Strategic Education, Inc. (SEI) (NASDAQ: STRA) today announced
financial results for the period ended June 30, 2019.
Karl McDonnell, Chief Executive Officer of SEI said, “We are
particularly pleased with the strong second quarter results and the
organization’s continued ability to execute as we mark the one year
anniversary since closing our merger with Capella Education
Company. Merger integration and synergies are on track, providing
us with a solid foundation as 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 June 30
- Revenue increased 113.8% to $245.1 million compared to $114.7
million for the same period in 2018.
- Income from operations was $27.6 million or 11.3% of revenue,
compared to $4.2 million or 3.6% of revenue 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 $3.0 million in costs associated with
the merger with Capella Education Company. Income from operations
in 2018 included $6.2 million in charges resulting from the
impairment of goodwill and intangible assets associated with The
New York Code + Design Academy, and $2.8 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 $46.0 million in 2019
compared to $13.2 million for the same period in 2018. The adjusted
operating income margin was 18.8% compared to 11.5% 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 items described above, and also
includes income from partnership interests and other investments,
and certain discrete tax adjustments, was $24.4 million in 2019
compared to $5.2 million for the same period in 2018. Adjusted net
income was $35.2 million compared to $9.9 million for the same
period in 2018.
- Earnings before interest, taxes, depreciation, and amortization
(EBITDA) was $54.1 million in 2019 compared to $9.1 million in
2018. Adjusted EBITDA was $60.3 million compared to $21.7 million
for the same period in 2018.
- Diluted earnings per share was $1.10 compared to $0.46 for the
same period in 2018. Adjusted diluted earnings per share increased
to $1.59 from $0.87 for the same period in 2018. Diluted weighted
average shares outstanding increased to 22,109,000 from 11,380,000
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 second quarter, student enrollment at Strayer
University increased 11.5% to 52,253 compared to 46,868 for the
same period in 2018. New student enrollment for the period
increased 8.5% and continuing student enrollment for the period
increased 12.2%.
- Revenue increased 13.2% to $128.9 million in the second quarter
of 2019 compared to $113.9 million for the same period in 2018,
driven primarily by higher second quarter enrollment.
- Income from operations increased to $24.6 million in the second
quarter of 2019 from $14.3 million for the same period in 2018. The
operating income margin was 19.1%, compared to 12.6% for the same
period in 2018.
- During the second quarter of 2019, Strayer University opened a
new campus in Killeen, Texas, and is planning to open two to three
additional campuses through the remainder of 2019.
Capella University Segment Highlights
- The Capella University segment consists solely of Capella
University.
- For the second quarter, student enrollment at Capella
University increased 1.6% to 38,392 compared to 37,786 for the same
period in 2018. New student enrollment for the period increased
7.8% and continuing student enrollment for the period increased
0.5%.
- FlexPath continued to be a significant driver of new and total
enrollment growth in the second quarter of 2019, and is 30% of
Capella University’s bachelor’s and master’s degrees total
enrollment.
- Revenue was $112.2 million in the second quarter of 2019 and
reflects higher enrollment and higher revenue-per-learner.
- Income from operations was $21.1 million in the second quarter
of 2019, and the operating income margin was 18.8%.
- During the second quarter of 2019, the Company opened the first
Capella University Campus Center in Atlanta, Georgia, and is on
track to open a Capella University Campus Center, pending
regulatory approval, in 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 second quarter, revenue increased to $4.0 million from
$0.8 million for the same period in 2018, primarily due to the
inclusion of revenue from DevMountain, Hackbright Academy, and
Sophia.
- Income from operations was $0.3 million in the second quarter
of 2019 compared to a loss from operations of $1.1 million in the
same period in 2018, and the operating income margin was 7.5%.
