Strategic Education, Inc. (SEI) (NASDAQ: STRA) today announced
financial results for the period ended December 31, 2018.
Karl McDonnell, Chief Executive Officer of SEI said, “We are
very pleased with the organization’s strong results in 2018, which
were achieved while closing our merger and integrating corporate
functions. Our particularly strong fourth quarter results position
us well for 2019 as we leverage our new scale and capabilities to
continue to deliver near-term growth, and long-term economic
mobility for our students and learners.”
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 104.0% to $242.1
million compared to $118.7 million for the same period in 2017.
Revenue in 2018 includes the impact of a purchase accounting
adjustment of $2.5 million to reflect Capella University deferred
revenue at fair value. Adjusted revenue, which is a non-GAAP
financial measure and excludes the aforementioned deferred revenue
adjustment, increased 106.1% to $244.6 million compared to $118.7
million for the same period in 2017. 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 $18.9
million compared to $11.7 million for the same period in 2017.
Income from operations in 2018 includes the impact of the
aforementioned deferred revenue 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 charge
resulting from the impairment of intangible assets associated with
The New York Code + Design Academy, and a $0.3 million charge to
the Company’s reserve for leases on facilities no longer in use.
Income from operations in 2017 included $8.5 million in costs
associated with the merger with Capella Education Company. Adjusted
income from operations was $45.4 million in 2018 compared to $20.2
million for the same period in 2017. The adjusted operating income
margin was 18.6% compared to 17.0% for the same period in
2017.
- Net income, which includes the
adjustments described above and certain tax benefits, including the
effects of the new lower federal income tax rate, was $22.5 million
in 2018 compared to a net loss of $6.5 million in 2017. Adjusted
net income was $34.4 million compared to adjusted net income of
$12.3 million for the same period in 2017.
- Earnings before interest, taxes,
depreciation, and amortization (EBITDA) was $44.3 million in 2018
compared to $16.7 million in 2017. Adjusted EBITDA was $59.2
million compared to $28.6 million for the same period in 2017.
- Diluted earnings per share was $1.02
compared to a loss per share of $0.61 for the same period in 2017.
Adjusted diluted earnings per share increased to $1.56 from $1.09
for the same period in 2017. Diluted weighted average shares
outstanding increased to 22,033,000 from 11,273,000 for the same
period in 2017, due primarily to new shares issued to facilitate
the merger with Capella Education Company.
Year Ended December 31
- Revenue increased 39.4% to $634.2
million compared to $454.9 million in 2017. Revenue in 2018
includes the impact of a purchase accounting adjustment of $28.7
million to reflect Capella University deferred revenue at fair
value. Adjusted revenue, which is a non-GAAP financial measure and
excludes the aforementioned deferred revenue adjustment, increased
45.7% to $662.9 million compared to $454.9 million in 2017. For
more details on non-GAAP financial measures, refer to the
information in the Non-GAAP Financial Measures section of this
press release.
- The Company reported a loss from
operations of $22.7 million, compared to income of $52.2 million in
2017. Loss from operations in 2018 includes the impact of the
aforementioned deferred revenue 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 charges
resulting from the impairment of goodwill and intangible assets
associated with The New York Code + Design Academy, and a $0.3
million charge to increase the Company’s reserve for leases on
facilities no longer in use. Income from operations in 2017
included $11.9 million in costs associated with the merger with
Capella Education Company, a $7.8 million benefit associated with
the reduction to the value of contingent consideration related to
the Company’s acquisition of The New York Code + Design Academy,
and a $0.3 million charge to increase the Company’s reserve for
leases on facilities no longer in use. Adjusted income from
operations was $97.4 million in 2018 compared to $56.6 million in
2017. The adjusted operating income margin was 14.7% compared to
12.4% in 2017.
