STRATEGIC EDUCATION, INC. : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations is a supplement to and should be read in conjunction with our
condensed consolidated financial statements and the related notes and other
financial information included elsewhere in this Quarterly Report on Form 10-Q
and with our Annual Report on Form 10-K for the year ended December 31, 2021.

Caution Regarding Forward-Looking Statements


Certain of the statements included in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" as well as elsewhere in this
Quarterly Report on Form 10-Q are forward-looking statements made pursuant to
the Private Securities Litigation Reform Act of 1995 ("Reform Act"). Such
statements may be identified by the use of words such as "expect," "estimate,"
"assume," "believe," "anticipate," "may," "will," "forecast," "outlook," "plan,"
"project," "potential" or similar words, and include, without limitation,
statements relating to future enrollment, revenues, revenues per student,
earnings growth, operating expenses, capital expenditures and the ultimate
effect of the COVID-19 pandemic on the Company's business and results. These
statements are based on the Company's current expectations and are subject to a
number of assumptions, risks and uncertainties. In accordance with the Safe
Harbor provisions of the Reform Act, the Company has identified important
factors that could cause the actual results to differ materially from those
expressed in or implied by such statements. The assumptions, risks and
uncertainties include the pace of student enrollment, our 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 and other action by the
Department, including without limitation action related to borrower defense to
repayment applications, 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 our acquisition of Torrens University and
associated assets in Australia and New Zealand, the risk that the benefits of
our acquisition of Torrens University and associated assets in Australia and New
Zealand may not be fully realized or may take longer to realize than expected,
the risk that our acquisition of Torrens University and associated assets in
Australia and New Zealand may not advance our business strategy and growth
strategy, risks related to the timing of regulatory approvals, our ability to
implement our growth strategy, the risk that the combined company may experience
difficulty integrating employees or operations, risks associated with the
ability of our students to finance their education in a timely manner, and
general economic and market conditions. You should not put undue reliance on any
forward-looking statements. Further information about these and other relevant
risks and uncertainties may be found in Part II, "Item 1A. Risk Factors" of this
Quarterly Report on Form 10-Q, Part I, "Item 1A. Risk Factors" of the Company's
Annual Report on Form 10-K and in the Company's other filings with the
Securities and Exchange Commission. The Company undertakes no obligation to
update or revise forward-looking statements, except as required by law.

Further information


We maintain a website at http://www.strategiceducation.com. The information on
our website is not incorporated by reference in this Quarterly Report on Form
10-Q, and our web address is included as an inactive textual reference only. We
make available, free of charge through our website, our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the Securities and
Exchange Commission.

Background

Strategic Education, Inc. ("SEI," "we", "us" or "our") is an education services
company that provides access to high-quality education through campus-based and
online post-secondary education offerings, as well as through programs to
develop job-ready skills for high-demand markets. We operate primarily through
our wholly-owned subsidiaries Strayer University and Capella University, both
accredited post-secondary institutions of higher education located in the United
States, and Torrens University, an accredited post-secondary institution of
higher education located in Australia. Our operations emphasize relationships
through our Education Technology Services segment with employers to build
employee education benefits programs that provide employees with access to
affordable and industry relevant training, certificate, and degree programs.

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Company presentation

From June 30, 2022we had the following declarable segments:

WE Higher education sector


•The USHE segment provides flexible and affordable certificate and degree
programs to working adults primarily through Strayer University and Capella
University, including the Jack Welch Management Institute MBA, which is a unit
of Strayer University. USHE also operates non-degree web and mobile application
development courses through Hackbright Academy and Devmountain, which are units
of Strayer University.

•Strayer University is accredited by the Middle States Commission on Higher
Education and Capella University is accredited by the Higher Learning
Commission, both higher education institutional accrediting agencies recognized
by the Department of Education. The USHE segment provides academic offerings
both online and in physical classrooms, helping working adult students develop
specific competencies they can apply in their workplace.

• In the second quarter of 2022, USHE enrollment decreased by 9% to 76,728, compared to 83,923 for the same period in 2021.


•Trailing 4-quarter student persistence within USHE was 87.1% in the first
quarter of 2022 compared to 86.5% for the same period in 2021. Student
persistence is calculated as the rate of students continuing from one quarter to
the next, adjusted for graduates, on a trailing 4-quarter basis. Student
persistence is reported one quarter in arrears. The table below summarizes USHE
trailing 4-quarter student persistence for the past 8 quarters.

