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Strategic Education, Inc. Reports First Quarter 2022 Results

Strategic Education, Inc. Reports First Quarter 2022 Results

Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended March 31, 2022.

“We are pleased with continued stabilization of enrollment within the U.S. Higher Education segment during the first quarter of 2022,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “We are also encouraged by continued progress within Education Technology Services, especially the growth in Sophia Learning, and are optimistic about demand in Australia/New Zealand as borders have opened and international students are returning.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

Three Months Ended March 31

  • Revenue decreased 10.8% to $258.9 million compared to $290.3 million for the same period in 2021. Adjusted revenue, which is a non-GAAP financial measure, decreased 11.5% to $258.9 million compared to $292.6 million for the same period in 2021. [Adjusted results for 2021 exclude foreign currency exchange impacts and are therefore not directly comparable to adjusted results previously reported for the three months ended March 31, 2021.] For more details on non-GAAP financial measures, refer to the information in the Non-GAAP Financial Measures section of this press release.
  • Income from operations was $13.4 million or 5.2% of revenue, compared to $12.0 million or 4.1% of revenue for the same period in 2021. Adjusted income from operations, which is a non-GAAP financial measure, was $19.4 million compared to $52.9 million for the same period in 2021. The adjusted operating income margin, which is a non-GAAP financial measure, was 7.5% compared to 18.1% for the same period in 2021.
  • Net income was $7.0 million compared to $9.6 million for the same period in 2021. Adjusted net income, which is a non-GAAP financial measure, was $13.1 million compared to $37.0 million for the same period in 2021.
  • Adjusted EBITDA, which is a non-GAAP financial measure, was $38.4 million compared to $70.6 million for the same period in 2021.
  • Diluted earnings per share was $0.29 compared to $0.40 for the same period in 2021. Adjusted diluted earnings per share, which is a non-GAAP financial measure, decreased to $0.54 from $1.53 for the same period in 2021. Adjusted diluted earnings per share on a constant currency basis, which is a non-GAAP financial measure, was $0.53. Diluted weighted average shares outstanding decreased to 24,114,000 from 24,153,000 for the same period in 2021.

U.S. Higher Education Segment Highlights

  • The U.S. Higher Education segment (USHE) is comprised of Strayer University and Capella University.
  • For the first quarter, student enrollment within USHE decreased 12.6% to 78,172 compared to 89,482 for the same period in 2021.
  • For the first quarter, FlexPath enrollment was 20% of USHE enrollment compared to 17% for the same period in 2021.
  • Revenue decreased 13.6% to $195.8 million in the first quarter of 2022 compared to $226.5 million for the same period in 2021, driven by lower first quarter enrollment and slightly lower revenue-per-student.
  • Income from operations decreased to $15.5 million in the first quarter of 2022 from $47.8 million for the same period in 2021. The operating income margin was 7.9%, compared to 21.1% for the same period in 2021.

Education Technology Services Segment Highlights

  • The Education Technology Services segment (ETS) is comprised primarily of Employer Solutions, Sophia Learning, and Workforce Edge.
  • For the first quarter, employer affiliated enrollment was 23.0% of USHE enrollment compared to 20.7% for the same period in 2021.
  • As of March 31, 2022, Workforce Edge had a total of 37 corporate agreements, collectively employing approximately 920,000 employees.
  • Revenue increased 16.4% to $14.6 million in the first quarter of 2022 compared to $12.5 million for the same period in 2021, driven by growth in Sophia Learning subscriptions.
  • Income from operations decreased to $4.7 million in the first quarter of 2022 from $5.9 million for the same period in 2021. The operating income margin was 32.3%, compared to 47.0% for the same period in 2021.

Australia/New Zealand Segment Highlights

  • The Australia/New Zealand segment (ANZ) is comprised of Torrens University, Think Education, and Media Design School.
  • For the first quarter, student enrollment within ANZ decreased 4.2% to 20,575 compared to 21,469 for the same period in 2021.
  • Revenue decreased 5.4% to $48.5 million in the first quarter of 2022 compared to $51.3 million for the same period in 2021. Adjusted revenue, which is a non-GAAP financial measure, decreased 9.3% to $48.5 million compared to $53.5 million for the same period in 2021.
  • Loss from operations was $0.7 million in the first quarter of 2022 compared to loss from operations of $2.9 million for the same period in 2021. Adjusted loss from operations, which is a non-GAAP financial measure, was $0.7 million compared to adjusted loss from operations of $0.7 million for the same period in 2021.

