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Strategic Education, Inc. Reports Fourth Quarter 2021 Results

Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended December 31, 2021.

“We are very proud of the organization’s commitment over the past year to the success of our students and our mission to enable economic mobility,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “As we enter 2022, we are focused on investing in opportunities within our diversified portfolio, including more growth in the Education Technology Services and Australia/New Zealand segments and continued recovery in our U.S. Higher Education segment.”

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 December 31

  • Revenue increased 1.7% to $272.1 million compared to $267.5 million for the same period in 2020. Adjusted revenue, which is a non-GAAP financial measure, decreased 2.1% to $272.8 million compared to $278.8 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 $27.9 million or 10.2% of revenue, compared to $3.6 million or 1.3% of revenue for the same period in 2020. Adjusted income from operations, which is a non-GAAP financial measure, was $37.9 million in 2021 compared to $47.1 million for the same period in 2020. The adjusted operating income margin, which is a non-GAAP financial measure, was 13.9% compared to 16.9% for the same period in 2020.
  • Net income was $21.7 million in 2021 compared to $5.9 million for the same period in 2020. Adjusted net income, which is a non-GAAP financial measure, was $27.7 million compared to $33.4 million for the same period in 2020.
  • Adjusted EBITDA, which is a non-GAAP financial measure, was $56.1 million compared to $64.2 million for the same period in 2020.
  • Diluted earnings per share was $0.90 compared to $0.25 for the same period in 2020. Adjusted diluted earnings per share, which is a non-GAAP financial measure, decreased to $1.15 from $1.39 for the same period in 2020. Diluted weighted average shares outstanding decreased to 24,098,000 from 24,143,000 for the same period in 2020.

Year Ended December 31

  • Revenue increased 10.1% to $1,131.7 million compared to $1,027.7 million in 2020. Adjusted revenue, which is a non-GAAP financial measure, increased 9.0% to $1,132.1 million compared to $1,038.9 million 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 $73.9 million or 6.5% of revenue, compared to $109.4 million or 10.6% of revenue in 2020. Adjusted income from operations, which is a non-GAAP financial measure, was $165.3 million in 2021 compared to $211.1 million in 2020. The adjusted operating income margin, which is a non-GAAP financial measure, was 14.6% compared to 20.3% in 2020.
  • Net income was $55.1 million in 2021 compared to $86.3 million in 2020. Adjusted net income, which is a non-GAAP financial measure, was $116.4 million compared to $152.7 million in 2020.
  • Adjusted EBITDA, which is a non-GAAP financial measure, was $237.3 million compared to $271.2 million in 2020.
  • Diluted earnings per share was $2.28 compared to $3.77 in 2020. Adjusted diluted earnings per share, which is a non-GAAP financial measure, decreased to $4.82 from $6.68 in 2020. Diluted weighted average shares outstanding increased to 24,122,000 from 22,860,000 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 and Capella University.
  • For the fourth quarter, student enrollment within USHE decreased 14.3% to 78,721 compared to 91,846 for the same period in 2020. Full-year 2021 student enrollment within USHE decreased 11.0% compared to 2020.
  • For the fourth quarter, FlexPath enrollment was 18% of USHE enrollment compared to 15% for the same period in 2020.
  • Revenue decreased 14.9% to $198.6 million in the fourth quarter of 2021 compared to $233.4 million for the same period in 2020, driven by lower fourth quarter enrollment and slightly lower revenue-per-student.
  • Income from operations decreased to $19.9 million in the fourth quarter of 2021 from $44.2 million for the same period in 2020. The operating income margin was 10.0%, compared to 18.9% for the same period in 2020.
  • Strayer University has now reopened 50 campuses that had been closed during the COVID-19 pandemic, and continues to evaluate reopening additional campuses in 2022.

Education Technology Services Segment Highlights

  • The Alternative Learning segment has been renamed to the Education Technology Services segment, and is comprised primarily of Employer Solutions, Sophia Learning, and Workforce Edge.
  • For the fourth quarter, employer affiliated enrollment was 21.7% of USHE enrollment compared to 18.8% for the same period in 2020. Full-year 2021 employer affiliated enrollment was 21.0% of USHE enrollment compared to 17.8% in 2020.
  • As of December 31, 2021, Workforce Edge had a total of 32 corporate agreements, collectively employing approximately 640,000 employees.
  • Revenue increased 29.8% to $13.9 million in the fourth quarter of 2021 compared to $10.7 million for the same period in 2020, driven by growth in Sophia Learning subscriptions.
  • Income from operations increased to $5.1 million in the fourth quarter of 2021 from $4.9 million for the same period in 2020. The operating income margin was 36.5%, compared to 45.9% for the same period in 2020.

