Strategic Education, Inc. (SEI) (NASDAQ: STRA) today announced
financial results for the period ended March 31, 2019.
Karl McDonnell, Chief Executive Officer of SEI said, “Our strong
first quarter results provide us with a solid foundation to build
on for the balance of 2019. We are moving into the tenth month
since we closed our merger with Capella Education Company, and are
very pleased with progress of the merger integration and the
organization’s continued ability to execute. We remain focused on
delivering academic success and long-term economic mobility for our
students and alumni.”
STRATEGIC EDUCATION, INC. CONSOLIDATED
RESULTS
[Note: Strategic Education, Inc.’s financial results for any
periods ended prior to August 1, 2018 do not include the financial
results of Capella Education Company and are therefore not directly
comparable.]
Three Months Ended March 31
- Revenue increased 111.7% to $246.5
million compared to $116.5 million for the same period in
2018.
- Income from operations was $25.7
million compared to $11.3 million for the same period in 2018.
Income from operations in 2019 includes $15.4 million of
amortization expense related to assets acquired in the merger with
Capella Education Company and $7.2 million in costs associated with
the merger with Capella Education Company. Income from operations
in 2018 included $5.3 million in costs associated with the merger
with Capella Education Company. Adjusted income from operations,
which is a non-GAAP financial measure and excludes the
aforementioned expenses, was $48.3 million in 2019 compared to
$16.7 million for the same period in 2018. The adjusted operating
income margin was 19.6% compared to 14.3% for the same period in
2018. For more details on non-GAAP financial measures, refer to the
information in the Non-GAAP Financial Measures section of this
press release.
- Net income, which includes the
adjustments described above, income from partnership interests, and
certain discrete tax adjustments, was $11.5 million in 2019
compared to $9.5 million for the same period in 2018. Adjusted net
income was $36.7 million compared to $13.9 million for the same
period in 2018.
- Earnings before interest, taxes,
depreciation, and amortization (EBITDA) was $51.7 million in 2019
compared to $16.4 million in 2018. Adjusted EBITDA was $61.0
million compared to $24.8 million for the same period in 2018.
- Diluted earnings per share was $0.52
compared to $0.84 for the same period in 2018. Adjusted diluted
earnings per share increased to $1.66 from $1.23 for the same
period in 2018. Diluted weighted average shares outstanding
increased to 22,050,000 from 11,311,000 for the same period in
2018, due primarily to new shares issued to facilitate the merger
with Capella Education Company.
Strayer University Segment Highlights
- The Strayer University segment is
comprised of Strayer University, including its programs offered
through the Jack Welch Management Institute.
- For the first quarter, student
enrollment at Strayer University increased 11.5% to 51,479 compared
to 46,184 for the same period in 2018. New student enrollment for
the period increased 13.2% and continuing student enrollment for
the period increased 11.1%.
- Revenue increased 11.1% to $128.1
million in the first quarter of 2019 compared to $115.3 million for
the same period in 2018, driven primarily by higher first quarter
enrollment.
- Income from operations increased to
$25.0 million in the first quarter of 2019 from $18.0 million for
the same period in 2018. The operating income margin was 19.5%,
compared to 15.6% for the same period in 2018.
- During the first quarter of 2019,
Strayer University opened new campuses in Mobile, Alabama and Fort
Worth, Texas, and is planning to open four to six additional
campuses through the balance of 2019.
Capella University Segment Highlights
- The Capella University segment consists
solely of Capella University.
- For the first quarter, student
enrollment at Capella University increased 2.9% to 39,271 compared
to 38,181 for the same period in 2018. New student enrollment for
the period increased 14.7% and continuing student enrollment for
the period increased 0.7%.
- FlexPath continued to be a significant
driver of new and total enrollment growth in the first quarter of
2019, and is now 30% of Capella University’s bachelor’s and
master’s degrees total enrollment.
- Revenue was $114.7 million in the first
quarter of 2019 and reflects higher enrollment and
revenue-per-learner.
- Income from operations was $24.2
million in the first quarter of 2019, and the operating income
margin was 21.1%.
- The Company is on track to open Capella
University learner support centers, pending regulatory approval, in
Atlanta, Georgia in the second quarter and Orlando, Florida in the
third quarter.
Non-Degree Programs Segment Highlights
- The non-degree programs segment
includes Hackbright Academy, DevMountain, The New York Code +
Design Academy, and Sophia.
