HERNDON, Va.--(BUSINESS WIRE)-- Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended June 30, 2020.
Karl McDonnell, Chief Executive Officer of Strategic Education said, “We are very proud of our staff and faculty’s ongoing commitment to help our students continue their educational journeys during the second quarter of 2020. As our organization continues to adapt to the challenges presented by the COVID-19 pandemic, we remain focused on maintaining the highest level of educational quality and access while investing in strategies and opportunities to support our mission of advancing career and economic mobility for all.”
UPDATE ON IMPACT OF PANDEMIC
The Company continues to take action to ensure the health and well-being of its students and employees during the ongoing pandemic. Current measures taken, which have been informed by guidance from the Centers for Disease Control and Prevention (CDC) and other public health and government authorities, include:
The Company is continuing to provide financial relief to students and employer partners as they experience the negative impact of the pandemic. These measures, which include payment flexibility, scholarship opportunities, and other pricing relief, are likely to result in a full-year revenue-per-student decline of approximately one percent.
Finally, the Company maintains a solid financial foundation, with over $500 million in cash, $250 million of undrawn credit, and projected continued quarterly cash generation. Accordingly, the Company has maintained the position that it will not accept any financial support from the Federal or state pandemic related relief programs.
STRATEGIC EDUCATION CONSOLIDATED RESULTS
Three Months Ended June 30
Strayer University Segment Highlights
Capella University Segment Highlights
BALANCE SHEET AND CASH FLOW
At June 30, 2020, Strategic Education had cash, cash equivalents, and marketable securities of $525.3 million, and no debt. For the first six months of 2020, cash provided by operations was $111.9 million compared to $103.1 million for the same period in 2019. Capital expenditures for the first six months of 2020 were $25.5 million compared to $18.9 million for the same period in 2019. Capital expenditures for 2020 are expected to be at the lower end of our estimate of between $40 million and $45 million.
Consolidated bad debt expense as a percentage of revenue was 4.7% for the second quarter of 2020 and 2019. Bad debt expense for the quarter includes additional reserves to account for projected deterioration in collections performance in 2020 due to the pandemic.
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 September 14, 2020 to shareholders of record as of September 4, 2020.
CONFERENCE CALL WITH MANAGEMENT
Strategic Education will host a conference call to discuss its second quarter 2020 earnings results at 10:00 a.m. (ET) today. To participate in the live call, investors should dial (877) 303-9047 ten minutes prior to the start time. In addition, the call will be available via webcast. To access the live webcast of the conference call, please go to www.strategiceducation.com in the Investor Relations section 15 minutes prior to the start time of the call to register. An earnings release presentation will also be posted to www.strategiceducation.com in the Investor Relations section prior to the start time of the call. Following the call, the webcast will be archived and available at www.strategiceducation.com in the Investor Relations section.
About Strategic Education
Strategic Education (NASDAQ: STRA) (www.strategiceducation.com) is dedicated to enabling economic mobility with education. We serve working adult students through a range of educational opportunities that include: Strayer University and Capella University (separate institutions that are each regionally accredited), which collectively offer flexible and affordable associate, bachelor’s, master’s, and doctoral programs; a Top-25 Princeton Review-ranked online MBA program through the Jack Welch Management Institute at Strayer University; self-paced courses for college credit through Sophia; customized degrees for corporations through Degrees@Work; and non-degree web and mobile application development courses through DevMountain, Generation Code, and Hackbright Academy. These programs help our students prepare for success in today’s jobs and find a path to bettering their lives.
Forward-Looking Statements
This communication contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by the use of words such as “expect,” “estimate,” “assume,” “believe,” “anticipate,” “may,” “will,” “forecast,” “outlook,” “plan,” “project,” “potential” and other similar words, and include all statements that are not historical facts, including with respect to, among other things, the future financial performance of Strategic Education; Strategic Education’s plans, strategies and prospects; the impact of the current COVID-19 pandemic on Strategic Education’s business and results; 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:
Many of these risks, uncertainties and assumptions are beyond Strategic Education’s ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, these forward-looking statements speak only as of the information currently available to Strategic Education on the date they are made, and Strategic Education undertakes no obligation to update or revise forward-looking statements, except as required by law. Actual results may differ materially from those projected in the forward-looking statements.
STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) | |||||||||||||||
| For the three months ended June 30, |
| For the six months ended June 30, | ||||||||||||
| 2019 |
| 2020 |
| 2019 |
| 2020 | ||||||||
Revenues | $ | 245,110 |
|
| $ | 255,831 |
|
| $ | 491,618 |
|
| $ | 521,133 |
|
Costs and expenses: |
|
|
|
|
|
|
| ||||||||
Instructional and support costs | 130,704 |
|
| 125,544 |
|
| 264,754 |
|
| 258,480 |
| ||||
General and administration | 68,374 |
|
| 67,301 |
|
| 132,513 |
|
| 136,527 |
| ||||
Amortization of intangible assets | 15,417 |
|
| 15,417 |
|
| 30,834 |
|
| 30,834 |
| ||||
Merger and integration costs | 3,019 |
|
| 1,174 |
|
| 10,198 |
|
| 4,938 |
| ||||
Total costs and expenses | 217,514 |
|
| 209,436 |
|
| 438,299 |
|
| 430,779 |
| ||||
Income from operations | 27,596 |
|
| 46,395 |
|
| 53,319 |
|
| 90,354 |
| ||||
Other income | 4,125 |
|
| 1,639 |
|
| 7,452 |
|
| 3,762 |
| ||||
Income before income taxes | 31,721 |
|
| 48,034 |
|
| 60,771 |
|
| 94,116 |
| ||||
Provision for income taxes | 7,312 |
|
| 13,882 |
|
| 24,862 |
|
| 24,725 |
| ||||
Net income | $ | 24,409 |
|
| $ | 34,152 |
|
| $ | 35,909 |
|
| $ | 69,391 |
|
Earnings per share: |
|
|
|
|
|
|
| ||||||||
Basic | $ | 1.12 |
|
| $ | 1.57 |
|
| $ | 1.66 |
|
| $ | 3.18 |
|
Diluted | $ | 1.10 |
|
| $ | 1.55 |
|
| $ | 1.63 |
|
| $ | 3.15 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
| ||||||||
Basic | 21,777 |
|
| 21,764 |
|
| 21,638 |
|
| 21,787 |
| ||||
Diluted | 22,109 | 22,012 | 22,079 | 22,041 |
STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) | |||||||
| December 31, 2019 |
| June 30, 2020 | ||||
ASSETS |
|
|
| ||||
Current assets: |
|
|
| ||||
Cash and cash equivalents | $ | 419,693 |
|
| $ | 470,319 |
|
Marketable securities | 34,874 |
|
| 23,106 |
| ||
Tuition receivable, net | 51,523 |
|
| 41,004 |
| ||
Other current assets | 18,004 |
|
| 19,067 |
| ||
Total current assets | 524,094 |
|
| 553,496 |
| ||
Property and equipment, net | 117,029 |
|
| 117,247 |
| ||
Right-of-use lease assets | 84,778 |
|
| 81,418 |
| ||
Marketable securities, non-current | 36,633 |
|
| 31,917 |
| ||
Intangible assets, net | 273,011 |
|
| 245,344 |
| ||
Goodwill | 732,075 |
|
| 732,075 |
| ||
Other assets | 21,788 |
|
| 30,067 |
| ||
Total assets | $ | 1,789,408 |
|
| $ | 1,791,564 |
|
|
|
|
| ||||
LIABILITIES & STOCKHOLDERS’ EQUITY |
|
|
| ||||
Current liabilities: |
|
|
| ||||
Accounts payable and accrued expenses | $ | 90,828 |
|
| $ | 67,258 |
|
Income taxes payable | 1,352 |
|
| 16,722 |
| ||
Contract liabilities | 39,284 |
|
| 40,052 |
| ||
Lease liabilities | 25,284 |
|
| 24,852 |
| ||
Total current liabilities | 156,748 |
|
| 148,884 |
| ||
Deferred income tax liabilities | 47,942 |
|
| 40,107 |
| ||
Lease liabilities, non-current | 80,557 |
|
| 77,458 |
| ||
Other long-term liabilities | 41,451 |
|
| 40,565 |
| ||
Total liabilities | 326,698 |
|
| 307,014 |
| ||
Commitments and contingencies |
|
|
| ||||
Stockholders’ equity: |
|
|
| ||||
Common stock, par value $0.01; 32,000,000 shares authorized; 21,964,809 and 22,222,936 shares issued and outstanding at December 31, 2019 and June 30, 2020, respectively | 220 |
|
| 222 |
| ||
Additional paid-in capital | 1,309,438 |
|
| 1,291,597 |
| ||
Accumulated other comprehensive income | 233 |
|
| 659 |
| ||
Retained earnings | 152,819 |
|
| 192,072 |
| ||
Total stockholders’ equity | 1,462,710 |