- Net loss, which includes the
adjustments described above and certain tax benefits, including the
effects of the new lower federal income tax rate, was $15.7 million
in 2018 compared to net income of $20.6 million in 2017. Adjusted
net income was $75.1 million compared to adjusted net income of
$34.9 million in 2017.
- Earnings before interest, taxes,
depreciation, and amortization (EBITDA) was $31.8 million in 2018
compared to $70.9 million in 2017. Adjusted EBITDA was $139.7
million compared to $88.7 million in 2017.
- Loss per share was $1.03 compared to
diluted earnings per share of $1.84 in 2017. Adjusted diluted
earnings per share increased to $4.75 from $3.11 in 2017. Diluted
weighted average shares outstanding increased to 15,801,000 from
11,199,000 in 2017.
Strayer University Segment Highlights
- The Strayer University segment is
comprised of Strayer University, including its programs offered
through the Jack Welch Management Institute.
- For the fourth quarter, student
enrollment at Strayer University increased 8.9% to 52,447 compared
to 48,144 for the same period in 2017. New student enrollment for
the period increased 9.2% and continuing student enrollment for the
period increased 8.9%. Full-year 2018 student enrollment at Strayer
University increased 8.1% and new student enrollment increased 8.7%
compared to 2017.
- Revenue increased 8.5% to $127.5
million in the fourth quarter of 2018 compared to $117.5 million
for the same period in 2017, driven primarily by higher fourth
quarter enrollment.
- Income from operations increased to
$24.0 million in the fourth quarter of 2018 from $21.7 million for
the same period in 2017. The operating income margin was 18.8%,
compared to 18.5% for the same period in 2017.
- Strayer University opened its third and
fourth new campuses for 2018 in El Paso, Texas and Decatur, Alabama
for a total of four new campuses opened in 2018. The University is
planning to open six to eight additional new campuses in 2019.
Capella University Segment Highlights
- The Capella University segment consists
solely of Capella University.
- For the fourth quarter, student
enrollment at Capella University increased 2.4% to 38,409 compared
to 37,517 for the same period in 2017. New student enrollment for
the period increased 10.6% and continuing student enrollment for
the period increased 1.0%. Full-year 2018 student enrollment at
Capella University increased 0.7% and new student enrollment
increased 10.0% compared to 2017.
- FlexPath continued to be a significant
driver of new and total enrollment growth in the fourth quarter of
2018, and is now 28% of Capella University’s bachelor’s and
master’s degrees total enrollment.
- Revenue was $111.1 million in the
fourth quarter of 2018 and reflects higher enrollment and a slight
increase in revenue-per-learner. Revenue in the fourth quarter of
2018 includes the impact of a purchase accounting adjustment of
$2.5 million to reflect deferred revenue at fair value in
connection with the merger. Excluding this purchase accounting
adjustment, Capella University revenue was $113.7 million.
- Income from operations was $20.7
million in the fourth quarter of 2018, which includes the impact
from the aforementioned deferred revenue adjustment. Adjusted
income from operations was $23.2 million in the fourth quarter of
2018, and the adjusted operating income margin was 20.4%.
- The Company is currently planning to
open Capella University learner support centers, pending regulatory
approval, in Orlando, Florida and Atlanta, Georgia in the first
half of 2019.
Non-Degree Programs Segment Highlights
- The non-degree programs segment
includes Hackbright Academy, DevMountain, The New York Code +
Design Academy, and Sophia.
- For the fourth quarter, revenue
increased to $3.5 million from $1.3 million for the same period in
2017, primarily due to the inclusion of revenue from DevMountain,
Hackbright Academy, and Sophia.
- Loss from operations was $1.8 million
in the fourth quarter of 2018 compared to a loss of $1.6 million in
the same period in 2017.
BALANCE SHEET AND CASH
FLOW
At December 31, 2018, Strategic Education, Inc. had cash, cash
equivalents, and marketable securities of $386.5 million, and no
debt. Cash provided by operations in 2018 was $46.9 million
compared to cash provided by operations of $56.2 million in 2017.