Australia/New Zealand Segment Highlights

  • The Australia/New Zealand segment (ANZ) is comprised of Torrens University, Think Education, and Media Design School.
  • For the fourth quarter, student enrollment within ANZ was 18,942. On a pro forma basis, full-year 2021 student enrollment within ANZ increased 1.5% compared to 2020.
  • Revenue was $59.6 million in the fourth quarter of 2021, and adjusted revenue, which is a non-GAAP financial measure, was $60.3 million.
  • Income from operations was $12.8 million or 21.6% of revenue in the fourth quarter of 2021, and adjusted income from operations, which is a non-GAAP financial measure, was $12.9 million or 21.4% of adjusted revenue.

BALANCE SHEET AND CASH FLOW

At December 31, 2021, Strategic Education had cash, cash equivalents, and marketable securities of $298.8 million, and $141.6 million outstanding under its revolving credit facility. Cash provided by operations in 2021 was $180.5 million compared to $142.9 million in 2020. Capital expenditures for 2021 were $49.4 million compared to $46.8 million in 2020.

For the fourth quarter of 2021, consolidated bad debt expense as a percentage of revenue was 4.5%, compared to 5.5%, or 5.3% of adjusted revenue, which is a non-GAAP financial measure, for the same period in 2020.

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 March 14, 2022 to shareholders of record as of March 7, 2022.

CONFERENCE CALL WITH MANAGEMENT

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

December 31,

 

For the twelve months ended

December 31,

 

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

Revenues

 

$

267,494

 

 

$

272,099

 

 

$

1,027,653

 

 

$

1,131,686

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

Instructional and support costs

 

 

147,007

 

 

 

148,867

 

 

 

532,661

 

 

 

608,261

 

General and administration

 

 

84,635

 

 

 

85,391

 

 

 

295,231

 

 

 

361,345

 

Amortization of intangible assets

 

 

17,974

 

 

 

3,764

 

 

 

64,225

 

 

 

51,495

 

Merger and integration costs

 

 

5,912

 

 

 

7,141

 

 

 

13,770

 

 

 

11,201

 

Restructuring costs

 

 

8,358

 

 

 

(928

)

 

 

12,382

 

 

 

25,472

 

Total costs and expenses

 

 

263,886

 

 

 

244,235

 

 

 

918,269

 

 

 

1,057,774

 

Income from operations

 

 

3,608

 

 

 

27,864

 

 

 

109,384

 

 

 

73,912

 

Other income (expense)

 

 

(101

)

 

 

1,611

 

 

 

4,573

 

 

 

2,687

 

Income before income taxes

 

 

3,507

 

 

 

29,475

 

 

 

113,957

 

 

 

76,599

 

Provision (benefit) for income taxes

 

 

(2,410

)

 

 

7,795

 

 

 

27,689

 

 

 

21,512

 

Net income

 

$

5,917

 

 

$

21,680

 

 

$

86,268

 

 

$

55,087

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.25

 

 

$

0.91

 

 

$

3.81

 

 

$

2.30

 

Diluted

 

$

0.25

 

 

$

0.90

 

 

$

3.77

 

 

$

2.28

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

23,955

 

 

 

23,924

 

 

 

22,633

 

 

 

23,955

 

Diluted

 

 

24,143

 

 

 

24,098

 

 

 

22,860

 

 

 

24,122

 

 

 

 

 

 

 

 

 

 

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

 

December 31,

2020

 

December 31,

2021

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

187,509

 

 

$

268,918

 

Marketable securities

 

 

7,557

 

 

 

6,501

 

Tuition receivable, net

 

 

50,169

 

 

 

51,277

 

Income taxes receivable

 

 

1,429

 

 

 

313

 

Other current assets

 

 

39,458

 

 

 

40,777

 

Total current assets

 

 

286,122

 

 

 

367,786

 

Property and equipment, net

 

 

158,854

 

 

 

150,589

 

Right-of-use lease assets

 

 

120,687

 

 

 

149,587

 

Marketable securities, non-current

 

 

30,270

 

 

 

23,377

 

Intangible assets, net

 

 

326,420

 

 

 

276,380

 

Goodwill

 

 

1,318,526

 

 

 

