Business Wire | Jul 28, 2021 06:30AM EDT

Strategic Education, Inc. Reports Second Quarter 2021 Results

Jul. 28, 2021

HERNDON, Va.--(BUSINESS WIRE)--Jul. 28, 2021--Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended June 30, 2021.

"We are pleased with performance at Capella University and in our Alternative Learning and Australia/New Zealand segments and continue to focus on returning Strayer University to growth," said Karl McDonnell, Chief Executive Officer of Strategic Education. "Our financial strength provides a solid foundation as we continue to invest in Australia/New Zealand, Alternative Learning, and the success of our Capella and Strayer students."

STRATEGIC EDUCATION CONSOLIDATED RESULTS

[Note: Strategic Education's financial results for any periods ended prior to November 3, 2020 do not include the financial results of the Australia/New Zealand acquisition and are therefore not directly comparable.]

Three Months Ended June 30

* Revenue increased 16.9% to $299.2 million compared to $255.8 million for the same period in 2020. Adjusted revenue, which is a non-GAAP financial measure and excludes a purchase accounting revenue adjustment and foreign currency exchange impacts, increased 16.5% to $298.1 million compared to $255.8 million for the same period in 2020. For more details on non-GAAP financial measures, refer to the information in the Non-GAAP Financial Measures section of this press release.

* Income from operations was $26.7 million or 8.9% of revenue, compared to $46.4 million or 18.1% of revenue for the same period in 2020. Adjusted income from operations, which is a non-GAAP financial measure, was $53.7 million in 2021 compared to $63.0 million for the same period in 2020. The adjusted operating income margin, which is a non-GAAP financial measure, was 18.0% compared to 24.6% for the same period in 2020.

* Net income was $20.0 million in 2021 compared to $34.2 million for the same period in 2020. Adjusted net income, which is a non-GAAP financial measure, was $37.5 million compared to $45.4 million for the same period in 2020.

* Adjusted EBITDA, which is a non-GAAP financial measure, was $71.9 million compared to $77.7 million for the same period in 2020.

* Diluted earnings per share was $0.83 compared to $1.55 for the same period in 2020. Adjusted diluted earnings per share, which is a non-GAAP financial measure, decreased to $1.55 from $2.06 for the same period in 2020. Diluted weighted average shares outstanding increased to 24,126,000 from 22,012,000 for the same period in 2020, due primarily to new shares issued to facilitate the acquisition of Torrens University and associated assets in Australia and New Zealand.

U.S. Higher Education Segment Highlights

* The U.S. Higher Education segment (USHE) is comprised primarily of Strayer University and Capella University.

* For the second quarter, student enrollment within USHE decreased 9.9% to 83,923 compared to 93,123 for the same period in 2020.

* For the second quarter, FlexPath enrollment was 18% of USHE enrollment compared to 12% for the same period in 2020.

* Revenue decreased 14.2% to $212.2 million in the second quarter of 2021 compared to $247.4 million for the same period in 2020, driven by lower second quarter enrollment and lower revenue-per-student.

* Income from operations decreased to $32.1 million in the second quarter of 2021 from $58.8 million for the same period in 2020. The operating income margin was 15.1%, compared to 23.8% for the same period in 2020.

* Strayer University has now reopened 30 campuses that had been closed during the COVID-19 pandemic, with the majority of remaining campuses expected to be reopened by the end of 2021.

Alternative Learning Segment Highlights

* The Alternative Learning segment is comprised primarily of Employer Solutions, Sophia Learning, and Workforce Edge.

* For the second quarter, employer affiliated enrollment was 20.5% of USHE enrollment compared to 17.2% for the same period in 2020.

* Revenue increased 52.2% to $12.9 million in the second quarter of 2021 compared to $8.5 million for the same period in 2020, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.

* Income from operations increased to $5.2 million in the second quarter of 2021 from $4.2 million for the same period in 2020. The operating income margin was 40.1%, compared to 49.8% for the same period in 2020.

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 was 18,800.

* Revenue was $74.1 million in the second quarter of 2021, and adjusted revenue, which is a non-GAAP financial measure, was $72.9 million.

* Income from operations was $15.6 million or 21.1% of revenue in the second quarter of 2021, and adjusted income from operations, which is a non-GAAP financial measure, was $16.5 million or 22.6% of adjusted revenue.

