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Strategic Education, Inc. Reports First Quarter 2021 Results

April 29, 2021

HERNDON, Va.--(BUSINESS WIRE)-- Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended March 31, 2021.

“We are pleased with the organization’s ongoing commitment to the success of our students and to our mission to enable economic mobility,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “As we continue to navigate through the challenges presented by the COVID-19 pandemic, we are encouraged by continued strength in our Australia/New Zealand and Alternative Learning segments.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

[Note: Strategic Education’s financial results for any periods ended prior to November 3, 2020 do not include the financial results of the Australia/New Zealand acquisition and are therefore not directly comparable.]

Three Months Ended March 31

  • Revenue increased 9.4% to $290.3 million compared to $265.3 million for the same period in 2020. Revenue in 2021 includes the impact of a purchase accounting adjustment of $2.2 million to record acquired contract liabilities at fair value as a result of the acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact. Adjusted revenue, which is a non-GAAP financial measure and excludes the aforementioned adjustments, increased 9.5% to $290.5 million compared to $265.3 million for the same period in 2020. 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 $12.0 million or 4.1% of revenue, compared to $44.0 million or 16.6% of revenue for the same period in 2020. Income from operations in 2021 includes the impact of the aforementioned contract liabilities adjustment, $19.4 million of amortization expense related to assets acquired in the merger with Capella Education Company and the acquisition of Torrens University and associated assets in Australia and New Zealand, $1.0 million in expenses associated with the merger with Capella Education Company and the acquisition of Torrens University and associated assets in Australia and New Zealand, $18.3 million of restructuring charges for severance costs and right-of-use lease asset impairment charges, and foreign currency exchange impact. Income from operations in 2020 included $15.4 million of amortization expense related to assets acquired in the merger with Capella Education Company and $3.8 million in expenses associated with the merger with Capella Education Company. Adjusted income from operations was $52.9 million in 2021 compared to $63.1 million for the same period in 2020. The adjusted operating income margin was 18.2% compared to 23.8% for the same period in 2020.
  • Net income, which includes the items described above, and also includes income from partnership interests and other investments, certain discrete tax adjustments, and foreign currency exchange impact, was $9.6 million in 2021 compared to $35.2 million for the same period in 2020. Adjusted net income was $37.0 million compared to $46.5 million for the same period in 2020.
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $46.6 million in 2021 compared to $69.7 million in 2020. Adjusted EBITDA, which excludes the items described above, as well as amortization expense associated with deferred implementation costs incurred in cloud computing arrangements, and stock-based compensation expense, was $70.6 million compared to $76.5 million for the same period in 2020.
  • Diluted earnings per share was $0.40 compared to $1.60 for the same period in 2020. Adjusted diluted earnings per share decreased to $1.53 from $2.11 for the same period in 2020. Diluted weighted average shares outstanding increased to 24,153,000 from 22,071,000 for the same period in 2020, due primarily to new shares issued to facilitate the acquisition of Torrens University and associated assets in Australia and New Zealand.

U.S. Higher Education Segment Highlights

  • The U.S. Higher Education segment (USHE) is comprised of Strayer University, including the Jack Welch Management Institute and DevMountain, Capella University, and Hackbright Academy.
  • For the first quarter, student enrollment within USHE decreased 7.3% to 89,482 compared to 96,537 for the same period in 2020.
  • For the first quarter, FlexPath enrollment was 17% of USHE enrollment compared to 12% for the same period in 2020.
  • Revenue decreased 11.3% to $226.5 million in the first quarter of 2021 compared to $255.5 million for the same period in 2020, driven by lower first quarter enrollment and lower revenue-per-student.
  • Income from operations decreased to $47.8 million in the first quarter of 2021 from $56.7 million for the same period in 2020. The operating income margin was 21.1%, compared to 22.2% for the same period in 2020.

Alternative Learning Segment Highlights

  • The Alternative Learning segment includes Employer Solutions, Workforce Edge, Sophia Learning, and Digital Enablement Partnerships.
  • For the first quarter, employer affiliated enrollment was 20.7% of USHE enrollment compared to 17.0% for the same period in 2020.
  • Revenue increased 27.9% to $12.5 million in the first quarter of 2021 compared to $9.8 million for the same period in 2020, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.
  • Income from operations decreased to $5.9 million in the first quarter of 2021 from $6.4 million for the same period in 2020, as we continue to invest in the Alternative Learning group. The operating income margin was 47.0%, compared to 65.3% for the same period in 2020.

