 29, 2021.

CONFERENCE CALL WITH MANAGEMENT

Strategic Education will host a conference call to discuss its third quarter 2021 results at 10:00 a.m. (ET) today. To participate in the live call, investors should dial (877) 303-9047 ten minutes prior to the start time. In addition, the call will be available via webcast. To access the live webcast of the conference call, please go to www.strategiceducation.com in the Investor Relations section 15 minutes prior to the start time of the call to register. An earnings release presentation will also be posted to www.strategiceducation.com in the Investor Relations section. Following the call, the webcast will be archived and available at www.strategiceducation.com in the Investor Relations section.

About Strategic Education, Inc.

Strategic Education, Inc. (NASDAQ: STRA) (www.strategiceducation.com) is dedicated to helping advance economic mobility through higher education. We primarily serve working adult students globally through our core focus areas: 1) U.S. Higher Education, including Strayer University and Capella University, each institutionally accredited, and collectively offer flexible and affordable associate, bachelor’s, master’s, and doctoral programs including the Jack Welch Management Institute at Strayer University, and non-degree web and mobile application development courses through Strayer University’s Hackbright Academy and Devmountain; 2) Alternative Learning, encompassing Employer Solutions, developing and maintaining relationships with large employers; Workforce Edge, a full service, online employee education management platform; Sophia Learning, self-paced general education courses that are ACE-recommended for college credit; and Digital Enablement Partnerships, helping advance capabilities in course development, online delivery, and student support; and 3) Australia/New Zealand, comprised of Torrens University, Think Education, and Media Design School that collectively offer certificate and degree programs in Australia and New Zealand. This portfolio of high quality, innovative, relevant, and affordable programs and institutions helps our students prepare for success in today’s workforce and find a path to bettering their lives.

Forward-Looking Statements

This communication contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by the use of words such as “expect,” “estimate,” “assume,” “believe,” “anticipate,” “may,” “will,” “forecast,” “outlook,” “plan,” “project,” “potential” and other similar words, and include all statements that are not historical facts, including with respect to, among other things, the future financial performance and growth opportunities of Strategic Education; Strategic Education’s plans, strategies and prospects; and future events and expectations. The statements are based on Strategic Education’s current expectations and are subject to a number of assumptions, uncertainties and risks, including but not limited to:

  • the pace of student enrollment;
  • Strategic Education’s continued compliance with Title IV of the Higher Education Act, and the regulations thereunder, as well as other federal laws and regulations, institutional accreditation standards and state regulatory requirements;
  • rulemaking by the Department of Education and increased focus by the U.S. Congress on for-profit education institutions;
  • competitive factors;
  • risks associated with the further spread of COVID-19, including the ultimate impact of COVID-19 on people and economies;
  • the impact of regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19, including restrictions on business operations or social distancing requirements;
  • risks associated with the opening of new campuses;
  • risks associated with the offering of new educational programs and adapting to other changes;
  • risks associated with the acquisition of existing educational institutions, including in the case of Strategic Education’s acquisition of Torrens University and associated assets in Australia and New Zealand, the risk that the benefits of the acquisition may not be fully realized or may take longer to realize than expected, and the risk that the acquisition may not advance Strategic Education’s business strategy and growth strategy;
  • risks relating to the timing of regulatory approvals;
  • Strategic Education’s ability to implement its growth strategy;
  • the risk that the combined company may experience difficulty integrating employees or operations;
  • risks associated with the ability of Strategic Education’s students to finance their education in a timely manner;
  • general economic and market conditions; and
  • additional factors described in Strategic Education’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Many of these risks, uncertainties and assumptions are beyond Strategic Education’s ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, these forward-looking statements speak only as of the information currently available to Strategic Education on the date they are made, and Strategic Education undertakes no obligation to update or revise forward-looking statements, except as required by law. Actual results may differ materially from those projected in the forward-looking statements.

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

 

 

For the three months ended

September 30,

 

For the nine months ended

September 30,

 

2020

 

2021

 

2020

 

2021

Revenues

$

239,026

 

$

270,078

 

 

$

760,159

 

$

859,587

Costs and expenses:

 

 

 

 

 

 

 

Instructional and support costs

 

127,174

 

 

153,651

 

 

 

385,654

 

 

459,394

General and administration

 

74,069

 

 

95,714

 

 

 

210,596

 

 

275,954

Amortization of intangible assets

 

15,417

 

 

8,932

 

 

 

46,251

 

 

47,731

Merger and integration costs

 

2,920

 

 

1,111

 

 

 

7,858

 

 

4,060

Restructuring costs

 

