STRA Strategic Education Inc

Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended December 31, 2023.

“During 2023, we delivered strong enrollment, revenue, and earnings growth and are proud of the organization’s ongoing commitment to the success of our students,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “As we begin a new year, we look toward continued strength in the U.S. Higher Education segment driven by employer affiliated enrollment; strong growth in the Education Technology Services segment, including Sophia subscription growth; and a return to total enrollment growth in the Australia/New Zealand segment.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

Three Months Ended December 31

• Revenue increased 12.1% to $302.7 million compared to $269.9 million for the same period in 2022. Revenue on a constant currency basis increased 12.5% to $303.6 million in the fourth quarter of 2023 compared to $269.9 million for the same period in 2022.
• Income from operations was $54.2 million or 17.9% of revenue, compared to $27.6 million or 10.2% of revenue for the same period in 2022. Adjusted income from operations, which is a non-GAAP financial measure, was $56.6 million compared to $27.2 million for the same period in 2022. The adjusted operating income margin, which is a non-GAAP financial measure, was 18.7% compared to 10.1% for the same period in 2022. For more details on non-GAAP financial measures, refer to the information in the Non-GAAP Financial Measures section of this press release.
• Net income was $39.1 million compared to $18.3 million for the same period in 2022. Adjusted net income, which is a non-GAAP financial measure, was $40.4 million compared to $18.7 million for the same period in 2022.
• Adjusted EBITDA, which is a non-GAAP financial measure, was $74.4 million compared to $45.2 million for the same period in 2022.
• Diluted earnings per share was $1.63 compared to $0.77 for the same period in 2022. Adjusted diluted earnings per share, which is a non-GAAP financial measure, increased to $1.68 from $0.78 for the same period in 2022. Adjusted diluted earnings per share on a constant currency basis, which is a non-GAAP financial measure, was $1.70. Diluted weighted average shares outstanding increased slightly to 23,968,000 from 23,911,000 for the same period in 2022.

Year Ended December 31

• Revenue increased 6.3% to $1,132.9 million compared to $1,065.5 million in 2022. Revenue on a constant currency basis increased 7.4% to $1,143.9 million in 2023 compared to $1,065.5 million in 2022.
• Income from operations was $95.3 million or 8.4% of revenue, compared to $70.8 million or 6.6% of revenue in 2022. Adjusted income from operations, which is a non-GAAP financial measure, was $124.6 million in 2023 compared to $88.3 million in 2022. The adjusted operating income margin, which is a non-GAAP financial measure, was 11.0% compared to 8.3% in 2022. For more details on non-GAAP financial measures, refer to the information in the Non-GAAP Financial Measures section of this press release.
• Net income was $69.8 million in 2023 compared to $46.7 million in 2022. Adjusted net income, which is a non-GAAP financial measure, was $89.1 million compared to $60.3 million in 2022.
• Adjusted EBITDA, which is a non-GAAP financial measure, was $196.5 million compared to $163.1 million in 2022.
• Diluted earnings per share was $2.91 compared to $1.94 in 2022. Adjusted diluted earnings per share, which is a non-GAAP financial measure, increased to $3.72 from $2.51 in 2022. Adjusted diluted earnings per share on a constant currency basis, which is a non-GAAP financial measure, was $3.78. Diluted weighted average shares outstanding decreased slightly to 23,956,000 from 23,998,000 in 2022.

U.S. Higher Education Segment Highlights

• The U.S. Higher Education segment (USHE) is comprised of Capella University and Strayer University.
• For the fourth quarter, student enrollment within USHE increased 10.5% to 86,233 compared to 78,062 for the same period in 2022. Full-year 2023 student enrollment within USHE increased 6.8% compared to 2022.
• For the fourth quarter, FlexPath enrollment was 21% of USHE enrollment compared to 19% for the same period in 2022.
• Revenue increased 8.9% to $217.6 million in the fourth quarter of 2023 compared to $199.7 million for the same period in 2022, driven by higher fourth quarter enrollment.
• Income from operations was $32.9 million in the fourth quarter of 2023 compared to $13.2 million for the same period in 2022. The operating income margin was 15.1%, compared to 6.6% for the same period in 2022.