BALANCE SHEET AND CASH
FLOW
At June 30, 2019, Strategic Education, Inc. had cash, cash
equivalents, and marketable securities of $440.5 million, and no
debt. For the first six months of 2019, cash provided by operations
was $103.1 million compared to $30.0 million for the same period in
2018. Capital expenditures for the first six months of 2019 were
$18.9 million compared to $8.6 million for the same period in 2018.
Capital expenditures for 2019 are expected to be between $40
million and $45 million.
For the second quarter of 2019, consolidated bad debt expense as
a percentage of revenue was 4.7%, compared to 5.8% 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 September 16, 2019 to shareholders of record as of
September 3, 2019.
CONFERENCE CALL WITH
MANAGEMENT
SEI will host a conference call to discuss its second quarter
2019 earnings 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 prior
to the start time of the call. 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 ended
June 30,
For the six months ended June
30,
2018
2019
2018
2019
Revenues
$
114,668
$
245,110
$
231,137
$
491,618
Costs and expenses:
Instructional and support costs
69,299
130,704
137,751
264,754
General and administration
32,176
68,374
63,518
132,513
Amortization of intangible assets
—
15,417
—
30,834
Merger and integration costs
2,824
3,019
8,171
10,198
Impairment of intangible assets
6,185
—
6,185
—
Total costs and expenses
110,484
217,514
215,625
438,299
Income from operations
4,184
27,596
15,512
53,319
Other income
447
4,125
736
7,452
Income before income taxes
4,631
31,721
16,248
60,771
Provision (benefit) for income taxes
(557
)
7,312
1,593
24,862
Net income
$
5,188
$
24,409
$
14,655
$
35,909
Earnings per share:
Basic
$
0.48
$
1.12
$
1.36
$
1.66
Diluted
$
0.46
$
1.10
$
1.29
$
1.63
Weighted average shares outstanding:
Basic
10,879
21,777
10,812
21,638
Diluted
11,380
22,109
11,346
22,079
Cash dividend declared per share
$
0.25
$
0.50
$
0.50
$
1.00
STRATEGIC EDUCATION, INC.UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS(in thousands, except share and per share data)
December 31, 2018
June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
311,732
$
375,515
Marketable securities
37,121
39,288
Tuition receivable, net
55,694
47,340
Income tax receivable
—
10,518
Other current assets
15,814
17,660
Total current assets
420,361
490,321
Property and equipment, net
122,677
118,462
Right-of-use lease assets
—
97,484
Marketable securities, non-current
37,678
25,737
Intangible assets, net
328,344
300,678
Goodwill
732,540
732,104
Other assets
19,429
19,784
Total assets
$
1,661,029
$
1,784,570
LIABILITIES &
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
85,979
$
86,066
Income taxes payable
419
—
Contract liabilities
38,733
40,919
Lease liabilities
—
26,834
Total current liabilities
125,131
153,819
Deferred income tax liabilities
59,358
66,323
Lease liabilities, non-current
—
86,998
Other long-term liabilities
51,316
39,554
Total liabilities
235,805
346,694
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.01; 32,000,000
shares authorized; 21,743,498 and 21,948,563 shares issued and
outstanding at December 31, 2018 and June 30, 2019,
respectively
217
219
Additional paid-in capital
1,306,653
1,305,148
Accumulated other comprehensive income
32
449
Retained earnings
118,322
132,060
Total stockholders’ equity
1,425,224
1,437,876
Total liabilities and stockholders’
equity
$
1,661,029
$
1,784,570
STRATEGIC EDUCATION, INC.UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(in thousands)
For the six months ended June
30,
2018
2019
Cash flows from operating activities:
Net income
$
14,655
$
35,909
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred financing
costs
131
167
Amortization of investment
discount/premium
—
220
Depreciation and amortization
9,915
52,497
Deferred income taxes
(1,581
)
9,909
Stock-based compensation
5,937
6,576
Impairment of intangible assets
6,185
—
Changes in assets and liabilities:
Tuition receivable, net
(2,916
)
5,777
Other current assets
96
(1,304
)
Other assets
(824
)
64
Accounts payable and accrued expenses
