STRA Strategic Education Inc

Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended June 30, 2023.

“During the second quarter, enrollment trends in our U.S. Higher Education segment continued to improve, the Education Technology Services segment posted another quarter of strong growth, and we continue to be optimistic about the Australia/New Zealand segment as conditions normalize,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “As we progress toward enrollment, revenue, and earnings growth in 2023, we remain focused on our mission to promote economic mobility for working adults.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

Three Months Ended June 30

• Revenue increased 5.2% to $287.7 million compared to $273.6 million for the same period in 2022. Revenue on a constant currency basis increased 6.8% to $292.3 million in the second quarter of 2023 compared to $273.6 million for the same period in 2022.
• Income from operations was $16.8 million or 5.8% of revenue, compared to $21.9 million or 8.0% of revenue for the same period in 2022. Adjusted income from operations, which is a non-GAAP financial measure, was $27.2 million compared to $29.5 million for the same period in 2022. The adjusted operating income margin, which is a non-GAAP financial measure, was 9.5% compared to 10.8% for the same period in 2022. 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 was $14.2 million compared to $15.2 million for the same period in 2022. Adjusted net income, which is a non-GAAP financial measure, was $19.7 million compared to $20.5 million for the same period in 2022.
• Adjusted EBITDA, which is a non-GAAP financial measure, was $45.4 million compared to $47.9 million for the same period in 2022.
• Diluted earnings per share was $0.59 compared to $0.63 for the same period in 2022. Adjusted diluted earnings per share, which is a non-GAAP financial measure, decreased to $0.82 from $0.85 for the same period in 2022. Adjusted diluted earnings per share on a constant currency basis, which is a non-GAAP financial measure, was $0.85. Diluted weighted average shares outstanding decreased to 23,964,000 from 24,063,000 for the same period in 2022.

U.S. Higher Education Segment Highlights

• The U.S. Higher Education segment (USHE) is comprised of Strayer University and Capella University.
• For the second quarter, student enrollment within USHE increased 4.7% to 80,353 compared to 76,728 for the same period in 2022.
• For the second quarter, FlexPath enrollment was 21% of USHE enrollment compared to 19% for the same period in 2022.
• Revenue increased 6.7% to $202.7 million in the second quarter of 2023 compared to $190.0 million for the same period in 2022, driven by higher second quarter enrollment and revenue-per-student.
• Income from operations was $6.7 million in the second quarter of 2023 compared to $11.9 million for the same period in 2022. The operating income margin was 3.3%, compared to 6.2% for the same period in 2022.

Education Technology Services Segment Highlights

• The Education Technology Services segment (ETS) is comprised primarily of Employer Solutions, Sophia Learning, and Workforce Edge.
• For the second quarter, employer affiliated enrollment was 27.1% of USHE enrollment compared to 24.6% for the same period in 2022.
• For the second quarter, Sophia Learning had an increase in average total subscribers of approximately 30% from the same period in 2022.
• As of June 30, 2023, Workforce Edge had a total of 62 corporate agreements, collectively employing approximately 1,400,000 employees.
• Revenue increased 22.1% to $19.5 million in the second quarter of 2023 compared to $16.0 million for the same period in 2022, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.
• Income from operations was $6.2 million in the second quarter of 2023 compared to $5.3 million for the same period in 2022. The operating income margin was 31.6%, compared to 33.1% for the same period in 2022.

Australia/New Zealand Segment Highlights

• The Australia/New Zealand segment (ANZ) is comprised of Torrens University, Think Education, and Media Design School.
• For the second quarter, student enrollment within ANZ decreased 4.6% to 17,966 compared to 18,834 for the same period in 2022.
• Revenue decreased 3.1% to $65.5 million in the second quarter of 2023 compared to $67.5 million for the same period in 2022, driven by foreign currency impacts. Revenue on a constant currency basis increased 3.7% to $70.1 million in the second quarter of 2023 compared to $67.5 million for the same period in 2022, driven by higher revenue-per-student.
• Income from operations was $14.3 million in the second quarter of 2023 compared to $12.3 million for the same period in 2022. The operating income margin was 21.8%, compared to 18.2% for the same period in 2022. Income from operations on a constant currency basis was $15.4 million in the second quarter of 2023 compared to $12.3 million for the same period in 2022. The operating income margin on a constant currency basis was 22.0%, compared to 18.2% for the same period in 2022.

