Strategic Education, Inc. Reports Fourth Quarter 2019 Results; Continued Strong Performance at Both Strayer University and Capella University to Finish Record 2019

HERNDON, Va.--()--Strategic Education, Inc. (SEI) (NASDAQ: STRA) today announced financial results for the period ended December 31, 2019.

Karl McDonnell, Chief Executive Officer of SEI said, “We are very pleased with the organization’s execution to deliver record results in 2019, our first full year as a combined company since closing the merger with Capella Education Company. This strong performance provides us with a solid foundation and momentum to drive growth in 2020 as we remain focused on delivering academic success and long-term economic mobility for our students and alumni.”

STRATEGIC EDUCATION, INC. CONSOLIDATED RESULTS

[Note: Strategic Education, Inc.’s financial results for any periods ended prior to August 1, 2018 do not include the financial results of Capella Education Company and are therefore not directly comparable.]

Three Months Ended December 31

  • Revenue increased 9.0% to $263.8 million compared to $242.1 million for the same period in 2018. Revenue in 2018 included the impact of a purchase accounting adjustment of $2.5 million to reflect Capella University contract liabilities at fair value. Adjusted revenue, which is a non-GAAP financial measure and excludes the aforementioned contract liabilities adjustment, increased 7.8% to $263.8 million compared to $244.6 million for the same period in 2018. 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 $37.2 million or 14.1% of revenue, compared to $18.9 million or 7.8% of revenue for the same period in 2018. Income from operations in 2019 includes $15.4 million of amortization expense related to assets acquired in the merger with Capella Education Company and $10.2 million in costs associated with the merger with Capella Education Company. Income from operations in 2018 included the impact of the aforementioned contract liabilities adjustment, $15.4 million of amortization expense related to assets acquired in the merger with Capella Education Company, $8.0 million in costs associated with the merger with Capella Education Company, a $0.3 million noncash charge resulting from the impairment of intangible assets associated with The New York Code + Design Academy, and a $0.3 million noncash charge related to the Company’s reserve for leases on facilities no longer in use. Adjusted income from operations was $62.9 million in 2019 compared to $45.4 million for the same period in 2018. The adjusted operating income margin was 23.8% compared to 18.6% for the same period in 2018.
  • Net income, which includes the items described above, and also includes income from partnership interests and other investments, and certain discrete tax adjustments, was $28.5 million in 2019 compared to $22.5 million for the same period in 2018. Adjusted net income was $47.0 million compared to $34.4 million for the same period in 2018.
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $63.2 million in 2019 compared to $44.3 million in 2018. Adjusted EBITDA was $76.5 million compared to $59.2 million for the same period in 2018.
  • Diluted earnings per share was $1.29 compared to $1.02 for the same period in 2018. Adjusted diluted earnings per share increased to $2.13 from $1.56 for the same period in 2018. Diluted weighted average shares outstanding increased to 22,101,000 from 22,033,000 for the same period in 2018.

Year Ended December 31

  • Revenue increased 57.2% to $997.1 million compared to $634.2 million in 2018. Revenue in 2018 included the impact of a purchase accounting adjustment of $28.7 million to reflect Capella University contract liabilities at fair value. Adjusted revenue, which is a non-GAAP financial measure and excludes the aforementioned contract liabilities adjustment, increased 50.4% to $997.1 million compared to $662.9 million in 2018. 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 $110.5 million or 11.1% of revenue, compared to a loss from operations of $22.7 million in 2018. Income from operations in 2019 includes $61.7 million of amortization expense related to assets acquired in the merger with Capella Education Company and $21.9 million in costs associated with the merger with Capella Education Company. Loss from operations in 2018 included the impact of the aforementioned contract liabilities adjustment, $25.7 million of amortization expense related to assets acquired in the merger with Capella Education Company, $45.7 million in costs associated with the merger with Capella Education Company, $19.6 million in noncash charges resulting from the impairment of goodwill and intangible assets associated with The New York Code + Design Academy, and a $0.3 million noncash charge related to the Company’s reserve for leases on facilities no longer in use. Adjusted income from operations was $194.1 million in 2019 compared to $97.4 million in 2018. The adjusted operating income margin was 19.5% compared to 14.7% in 2018.
  • Net income, which includes the items described above, and also includes income from partnership interests and other investments, and certain discrete tax adjustments, was $81.1 million in 2019 compared to a net loss of $15.7 million in 2018. Adjusted net income was $147.3 million compared to adjusted net income of $75.1 million in 2018.
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $215.4 million in 2019 compared to $31.8 million in 2018. Adjusted EBITDA was $248.7 million compared to $139.7 million in 2018.
  • Diluted earnings per share was $3.67 compared to a loss per share of $1.03 in 2018. Adjusted diluted earnings per share increased to $6.67 from $4.75 in 2018. Diluted weighted average shares outstanding increased to 22,097,000 from 15,801,000 in 2018 due primarily to the timing of new shares issued to facilitate the merger with Capella Education Company.