1,285,864

 

Other assets

 

 

54,928

 

 

 

52,297

 

Total assets

 

$

2,295,807

 

 

$

2,305,880

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

104,742

 

 

$

95,518

 

Contract liabilities

 

 

60,501

 

 

 

73,232

 

Lease liabilities

 

 

34,809

 

 

 

27,005

 

Total current liabilities

 

 

200,052

 

 

 

195,755

 

Long-term debt

 

 

141,823

 

 

 

141,630

 

Deferred income tax liabilities

 

 

53,407

 

 

 

44,595

 

Lease liabilities, non-current

 

 

106,151

 

 

 

162,821

 

Other long-term liabilities

 

 

46,055

 

 

 

47,089

 

Total liabilities

 

 

547,488

 

 

 

591,890

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, par value $0.01; 32,000,000 shares authorized; 24,418,939 and 24,592,098 shares issued and outstanding at December 31, 2020 and December 31, 2021, respectively

 

 

244

 

 

 

246

 

Additional paid-in capital

 

 

1,519,549

 

 

 

1,529,969

 

Accumulated other comprehensive income

 

 

48,880

 

 

 

9,203

 

Retained earnings

 

 

179,646

 

 

 

174,572

 

Total stockholders’ equity

 

 

1,748,319

 

 

 

1,713,990

 

Total liabilities and stockholders’ equity

 

$

2,295,807

 

 

$

2,305,880

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

   

 

 

For the year ended

December 31,

 

 

 

2020

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

86,268

 

 

$

55,087

 

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

 

 

 

 

Loss on sale of marketable securities

 

 

 

 

 

781

 

Gain on sale of property and equipment

 

 

 

 

 

(2,656

)

Amortization of deferred financing costs

 

 

466

 

 

 

552

 

Amortization of investment discount/premium

 

 

146

 

 

 

70

 

Depreciation and amortization

 

 

109,154

 

 

 

103,416

 

Deferred income taxes

 

 

(13,431

)

 

 

(7,710

)

Stock-based compensation

 

 

14,610

 

 

 

18,149

 

Impairment of right-of-use lease assets

 

 

848

 

 

 

18,876

 

Changes in assets and liabilities:

 

 

 

 

Tuition receivable, net

 

 

19,659

 

 

 

(196

)

Other assets

 

 

(32,326

)

 

 

(6,964

)

Accounts payable and accrued expenses

 

 

(22,685

)

 

 

(6,700

)

Income taxes payable and income taxes receivable

 

 

(4,020

)

 

 

1,196

 

Contract liabilities

 

 

(10,095

)

 

 

13,995

 

Other liabilities

 

 

(5,689

)

 

 

(7,369

)

Net cash provided by operating activities

 

 

142,905

 

 

 

180,527

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Cash paid for acquisition, net of cash acquired

 

 

(628,759

)

 

 

 

Purchases of property and equipment

 

 

(46,812

)

 

 

(49,433

)

Purchases of marketable securities

 

 

(1,863

)

 

 

 

Proceeds from marketable securities

 

 

36,192

 

 

 

9,300

 

Proceeds from sale of property and equipment

 

 

 

 

 

8,331

 

Other investments

 

 

(950

)

 

 

(1,292

)

Net cash used in investing activities

 

 

(642,192

)

 

 

(33,094

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Net proceeds from issuance of common stock

 

 

220,248

 

 

 

 

Proceeds from long-term debt

 

 

145,630

 

 

 

 

Common dividends paid

 

 

(55,956

)

 

 

(59,045

)

Net payments for stock awards

 

 

(24,741

)

 

 

(2,938

)

Payments on long-term debt

 

 

(3,807

)

 

 

 

Payment of deferred financing costs

 

 

(1,940

)

 

 

 

Repurchase of common stock

 

 

(247

)

 

 

(5,905

)

Net cash provided by (used in) financing activities

 

 

279,187

 

 

 

(67,888

)

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

 

 

1,623

 

 

 

(2,353

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

(218,477

)

 

 

77,192

 

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

 

 

420,497

 

 

 

202,020

 

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

 

$

202,020

 

 

$

279,212

 

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

   

 

 

For the three months

ended December 31,

 

For the twelve months

ended December 31,

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

U.S. Higher Education

 

$

233,405

 

 

$

198,623

 

 

$

966,579

 

 

$

829,270

 

Australia/New Zealand

 

 

23,381

 

 

 

59,575

 

 

 

23,381

 