Education Technology Services Segment Highlights

• The Education Technology Services segment (ETS) is comprised primarily of Enterprise Partnerships, Sophia Learning, and Workforce Edge.
• For the fourth quarter, employer affiliated enrollment was 27.7% of USHE enrollment compared to 24.7% for the same period in 2022. Full-year 2023 employer affiliated enrollment was 27.2% of USHE enrollment compared to 24.4% in 2022.
• For the fourth quarter, average total subscribers at Sophia Learning increased approximately 44% from the same period in 2022.
• As of December 31, 2023, Workforce Edge had a total of 65 corporate agreements, collectively employing approximately 1,460,000 employees.
• Revenue increased 30.7% to $21.9 million in the fourth quarter of 2023 compared to $16.7 million for the same period in 2022, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.
• Income from operations was $8.8 million in the fourth quarter of 2023 compared to $4.0 million for the same period in 2022. The operating income margin was 40.3%, compared to 24.1% for the same period in 2022.

Australia/New Zealand Segment Highlights

• The Australia/New Zealand segment (ANZ) is comprised of Torrens University, Think Education, and Media Design School.
• For the fourth quarter, student enrollment within ANZ decreased 2.0% to 19,252 compared to 19,651 for the same period in 2022. Full-year 2023 student enrollment within ANZ decreased 3.6% compared to 2022.
• Revenue increased 18.2% to $63.3 million in the fourth quarter of 2023 compared to $53.5 million for the same period in 2022, driven by higher revenue-per-student. Revenue on a constant currency basis increased 20.0% to $64.2 million in the fourth quarter of 2023 compared to $53.5 million for the same period in 2022, driven by higher revenue-per-student.
• Income from operations was $14.9 million in the fourth quarter of 2023 compared to $10.0 million for the same period in 2022. The operating income margin was 23.5%, compared to 18.6% for the same period in 2022. Income from operations on a constant currency basis was $15.2 million in the fourth quarter of 2023 compared to $10.0 million for the same period in 2022. The operating income margin on a constant currency basis was 23.7%, compared to 18.6% for the same period in 2022.

Balance Sheet and Cash Flow

At December 31, 2023, Strategic Education had cash, cash equivalents, and marketable securities of $208.7 million, and $61.4 million outstanding under its revolving credit facility. Cash provided by operations in 2023 was $117.1 million compared to $126.1 million in 2022. Capital expenditures for 2023 were $36.9 million compared to $43.2 million in 2022.

For the fourth quarter of 2023, consolidated bad debt expense as a percentage of revenue was 3.7%, compared to 4.9% of revenue for the same period in 2022.

COMMON STOCK CASH DIVIDEND

Strategic Education announced today that it declared a regular, quarterly cash dividend of $0.60 per share of common stock. This dividend will be paid on March 18, 2024 to shareholders of record as of March 11, 2024.

CONFERENCE CALL WITH MANAGEMENT

Strategic Education will host a conference call to discuss its fourth quarter 2023 results at 10:00 a.m. (ET) today. This call will be available via webcast. To access the live webcast of the conference call, please go to www.strategiceducation.com in the Investor Relations section 15 minutes prior to the start time of the call to register. An earnings release presentation will also be posted to www.strategiceducation.com in the Investor Relations section. Following the call, the webcast will be archived and available at www.strategiceducation.com in the Investor Relations section. To participate in the live call, investors should register here prior to the call to receive dial-in information and a PIN.

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 Capella University and Strayer University, each institutionally accredited, and collectively offer flexible and affordable associate, bachelor’s, master’s, and doctoral programs including the Jack Welch Management Institute at Strayer University, and non-degree web and mobile application development courses through Strayer University’s Hackbright Academy and Devmountain; 2) Education Technology Services, developing and maintaining relationships with employers to build education benefits programs providing employees access to affordable and industry-relevant training, certificate, and degree programs, including through Workforce Edge, a full-service education benefits administration solution for employers, and Sophia Learning, enabling education benefits programs through low-cost online general education-level courses that are ACE-recommended for college credit; and 3) Australia/New Zealand, comprised of Torrens University, Think Education, and Media Design School that collectively offer certificate and degree programs in Australia and New Zealand. This portfolio of high quality, innovative, relevant, and affordable programs and institutions helps our students prepare for success in today’s workforce and find a path to bettering their lives.