BALANCE SHEET AND CASH FLOW

At June 30, 2021, Strategic Education had cash, cash equivalents, and marketable securities of $293.7 million, and $141.7 million outstanding under its revolving credit facility. For the first six months of 2021, cash provided by operations was $125.8 million compared to $111.9 million for the same period in 2020. Capital expenditures for the first six months of 2021 were $23.1 million compared to $25.5 million for the same period in 2020. Capital expenditures for 2021 are expected to be $50 million to $55 million.

For the second quarter of 2021, consolidated bad debt expense as a percentage of revenue was 3.3%, compared to 4.7% of revenue for the same period in 2020.

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 13, 2021 to shareholders of record as of September 3, 2021.

CONFERENCE CALL WITH MANAGEMENT

Strategic Education will host a conference call to discuss its second quarter 2021 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, Inc.

Strategic Education, Inc. (NASDAQ: STRA) (www.strategiceducation.com) is dedicated to helping advance economic mobility through higher education. We 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 Hackbright Academy and Strayer University's DevMountain; 2) Alternative Learning, encompassing Employer Solutions, developing and maintaining relationships with large employers; Workforce Edge, a full service, online employee education management platform; Sophia Learning, self-paced general education courses that are ACE-recommended for college credit; and Digital Enablement Partnerships, helping advance capabilities in course development, online delivery, and student support; 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.

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 and growth opportunities 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:

* the pace of student enrollment; * Strategic Education's continued compliance with Title IV of the Higher Education Act, and the regulations thereunder, as well as other federal laws and regulations, institutional 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 further spread of COVID-19, including the ultimate impact of COVID-19 on people and economies; * the impact of regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19, including restrictions on business operations or social distancing requirements; * risks associated with the opening of new campuses; * risks associated with the offering of new educational programs and adapting to other changes; * risks associated with the acquisition of existing educational institutions, including in the case of Strategic Education's acquisition of Torrens University and associated assets in Australia and New Zealand, the risk that the benefits of the acquisition may not be fully realized or may take longer to realize than expected, and the risk that the acquisition may not advance Strategic Education's business strategy and growth strategy; * risks relating to the timing of regulatory approvals; * Strategic Education's ability to implement its growth strategy; * the risk that the combined company may experience difficulty integrating employees or operations; * risks associated with the ability of Strategic Education's students to finance their education in a timely manner; * general economic and market conditions; and * additional factors described in Strategic Education's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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 For the six months ended ended June 30, June 30,

2020 2021 2020 2021

Revenues $ 255,831 $ 299,173 $ 521,133 $ 589,509

Costs and expenses:

Instructional and support 125,544 152,938 258,480 305,743 costs

General and administration 67,301 93,395 136,527 180,240

Amortization of intangible 15,417 19,392 30,834 38,799 assets

Merger and integration 1,174 1,937 4,938 2,949 costs

Restructuring costs - 4,811 - 23,078

Total costs and expenses 209,436 272,473 430,779 550,809

Income from operations 46,395 26,700 90,354 38,700

Other income 1,639 757 3,762 2,924

Income before income taxes 48,034 27,457 94,116 41,624

Provision for income taxes 13,882 7,481 24,725 12,071

Net income $ 34,152 $ 19,976 $ 69,391 $ 29,553

Earnings per share:

Basic $ 1.57 $ 0.83 $ 3.18 $ 1.23

Diluted $ 1.55 $ 0.83 $ 3.15 $ 1.22

Weighted average shares outstanding:

Basic 21,764 23,975 21,787 23,974

Diluted 22,012 24,126 22,041 24,139



STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

December 31, June 30, 2020 2021

ASSETS

Current assets:

Cash and cash equivalents $ 187,509 $ 261,585

Marketable securities 7,557 4,040

Tuition receivable, net 50,169 78,609

Income taxes receivable 1,429 -

Assets held for sale - 5,801

Other current assets 39,458 43,600

Total current assets 286,122 393,635

Property and equipment, net 158,854 153,812

Right-of-use lease assets 120,687 134,069

Marketable securities, non-current 30,270 28,062

Intangible assets, net 326,420 289,985

Goodwill 1,318,526 1,303,863

Other assets 54,928 59,887

Total assets $ 2,295,807 $ 2,363,313



LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses $ 104,742 $ 100,119

Income taxes payable - 4,015

Contract liabilities 60,501 118,771

Lease liabilities 34,809 29,284

Total current liabilities 200,052 252,189

Long-term debt 141,823 141,748

Deferred income tax liabilities 53,407 42,810

Lease liabilities, non-current 106,151 148,382

Other long-term liabilities 46,055 45,004

Total liabilities 547,488 630,133

Commitments and contingencies

Stockholders' equity:

Common stock, par value $0.01; 32,000,000 sharesauthorized; 24,418,939 and 244 246 24,621,111 shares issued and outstanding atDecember 31, 2020 and June 30, 2021, respectively

Additional paid-in capital 1,519,549 1,523,022

Accumulated other comprehensive income 48,880 30,823

Retained earnings 179,646 179,089

Total stockholders' equity 1,748,319 1,733,180

Total liabilities and stockholders' equity $ 2,295,807 $ 2,363,313

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the six months ended June 30,

2020 2021

Cash flows from operating activities:

Net income $ 69,391 $ 29,553

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of deferred financing costs 167 276

Amortization of investment discount/premium 68 40

Depreciation and amortization 51,981 66,624

Deferred income taxes (6,736) (10,499)

Stock-based compensation 6,884 8,068

Impairment of right-of-use lease assets 453 17,015

Changes in assets and liabilities:

Tuition receivable, net 3,820 (28,947)

Other assets (6,338) (9,308)

Accounts payable and accrued expenses (22,180) (7,835)

Income taxes payable and income taxes receivable 15,303 5,444

Contract liabilities 2,053 58,937

Other liabilities (2,925) (3,537)

Net cash provided by operating activities 111,941 125,831



Cash flows from investing activities:

Purchases of property and equipment (25,465) (23,138)

Purchases of marketable securities (1,863) -

Proceeds from marketable securities 18,869 5,595

Other investments (693) (262)

Net cash used in investing activities (9,152) (17,805)



Cash flows from financing activities:

Common dividends paid (26,662) (29,549)

Net payments for stock awards (24,758) (2,283)

Repurchase of common stock (247) (2,904)

Net cash used in financing activities (51,667) (34,736)

Effect of exchange rate changes on cash, cash - (1,396) equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted 51,122 71,894 cash

Cash, cash equivalents, and restricted cash - beginning 420,497 202,020 of period

Cash, cash equivalents, and restricted cash - end of $ 471,619 $ 273,914 period

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

For the three months For the six months ended ended June 30, June 30,

2020 2021 2020 2021

Revenues:

U.S. Higher Education $ 247,350 $ 212,207 $ 502,863 $ 438,754

Australia/New Zealand - 74,060 - 125,325

Alternative Learning 8,481 12,906 18,270 25,430

Consolidated revenues $ 255,831 $ 299,173 $ 521,133 $ 589,509

Income from operations:

U.S. Higher Education $ 58,765 $ 32,059 $ 115,508 $ 79,813

Australia/New Zealand - 15,601 - 12,652

Alternative Learning 4,221 5,180 10,618 11,061

Amortization of intangible (15,417) (19,392) (30,834) (38,799) assets

Merger and integration costs (1,174) (1,937) (4,938) (2,949)

Restructuring costs - (4,811) - (23,078)

Consolidated income from $ 46,395 $ 26,700 $ 90,354 $ 38,700 operations

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, income before income taxes, 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. Management believes this information is useful to investors to compare the Company's results of operations period-over-period. These measures are Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA and Adjusted Diluted Earnings Per Share (EPS). We define Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted EPS to exclude (1) 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, and 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, (3) severance costs and right-of-use lease asset impairment charges associated with the Company's restructuring, (4) income recognized from the Company's investments in partnership interests and other investments, (5) discrete tax adjustments utilizing adjusted effective income tax rates of 28.5% and 29.5% for the three months ended June 30, 2020 and 2021, respectively, and (6) foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate. 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, amortization expense associated with deferred implementation costs incurred in cloud computing arrangements, a purchase accounting adjustment to record acquired contract liabilities at fair value, and the amounts in (2), (3) and (6) 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 MEASURESADJUSTED REVENUE, ADJUSTED TOTAL COSTS AND EXPENSES, ADJUSTED INCOME FROMOPERATIONS, ADJUSTED INCOME BEFORE INCOME TAXES, ADJUSTED NET INCOME, ANDADJUSTED EPS(in thousands, except per share data)