4,024

 

 

3,322

 

 

 

4,024

 

 

26,400

Total costs and expenses

 

223,604

 

 

262,730

 

 

 

654,383

 

 

813,539

Income from operations

 

15,422

 

 

7,348

 

 

 

105,776

 

 

46,048

Other income (expense)

 

912

 

 

(1,848

)

 

 

4,674

 

 

1,076

Income before income taxes

 

16,334

 

 

5,500

 

 

 

110,450

 

 

47,124

Provision for income taxes

 

5,374

 

 

1,646

 

 

 

30,099

 

 

13,717

Net income

$

10,960

 

$

3,854

 

 

$

80,351

 

$

33,407

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.48

 

$

0.16

 

 

$

3.62

 

$

1.39

Diluted

$

0.47

 

$

0.16

 

 

$

3.58

 

$

1.38

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

23,004

 

 

23,948

 

 

 

22,193

 

 

23,966

Diluted

 

23,214

 

 

24,113

 

 

 

22,432

 

 

24,131

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

December 31,

2020

 

September 30,

2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

187,509

 

 

$

274,774

 

Marketable securities

7,557

 

 

2,632

 

Tuition receivable, net

50,169

 

 

87,123

 

Income taxes receivable

1,429

 

 

 

Assets held for sale

 

 

2,167

 

Other current assets

39,458

 

 

39,785

 

Total current assets

286,122

 

 

406,481

 

Property and equipment, net

158,854

 

 

147,246

 

Right-of-use lease assets

120,687

 

 

121,818

 

Marketable securities, non-current

30,270

 

 

27,567

 

Intangible assets, net

326,420

 

 

278,365

 

Goodwill

1,318,526

 

 

1,280,221

 

Other assets

54,928

 

 

54,424

 

Total assets

$

2,295,807

 

 

$

2,316,122

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

104,742

 

 

$

103,383

 

Income taxes payable

 

 

2,622

 

Contract liabilities

60,501

 

 

123,906

 

Lease liabilities

34,809

 

 

25,737

 

Total current liabilities

200,052

 

 

255,648

 

Long-term debt

141,823

 

 

141,593

 

Deferred income tax liabilities

53,407

 

 

41,024

 

Lease liabilities, non-current

106,151

 

 

139,031

 

Other long-term liabilities

46,055

 

 

43,770

 

Total liabilities

547,488

 

 

621,066

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.01; 32,000,000 shares authorized; 24,418,939 and 24,600,479 shares issued and outstanding at December 31, 2020 and September 30, 2021, respectively

244

 

 

246

 

Additional paid-in capital

1,519,549

 

 

1,525,189

 

Accumulated other comprehensive income

48,880

 

 

1,956

 

Retained earnings

179,646

 

 

167,665

 

Total stockholders’ equity

1,748,319

 

 

1,695,056

 

Total liabilities and stockholders’ equity

$

2,295,807

 

 

$

2,316,122

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

For the nine months ended

September 30,

 

2020

 

2021

Cash flows from operating activities:

 

 

 

Net income

$

80,351

 

 

$

33,407

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Loss on sale of marketable securities

 

 

 

 

781

 

Gain on sale of property and equipment

 

 

 

 

(681

)

Amortization of deferred financing costs

 

250

 

 

 

414

 

Amortization of investment discount/premium

 

108

 

 

 

55

 

Depreciation and amortization

 

78,189

 

 

 

88,188

 

Deferred income taxes

 

(12,867

)

 

 

(12,197

)

Stock-based compensation

 

10,759

 

 

 

12,714

 

Impairment of right-of-use lease assets

 

453

 

 

 

18,914

 

Changes in assets and liabilities:

 

 

 

Tuition receivable, net

 

(1,224

)

 

 

(38,490

)

Other assets

 

(8,684

)

 

 

(6,106

)

Accounts payable and accrued expenses

 

681

 

 

 

(253

)

Income taxes payable and income taxes receivable

 

10,674

 

 

 

4,050

 

Contract liabilities

 

4,540

 

 

 

66,022

 

Other liabilities

 

(4,444

)

 

 

(5,655

)

Net cash provided by operating activities

 

158,786

 

 

 

161,163

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(34,787

)

 

 

(33,632

)

Purchases of marketable securities

 

(1,863

)

 

 

 

Proceeds from marketable securities

 

22,868

 

 

 

9,300

 

Proceeds from sale of property and equipment

 

 

 

 

4,328

 

Other investments

 

(768

)

 

 

(589

)

Net cash used in investing activities

 

(14,550

)

 

 

