Strategic Education (STRA) Tops Q3 EPS by 8c, Revenues Beat

Strategic Education (NASDAQ: STRA) reported Q3 EPS of $1.28, $0.08 better than the analyst estimate of $1.20. Revenue for the quarter came in at $241.7 million versus the consensus estimate of $237.24 million.

Three Months Ended September 30

• Revenue increased 50.2% to $241.7 million compared to $160.9 million for the same period in 2018. Revenue in 2018 included a purchase accounting adjustment of $26.2 million to reflect Capella University contract liabilities at fair value. Adjusted revenue, which is a non-GAAP financial measure and excludes the aforementioned contract liabilities adjustment, increased 29.2% to $241.7 million compared to $187.2 million for the same period in 2018. 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 $20.0 million or 8.3% of revenue, compared to a loss from operations of $57.1 million for the same period in 2018. Income from operations in 2019 includes $15.4 million of amortization expense related to assets acquired in the merger with Capella Education Company and $1.5 million in costs associated with the merger with Capella Education Company. Loss from operations in 2018 included the aforementioned adjustment to contract liabilities, $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. Adjusted income from operations was $36.9 million in 2019 compared to $22.1 million for the same period in 2018. The adjusted operating income margin was 15.3% compared to 11.8% for the same period in 2018.
• Net income, which includes the items described above, and also includes income from partnership interests and other investments, and certain discrete tax adjustments, was $16.7 million in 2019 compared to a net loss of $52.8 million for the same period in 2018. Adjusted net income was $28.4 million compared to $16.9 million for the same period in 2018.
• Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $46.4 million in 2019 compared to a loss of $38.7 million in 2018. Adjusted EBITDA was $50.9 million compared to $34.0 million for the same period in 2018.
• Diluted earnings per share was $0.75 compared to a loss per share of $2.97 for the same period in 2018. Adjusted diluted earnings per share increased to $1.28 from $0.92 for the same period in 2018. Diluted weighted average shares outstanding increased to 22,129,000 from 18,480,000 for the same period in 2018, due primarily to new shares issued to facilitate the merger with Capella Education Company.

Karl McDonnell, Chief Executive Officer of SEI said, “Continued strong performance at both Strayer University and Capella University during the third quarter positions us well as we approach the end of 2019. Merger synergies are on track, and our significant liquidity position provides us with a solid foundation to drive growth as we remain focused on delivering academic success and long-term economic mobility for our students and alumni.”

For earnings history and earnings-related data on Strategic Education (STRA) click here.

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