|
| 1,484,550 |
| ||
Total liabilities and stockholders’ equity | $ | 1,789,408 |
|
| $ | 1,791,564 |
|
STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) | |||||||
| For the six months ended June 30, | ||||||
| 2019 |
| 2020 | ||||
Cash flows from operating activities: |
|
|
| ||||
Net income | $ | 35,909 |
|
| $ | 69,391 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
| ||||
Amortization of deferred financing costs | 167 |
|
| 167 |
| ||
Amortization of investment discount/premium | 220 |
|
| 68 |
| ||
Depreciation and amortization | 52,497 |
|
| 51,981 |
| ||
Deferred income taxes | 9,909 |
|
| (6,736) |
| ||
Stock-based compensation | 6,576 |
|
| 6,884 |
| ||
Impairment of right-of-use lease assets | — |
|
| 453 |
| ||
Changes in assets and liabilities: |
|
|
| ||||
Tuition receivable, net | 5,777 |
|
| 3,820 |
| ||
Other assets | (1,240) |
|
| (6,338) |
| ||
Accounts payable and accrued expenses | 229 |
|
| (22,180) |
| ||
Income taxes payable and income taxes receivable | (10,673) |
|
| 15,303 |
| ||
Contract liabilities | 4,778 |
|
| 2,053 |
| ||
Other long-term liabilities | (1,086) |
|
| (2,925) |
| ||
Net cash provided by operating activities | 103,063 |
|
| 111,941 |
| ||
|
|
|
| ||||
Cash flows from investing activities: |
|
|
| ||||
Purchases of property and equipment | (18,859) |
|
| (25,465) |
| ||
Purchases of marketable securities | (12,443) |
|
| (1,863) |
| ||
Proceeds from marketable securities | 22,560 |
|
| 18,869 |
| ||
Other investments | (740) |
|
| (693) |
| ||
Net cash used in investing activities | (9,482) |
|
| (9,152) |
| ||
|
|
|
| ||||
Cash flows from financing activities: |
|
|
| ||||
Common dividends paid | (22,194) |
|
| (26,662) |
| ||
Net payments for stock awards | (7,607) |
|
| (24,758) |
| ||
Repurchase of common stock | — |
|
| (247) |
| ||
Net cash used in financing activities | (29,801) |
|
| (51,667) |
| ||
Net increase in cash, cash equivalents, and restricted cash | 63,780 |
|
| 51,122 |
| ||
Cash, cash equivalents, and restricted cash — beginning of period | 312,237 |
|
| 420,497 |
| ||
Cash, cash equivalents, and restricted cash — end of period | $ | 376,017 |
|
| $ | 471,619 |
|
STRATEGIC EDUCATION, INC. UNAUDITED SEGMENT REPORTING (in thousands) | |||||||||||||||
| For the three months ended June 30, |
| For the six months ended June 30, | ||||||||||||
| 2019 |
| 2020 |
| 2019 |
| 2020 | ||||||||
Revenues: |
|
|
|
|
|
|
| ||||||||
Strayer University | $ | 131,728 |
|
| $ | 138,080 |
|
| $ | 262,474 |
|
| $ | 283,734 |
|
Capella University | 113,382 |
|
| 117,751 |
|
|
| 229,144 |
|
| 237,399 |
| |||
Consolidated revenues | $ | 245,110 |
|
| $ | 255,831 |
|
| $ | 491,618 |
|
| $ | 521,133 |
|
Income from operations: |
|
|
|
|
|
|
| ||||||||
Strayer University | $ | 24,433 |
|
| $ | 35,813 |
|
| $ | 48,236 |
|
| $ | 72,416 |
|
Capella University | 21,599 |
|
| 27,173 |
|
| 46,115 |
|
| 53,710 |
| ||||
Amortization of intangible assets | (15,417) |
|
| (15,417) |
|
| (30,834) |
|
| (30,834) |
| ||||
Merger and integration costs | (3,019) |
|
| (1,174) |
|
| (10,198) |
|
| (4,938) |
| ||||
Consolidated income from operations | $ | 27,596 |
|
| $ | 46,395 |
|
| $ | 53,319 |
|
| $ | 90,354 |
|
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, net income, earnings per share or any other comparable financial measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.