BALANCE SHEET AND CASH FLOW

At March 31, 2022, Strategic Education had cash, cash equivalents, and marketable securities of $321.5 million, and $141.7 million outstanding under its revolving credit facility. For the first three months of 2022, cash provided by operations was $56.6 million compared to $78.8 million for the same period in 2021. Capital expenditures for the first three months of 2022 were $9.7 million compared to $12.7 million for the same period in 2021. Capital expenditures for 2022 are expected to be approximately $50 million.

For the first quarter of 2022, consolidated bad debt expense as a percentage of revenue was 2.8%, compared to 3.7% of revenue and adjusted revenue, which is a non-GAAP financial measure, for the same period in 2021.

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 June 6, 2022 to shareholders of record as of May 27, 2022.

CONFERENCE CALL WITH MANAGEMENT

Strategic Education will host a conference call to discuss its first quarter 2022 results at 10:00 a.m. (ET) today. To participate in the live call, investors should dial (877) 303-9047 ten minutes prior to the start time. In addition, the call will be available via webcast. To access the live webcast of the conference call, please go to www.strategiceducation.com in the Investor Relations section 15 minutes prior to the start time of the call to register. An earnings release presentation will also be posted to www.strategiceducation.com in the Investor Relations section. Following the call, the webcast will be archived and available at www.strategiceducation.com in the Investor Relations section.

About Strategic Education, Inc.

Strategic Education, Inc. (NASDAQ: STRA) (www.strategiceducation.com) is dedicated to helping advance economic mobility through higher education. We primarily serve working adult students globally through our core focus areas: 1) U.S. Higher Education, including Strayer University and Capella University, each institutionally accredited, and collectively offer flexible and affordable associate, bachelor’s, master’s, and doctoral programs including the Jack Welch Management Institute at Strayer University, and non-degree web and mobile application development courses through Strayer University’s Hackbright Academy and Devmountain; 2) 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 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 by the Department of Education and increased focus by the U.S. Congress on for-profit education institutions;
  • competitive factors;
  • risks associated with the further spread of COVID-19, including the ultimate impact of COVID-19 on people and economies;
  • the impact of regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19, including restrictions on business operations or social distancing requirements;
  • risks associated with the opening of new campuses;
  • risks associated with the offering of new educational programs and adapting to other changes;
  • risks associated with the acquisition of existing educational institutions, including 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
March 31,

 

 

2021

 

2022

Revenues

 

$

290,336

 

$

258,855

 

Costs and expenses:

 

 

 

 

Instructional and support costs

 

 

152,805

 

 

 

144,624

 

General and administration

 

 

86,845

 

 

 

94,784

 

Amortization of intangible assets

 

 

19,407

 

 

 

3,738

 

Merger and integration costs

 

 

1,012

 

 

 

410

 

Restructuring costs

 

 

18,267

 

 

 

1,858

 

Total costs and expenses

 

 

278,336

 

 

 

245,414

 

Income from operations

 

 

12,000

 

 

 

13,441

 

Other income (expense)

 

 

2,167

 

 

 

(1,171

)

Income before income taxes

 

 

14,167

 

 

 

12,270

 

Provision for income taxes

 

 

4,590

 

 

 

5,241

 

Net income

 

$

9,577

 

 

$

7,029

 

Earnings per share:

 

 

 

 

Basic

 

$

0.40

 

 

$

0.29

 

Diluted

 

$

0.40

 

 

$

0.29

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

 

23,974

 

 

 

23,948

 

Diluted

 

 

24,153

 

 

 

24,114

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

 

December 31,
2021

 

March 31,
2022

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

268,918

 

$

293,419

Marketable securities

 

 

6,501

 

 

6,785

Tuition receivable, net

 

 

51,277

 

 

64,798

Income taxes receivable

 

 

313

 

 

Other current assets

 

 

40,777

 

 

52,846

Total current assets

 

 

367,786

 

 

417,848

Property and equipment, net

 

 

150,589

 

 

152,742

Right-of-use lease assets

 

 

149,587

 

 

146,508

Marketable securities, non-current

 

 

23,377

 

 

21,277

Intangible assets, net

 

 

276,380

 

 

276,267

Goodwill

 

 

1,285,864

 

 

1,303,175

Other assets

 

 

52,297

 

 

50,066

Total assets

 

$

2,305,880

 

$

2,367,883

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and accrued expenses

 

$

95,518

 

$

103,934

Income taxes payable

 

 

 

 

9,422

Contract liabilities

 

 

73,232

 

 

115,647

Lease liabilities

 

 

27,005

 

 

25,833

Total current liabilities

 

 

195,755

 

 