The decrease in cash flow from operations was primarily due to cash
payments of costs related to the merger with Capella Education
Company. Capital expenditures for 2018 were $27.5 million compared
to $18.1 million in 2017. Capital expenditures for 2019 are
expected to be between $40 million and $45 million.
For the fourth quarter of 2018, consolidated bad debt expense as
a percentage of revenue was 6.1% of reported and adjusted revenue,
compared to 5.8% for the same period in 2017.
COMMON STOCK CASH
DIVIDEND
SEI announced today that it declared a regular, quarterly cash
dividend of $0.50 per share of common stock. This dividend will be
paid on March 18, 2019 to shareholders of record as of March 4,
2019.
CONFERENCE CALL WITH
MANAGEMENT
SEI will host a conference call to discuss its fourth quarter
2018 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.
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, Hackbright Academy, and The New York Code + Design 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 relating to the timing of
regulatory approvals;
- SEI’s ability to implement its growth
strategy;
- the risk that the benefits of the
merger with Capella Education Company, including expected
synergies, may not be fully realized or may take longer to realize
than expected;
- 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 CONSOLIDATED
STATEMENTS OF INCOME (Amounts in thousands, except per share
data) For the Three Months Ended
For the Twelve Months Ended December 31, December
31, 2017 2018 2017
2018 Revenues $ 118,707 $
242,103 $ 454,851 $ 634,185 Costs and expenses: Instruction and
educational support 65,118 118,320 249,939 340,076 Marketing 17,840
49,577 82,540 136,979 Admissions advisory 4,681 12,392 19,004
31,466 General and administration 10,915 18,964 46,792 57,056
Amortization of intangible assets - 15,416 - 25,694 Merger costs
8,465 7,954 11,879 45,745
Fair value adjustments and impairment of
intangible assets
- 605 (7,512) 19,909 Total costs and
expenses 107,019 223,228 402,642
656,925 Income (loss) from operations 11,688 18,875 52,209 (22,740)
Other income 181 1,755 437 3,601 Income
(loss) before income taxes 11,869 20,630 52,646 (19,139) Provision
(benefit) for income taxes 18,364 (1,825)
32,034 (3,468) Net income (loss) $ (6,495) $ 22,455 $ 20,612
$ (15,671) Earnings (loss) per share: Basic $ (0.61) $ 1.05 $ 1.93
$ (1.03) Diluted $ (0.61) $ 1.02 $ 1.84 $ (1.03) Weighted average
shares outstanding: Basic 10,701 21,335 10,678 15,190 Diluted
11,273 22,033 11,199 15,801 Cash dividend paid per share $ 0.25 $
0.50 $ 1.00 $ 1.50
STRATEGIC EDUCATION, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS (Amounts in
thousands, except share and per share data)
December 31, 2017 2018 ASSETS Current
assets: Cash and cash equivalents $ 155,933 $ 311,732 Marketable
securities, current - 37,121 Tuition receivable, net 23,122 55,694
Other current assets 11,293 15,814 Total current
assets 190,348 420,361 Property and equipment, net 73,763 122,677
Marketable securities, non-current - 37,678 Deferred income tax
assets 24,452 - Intangible assets, net 7,260 328,344 Goodwill
20,744 732,540 Other assets 4,711 19,429 Total assets
$ 321,278 $ 1,661,029
LIABILITIES & STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable and accrued
expenses $ 46,177 $ 85,979 Income taxes payable 1,038 419 Contract
liabilities 21,851 38,733 Total current liabilities
69,066 125,131 Deferred income tax liabilities - 59,358 Other
long-term liabilities 43,015 51,316 Total liabilities
112,081 235,805 Commitments and contingencies
Stockholders' equity: Common stock, par value $0.01; 32,000,000
shares authorized; 11,167,425 and 21,743,498 shares issued and
