STRA Strategic Education Inc

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

“We are pleased with the strength of our Q3 2023 results across all three segments, led by continued enrollment growth in the U.S. Higher Education segment, driven significantly by employer affiliated enrollment; strong growth in the Education Technology Services segment; and improving performance in the Australia/New Zealand segment,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “Our team remains focused on delivering overall enrollment, revenue, and earnings growth in 2023 and supporting our mission to drive economic mobility for working adults.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

Three Months Ended September 30

• Revenue increased 8.7% to $285.9 million compared to $263.1 million for the same period in 2022. Revenue on a constant currency basis increased 9.6% to $288.4 million in the third quarter of 2023 compared to $263.1 million for the same period in 2022.
• Income from operations was $25.6 million or 9.0% of revenue, compared to $7.8 million or 3.0% of revenue for the same period in 2022. Adjusted income from operations, which is a non-GAAP financial measure, was $32.6 million compared to $12.2 million for the same period in 2022. The adjusted operating income margin, which is a non-GAAP financial measure, was 11.4% compared to 4.6% 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 $18.5 million compared to $6.1 million for the same period in 2022. Adjusted net income, which is a non-GAAP financial measure, was $23.3 million compared to $8.0 million for the same period in 2022.
• Adjusted EBITDA, which is a non-GAAP financial measure, was $49.5 million compared to $31.6 million for the same period in 2022.
• Diluted earnings per share was $0.77 compared to $0.25 for the same period in 2022. Adjusted diluted earnings per share, which is a non-GAAP financial measure, increased to $0.97 from $0.33 for the same period in 2022. Adjusted diluted earnings per share on a constant currency basis, which is a non-GAAP financial measure, was $0.99. Diluted weighted average shares outstanding decreased slightly to 23,870,000 from 23,902,000 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 third quarter, student enrollment within USHE increased 9.9% to 82,548 compared to 75,144 for the same period in 2022.
• For the third quarter, FlexPath enrollment was 22% of USHE enrollment compared to 21% for the same period in 2022.
• Revenue increased 8.8% to $201.8 million in the third quarter of 2023 compared to $185.5 million for the same period in 2022, driven by higher third quarter enrollment.
• Income from operations was $10.4 million or 5.2% of revenue in the third quarter of 2023 compared to a loss from operations of $1.9 million for the same period in 2022.

Education Technology Services Segment Highlights

• The Education Technology Services segment (ETS) is comprised primarily of Enterprise Partnerships, Sophia Learning, and Workforce Edge.
• For the third quarter, employer affiliated enrollment was 27.8% of USHE enrollment compared to 25.3% for the same period in 2022.
• For the third quarter, average total subscribers at Sophia Learning increased approximately 38% from the same period in 2022.
• As of September 30, 2023, Workforce Edge had a total of 60 corporate agreements, collectively employing approximately 1,410,000 employees.
• Revenue increased 26.7% to $20.8 million in the third quarter of 2023 compared to $16.4 million for the same period in 2022, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.
• Income from operations was $8.3 million in the third quarter of 2023 compared to $5.2 million for the same period in 2022. The operating income margin was 39.9%, compared to 31.8% 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 third quarter, student enrollment within ANZ decreased 1.2% to 18,279 compared to 18,493 for the same period in 2022.
• Revenue increased 3.4% to $63.3 million in the third quarter of 2023 compared to $61.2 million for the same period in 2022, driven by higher revenue-per-student. Revenue on a constant currency basis increased 7.4% to $65.7 million in the third quarter of 2023 compared to $61.2 million for the same period in 2022, driven by higher revenue-per-student.
• Income from operations was $13.9 million in the third quarter of 2023 compared to $8.9 million for the same period in 2022. The operating income margin was 21.9%, compared to 14.6% for the same period in 2022. Income from operations on a constant currency basis was $14.3 million in the third quarter of 2023 compared to $8.9 million for the same period in 2022. The operating income margin on a constant currency basis was 21.8%, compared to 14.6% for the same period in 2022.