Balance Sheet and Cash Flow

At June 30, 2023, Strategic Education had cash, cash equivalents, and marketable securities of $215.1 million, and $101.3 million outstanding under its revolving credit facility. For the first six months of 2023, cash provided by operations was $40.7 million compared to $80.7 million for the same period in 2022. Capital expenditures for the first six months of 2023 were $17.8 million compared to $22.7 million for the same period in 2022. Capital expenditures for 2023 are expected to be approximately $40 million.

For the second quarter of 2023, consolidated bad debt expense as a percentage of revenue was 4.4%, compared to 3.2% of revenue for the same period in 2022.

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 September 11, 2023 to shareholders of record as of September 1, 2023.

CONFERENCE CALL WITH MANAGEMENT

Strategic Education will host a conference call to discuss its second quarter 2023 results at 10:00 a.m. (ET) today. This 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. To participate in the live call, investors should register here prior to the call to receive dial-in information and a PIN.

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) Education Technology Services, developing and maintaining relationships with employers to build education benefits programs providing employees access to affordable and industry-relevant training, certificate, and degree programs, including through Workforce Edge, a full-service education benefits administration solution for employers, and Sophia Learning, enabling education benefits programs through low-cost online general education-level courses that are ACE-recommended for college credit; 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 and other action by the Department of Education or other governmental entities, including without limitation action related to borrower defense to repayment applications, 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;
• 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 Strategic Education’s acquisition of Torrens University and associated assets in Australia and New Zealand;
• the risk that the benefits of the acquisition of Torrens University and associated assets in Australia and New Zealand may not be fully realized or may take longer to realize than expected;
• the risk that the acquisition of Torrens University and associated assets in Australia and New Zealand 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 June 30,

 

For the six months ended June 30,

 

2022

 

2023

 

2022

 

2023

Revenues

$

273,564

 

$

287,680

 

$

532,419

 

 

$

544,286

Costs and expenses:

 

 

 

 

 

 

 

Instructional and support costs

 

147,368

 

 

161,479

 

 

291,992

 

 

 

314,417

General and administration

 

96,722

 

 

99,003

 

 

191,506

 

 

 

194,468

Amortization of intangible assets

 

3,694

 

 

3,450

 

 

7,432

 

 

 

6,982

Merger and integration costs

 

254

 

 

580

 

 

664

 

 

 

1,005

Restructuring costs

 

3,661

 

 

6,351

 

 

5,519

 

 

 

11,946

Total costs and expenses

 

251,699

 

 

270,863

 

 

497,113

 

 

 

528,818

Income from operations

 

21,865

 

 

16,817

 

 

35,306

 

 

 

15,468

Other income (expense)

 

300

 

 

3,171

 

 

(871

)

 

 

3,569

Income before income taxes

 

22,165

 

 

19,988

 

 

34,435

 

 

 

19,037

Provision for income taxes

 

6,945

 

 

5,757

 

 

12,186

 

 

 

6,834

Net income

$

15,220

 

$

14,231

 

$

22,249

 

 

$

12,203

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.64

 

$

0.61

 

$

0.93

 

 

$

0.52

Diluted

$

0.63

 

$

0.59

 

$

0.92

 

 

$

0.51

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

23,796

 

 

23,450

 

 

23,872

 

 

 

23,440

Diluted

 

24,063

 

 

23,964

 

 

24,089

 

 

 

23,993

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

December 31, 2022

 

June 30, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

213,667

 

 

$

181,024

 

Marketable securities

 

9,156

 

 

 

25,468

 

Tuition receivable, net

 

62,953

 

 

 

82,373

 

Income taxes receivable

 

—

 

 

 

9,719

 

Other current assets

 

43,285

 

 

 

52,330

 

Total current assets

 

329,061

 

 

 

350,914

 

Property and equipment, net

 

132,845

 

 

 

121,066

 

Right-of-use lease assets

 

125,248

 

 

 

115,376

 

Marketable securities, non-current

 

13,123

 

 

 

8,609

 

Intangible assets, net

 

260,541

 

 

 

253,353

 

Goodwill

 

1,251,277

 

 

 

1,237,982

 

Other assets

 

49,652

 

 

 

54,812

 

Total assets

$

2,161,747

 

 

$

2,142,112

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

90,588

 

 

$

90,057

 

Income taxes payable

 

6,989

 

 

 

—

 

Contract liabilities

 

88,488

 

 

 

128,650

 

Lease liabilities

 

23,879

 

 

 

23,380

 

Total current liabilities

 

209,944

 

 

 

242,087

 

Long-term debt

 

101,396

 

 

 

101,309

 

Deferred income tax liabilities

 

34,605

 

 

 

31,341

 

Lease liabilities, non-current

 

