AP NEWS

Strategic Education, Inc. Reports Third Quarter 2018 Results; Strong Enrollment Growth at Both Strayer University and Capella University

November 8, 2018

HERNDON, Va.--(BUSINESS WIRE)--Nov 8, 2018--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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20181108005196/en/

CONTACT: Strategic Education, Inc.

Terese Wilke

Manager, Investor Relations

612-977-6331

terese.wilke@strategiced.com

KEYWORD: UNITED STATES NORTH AMERICA VIRGINIA

INDUSTRY KEYWORD: EDUCATION UNIVERSITY CONTINUING TRAINING

SOURCE: Strategic Education, Inc.

Copyright Business Wire 2018.

PUB: 11/08/2018 06:30 AM/DISC: 11/08/2018 06:30 AM

http://www.businesswire.com/news/home/20181108005196/en

AP RADIO
Update hourly