Balance Sheet and Cash Flow

At September 30, 2023, Strategic Education had cash, cash equivalents, and marketable securities of $198.6 million. During the third quarter, the company repaid $40 million of outstanding debt on its revolving credit facility, leaving $61.2 million outstanding on the facility. For the first nine months of 2023, cash provided by operations was $87.2 million compared to $124.7 million for the same period in 2022. Capital expenditures for the first nine months of 2023 were $27.3 million compared to $32.5 million for the same period in 2022. Capital expenditures for 2023 are expected to be approximately $40 million.

For the third quarter of 2023, consolidated bad debt expense as a percentage of revenue was 5.2%, compared to 4.5% 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 December 4, 2023 to shareholders of record as of November 27, 2023.

CONFERENCE CALL WITH MANAGEMENT

Strategic Education will host a conference call to discuss its third 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.

INVESTOR AND ANALYST DAY

Strategic Education will hold its 2023 Investor and Analyst Day on Tuesday, November 7, 2023 at 8:00 a.m. (ET) at the Lotte New York Palace Hotel in New York City. The presentation will be available via webcast. To access the live webcast of the Investor and Analyst Day, please go to www.strategiceducation.com in the Investor Relations section 15 minutes prior to the start time of the event to register. Following the event, the webcast and presentation 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) 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 September 30,

 

For the nine months ended September 30,

 

2022

 

2023

 

2022

 

2023

Revenues

$

263,123

 

 

$

285,936

 

$

795,542

 

 

$

830,222

Costs and expenses:

 

 

 

 

 

 

 

Instructional and support costs

 

153,162

 

 

 

155,735

 

 

445,154

 

 

 

470,152

General and administration

 

97,753

 

 

 

97,598

 

 

289,259

 

 

 

292,066

Amortization of intangible assets

 

3,522

 

 

 

3,382

 

 

10,954

 

 

 

10,364

Merger and integration costs

 

269

 

 

 

330

 

 

933

 

 

 

1,335

Restructuring costs

 

610

 

 

 

3,262

 

 

6,129

 

 

 

15,208

Total costs and expenses

 

255,316

 

 

 

260,307

 

 

752,429

 

 

 

789,125

Income from operations

 

7,807

 

 

 

25,629

 

 

43,113

 

 

 

41,097

Other income (expense)

 

(262

)

 

 

842

 

 

(1,133

)

 

 

4,411

Income before income taxes

 

7,545

 

 

 

26,471

 

 

41,980

 

 

 

45,508

Provision for income taxes

 

1,453

 

 

 

8,012

 

 

13,639

 

 

 

14,846

Net income

$

6,092

 

 

$

18,459

 

$

28,341

 

 

$

30,662

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.26

 

 

$

0.79

 

$

1.19

 

 

$

1.31

Diluted

$

0.25

 

 

$

0.77

 

$

1.18

 

 

$

1.28

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

23,550

 

 

 

23,365

 

 

23,765

 

 

 

23,415

Diluted

 

23,902

 

 

 

23,870

 

 

24,026

 

 

 

23,952

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

December 31, 2022

 

September 30, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

213,667

 

 

$

167,707

 

Marketable securities

 

9,156

 

 

 

28,960

 

Tuition receivable, net

 

62,953

 

 

 

97,429

 

Income taxes receivable

 

—

 

 

 

7,850

 

Other current assets

 

43,285

 

 

 

48,689

 

Total current assets

 

329,061

 

 

 

350,635

 

Property and equipment, net

 

132,845

 

 

 

117,872

 

Right-of-use lease assets

 

125,248

 

 

 

110,789

 

Marketable securities, non-current

 

13,123

 

 

 

1,914

 

Intangible assets, net

 

260,541

 

 

 

249,514

 

Goodwill

 

1,251,277

 

 

 

1,228,431

 

Other assets

 

49,652

 

 

 

54,945

 