134,006

 

 

 

126,975

 

Other long-term liabilities

 

46,006

 

 

 

41,794

 

Total liabilities

 

525,957

 

 

 

543,506

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.01; 32,000,000 shares authorized; 24,402,891 and 24,465,671 shares issued and outstanding at December 31, 2022 and June 30, 2023, respectively

 

244

 

 

 

245

 

Additional paid-in capital

 

1,510,924

 

 

 

1,509,077

 

Accumulated other comprehensive loss

 

(35,068

)

 

 

(51,084

)

Retained earnings

 

159,690

 

 

 

140,368

 

Total stockholders’ equity

 

1,635,790

 

 

 

1,598,606

 

Total liabilities and stockholders’ equity

$

2,161,747

 

 

$

2,142,112

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

For the six months ended June 30,

 

2022

 

2023

Cash flows from operating activities:

 

 

 

Net income

$

22,249

 

 

$

12,203

 

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

 

 

 

Gain on sale of property and equipment

 

—

 

 

 

(2,136

)

Amortization of deferred financing costs

 

276

 

 

 

276

 

Amortization of investment discount/premium

 

28

 

 

 

(7

)

Depreciation and amortization

 

33,436

 

 

 

30,196

 

Deferred income taxes

 

(4,909

)

 

 

(3,036

)

Stock-based compensation

 

10,597

 

 

 

11,125

 

Impairment of right-of-use lease assets

 

1,121

 

 

 

5,135

 

Changes in assets and liabilities:

 

 

 

Tuition receivable, net

 

(25,162

)

 

 

(19,626

)

Other assets

 

(2,354

)

 

 

(12,165

)

Accounts payable and accrued expenses

 

(8,113

)

 

 

(2,344

)

Income taxes payable and income taxes receivable

 

4,913

 

 

 

(16,699

)

Contract liabilities

 

51,901

 

 

 

38,906

 

Other liabilities

 

(3,307

)

 

 

(1,091

)

Net cash provided by operating activities

 

80,676

 

 

 

40,737

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(22,688

)

 

 

(17,794

)

Purchases of marketable securities

 

—

 

 

 

(16,904

)

Proceeds from marketable securities

 

2,100

 

 

 

4,960

 

Proceeds from sale of property and equipment

 

—

 

 

 

5,890

 

Proceeds from other investments

 

—

 

 

 

457

 

Other investments

 

(223

)

 

 

(152

)

Cash paid for acquisition, net of cash acquired

 

—

 

 

 

(211

)

Net cash used in investing activities

 

(20,811

)

 

 

(23,754

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Common dividends paid

 

(29,886

)

 

 

(29,468

)

Net payments for stock awards

 

(2,881

)

 

 

(4,964

)

Repurchase of common stock

 

(24,972

)

 

 

(9,999

)

Net cash used in financing activities

 

(57,739

)

 

 

(44,431

)

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

 

(4,981

)

 

 

(1,924

)

Net decrease in cash, cash equivalents, and restricted cash

 

(2,855

)

 

 

(29,372

)

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

 

279,212

 

 

 

227,454

 

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

$

276,357

 

 

$

198,082

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

2022

 

2023

 

2022

 

2023

Revenues:

 

 

 

 

 

 

 

U.S. Higher Education

$

190,026

 

 

$

202,679

 

 

$

385,792

 

 

$

399,574

 

Australia/New Zealand

 

67,543

 

 

 

65,472

 

 

 

116,055

 

 

 

106,975

 

Education Technology Services

 

15,995

 

 

 

19,529

 

 

 

30,572

 

 

 

37,737

 

Consolidated revenues

$

273,564

 

 

$

287,680

 

 

$

532,419

 

 

$

544,286

 

Income from operations:

 

 

 

 

 

 

 

U.S. Higher Education

$

11,851

 

 

$

6,741

 

 

$

27,334

 

 

$

16,330

 

Australia/New Zealand

 

12,321

 

 

 

14,291

 

 

 

11,572

 

 

 

7,109

 

Education Technology Services

 

5,302

 

 

 

6,166

 

 

 

10,015

 

 

 

11,962

 

Amortization of intangible assets

 

(3,694

)

 

 

(3,450

)

 

 

(7,432

)

 

 

(6,982

)

Merger and integration costs

 

(254

)

 

 

(580

)

 

 

(664

)

 

 

(1,005

)

Restructuring costs

 

(3,661

)

 

 

(6,351

)

 

 

(5,519

)

 

 

(11,946

)

Consolidated income from operations

$

21,865

 

 

$

16,817

 

 

