Strategic Education Reports Second Quarter 2023 Results

July 27, 2023

HERNDON, Va.–(BUSINESS WIRE)–Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended June 30, 2023.

“During the second quarter, enrollment trends in our U.S. Higher Education segment continued to improve, the Education Technology Services segment posted another quarter of strong growth, and we continue to be optimistic about the Australia/New Zealand segment as conditions normalize,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “As we progress toward enrollment, revenue, and earnings growth in 2023, we remain focused on our mission to promote economic mobility for working adults.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

Three Months Ended June 30

  • Revenue increased 5.2% to $287.7 million compared to $273.6 million for the same period in 2022. Revenue on a constant currency basis increased 6.8% to $292.3 million in the second quarter of 2023 compared to $273.6 million for the same period in 2022.
  • Income from operations was $16.8 million or 5.8% of revenue, compared to $21.9 million or 8.0% of revenue for the same period in 2022. Adjusted income from operations, which is a non-GAAP financial measure, was $27.2 million compared to $29.5 million for the same period in 2022. The adjusted operating income margin, which is a non-GAAP financial measure, was 9.5% compared to 10.8% for the same period in 2022. 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 $14.2 million compared to $15.2 million for the same period in 2022. Adjusted net income, which is a non-GAAP financial measure, was $19.7 million compared to $20.5 million for the same period in 2022.
  • Adjusted EBITDA, which is a non-GAAP financial measure, was $45.4 million compared to $47.9 million for the same period in 2022.
  • Diluted earnings per share was $0.59 compared to $0.63 for the same period in 2022. Adjusted diluted earnings per share, which is a non-GAAP financial measure, decreased to $0.82 from $0.85 for the same period in 2022. Adjusted diluted earnings per share on a constant currency basis, which is a non-GAAP financial measure, was $0.85. Diluted weighted average shares outstanding decreased to 23,964,000 from 24,063,000 for the same period in 2022.

U.S. Higher Education Segment Highlights

  • The U.S. Higher Education segment (USHE) is comprised of Strayer University and Capella University.
  • For the second quarter, student enrollment within USHE increased 4.7% to 80,353 compared to 76,728 for the same period in 2022.
  • For the second quarter, FlexPath enrollment was 21% of USHE enrollment compared to 19% for the same period in 2022.
  • Revenue increased 6.7% to $202.7 million in the second quarter of 2023 compared to $190.0 million for the same period in 2022, driven by higher second quarter enrollment and revenue-per-student.
  • Income from operations was $6.7 million in the second quarter of 2023 compared to $11.9 million for the same period in 2022. The operating income margin was 3.3%, compared to 6.2% for the same period in 2022.

Education Technology Services Segment Highlights

  • The Education Technology Services segment (ETS) is comprised primarily of Employer Solutions, Sophia Learning, and Workforce Edge.
  • For the second quarter, employer affiliated enrollment was 27.1% of USHE enrollment compared to 24.6% for the same period in 2022.
  • For the second quarter, Sophia Learning had an increase in average total subscribers of approximately 30% from the same period in 2022.
  • As of June 30, 2023, Workforce Edge had a total of 62 corporate agreements, collectively employing approximately 1,400,000 employees.
  • Revenue increased 22.1% to $19.5 million in the second quarter of 2023 compared to $16.0 million for the same period in 2022, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.
  • Income from operations was $6.2 million in the second quarter of 2023 compared to $5.3 million for the same period in 2022. The operating income margin was 31.6%, compared to 33.1% for the same period in 2022.

Australia/New Zealand Segment Highlights

  • The Australia/New Zealand segment (ANZ) is comprised of Torrens University, Think Education, and Media Design School.
  • For the second quarter, student enrollment within ANZ decreased 4.6% to 17,966 compared to 18,834 for the same period in 2022.
  • Revenue decreased 3.1% to $65.5 million in the second quarter of 2023 compared to $67.5 million for the same period in 2022, driven by foreign currency impacts. Revenue on a constant currency basis increased 3.7% to $70.1 million in the second quarter of 2023 compared to $67.5 million for the same period in 2022, driven by higher revenue-per-student.
  • Income from operations was $14.3 million in the second quarter of 2023 compared to $12.3 million for the same period in 2022. The operating income margin was 21.8%, compared to 18.2% for the same period in 2022. Income from operations on a constant currency basis was $15.4 million in the second quarter of 2023 compared to $12.3 million for the same period in 2022. The operating income margin on a constant currency basis was 22.0%, compared to 18.2% for the same period in 2022.

BALANCE SHEET AND CASH FLOW

At June 30, 2023, Strategic Education had cash, cash equivalents, and marketable securities of $215.1 million, and $101.3 million outstanding under its revolving credit facility. For the first six months of 2023, cash provided by operations was $40.7 million compared to $80.7 million for the same period in 2022. Capital expenditures for the first six months of 2023 were $17.8 million compared to $22.7 million for the same period in 2022. Capital expenditures for 2023 are expected to be approximately $40 million.

For the second quarter of 2023, consolidated bad debt expense as a percentage of revenue was 4.4%, compared to 3.2% of revenue for the same period in 2022.

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 11, 2023 to shareholders of record as of September 1, 2023.

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.