Australia/New Zealand Segment Highlights

  • The Australia/New Zealand segment (ANZ) includes Torrens University, Think Education, and Media Design School.
  • For the first quarter, student enrollment within ANZ was 21,469, an increase of 11.9% compared to pro forma enrollment of 19,192 for the same period in 2020.
  • Revenue was $51.3 million in the first quarter of 2021, and adjusted revenue was $51.5 million excluding the impact of a purchase accounting adjustment of $2.2 million to record acquired contract liabilities at fair value as a result of the acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact. On a pro forma basis, revenue was $50.2 million in the first quarter of 2020.
  • Loss from operations was $2.9 million in the first quarter of 2021, and the adjusted loss from operations was $0.7 million excluding the impact of a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact. On a pro forma basis, income from operations was $2.7 million in the first quarter of 2020.

BALANCE SHEET AND CASH FLOW

At March 31, 2021, Strategic Education had cash, cash equivalents, and marketable securities of $274.0 million, and $141.8 million outstanding under its revolving credit facility. For the first three months of 2021, cash provided by operations was $78.8 million compared to $68.7 million for the same period in 2020. Capital expenditures for the first three months of 2021 were $12.7 million compared to $14.3 million for the same period in 2020. Capital expenditures for 2021 are expected to be $50 million to $55 million.

For the first quarter of 2021, consolidated bad debt expense as a percentage of revenue and adjusted revenue was 3.7%, compared to 4.2% of revenue for the same period in 2020. Net tuition receivable as of March 31, 2021 includes additional reserves to account for projected deterioration in collections performance due to the pandemic.

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 7, 2021 to shareholders of record as of May 28, 2021.

CONFERENCE CALL WITH MANAGEMENT

Strategic Education will host a conference call to discuss its first quarter 2021 results at 10:00 a.m. (ET) today. To participate in the live call, investors should dial (877) 303-9047 ten minutes prior to the start time. In addition, the call will be available via webcast. To access the live webcast of the conference call, please go to www.strategiceducation.com in the Investor Relations section 15 minutes prior to the start time of the call to register. An earnings release presentation will also be posted to www.strategiceducation.com in the Investor Relations section prior to the start time of the call. Following the call, the webcast will be archived and available at www.strategiceducation.com in the Investor Relations section.

About Strategic Education, Inc.

Strategic Education, Inc. (NASDAQ: STRA) (www.strategiceducation.com) is dedicated to helping advance economic mobility through higher education. We 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 Hackbright Academy and Strayer University’s DevMountain; 2) Alternative Learning, encompassing Employer Solutions, developing and maintaining relationships with large employers; Workforce Edge, a full service, online employee education management platform; Sophia Learning, self-paced general education courses that are ACE-recommended for college credit; and Digital Enablement Partnerships, helping advance capabilities in course development, online delivery, and student support; 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; the impact of the current COVID-19 pandemic on Strategic Education’s business and results; 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 in the case of Strategic Education’s acquisition of Torrens University and associated assets in Australia and New Zealand, the risk that the benefits of the acquisition may not be fully realized or may take longer to realize than expected, and the risk that the acquisition 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,

 

2020

 

2021

Revenues

$

265,302

 

 

$

290,336

 

Costs and expenses:

 

 

 

Instructional and support costs

132,936

 

 

152,805

 

General and administration

69,226

 

 

86,845

 

Amortization of intangible assets

15,417

 

 

19,407

 

Merger and integration costs

3,764

 

 

1,012

 

Restructuring costs

 

 

18,267

 

Total costs and expenses

221,343

 

 

278,336

 

Income from operations

43,959

 

 

12,000

 

Other income

2,123

 

 

2,167

 

Income before income taxes

46,082

 

 

14,167

 

Provision for income taxes

10,843

 

 

4,590

 

Net income

$

35,239

 

 

$

9,577

 

Earnings per share:

 

 

 

Basic

$

1.62

 

 

$

0.40

 

Diluted

$

1.60

 

 

$

0.40

 

Weighted average shares outstanding:

 

 

 

Basic

21,810

 

 

23,974

 

Diluted

22,071

 

 

24,153

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

December 31,
2020

 

March 31,
2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

187,509

 

 

$

238,290

 

Marketable securities

7,557

 

 

6,455

 

Tuition receivable, net

50,169

 

 

63,469

 

Income taxes receivable

1,429

 

 

 

Other current assets

39,458

 

 

44,714

 

Total current assets

286,122

 

 

352,928

 