$

35,306

 

 

$

15,468

 

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) amortization and depreciation expense related to intangible assets and software assets associated with the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (2) 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, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities, (4) income/loss 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 30.0% for the three months ended June 30, 2022 and 2023. To illustrate currency impacts to operating results, 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 for the three months ended June 30, 2023 are also presented on a constant currency basis utilizing an exchange rate of 0.72 Australian Dollars to U.S. Dollars, which was the average exchange rate for the same period in 2022. We define EBITDA as net income before other income, the provision for income taxes, gains 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) and (3) 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 OPERATING MARGIN, ADJUSTED INCOME BEFORE INCOME TAXES, ADJUSTED NET INCOME, AND ADJUSTED EPS

(in thousands, except per share data)

 

 

 

 

For the three months ended June 30, 2022

Non-GAAP Adjustments

 

 

 

As Reported

(GAAP)

 

Amortization of intangible assets(1)

 

Merger and integration costs(2)

 

Restructuring costs(3)

 

Income from other investments(4)

 

Tax

adjustments(5)

 

As Adjusted

(Non-GAAP)

Revenues

$

273,564

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

273,564

 

Total costs and expenses

$

251,699

 

 

$

(3,694

)

 

$

(254

)

 

$

(3,661

)

 

$

—

 

 

$

—

 

 

$

244,090

 

Income from operations

$

21,865

 

 

$

3,694

 

 

$

254

 

 

$

3,661

 

 

$

—

 

 

$

—

 

 

$

29,474

 

Operating margin

 

8.0

%

 

 

 

 

 

 

 

 

 

 

 

 

10.8

%

Income before income taxes

$

22,165

 

 

$

3,694

 

 

$

254

 

 

$

3,661

 

 

$

(526

)

 

$

—

 

 

$

29,248

Net income

$

15,220

 

 

$

3,694

 

 

$

254

 

 

$

3,661

 

 

$

(526

)

 

$

(1,829

)

 

$

20,474

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

0.63

 

 

 

 

 

 

 

 

 

 

 

 

$

0.85

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

24,063

 

 

 

 

 

 

 

 

 

 

 

 

 

24,063

 

 

 

 

For the three months ended June 30, 2023

Non-GAAP Adjustments

 

 

 

As Reported

(GAAP)

 

Amortization of intangible assets(1)

 

Merger and integration costs(2)

 

Restructuring costs(3)

 

Income from other investments(4)

 

Tax

adjustments(5)

 

As Adjusted

(Non-GAAP)

Revenues

$

287,680

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

287,680

 

Total costs and expenses

$

270,863

 

 

$

(3,450

)

 

$

(580

)

 

$

(6,351

)

 

$

—

 

 

$

—

 

 

$

260,482

 

Income from operations

$

16,817

 

 

$

3,450

 

 

$

580

 

 

$

6,351

 

 

$

—

 

 

$

—

 

 

$

27,198

 

Operating margin

 

5.8

%

 

 

 

 

 

 

 

 

 

 

 

 

9.5

%

Income before income taxes

$

19,988

 

 

$

3,450

 

 

$

580

 

 

$

6,351

 

 

$

(2,286

)

 

$

—

 

 

$

28,083

 

Net income

$

14,231

 

 

$

3,450

 

 

$

580

 

 

$

6,351

 

 

$

(2,286

)

 

$

(2,668

)

 

$

19,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

0.59

 

 

 

 

 

 

 

 

 

 

 

 

$

0.82

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,964

 

 

 

 

 

 

 

 

 

 

 

 

 

23,964

 

(1)

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

(2)

Reflects 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, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities.

(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 an adjusted effective income tax rate of 30.0% for the three months ended June 30, 2022 and 2023

 

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Q2 2023 AS ADJUSTED WITH CONSTANT CURRENCY

(in thousands, except per share data)

 

 

As Adjusted

(Non-GAAP)

 

Constant currency adjustment(1)

 

As Adjusted with Constant Currency

(Non-GAAP)

Revenues

$

287,680

 

 

$

4,584

 

$

292,264

 

Total costs and expenses

$

260,482

 

 

$

3,495

 

$

263,977

 

Income from operations

$

27,198

 

 

$

1,089

 

$

28,287

 

Operating margin

 

9.5

%

 

 

 

 

9.7

%

Income before income taxes

$

28,083

 

 

$

1,118

 

$

29,201

 

Net income

$

19,658

 

 

$

783

 

$

20,441

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

Diluted

$

0.82

 

 

 

 

$

0.85

 

Weighted average shares outstanding:

 

 

 

 

Diluted

 

23,964

 

 

 

 

 

23,964

 

(1)

Reflects an adjustment to translate foreign currency results for the three months ended June 30, 2023 at a constant exchange rate of 0.72 Australian Dollars to U.S. Dollars, which was the average exchange rate for the same period in 2022.