Forward-Looking Statements

This communication contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by the use of words such as “expect,” “estimate,” “assume,” “believe,” “anticipate,” “may,” “will,” “forecast,” “outlook,” “plan,” “project,” “potential” and other similar words, and include all statements that are not historical facts, including with respect to, among other things, the future financial performance and growth opportunities of Strategic Education; Strategic Education’s plans, strategies and prospects; and future events and expectations. The statements are based on Strategic Education’s current expectations and are subject to a number of assumptions, uncertainties and risks, including but not limited to:

• the pace of student enrollment;
• Strategic Education’s continued compliance with Title IV of the Higher Education Act, and the regulations thereunder, as well as other federal laws and regulations, institutional accreditation standards and state regulatory requirements;
• rulemaking and other action by the Department of Education or other governmental entities, including without limitation action related to borrower defense to repayment applications, gainful employment, 90/10, and increased focus by the U.S. Congress on for-profit education institutions;
• competitive factors;
• risks associated with the ultimate impact of COVID-19 on people and economies;
• risks associated with the opening of new campuses;
• risks associated with the offering of new educational programs and adapting to other changes;
• risks associated with the acquisition of existing educational institutions, including Strategic Education’s acquisition of Torrens University and associated assets in Australia and New Zealand;
• the risk that the benefits of the acquisition of Torrens University and associated assets in Australia and New Zealand may not be fully realized or may take longer to realize than expected;
• the risk that the acquisition of Torrens University and associated assets in Australia and New Zealand may not advance Strategic Education’s business strategy and growth strategy;
• risks relating to the timing of regulatory approvals;
• Strategic Education’s ability to implement its growth strategy;
• the risk that the combined company may experience difficulty integrating employees or operations;
• risks associated with the ability of Strategic Education’s students to finance their education in a timely manner;
• general economic and market conditions; and
• additional factors described in Strategic Education’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Many of these risks, uncertainties and assumptions are beyond Strategic Education’s ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, these forward-looking statements speak only as of the information currently available to Strategic Education on the date they are made, and Strategic Education undertakes no obligation to update or revise forward-looking statements, except as required by law. Actual results may differ materially from those projected in the forward-looking statements.

     

STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) 

 

 

For the three months ended

December 31,

 

For the twelve months ended

December 31,

 

2022

 

2023

 

2022

 

2023

Revenues

$

269,938

 

 

$

302,702

 

$

1,065,480

 

 

$

1,132,924

Costs and expenses:

 

 

 

 

 

 

 

Instructional and support costs

 

152,167

 

 

 

153,751

 

 

597,321

 

 

 

623,903

General and administration

 

90,558

 

 

 

92,377

 

 

379,817

 

 

 

384,443

Amortization of intangible assets

 

3,396

 

 

 

1,093

 

 

14,350

 

 

 

11,457

Merger and integration costs

 

184

 

 

 

209

 

 

1,117

 

 

 

1,544

Restructuring costs

 

(4,014

)

 

 

1,048

 

 

2,115

 

 

 

16,256

Total costs and expenses

 

242,291

 

 

 

248,478

 

 

994,720

 

 

 

1,037,603

Income from operations

 

27,647

 

 

 

54,224

 

 

70,760

 

 

 

95,321

Other income (expense)

 

(58

)

 

 

994

 

 

(1,191

)

 

 

5,405

Income before income taxes

 

27,589

 

 

 

55,218

 

 

69,569

 

 

 

100,726

Provision for income taxes

 

9,260

 

 

 

16,089

 

 

22,899

 

 

 

30,935

Net income

$

18,329

 

 

$

39,129

 

$

46,670

 

 

$

69,791

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.78

 

 

$

1.67

 

$

1.97

 

 

$

2.98

Diluted

$

0.77

 

 

$

1.63

 

$

1.94

 

 

$

2.91

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

23,421

 

 

 

23,367

 

 

23,679

 

 

 

23,403

Diluted

 

23,911

 

 

 

23,968

 

 

23,998

 

 

 

23,956

       

STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) 

 

 

December 31,

2022

 

December 31,

2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

213,667

 

 

$

168,481

 

Marketable securities

 

9,156

 

 

 

39,728

 

Tuition receivable, net

 