Strayer University Segment Highlights

  • For the fourth quarter, student enrollment at Strayer University increased 10% to 57,538 compared to 52,447 for the same period in 2018. New student enrollment for the period increased 3% and continuing student enrollment for the period increased 12%. Full-year 2019 student enrollment at Strayer University increased 11% and new student enrollment increased 7% compared to 2018.
  • Revenue increased 11.6% to $142.2 million in the fourth quarter of 2019 compared to $127.5 million for the same period in 2018, driven by higher fourth quarter enrollment and revenue-per-student.
  • Income from operations increased to $37.9 million in the fourth quarter of 2019 from $24.0 million for the same period in 2018. The operating income margin was 26.6%, compared to 18.8% for the same period in 2018.
  • During the fourth quarter of 2019, Strayer University opened a new campus in Tallahassee, Florida, for a total of five new campuses opened in 2019. The University is planning to open four to six additional campuses, pending regulatory approval, in 2020.

Capella University Segment Highlights

  • For the fourth quarter, student enrollment at Capella University increased 2% to 39,220 compared to 38,409 for the same period in 2018. New student enrollment for the period increased 7% and continuing student enrollment for the period increased 1%. Full-year 2019 student enrollment at Capella University increased 2% and new student enrollment increased 9% compared to 2018.
  • FlexPath continued to be a significant driver of new and total enrollment growth in the fourth quarter of 2019, and is 34% of Capella University’s bachelor’s and master’s degrees total enrollment. Capella University has also received approval from the Higher Learning Commission to offer its Doctor of Nursing Practice program via the FlexPath learning format, with students able to start classes in the second half of 2020. The program is pending approval from the U.S. Department of Education to offer federal financial aid to its students.
  • Revenue was $117.9 million in the fourth quarter of 2019 compared to revenue of $111.1 million, or adjusted revenue of $113.7 million excluding the impact of a purchase accounting adjustment of $2.5 million to reflect Capella University contract liabilities at fair value, for the same period in 2018. The increase was driven by higher enrollment and higher revenue-per-learner.
  • Income from operations was $25.1 million or 21.3% of revenue in the fourth quarter of 2019 compared to income from operations of $20.7 million or 18.6% of revenue, or adjusted income from operations of $23.2 million or 20.4% of revenue, for the same period in 2018.
  • The Company opened the first Capella University Campus Center in Atlanta, Georgia in 2019, and is planning to open four to six additional Campus Centers, pending regulatory approval, in 2020.

Non-Degree Programs Segment Highlights

  • For the fourth quarter, revenue increased to $3.6 million from $3.5 million for the same period in 2018.
  • Loss from operations was $0.1 million in the fourth quarter of 2019 compared to a loss from operations of $1.8 million in the same period in 2018.

BALANCE SHEET AND CASH FLOW

At December 31, 2019, Strategic Education, Inc. had cash, cash equivalents, and marketable securities of $491.2 million, and no debt. Cash provided by operations in 2019 was $202.1 million compared to cash provided by operations of $46.9 million in 2018. Capital expenditures for 2019 were $38.7 million compared to $27.5 million in 2018. Capital expenditures for 2020 are expected to be between $40 million and $45 million.

For the fourth quarter of 2019, consolidated bad debt expense as a percentage of revenue was 5.0%, compared to 6.1% of revenue for the same period in 2018.

COMMON STOCK CASH DIVIDEND

SEI 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 16, 2020 to shareholders of record as of March 9, 2020.