- For the first quarter, revenue
increased to $3.8 million from $1.2 million for the same period in
2018, primarily due to the inclusion of revenue from DevMountain,
Hackbright Academy, and Sophia.
- Loss from operations was $0.8 million
in the first quarter of 2019 compared to a loss of $1.3 million in
the same period in 2018.
BALANCE SHEET AND CASH
FLOW
At March 31, 2019, Strategic Education, Inc. had cash, cash
equivalents, and marketable securities of $420.7 million, and no
debt. For the first three months of 2019, cash provided by
operations was $58.7 million compared to $17.0 million for the same
period in 2018. Capital expenditures for the first three months of
2019 were $8.8 million compared to $4.2 million for the same period
in 2018. Capital expenditures for 2019 are expected to be between
$40 million and $45 million.
For the first quarter of 2019, consolidated bad debt expense as
a percentage of revenue was 5.0%, compared to 5.5% for the same
period in 2018.
COMMON STOCK CASH
DIVIDEND
SEI announced today that it declared a regular, quarterly cash
dividend of $0.50 per share of common stock. This dividend will be
paid on June 10, 2019 to shareholders of record as of May 28,
2019.
CONFERENCE CALL WITH
MANAGEMENT
SEI will host a conference call to discuss its first quarter
2019 earnings results at 9:00 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.
Following the call, the webcast will be archived and available at
www.strategiceducation.com in the Investor Relations section.
About SEI
Strategic Education, Inc. (NASDAQ: STRA)
(www.strategiceducation.com) is dedicated to enabling economic
mobility with education. We serve working adult students through a
range of educational opportunities that include: Strayer University
and Capella University (separate institutions that are each
regionally accredited), which collectively offer flexible and
affordable associate, bachelor’s, master’s, and doctoral programs;
a Top-25 Princeton Review-ranked online MBA program through the
Jack Welch Management Institute at Strayer University; self-paced
courses for college credit through Sophia; customized degrees for
corporations through Degrees@Work; and non-degree web and mobile
application development courses through DevMountain, Generation
Code, Hackbright Academy, and The New York Code + Design Academy.
These programs help our students prepare for success in today’s
jobs 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 of SEI; SEI’s plans, strategies
and prospects; and future events and expectations. The statements
are based on SEI’s current expectations and are subject to a number
of assumptions, uncertainties and risks, including but not limited
to:
- SEI’s continued compliance with Title
IV of the Higher Education Act, and the regulations thereunder, as
well as regional 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;
- the pace of growth of student
enrollment;
- competitive factors;
- 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;
- risks relating to the timing of
regulatory approvals;
- SEI’s ability to implement its growth
strategy;
- the risk that the benefits of the
merger with Capella Education Company, including expected
synergies, may not be fully realized or may take longer to realize
than expected;
- the risk that the combined company may
experience difficulty integrating employees or operations;
- risks associated with the ability of
SEI’s students to finance their education in a timely manner;
- general economic and market conditions;
and
- additional factors described in SEI’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
SEI’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 SEI on the date they are made, and SEI
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 endedMarch
31,
2018 2019 Revenues $ 116,469 $ 246,508
Costs and expenses: Instructional and support costs 68,452 134,050
General and administration 31,342 64,139 Amortization of intangible
assets — 15,417 Merger and integration costs 5,347 7,179
Total costs and expenses 105,141 220,785 Income from
operations 11,328 25,723 Other income 289 3,327 Income
before income taxes 11,617 29,050 Provision for income taxes 2,150
17,550 Net income $ 9,467 $ 11,500 Earnings per
share: Basic $ 0.88 $ 0.53 Diluted $ 0.84 $ 0.52 Weighted average
shares outstanding: Basic 10,745 21,499 Diluted 11,311 22,050 Cash
dividend declared per share $ 0.25 $ 0.50
STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands, except share and
per share data)
December 31,2018
March 31,2019
ASSETS Current assets: Cash and cash equivalents $ 311,732 $
352,387 Marketable securities, current 37,121 36,486 Tuition
receivable, net 55,694 50,842 Other current assets 15,814
16,874 Total current assets 420,361 456,589 Property and equipment,