 Q2 2020      Q3 2020      Q4 2020      Q1 2021      Q2 2021      Q3 2021      Q4 2021      Q1 2022
  86.6  %      86.8  %      86.7  %      86.5  %      87.0  %      86.9  %      86.8  %      87.1  %

Education Technology Services Segment


•Our Education Technology Services segment is primarily focused on developing
and maintaining relationships with employers to build employee education
benefits programs that provide employees with access to affordable and industry
relevant training, certificate, and degree programs. The employer relationships
developed by the Education Technology Services division are an important source
of student enrollment for Strayer University and Capella University, and the
majority of the revenue attributed to the Education Technology Services division
is driven by the volume of enrollment derived from these employer relationships.
Enrollments attributed to the Education Technology Services segment are
determined based on a student's employment status and the existence of a
corporate partnership arrangement with SEI. All enrollments attributed to the
Education Technology Services division continue to be attributed to the division
until the student graduates or withdraws, even if his or her employment status
changes or if the partnership contract expires.

• In the second quarter of 2022, affiliated employer enrollment as a percentage of USHE enrollment was 24.6%, compared to 20.5% for the same period in 2021.


•Education Technology Services also supports employer partners through Workforce
Edge, a platform which provides employers a full-service education benefits
administration solution, and Sophia Learning, which enables education benefits
programs through the use of low-cost online general education-level courses
recommended by the American Council on Education for credit at other colleges
and universities.

Australia/New Zealand Segment

•Torrens University is the only investor-funded university in Australia. Torrens
University offers undergraduate, graduate, higher degree by research, and
specialized degree courses primarily in five fields of study: business, design
and creative technology, health, hospitality, and education. Courses are offered
both online and at physical campuses. Torrens University is registered with the
Tertiary Education Quality and Standards Agency ("TEQSA"), the regulator for
higher education providers and universities throughout Australia, as an
Australian University that is authorized to self-accredit its courses.

•Think Education is a vocational registered training organization and accredited
higher education provider in Australia. Think Education delivers education at
several campuses in Sydney, Melbourne, Brisbane, and Adelaide as well as through
online study. Think Education and its colleges are accredited in Australia by
the TEQSA and the Australian Skills Quality Authority, the regulator for
vocational education and training organizations that operate in Australia.

• Media Design School is a private higher education institution for creative and technological qualifications in New Zealand. School of Media Design offers industry-approved courses in 3D animation and visual effects, game art, game programming,

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graphic and motion design, digital media artificial intelligence, and creative
advertising. Media Design School is accredited in New Zealand by the New Zealand
Qualifications Authority, the organization responsible for the quality assurance
of non-university tertiary training providers.

• In the second quarter of 2022, Australia/New Zealand registrations were 18,834 compared to 18,800 for the same period in 2021.


We believe we have the right operating strategies in place to provide the most
direct path between learning and employment for our students. We are constantly
innovating to differentiate ourselves in our markets and drive growth by
supporting student success, producing affordable degrees, optimizing our
comprehensive marketing strategy, serving a broader set of our students'
professional needs, and establishing new growth platforms. The talent of our
faculty and employees, supported by market leading technology, enable these
strategies. We believe our strategy will allow us to continue to deliver high
quality, affordable education, resulting in continued growth over the long-term.
We will continue to invest in this strategy to strengthen the foundation and
future of our business.

Significant Accounting Policies and Estimates


"Management's Discussion and Analysis of Financial Condition and Results of
Operations" discusses our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related
disclosures of contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates and judgments related to its allowance for
credit losses; income tax provisions; the useful lives of property and equipment
and intangible assets; redemption rates for scholarship programs and valuation
of contract liabilities; fair value of right-of-use lease assets for facilities
that have been vacated; incremental borrowing rates; valuation of deferred tax
assets, goodwill, and intangible assets; forfeiture rates and achievability of
performance targets for stock-based compensation plans; and accrued expenses.
Management bases its estimates and judgments on historical experience and
various other factors and assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
regarding the carrying values of assets and liabilities that are not readily
apparent from other sources. Management regularly reviews its estimates and
judgments for reasonableness and may modify them in the future. Actual results
may differ from these estimates under different assumptions or conditions.

