[November 08, 2018] |
|
Strategic Education, Inc. Reports Third Quarter 2018 Results; Strong Enrollment Growth at Both Strayer University and Capella University
Strategic
Education, Inc. (SEI) (NASDAQ: STRA) today announced financial
results for the period ended September 30, 2018.
Karl McDonnell, Chief Executive Officer of SEI said, "We are pleased
with the positive momentum we are seeing across the organization as we
continue to work through a successful merger integration. SEI's strong
performance in Q3 2018, including strong new enrollment growth at both
Strayer University and Capella University, continues to demonstrate our
organization's ability to execute. Our new scale and capabilities allow
us to serve students and employers better as we continue to focus on
cost and revenue synergies. SEI is now even better positioned to be a
national leader in education innovation."
STRATEGIC EDUCATION, INC. CONSOLIDATED RESULTS Three
Months Ended September 30
[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.]
-
Revenue increased 48.3% to $160.9 million compared to $108.5 million
for the same period in 2017. Revenue in 2018 includes a purchase
accounting adjustment of $26.2 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 72.5% to $187.2 million compared to $108.5
million for the same period in 2017. For more details on non-GAAP
financial measures, refer to the information on pages 8 through 12.
-
The Company reported a loss from operations of $57.1 million, compared
to income of $8.2 million for the same period in 2017. Loss from
operations in 2018 includes the aforementioned deferred revenue
adjustment, $10.3 million of amortization expense related to assets
acquired in the merger with Capella Education Company, $29.6 million
in costs associated with the merger with Capella Education Company,
and a $13.1 million noncash charge resulting from the impairment of
intangible assets associated with The New York Code + Design Academy.
Income from operations in 2017 included $3.4 million in costs
associated with the merger with Capella Education Company, and a $5.5
million noncash benefit associated with the reduction in value of
contingent consideration payable to the sellers of The New York Code +
Design Academy. Adjusted income from operations was $22.1 million in
2018 compared to $6.1 million for the same period in 2017. The
adjusted operating income margin was 11.8% compared to 5.6% for the
same period 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 $52.8 million in 2018 compared to net income of $6.2
million in 2017. Adjusted net income was $16.9 million compared to
adjusted net income of $3.8 million for the same period in 2017.
-
Earnings before interest, taxes, depreciation, and amortization
(EBITDA) was a loss of $38.7 million in 2018 compared to earnings of
$13.0 million in 2017. Adjusted EBITDA was $34.0 million compared to
$14.2 million for the same period in 2017.
-
Loss per share was $2.97 compared to diluted earnings per share of
$0.56 for the same period in 2017. Adjusted diluted earnings per share
increased to $0.92 from $0.34 for the same period in 2017. Diluted
weighted average shares outstanding increased to 18,480,000 from
11,210,000 for the same period 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 third quarter, student enrollment at Strayer University
increased 9.0% to 45,431 compared to 41,679 for the same period in
2017. New student enrollment for the period increased 11.9% and
continuing student enrollment for the period increased 8.3%.
-
Revenue increased 6.7% to $114.5 million compared to $107.3 million
for the same period in 2017, driven by higher summer term enrollment
offset by lower revenue-per-student.
-
Income from operations increased to $11.9 million from $8.1 million
for the same period in 2017. The operating income margin was 10.4%,
compared to 7.5% for the same period in 2017.
-
Strayer University opened its second new campus for 2018 in
Montgomery, Alabama. The University is on track to open two additional
new campuses by the end of 2018.
Capella University Segment Highlights
[Note: Capella University's financial results are for the period from
August 1, 2018 through September 30, 2018.]
-
The Capella University segment consists solely of Capella University.
-
For the third quarter, student enrollment at Capella University
increased 1.6% to 37,822 compared to 37,223 for the same period in
2017. New student enrollment for the period increased 13.2% and
continuing student enrollment for the period decreased 0.8%.
-
FlexPath continued to be the most significant driver of new and total
enrollment growth in the third quarter of 2018, and is now 26% of
Capella University's bachelor's and master's degrees total enrollment.
-
Revenue was $43.8 million in the third quarter of 2018 and reflects
higher enrollment and a slight increase in revenue-per-learner.