CONFERENCE CALL WITH MANAGEMENT

SEI will host a conference call to discuss its fourth quarter 2019 earnings 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 SEI

Strategic Education, Inc. (NASDAQ: STRA) (www.strategiceducation.com) is dedicated to enabling economic mobility with education. We serve working adult students through a range of educational opportunities that include: Strayer University and Capella University (separate institutions that are each regionally accredited), which collectively offer flexible and affordable associate, bachelor’s, master’s, and doctoral programs; a Top-25 Princeton Review-ranked online MBA program through the Jack Welch Management Institute at Strayer University; self-paced courses for college credit through Sophia; customized degrees for corporations through Degrees@Work; and non-degree web and mobile application development courses through DevMountain, Generation Code, and Hackbright Academy. These programs help our students prepare for success in today’s jobs 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 of SEI; SEI’s plans, strategies and prospects; and future events and expectations. The statements are based on SEI’s current expectations and are subject to a number of assumptions, uncertainties and risks, including but not limited to:

  • SEI’s continued compliance with Title IV of the Higher Education Act, and the regulations thereunder, as well as regional 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;
  • the pace of growth of student enrollment;
  • competitive factors;
  • 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;
  • risks relating to the timing of regulatory approvals;
  • SEI’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 SEI’s students to finance their education in a timely manner;
  • general economic and market conditions; and
  • additional factors described in SEI’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 SEI’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 SEI on the date they are made, and SEI 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,

 

2018

 

 

2019

 

2018

 

 

2019

Revenues

$

242,103

 

 

 

$

263,772

 

 

$

634,185

 

 

 

$

997,137

 

Costs and expenses:

 

 

 

 

 

 

 

Instructional and support costs

130,712

 

 

 

133,323

 

 

371,542

 

 

 

530,604

 

General and administration

68,541

 

 

 

67,595

 

 

194,035

 

 

 

272,411

 

Amortization of intangible assets

15,416

 

 

 

15,416

 

 

25,694

 

 

 

61,667

 

Merger and integration costs

7,954

 

 

 

10,225

 

 

45,745

 

 

 

21,923

 

Fair value adjustments and impairment of intangible assets

605

 

 

 

 

 

19,909

 

 

 

 

Total costs and expenses

223,228

 

 

 

226,559

 

 

656,925

 

 

 

886,605

 

Income (loss) from operations

18,875

 

 

 

37,213

 

 

(22,740

)

 

 

110,532

 

Other income

1,755

 

 

 

2,497

 

 

3,601

 

 

 

13,192

 

Income (loss) before income taxes

20,630

 

 

 

39,710

 

 

(19,139

)

 

 

123,724

 

Provision (benefit) for income taxes

(1,825

)

 

 

11,173

 

 

(3,468

)

 

 

42,586

 

Net income (loss)

$

22,455

 

 

 

$

28,537

 

 

$

(15,671

)

 

 

$

81,138

 

Earnings (loss) per share:

 

 

 

 

 

 

 

Basic

$

1.05

 

 

 

$

1.31

 

 

$

(1.03

)

 

 

$

3.73

 

Diluted

$

1.02

 

 

 

$

1.29

 

 

$

(1.03

)

 

 

$

3.67

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

21,335

 

 

 

21,817

 

 

15,190

 

 

 

21,725

 

Diluted

22,033

 

 

 

22,101

 

 

15,190

 

 

 

22,097

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividend declared per share

$

0.50

 

 

 

$

0.60

 

 

$

1.50

 

 

 

$

2.10

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

December 31,
2018

 

December 31,
2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

311,732

 

 

$

419,693

 

Marketable securities

37,121

 

 

34,874

 

Tuition receivable, net

55,694

 

 

51,523

 

Other current assets

15,814

 

 

18,004

 

Total current assets

420,361

 

 

524,094

 

Property and equipment, net

122,677

 

 

117,029

 

Right-of-use lease assets

 

 

84,778

 

Marketable securities, non-current

37,678

 

 

36,633

 

Intangible assets, net

328,344

 

 

273,011

 

Goodwill

732,540

 

 

732,075

 

Other assets

19,429

 

 

21,788

 

Total assets

$

1,661,029

 