Management believes that the following critical accounting policies are its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue recognition - Strayer University and Capella University offer
educational programs primarily on a quarter system having four academic terms,
which generally coincide with our quarterly financial reporting periods. Torrens
University offers the majority of its education programs on a trimester system
having three primary academic terms, which all occur within the calendar year.
Approximately 96% of our revenues during the six months ended June 30, 2022
consisted of tuition revenue. Capella University offers monthly start options
for new students, who then transition to a quarterly schedule. Capella
University also offers its FlexPath program, which allows students to determine
their 12-week billing session schedule after they complete their first course.
Tuition revenue for all students is recognized ratably over the course of
instruction as the universities provide academic services, whether delivered in
person at a physical campus or online. Tuition revenue is shown net of any
refunds, withdrawals, corporate discounts, scholarships, and employee tuition
discounts. The universities also derive revenue from other sources such as
textbook-related income, certificate revenue, certain academic fees, licensing
revenue, accommodation revenue, food and beverage fees, and other income, which
are all recognized when earned. In accordance with ASC 606, materials provided
to students in connection with their enrollment in a course are recognized as
revenue when control of those materials transfers to the student. At the start
of each academic term or program, a contract liability is recorded for academic
services to be provided, and a tuition receivable is recorded for the portion of
the tuition not paid in advance. Any cash received prior to the start of an
academic term or program is recorded as a contract liability.

Students at Strayer University and Capella University finance their education in
a variety of ways, and historically about 75% of our students have participated
in one or more financial aid program provided through Title IV of the Higher
Education Act. In addition, many of our working adult students finance their own
education or receive full or partial tuition reimbursement from their employers.
Those students who are veterans or active duty military personnel have access to
various additional government-funded educational benefit programs.

In Australia, domestic students attending an ANZ institution fund their studies themselves or by taking out a loan through the government’s Higher Education Loans Scheme or Professional Student Loans Scheme. In New Zealand, domestic students can use government loans to fund tuition fees and may be eligible for a government-funded “no-cost” period of study. International students attending an ANZ institution are not eligible for funding from Australia or New Zealand Governments.

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A typical class is offered in weekly increments over a six- to twelve-week
period, depending on the university and course type, and is followed by an exam.
Student attendance is based on physical presence in class for on-ground classes.
For online classes, attendance consists of logging into one's course shell and
performing an academically-related activity (e.g., engaging in a discussion post
or taking a quiz).

If a student withdraws from a course prior to completion, a portion of the
tuition may be refundable depending on when the withdrawal occurs. We use the
student's withdrawal date or last date of attendance for this purpose. Our
specific refund policies vary across the universities and non-degree programs.
For students attending Strayer University, our refund policy typically permits
students who complete less than half of a course to receive a partial refund of
tuition for that course. For students attending Capella University, our refund
policy varies based on course format. GuidedPath students are allowed a 100%
refund through the first five days of the course, a 75% refund from six to
twelve days, and 0% refund for the remainder of the period. FlexPath students
receive a 100% refund through the 12th calendar day of the course for their
first billing session only and a 0% refund after that date and for all
subsequent billing sessions. For domestic students attending an ANZ institution,
refunds are typically provided to students that withdraw within the first 20% of
a course term. For international students attending an ANZ institution, refunds
are provided to students that withdraw prior to the course commencement date. In
limited circumstances, refunds to students attending an ANZ institution may be
granted after these cut-offs subject to an application for special consideration
by the student and approval of that application by the institution. Refunds
reduce the tuition revenue that otherwise would have been recognized for that
student. Since the academic terms coincide with our financial reporting periods
for most programs, nearly all refunds are processed and recorded in the same
quarter as the corresponding revenue. For certain programs where courses may
overlap a quarter-end date, we estimate a refund or withdrawal rate and do not
recognize the related revenue until the uncertainty related to the refund is
resolved. The portion of tuition revenue refundable to students may vary based
on the student's state of residence.