outstanding at December 31, 2017 and 2018, respectively 112 217
Additional paid-in capital 47,079 1,306,653 Accumulated other
comprehensive income - 32 Retained earnings 162,006
118,322 Total stockholders' equity 209,197 1,425,224
Total liabilities and stockholders' equity $ 321,278 $ 1,661,029
STRATEGIC EDUCATION, INC. UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in
thousands) For the Year Ended December
31, 2017 2018 Cash flows from operating
activities: Net income (loss) $ 20,612 $ (15,671) Adjustments to
reconcile net income (loss) to net cash provided by operating
activities: Amortization of gain on sale of assets (133) -
Amortization of deferred rent (1,780) (1,716) Amortization of
deferred financing costs 262 292 Amortization of investment
discount/premium - 298 Depreciation and amortization 18,733 54,543
Deferred income taxes 6,429 (16,322) Stock-based compensation
11,627 15,532 Fair value adjustments and impairment of intangible
assets (7,512) 19,909 Changes in assets and liabilities: Tuition
receivable, net (3,250) 7,880 Other current assets (526) 3,768
Other assets 1,582 (135) Accounts payable and accrued expenses
4,468 1,140 Income taxes payable and income taxes receivable (629)
(516) Contract liabilities 8,212 (19,329) Other long-term
liabilities (1,938) (2,806) Net cash provided by
operating activities 56,157 46,867 Cash flows from
investing activities: Net cash acquired in acquisition - 167,859
Purchases of property and equipment (18,051) (27,547) Purchases of
marketable securities - (25,304) Maturities of marketable
securities - 16,367 Other investments - (1,238) Net
cash (used in) provided by investing activities (18,051)
130,137 Cash flows from financing activities: Common
dividends paid (11,416) (27,842) Net proceeds from exercise of
stock options - 8,648 Taxes paid for restricted stock units - (859)
Payment of deferred financing costs - (1,162) Net
cash used in financing activities (11,416) (21,215)
Net increase in cash, cash equivalents, and restricted cash 26,690
155,789 Cash, cash equivalents, and restricted cash - beginning of
period 129,758 156,448 Cash, cash equivalents, and
restricted cash - end of period $ 156,448 $ 312,237 Noncash
transactions: Purchases of property and equipment included in
accounts payable $ 1,734 $ 1,029
STRATEGIC
EDUCATION, INC. UNAUDITED SEGMENT REPORTING (Amounts
in thousands) For the Three
Months Ended For the Twelve Months Ended December
31, December 31, 2017 2018 2017
2018 Revenues: Strayer University $ 117,453 $ 127,461
$ 449,547 $ 471,104 Capella University - 111,126 - 154,918
Non-Degree Programs 1,254 3,516 5,304
8,163 Consolidated revenues $ 118,707 $ 242,103 $ 454,851 $ 634,185
Income (loss) from operations: Strayer University $ 21,729 $
23,974 $ 64,801 $ 68,188 Capella University - 20,666 - 6,340
Non-Degree Programs (1,576) (1,790) (8,225) (5,920) Amortization of
intangible assets - (15,416) - (25,694) Merger costs (8,465)
(7,954) (11,879) (45,745) Fair value adjustments and impairment of
intangible assets - (605) 7,512
(19,909) Consolidated income (loss) from operations $ 11,688 $
18,875 $ 52,209 $ (22,740)
Non-GAAP Financial Measures
In our press release and schedules, and on the related
conference call, 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, 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 its 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
deferred revenue at fair value as a result of the Company's merger
with Capella Education Company, (2) amortization expense related to
intangible 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) fair
value adjustments to the value of contingent consideration,