1,363
229
Income taxes payable and income taxes
receivable
(3,447
)
(10,673
)
Contract liabilities
2,768
4,778
Other long-term liabilities
(2,256
)
(1,086
)
Net cash provided by operating
activities
30,026
103,063
Cash flows from investing activities:
Purchases of property and equipment
(8,596
)
(18,859
)
Purchases of marketable securities
—
(12,443
)
Maturities of marketable securities
—
22,560
Other investments
—
(740
)
Net cash used in investing activities
(8,596
)
(9,482
)
Cash flows from financing activities:
Common dividends paid
(5,778
)
(22,194
)
Taxes paid for stock awards
—
(7,607
)
Net cash used in financing activities
(5,778
)
(29,801
)
Net increase in cash, cash equivalents,
and restricted cash
15,652
63,780
Cash, cash equivalents, and restricted
cash — beginning of period
156,448
312,237
Cash, cash equivalents, and restricted
cash — end of period
$
172,100
$
376,017
Noncash transactions:
Purchases of property and equipment
included in accounts payable
$
1,252
$
840
STRATEGIC EDUCATION, INC.UNAUDITED SEGMENT REPORTING(in
thousands)
For the three months ended
June 30,
For the six months ended June
30,
2018
2019
2018
2019
Revenues
Strayer University
$
113,903
$
128,911
$
229,174
$
256,969
Capella University
—
112,171
—
226,869
Non-Degree Programs
765
4,028
1,963
7,780
Consolidated revenues
$
114,668
$
245,110
$
231,137
$
491,618
Income (loss) from operations
Strayer University
$
14,320
$
24,606
$
32,312
$
49,579
Capella University
—
21,122
—
45,275
Non-Degree Programs
(1,127
)
304
(2,444
)
(503
)
Amortization of intangible assets
—
(15,417
)
—
(30,834
)
Merger and integration costs
(2,824
)
(3,019
)
(8,171
)
(10,198
)
Impairment of intangible assets
(6,185
)
—
(6,185
)
—
Consolidated income from operations
$
4,184
$
27,596
$
15,512
$
53,319
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)
goodwill and intangible asset impairment charges related to the
Company’s acquisition of the New York Code and Design Academy, (4)
income recognized from the Company’s investments in partnership
interests and other investments, and (5) discrete tax adjustments
utilizing an adjusted effective income tax rate of 27.5% for 2018
and 2019. 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) and (3) above, stock-based compensation expense, and
adjustments to the value of purchase consideration related to the
Company’s acquisition of the New York Code and Design Academy.
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
June 30, 2018
Non-GAAP Adjustments
As Reported (GAAP)
Amortization of intangible
assets(1)
Merger and integration
costs(2)
Impairment of intangible
assets(3)
Income from other investments
(4)
Tax adjustments (5)
As Adjusted (Non-GAAP)
Income from operations
$
4,184
$
—
$
2,824
$
6,185
$
—
$
—
$
13,193
Operating margin
3.6%
11.5%
Other income, net
447
—
—
—
—
—
447
Income before income taxes
4,631
—
2,824
6,185
—
—
13,640
(Benefit) provision for income taxes
(557
)
—
—
—
—
4,308
3,751
Net income
$
5,188
$
—
$
2,824
$
6,185
$
—
$
(4,308
)
$
9,889
Earnings per share:
Basic
$
0.48
$
0.91
Diluted
$
0.46
$
0.87
Weighted average shares
outstanding:
Basic
10,879
10,879
Diluted
11,380
11,380
For the three months ended
June 30, 2019
Non-GAAP Adjustments
As Reported (GAAP)
Amortization of intangible
assets(1)
Merger and integration
costs(2)
Impairment of intangible
assets(3)
Income from other investments
(4)
Tax Adjustments (5)
As Adjusted (Non-GAAP)
Income from operations
$
27,596
$
15,417
$
3,019
$
—
$
—
$
—
$
46,032
Operating margin
11.3%
18.8%
Other income, net
4,125
—
—
—
(1,605)
—
2,520
Income before income taxes
31,721
15,417
3,019
—
(1,605)
—
48,552
Provision for income taxes
7,312
—
—
—
—
6,040
13,352
Net income
$
24,409
$
15,417
$
3,019
$
—
$
(1,605)
$
(6,040
)
$
35,200
Earnings per share:
Basic
$
1.12
$
1.62
Diluted
$
1.10
$
1.59
Weighted average shares
outstanding:
Basic
21,777
21,777
Diluted
22,109
22,109
(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 impairment of goodwill and
intangible assets related to the Company’s acquisition of the New
York Code and Design Academy.