For U.S. students who receive funding under Title IV and withdraw, funds are
subject to return provisions as defined by the Department of Education. The
university is responsible for returning Title IV funds to the Department and
then may seek payment from the withdrawn student of prorated tuition or other
amounts charged to him or her. Loss of financial aid eligibility during an
academic term is rare and would normally coincide with the student's withdrawal
from the institution. In Australia and New Zealand, government funding for
eligible students is provided directly to the institution on an estimated basis
annually. The amount of government funding provided is based on a
course-by-course forecast of enrollments that the institution submits for the
upcoming calendar year. Using the enrollment forecast provided as well as the
requesting institution's historical enrollment trends, the government approves a
fixed amount, which is then funded to the institution evenly on a monthly basis.
Periodic reconciliation and true-ups are undertaken between the relevant
government authority and the institution based on actual eligible enrollments,
which may result in a net amount being due to or from the government.

Students at Strayer University registering in credit-bearing courses in any
undergraduate or graduate program qualify for the Graduation Fund, whereby
qualifying students earn tuition credits that are redeemable in the final year
of a student's course of study if he or she successfully remains in the program.
Students must meet all of Strayer University's admission requirements and not be
eligible for any previously offered scholarship program. To maintain
eligibility, students must be enrolled in a bachelor's or master's degree
program. Students who have more than one consecutive term of non-attendance lose
any Graduation Fund credits earned to date, but may earn and accumulate new
credits if the student is reinstated or readmitted by Strayer University in the
future. In their final academic year, qualifying students will receive one free
course for every three courses that the student successfully completed in prior
years. Strayer University's performance obligation associated with free courses
that may be redeemed in the future is valued based on a systematic and rational
allocation of the cost of honoring the benefit earned to each of the underlying
revenue transactions that result in progress by the student toward earning the
benefit. The estimated value of awards under the Graduation Fund that will be
recognized in the future is based on historical experience of students'
persistence in completing their course of study and earning a degree and the
tuition rate in effect at the time it was associated with the transaction.
Estimated redemption rates of eligible students vary based on their term of
enrollment. As of June 30, 2022, we had deferred $50.1 million for estimated
redemptions earned under the Graduation Fund, as compared to $52.0 million at
December 31, 2021. Each quarter, we assess our assumptions underlying our
estimates for persistence and estimated redemptions based on actual experience.
To date, any adjustments to our estimates have not been material. However, if
actual persistence or redemption rates change, adjustments to the reserve may be
necessary and could be material.

Tuition receivable - We record estimates for our allowance for credit losses
related to tuition receivable from students primarily based on our historical
collection rates by age of receivable and adjusted for reasonable expectations
of future collection performance, net of recoveries. Our experience is that
payment of outstanding balances is influenced by whether the student returns to
the institution, as we require students to make payment arrangements for their
outstanding balances prior to enrollment. Therefore, we monitor outstanding
tuition receivable balances through subsequent terms, increasing the reserve on
such balances over time as the likelihood of returning to the institution
diminishes and our historical experience indicates collection is less likely. We
periodically assess our methodologies for estimating credit losses in
consideration of actual experience. If the financial condition of our students
were to deteriorate based on current or expected future events resulting in
evidence of impairment of
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their ability to make required payments for tuition payable to us, additional
allowances or write-offs may be required. For the second quarter of 2022, our
bad debt expense was 3.2% of revenue, compared to 3.3% for the same period in
2021. A change in our allowance for credit losses of 1% of gross tuition
receivable as of June 30, 2022 would have changed our income from operations by
approximately $1.2 million.

Goodwill and intangible assets - Goodwill represents the excess of the purchase
price of an acquired business over the amount assigned to the assets acquired
and liabilities assumed. Indefinite-lived intangible assets, which include trade
names, are recorded at fair market value on their acquisition date. At the time
of acquisition, goodwill and indefinite-lived intangible assets are allocated to
reporting units. Management identifies its reporting units by assessing whether
the components of its operating segments constitute businesses for which
discrete financial information is available and management regularly reviews the
operating results of those components. Goodwill and indefinite-lived intangible
assets are assessed at least annually for impairment. No events or circumstances
occurred in the three and six months ended June 30, 2022 to indicate an
impairment to goodwill or indefinite-lived intangible assets. Accordingly, no
impairment charges related to goodwill or indefinite-lived intangible assets
were recorded during the three and six month periods ended June 30, 2022.

Finite-lived intangible assets that are acquired in business combinations are
recorded at fair value on their acquisition dates and are amortized on a
straight-line basis over the estimated useful life of the asset. Finite-lived
intangible assets consist of student relationships. We review our finite-lived
intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If such
assets are not recoverable, a potential impairment loss is recognized to the
extent the carrying amount of the assets exceeds the fair value of the assets.
No impairment charges related to finite-lived intangible assets were recorded
during the three and six month periods ended June 30, 2022.