Management uses certain non-GAAP measures to evaluate financial performance because those non-GAAP measures allow for period-over-period comparisons of the Company’s ongoing operations before the impact of certain items described below. These measures are Adjusted Total Costs and Expenses, 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 Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, 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 merger with Capella Education Company, (2) integration expenses associated with the Company's merger with Capella Education Company, and transaction expenses associated with potential future business combinations, (3) income recognized from the Company’s investments in partnership interests and other investments, and (4) discrete tax adjustments utilizing an adjusted effective tax rate of 27.5% and 28.5% for the three months ended June 30, 2019 and 2020, respectively. We define EBITDA as net income before other income, the provision for income taxes, depreciation and amortization, and from this amount in arriving at Adjusted EBITDA we also exclude stock-based compensation expense and the amounts in (2) above. These non-GAAP measures are reconciled to the most directly comparable GAAP measures in the sections that follow. Non-GAAP measures should not be viewed as substitutes for GAAP measures.
STRATEGIC EDUCATION, INC. UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ADJUSTED INCOME FROM OPERATIONS, ADJUSTED NET INCOME, AND ADJUSTED EPS (in thousands, except per share data) | ||||||||||||||||||||||||
|
|
| For the three months ended June 30, 2019 | |||||||||||||||||||||
|
|
| Non-GAAP Adjustments | |||||||||||||||||||||
| As Reported (GAAP) |
| Amortization of intangible assets(1) |
| Merger and integration costs(2) |
| Income from other investments(3) |
| Tax Adjustments(4) |
| As Adjusted (Non-GAAP) | |||||||||||||
Revenues | $ | 245,110 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| $ | — |
| $ | 245,110 | ||||
Total costs and expenses | $ | 217,514 |
|
| $ | (15,417) |
|
| $ | (3,019) |
|
| $ | — |
| $ | — |
| $ | 199,078 | ||||
Income from operations | $ | 27,596 |
|
| $ | 15,417 |
|
| $ | 3,019 |
|
| $ | — |
| $ | — |
| $ | 46,032 | ||||
Operating margin |
| 11.3% |
|
|
|
|
|
|
|
|
|
|
| 18.8% | ||||||||||
Net income | $ | 24,409 |
|
| $ | 15,417 |
|
| $ | 3,019 |
|
| $ | (1,605) |
| $ | (6,040) | $ | 35,200 | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Earnings per share: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Diluted | $ | 1.10 |
|
|
|
|
|
|
|
| $ | 1.59 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Diluted |
| 22,109 |
|
|
|
|
|
|
|
|
|
| 22,109 | |||||||||||
|
|
| For the three months ended June 30, 2020 |
| |||||||||||||||||||
|
|
| Non-GAAP Adjustments |
| |||||||||||||||||||
| As Reported (GAAP) |
| Amortization of intangible assets(1) |
| Merger and integration costs(2) |
| Income from other investments(3) | Tax adjustments(4) |
| As Adjusted (Non-GAAP) | |||||||||||||
Revenues | $ | 255,831 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| $ | — |
|
| $ | 255,831 |
| |
Total costs and expenses | $ | 209,436 |
|
| $ | (15,417) |
|
| $ | (1,174) |
|
| $ | — |
| $ | — |
|
| $ | 192,845 |
| |
Income from operations | $ | 46,395 |
|
| $ | 15,417 |
|
| $ | 1,174 |
|
| $ | — |
| $ | — |
|
| $ | 62,986 |
| |
Operating margin |
| 18.1% |
|
|
|
|
|
|
|
|
|
|
|
|
| 24.6% |
| ||||||
Net income | $ | 34,152 |
|
| $ | 15,417 |
|
| $ | 1,174 |
|
| $ | (1,135) |
| $ | (4,213) |
| $ | 45,395 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Diluted | $ | 1.55 |
|
|
|
|
|
|
|
|