254,836

Long-term debt

 

 

141,630

 

 

141,743

Deferred income tax liabilities

 

 

44,595

 

 

39,974

Lease liabilities, non-current

 

 

162,821

 

 

158,930

Other long-term liabilities

 

 

47,089

 

 

48,087

Total liabilities

 

 

591,890

 

 

643,570

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock, par value $0.01; 32,000,000 shares authorized; 24,592,098 and 24,963,542 shares issued and outstanding at December 31, 2021 and March 31, 2022, respectively

 

 

246

 

 

250

Additional paid-in capital

 

 

1,529,969

 

 

1,528,328

Accumulated other comprehensive income

 

 

9,203

 

 

29,185

Retained earnings

 

 

174,572

 

 

166,550

Total stockholders’ equity

 

 

1,713,990

 

 

1,724,313

Total liabilities and stockholders’ equity

 

$

2,305,880

 

$

2,367,883

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

For the three months
ended March 31,

 

 

2021

 

2022

Cash flows from operating activities:

 

 

 

 

Net income

 

$

9,577

 

 

$

7,029

 

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

 

 

 

 

Amortization of deferred financing costs

 

 

138

 

 

 

138

 

Amortization of investment discount/premium

 

 

24

 

 

 

15

 

Depreciation and amortization

 

 

34,571

 

 

 

16,272

 

Deferred income taxes

 

 

(8,898

)

 

 

(4,955

)

Stock-based compensation

 

 

3,900

 

 

 

5,068

 

Impairment of right-of-use lease assets

 

 

14,388

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

Tuition receivable, net

 

 

(13,417

)

 

 

(12,669

)

Other assets

 

 

(9,897

)

 

 

(6,374

)

Accounts payable and accrued expenses

 

 

(10,276

)

 

 

2,972

 

Income taxes payable and income taxes receivable

 

 

12,777

 

 

 

9,660

 

Contract liabilities

 

 

46,872

 

 

 

41,012

 

Other liabilities

 

 

(978

)

 

 

(1,573

)

Net cash provided by operating activities

 

 

78,781

 

 

 

56,595

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(12,650

)

 

 

(9,686

)

Proceeds from marketable securities

 

 

1,930

 

 

 

1,100

 

Other investments

 

 

(72

)

 

 

(175

)

Net cash used in investing activities

 

 

(10,792

)

 

 

(8,761

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Common dividends paid

 

 

(14,778

)

 

 

(15,018

)

Net payments for stock awards

 

 

(2,326

)

 

 

(2,849

)

Repurchase of common stock

 

 

 

 

 

(3,961

)

Net cash used in financing activities

 

 

(17,104

)

 

 

(21,828

)

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

 

 

(866

)

 

 

2,097

 

Net increase in cash, cash equivalents, and restricted cash

 

 

50,019

 

 

 

28,103

 

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

 

 

202,020

 

 

 

279,212

 

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

 

$

252,039

 

 

$

307,315

 

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

 

 

 

For the three months ended
March 31,

 

 

2021

 

2022

Revenues:

 

 

 

 

U.S. Higher Education

 

$

226,547

 

 

$

195,766

 

Australia/New Zealand

 

 

51,265

 

 

 

48,512

 

Education Technology Services

 

 

12,524

 

 

 

14,577

 

Consolidated revenues

 

$

290,336

 

 

$

258,855

 

Income (loss) from operations:

 

 

 

 

U.S. Higher Education

 

$

47,754

 

 

$

15,483

 

Australia/New Zealand

 

 

(2,949

)

 

 

(749

)

Education Technology Services

 

 

5,881

 

 

 

4,713

 

Amortization of intangible assets

 

 

(19,407

)

 

 

(3,738

)

Merger and integration costs

 

 

(1,012

)

 

 

(410

)

Restructuring costs

 

 

(18,267

)

 

 

(1,858

)

Consolidated income from operations

 

$

12,000

 

 

$

13,441

 

Non-GAAP Financial Measures

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

Management uses certain non-GAAP measures to evaluate financial performance because those non-GAAP measures allow for period-over-period comparisons of the Company’s ongoing operations before the impact of certain items described below. Management believes this information is useful to investors to compare the Company’s results of operations period-over-period. These measures are Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA and Adjusted Diluted Earnings Per Share (EPS). We define Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted EPS to exclude (1) a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense related to intangible assets and software assets associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (2) transaction and integration expenses associated with the Company's merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (3) severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring, (4) income/loss recognized from the Company’s investments in partnership interests and other investments, and (5) discrete tax adjustments utilizing adjusted effective income tax rates of 29.2% and 30.0% for the three months ended March 31, 2021 and 2022, 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 March 31, 2022 are also presented on a constant currency basis utilizing an exchange rate of 0.7728 Australian Dollars to U.S. Dollars, which was the average exchange rate for the same period in 2021. We define EBITDA as net income before other income, 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, a purchase accounting adjustment to record acquired contract liabilities at fair value, 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 INCOME BEFORE INCOME TAXES, ADJUSTED NET INCOME, AND ADJUSTED