Other estimates - We record estimates for certain of our accrued expenses and
for income tax liabilities. We estimate the useful lives of our property and
equipment and intangible assets and periodically review our assumed forfeiture
rates and ability to achieve performance targets for stock-based awards and
adjust them as necessary. Should actual results differ from our estimates,
revisions to our accrued expenses, carrying amount of goodwill and intangible
assets, stock-based compensation expense, and income tax liabilities may be
required.

Operating results


In the second quarter of 2022, we generated $273.6 million in revenue compared
to $299.2 million in 2021. Our income from operations was $21.9 million for the
second quarter of 2022 compared to $26.7 million in 2021, principally due to
lower earnings in the USHE segment, partially offset by lower amortization
expense of intangible assets and merger and integration costs. Net income in the
second quarter of 2022 was $15.2 million compared to $20.0 million for the same
period in 2021. Diluted earnings per share was $0.63 compared to $0.83 for the
same period in 2021. For the six months ended June 30, 2022, we generated
$532.4 million in revenue, compared to $589.5 million for the same period in
2021. Our income from operations was $35.3 million for the six months ended
June 30, 2022 compared to $38.7 million for the same period in 2021, principally
due to lower earnings in the USHE segment, partially offset by lower
restructuring costs and amortization expense of intangible assets. Net income
was $22.2 million for the six months ended June 30, 2022 compared to $29.6
million for the same period in 2021, and diluted earnings per share was $0.92 in
the six months ended June 30, 2022 compared to $1.22 for the same period in
2021.

In the accompanying analysis of financial information for 2022 and 2021, we use
certain financial measures including 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 Earnings
per Share that are not required by or prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). These
measures, which are considered "non-GAAP financial measures" under SEC rules,
are defined by us to exclude the following:

•purchase accounting adjustments to record acquired contract liabilities at fair
value as a result of our acquisition of Torrens University and associated assets
in Australia and New Zealand and to record amortization and depreciation expense
related to intangible assets and software assets acquired through our merger
with Capella Education Company and our acquisition of Torrens University and
associated assets in Australia and New Zealand;

•integration expenses associated with our merger with Capella Education Company
and our acquisition of Torrens University and associated assets in Australia and
New Zealand;

•severance costs and right-of-use asset impairment charges related to our restructuring;

•income/losses from partnership and other investments that are not part of our core business;

•separate tax adjustments related to stock-based compensation and other adjustments; and

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To illustrate currency impacts to operating results, 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 Earnings per Share for the three and six months ended June 30, 2022 are
also presented on a constant currency basis.

When considered together with GAAP financial results, we believe these measures
provide management and investors with an additional understanding of our
business and operating results, including underlying trends associated with our
ongoing operations.

Non-GAAP financial measures are not defined in the same manner by all companies
and may not be comparable with other similarly titled measures of other
companies. Non-GAAP financial measures may be considered in addition to, but not
as a substitute for or superior to, GAAP results. A reconciliation of these
measures to the most directly comparable GAAP measures is provided below.

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 and six months ended June 30, 2021. Adjusted income from
operations was $29.5 million in the second quarter of 2022 compared to $54.3
million in 2021. Adjusted net income was $20.5 million in the second quarter of
2022 compared to $37.8 million in 2021, and adjusted diluted earnings per share
was $0.85 in the second quarter of 2022 compared to $1.57 in 2021. Adjusted
income from operations was $48.9 million for the six months ended June 30, 2022
compared to $107.2 million for the same period in 2021. Adjusted net income was
$33.5 million for the six months ended June 30, 2022 compared to $74.8 million
for the same period in 2021, and adjusted diluted earnings per share was $1.39
for the six months ended June 30, 2022 compared to $3.10 for the same period in
2021.