(20,593

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Net proceeds from issuance of common stock

 

220,248

 

 

 

 

Common dividends paid

 

(41,305

)

 

 

(44,289

)

Net payments for stock awards

 

(24,778

)

 

 

(2,283

)

Repurchase of common stock

 

(247

)

 

 

(5,905

)

Net cash provided by (used in) financing activities

 

153,918

 

 

 

(52,477

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

 

 

(3,280

)

Net increase in cash, cash equivalents, and restricted cash

 

298,154

 

 

 

84,813

 

Cash, cash equivalents, and restricted cash — beginning of period

 

420,497

 

 

 

202,020

 

Cash, cash equivalents, and restricted cash — end of period

$

718,651

 

 

$

286,833

 

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

 

 

For the three months ended

September 30,

 

For the nine months ended

September 30,

 

2020

 

2021

 

2020

 

2021

Revenues:

 

 

 

 

 

 

 

U.S. Higher Education

$

230,311

 

 

$

191,893

 

 

$

733,174

 

 

$

630,647

 

Australia/New Zealand

 

 

 

 

65,224

 

 

 

 

 

 

190,549

 

Alternative Learning

 

8,715

 

 

 

12,961

 

 

 

26,985

 

 

 

38,391

 

Consolidated revenues

$

239,026

 

 

$

270,078

 

 

$

760,159

 

 

$

859,587

 

Income from operations:

 

 

 

 

 

 

 

U.S. Higher Education

$

33,672

 

 

$

5,168

 

 

$

149,180

 

 

$

84,981

 

Australia/New Zealand

 

 

 

 

10,364

 

 

 

 

 

 

23,016

 

Alternative Learning

 

4,111

 

 

 

5,181

 

 

 

14,729

 

 

 

16,242

 

Amortization of intangible assets

 

(15,417

)

 

 

(8,932

)

 

 

(46,251

)

 

 

(47,731

)

Merger and integration costs

 

(2,920

)

 

 

(1,111

)

 

 

(7,858

)

 

 

(4,060

)

Restructuring costs

 

(4,024

)

 

 

(3,322

)

 

 

(4,024

)

 

 

(26,400

)

Consolidated income from operations

$

15,422

 

 

$

7,348

 

 

$

105,776

 

 

$

46,048

 

Non-GAAP Financial Measures

In our press release and schedules, we report certain financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America ("GAAP"). We discuss management's reasons for reporting these non-GAAP measures below, and the press release schedules that follow reconcile the most directly comparable GAAP measure to each non-GAAP measure that we reference. Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, total costs and expenses, income from operations, operating margin, income before income taxes, net income, earnings per share or any other comparable financial measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.

Management uses certain non-GAAP measures to evaluate financial performance because those non-GAAP measures allow for period-over-period comparisons of the Company’s ongoing operations before the impact of certain items described below. Management believes this information is useful to investors to compare the Company’s results of operations period-over-period. These measures are Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA and Adjusted Diluted Earnings Per Share (EPS). We define Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted EPS to exclude (1) a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense related to intangible assets and software assets associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (2) transaction and integration expenses associated with the Company's merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (3) severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring, (4) income/loss recognized from the Company’s investments in partnership interests and other investments, (5) discrete tax adjustments utilizing adjusted effective income tax rates of 28.5% and 29.7% for the three months ended September 30, 2020 and 2021, respectively, and (6) foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate. We define EBITDA as net income before other income, the provision for income taxes, gain on sale of property and equipment, depreciation and amortization, and from this amount in arriving at Adjusted EBITDA we also exclude stock-based compensation expense, amortization expense associated with deferred implementation costs incurred in cloud computing arrangements, and the amounts in (2), (3) and (6) above. These non-GAAP measures are reconciled to the most directly comparable GAAP measures in the sections that follow. Non-GAAP measures should not be viewed as substitutes for GAAP measures.

STRATEGIC EDUCATION, INC.