Revenue in the third quarter of 2018 includes a purchase accounting
adjustment of $26.2 million to reflect deferred revenue at fair value,
in connection with the merger. Excluding this purchase accounting
adjustment, Capella University revenue was $70.0 million.
-
Loss from operations was $14.3 million in the third quarter of 2018,
which includes the impact from the aforementioned deferred revenue
adjustment. Adjusted income from operations was $11.9 million in the
third quarter of 2018, and the adjusted operating income margin was
17.0%.
-
The Company is currently planning to open Capella University learner
support centers, pending regulatory notification and approval, in
Orlando, Florida, and Atlanta, Georgia in 2019.
Non-Degree Programs Segment Highlights
-
The non-degree programs segment includes The New York Code + Design
Academy, Hackbright Academy, DevMountain, and Sophia.
-
For the third quarter, revenue increased to $2.7 million from $1.2
million for the same period in 2017, primarily due to the inclusion of
revenue from DevMountain, Hackbright Academy, and Sophia.
-
Loss from operations was $1.7 million in 2018 compared to a loss of
$1.9 million in the same period in 2017.
BALANCE SHEET AND CASH FLOW
At September 30, 2018, Strategic Education, Inc. had cash, cash
equivalents, and marketable securities of $347.8 million and no debt.
For the first nine months of 2018, cash used in operations was $14.6
million compared to cash provided by operations of $44.4 million for the
same period 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 the first nine
months of 2018 were $16.0 million compared to $14.6 million for the same
period in 2017. Capital expenditures for the year 2018 are expected to
be between $25 million and $26 million.
The Company had $70 million of share repurchase authorization remaining
at September 30, 2018. No shares were repurchased in the third quarter
of 2018.
For the third quarter of 2018, consolidated bad debt expense as a
percentage of revenue was 6.1%, or 5.3% of adjusted revenue, compared to
4.9% 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
December 17, 2018 to shareholders of record as of December 3, 2018.
CONFERENCE CALL WITH MANAGEMENT
SEI will host a conference call to discuss its third 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 made
pursuant to the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such statements may be identified by the use of words
such as "expect," "estimate," "assume," "believe," "anticipate," "will,"
"forecast," "outlook," "plan," "project," or similar words and may
include statements with respect to, among other things, future events or
the future financial performance of SEI, the anticipated benefits of the
merger, including estimated synergies; SEI's plans, objectives and
expectations; future financial and operating results; and other
statements that are not historical facts. The statements are based on
SEI's current expectations and are subject to a number of assumptions,
uncertainties and risks. In connection with the safe-harbor provisions
of the Reform Act, SEI has identified important factors that could cause
SEI's actual results to differ materially from those expressed in or
implied by such statements. The assumptions, uncertainties and risks
include:
-
the risk that the benefits of the merger, including expected
synergies, may not be fully realized or may take longer to realize
than expected;
-
the risk that the merger may not advance the combined company's
business strategy and growth strategy;
-
the risk that the combined company may experience difficulty
integrating employees or operations;
-
the potential diversion of management's attention resulting from the
merger;
-
the pace of growth of student enrollment;
-
our 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;
-
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;
-
our ability to implement our growth strategy;
-
risks associated with the ability of our students to finance their
education in a timely manner; and
-
general economic and market conditions.
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. Actual results may differ materially
from those projected in the forward-looking statements.
|
STRATEGIC EDUCATION, INC.