EPS

(in thousands, except per share data)

 

 

 

 

 

For the three months ended March 31, 2021
Non-GAAP Adjustments

 

 

 

 

As Reported
(GAAP)

 

Purchase
accounting
adjustments(1)

 

Merger and
integration
costs(2)

 

Restructuring
costs(3)

 

Income from
other
investments(4)

 

Tax
adjustments(5)

 

As Adjusted
(Non-GAAP)

Revenues

 

$

290,336

 

 

$

2,223

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

292,559

 

Total costs and expenses

 

$

278,336

 

 

$

(19,407

)

 

$

(1,012

)

 

$

(18,267

)

 

$

 

 

$

 

 

$

239,650

 

Income from operations

 

$

12,000

 

 

$

21,630

 

 

$

1,012

 

 

$

18,267

 

 

$

 

 

$

 

 

$

52,909

 

Operating margin

 

 

4.1

%

 

 

 

 

 

 

 

 

 

 

 

 

18.1

%

Income before income taxes

 

$

14,167

 

 

$

21,630

 

 

$

1,012

 

 

$

18,267

 

 

$

(2,783

)

 

$

 

 

$

52,293

 

Net income

 

$

9,577

 

 

$

21,630

 

 

$

1,012

 

 

$

18,267

 

 

$

(2,783

)

 

$

(10,688

)

 

$

37,015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

Diluted

 

$

0.40

 

 

 

 

 

 

 

 

 

 

 

 

$

1.53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

Diluted

 

 

24,153

 

 

 

 

 

 

 

 

 

 

 

 

 

24,153

 

 

 

 

 

For the three months ended March 31, 2022
Non-GAAP Adjustments

 

 

 

 

As Reported
(GAAP)

 

Purchase
accounting
adjustments(1)

 

Merger and
integration
costs(2)

 

Restructuring
costs(3)

 

Loss from
other
investments(4)

 

Tax
adjustments(5)

 

As Adjusted
(Non-GAAP)

Revenues

 

$

258,855

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

258,855

 

Total costs and expenses

 

$

245,414

 

 

$

(3,738

)

 

$

(410

)

 

$

(1,858

)

 

$

 

 

$

 

 

$

239,408

 

Income from operations

 

$

13,441

 

 

$

3,738

 

 

$

410

 

 

$

1,858

 

 

$

 

 

$

 

 

$

19,447

 

Operating margin

 

 

5.2

%

 

 

 

 

 

 

 

 

 

 

 

 

7.5

%

Income before income taxes

 

$

12,270

 

 

$

3,738

 

 

$

410

 

 

$

1,858

 

 

$

387

 

 

$

 

 

$

18,663

 

Net income

 

$

7,029

 

 

$

3,738

 

 

$

410

 

 

$

1,858

 

 

$

387

 

$

(358

)

 

$

13,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

Diluted

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

Diluted

 

 

24,114

 

 

 

 

 

 

 

 

 

 

 

 

 

24,114

 

(1)

Reflects a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

(2)

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

(3)

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

(4)

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

(5)

Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing adjusted effective income tax rates of 29.2% and 30.0% for the three months ended March 31, 2021 and 2022, respectively.

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Q1 2022 AS ADJUSTED ON A CONSTANT CURRENCY BASIS

(in thousands, except per share data)

 

 

 

As Adjusted
(Non-GAAP)

 

Constant
currency
adjustment(1)

 

As Adjusted
with Constant
Currency
(Non-GAAP)

Revenues

 

$

258,855

 

 

$

2,886

 

 

$

261,741

 

Total costs and expenses

 

$

239,408

 

 

$

3,150

 

 

$

242,558

 

Income from operations

 

$

19,447

 

 

$

(264

)

 

$

19,183

 

Operating margin

 

 

7.5

%

 

 

 

 

7.3

%

Income before income taxes

 

$

18,663

 

 

$

(268

)

 

$

18,395

 

Net income

 

$

13,064

 

 

$

(210

)

 

$

12,854

 

 

 

 

 

 

 

 

Earnings per share:

Diluted

 

$

0.54

 

 

 

 

$

0.53

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

Diluted

 

 

24,114

 

 

 

 

 

24,114

 

(1)

Reflects an adjustment to translate foreign currency results for the three months ended March 31, 2022 at a constant exchange rate of 0.7728 Australian Dollars to U.S. Dollars, which was the average exchange rate for the same period in 2021.