Property and equipment, net

158,854

 

 

164,277

 

Right-of-use lease assets

120,687

 

 

142,998

 

Marketable securities, non-current

30,270

 

 

29,280

 

Intangible assets, net

326,420

 

 

308,190

 

Goodwill

1,318,526

 

 

1,311,487

 

Other assets

54,928

 

 

60,282

 

Total assets

$

2,295,807

 

 

$

2,369,442

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

104,742

 

 

$

97,448

 

Income taxes payable

 

 

11,350

 

Contract liabilities

60,501

 

 

108,073

 

Lease liabilities

34,809

 

 

32,886

 

Total current liabilities

200,052

 

 

249,757

 

Long-term debt

141,823

 

 

141,798

 

Deferred income tax liabilities

53,407

 

 

44,264

 

Lease liabilities, non-current

106,151

 

 

152,981

 

Other long-term liabilities

46,055

 

 

44,717

 

Total liabilities

547,488

 

 

633,517

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.01; 32,000,000 shares authorized; 24,418,939 and 24,651,205 shares issued and outstanding at December 31, 2020 and March 31, 2021, respectively

244

 

 

247

 

Additional paid-in capital

1,519,549

 

 

1,521,145

 

Accumulated other comprehensive income

48,880

 

 

40,064

 

Retained earnings

179,646

 

 

174,469

 

Total stockholders’ equity

1,748,319

 

 

1,735,925

 

Total liabilities and stockholders’ equity

$

2,295,807

 

$

2,369,442

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

For the three months ended
March 31,

 

2020

2021

Cash flows from operating activities:

 

 

 

 

Net income

$

35,239

 

$

9,577

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

 

 

 

 

Amortization of deferred financing costs

83

 

138

Amortization of investment discount/premium

65

 

24

Depreciation and amortization

25,733

 

34,571

Deferred income taxes

(2,108)

 

(8,898)

Stock-based compensation

3,025

 

3,900

Impairment of right-of-use lease assets

453

 

14,388

Changes in assets and liabilities:

 

 

 

 

Tuition receivable, net

3,553

 

(13,417)

Other assets

(3,090)

 

(9,897)

Accounts payable and accrued expenses

(7,028)

 

(10,276)

Income taxes payable and income taxes receivable

12,314

 

12,777

Contract liabilities

1,901

 

46,872

Other long-term liabilities

(1,445)

 

(978)

Net cash provided by operating activities

68,695

 

78,781

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

(14,258)

 

(12,650)

Purchases of marketable securities

(1,863)

 

Proceeds from marketable securities

9,905

 

1,930

Other investments

(118)

 

(72)

Net cash used in investing activities

(6,334)

 

(10,792)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Common dividends paid

(13,327)

 

(14,778)

Net payments for stock awards

(25,089)

 

(2,326)

Repurchase of common stock

(247)

 

Net cash used in financing activities

(38,663)

 

(17,104)

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

 

(866)

Net increase in cash, cash equivalents, and restricted cash

23,698

 

50,019

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

420,497

 

202,020

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

$

444,195

 

$

252,039

 

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

 

 

For the three months ended
March 31,

 

2020

 

2021

Revenues:

 

 

 

U.S. Higher Education

$

255,513

 

$

226,547

 

Australia/New Zealand

 

51,265

 

Alternative Learning

9,789

 

12,524

 

Consolidated revenues

$

265,302

 

$

290,336

 

Income (loss) from operations:

 

 

 

U.S. Higher Education

$

56,743

 

$

47,754

 

Australia/New Zealand

 

(2,949)

 

Alternative Learning

6,397

 

5,881

 

Amortization of intangible assets

(15,417)

 

(19,407)

 

Merger and integration costs

(3,764)

 

(1,012)

 

Restructuring costs

 

(18,267)

 

Consolidated income from operations

$

43,959

 

$

12,000

 

 

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 operation 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 recognized from the Company’s investments in partnership interests and other investments, (5) discrete tax adjustments utilizing adjusted effective income tax rates of 28.5% and 29.2% for the three months ended March 31, 2020 and 2021, respectively, and (6) foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate. 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), (3) and (6) 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, 2020
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)

 

Foreign
currency
adjustments(6)

As Adjusted
(Non-GAAP)

Revenues

$

265,302

 

$

 

$

 

$

 

$

 

$

 

$

 

$

265,302

Total costs and expenses

$

221,343

 

$

(15,417)

 

$

(3,764)

 

$

 

$

 

$

 

$

 