 

$

1,789,408

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

85,979

 

 

$

90,828

 

Income taxes payable

419

 

 

1,352

 

Contract liabilities

38,733

 

 

39,284

 

Lease liabilities

 

 

25,284

 

Total current liabilities

125,131

 

 

156,748

 

Deferred income tax liabilities

59,358

 

 

47,942

 

Lease liabilities, non-current

 

 

80,557

 

Other long-term liabilities

51,316

 

 

41,451

 

Total liabilities

235,805

 

 

326,698

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.01; 32,000,000 shares authorized; 21,743,498 and 21,964,809 shares issued and outstanding at December 31, 2018 and 2019, respectively

217

 

 

220

 

Additional paid-in capital

1,306,653

 

 

1,309,438

 

Accumulated other comprehensive income

32

 

 

233

 

Retained earnings

118,322

 

 

152,819

 

Total stockholders’ equity

1,425,224

 

 

1,462,710

 

Total liabilities and stockholders’ equity

$

1,661,029

 

 

$

1,789,408

 

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

For the Year Ended
December 31,

 

 

2018

 

2019

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

(15,671

)

 

 

$

81,138

 

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Amortization of deferred financing costs

 

292

 

 

 

333

 

 

Amortization of investment discount/premium

 

298

 

 

 

296

 

 

Depreciation and amortization

 

54,543

 

 

 

104,861

 

 

Deferred income taxes

 

(16,322

)

 

 

(8,037

)

 

Stock-based compensation

 

15,532

 

 

 

12,160

 

 

Fair value adjustments and impairment of intangible assets

 

19,909

 

 

 

 

Impairment of right-of-use lease assets

 

 

 

6,046

 

 

Changes in assets and liabilities:

 

 

 

 

Tuition receivable, net

 

7,880

 

 

 

1,770

 

 

Other current assets

 

3,768

 

 

 

(1,589

)

 

Other assets

 

(135

)

 

 

(540

)

 

Accounts payable and accrued expenses

 

1,140

 

 

 

245

 

 

Income taxes payable

 

(516

)

 

 

1,198

 

 

Contract liabilities

 

(19,329

)

 

 

7,716

 

 

Other long-term liabilities

 

(4,522

)

 

 

(3,451

)

 

Net cash provided by operating activities

 

46,867

 

 

 

202,146

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Net cash acquired in acquisition

 

167,859

 

 

 

 

Purchases of property and equipment

 

(27,547

)

 

 

(38,689

)

 

Purchases of marketable securities

 

(25,304

)

 

 

(40,481

)

 

Maturities of marketable securities

 

16,367

 

 

 

43,762

 

 

Other investments

 

(1,238

)

 

 

(2,658

)

 

Net cash provided by (used in) investing activities

 

130,137

 

 

 

(38,066

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Common dividends paid

 

(27,842

)

 

 

(46,625

)

 

Net payments for stock awards

 

7,789

 

 

 

(9,195

)

 

Payment of deferred financing costs

 

(1,162

)

 

 

 

Net cash used in financing activities

 

(21,215

)

 

 

(55,820

)

 

Net increase in cash, cash equivalents, and restricted cash

 

155,789

 

 

 

108,260

 

 

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

 

156,448

 

 

 

312,237

 

 

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

 

$

312,237

 

 

 

$

420,497

 

 

Noncash transactions:

 

 

 

 

Purchases of property and equipment included in accounts payable

 

$

1,029

 

 

 

$

3,406

 

 

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

 

For the Three Months
Ended December 31,

 

For the Twelve Months
Ended December 31,

 

2018

 

 

2019

 

 

2018

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

Strayer University

$

127,461

 

 

 

$

142,226

 

 

 

$

471,104

 

 

 

$

527,032

 

 

Capella University

111,126

 

 

 

117,902

 

 

 

154,918

 

 

 

455,320

 

 

Non-Degree Programs

3,516

 

 

 

3,644

 

 

 

8,163

 

 

 

14,785

 

 

Consolidated revenues

$

242,103

 

 

 

$

263,772

 

 

 

$

634,185

 

 

 

$

997,137

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

Strayer University

$

23,974

 

 

 

$

37,864

 

 

 

$

68,188

 

 