STRATEGIC EDUCATION, INC.

UNAUDITED NON-GAAP SEGMENT REPORTING

(in thousands)

 

 

 

For the three months ended

 

 

March 31,

 

 

2021

 

2022

Revenues:

 

 

 

 

U.S. Higher Education

 

$

226,547

 

 

$

195,766

 

Australia/New Zealand

 

 

51,265

 

 

 

48,512

 

Education Technology Services

 

 

12,524

 

 

 

14,577

 

Consolidated revenues

 

 

290,336

 

 

 

258,855

 

 

 

 

 

 

Adjustments to consolidated revenues:

 

 

 

 

U.S. Higher Education

 

 

 

 

 

 

Australia/New Zealand(1)

 

 

2,223

 

 

 

 

Education Technology Services

 

 

 

 

 

 

Total adjustments to consolidated revenues

 

 

2,223

 

 

 

 

 

 

 

 

 

Adjusted revenues by segment:

 

 

 

 

U.S. Higher Education

 

 

226,547

 

 

 

195,766

 

Australia/New Zealand

 

 

53,488

 

 

 

48,512

 

Education Technology Services

 

 

12,524

 

 

 

14,577

 

Adjusted consolidated revenues

 

$

292,559

 

 

$

258,855

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

U.S. Higher Education

 

$

47,754

 

 

$

15,483

 

Australia/New Zealand

 

 

(2,949

)

 

 

(749

)

Education Technology Services

 

 

5,881

 

 

 

4,713

 

Amortization of intangible assets

 

 

(19,407

)

 

 

(3,738

)

Merger and integration costs

 

 

(1,012

)

 

 

(410

)

Restructuring costs

 

 

(18,267

)

 

 

(1,858

)

Consolidated income from operations

 

 

12,000

 

 

 

13,441

 

 

 

 

 

 

Adjustments to consolidated income from operations:

 

 

 

 

Australia/New Zealand(1)

 

 

2,223

 

 

 

 

Amortization of intangible assets

 

 

19,407

 

 

 

3,738

 

Merger and integration costs

 

 

1,012

 

 

 

410

 

Restructuring costs

 

 

18,267

 

 

 

1,858

 

Total adjustments to consolidated income from operations

 

 

40,909

 

 

 

6,006

 

 

 

 

 

 

Adjusted income (loss) from operations by segment:

 

 

 

 

U.S. Higher Education

 

 

47,754

 

 

 

15,483

 

Australia/New Zealand

 

 

(726

)

 

 

(749

)

Education Technology Services

 

 

5,881

 

 

 

4,713

 

Total adjusted income from operations

 

$

52,909

 

 

$

19,447

 

(1)

Adjustments to the Australia/New Zealand segment revenue and loss from operations for the three months ended March 31, 2021, include a purchase accounting adjustment of $2.2 million to record acquired contract liabilities at fair value as a result of the Company's acquisition of Torrens University and associated assets in Australia and New Zealand.

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

(in thousands)

 

 

 

For the three months ended

 

 

March 31,

 

 

2021

 

2022

 

 

 

 

 

Net income

 

$

9,577

 

 

$

7,029

Provision for income taxes

 

 

4,590

 

 

 

5,241

 

Other (income) expense

 

 

(2,167

)

 

 

1,171

 

Depreciation and amortization

 

 

34,571

 

 

 

16,272

 

EBITDA (1)

 

 

46,571

 

 

 

29,713

 

Stock-based compensation

 

 

3,900

 

 

 

5,068

 

Merger and integration costs (2)

 

 

1,012

 

 

 

463

 

Restructuring costs (3)

 

 

16,231

 

 

 

1,621

 

Cloud computing amortization (4)

 

 

641

 

 

 

1,492

 

Contract liability adjustment (5)

 

 

2,223

 

 

 

 

Adjusted EBITDA (1)

 

$

70,578

 

 

$

38,357

 

(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, including a premerger litigation settlement, and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand. Excludes $0.1 million of depreciation and amortization for the three months ended March 31, 2022.

(3)

Reflects severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring. Excludes $2.0 million and $0.2 million of depreciation and amortization expense for the three months ended March 31, 2021 and 2022, respectively.

(4)

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

(5)

Reflects a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

 

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220428005302/en/