Total assets

$

2,161,747

 

 

$

2,114,100

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

90,588

 

 

$

102,122

 

Income taxes payable

 

6,989

 

 

 

—

 

Contract liabilities

 

88,488

 

 

 

140,248

 

Lease liabilities

 

23,879

 

 

 

23,121

 

Total current liabilities

 

209,944

 

 

 

265,491

 

Long-term debt

 

101,396

 

 

 

61,247

 

Deferred income tax liabilities

 

34,605

 

 

 

28,254

 

Lease liabilities, non-current

 

134,006

 

 

 

121,395

 

Other long-term liabilities

 

46,006

 

 

 

42,959

 

Total liabilities

 

525,957

 

 

 

519,346

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.01; 32,000,000 shares authorized; 24,402,891 and 24,419,092 shares issued and outstanding at December 31, 2022 and September 30, 2023, respectively

 

244

 

 

 

244

 

Additional paid-in capital

 

1,510,924

 

 

 

1,513,023

 

Accumulated other comprehensive loss

 

(35,068

)

 

 

(62,878

)

Retained earnings

 

159,690

 

 

 

144,365

 

Total stockholders’ equity

 

1,635,790

 

 

 

1,594,754

 

Total liabilities and stockholders’ equity

$

2,161,747

 

 

$

2,114,100

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

For the nine months ended September 30,

 

2022

 

2023

Cash flows from operating activities:

 

 

 

Net income

$

28,341

 

 

$

30,662

 

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

 

414

 

 

 

416

 

Amortization of investment discount/premium

 

29

 

 

 

(40

)

Depreciation and amortization

 

49,193

 

 

 

44,881

 

Deferred income taxes

 

(9,213

)

 

 

(5,947

)

Stock-based compensation

 

16,209

 

 

 

15,202

 

Impairment of right-of-use lease assets

 

1,185

 

 

 

5,135

 

Changes in assets and liabilities:

 

 

 

Tuition receivable, net

 

(33,320

)

 

 

(35,113

)

Other assets

 

417

 

 

 

(12,456

)

Accounts payable and accrued expenses

 

6,768

 

 

 

11,119

 

Income taxes payable and income taxes receivable

 

4,498

 

 

 

(14,669

)

Contract liabilities

 

65,437

 

 

 

52,836

 

Other liabilities

 

(5,226

)

 

 

(2,717

)

Net cash provided by operating activities

 

124,732

 

 

 

87,173

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(32,508

)

 

 

(27,318

)

Purchases of marketable securities

 

—

 

 

 

(16,904

)

Proceeds from marketable securities

 

2,600

 

 

 

8,175

 

Proceeds from sale of property and equipment

 

—

 

 

 

5,890

 

Proceeds from other investments

 

—

 

 

 

457

 

Other investments

 

(223

)

 

 

(314

)

Cash paid for acquisition, net of cash acquired

 

(193

)

 

 

(448

)

Net cash used in investing activities

 

(30,324

)

 

 

(30,462

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Common dividends paid

 

(44,600

)

 

 

(44,139

)

Payments on long-term debt

 

—

 

 

 

(40,000

)

Net payments for stock awards

 

(2,973

)

 

 

(4,925

)

Repurchase of common stock

 

(36,916

)

 

 

(9,999

)

Net cash used in financing activities

 

(84,489

)

 

 

(99,063

)

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

 

(10,729

)

 

 

(3,657

)

Net decrease in cash, cash equivalents, and restricted cash

 

(810

)

 

 

(46,009

)

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

 

279,212

 

 

 

227,454

 

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

$

278,402

 

 

$

181,445

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

 

 

For the three months ended September 30,

 

For the nine months ended September 30,

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

U.S. Higher Education

$

185,499

 

 

$

201,828

 

 

$

571,291

 

 

$

601,402

 

Australia/New Zealand

 

61,177

 

 

 

63,264

 

 

 

177,232

 

 

 

170,239

 

Education Technology Services

 