62,953

 

 

 

76,102

 

Other current assets

 

43,285

 

 

 

44,758

 

Total current assets

 

329,061

 

 

 

329,069

 

Property and equipment, net

 

132,845

 

 

 

118,529

 

Right-of-use lease assets

 

125,248

 

 

 

119,202

 

Marketable securities, non-current

 

13,123

 

 

 

483

 

Intangible assets, net

 

260,541

 

 

 

251,623

 

Goodwill

 

1,251,277

 

 

 

1,251,888

 

Other assets

 

49,652

 

 

 

54,419

 

Total assets

$

2,161,747

 

 

$

2,125,213

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

90,588

 

 

$

90,888

 

Income taxes payable

 

6,989

 

 

 

2,200

 

Contract liabilities

 

88,488

 

 

 

92,341

 

Lease liabilities

 

23,879

 

 

 

24,190

 

Total current liabilities

 

209,944

 

 

 

209,619

 

Long-term debt

 

101,396

 

 

 

61,400

 

Deferred income tax liabilities

 

34,605

 

 

 

28,338

 

Lease liabilities, non-current

 

134,006

 

 

 

127,735

 

Other long-term liabilities

 

46,006

 

 

 

45,603

 

Total liabilities

 

525,957

 

 

 

472,695

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.01; 32,000,000 shares authorized; 24,402,891 and 24,406,816 shares issued and outstanding at December 31, 2022 and December 31, 2023, respectively

 

244

 

 

 

244

 

Additional paid-in capital

 

1,510,924

 

 

 

1,517,650

 

Accumulated other comprehensive loss

 

(35,068

)

 

 

(34,247

)

Retained earnings

 

159,690

 

 

 

168,871

 

Total stockholders’ equity

 

1,635,790

 

 

 

1,652,518

 

Total liabilities and stockholders’ equity

$

2,161,747

 

 

$

2,125,213

 

       

STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) 

 

 

For the year ended

December 31,

 

 

2022

 

 

 

2023

 

Cash flows from operating activities:

 

 

 

Net income

$

46,670

 

 

$

69,791

 

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

 

 

 

Gain on sale of property and equipment

 

(2,886

)

 

 

(2,136

)

Amortization of deferred financing costs

 

552

 

 

 

557

 

Amortization of investment discount/premium

 

32

 

 

 

(65

)

Depreciation and amortization

 

63,124

 

 

 

57,313

 

Deferred income taxes

 

(8,667

)

 

 

(6,322

)

Stock-based compensation

 

21,792

 

 

 

19,772

 

Impairment of right-of-use lease assets

 

1,185

 

 

 

5,135

 

Changes in assets and liabilities:

 

 

 

Tuition receivable, net

 

(12,558

)

 

 

(12,874

)

Other assets

 

3,584

 

 

 

(7,631

)

Accounts payable and accrued expenses

 

(4,339

)

 

 

552

 

Income taxes payable and income taxes receivable

 

7,580

 

 

 

(4,688

)

Contract liabilities

 

18,960

 

 

 

4,495

 

Other liabilities

 

(8,977

)

 

 

(6,780

)

Net cash provided by operating activities

 

126,052

 

 

 

117,119

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Cash paid for acquisition, net of cash acquired

 

(800

)

 

 

(530

)

Purchases of property and equipment

 

(43,170

)

 

 

(36,943

)

Purchases of marketable securities

 

—

 

 

 

(26,905

)

Proceeds from marketable securities

 

6,420

 

 

 

9,800

 

Proceeds from sale of property and equipment

 

6,525

 

 

 

5,890

 

Proceeds from other investments

 

—

 

 

 

457

 

Other investments

 

(335

)

 

 

(314

)

Net cash used in investing activities

 

(31,360

)

 

 

(48,545

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Common dividends paid

 

(59,240

)

 

 

(58,780

)

Payments on long-term debt

 

(40,000

)

 

 

(40,000

)

Net payments for stock awards

 

(3,004

)

 

 

(4,828

)

Repurchase of common stock

 

(40,116

)

 

 

(9,999

)

Net cash used in financing activities

 

(142,360

)

 

 

(113,607

)

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

 

(4,090

)

 

 

(496

)

Net decrease in cash, cash equivalents, and restricted cash

 