 

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

 

ADJUSTED REVENUE, ADJUSTED TOTAL COSTS AND EXPENSES, ADJUSTED INCOME FROM OPERATIONS, ADJUSTED INCOME BEFORE INCOME TAXES, ADJUSTED NET INCOME, AND ADJUSTED EPS

 

(in thousands, except per share data)

 
   

 

 

 

For the three months ended September 30, 2020

 

 

 

Non-GAAP Adjustments

 

 

As

Reported

(GAAP)

 

Purchase

accounting

adjustments(1)

 

Merger and

integration

costs(2)

 

Restructuring

costs(3)

 

Income from

other

investments(4)

 

Tax

adjustments(5)

 

Foreign

exchange

adjustments(6)

 

As

Adjusted

(Non-

GAAP)

Revenues

$

239,026

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

$

239,026

 

Total costs and expenses

$

223,604

 

$

(15,417

)

 

$

(2,920

)

 

$

(4,024

)

 

$

 

 

$

 

 

$

 

$

201,243

 

Income from operations

$

15,422

 

$

15,417

 

 

$

2,920

 

 

$

4,024

 

 

$

 

 

$

 

 

$

 

$

37,783

 

Operating margin

 

6.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15.8%

 

Income before income taxes

$

16,334

 

$

15,417

 

 

$

2,920

 

 

$

4,024

 

 

$

(391

)

 

$

 

 

$

 

$

38,304

 

Net income

$

10,960

 

$

15,417

 

 

$

2,920

 

 

$

4,024

 

 

$

(391

)

 

$

(5,543

)

 

$

 

$

27,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

0.47

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,214

 

 

 

 

For the three months ended September 30, 2021

 

 

 

Non-GAAP Adjustments

 

 

As

Reported

(GAAP)

 

Purchase

accounting

adjustments(1)

 

Merger and

integration

costs(2)

 

Restructuring

costs(3)

 

Loss from

other

investments(4)

 

Tax

adjustments(5)

 

Foreign

exchange

adjustments(6)

 

As

Adjusted

(Non-

GAAP)

Revenues

$

270,078

 

$

 

 

$

 

 

$

 

 

$

 

$

 

 

$

646

 

$

270,724

 

Total costs and expenses

$

262,730

 

$

(8,932

)

 

$

(1,111

)

 

$

(3,322

)

 

$

 

$

 

 

$

580

 

$

249,945

 

Income from operations

$

7,348

 

$

8,932

 

 

$

1,111

 

 

$

3,322

 

 

$

 

$

 

 

$

66

 

$

20,779

 

Operating margin

 

2.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.7%

 

Income before income taxes

$

5,500

 

$

8,932

 

 

$

1,111

 

 

$

3,322

 

 

$

1,211

 

$

 

 

$

66

 

$

20,142

 

Net income

$

3,854

 

$

8,932

 

 

$

1,111

 

 

$

3,322

 

 

$

1,211

 

$

(4,331

)

 

$

66

 

$

14,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

24,113

 

 

 

 

 

 

 

 

 

 

 

 

 

24,113

 

(1)

Reflects amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

(2)

Reflects transaction and integration expenses associated with the Company's merger with Capella Education Company and the Company's acquisition of Torrens University and associated assets in Australia and New Zealand.

(3)

Reflects severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring.

(4)

Reflects income/loss recognized from the Company's investments in partnership interests and other investments.

(5)

Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing adjusted effective income tax rates of 28.5% and 29.7% for the three months ended September 30, 2020 and 2021, respectively.

(6)

Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

STRATEGIC EDUCATION, INC.

UNAUDITED NON-GAAP SEGMENT REPORTING

(in thousands)

 

 

For the three months ended

 

For the nine months ended

 

September 30,

 

September 30,

 

2020

 

2021

 

2020

 

2021

Revenues:

 

 

 

 

 

 

 

U.S. Higher Education

$

230,311

 

 

$

191,893

 

 

$

733,174

 

 

$

630,647

 

Australia/New Zealand

 

 

 

 

65,224

 

 

 

 

 

 

190,549

 

Alternative Learning

 

8,715

 

 

 

12,961

 

 

 

26,985

 

 

 

38,391

 

Consolidated revenues

 

239,026

 

 

 

270,078

 

 

 

760,159

 

 

 

859,587

 

 

 

 

 

 

 

 

 

Adjustments to consolidated revenues:

 

 

 

 

 

 

 

U.S. Higher Education

 

 

 

 

 

 

 

 

 

 

 

Australia/New Zealand1

 

 

 

 

646

 

 

 

 

 

 

(261

)

Alternative Learning

 

 

 

 

 

 

 

 

 

 

 

Total adjustments to consolidated revenues

 

 

 

 

646

 

 

 

 

 

 

(261

)

 

 

 

 

 

 

 

 

Adjusted revenues by segment:

 

 

 

 

 

 

 

U.S. Higher Education

 

230,311

 

 

 

191,893

 

 

 

733,174

 

 

 

630,647

 

Australia/New Zealand

 

 

 

 

65,870

 

 

 

 

 

 

190,288

 

Alternative Learning

 

8,715

 

 

 

12,961

 

 

 

26,985

 

 

 

38,391

 