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
(Amounts in thousands, except per share data)
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Revenues
|
|
$
|
108,512
|
|
$
|
160,945
|
|
$
|
336,144
|
|
$
|
392,082
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruction and educational support
|
|
|
59,755
|
|
|
93,290
|
|
|
184,821
|
|
|
221,756
|
Marketing
|
|
|
26,756
|
|
|
46,165
|
|
|
64,700
|
|
|
87,402
|
Admissions advisory
|
|
|
4,828
|
|
|
9,789
|
|
|
14,323
|
|
|
19,074
|
General and administration
|
|
|
11,053
|
|
|
15,811
|
|
|
35,877
|
|
|
38,092
|
Amortization of intangible assets
|
|
|
-
|
|
|
10,278
|
|
|
-
|
|
|
10,278
|
Merger costs
|
|
|
3,414
|
|
|
29,620
|
|
|
3,414
|
|
|
37,791
|
Fair value adjustments and impairment of intangible assets
|
|
|
(5,518)
|
|
|
13,119
|
|
|
(7,512)
|
|
|
19,304
|
Total costs and expenses
|
|
|
100,288
|
|
|
218,072
|
|
|
295,623
|
|
|
433,697
|
Income (loss) from operations
|
|
|
8,224
|
|
|
(57,127)
|
|
|
40,521
|
|
|
(41,615)
|
Other income
|
|
|
141
|
|
|
1,110
|
|
|
256
|
|
|
1,846
|
Income (loss) before income taxes
|
|
|
8,365
|
|
|
(56,017)
|
|
|
40,777
|
|
|
(39,769)
|
Provision (benefit) for income taxes
|
|
|
2,138
|
|
|
(3,236)
|
|
|
13,670
|
|
|
(1,643)
|
Net income (loss)
|
|
$
|
6,227
|
|
$
|
(52,781)
|
|
$
|
27,107
|
|
$
|
(38,126)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.58
|
|
$
|
(2.97)
|
|
$
|
2.54
|
|
$
|
(2.90)
|
Diluted
|
|
$
|
0.56
|
|
$
|
(2.97)
|
|
$
|
2.43
|
|
$
|
(2.90)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,701
|
|
|
17,799
|
|
|
10,671
|
|
|
13,141
|
Diluted
|
|
|
11,210
|
|
|
18,480
|
|
|
11,174
|
|
|
13,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STRATEGIC EDUCATION, INC.
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
December 31,
|
|
September 30,
|
|
2017
|
2018
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
155,933
|
|
$
|
276,382
|
Marketable securities, current
|
|
|
-
|
|
|
38,139
|
Tuition receivable, net
|
|
|
23,122
|
|
|
52,527
|
Income taxes receivable
|
|
|
-
|
|
|
6,995
|
Other current assets
|
|
|
11,293
|
|
|
17,367
|
Total current assets
|
|
|
190,348
|
|
|
391,410
|
Property and equipment, net
|
|
|
73,763
|
|
|
124,613
|
Marketable securities, non-current
|
|
|
-
|
|
|
33,324
|
Deferred income tax assets
|
|
|
24,452
|
|
|
-
|
Intangible assets, net
|
|
|
7,260
|
|
|
342,477
|
Goodwill
|
|
|
20,744
|
|
|
730,729
|
Other assets
|
|
|
4,711
|
|
|
23,143
|
Total assets
|
|
$
|
321,278
|
|
$
|
1,645,696
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
46,177
|
|
$
|
78,092
|
Income taxes payable
|
|
|
1,038
|
|
|
-
|
Contract liabilities
|
|
|
21,851
|
|
|
38,025
|
Total current liabilities
|
|
|
69,066
|
|
|
116,117
|
Deferred income tax liabilities
|
|
|
-
|
|
|
71,126
|
Other long-term liabilities
|
|
|
43,015
|
|
|
50,123
|
Total liabilities
|
|
|
112,081
|
|
|
237,366
|
Commitments and contingencies
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
Common stock, par value $0.01; 32,000,000 shares authorized;
11,167,425 and 21,707,599 shares issued and outstanding at
December 31, 2017 and September 30, 2018, respectively
|
|
|
112
|
|
|
217
|
Additional paid-in capital
|
|
|
47,079
|
|
|
1,301,228
|
Accumulated other comprehensive income (loss)
|
|
|
-
|
|
|
(22)
|
Retained earnings
|
|
|
162,006
|
|
|
106,907
|
Total stockholders' equity
|
|
|
209,197
|
|
|
1,408,330
|
Total liabilities and stockholders' equity
|
|
$
|
321,278
|
|
$
|
1,645,696
|
|
|
|
|
|
|
|
|
STRATEGIC EDUCATION, INC.