For the three months ended June 30, 2020 Non-GAAP Adjustments

As Purchase Merger and Income from Tax Foreign As Reported accounting integration Restructuring other adjustments exchange Adjusted (GAAP) adjustments^ costs^(2) costs^(3) investments ^(5) adjustments (Non-GAAP) (1) ^(4) ^(6)

Revenues $ 255,831 $ - $ - $ - $ - $ - $ - $ 255,831

Totalcosts and $ 209,436 $ (15,417) $ (1,174) $ - $ - $ - $ - $ 192,845expenses

Incomefrom $ 46,395 $ 15,417 $ 1,174 $ - $ - $ - $ - $ 62,986operations

Operating 18.1% 24.6%margin

Incomebefore $ 48,034 $ 15,417 $ 1,174 $ - $ (1,135) $ - $ - $ 63,490incometaxes

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



For the three months ended June 30, 2021 Non-GAAP Adjustments

As Purchase Merger and Income from Tax Foreign As Reported accounting integration Restructuring other adjustments exchange Adjusted (GAAP) adjustments^ costs^(2) costs^(3) investments ^(5) adjustments (Non-GAAP) (1) ^(4) ^(6)

Revenues $ 299,173 $ 1,423 $ - $ - $ - $ - $ (2,534) $ 298,062

Total costs and $ 272,473 $ (19,392) $ (1,937) $ (4,811) $ - $ - $ (2,008) $ 244,325expenses

Income from $ 26,700 $ 20,815 $ 1,937 $ 4,811 $ - $ - $ (526) $ 53,737operations

Operating margin 8.9% 18.0%

Income before $ 27,457 $ 20,815 $ 1,937 $ 4,811 $ (1,398) $ - $ (526) $ 53,096income taxes

Net income $ 19,976 $ 20,815 $ 1,937 $ 4,811 $ (1,398) $ (8,164) $ (526) $ 37,451



Earnings per share:

Diluted $ 0.83 $ 1.55



Weighted average shares outstanding:

Diluted 24,126 24,126

(1)

Reflects 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, and amortization and depreciation expense of intangible assets and software assets acquired through 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)

Reflects 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.(3)

Reflects severance costs and right-of-use lease asset impairment charges associated with the Company's restructuring.(4)

Reflects income recognized from the Company's investments in partnership interests and other investments.(5)

Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing adjusted effective income tax rates of 28.5% and 29.5% for the three months ended June 30, 2020 and 2021, respectively.(6)

Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate. Reflects 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,(1) and amortization and depreciation expense of intangible assets and software assets acquired through the Company's merger with Capella Education Company and the Company's acquisition of Torrens University and associated assets in Australia and New Zealand.^ Reflects transaction and integration expenses associated with the(2) Company's merger with Capella Education Company and the Company's acquisition of Torrens University and associated assets in Australia and New Zealand.^ Reflects severance costs and right-of-use lease asset impairment charges(3) associated with the Company's restructuring.

^ Reflects income recognized from the Company's investments in partnership(4) interests and other investments.

^ Reflects tax impacts of the adjustments described above and discrete tax(5) adjustments related to stock-based compensation and other adjustments, utilizing adjusted effective income tax rates of 28.5% and 29.5% for the three months ended June 30, 2020 and 2021, respectively.^ Reflects foreign currency exchange impact related to translating foreign(6) currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.STRATEGIC EDUCATION, INC.