(51,758

)

 

 

(45,529

)

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

 

279,212

 

 

 

227,454

 

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

$

227,454

 

 

$

181,925

 

       

STRATEGIC EDUCATION, INC. UNAUDITED SEGMENT REPORTING (in thousands) 

 

 

For the three months ended

December 31,

 

For the twelve months ended

December 31,

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

U.S. Higher Education

$

199,688

 

 

$

217,551

 

 

$

770,979

 

 

$

818,953

 

Australia/New Zealand

 

53,515

 

 

 

63,279

 

 

 

230,747

 

 

 

233,518

 

Education Technology Services

 

16,735

 

 

 

21,872

 

 

 

63,754

 

 

 

80,453

 

Consolidated revenues

$

269,938

 

 

$

302,702

 

 

$

1,065,480

 

 

$

1,132,924

 

Income from operations:

 

 

 

 

 

 

 

U.S. Higher Education

$

13,219

 

 

$

32,886

 

 

$

38,605

 

 

$

59,628

 

Australia/New Zealand

 

9,967

 

 

 

14,878

 

 

 

30,473

 

 

 

35,862

 

Education Technology Services

 

4,027

 

 

 

8,810

 

 

 

19,264

 

 

 

29,088

 

Amortization of intangible assets

 

(3,396

)

 

 

(1,093

)

 

 

(14,350

)

 

 

(11,457

)

Merger and integration costs

 

(184

)

 

 

(209

)

 

 

(1,117

)

 

 

(1,544

)

Restructuring costs

 

4,014

 

 

 

(1,048

)

 

 

(2,115

)

 

 

(16,256

)

Consolidated income from operations

$

27,647

 

 

$

54,224

 

 

$

70,760

 

 

$

95,321

 

     

Non-GAAP Financial Measures

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

Management uses certain non-GAAP measures to evaluate financial performance because those non-GAAP measures allow for period-over-period comparisons of the Company’s ongoing operations before the impact of certain items described below. Management believes this information is useful to investors to compare the Company’s results of operations period-over-period. These measures are Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA and Adjusted Diluted Earnings Per Share (EPS). We define Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted EPS to exclude (1) amortization and depreciation expense related to intangible assets and software assets associated with the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (2) integration expenses associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (3) severance costs, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities, (4) income/loss recognized from the Company’s investments in partnership interests and other investments, and (5) discrete tax adjustments utilizing an adjusted effective income tax rate of 30.0% for the three months ended December 31, 2022 and 2023, and adjusted effective income tax rates of 30.4% and 30.0% for the twelve months ended December 31, 2022 and 2023, respectively. To illustrate currency impacts to operating results, Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted EPS for the three and twelve months ended December 31, 2023 are also presented on a constant currency basis utilizing an exchange rate of 0.66 and 0.69 Australian Dollars to U.S. Dollars, respectively, which were the average exchange rates for the same periods in 2022. We define EBITDA as net income before other income (expense), 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, and the amounts in (2) and (3) above. These non-GAAP measures are reconciled to the most directly comparable GAAP measures in the sections that follow. Non-GAAP measures should not be viewed as substitutes for GAAP measures.

     

STRATEGIC EDUCATION, INC. UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ADJUSTED REVENUE, ADJUSTED TOTAL COSTS AND EXPENSES, ADJUSTED INCOME FROM OPERATIONS, ADJUSTED OPERATING MARGIN, ADJUSTED INCOME BEFORE INCOME TAXES, ADJUSTED NET INCOME, AND ADJUSTED EPS (in thousands, except per share data) 

 

 

 

 

For the three months ended December 31, 2022

Non-GAAP Adjustments

 

 

 

As Reported

(GAAP)

 

Amortization

of intangible

assets(1)

 

Merger and

integration

costs(2)

 

Restructuring

costs(3)

 

Income from

other

investments(4)

 

Tax

adjustments(5)

 

As Adjusted

(Non-GAAP)

Revenues

$

269,938

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

$

269,938

 

Total costs and expenses

$

242,291

 

 

$

(3,396

)

 

$

(184

)

 

$

4,014

 

 

$

—

 

 

$

—

 

$

242,725

 

Income from operations

$

27,647

 

 

$

3,396

 

