Strategic Education Reports Third Quarter 2022 Results

November 3, 2022

HERNDON, Va.–(BUSINESS WIRE)–Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended September 30, 2022.

“We are pleased with the continued strengthening of demand in our U.S. Higher Education segment during the third quarter of 2022,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “Our Education Technology Services segment also produced strong results during the quarter, and notwithstanding continued delays in a return to pre-pandemic student immigration conditions in Australia and New Zealand, we remain confident in the long-term growth potential of the Australia/New Zealand segment.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

Three Months Ended September 30

  • Revenue decreased 2.6% to $263.1 million compared to $270.1 million for the same period in 2021.
  • Income from operations was $7.8 million or 3.0% of revenue, compared to $7.3 million or 2.7% of revenue for the same period in 2021. Adjusted income from operations, which is a non-GAAP financial measure, was $12.2 million compared to $20.7 million for the same period in 2021. The adjusted operating income margin, which is a non-GAAP financial measure, was 4.6% compared to 7.7% for the same period in 2021. [Adjusted results for 2021 exclude an adjustment for foreign currency exchange impacts and are therefore not directly comparable to adjusted results previously reported for the three months ended September 30, 2021.] 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 $6.1 million compared to $3.9 million for the same period in 2021. Adjusted net income, which is a non-GAAP financial measure, was $8.0 million compared to $14.1 million for the same period in 2021.
  • Adjusted EBITDA, which is a non-GAAP financial measure, was $31.6 million compared to $38.6 million for the same period in 2021.
  • Diluted earnings per share was $0.25 compared to $0.16 for the same period in 2021. Adjusted diluted earnings per share, which is a non-GAAP financial measure, decreased to $0.33 from $0.59 for the same period in 2021. Adjusted diluted earnings per share on a constant currency basis, which is a non-GAAP financial measure, was $0.35. Diluted weighted average shares outstanding decreased to 23,902,000 from 24,113,000 for the same period in 2021.

U.S. Higher Education Segment Highlights

  • The U.S. Higher Education segment (USHE) is comprised of Strayer University and Capella University.
  • For the third quarter, student enrollment within USHE decreased 3.1% to 75,144 compared to 77,574 for the same period in 2021.
  • For the third quarter, FlexPath enrollment was 21% of USHE enrollment compared to 19% for the same period in 2021.
  • Revenue decreased 3.3% to $185.5 million in the third quarter of 2022 compared to $191.9 million for the same period in 2021, driven by lower third quarter enrollment.
  • Loss from operations was $1.9 million in the third quarter of 2022 compared to income from operations of $5.2 million for the same period in 2021.

Education Technology Services Segment Highlights

  • The Education Technology Services segment (ETS) is comprised primarily of Employer Solutions, Sophia Learning, and Workforce Edge.
  • For the third quarter, employer affiliated enrollment was 25.3% of USHE enrollment compared to 21.1% for the same period in 2021.
  • For the third quarter, Sophia Learning had an increase in average total subscribers of approximately 33% from the same period in 2021.
  • As of September 30, 2022, Workforce Edge had a total of 51 corporate agreements, collectively employing approximately 1,200,000 employees.
  • Revenue increased 26.9% to $16.4 million in the third quarter of 2022 compared to $13.0 million for the same period in 2021, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.
  • Income from operations was $5.2 million in the third quarter of 2022 compared to $5.2 million for the same period in 2021. The operating income margin was 31.8%, compared to 40.0% for the same period in 2021.

Australia/New Zealand Segment Highlights

  • The Australia/New Zealand segment (ANZ) is comprised of Torrens University, Think Education, and Media Design School.
  • For the third quarter, student enrollment within ANZ increased 1.7% to 18,493 compared to 18,188 for the same period in 2021.
  • Revenue decreased 6.2% to $61.2 million in the third quarter of 2022 compared to $65.2 million for the same period in 2021. Revenue on a constant currency basis increased 0.7% to $65.7 million in the third quarter of 2022 compared to $65.2 million for the same period in 2021.
  • Income from operations was $8.9 million or 14.6% of revenue, compared to $10.4 million or 15.9% of revenue for the same period in 2021. Income from operations and the operating income margin on a constant currency basis were $9.6 million or 14.7% of revenue in the third quarter of 2022, compared to $10.4 million or 15.9% of revenue for the same period in 2021.

BALANCE SHEET AND CASH FLOW

At September 30, 2022, Strategic Education had cash, cash equivalents, and marketable securities of $288.8 million, and $141.2 million outstanding under its revolving credit facility. For the first nine months of 2022, cash provided by operations was $124.7 million compared to $161.2 million for the same period in 2021. Capital expenditures for the first nine months of 2022 were $32.5 million compared to $33.6 million for the same period in 2021. Capital expenditures for 2022 are expected to be approximately $45 million.

For the third quarter of 2022, consolidated bad debt expense as a percentage of revenue was 4.5%, compared to 3.8% of revenue for the same period in 2021.

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 December 5, 2022 to shareholders of record as of November 28, 2022.

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 Strayer University and Capella 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.