net 122,677 119,040 Right-of-use lease assets — 101,533 Marketable
securities, non-current 37,678 31,866 Intangible assets, net
328,344 314,511 Goodwill 732,540 732,799 Other assets 19,429
19,052 Total assets $ 1,661,029 $ 1,775,390
LIABILITIES & STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable and accrued expenses $ 85,979 $ 80,085 Income
taxes payable 419 6,144 Contract liabilities 38,733 40,826 Lease
liabilities, current — 26,462 Total current liabilities 125,131
153,517 Deferred income tax liabilities 59,358 70,298 Lease
liabilities, non-current — 90,501 Other long-term liabilities
51,316 37,636 Total liabilities 235,805 351,952
Commitments and contingencies Stockholders’ equity: Common stock,
par value $0.01; 32,000,000 shares authorized; 21,743,498 and
21,923,800 shares issued and outstanding at December 31, 2018 and
March 31, 2019, respectively 217 219 Additional paid-in capital
1,306,653 1,304,170 Accumulated other comprehensive income 32 266
Retained earnings 118,322 118,783 Total stockholders’ equity
1,425,224 1,423,438 Total liabilities and stockholders’
equity $ 1,661,029 $ 1,775,390
STRATEGIC
EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (in thousands)
For the three months endedMarch
31,
2018 2019 Cash flows from operating
activities: Net income $ 9,467 $ 11,500 Adjustments to reconcile
net income to net cash provided by operating activities:
Amortization of deferred financing costs 66 83 Amortization of
investment discount/premium — 127 Depreciation and amortization
5,035 25,983 Deferred income taxes (1,842 ) 10,834 Stock-based
compensation 2,688 3,010 Changes in assets and liabilities: Tuition
receivable, net (2,249 ) 4,847 Other current assets 931 (1,060 )
Other assets 115 325 Accounts payable and accrued expenses (867 )
(3,537 ) Income taxes payable and income taxes receivable 3,995
6,031 Contract liabilities 1,192 1,702 Other long-term liabilities
(1,482 ) (1,187 ) Net cash provided by operating activities 17,049
58,658 Cash flows from investing activities:
Purchases of property and equipment (4,233 ) (8,756 ) Purchases of
marketable securities — (6,249 ) Maturities of marketable
securities — 12,910 Other investments — (374 ) Net cash used
in investing activities (4,233 ) (2,469 ) Cash flows from
financing activities: Common dividends paid (2,889 ) (11,091 )
Taxes paid for stock awards — (4,443 ) Net cash used in
financing activities (2,889 ) (15,534 ) Net increase in cash, cash
equivalents, and restricted cash 9,927 40,655 Cash, cash
equivalents, and restricted cash — beginning of period 156,448
312,237 Cash, cash equivalents, and restricted cash —
end of period $ 166,375 $ 352,892 Noncash
transactions: Purchases of property and equipment included in
accounts payable $ 2,385 $ 634
STRATEGIC
EDUCATION, INC. UNAUDITED SEGMENT REPORTING (in
thousands)
For the three monthsended March
31,
2018 2019 Revenues: Strayer University $
115,271 $ 128,058 Capella University — 114,698 Non-Degree Programs
1,198 3,752 Consolidated revenues $ 116,469 $
246,508 Income (loss) from operations: Strayer University $
17,992 $ 24,973 Capella University — 24,153 Non-Degree Programs
(1,317 ) (807 ) Amortization of intangible assets — (15,417 )
Merger and integration costs (5,347 ) (7,179 ) Consolidated income
from operations $ 11,328 $ 25,723
Non-GAAP Financial Measures
In our press release and schedules, and on the related
conference call, 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 income from
operations, operating margin, 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 its ongoing operations before the
impact of certain items described below. These measures are
Adjusted Income from Operations, Adjusted Operating Margin,
Adjusted Net Income, Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA), Adjusted EBITDA and Adjusted Diluted
Earnings Per Share (EPS). We define Adjusted Income from
Operations, Adjusted Operating Margin, Adjusted Net Income, and
Adjusted Diluted EPS to exclude (1) amortization expense related to
intangible assets associated with the Company’s merger with Capella
Education Company, (2) transaction and integration costs associated
with the Company’s merger with Capella Education Company, (3)
income recognized from the Company’s investments in partnership
interests, and (4) discrete tax adjustments utilizing adjusted
effective income tax rates of 18.1% and 27.5% for 2018 and 2019,
respectively. We define EBITDA as net income before the provision
for income taxes, other income, depreciation and amortization, and
from this amount in arriving at Adjusted EBITDA we also exclude the
amounts in (2) above, stock-based compensation expense, and
adjustments to the value of purchase consideration related to the
Company’s acquisition of The New York Code + Design Academy, Inc.