 

$

184

 

 

$

(4,014

)

 

$

—

 

 

$

—

 

$

27,213

 

Operating margin

 

10.2

%

 

 

 

 

 

 

 

 

 

 

 

 

10.1

%

Income before income taxes

$

27,589

 

 

$

3,396

 

 

$

184

 

 

$

(4,014

)

 

$

(401

)

 

$

—

 

$

26,754

 

Net income

$

18,329

 

 

$

3,396

 

 

$

184

 

 

$

(4,014

)

 

$

(401

)

 

$

1,246

 

$

18,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

0.77

 

 

 

 

 

 

 

 

 

 

 

 

$

0.78

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,911

 

 

 

 

 

 

 

 

 

 

 

 

 

23,911

 

   

 

 

 

For the three months ended December 31, 2023

Non-GAAP Adjustments

 

 

 

As Reported

(GAAP)

 

Amortization

of intangible

assets(1)

 

Merger and

integration

costs(2)

 

Restructuring

costs(3)

 

Loss from

other

investments(4)

 

Tax

adjustments(5)

 

As Adjusted

(Non-GAAP)

Revenues

$

302,702

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

$

—

 

 

$

302,702

 

Total costs and expenses

$

248,478

 

 

$

(1,093

)

 

$

(209

)

 

$

(1,048

)

 

$

—

 

$

—

 

 

$

246,128

 

Income from operations

$

54,224

 

 

$

1,093

 

 

$

209

 

 

$

1,048

 

 

$

—

 

$

—

 

 

$

56,574

 

Operating margin

 

17.9

%

 

 

 

 

 

 

 

 

 

 

 

 

18.7

%

Income before income taxes

$

55,218

 

 

$

1,093

 

 

$

209

 

 

$

1,048

 

 

$

108

 

$

—

 

 

$

57,676

 

Net income

$

39,129

 

 

$

1,093

 

 

$

209

 

 

$

1,048

 

 

$

108

 

$

(1,214

)

 

$

40,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

1.63

 

 

 

 

 

 

 

 

 

 

 

 

$

1.68

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,968

 

 

 

 

 

 

 

 

 

 

 

 

 

23,968

 

   

 

 

 

For the twelve months ended December 31, 2022

Non-GAAP Adjustments

 

 

 

As Reported

(GAAP)

 

Amortization

of intangible

assets(1)

 

Merger and

integration

costs(2)

 

Restructuring

costs(3)

 

Income from

other

investments(4)

 

Tax

adjustments(5)

 

As Adjusted

(Non-GAAP)

Revenues

$

1,065,480

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,065,480

 

Total costs and expenses

$

994,720

 

 

$

(14,350

)

 

$

(1,117

)

 

$

(2,115

)

 

$

—

 

 

$

—

 

 

$

977,138

 

Income from operations

$

70,760

 

 

$

14,350

 

 

$

1,117

 

 

$

2,115

 

 

$

—

 

 

$

—

 

 

$

88,342

 

Operating margin

 

6.6

%

 

 

 

 

 

 

 

 

 

 

 

 

8.3

%

Income before income taxes

$

69,569

 

 

$

14,350

 

 

$

1,117

 

 

$

2,115

 

 

$

(579

)

 

$

—

 

 

$

86,572

 

Net income

$

46,670

 

 

$

14,350

 

 

$

1,117

 

 

$

2,115

 

 

$

(579

)

 

$

(3,419

)

 

$

60,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

1.94

 

 

 

 

 

 

 

 

 

 

 

 

$

2.51

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,998

 

 

 

 

 

 

 

 

 

 

 

 

 

23,998

 

   

 

 

 

For the twelve months ended December 31, 2023

Non-GAAP Adjustments

 

 

 

As Reported

(GAAP)

 

Amortization

of intangible

assets(1)

 

Merger and

integration

costs(2)

 

Restructuring

costs(3)

 

Income from

other

investments(4)

 

Tax

adjustments(5)

 

As Adjusted

(Non-GAAP)

Revenues

$

1,132,924

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,132,924

 

Total costs and expenses

$

1,037,603

 

 

$

(11,457

)

 

$

(1,544

)

 

$

(16,256

)

 

$

—

 

 

$

—

 

 

$

1,008,346

 