 

 

250,124

 

Education Technology Services

 

 

10,708

 

 

 

13,901

 

 

 

37,693

 

 

 

52,292

 

Consolidated revenues

 

$

267,494

 

 

$

272,099

 

 

$

1,027,653

 

 

$

1,131,686

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

U.S. Higher Education

 

$

44,213

 

 

$

19,933

 

 

$

193,393

 

 

$

104,914

 

Australia/New Zealand

 

 

(13,275

)

 

 

12,839

 

 

 

(13,275

)

 

 

35,855

 

Education Technology Services

 

 

4,914

 

 

 

5,069

 

 

 

19,643

 

 

 

21,311

 

Amortization of intangible assets

 

 

(17,974

)

 

 

(3,764

)

 

 

(64,225

)

 

 

(51,495

)

Merger and integration costs

 

 

(5,912

)

 

 

(7,141

)

 

 

(13,770

)

 

 

(11,201

)

Restructuring costs

 

 

(8,358

)

 

 

928

 

 

 

(12,382

)

 

 

(25,472

)

Consolidated income from operations

 

$

3,608

 

 

$

27,864

 

 

$

109,384

 

 

$

73,912

 

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, (5) discrete tax adjustments utilizing adjusted effective income tax rates of 28.4% and 25.5% for the three months ended December 31, 2020 and 2021, respectively, and an adjusted effective income tax rate of 28.5% for the twelve months ended December 31, 2020 and 2021, 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, gains on sale of property and equipment, depreciation and amortization, and from this amount in arriving at Adjusted EBITDA we also exclude stock-based compensation expense, amortization expense associated with deferred implementation costs incurred in cloud computing arrangements, 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 December 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

exchange

adjustments(6)

 

As

Adjusted

(Non-

GAAP)

Revenues

 

$

267,494

 

 

$

11,296

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

278,790

 

Total costs and expenses

 

$

263,886

 

 

$

(17,974

)

 

$

(5,912

)

 

$

(8,358

)

 

$

 

 

$

 

 

$

 

 

$

231,642

 

Income from operations

 

$

3,608

 

 

$

29,270

 

 

$

5,912

 

 

$

8,358

 

 

$

 

 

$

 

 

$

 

 

$

47,148

 

Operating margin

 

 

1.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16.9

%

Income before income taxes

 

$

3,507

 

 

$

29,270

 

 

$

5,912

 

 

$

8,358

 

 

$

(315

)

 

$

 

 

$

 

 

$

46,732

 

Net income

 

$

5,917

 

 

$

29,270

 

 

$

5,912

 

 

$

8,358

 

 

$

(315

)

 

$

(15,700

)

 

$

 

 

$

33,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

24,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,143

 

 

 

 

 

For the three months ended December 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

exchange

adjustments(6)

 

As

Adjusted

(Non-

GAAP)

Revenues

 

$

272,099

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

698

 

 

$

272,797

 

Total costs and expenses

 

$

244,235

 

 

$

(3,764

)

 

$

(7,141

)

 

$

928

 

 

$

 

 

$

 

 

$

646

 

 

$

234,904

 

Income from operations

 

$

27,864

 

 

$

3,764

 

 

$

7,141

 

 

$

(928

)

 

$

 

 

$

 

 

$

52

 

 

$

37,893

 

Operating margin

 

 

10.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13.9

%

Income before income taxes

 

$

29,475

 

 

$

3,764

 

 

$

7,141

 

 

$

(928

)

 

$

(2,330

)

 

$

 

 

$

52

 

 

$

37,174

 

Net income

 

$

21,680

 

 

$

3,764

 

 

$

7,141

 

 

$

(928

)

 

$

(2,330

)

 

$

(1,682

)

 

$

52

 

 

$

27,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

24,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,098

 

 

 

 

 

For the twelve months ended December 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

exchange

adjustments(6)

 

As

Adjusted

(Non-

GAAP)

Revenues

 

$

1,027,653

 

 

$

11,296

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

1,038,949

 

Total costs and expenses

 

$

918,269

 

 

$

(64,225

)

 

$

(13,770

)

 

$

(12,382

)

 

$

 

 

$

 

 

$

 

 

$

827,892

 

Income from operations

 

$

109,384

 

 

$

75,521

 

 

$

13,770

 

 

$

12,382

 

 

$

 

 

$

 

 

$

 

 

$

211,057

 

Operating margin

 

 

10.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20.3

%

Income before income taxes

 