The tables below reconcile our reported operating results to adjusted results (amounts in thousands, except per share data):

Reconciliation of reported and adjusted operating results for the three months ended June 30, 2022

                                                                                                          Non-GAAP Adjustments
                                                                                      Merger and
                                  As Reported          Purchase accounting            integration             Restructuring            Income from other                Tax                 As Adjusted
                                    (GAAP)               adjustments(1)                costs(2)                  costs(3)               investments(4)             adjustments(5)           (Non-GAAP)
Revenues                        $    273,564          $                -          $              -          $             -          $                -          $             -          $    273,564
Total costs and expenses        $    251,699          $           (3,694)         $           (254)         $        (3,661)         $                -          $             -          $    244,090
Income from operations          $     21,865          $            3,694          $            254          $         3,661          $                -          $             -          $     29,474
Operating margin                           8.0%                                                                                                                                                     10.8%
Income before income taxes      $     22,165          $            3,694          $            254          $         3,661          $             (526)         $             -          $     29,248
Net income                      $     15,220          $            3,694          $            254          $         3,661          $             (526)         $        (1,829)         $     20,474

Diluted earnings per share      $       0.63                                                                                                                                              $       0.85
Weighted average diluted shares
outstanding                              24,063                                                                                                                                                    24,063

Reconciliation of reported and adjusted operating results for the three months ended June 30, 2021

                                                                                                        Non-GAAP Adjustments
                                                                                    Merger and
                                  As Reported         Purchase accounting           integration            Restructuring           Income from other                Tax                 As Adjusted
                                    (GAAP)               adjustments(1)              costs(2)                 costs(3)               investments(4)            adjustments(5)           (Non-GAAP)
Revenues                        $    299,173          $           1,423          $            -          $             -          $               -          $             -          $    300,596
Total costs and expenses        $    272,473          $         (19,392)         $       (1,937)         $        (4,811)         $               -          $             -          $    246,333
Income from operations          $     26,700          $          20,815          $        1,937          $         4,811          $               -          $             -          $     54,263
Operating margin                           8.9%                                                                                                                                                 18.1%

income before taxes $27,457 $20,815

     $        1,937          $         4,811          $          (1,398)         $             -          $     53,622
Net income                      $     19,976          $          20,815          $        1,937          $         4,811          $          (1,398)         $        (8,312)         $     37,829

Diluted earnings per share      $       0.83                                                                                                                                          $       1.57
Weighted average diluted shares
outstanding                              24,126                                                                                                                                                24,126



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Reconciliation of Reported to Adjusted Results of Operations for the six months
ended June 30, 2022

                                                                                                          Non-GAAP Adjustments
                                                                                      Merger and
                                  As Reported          Purchase accounting            integration             Restructuring            Income from other                Tax                 As Adjusted
                                    (GAAP)               adjustments(1)                costs(2)                  costs(3)               investments(4)             adjustments(5)           (Non-GAAP)
Revenues                        $    532,419          $                -          $              -          $             -          $                -          $             -          $    532,419
Total costs and expenses        $    497,113          $           (7,432)         $           (664)         $        (5,519)         $                -          $             -          $    483,498
Income from operations          $     35,306          $            7,432          $            664          $         5,519          $                -          $             -          $     48,921
Operating margin                           6.6%                                                                                                                                                      9.2%
Income before income taxes      $     34,435          $            7,432          $            664          $         5,519          $             (139)         $             -          $     47,911
Net income                      $     22,249          $            7,432          $            664          $         5,519          $             (139)         $        (2,187)         $     33,538

Diluted earnings per share      $       0.92                                                                                                                                              $       1.39
Weighted average diluted shares
outstanding                              24,089                                                                                                                                                    24,089


Reconciliation of Reported to Adjusted Results of Operations for the six months
ended June 30, 2021

                                                                                                        Non-GAAP Adjustments
                                                                                    Merger and
                                  As Reported         Purchase accounting           integration            Restructuring           Income from other                Tax                 As Adjusted
                                    (GAAP)               adjustments(1)              costs(2)                 costs(3)               investments(4)            adjustments(5)           (Non-GAAP)
Revenues                        $    589,509          $           3,646          $            -          $             -          $               -          $             -          $    593,155
Total costs and expenses        $    550,809          $         (38,799)         $       (2,949)         $       (23,078)         $               -          $             -          $    485,983
Income from operations          $     38,700          $          42,445          $        2,949          $        23,078          $               -          $             -          $    107,172
Operating margin                           6.6%                                                                                                                                                 18.1%

income before taxes $41,624 $42,445

     $        2,949          $        23,078          $          (4,181)         $             -          $    105,915
Net income                      $     29,553          $          42,445          $        2,949          $        23,078          $          (4,181)         $       (19,000)         $     74,844