 

STRATEGIC EDUCATION, INC.

UNAUDITED NON-GAAP SEGMENT REPORTING

(in thousands)

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

2022

 

2023

 

2022

 

2023

Revenues:

 

 

 

 

 

 

 

U.S. Higher Education

$

190,026

 

 

$

202,679

 

 

$

385,792

 

 

$

399,574

 

Australia/New Zealand

 

67,543

 

 

 

65,472

 

 

 

116,055

 

 

 

106,975

 

Education Technology Services

 

15,995

 

 

 

19,529

 

 

 

30,572

 

 

 

37,737

 

Consolidated revenues

 

273,564

 

 

 

287,680

 

 

 

532,419

 

 

 

544,286

 

 

 

 

 

 

 

 

 

Income from operations:

 

 

 

 

 

 

 

U.S. Higher Education

$

11,851

 

 

$

6,741

 

 

$

27,334

 

 

$

16,330

 

Australia/New Zealand

 

12,321

 

 

 

14,291

 

 

 

11,572

 

 

 

7,109

 

Education Technology Services

 

5,302

 

 

 

6,166

 

 

 

10,015

 

 

 

11,962

 

Amortization of intangible assets

 

(3,694

)

 

 

(3,450

)

 

 

(7,432

)

 

 

(6,982

)

Merger and integration costs

 

(254

)

 

 

(580

)

 

 

(664

)

 

 

(1,005

)

Restructuring costs

 

(3,661

)

 

 

(6,351

)

 

 

(5,519

)

 

 

(11,946

)

Consolidated income from operations

 

21,865

 

 

 

16,817

 

 

 

35,306

 

 

 

15,468

 

 

 

 

 

 

 

 

 

Adjustments to consolidated income from operations:

 

 

 

 

 

 

 

Amortization of intangible assets

 

3,694

 

 

 

3,450

 

 

 

7,432

 

 

 

6,982

 

Merger and integration costs

 

254

 

 

 

580

 

 

 

664

 

 

 

1,005

 

Restructuring costs

 

3,661

 

 

 

6,351

 

 

 

5,519

 

 

 

11,946

 

Total adjustments to consolidated income from operations

 

7,609

 

 

 

10,381

 

 

 

13,615

 

 

 

19,933

 

 

 

 

 

 

 

 

 

Adjusted income from operations by segment:

 

 

 

 

 

 

 

U.S. Higher Education

 

11,851

 

 

 

6,741

 

 

 

27,334

 

 

 

16,330

 

Australia/New Zealand

 

12,321

 

 

 

14,291

 

 

 

11,572

 

 

 

7,109

 

Education Technology Services

 

5,302

 

 

 

6,166

 

 

 

10,015

 

 

 

11,962

 

Total adjusted income from operations

$

29,474

 

 

$

27,198

 

 

$

48,921

 

 

$

35,401

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

(in thousands)

 

 

For the three months ended June 30,

 

2022

 

2023

Net income

$

15,220

 

 

$

14,231

 

Provision for income taxes

 

6,945

 

 

 

5,757

 

Other income

 

(300

)

 

 

(3,171

)

Gain on sale of property and equipment

 

—

 

 

 

(2,136

)

Depreciation and amortization

 

17,164

 

 

 

15,545

 

EBITDA (1)

 

39,029

 

 

 

30,226

 

Stock-based compensation

 

5,529

 

 

 

5,493

 

Merger and integration costs (2)

 

254

 

 

 

244

 

Restructuring costs (3)

 

1,518

 

 

 

7,576

 

Cloud computing amortization (4)

 

1,606

 

 

 

1,884

 

Adjusted EBITDA (1)

$

47,936

 

 

$

45,423

 

(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 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. Excludes $0.3 million of depreciation and amortization expense for the three months ended June 30, 2023.

(3)

Reflects severance costs, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities. Excludes $2.1 million and $0.3 million of depreciation and amortization expense for the three months ended June 30, 2022 and 2023, respectively. Excludes $1.6 million of gain on sale of property and equipment and $0.1 million of stock-based compensation expense for the three months ended June 30, 2023.

(4)

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727547850/en/

Terese Wilke Director of Investor Relations Strategic Education, Inc. (612) 977-6331 terese.wilke@strategiced.com