Adjusted consolidated revenues

$

239,026

 

 

$

270,724

 

 

$

760,159

 

 

$

859,326

 

 

 

 

 

 

 

 

 

Income from operations:

 

 

 

 

 

 

 

U.S. Higher Education

$

33,672

 

 

$

5,168

 

 

$

149,180

 

 

$

84,981

 

Australia/New Zealand

 

 

 

 

10,364

 

 

 

 

 

 

23,016

 

Alternative Learning

 

4,111

 

 

 

5,181

 

 

 

14,729

 

 

 

16,242

 

Amortization of intangible assets

 

(15,417

)

 

 

(8,932

)

 

 

(46,251

)

 

 

(47,731

)

Merger and integration costs

 

(2,920

)

 

 

(1,111

)

 

 

(7,858

)

 

 

(4,060

)

Restructuring costs

 

(4,024

)

 

 

(3,322

)

 

 

(4,024

)

 

 

(26,400

)

Consolidated income from operations

 

15,422

 

 

 

7,348

 

 

 

105,776

 

 

 

46,048

 

 

 

 

 

 

 

 

 

Adjustments to consolidated income from operations:

 

 

 

 

 

 

 

Australia/New Zealand2

 

 

 

 

66

 

 

 

 

 

 

3,208

 

Amortization of intangible assets

 

15,417

 

 

 

8,932

 

 

 

46,251

 

 

 

47,731

 

Merger and integration costs

 

2,920

 

 

 

1,111

 

 

 

7,858

 

 

 

4,060

 

Restructuring costs

 

4,024

 

 

 

3,322

 

 

 

4,024

 

 

 

26,400

 

Total adjustments to consolidated income from operations

 

22,361

 

 

 

13,431

 

 

 

58,133

 

 

 

81,399

 

 

 

 

 

 

 

 

 

Adjusted income from operations by segment:

 

 

 

 

 

 

 

U.S. Higher Education

 

33,672

 

 

 

5,168

 

 

 

149,180

 

 

 

84,981

 

Australia/New Zealand

 

 

 

 

10,430

 

 

 

 

 

 

26,224

 

Alternative Learning

 

4,111

 

 

 

5,181

 

 

 

14,729

 

 

 

16,242

 

Total adjusted income from operations

$

37,783

 

 

$

20,779

 

 

$

163,909

 

 

$

127,447

 

(1)

Adjustments to the Australia/New Zealand segment revenue include a purchase accounting adjustment of $3.6 million for the nine months ended September 30, 2021, to record acquired contract liabilities at fair value as a result of the Company's acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact of $0.6 million and ($3.9) million for the three and nine months ended September 30, 2021, respectively, related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

(2)

Adjustments to the Australia/New Zealand segment income from operations include the aforementioned purchase accounting revenue adjustment of $3.6 million for the nine months ended September 30, 2021, to record acquired contract liabilities at fair value as a result of the Company's acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact of $0.1 million and ($0.4) million for the three and nine months ended September 30, 2021, respectively, related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

(in thousands)

 

 

For the three months ended

 

September 30,

 

2020

 

2021

 

 

 

 

Net income

$

10,960

 

 

$

3,854

 

Provision for income taxes

 

5,374

 

 

 

1,646

 

Other (income) expense

 

(912

)

 

 

1,848

 

Gain on sale of property and equipment

 

 

 

 

(681

)

Depreciation and amortization

 

26,208

 

 

 

21,564

 

EBITDA (1)

 

41,630

 

 

 

28,231

 

Stock-based compensation

 

3,875

 

 

 

4,868

 

Merger and integration costs (2)

 

2,920

 

 

 

1,111

 

Restructuring costs (3)

 

4,024

 

 

 

3,404

 

Cloud computing amortization (4)

 

 

 

 

1,019

 

Foreign currency exchange impact (5)

 

 

 

 

66

 

Adjusted EBITDA (1)

$

52,449

 

 

$

38,699

 

(1)

Denotes non-GAAP financial measures. Please see the information in the Non-GAAP Financial Measures section of this press release for more detail regarding these adjustments and management’s reasons for providing this information.

(2)

Reflects transaction and integration charges associated with the Company's merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

(3)

Reflects severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring. Includes $0.2 million of stock-based compensation benefit related to forfeitures of stock-based awards for the three months ended September 30, 2021. Excludes $0.7 million of gain on sale of property and equipment and $0.6 million of depreciation and amortization expense for the three months ended September 30, 2021.

(4)

Reflects amortization expense associated with deferred implementation costs incurred in cloud computing arrangements.

(5)

Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

 

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