Diluted earnings per share      $       1.22                                                                                                                                          $       3.10
Weighted average diluted shares
outstanding                              24,139                                                                                                                                                24,139

__________________________________________________________________________________________

(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 integration expenses associated with the Company's merger with
Capella Education Company, including premerger litigation settlement, 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/loss 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
an adjusted effective tax rate of 30.0% for the three and six months ended
June 30, 2022, and an adjusted effective tax rate of 29.5% and 29.3% for the
three and six months ended June 30, 2021, respectively.
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The table below shows our adjusted operating results in constant currency for the three and six months ended June 30, 2022 (amounts in thousands, except data per share):


                                       For the three months ended June 30, 2022                                   For the six months ended June 30, 2022
                                                                                As Adjusted                                                               As Adjusted
                                                                               with Constant                                                             with Constant
                             As Adjusted            Constant currency            Currency              As Adjusted            Constant currency            Currency
                              (Non-GAAP)              adjustment(1)             (Non-GAAP)              (Non-GAAP)              adjustment(1)             (Non-GAAP)
Revenues                  $       273,564          $           4,839          $    278,403          $       532,419          $           7,725          $    540,144
Total costs and expenses  $       244,090          $           4,065          $    248,155          $       483,498          $           7,215          $    490,713
Income from operations    $        29,474          $             774          $     30,248          $        48,921          $             510          $     49,431
Operating margin                       10.8%                                            10.9%                     9.2%                                             9.2%
Income before income
taxes                     $        29,248          $             770          $     30,018          $        47,911          $             502          $     48,413
Net income                $        20,474          $             548          $     21,022          $        33,538          $             338          $     33,876

Diluted earnings per
share                     $          0.85                                     $       0.87          $          1.39                                     $       1.41
Weighted average diluted
shares outstanding                    24,063                                           24,063                   24,089                                           24,089

__________________________________________________________________________________________

(1)Reflects an adjustment to translate foreign currency results for the three
and six months ended June 30, 2022 at a constant exchange rate of 0.77
Australian Dollars to U.S. Dollars, which was the average exchange rate for the
same periods in 2021.

Three months completed June 30, 2022 Compared to the three months ended June 30, 2021


Revenues. Consolidated revenue decreased to $273.6 million in the second quarter
of 2022, compared to $299.2 million in the same period in the prior year,
primarily due to declines in enrollment. In the USHE segment for the three
months ended June 30, 2022, total enrollment decreased 9% to 76,728 from 83,923
for the same period in 2021. USHE segment revenue decreased 10.5% to $190.0
million compared to $212.2 million in 2021 primarily as a result of declines in
enrollment. In the Australia/New Zealand segment for the three months ended
June 30, 2022, total enrollment was 18,834, compared to 18,800 for the same
period in 2021. Australia/New Zealand segment revenue decreased 8.8% to $67.5
million compared to $74.1 million in 2021, primarily due to foreign exchange
impacts and lower revenue-per-student. In the Education Technology Services
segment, revenue for the three months ended June 30, 2022 increased 23.9% to
$16.0 million compared to $12.9 million in 2021 as a result of growth in Sophia
Learning and higher employer affiliated enrollment.

Instructional and support costs. Consolidated instructional and support costs
decreased to $147.4 million, compared to $152.9 million in the same period in
the prior year, principally due to lower facility costs. Consolidated
instructional and support costs as a percentage of revenues increased to 53.9%
in the second quarter of 2022 from 51.1% in the second quarter of 2021.

General and administration expenses. Consolidated general and administration
expenses increased to $96.7 million in the second quarter of 2022 compared to
$93.4 million in the prior year, principally due to increased investments in
branding initiatives and partnerships with brand ambassadors. Consolidated
general and administration expenses as a percentage of revenues increased to
35.4% in the second quarter of 2022 from 31.2% in the second quarter of 2021.

Amortization of intangible assets. Amortization of intangible assets decreased
to $3.7 million in the second quarter of 2022 compared to $19.4 million in 2021,
due to the finite-lived intangible assets acquired through the merger with
Capella Education Company being fully amortized as of the third quarter of 2021.

Merger and integration costs. Merger and integration costs decreased to $0.3
million in the second quarter of 2022 compared to $1.9 million for the same
period in 2021, as a result of lower integration expenses associated with the
acquisition of ANZ.