impairment charges for intangible assets related to the Company's
acquisition of The New York Code + Design Academy, and adjustments
to reserves for leases on facilities no longer in use, and (5)
discrete tax adjustments utilizing adjusted annual effective income
tax rates of 27.1% and 39.5% for the fourth quarter of 2018 and
2017, respectively, and 25.6% and 38.8% for the 2018 and 2017
year-to-date periods. We define EBITDA as net income before
provision (benefit) 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, and
stock-based compensation expense. 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 (Amounts
in thousands, except per share data) For the
Three Months Ended December 31, 2018 Non-GAAP
Adjustments
AsReported(GAAP)
DeferredRevenueAdjustment(1)
Amortizationof
AcquiredAssets (2)
MergerCosts (3)
Fair
ValueAdjustmentsandImpairment
ofIntangibleAssets (4)
TaxAdjustments(5)
AsAdjusted(Non-GAAP)
Revenue $ 242,103 $ 2,534 $ - $ - $ - $ - $ 244,637
Costs and expenses:
Instruction and educational support 118,320 - - - - - 118,320
Marketing 49,577 - - - - - 49,577 Admissions advisory 12,392 - - -
- - 12,392 General and administration 18,964 - - - - - 18,964
Amortization of intangible assets 15,416 - (15,416) - - - - Merger
costs 7,954 - - (7,954) - - - Fair value adjustments and impairment
of intangible assets 605 - - -
(605) - - Total costs and expenses 223,228
- (15,416) (7,954) (605) -
199,253 Income from operations 18,875 2,534 15,416 7,954 605
- 45,384 Other income, net 1,755 - - -
- - 1,755 Income before income taxes 20,630
2,534 15,416 7,954 605 - 47,139 Provision (benefit) for income
taxes (1,825) - - - -
14,600 12,775 Net income (loss) $ 22,455 $ 2,534 $ 15,416 $
7,954 $ 605 $ (14,600) $ 34,364 Earnings per share: Basic $ 1.05 $
1.61 Diluted $ 1.02 $ 1.56 Weighted average shares outstanding:
Basic 21,335 21,335 Diluted 22,033 22,033
For the Three Months Ended December 31, 2017
Non-GAAP Adjustments
AsReported(GAAP)
DeferredRevenueAdjustment(1)
Amortizationof
AcquiredAssets (2)
MergerCosts (3)
Fair
ValueAdjustmentsandImpairment
ofIntangibleAssets (4)
TaxAdjustments(5)
AsAdjusted(Non-GAAP)
Revenue $ 118,707 $ - $ - $ - $ - $ - $ 118,707 Costs and expenses:
Instruction and educational support 65,118 - - - - - 65,118
Marketing 17,840 - - - - - 17,840 Admissions advisory 4,681 - - - -
- 4,681 General and administration 10,915 - - - - - 10,915
Amortization of intangible assets - - - - - - - Merger costs 8,465
- - (8,465) - - - Fair value adjustments and impairment of
intangible assets - - - - -
- - Total costs and expenses 107,019 -
- (8,465) - - 98,554 Income from
operations 11,688 - - 8,465 - - 20,153 Other income, net 181
- - - - - 181 Income
before income taxes 11,869 - - 8,465 - - 20,334 Provision (benefit)
for income taxes 18,364 - - - -
(10,332) 8,032 Net income (loss) $ (6,495) $ - $ - $
8,465 $ - $ 10,332 $ 12,302 Earnings per share: Basic $ (0.61) $
1.15 Diluted $ (0.61) $ 1.09 Weighted average shares outstanding:
Basic 10,701 10,701 Diluted 11,273 11,273
(1) Reflects a purchase
accounting adjustment to record Capella University deferred revenue
at fair value as a result of the Company's merger with Capella
Education Company. (2) Reflects amortization expense related to
intangible assets acquired in 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 intangible
assets of $0.3 million related to the Company's acquisition of The
New York Code + Design Academy, Inc., and adjustments to increase
the Company's reserve for leases on facilities no longer in use of
$0.3 million in 2018. (5) Reflects tax adjustments, utilizing an
adjusted effective tax rate of 27.1% for 2018 and 39.5% for 2017.