| $ | 2.06 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Diluted |
| 22,012 |
|
|
|
|
|
|
|
|
|
| 22,012 |
| |||||||||
(1) | Reflects amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company. | |
(2) | Reflects integration expenses associated with the Company's merger with Capella Education Company, and transaction expenses associated with potential future business combinations. | |
(3) | Reflects income recognized from the Company's investments in partnership interests and other investments. | |
(4) | Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted effective tax rate of 27.5% and 28.5% for the three months ended June 30, 2019 and 2020, respectively. |
STRATEGIC EDUCATION, INC. UNAUDITED NON-GAAP SEGMENT REPORTING (in thousands) | ||||||||||||||||
| For the three months ended June 30, |
| For the six months ended June 30, |
| ||||||||||||
| 2019 |
| 2020 |
| 2019 |
| 2020 |
| ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer University | $ | 131,728 |
|
| $ | 138,080 |
|
| $ | 262,474 |
|
| $ | 283,734 |
|
|
Capella University | 113,382 |
|
| 117,751 |
|
| 229,144 |
|
| 237,399 |
|
| ||||
Consolidated revenues | $ 245,110 |
|
| $ 255,831 |
|
| $ 491,618 |
|
| $ 521,133 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income from operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Strayer University | $ 24,433 |
|
| $ 35,813 |
|
| $ 48,236 |
|
| $ 72,416 |
|
| ||||
Capella University | 21,599 |
|
| 27,173 |
|
| 46,115 |
|
| 53,710 |
|
| ||||
Amortization of intangible assets | (15,417) |
|
| (15,417) |
|
| (30,834) |
|
| (30,834) |
|
| ||||
Merger and integration costs | (3,019) |
|
| (1,174) |
|
| (10,198) |
|
| (4,938) |
|
| ||||
Consolidated income from operations |
| 27,596 |
|
|
| 46,395 |
|
|
| 53,319 |
|
|
| 90,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to consolidated income from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
| 15,417 |
|
|
| 15,417 |
|
|
| 30,834 |
|
|
| 30,834 |
|
|
Merger and integration costs |
| 3,019 |
|
|
| 1,174 |
|
|
| 10,198 |
|
|
| 4,938 |
|
|
Total adjustments to consolidated income from operations |
| 18,436 |
|
|
| 16,591 |
|
|
| 41,032 |
|
|
| 35,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income from operations by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strayer University |
| 24,433 |
|
|
| 35,813 |
|
|
| 48,236 |
|
|
| 72,416 |
|
|
Capella University |
| 21,599 |
|
|
| 27,173 |
|
|
| 46,115 |
|
|
| 53,710 |
|
|
Total adjusted income from operations by segment | $ | 46,032 |
|
| $ | 62,986 |
|
| $ | 94,351 |
|
| $ | 126,126 |
|
|
STRATEGIC EDUCATION, INC. UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ADJUSTED EBITDA (in thousands) | |||||||
| For the three months ended June 30, | ||||||
| 2019 |
| 2020 | ||||
Net income | $ | 24,409 |
|
| $ | 34,152 |
|
Provision for income taxes | 7,312 |
|
| 13,882 |
| ||
Other income | (4,125) |
|
| (1,639) |
| ||
Depreciation and amortization | 26,514 |
|
| 26,248 |
| ||
EBITDA | 54,110 |
|
| 72,643 |
| ||
Stock-based compensation | 3,155 |
|
| 3,859 |
| ||
Merger and integration costs (1) | 3,019 |
|
| 1,174 |
| ||
Adjusted EBITDA | $ | 60,284 |
|
| $ | 77,676 |
|
(1) | Reflects integration expenses associated with the Company's merger with Capella Education Company, and transaction expenses associated with potential future business combinations. Includes $0.4 million of stock-based compensation expense for the three months ended June 30, 2019. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200729005268/en/
Terese Wilke Manager, Investor Relations Strategic Education, Inc. (612) 977-6331 terese.wilke@strategiced.com
Source: Strategic Education, Inc.