 

$

106,132

 

 

Capella University

20,666

 

 

 

25,063

 

 

 

6,340

 

 

 

88,981

 

 

Non-Degree Programs

(1,790

)

 

 

(73

)

 

 

(5,920

)

 

 

(991

)

 

Amortization of intangible assets

(15,416

)

 

 

(15,416

)

 

 

(25,694

)

 

 

(61,667

)

 

Merger and integration costs

(7,954

)

 

 

(10,225

)

 

 

(45,745

)

 

 

(21,923

)

 

Fair value adjustments and impairment of intangible assets

(605

)

 

 

 

 

(19,909

)

 

 

 

Consolidated income (loss) from operations

$

18,875

 

 

 

$

37,213

 

 

 

$

(22,740

)

 

 

$

110,532

 

 

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, income from operations, operating margin, 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. These measures are Adjusted Revenue, Adjusted Income from Operations, Adjusted Operating Margin, 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 Income from Operations, Adjusted Operating Margin, Adjusted Net Income, and Adjusted Diluted EPS to exclude (1) a purchase accounting adjustment to record Capella University contract liabilities at fair value as a result of the Company’s merger with Capella Education Company, (2) amortization and depreciation expense related to intangible assets and software assets associated with the Company’s merger with Capella Education Company, (3) transaction and integration costs associated with the Company’s merger with Capella Education Company, (4) goodwill and intangible asset impairment charges related to the Company’s acquisition of The New York Code + Design Academy, and adjustments to the Company’s reserve for leases on facilities no longer in use, (5) income recognized from the Company’s investments in partnership interests and other investments, and (6) discrete tax adjustments utilizing adjusted effective income tax rates of 27.1% and 28.0% for the three months ended December 31, 2018 and 2019, respectively, and adjusted effective income tax rates of 25.6% and 27.8% for the twelve months ended December 31, 2018 and 2019, respectively. We define EBITDA as net income before the provision for income taxes, other income, depreciation and amortization, and from this amount in arriving at Adjusted EBITDA we also exclude the amounts in (1), (3) and (4) above, stock-based compensation expense, and adjustments to the value of purchase consideration related to the Company’s acquisition of The New York Code + Design Academy. 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 INCOME FROM OPERATIONS, ADJUSTED NET INCOME, AND ADJUSTED EPS

(in thousands, except per share data)

 

 

 

 

For the Three Months Ended December 31, 2018

 

 

 

 

 

Non-GAAP adjustments

 

 

 

As Reported

(GAAP)

 

Contract liability adjustment

(1)

 

Amortization of

intangible assets(2)

 

Merger and integration costs(3)

 

Fair value adjustments and impairment of intangible assets(4)

 

Income from other investments(5)

 

Tax

adjustments(6)

 

As Adjusted

(Non-GAAP)

Revenues

$

 

242,103

 

 

 

 

$

 

2,534

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

244,637

 

 

Income from operations

$

 

18,875

 

 

 

 

$

 

2,534

 

 

$

 

15,416

 

 

$

 

7,954

 

 

$

 

605

 

 

$

 

 

 

$

 

 

 

$

 

45,384

 

 

Operating margin

 

 

7.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18.6

%

 

Net income

$

 

22,455

 

 

 

 

$

 

2,534

 

 

$

 

15,416

 

 

$

 

7,954

 

 

$

 

605

 

 

$

 

 

 

$

 

(14,600

)

 

 

$

 

34,364

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

 

1.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

1.56

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

22,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,033

 

 

 

 

For the Three Months Ended December 31, 2019

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

As Reported

(GAAP)

 

Contract liability adjustment (1)

 

Amortization of

intangible assets(2)

 

Merger and integration costs(3)

 

Fair value adjustments and impairment of intangible assets(4)

 

Income from other investments(5)

 

Tax

adjustments(6)

 

As Adjusted

(Non-GAAP)

 

Revenues

$

263,772

 

 

$

 

 

$

 

 

$

 

$

 

 

$

 

 

$

 

 

$

263,772

 

 

Income from operations

$

37,213

 

 

$

 

 

$

15,416

 

 

$

10,225

 

$

 

 

$

 

 

$

 

 

$

62,854

 

 

Operating margin

 