STRATEGIC EDUCATION, INC. UNAUDITED
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ADJUSTED
INCOME FROM OPERATIONS, ADJUSTED NET INCOME, AND ADJUSTED EPS
(Amounts in thousands, except per share data)
For the Year Ended December 31, 2018 Non-GAAP
Adjustments
AsReported(GAAP)
DeferredRevenueAdjustment(1)
Amortizationof
AcquiredAssets (2)
MergerCosts (3)
Fair
ValueAdjustmentsandImpairment
ofIntangibleAssets (4)
TaxAdjustments(5)
AsAdjusted(Non-GAAP)
Revenue $ 634,185 $ 28,748 $ - $ - $ - $ - $ 662,933 Costs and
expenses: Instruction and educational support 340,076 - - - - -
340,076 Marketing 136,979 - - - - - 136,979 Admissions advisory
31,466 - - - - - 31,466 General and administration 57,056 - - - - -
57,056 Amortization of intangible assets 25,694 - (25,694) - - - -
Merger costs 45,745 - - (45,745) - - - Fair value adjustments and
impairment of intangible assets 19,909 - -
- (19,909) - - Total costs and expenses
656,925 - (25,694) (45,745)
(19,909) - 565,577 Income (loss) from operations
(22,740) 28,748 25,694 45,745 19,909 - 97,356 Other income, net
3,601 - - - - -
3,601 Income (loss) before income taxes (19,139) 28,748 25,694
45,745 19,909 - 100,957 Provision (benefit) for income taxes
(3,468) - - - - 29,348
25,880 Net income (loss) $ (15,671) $ 28,748 $ 25,694 $ 45,745 $
19,909 $ (29,348) $ 75,077 Earnings per share: Basic $ (1.03) $
4.94 Diluted $ (1.03) $ 4.75 Weighted average shares outstanding:
Basic 15,190 15,190 Diluted 15,801 15,801
For the
Year Ended December 31, 2017 Non-GAAP Adjustments
AsReported(GAAP)
DeferredRevenueAdjustment(1)
Amortizationof
AcquiredAssets (2)
MergerCosts (3)
Fair
ValueAdjustmentsandImpairment
ofIntangibleAssets (4)
TaxAdjustments(5)
AsAdjusted(Non-GAAP)
Revenue $ 454,851 $ - $ - $ - $ - $ - $ 454,851 Costs and expenses:
Instruction and educational support 249,939 - - - - - 249,939
Marketing 82,540 - - - - - 82,540 Admissions advisory 19,004 - - -
- - 19,004 General and administration 46,792 - - - - - 46,792
Amortization of intangible assets - - - - - - - Merger costs 11,879
- - (11,879) - - - Fair value adjustments and impairment of
intangible assets (7,512) - - -
7,512 - - Total costs and expenses 402,642
- - (11,879) 7,512 -
398,275 Income (loss) from operations 52,209 - - 11,879 (7,512) -
56,576 Other income, net 437 - - -
- - 437 Income (loss) before income taxes
52,646 - - 11,879 (7,512) - 57,013 Provision (benefit) for income
taxes 32,034 - - - -
(9,892) 22,142 Net income (loss) $ 20,612 $ - $ - $ 11,879 $
(7,512) $ 9,892 $ 34,871 Earnings per share: Basic $ 1.93 $ 3.27
Diluted $ 1.84 $ 3.11 Weighted average shares outstanding: Basic
10,678 10,678 Diluted 11,199 11,199
(1) Reflects a purchase accounting
adjustment to record Capella University deferred revenue at fair
value as a result of the Company's merger with Capella Education
Company. (2) Reflects amortization expense related to intangible
assets acquired in 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 adjustments to decrease the value of
contingent consideration of $7.8 million and adjustments to
increase the Company's reserve for leases on facilities no longer
in use of $0.3 million in 2017 as well as charges for the
impairment of intangible assets of $19.6 million related to the
Company's acquisition of The New York Code + Design Academy, Inc.
and adjustments to increase the Company's reserve for leases on
facilities no longer in use of $0.3 million in 2018. (5) Reflects
tax adjustments, utilizing an adjusted annual effective tax rate of
25.6% for 2018 and 38.8% for 2017.