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Amounts in thousands)
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
2017
|
|
2018
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
27,107
|
|
$
|
(38,126)
|
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
Amortization of gain on sale of assets
|
|
|
(133)
|
|
|
-
|
Amortization of deferred rent
|
|
|
(1,351)
|
|
|
(1,362)
|
Amortization of deferred financing costs
|
|
|
197
|
|
|
209
|
Amortization of investment discount/premium
|
|
|
-
|
|
|
132
|
Depreciation and amortization
|
|
|
13,718
|
|
|
29,107
|
Deferred income taxes
|
|
|
(3,728)
|
|
|
(4,443)
|
Stock-based compensation
|
|
|
8,569
|
|
|
11,781
|
Fair value adjustments and impairment of intangible assets
|
|
|
(7,512)
|
|
|
19,304
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
Tuition receivable, net
|
|
|
(454)
|
|
|
8,227
|
Other current assets
|
|
|
(2,155)
|
|
|
2,223
|
Other assets
|
|
|
1,200
|
|
|
(581)
|
Accounts payable and accrued expenses
|
|
|
9,711
|
|
|
(8,949)
|
Income taxes payable and income taxes receivable
|
|
|
(4,401)
|
|
|
(7,868)
|
Contract liabilities
|
|
|
5,386
|
|
|
(21,946)
|
Other long-term liabilities
|
|
|
(1,786)
|
|
|
(2,355)
|
Net cash provided by (used in) operating activities
|
|
|
44,368
|
|
|
(14,647)
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Net cash acquired in acquisition
|
|
|
-
|
|
|
168,387
|
Purchases of property and equipment
|
|
|
(14,573)
|
|
|
(16,028)
|
Purchases of marketable securities
|
|
|
-
|
|
|
(11,346)
|
Maturities of marketable securities
|
|
|
-
|
|
|
5,842
|
Investments in partnership interests
|
|
|
-
|
|
|
(167)
|
Net cash (used in) provided by investing activities
|
|
|
(14,573)
|
|
|
146,688
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Common dividends paid
|
|
|
(8,561)
|
|
|
(16,802)
|
Net proceeds from exercise of stock options
|
|
|
-
|
|
|
6,831
|
Taxes paid for restricted stock units
|
|
|
-
|
|
|
(459)
|
Payment of deferred financing costs
|
|
|
-
|
|
|
(1,162)
|
Net cash used in financing activities
|
|
|
(8,561)
|
|
|
(11,592)
|
Net increase in cash, cash equivalents, and restricted cash
|
|
|
21,234
|
|
|
120,449
|
Cash, cash equivalents, and restricted cash - beginning of period
|
|
|
129,758
|
|
|
156,448
|
Cash, cash equivalents, and restricted cash - end of period
|
|
$
|
150,992
|
|
$
|
276,897
|
|
|
|
|
|
|
|
Noncash transactions:
|
|
|
|
|
|
|
Purchases of property and equipment included in accounts payable
|
|
$
|
749
|
|
$
|
2,975
|
|
|
|
|
|
|
|
|
STRATEGIC EDUCATION, INC.
|
UNAUDITED SEGMENT REPORTING
|
(Amounts in thousands)
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer
|
|
$
|
107,321
|
|
$
|
114,471
|
|
$
|
332,094
|
|
$
|
343,644
|
Capella
|
|
|
-
|
|
|
43,792
|
|
|
-
|
|
|
43,792
|
Non-Degree Programs
|
|
|
1,191
|
|
|
2,682
|
|
|
4,050
|
|
|
4,646
|
Consolidated revenues
|
|
$
|
108,512
|
|
$
|
160,945
|
|
$
|
336,144
|
|
$
|
392,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer
|
|
$
|
8,069
|
|
$
|
11,904
|
|
$
|
43,072
|
|
$
|
44,215
|
Capella
|
|
|
-
|
|
|
(14,326)
|
|
|
-
|
|
|
(14,326)
|
Non-Degree Programs
|
|
|
(1,949)
|
|
|
(1,688)
|
|
|
(6,649)
|
|
|
(4,131)
|
Amortization of intangible assets
|
|
|
-
|
|
|
(10,278)
|
|
|
-
|
|
|
(10,278)
|
Merger costs
|
|
|
(3,414)
|
|
|
(29,620)
|
|
|
(3,414)
|
|
|
(37,791)
|
Fair value adjustments and impairment of intangible assets
|
|
|
5,518
|
|
|
(13,119)
|
|
|
7,512
|
|
|
(19,304)
|
Consolidated income (loss) from operations
|
|
$
|
8,224
|
|
$
|
(57,127)
|
|
$
|
40,521
|
|
$
|
(41,615)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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
Income from Operations, Adjusted Net Income, Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted
EBITDA and Adjusted Diluted Earnings Per Share (EPS). We define
Adjusted Income from Operations, Adjusted Net Income, and Adjusted
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, and impairment charges for intangible
assets related to the Company's acquisition of The New York Code +
Design Academy, and (5) discrete tax adjustments utilizing adjusted
annual effective income tax rates of 27.1% and 38.8% for 2018 and
2017, respectively. 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 on pages 9 through 12.