Income from operations

$

95,321

 

 

$

11,457

 

 

$

1,544

 

 

$

16,256

 

 

$

—

 

 

$

—

 

 

$

124,578

 

Operating margin

 

8.4

%

 

 

 

 

 

 

 

 

 

 

 

 

11.0

%

Income before income taxes

$

100,726

 

 

$

11,457

 

 

$

1,544

 

 

$

16,256

 

 

$

(2,718

)

 

$

—

 

 

$

127,265

 

Net income

$

69,791

 

 

$

11,457

 

 

$

1,544

 

 

$

16,256

 

 

$

(2,718

)

 

$

(7,245

)

 

$

89,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

2.91

 

 

 

 

 

 

 

 

 

 

 

 

$

3.72

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,956

 

 

 

 

 

 

 

 

 

 

 

 

 

23,956

 

(1)

Reflects amortization and depreciation expense of intangible assets and software assets acquired through the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand. 

(2)

Reflects integration expenses associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand. 

(3)

Reflects severance costs, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities. 

(4)

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

(5)

Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted effective income tax rate of 30.0% for the three months ended December 31, 2022 and 2023, and adjusted effective income tax rates of 30.4% and 30.0% for the twelve months ended December 31, 2022 and 2023, respectively. 

       

STRATEGIC EDUCATION, INC. UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES 2023 AS ADJUSTED WITH CONSTANT CURRENCY (in thousands, except per share data) 

 

 

For the three months ended

December 31, 2023

 

For the twelve months ended

December 31, 2023

 

As Adjusted

(Non-GAAP)

 

Constant

currency

adjustment(1)

 

As Adjusted

with Constant

Currency

(Non-GAAP)

 

As Adjusted

(Non-GAAP)

 

Constant

currency

adjustment(1)

 

As Adjusted

with Constant

Currency

(Non-GAAP)

Revenues

$

302,702

 

 

$

922

 

$

303,624

 

 

$

1,132,924

 

 

$

10,937

 

$

1,143,861

 

Total costs and expenses

$

246,128

 

 

$

555

 

$

246,683

 

 

$

1,008,346

 

 

$

8,925

 

$

1,017,271

 

Income from operations

$

56,574

 

 

$

367

 

$

56,941

 

 

$

124,578

 

 

$

2,012

 

$

126,590

 

Operating margin

 

18.7

%

 

 

 

 

18.8

%

 

 

11.0

%

 

 

 

 

11.1

%

Income before income taxes

$

57,676

 

 

$

369

 

$

58,045

 

 

$

127,265

 

 

$

2,106

 

$

129,371

 

Net income

$

40,373

 

 

$

258

 

$

40,631

 

 

$

89,085

 

 

$

1,475

 

$

90,560

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

Diluted

$

1.68

 

 

 

 

$

1.70

 

 

$

3.72

 

 

 

 

$

3.78

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Diluted

 

23,968

 

 

 

 

 

23,968

 

 

 

23,956

 

 

 

 

 

23,956

 

(1)

Reflects an adjustment to translate foreign currency results for the three and twelve months ended December 31, 2023 at a constant exchange rate of 0.66 and 0.69 Australian Dollars to U.S. Dollars, respectively, which were the average exchange rates for the same periods in 2022.

       

STRATEGIC EDUCATION, INC. UNAUDITED NON-GAAP SEGMENT REPORTING (in thousands) 

 

 

For the three months ended

December 31,

 

For the twelve months ended

December 31,

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

U.S. Higher Education

$

199,688

 

 

$

217,551

 

 

$

770,979

 

 

$

818,953

 

Australia/New Zealand

 

53,515

 

 

 

63,279

 

 

 

230,747

 

 

 

233,518

 

Education Technology Services

 

16,735

 

 

 

21,872

 

 

 

63,754

 

 

 

80,453

 

Consolidated revenues

 

269,938

 

 

 

302,702

 

 

 

1,065,480

 

 

 

1,132,924

 

 

 

 

 

 

 

 

 

Income from operations:

 

 

 

 

 

 

 

U.S. Higher Education

$

13,219

 

 

$

32,886

 

 

$

38,605

 

 

$

59,628

 

Australia/New Zealand

 

9,967

 

 

 

14,878

 

 