 

14.1

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23.8

%

 

 

Net income

$

28,537

 

 

$

 

 

$

15,416

 

 

$

10,225

 

$

 

 

$

(112

)

 

 

$

(7,094

)

 

 

$

46,972

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

1.29

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2.13

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

22,101

 

 

 

 

 

 

 

 

 

 

 

 

 

22,101

 

 

 

 

 

For the Twelve Months Ended December 31, 2018

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

As Reported

(GAAP)

 

Contract liability adjustment

(1)

 

Amortization of

intangible assets(2)

 

Merger and integration costs(3)

 

Fair value adjustments and impairment of intangible assets(4)

 

Income from other investments(5)

 

Tax

adjustments(6)

 

As Adjusted

(Non-GAAP)

 

Revenues

$

634,185

 

 

 

$

28,748

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

662,933

 

 

Income from operations

$

(22,740

)

 

 

$

28,748

 

 

$

25,694

 

 

$

45,745

 

 

$

19,909

 

 

$

 

 

$

 

 

$

97,356

 

 

Operating margin

 

-3.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14.7

%

 

 

Net income

$

(15,671

)

 

 

$

28,748

 

 

$

25,694

 

 

$

45,745

 

 

$

19,909

 

 

$

 

 

$

(29,348

)

 

 

$

75,077

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

(1.03

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

4.75

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

15,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,801

 

 

 

 

 

For the Twelve Months Ended December 31, 2019

 

 

 

 

 

 

Non-GAAP adjustments

 

 

 

 

As Reported

(GAAP)

 

Contract liability adjustment

(1)

 

Amortization of

intangible assets(2)

 

Merger and integration costs(3)

 

Fair value adjustments and impairment of intangible assets(4)

 

Income from other investments(5)

 

Tax

adjustments(6)

 

As Adjusted

(Non-GAAP)

 

Revenues

$

997,137

 

 

$

 

 

$

 

 

$

 

$

 

 

$

 

 

$

 

 

$

997,137

 

 

Income from operations

$

110,532

 

 

$

 

 

$

61,667

 

 

$

21,923

 

$

 

 

$

 

 

$

 

 

$

194,122

 

 

Operating margin

 

11.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19.5

%

 

 

Net income

$

81,138

 

 

$

 

 

$

61,667

 

 

$

21,923

 

$

 

 

$

(3,446

)

 

 

$

(14,001

)

 

 

$

147,281

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

3.67

 

 

 

 

 

 

 

 

 

 

 

 

 

$

6.67

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

22,097

 

 

 

 

 

 

 

 

 

 

 

 

 

22,097

 

 

(1)

Reflects a purchase accounting adjustment to record Capella University contract liabilities at fair value as a result of the Company's merger with Capella Education Company.

(2)

Reflects amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company.

(3)

Reflects transaction and integration charges associated with the Company's merger with Capella Education Company.

(4)

Reflects charges for the impairment of goodwill and intangible assets of $0.3 million and $19.6 million related to the Company’s acquisition of The New York Code + Design Academy during the three and twelve months ended December 31, 2018, respectively, as well as adjustments to the Company’s reserve for leases on facilities no longer in use of $0.3 million during the three and twelve months ended December 31, 2018.

(5)

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

(6)

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 27.1% and 28.0% for the three months ended December 31, 2018 and 2019, respectively, and adjusted effective income tax rates of 25.6% and 27.8% for the twelve months ended December 31, 2018 and 2019, respectively.

STRATEGIC EDUCATION, INC.

UNAUDITED NON-GAAP SEGMENT REPORTING

(in thousands)

For the Three Months Ended

 

For the Twelve Months Ended

December 31,

 

December 31,

2018

 

2019

 

2018

 

2019

Revenues:

Strayer University

$

127,461

$

142,226

$

471,104

$

527,032

Capella University

111,126

117,902

154,918

455,320

Non-Degree Programs

3,516

3,644

8,163

14,785

Consolidated revenues

 

242,103

 

263,772

 

634,185

 

997,137

 

 

Adjustments to consolidated revenues:

 

 

Strayer University

Capella University

2,534

28,748

Non-Degree Programs

Total adjustments to consolidated revenues

 

2,534

 

 

28,748

 