Non-GAAP measures should not be viewed as substitutes for GAAP
measures.
|
|
|
STRATEGIC EDUCATION, INC.
|
NON-GAAP UNAUDITED ADJUSTING STATEMENTS OF INCOME
|
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
Non-GAAP Adjustments
|
|
|
|
|
|
|
|
|
As Reported (GAAP)
|
|
|
Deferred Revenue Adjustment (1)
|
|
|
Amortization of Intangible Assets (2)
|
|
|
Merger Costs (3)
|
|
|
Fair Value Adjustments and Impairment of
Intangible Assets (4)
|
|
|
Other Tax Adjustments (5)
|
|
|
As Adjusted (Non-GAAP)
|
Revenues
|
|
|
|
$
|
160,945
|
|
|
$
|
26,214
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
187,159
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruction and educational support
|
|
|
|
|
93,290
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93,290
|
Marketing
|
|
|
|
|
46,165
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,165
|
Admissions advisory
|
|
|
|
|
9,789
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,789
|
General and administration
|
|
|
|
|
15,811
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,811
|
Amortization of intangible assets
|
|
|
|
|
10,278
|
|
|
|
-
|
|
|
|
(10,278)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
Merger costs
|
|
|
|
|
29,620
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(29,620)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
Fair value adjustments and impairment of intangible assets
|
|
|
|
|
13,119
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,119)
|
|
|
|
-
|
|
|
|
-
|
Total costs and expenses
|
|
|
|
|
218,072
|
|
|
|
-
|
|
|
|
(10,278)
|
|
|
|
(29,620)
|
|
|
|
(13,119)
|
|
|
|
-
|
|
|
|
165,055
|
Income (loss) from operations
|
|
|
|
|
(57,127)
|
|
|
|
26,214
|
|
|
|
10,278
|
|
|
|
29,620
|
|
|
|
13,119
|
|
|
|
-
|
|
|
|
22,104
|
Other income
|
|
|
|
|
1,110
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,110
|
Income (loss) before income taxes
|
|
|
|
|
(56,017)
|
|
|
|
26,214
|
|
|
|
10,278
|
|
|
|
29,620
|
|
|
|
13,119
|
|
|
|
-
|
|
|
|
23,214
|
Provision (benefit) for income taxes
|
|
|
|
|
(3,236)
|
|
|
|
7,104
|
|
|
|
2,785
|
|
|
|
7,275
|
|
|
|
542
|
|
|
|
(8,179)
|
|
|
|
6,291
|
Net income (loss)
|
|
|
|
$
|
(52,781)
|
|
|
$
|
19,110
|
|
|
$
|
7,493
|
|
|
$
|
22,345
|
|
|
$
|
12,577
|
|
|
$
|
8,179
|
|
|
$
|
16,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
(2.97)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.95
|
Diluted
|
|
|
|
$
|
(2.97)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
17,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,799
|
Diluted
|
|
|
|
|
18,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,480
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2017
|
|
|
|
|
|
|
|
|
Non-GAAP Adjustments
|
|
|
|
|
|
|
|
|
As Reported (GAAP)
|
|
|
Deferred Revenue Adjustment (1)
|
|
|
Amortization of Intangible Assets (2)
|
|
|
Merger Costs (3)
|
|
|
Fair Value Adjustments and Impairment of
Intangible Assets (4)
|
|
|
Other Tax Adjustments (5)
|
|
|
As Adjusted (Non-GAAP)
|
Revenues
|
|
|
|
$
|
108,512
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
108,512
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruction and educational support
|
|
|
|
|
59,755
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
59,755
|
Marketing
|
|
|
|
|
26,756
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,756