16,447

 

 

 

20,844

 

 

 

47,019

 

 

 

58,581

 

Consolidated revenues

$

263,123

 

 

$

285,936

 

 

$

795,542

 

 

$

830,222

 

Income (loss) from operations:

 

 

 

 

 

 

 

U.S. Higher Education

$

(1,948

)

 

$

10,412

 

 

$

25,386

 

 

$

26,742

 

Australia/New Zealand

 

8,934

 

 

 

13,875

 

 

 

20,506

 

 

 

20,984

 

Education Technology Services

 

5,222

 

 

 

8,316

 

 

 

15,237

 

 

 

20,278

 

Amortization of intangible assets

 

(3,522

)

 

 

(3,382

)

 

 

(10,954

)

 

 

(10,364

)

Merger and integration costs

 

(269

)

 

 

(330

)

 

 

(933

)

 

 

(1,335

)

Restructuring costs

 

(610

)

 

 

(3,262

)

 

 

(6,129

)

 

 

(15,208

)

Consolidated income from operations

$

7,807

 

 

$

25,629

 

 

$

43,113

 

 

$

41,097

 

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 33.0% and 30.0% for the three months ended September 30, 2022 and 2023, respectively. 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 September 30, 2023 are also presented on a constant currency basis utilizing an exchange rate of 0.68 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 (loss), the provision for income taxes, 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 September 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

$

263,123

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

263,123

 

Total costs and expenses

$

255,316

 

 

$

(3,522

)

 

$

(269

)

 

$

(610

)

 

$

—

 

 

$

—

 

 

$

250,915

 

Income from operations

$

7,807

 

 

$

3,522

 

 

$

269

 

 

$

610

 

 

$

—

 

 

$

—

 

 

$

12,208

 

Operating margin

 

3.0

%

 

 

 

 

 

 

 

 

 

 

 

 

4.6

%

Income before income taxes

$

7,545

 

 

$

3,522

 

 

$

269

 

 

$

610

 

 

$

(39

)

 

$

—

 

 

$

11,907

 

Net income

$

6,092

 

 

$

3,522

 

 

$

269

 

 

$

610

 

 

$

(39

)

 

$

(2,478

)

 

$

7,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

0.25

 

 

 

 

 

 

 

 

 

 

 

 

$

0.33

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,902

 

 

 

 

 

 

 

 

 

 

 

 

 

23,902

 

 

 

 

For the three months ended September 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

$

285,936

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

285,936

 

Total costs and expenses

$

260,307

 

 

$

(3,382

)

 

$

(330

)

 

$

(3,262

)

 

$

—

 

 

$

—

 

 

$

253,333

 

Income from operations

$

25,629

 

 

$

3,382

 

 

$

330

 

 

$

3,262

 

 

$

—

 

 

$

—

 

 

$

32,603

 

Operating margin

 

9.0

%

 

 

 

 

 

 

 

 

 

 

 

 

11.4

%

Income before income taxes

$

26,471

 

 

$

3,382

 

 

$

330

 

 

$

3,262

 

 

$

(215

)

 

$

—

 

 

$

33,230

 

Net income

$

18,459

 

 

$

3,382

 

 

$

330

 

 

$

3,262

 

 

$

(215

)

 

$

(1,957

)

 

$

23,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

0.77

 

 

 

 

 

 

 

 

 

 

 

 

$

0.97

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,870

 

 

 

 

 

 

 

 

 

 

 

 

 

23,870

 

(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 33.0% and 30.0% for the three months ended September 30, 2022 and 2023, respectively.