(4)
Reflects income 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 an adjusted effective
tax rate of 27.5% for the three months ended June 30, 2018 and
2019.
STRATEGIC EDUCATION, INC.
UNAUDITED NON-GAAP SEGMENT
REPORTING
(in thousands)
For the three months
ended
For the six months
ended
June 30,
June 30,
2018
2019
2018
2019
Revenues:
Strayer University
$
113,903
$
128,911
$
229,174
$
256,969
Capella University
—
112,171
—
226,869
Non-Degree Programs
765
4,028
1,963
7,780
Consolidated revenues
$
114,668
$
245,110
$
231,137
$
491,618
Income (loss) from operations:
Strayer University
$
14,320
$
24,606
$
32,312
$
49,579
Capella University
—
21,122
—
45,275
Non-Degree Programs
(1,127)
304
(2,444)
(503)
Amortization of intangible assets
—
(15,417)
—
(30,834)
Merger and integration costs
(2,824)
(3,019)
(8,171)
(10,198)
Impairment of intangible assets
(6,185)
—
(6,185)
—
Consolidated income from operations
4,184
27,596
15,512
53,319
Adjustments to consolidated income from
operations:
Amortization of intangible assets
—
15,417
—
30,834
Merger and integration costs
2,824
3,019
8,171
10,198
Impairment of intangible assets
6,185
—
6,185
—
Total adjustments to consolidated income
from operations
9,009
18,436
14,356
41,032
Adjusted income from operations by
segment:
Strayer University
14,320
24,606
32,312
49,579
Capella University
—
21,122
—
45,275
Non-Degree Programs
(1,127)
304
(2,444)
(503)
Total adjusted income from operations by
segment
$
13,193
$
46,032
$
29,868
$
94,351
STRATEGIC EDUCATION, INC.
UNAUDITED RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
ADJUSTED EBITDA
(in thousands)
For the three months
ended
June 30,
2018
2019
Net income
$
5,188
$
24,409
Provision (benefit) for income taxes
(557)
7,312
Other income
(447)
(4,125)
Depreciation and amortization
4,881
26,514
EBITDA (1)
9,065
54,110
Stock-based compensation
3,249
3,155
Merger and integration costs (2)
2,824
3,019
Impairment of intangible assets and fair
value adjustments (3)
6,567
—
Adjusted EBITDA (1)
$
21,705
$
60,284
(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. Includes $0.4 million of stock-based compensation expense
for the three months ended June 30, 2019.
(3)
Reflects adjustments to the value of
purchase consideration and goodwill and intangible asset impairment
charges related to the Company’s acquisition of The New York Code
and Design Academy, Inc. for the three months ended June 30,
2018.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731005299/en/
Terese Wilke Manager, Investor Relations Strategic Education,
Inc. (612) 977-6331 terese.wilke@strategiced.com
Strategic Education (NASDAQ:STRA)
Historical Stock Chart
From Feb 2024 to Mar 2024
Strategic Education (NASDAQ:STRA)
Historical Stock Chart
From Mar 2023 to Mar 2024