 

 

Adjusted revenues by segment:

 

 

Strayer University

127,461

142,226

471,104

527,032

Capella University

113,660

117,902

183,666

455,320

Non-Degree Programs

3,516

3,644

8,163

14,785

Adjusted consolidated revenues

$

244,637

$

263,772

$

662,933

$

997,137

 

 

Income (loss) from operations:

 

 

Strayer University

$

23,974

$

37,864

$

68,188

$

106,132

Capella University

20,666

25,063

6,340

88,981

Non-Degree Programs

(1,790)

(73)

(5,920)

(991)

Amortization of intangible assets

(15,416)

(15,416)

(25,694)

(61,667)

Merger and integration costs

(7,954)

(10,225)

(45,745)

(21,923)

Fair value adjustments and impairment of intangible assets

 

(605)

 

 

(19,909)

 

Consolidated income (loss) from operations

 

18,875

 

37,213

 

(22,740)

 

110,532

 

 

Adjustments to consolidated income (loss) from operations:

 

 

Contract liabilities adjustment

2,534

28,748

Amortization of intangible assets

15,416

15,416

25,694

61,667

Merger and integration costs

7,954

10,225

45,745

21,923

Fair value adjustments and impairment of intangible assets

605

19,909

Total adjustments to consolidated income (loss) from operations

 

26,509

 

25,641

 

120,096

 

83,590

 

 

 

Adjusted income (loss) from operations by segment:

 

 

 

Strayer University

23,974

37,864

68,188

106,132

Capella University

23,200

25,063

35,088

88,981

Non-Degree Programs

(1,790)

(73)

(5,920)

(991)

Total adjusted income (loss) from operations

$

45,384

$

62,854

$

97,356

$

194,122

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

 

 

 

 

 

 

 

 

 

Strayer University

 

18.8%

 

 

26.6%

 

 

14.5%

 

 

20.1%

Capella University

 

18.6%

 

 

21.3%

 

 

4.1%

 

 

19.5%

Non-Degree Programs

 

(50.9%)

 

 

(2.0%)

 

 

(72.5%)

 

 

(6.7%)

Adjusted operating margin

 

 

 

 

 

 

 

 

 

 

 

Strayer University

 

18.8%

 

 

26.6%

 

 

14.5%

 

 

20.1%

Capella University

 

20.4%

 

 

21.3%

 

 

19.1%

 

 

19.5%

Non-Degree Programs

 

(50.9%)

 

 

(2.0%)

 

 

(72.5%)

 

 

(6.7%) 

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,

 

2018

 

 

2019

 

 

2018

 

2019

 

Net income (loss)

$

22,455

$

28,537

$

(15,671)

$

81,138

Provision (benefit) for income taxes

 

(1,825)

 

11,173

 

(3,468)

 

42,586

Other income

 

(1,755)

 

(2,497)

 

(3,601)

 

(13,192)

Depreciation and amortization

 

25,436

 

25,999

 

54,543

 

104,861

EBITDA (1)

 

44,311

 

63,212

 

31,803

 

215,393

Stock-based compensation

 

3,781

 

3,085

 

13,291

 

11,790

Merger and integration costs (2)

 

7,954

 

10,225

 

45,011

 

21,525

Fair value adjustments and impairment of intangible assets (3)

 

605

 

20,798

Contract liability adjustment (4)

 

2,534

 

28,748

Adjusted EBITDA (1)

$

59,185

$

76,522

$

139,651

$

248,708

(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. Excludes $0.7 million and $0.4 million of depreciation and amortization expense for the twelve months ended December 31, 2018 and 2019, respectively, and includes $2.2 million and $0.4 million of stock-based compensation expense for the twelve months ended December 31, 2018 and 2019, respectively.

(3)

Reflects adjustments to the value of purchase consideration, charges for the impairment of intangible assets related to the Company's acquisition of The New York Code + Design Academy, and adjustments to the Company's reserve for leases on facilities no longer in use.

(4)

Reflects a purchase accounting adjustment to record Capella University contract liabilities at fair value as a result of the Company's merger with Capella Education Company.

 

Contacts

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

Release Summary

Strategic Education, Inc. Reports Fourth Quarter 2019 Results

Contacts

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