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Published: 2021-04-06 16:07:23 ET
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EX-99.1 2 tm2111274d1_ex99-1.htm EXHIBIT 99.1

 

EXHIBIT 99.1

 

Segment Reporting

 

In the fourth quarter of 2020, Strategic Education, Inc. (“SEI” or the “Company”) changed its organizational structure, which resulted in a change in the way management accounts for and reports financial information relied on by the Chief Operating Decision Maker (“CODM”) to evaluate performance and allocate the resources of the Company. The Company’s revised organizational structure includes three operating segments: U.S. Higher Education (“USHE”), Alternative Learning, and Australia/New Zealand (“ANZ”). Financial reporting under the new organizational structure began in the first quarter of 2021.

 

The USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Strayer University and Capella University, including the Jack Welch Management Institute MBA, which is a unit of Strayer University. USHE also operates non-degree web and mobile application development courses through Hackbright Academy and DevMountain, the latter being a unit of Strayer University.

 

The Alternative Learning segment is primarily focused on developing and maintaining relationships with large employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs. The employer relationships developed by the Alternative Learning division are an important source of student enrollment for Capella University and Strayer University, and a portion of the revenue attributed to the Alternative Learning division is driven by the volume of enrollment derived from these employer relationships. Alternative Learning also generates revenue through similar payments from other Universities that participate in Workforce Edge, a platform which provides employers a full-service education benefits administration solution. Lastly, Alternative Learning generates revenue through Sophia Learning, a provider of low-cost online general education courses recommended by the American Council on Education for transfer credit to other colleges and Universities, and Digital Enablement Partnerships, which provide online course delivery and support capabilities to other higher education institutions.

 

The ANZ segment is comprised of Torrens University, Think Education and Media Design School in Australia and New Zealand, which collectively offer certificate and degree programs in business, design, education, hospitality, healthcare, and technology through campuses in Australia, New Zealand, and online.

 

Revenue and operating expenses are generally directly attributable to the segments. Inter-segment revenues are not presented separately, as these amounts are immaterial. The Company’s CODM does not evaluate operating segments using asset information. A summary of quarterly enrollment and financial information by reportable segment for each three-month period and for the years ended December 31, 2019 and 2020 is presented in the following tables (dollar amounts in thousands):

 

Total Enrollment by Segment

 

  

As of

March 31,
2019

  

As of

June 30,

2019

   As of September 30, 2019   As of
December 31, 2019		   Average for the year ended December 31, 2019 
Total enrollment                         
U.S. Higher Education   89,586    89,692    88,081    95,032    90,598 
Australia/New Zealand   15,378    14,799    15,581    16,396    15,539 
Total enrollment   104,964    104,491    103,662    111,428    106,137 
Employer affiliated enrollments as a % of USHE   16.1%   16.2%   16.2%   16.0%   16.1%

 

  

As of

March 31,
2020

  

As of

June 30,

2020

   As of September 30, 2020   As of
December 31, 2020		   Average for the year ended December 31, 2020 
Total enrollment                         
U.S. Higher Education   96,537    93,123    89,042    91,846    92,637 
Australia/New Zealand   19,192    18,592    18,985    19,507    19,069 
Total enrollment   115,729    111,715    108,027    111,353    111,706 
Employer affiliated enrollments as a % of USHE   17.0%   17.2%   18.3%   18.8%   17.8%

 

 

 

Consolidated Revenues and Consolidated Income from Operations by Segment (1)

 

   Three months ended   Twelve months ended 
  

March 31,

2019

  

June 30,

2019

   September 30, 2019   December 31, 2019   December 31, 2019 
Revenues                         
U.S. Higher Education  $238,214   $236,622   $233,420   $254,796   $963,052 
Alternative Learning   8,294    8,488    8,327    8,976    34,085 
Australia/New Zealand   -    -    -    -    - 
Consolidated revenues  $246,508   $245,110   $241,747   $263,772   $997,137 
                          
Income from operations                         
U.S. Higher Education  $42,928   $40,678   $31,882   $57,401   $172,889 
Alternative Learning   5,391    5,354    5,035    5,453    21,233 
Australia/New Zealand   -    -    -    -    - 
Amortization of intangible assets   (15,417)   (15,417)   (15,417)   (15,416)   (61,667)
Merger and integration costs   (7,179)   (3,019)   (1,500)   (10,225)   (21,923)
Restructuring costs   -    -    -    -    - 
Consolidated income from operations  $25,723   $27,596   $20,000   $37,213   $110,532 

 

   Three months ended   Twelve months ended 
  

March 31,

2020

  

June 30,

2020

   September 30, 2020  

December 31,

2020

   December 31, 2020 
Revenues                         
U.S. Higher Education  $255,513   $247,350   $230,311   $233,405   $966,579 
Alternative Learning   9,789    8,481    8,715    10,708    37,693 
Australia/New Zealand   -    -    -    23,381    23,381 
Consolidated revenues  $265,302   $255,831   $239,026   $267,494   $1,027,653 
                          
Income from operations                         
U.S. Higher Education  $56,743   $58,765   $33,672   $44,213   $193,393 
Alternative Learning   6,397    4,221    4,111    4,914    19,643 
Australia/New Zealand   -    -    -    (13,275)   (13,275)
Amortization of intangible assets   (15,417)   (15,417)   (15,417)   (17,974)   (64,225)
Merger and integration costs   (3,764)   (1,174)   (2,920)   (5,912)   (13,770)
Restructuring costs   -    -    (4,024)   (8,358)   (12,382)
Consolidated income from operations  $43,959   $46,395   $15,422   $3,608   $109,384 

 

 

 

(1)Consolidated revenues for the three and twelve months ended December 31, 2020 includes a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand which reduced reported revenue in the ANZ segment by $11.3 million. Consolidated income from operations for 2019 and 2020 also includes (1) amortization and depreciation expense related to intangible assets and software assets 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, (2) transaction and 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, and (3) for the three months ended September 30, 2020 and the three and twelve months in the period ended December 31, 2020, severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring. Please see Item 7 of the Company’s 2020 Annual Report on Form 10-K, and Item 2 of the Company’s 2020 Quarterly Reports on Form 10-Q, for further discussion of these amounts.