 

30,473

 

 

 

35,862

 

Education Technology Services

 

4,027

 

 

 

8,810

 

 

 

19,264

 

 

 

29,088

 

Amortization of intangible assets

 

(3,396

)

 

 

(1,093

)

 

 

(14,350

)

 

 

(11,457

)

Merger and integration costs

 

(184

)

 

 

(209

)

 

 

(1,117

)

 

 

(1,544

)

Restructuring costs

 

4,014

 

 

 

(1,048

)

 

 

(2,115

)

 

 

(16,256

)

Consolidated income from operations

 

27,647

 

 

 

54,224

 

 

 

70,760

 

 

 

95,321

 

 

 

 

 

 

 

 

 

Adjustments to consolidated income from operations:

 

 

 

 

 

 

 

Amortization of intangible assets

 

3,396

 

 

 

1,093

 

 

 

14,350

 

 

 

11,457

 

Merger and integration costs

 

184

 

 

 

209

 

 

 

1,117

 

 

 

1,544

 

Restructuring costs

 

(4,014

)

 

 

1,048

 

 

 

2,115

 

 

 

16,256

 

Total adjustments to consolidated income from operations

 

(434

)

 

 

2,350

 

 

 

17,582

 

 

 

29,257

 

 

 

 

 

 

 

 

 

Adjusted income from operations by segment:

 

 

 

 

 

 

 

U.S. Higher Education

 

13,219

 

 

 

32,886

 

 

 

38,605

 

 

 

59,628

 

Australia/New Zealand

 

9,967

 

 

 

14,878

 

 

 

30,473

 

 

 

35,862

 

Education Technology Services

 

4,027

 

 

 

8,810

 

 

 

19,264

 

 

 

29,088

 

Total adjusted income from operations

$

27,213

 

 

$

56,574

 

 

$

88,342

 

 

$

124,578

 

       

STRATEGIC EDUCATION, INC. UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ADJUSTED EBITDA (in thousands) 

 

 

For the three months ended

December 31,

 

For the twelve months ended

December 31,

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

Net income

$

18,329

 

 

$

39,129

 

 

$

46,670

 

 

$

69,791

 

Provision for income taxes

 

9,260

 

 

 

16,089

 

 

 

22,899

 

 

 

30,935

 

Other (income) expense

 

58

 

 

 

(994

)

 

 

1,191

 

 

 

(5,405

)

Gain on sale of property and equipment

 

(2,886

)

 

 

—

 

 

 

(2,886

)

 

 

(2,136

)

Depreciation and amortization

 

13,931

 

 

 

12,432

 

 

 

63,124

 

 

 

57,313

 

EBITDA (1)

 

38,692

 

 

 

66,656

 

 

 

130,998

 

 

 

150,498

 

Stock-based compensation

 

5,583

 

 

 

4,570

 

 

 

21,792

 

 

 

19,772

 

Merger and integration costs (2)

 

184

 

 

 

209

 

 

 

1,170

 

 

 

1,208

 

Restructuring costs (3)

 

(1,128

)

 

 

907

 

 

 

2,521

 

 

 

17,500

 

Cloud computing amortization (4)

 

1,898

 

 

 

2,024

 

 

 

6,640

 

 

 

7,547

 

Adjusted EBITDA (1)

$

45,229

 

 

$

74,366

 

 

$

163,121

 

 

$

196,525

 

(1)

Denotes non-GAAP financial measures. Please see the information in the Non-GAAP Financial Measures section of this press release for more detail regarding these adjustments and management’s reasons for providing this information.

(2)

Reflects integration charges associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand. Excludes $0.1 million and $0.3 million of depreciation and amortization for the twelve months ended December 31, 2022 and 2023, respectively. 

(3)

Reflects severance costs, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities. Excludes $2.9 million of gain on the sale of property and equipment for the three and twelve months ended December 31, 2022, and $2.1 million of gain on the sale of property and equipment for the twelve months ended December 31, 2023. Excludes $2.5 million and $0.4 million of depreciation and amortization expense for the twelve months ended December 31, 2022 and 2023, respectively. Excludes $0.1 million and $0.5 million of stock-based compensation expense for the three and twelve months ended December 31, 2023, respectively.

(4)

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240229691731/en/

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