$

113,957

 

 

$

75,521

 

 

$

13,770

 

 

$

12,382

 

 

$

(2,094

)

 

$

 

 

$

 

 

$

213,536

 

Net income

 

$

86,268

 

 

$

75,521

 

 

$

13,770

 

 

$

12,382

 

 

$

(2,094

)

 

$

(33,141

)

 

$

 

 

$

152,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

3.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

6.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

22,860

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,860

 

 

 

 

 

For the twelve months ended December 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

exchange

adjustments(6)

 

As

Adjusted

(Non-

GAAP)

Revenues

 

$

1,131,686

 

 

$

3,646

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(3,209

)

 

$

1,132,123

 

Total costs and expenses

 

$

1,057,774

 

 

$

(51,495

)

 

$

(11,201

)

 

$

(25,472

)

 

$

 

 

$

 

 

$

(2,823

)

 

$

966,783

 

Income from operations

 

$

73,912

 

 

$

55,141

 

 

$

11,201

 

 

$

25,472

 

 

$

 

 

$

 

 

$

(386

)

 

$

165,340

 

Operating margin

 

 

6.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14.6

%

Income before income taxes

 

$

76,599

 

 

$

55,141

 

 

$

11,201

 

 

$

25,472

 

 

$

(5,300

)

 

$

 

 

$

(386

)

 

$

162,727

 

Net income

 

$

55,087

 

 

$

55,141

 

 

$

11,201

 

 

$

25,472

 

 

$

(5,300

)

 

$

(24,865

)

 

$

(386

)

 

$

116,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

2.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

4.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

24,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,122

 

(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 premerger litigation settlement in principle, net of insurance recovery, 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 28.4% and 25.5% for the three months ended December 31, 2020 and 2021, respectively, and an adjusted effective income tax rate of 28.5% for the twelve months ended December 31, 2020 and 2021.

(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

 

For the twelve months ended

 

 

December 31,

 

December 31,

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

U.S. Higher Education

 

$

233,405

 

 

$

198,623

 

 

$

966,579

 

 

$

829,270

 

Australia/New Zealand

 

 

23,381

 

 

 

59,575

 

 

 

23,381

 

 

 

250,124

 

Education Technology Services

 

 

10,708

 

 

 

13,901

 

 

 

37,693

 

 

 

52,292

 

Consolidated revenues

 

 

267,494

 

 

 

272,099

 

 

 

1,027,653

 

 

 

1,131,686

 

 

 

 

 

 

 

 

 

 

Adjustments to consolidated revenues:

 

 

 

 

 

 

 

 

U.S. Higher Education

 

 

 

 

 

 

 

 

 

 

 

 

Australia/New Zealand(1)

 

 

11,296

 

 

 

698

 

 

 

11,296

 

 

 

437

 

Education Technology Services

 

 

 

 

 

 

 

 

 

 

 

 

Total adjustments to consolidated revenues

 

 

11,296

 

 

 

698

 

 

 

11,296

 

 

 

437

 

 

 

 

 

 

 

 

 

 

Adjusted revenues by segment:

 

 

 

 

 

 

 

 

U.S. Higher Education

 

 

233,405

 

 

 

198,623

 

 

 

966,579

 

 

 

829,270

 

Australia/New Zealand

 

 

34,677

 

 

 

60,273

 

 

 

34,677

 

 

 

250,561

 

Education Technology Services

 

 

10,708

 

 

 

13,901

 

 

 

37,693

 

 

 

52,292

 

Adjusted consolidated revenues

 

$

278,790

 

 

$

272,797

 

 

$

1,038,949

 

 

$

1,132,123

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

U.S. Higher Education

 

$

44,213

 

 

$

19,933

 

 

$

193,393

 

 

$

104,914

 

Australia/New Zealand

 

 

(13,275

)

 

 

12,839

 

 

 

(13,275

)

 

 

35,855

 

Education Technology Services

 

 

4,914

 

 

 

5,069

 

 

 

19,643

 

 

 

21,311

 

Amortization of intangible assets

 

 

(17,974

)

 

 

(3,764

)

 

 

(64,225

)

 

 

(51,495

)

Merger and integration costs

 

 

(5,912

)

 

 

(7,141

)

 

 

(13,770

)

 

 

(11,201

)

Restructuring costs

 

 

(8,358

)

 

 

928

 

 

 

(12,382

)

 

 

(25,472

)

Consolidated income from operations

 

 

3,608

 

 

