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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report  (Date of earliest event reported): February 29, 2024

 

Strategic Education, Inc.
(Exact Name of Registrant as Specified in Charter)

 

Maryland 0-21039 52-1975978
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.)

 

2303 Dulles Station Boulevard
Herndon, VA 20171
(Address of Principal Executive Offices) (Zip Code)

 

(703) 561-1600
(Registrant’s telephone number, including area code)


N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities Registered Pursuant to Section 12(b) of the Exchange Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.01 par value   STRA   Nasdaq Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

Item 2.02.Results of Operations and Financial Condition.

 

On February 29, 2024, Strategic Education, Inc. (“Strategic Education”) issued a press release announcing its financial results for the period ended December 31, 2023. A copy of the press release is furnished as Exhibit 99.1 hereto and is hereby incorporated by reference into this Item 2.02.

 

The information furnished under this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by Strategic Education under the Securities Act of 1933, as amended.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit
Number

  

Description

   
99.1   Press Release dated February 29, 2024
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  STRATEGIC EDUCATION, INC.
Date: February 29, 2024    
     
  By: /s/ Daniel W. Jackson
    Daniel W. Jackson
    Executive Vice President and Chief Financial Officer

 

 

 

Exhibit 99.1

 

 

 

sTRAtegic eDUCATION, iNC. REPORTs FOURTH QUARTER 2023 rESULTS

 

HERNDON, Va., February 29, 2024 — 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.

 

1 

 

 

·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.

 

2 

 

 

·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.

 

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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.

 

For more information contact:

 

Terese Wilke

Director of Investor Relations

Strategic Education, Inc.

(612) 977-6331

terese.wilke@strategiced.com

 

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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 

 

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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 

 

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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 

 

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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 

 

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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.

 

9 

 

 

 

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  

 

10

 

 

          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.

 

11

 

 

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.

12

 

 

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 

 

13

 

 

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.

 

14

v3.24.0.1
Cover
Feb. 29, 2024
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Feb. 29, 2024
Entity File Number 0-21039
Entity Registrant Name Strategic Education, Inc.
Entity Central Index Key 0001013934
Entity Tax Identification Number 52-1975978
Entity Incorporation, State or Country Code MD
Entity Address, Address Line One 2303 Dulles Station Boulevard
Entity Address, City or Town Herndon
Entity Address, State or Province VA
Entity Address, Postal Zip Code 20171
City Area Code 703
Local Phone Number 561-1600
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, $0.01 par value
Trading Symbol STRA
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Entity Information, Former Legal or Registered Name N/A
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