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 INCOME FROM
OPERATIONS, ADJUSTED NET INCOME, AND ADJUSTED EPS (in
thousands, except per share data)
For the Three Months Ended March 31, 2018
Non-GAAP Adjustments
As Reported(GAAP)
AmortizationofAcquiredAssets(1)
Merger
andintegrationCosts(2)
Income
frompartnershipinterests(3)
TaxAdjustments(4)
As Adjusted(Non-GAAP)
Income from operations $ 11,328 $ — $ 5,347 $ — $ — $ 16,675
Operating margin 9.7% 14.3% Other income, net 289 — —
— — 289 Income before income taxes 11,617 —
5,347 — — 16,964 Provision for income taxes 2,150 — —
— 914 3,064 Net income $ 9,467 $ —
$ 5,347 $ — $ (914 ) $ 13,900
Earnings per
share: Basic $ 0.88 $ 1.29 Diluted $ 0.84 $ 1.23
Weighted
average shares outstanding: Basic 10,745 10,745 Diluted 11,311
11,311
For the Three Months Ended
March 31, 2019 Non-GAAP Adjustments
As Reported(GAAP)
AmortizationofAcquiredAssets(1)
Merger
andintegrationCosts(2)
Income
frompartnershipinterests(3)
TaxAdjustments(4)
As Adjusted(Non-GAAP)
Income from operations $ 25,723 $ 15,417 $ 7,179 $ — $ — $ 48,319
Operating margin 10.4% 19.6% Other income, net 3,327 —
— (1,023 ) — 2,304 Income before income taxes
29,050 15,417 7,179 (1,023 ) — 50,623 Provision for income taxes
17,550 — — — (3,629 ) 13,921 Net income
$ 11,500 $ 15,417 $ 7,179 $ (1,023 ) $ 3,629
$ 36,702
Earnings per share: Basic $ 0.53 $ 1.71
Diluted $ 0.52 $ 1.66
Weighted average shares outstanding:
Basic 21,499 21,499 Diluted 22,050 22,050 (1)
Reflects amortization expense related to intangible assets
associated with the Company’s merger with Capella Education
Company. (2) Reflects transaction and integration charges
associated with the Company's merger with Capella Education
Company. (3) Reflects income recognized from the Company's
investments in partnership interests. (4) Reflects discrete tax
adjustments related to stock-based compensation and other
adjustments, utilizing an adjusted effective tax rate of 18.1% and
27.5% for 2018 and 2019, respectively.
STRATEGIC
EDUCATION, INC. UNAUDITED NON-GAAP SEGMENT REPORTING
(in thousands) For the Three Months Ended
March 31, 2018 2019 Revenues:
Strayer University $ 115,271 $ 128,058 Capella University - 114,698
Non-Degree Programs 1,198 3,752
Consolidated revenues $ 116,469 $ 246,508
Income (loss) from operations: Strayer University $ 17,992 $
24,973 Capella University - 24,153 Non-Degree Programs (1,317 )
(807 ) Amortization of intangible assets - (15,417 ) Merger and
integration costs (5,347 ) (7,179 ) Consolidated
income from operations 11,328 25,723
Adjustments to consolidated income from operations:
Amortization of intangible assets - 15,417 Merger and integration
costs 5,347 7,179 Total adjustments to
consolidated income from operations 5,347
22,596 Adjusted income from operations by segment:
Strayer University 17,992 24,973 Capella University - 24,153
Non-Degree Programs (1,317 ) (807 ) Total adjusted
income from operations by segment $ 16,675 $ 48,319
STRATEGIC EDUCATION, INC. UNAUDITED
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ADJUSTED
EBITDA (in thousands)
For the three monthsended March
31,
2018 2019 Net income $ 9,467 $ 11,500
Provision for income taxes 2,150 17,550 Other income (289) (3,327)
Depreciation and amortization 5,035 25,983 EBITDA (1) 16,363 51,706
Stock-based compensation 2,688 2,530 Merger and integration costs
(2) 5,347 6,781 Fair value adjustments (3) 381 — Adjusted
EBITDA (1) $ 24,779 $ 61,017 (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. Excludes $0.4 million of depreciation
and amortization expense and includes $0.5 million of stock-based
compensation expense for the three months ended March 31, 2019. (3)
Reflects adjustments to the value of purchase consideration related
to the Company’s acquisition of The New York Code + Design Academy,
Inc. for the three months ended March 31, 2018.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190501005307/en/
Terese WilkeManager, Investor RelationsStrategic Education,
Inc.(612) 977-6331terese.wilke@strategiced.com
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