|
Admissions advisory
|
|
|
|
|
4,828
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,828
|
General and administration
|
|
|
|
|
11,053
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,053
|
Amortization of intangible assets
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
Merger costs
|
|
|
|
|
3,414
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,414)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
Fair value adjustments and impairment of intangible assets
|
|
|
|
|
(5,518)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,518
|
|
|
|
-
|
|
|
|
-
|
Total costs and expenses
|
|
|
|
|
100,288
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,414)
|
|
|
|
5,518
|
|
|
|
-
|
|
|
|
102,392
|
Income (loss) from operations
|
|
|
|
|
8,224
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,414
|
|
|
|
(5,518)
|
|
|
|
-
|
|
|
|
6,120
|
Other income
|
|
|
|
|
141
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
141
|
Income (loss) before income taxes
|
|
|
|
|
8,365
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,414
|
|
|
|
(5,518)
|
|
|
|
-
|
|
|
|
6,261
|
Provision (benefit) for income taxes
|
|
|
|
|
2,138
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,349
|
|
|
|
-
|
|
|
|
(1,014)
|
|
|
|
2,473
|
Net income (loss)
|
|
|
|
$
|
6,227
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,065
|
|
|
$
|
(5,518)
|
|
|
$
|
1,014
|
|
|
$
|
3,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.35
|
Diluted
|
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
10,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,701
|
Diluted
|
|
|
|
|
11,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
associated with 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 the value of contingent consideration of
$5.5 million in 2017, and an impairment of intangible assets of
$13.1 million in 2018, related to the Company's acquisition of The
New York Code + Design Academy.
|
|
|
|
|
(5)
|
|
|
Reflects discrete tax adjustments related to the vesting of stock
awards and other adjustments, utilizing an adjusted annual effective
tax rate of 27.1% and 38.8% for 2018 and 2017, respectively.
|
|
|
|
|
|
|
|
|
|
STRATEGIC EDUCATION, INC.
|
NON-GAAP UNAUDITED ADJUSTING SEGMENT REPORTING
|
(Amounts in thousands)
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer
|
|
|
|
$
|
107,321
|
|
|
$
|
114,471
|
|
|
$
|
332,094
|
|
|
$
|
343,644
|
Capella
|
|
|
|
|
-
|
|
|
|
43,792
|
|
|
|
-
|
|
|
|
43,792
|
Non-Degree Programs
|
|
|
|
|
1,191
|
|
|
|
2,682
|
|
|
|
4,050
|
|
|
|
4,646
|
Consolidated revenues
|
|
|
|
|
108,512
|
|
|
|
160,945
|
|
|
|
336,144
|
|
|
|
392,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to deferred revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
Capella
|
|
|
|
|
-
|
|
|
|
26,214
|
|
|
|
-
|
|
|
|
26,214
|
Non-Degree Programs
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
Total adjustments to deferred revenues
|
|
|
|
|
-
|
|
|
|
26,214
|
|
|
|
-
|
|
|
|
26,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted revenues by segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer
|
|
|
|
|
107,321
|
|
|
|
114,471
|
|
|
|
332,094
|
|
|
|
343,644
|
Capella
|
|
|
|
|
-
|
|
|
|
70,006
|
|
|
|
-
|
|
|
|
70,006
|
Non-Degree Programs
|
|
|
|
|
1,191
|
|
|