$

202,162

Income from operations

$

43,959

 

$

15,417

 

$

3,764

 

$

 

$

 

$

 

$

 

$

63,140

Operating margin

 

16.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23.8%

Income before income taxes

$

46,082

 

$

15,417

 

$

3,764

 

$

 

$

(254)

 

$

 

$

 

$

65,009

Net income

$

35,239

 

$

15,417

 

$

3,764

 

$

 

$

(254)

 

$

(7,685)

 

$

 

$

46,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

1.60

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

22,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,071

 

 

 

 

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)

 

Foreign
currency
adjustments(6)

 

As Adjusted
(Non-GAAP)

Revenues

$

290,336

$

2,223

$

$

$

$

$

(2,019)

$

290,540

Total costs and expenses

$

278,336

$

(19,407)

$

(1,012)

$

(18,267)

$

$

$

(2,041)

$

237,609

Income from operations

$

12,000

$

21,630

$

1,012

$

18,267

$

$

$

22

$

52,931

Operating margin

 

4.1%

 

 

 

 

 

 

 

18.2%

Income before income taxes

$

14,167

$

21,630

$

1,012

$

18,267

$

(2,783)

$

$

22

$

52,315

Net income

$

9,577

$

21,630

$

1,012

$

18,267

$

(2,783)

$

(10,688)

$

22

$

37,037

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Diluted

$

0.40

 

 

 

 

 

 

$

1.53

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Diluted

 

24,153

 

 

 

 

 

 

 

24,153

 

 

 

 

 

 

 

 

(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 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 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 28.5% and 29.2% for the three months ended March 31, 2020 and 2021, respectively.

(6)

Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

STRATEGIC EDUCATION, INC.

UNAUDITED NON-GAAP SEGMENT REPORTING

(in thousands)

 

For the three months ended

March 31,

2020

2021

Revenues:

U.S. Higher Education

$

255,513

$

226,547

Australia/New Zealand

51,265

Alternative Learning

9,789

12,524

Consolidated revenues

 

265,302

 

290,336

 

Adjustments to consolidated revenues:

 

U.S. Higher Education

Australia/New Zealand1

204

Alternative Learning

 

 

 

Total adjustments to consolidated revenues

 

 

204

 

Adjusted revenues by segment:

 

U.S. Higher Education

255,513

226,547

Australia/New Zealand

51,469

Alternative Learning

9,789

12,524

Adjusted consolidated revenues

$

265,302

$

290,540

 

Income (loss) from operations:

 

U.S. Higher Education

$

56,743

$

47,754

Australia/New Zealand

(2,949)

Alternative Learning

6,397

5,881

Amortization of intangible assets

(15,417)

(19,407)

Merger and integration costs

(3,764)

(1,012)

Restructuring costs

 

 

 

(18,267)

Consolidated income from operations

 

43,959

 

12,000

 

Adjustments to consolidated income from operations:

 

Australia/New Zealand1

 

 

 

2,245

Amortization of intangible assets

15,417

19,407

Merger and integration costs

3,764

1,012

Restructuring costs

 

 

 

18,267

Total adjustments to consolidated income from operations

 

19,181

 

40,931

 

 

Adjusted income (loss) from operations by segment:

 

 

U.S. Higher Education

56,743

47,754

Australia/New Zealand

(704)

Alternative Learning

6,397

5,881

Total adjusted income from operations

$

63,140

$

52,931

____________________

1Adjustments to the Australia/New Zealand segment revenue and loss from operations 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, and foreign currency exchange impact of ($2.0) million related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

(in thousands)

 

 

For the three months ended

March 31,

2020

 

2021

 

Net income

$

35,239

 

$

9,577

Provision for income taxes

 

10,843

 

 

4,590

Other income

 

(2,123)

 

 

(2,167)

Depreciation and amortization

 

25,733

 

 

34,571

EBITDA (1)

 

69,692

 

 

46,571

Stock-based compensation

 

3,025

 

 

3,900

Merger and integration costs (2)

 

3,764

 

 

1,012

Restructuring costs (3)

 

 

 

16,231

Cloud computing amortization (4)

 

 

 

641

Contract liability adjustment (5)

 

 

 

2,223

Foreign currency exchange impact (6)

 

 

 

22

Adjusted EBITDA (1)

$

76,481

 

$

70,600

(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 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. Excludes $2.0 million of depreciation and amortization expense for the three months ended March 31, 2021.

(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.

(6)  

Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

 

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

Source: Strategic Education, Inc.

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