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Strategic Education, Inc. Reports Third Quarter 2023 Results; Will Hold Investor and Analyst Day

HERNDON, Va., November 02, 2023--(BUSINESS WIRE)--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.

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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/

Contacts

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