|
2,682
|
|
|
|
4,050
|
|
|
|
4,646
|
Adjusted consolidated revenues
|
|
|
|
$
|
108,512
|
|
|
$
|
187,159
|
|
|
$
|
336,144
|
|
|
$
|
418,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer
|
|
|
|
$
|
8,069
|
|
|
$
|
11,904
|
|
|
$
|
43,072
|
|
|
$
|
44,215
|
Capella
|
|
|
|
|
-
|
|
|
|
(14,326)
|
|
|
|
-
|
|
|
|
(14,326)
|
Non-Degree Programs
|
|
|
|
|
(1,949)
|
|
|
|
(1,688)
|
|
|
|
(6,649)
|
|
|
|
(4,131)
|
Amortization of intangible assets
|
|
|
|
|
-
|
|
|
|
(10,278)
|
|
|
|
-
|
|
|
|
(10,278)
|
Merger costs
|
|
|
|
|
(3,414)
|
|
|
|
(29,620)
|
|
|
|
(3,414)
|
|
|
|
(37,791)
|
Fair value adjustments and impairment of intangible assets
|
|
|
|
|
5,518
|
|
|
|
(13,119)
|
|
|
|
7,512
|
|
|
|
(19,304)
|
Consolidated income (loss) from operations
|
|
|
|
|
8,224
|
|
|
|
(57,127)
|
|
|
|
40,521
|
|
|
|
(41,615)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to consolidated income (loss) from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue adjustment
|
|
|
|
|
-
|
|
|
|
26,214
|
|
|
|
-
|
|
|
|
26,214
|
Amortization of intangible assets
|
|
|
|
|
-
|
|
|
|
10,278
|
|
|
|
-
|
|
|
|
10,278
|
Merger costs
|
|
|
|
|
3,414
|
|
|
|
29,620
|
|
|
|
3,414
|
|
|
|
37,791
|
Fair value adjustments and impairment of intangible assets
|
|
|
|
|
(5,518)
|
|
|
|
13,119
|
|
|
|
(7,512)
|
|
|
|
19,304
|
Total adjustments to consolidated income (loss) from operations
|
|
|
|
|
(2,104)
|
|
|
|
79,231
|
|
|
|
(4,098)
|
|
|
|
93,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income (loss) from operations by segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer
|
|
|
|
|
8,069
|
|
|
|
11,904
|
|
|
|
43,072
|
|
|
|
44,215
|
Capella
|
|
|
|
|
-
|
|
|
|
11,888
|
|
|
|
-
|
|
|
|
11,888
|
Non-Degree Programs
|
|
|
|
|
(1,949)
|
|
|
|
(1,688)
|
|
|
|
(6,649)
|
|
|
|
(4,131)
|
Total adjusted income (loss) from operations
|
|
|
|
$
|
6,120
|
|
|
$
|
22,104
|
|
|
$
|
36,423
|
|
|
$
|
51,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STRATEGIC EDUCATION, INC.
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
ADJUSTED EBITDA
|
(Amounts in thousands)
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
|
|
2017
|
|
|
2018
|
Net income (loss)
|
|
|
|
$
|
6,227
|
|
|
$
|
(52,781)
|
Provision (benefit) for income taxes
|
|
|
|
|
2,138
|
|
|
|
(3,236)
|
Other income
|
|
|
|
|
(141)
|
|
|
|
(1,110)
|
Depreciation and amortization
|
|
|
|
|
4,743
|
|
|
|
18,457
|
EBITDA (1)
|
|
|
|
|
12,967
|
|
|
|
(38,670)
|
Stock-based compensation
|
|
|
|
|
2,915
|
|
|
|
3,572
|
Merger costs (2)
|
|
|
|
|
3,414
|
|
|
|
29,620
|
Fair value adjustments and impairment of intangible assets (3)
|
|
|
|
|
(5,078)
|
|
|
|
13,246
|
Deferred revenue adjustment (4)
|
|
|
|
|
-
|
|
|
|
26,214
|
Adjusted EBITDA (1)
|
|
|
|
$
|
14,218
|
|
|
$
|
33,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
Denotes non-GAAP financial measures. Please see page 8 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.
|
|
|
|
|
(3)
|
|
|
Reflects adjustments to the value of purchase consideration, and
charges for the impairment of intangible assets of $13.1 million in
2018 related to the Company's acquisition of The New York Code +
Design Academy.
|
|
|
|
|
(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/20181108005196/en/
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