UNAUDITED NON-GAAP SEGMENT REPORTING

(in thousands)

For the three months For the six months ended ended

June 30, June 30,

2020 2021 2020 2021

Revenues:

U.S. Higher Education $ 247,350 $ 212,207 $ 502,863 $ 438,754

Australia/New Zealand - 74,060 - 125,325

Alternative Learning 8,481 12,906 18,270 25,430

Consolidated revenues 255,831 299,173 521,133 589,509



Adjustments to consolidated revenues:

U.S. Higher Education - - - -

Australia/New Zealand^1 - (1,111) - (907)

Alternative Learning - - - -

Total adjustments to - (1,111) - (907) consolidated revenues



Adjusted revenues by segment:

U.S. Higher Education 247,350 212,207 502,863 438,754

Australia/New Zealand - 72,949 - 124,418

Alternative Learning 8,481 12,906 18,270 25,430

Adjusted consolidated $ 255,831 $ 298,062 $ 521,133 $ 588,602 revenues



Income from operations:

U.S. Higher Education $ 58,765 $ 32,059 $ 115,508 $ 79,813

Australia/New Zealand - 15,601 - 12,652

Alternative Learning 4,221 5,180 10,618 11,061

Amortization of (15,417) (19,392) (30,834) (38,799) intangible assets

Merger and integration (1,174) (1,937) (4,938) (2,949) costs

Restructuring costs - (4,811) - (23,078)

Consolidated income from 46,395 26,700 90,354 38,700 operations



Adjustments toconsolidated income from operations:

Australia/New Zealand^2 - 897 - 3,142

Amortization of 15,417 19,392 30,834 38,799 intangible assets

Merger and integration 1,174 1,937 4,938 2,949 costs

Restructuring costs - 4,811 - 23,078

Total adjustments toconsolidated income from 16,591 27,037 35,772 67,968 operations



Adjusted income from operations by segment:

U.S. Higher Education 58,765 32,059 115,508 79,813

Australia/New Zealand - 16,498 - 15,794

Alternative Learning 4,221 5,180 10,618 11,061

Total adjusted income $ 62,986 $ 53,737 $ 126,126 $ 106,668 from operations

___________________^1Adjustments to the Australia/New Zealand segment revenue for the three andsix months ended June 30, 2021 include a purchase accounting adjustment of $1.4million and $3.6 million, respectively, to record acquired contract liabilitiesat fair value as a result of the Company's acquisition of Torrens Universityand associated assets in Australia and New Zealand, and foreign currencyexchange impact of ($2.5) million and ($4.5) million, respectively, related totranslating foreign currency results at a constant exchange rate of 0.743Australian Dollars to U.S. Dollars, which is the 2021 budget rate.^2Adjustments to the Australia/New Zealand segment income from operations forthe three and six months ended June 30, 2021 include the aforementionedpurchase accounting revenue adjustment of $1.4 million and $3.6 million,respectively, to record acquired contract liabilities at fair value as a resultof the Company's acquisition of Torrens University and associated assets inAustralia and New Zealand, and foreign currency exchange impact of ($0.5)million related to translating foreign currency results at a constant exchangerate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budgetrate.STRATEGIC EDUCATION, INC.UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURESADJUSTED EBITDA(in thousands)

For the three months ended

June 30,

2020 2021



Net income $ 34,152 $ 19,976

Provision for income taxes 13,882 7,481

Other income (1,639) (757)

Depreciation and amortization 26,248 32,053

EBITDA ^(1) 72,643 58,753

Stock-based compensation 3,859 4,649

Merger and integration costs ^(2) 1,174 1,937

Restructuring costs ^(3) - 4,811

Cloud computing amortization ^(4) - 841

Contract liability adjustment ^(5) - 1,423

Foreign currency exchange impact ^(6) - (526)

Adjusted EBITDA ^(1) $ 77,676 $ 71,888

(1)

Denotes non-GAAP financial measures. Please see the information in the Non-GAAP Financial Measures section of this press release for more detail regarding these adjustments and management's reasons for providing this information.(2)

Reflects transaction and integration charges 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.(3)

Reflects severance costs and right-of-use lease asset impairment charges associated with the Company's restructuring. Includes $0.5 million of stock-based compensation benefit related to forfeitures of stock-based awards for the three months ended June 30, 2021.(4)

Reflects amortization expense associated with deferred implementation costs incurred in cloud computing arrangements.(5)

Reflects 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.(6)

Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate. View source version on businesswire.com: https://www.businesswire.com/news/home/20210728005304/en/

CONTACT: Terese Wilke Director of Investor Relations Strategic Education, Inc. (612) 977-6331 terese.wilke@strategiced.com