STRATEGIC
EDUCATION, INC. UNAUDITED NON-GAAP SEGMENT REPORTING
(Amounts in thousands) For
the Three Months Ended For the Twelve Months Ended
December 31, December 31, 2017 2018
2017 2018 Revenues: Strayer University $
117,453 $ 127,461 $ 449,547 $ 471,104 Capella University - 111,126
- 154,918 Non-Degree Programs 1,254 3,516
5,304 8,163 Consolidated revenues 118,707
242,103 454,851 634,185 Adjustments to
deferred revenues: Strayer University - - - - Capella University -
2,534 - 28,748 Non-Degree Programs - - -
- Consolidated revenues - 2,534 -
28,748 Adjusted revenues by segment: Strayer
University 117,453 127,461 449,547 471,104 Capella University -
113,660 - 183,666 Non-Degree Programs 1,254 3,516
5,304 8,163 Consolidated revenues $ 118,707 $ 244,637
$ 454,851 $ 662,933 Income (loss) from operations: Strayer
University $ 21,729 $ 23,974 $ 64,801 $ 68,188 Capella University -
20,666 - 6,340 Non-Degree Programs (1,576) (1,790) (8,225) (5,920)
Amortization of intangible assets - (15,416) - (25,694) Merger
costs (8,465) (7,954) (11,879) (45,745) Fair value adjustments and
impairment of intangible assets - (605) 7,512
(19,909) Consolidated income (loss) from operations
11,688 18,875 52,209 (22,740)
Adjustments to consolidated income (loss) from operations: Deferred
revenue adjustment - 2,534 - 28,748 Amortization of intangible
assets - 15,416 - 25,694 Merger costs 8,465 7,954 11,879 45,745
Fair value adjustments and impairment of intangible assets -
605 (7,512) 19,909 Total adjustments to
consolidated income (loss) from operations 8,465
26,509 4,367 120,096 Adjusted income from
operations by segment: Strayer University 21,729 23,974 64,801
68,188 Capella University - 23,200 - 35,088 Non-Degree Programs
(1,576) (1,790) (8,225) (5,920) Total
adjusted income from operations by segment $ 20,153 $ 45,384 $
56,576 $ 97,356
STRATEGIC EDUCATION, INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
ADJUSTED EBITDA (Amounts in thousands)
For the Three Months Ended For the Twelve
Months Ended December 31, December 31,
2017 2018 2017 2018 Net (loss)
income $ (6,495) $ 22,455 $ 20,612 $ (15,671) Provision (benefit)
for income taxes 18,364 (1,825) 32,034 (3,468) Other income (181)
(1,755) (437) (3,601) Depreciation and amortization 5,014
25,436 18,733 54,543 EBITDA (1) 16,702 44,311
70,942 31,803 Stock-based compensation 3,034 3,781 11,603 13,291
Merger costs (2) 8,465 7,954 11,879 45,011 Fair value adjustments
and impairment of intangible assets (3) 381 605 (5,757) 20,798
Deferred revenue adjustment (4) - 2,534 -
28,748 Adjusted EBITDA (1) $ 28,582 $ 59,185 $ 88,667 $
139,651 (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 of depreciation
and amortization expense for the twelve months ended December 31,
2018, and includes $24 thousand and $2.2 million of stock-based
compensation expense for the twelve months ended December 31, 2017
and 2018, 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, Inc., 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 deferred revenue
at fair value as a result of the Company's merger with Capella
Education Company.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190301005096/en/
Terese WilkeManager, Investor RelationsStrategic Education,
Inc.(612) 977-6331terese.wilke@strategiced.com
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