 

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Q3 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

$

285,936

 

 

$

2,453

 

$

288,389

 

Total costs and expenses

$

253,333

 

 

$

2,029

 

$

255,362

 

Income from operations

$

32,603

 

 

$

424

 

$

33,027

 

Operating margin

 

11.4

%

 

 

 

 

11.5

%

Income before income taxes

$

33,230

 

 

$

464

 

$

33,694

 

Net income

$

23,261

 

 

$

325

 

$

23,586

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

Diluted

$

0.97

 

 

 

 

$

0.99

 

Weighted average shares outstanding:

 

 

 

 

Diluted

 

23,870

 

 

 

 

 

23,870

 

(1)

Reflects an adjustment to translate foreign currency results for the three months ended September 30, 2023 at a constant exchange rate of 0.68 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 September 30,

 

For the nine months ended September 30,

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

U.S. Higher Education

$

185,499

 

 

$

201,828

 

 

$

571,291

 

 

$

601,402

 

Australia/New Zealand

 

61,177

 

 

 

63,264

 

 

 

177,232

 

 

 

170,239

 

Education Technology Services

 

16,447

 

 

 

20,844

 

 

 

47,019

 

 

 

58,581

 

Consolidated revenues

 

263,123

 

 

 

285,936

 

 

 

795,542

 

 

 

830,222

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

U.S. Higher Education

$

(1,948

)

 

$

10,412

 

 

$

25,386

 

 

$

26,742

 

Australia/New Zealand

 

8,934

 

 

 

13,875

 

 

 

20,506

 

 

 

20,984

 

Education Technology Services

 

5,222

 

 

 

8,316

 

 

 

15,237

 

 

 

20,278

 

Amortization of intangible assets

 

(3,522

)

 

 

(3,382

)

 

 

(10,954

)

 

 

(10,364

)

Merger and integration costs

 

(269

)

 

 

(330

)

 

 

(933

)

 

 

(1,335

)

Restructuring costs

 

(610

)

 

 

(3,262

)

 

 

(6,129

)

 

 

(15,208

)

Consolidated income from operations

 

7,807

 

 

 

25,629

 

 

 

43,113

 

 

 

41,097

 

 

 

 

 

 

 

 

 

Adjustments to consolidated income from operations:

 

 

 

 

 

 

 

Amortization of intangible assets

 

3,522

 

 

 

3,382

 

 

 

10,954

 

 

 

10,364

 

Merger and integration costs

 

269

 

 

 

330

 

 

 

933

 

 

 

1,335

 

Restructuring costs

 

610

 

 

 

3,262

 

 

 

6,129

 

 

 

15,208

 

Total adjustments to consolidated income from operations

 

4,401

 

 

 

6,974

 

 

 

18,016

 

 

 

26,907

 

 

 

 

 

 

 

 

 

Adjusted income (loss) from operations by segment:

 

 

 

 

 

 

 

U.S. Higher Education

 

(1,948

)

 

 

10,412

 

 

 

25,386

 

 

 

26,742

 

Australia/New Zealand

 

8,934

 

 

 

13,875

 

 

 

20,506

 

 

 

20,984

 

Education Technology Services

 

5,222

 

 

 

8,316

 

 

 

15,237

 

 

 

20,278

 

Total adjusted income from operations

$

12,208

 

 

$

32,603

 

 

$

61,129

 

 

$

68,004

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

(in thousands)

 

 

For the three months ended September 30,

 

2022

 

2023

Net income

$

6,092

 

 

$

18,459

 

Provision for income taxes

 

1,453

 

 

 

8,012

 

Other (income) loss

 

262

 

 

 

(842

)

Depreciation and amortization

 

15,757

 

 

 

14,685

 

EBITDA (1)

 

23,564

 

 

 

40,314

 

Stock-based compensation

 

5,612

 

 

 

4,077

 

Merger and integration costs (2)

 

269

 

 

 

330

 

Restructuring costs (3)

 

510

 

 

 

2,922

 

Cloud computing amortization (4)

 

1,644

 

 

 

1,894

 

Adjusted EBITDA (1)

$

31,599

 

 

$

49,537

 

(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.

(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 $0.1 million of depreciation and amortization expense for the three months ended September 30, 2022 and 2023 and $0.3 million of stock-based compensation expense for the three months ended September 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/20231102397409/en/

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