 

27,864

 

 

 

109,384

 

 

 

73,912

 

 

 

 

 

 

 

 

 

 

Adjustments to consolidated income from operations:

 

 

 

 

 

 

 

 

Australia/New Zealand(2)

 

 

11,296

 

 

 

52

 

 

 

11,296

 

 

 

3,260

 

Amortization of intangible assets

 

 

17,974

 

 

 

3,764

 

 

 

64,225

 

 

 

51,495

 

Merger and integration costs

 

 

5,912

 

 

 

7,141

 

 

 

13,770

 

 

 

11,201

 

Restructuring costs

 

 

8,358

 

 

 

(928

)

 

 

12,382

 

 

 

25,472

 

Total adjustments to consolidated income from operations

 

 

43,540

 

 

 

10,029

 

 

 

101,673

 

 

 

91,428

 

 

 

 

 

 

 

 

 

 

Adjusted income (loss) from operations by segment:

 

 

 

 

 

 

 

 

U.S. Higher Education

 

 

44,213

 

 

 

19,933

 

 

 

193,393

 

 

 

104,914

 

Australia/New Zealand

 

 

(1,979

)

 

 

12,891

 

 

 

(1,979

)

 

 

39,115

 

Education Technology Services

 

 

4,914

 

 

 

5,069

 

 

 

19,643

 

 

 

21,311

 

Total adjusted income from operations

 

$

47,148

 

 

$

37,893

 

 

$

211,057

 

 

$

165,340

 

(1)

  Adjustments to the Australia/New Zealand segment revenue include a purchase accounting adjustment of $11.3 million for the three and twelve months ended December 31, 2020, and a purchase accounting adjustment of $3.6 million for the twelve months ended December 31, 2021, 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 $0.7 million and ($3.2) million for the three and twelve months ended December 31, 2021, respectively, 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.

(2)

  Adjustments to the Australia/New Zealand segment income from operations include the aforementioned purchase accounting revenue adjustment of $11.3 million for the three and twelve months ended December 31, 2020, and the aforementioned purchase accounting revenue adjustment of $3.6 million for the twelve months ended December 31, 2021, 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 $0.1 million and ($0.4) million for the three and twelve months ended December 31, 2021, respectively, 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

 

For the twelve months ended

 

 

December 31,

 

December 31,

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,917

 

 

$

21,680

 

 

$

86,268

 

 

$

55,087

 

Provision (benefit) for income taxes

 

 

(2,410

)

 

 

7,795

 

 

 

27,689

 

 

 

21,512

 

Other (income) expense

 

 

101

 

 

 

(1,611

)

 

 

(4,573

)

 

 

(2,687

)

Gain on sale of property and equipment

 

 

 

 

 

(1,975

)

 

 

 

 

 

(2,656

)

Depreciation and amortization

 

 

30,965

 

 

 

15,228

 

 

 

109,154

 

 

 

103,416

 

EBITDA (1)

 

 

34,573

 

 

 

41,117

 

 

 

218,538

 

 

 

174,672

 

Stock-based compensation

 

 

3,851

 

 

 

5,435

 

 

 

14,610

 

 

 

18,852

 

Merger and integration costs (2)

 

 

5,912

 

 

 

7,141

 

 

 

13,770

 

 

 

11,201

 

Restructuring costs (3)

 

 

8,009

 

 

 

1,026

 

 

 

12,033

 

 

 

25,472

 

Cloud computing amortization (4)

 

 

520

 

 

 

1,347

 

 

 

983

 

 

 

3,848

 

Contract liability adjustment (5)

 

 

11,296

 

 

 

 

 

 

11,296

 

 

 

3,646

 

Foreign currency exchange impact (6)

 

 

 

 

 

52

 

 

 

 

 

 

(386

)

Adjusted EBITDA (1)

 

$

64,161

 

 

$

56,118

 

 

$

271,230

 

 

$

237,305

 

(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 premerger litigation settlement in principle, net of insurance recovery, 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. Includes $0.7 million of stock-based compensation benefit related to forfeitures of stock-based awards for the twelve months ended December 31, 2021. Excludes $2.0 million and $2.7 million of gain on sale of property and equipment for the three and twelve months ended December 31, 2021, respectively. Excludes $0.3 million of depreciation and amortization expense for the three months ended December 31, 2020, and $0.3 million and $2.7 million of depreciation and amortization expense for the twelve months ended December 31, 2020 and 2021, 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.

(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.

 

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