Restructuring costs. Restructuring costs decreased to $3.7 million in the second
quarter of 2022 compared to $4.8 million in 2021, primarily due to lower
severance and other personnel-related expenses from employee terminations in
connection with the Company's restructuring plan, offset by higher right-of-use
lease asset and fixed asset impairment charges associated with vacating leased
space in the second quarter of 2022.

Income from operations. Consolidated income from operations decreased to $21.9
million in the second quarter of 2022 compared to $26.7 million in the second
quarter of 2021, principally due to lower earnings in the USHE segment,
partially offset by lower amortization expense of intangible assets and merger
and integration costs. USHE segment income from operations decreased 63.0% to
$11.9 million in the second quarter of 2022, compared to $32.1 million in the
second quarter of 2021, primarily due to lower enrollments and increased
investments in marketing initiatives. In the Australia/New Zealand segment,
income from
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operations was $12.3 million in the second quarter of 2022, compared to $15.6
million in the second quarter of 2021, primarily driven by lower revenue. In the
Education Technology Services segment, income from operations for the three
months ended June 30, 2022 increased 2.4% to $5.3 million compared to $5.2
million in 2021 as a result of growth in Sophia Learning and an increase in
employer affiliated enrollment, partially offset by increased investment in
outreach to corporate partners.

Other income. Other income decreased to $0.3 million in the second quarter of
2022 compared to $0.8 million in the second quarter of 2021, as a result of a
decrease in investment income from our limited partnership investments and an
increase in interest expense. We incurred $1.1 million of interest expense in
the three months ended June 30, 2022 compared to $0.9 million in the three
months ended June 30, 2021.

Provision for income taxes. Income tax expense was $6.9 million in the second
quarter of 2022, compared to $7.5 million in the second quarter of 2021. Our
effective tax rate for the quarter was 31.3%, compared to 27.2% for the same
period in 2021.

Net revenue. Net profit decreased to $15.2 million in the second quarter of 2022 compared to $20.0 million in the second quarter of 2021 due to the factors discussed above.

Semester completed June 30, 2022 Compared to the half-year ended June 30, 2021


Revenues. Consolidated revenue decreased to $532.4 million in the six months
ended June 30, 2022, compared to $589.5 million in the same period in the prior
year, primarily due to declines in enrollment. USHE segment revenue decreased
12.1% to $385.8 million compared to $438.8 million in 2021 primarily as a result
of declines in enrollment. Australia/New Zealand segment revenue decreased 7.4%
to $116.1 million compared to $125.3 million in 2021 as a result of foreign
exchange impacts and declines in enrollment. In the Education Technology
Services segment, revenue for the six months ended June 30, 2022 increased 20.2%
to $30.6 million compared to $25.4 million in 2021 as a result of growth in
Sophia Learning and higher employer affiliated enrollment.

Instructional and support costs. Consolidated instructional and support costs
decreased to $292.0 million in the six months ended June 30, 2022 from $305.7
million in the six months ended June 30, 2021, principally due to lower facility
costs and bad debt expense. Consolidated instructional and support costs as a
percentage of revenues increased to 54.8% in the six months ended June 30, 2022
from 51.9% in the six months ended June 30, 2021.

General and administration expenses. Consolidated general and administration
expenses increased to $191.5 million in the six months ended June 30, 2022 from
$180.2 million in the six months ended June 30, 2021, principally due to
increased investments in branding initiatives and partnerships with brand
ambassadors. Consolidated general and administration expenses as a percentage of
revenues increased to 36.0% in the six months ended June 30, 2022 from 30.6% in
the six months ended June 30, 2021.

Amortization of intangible assets. Amortization of intangible assets decreased
to $7.4 million in the six months ended June 30, 2022 from $38.8 million in the
six months ended June 30, 2021, due to the finite-lived intangible assets
acquired through the merger with Capella Education Company being fully amortized
as of the third quarter of 2021.

Merger and integration costs. Merger and integration costs decreased to $0.7
million in the six months ended June 30, 2022 from $2.9 million in the six
months ended June 30, 2021, as a result of lower integration expenses associated
with the acquisition of ANZ.

Restructuring costs. Restructuring costs decreased to $5.5 million in the six
months ended June 30, 2022 from $23.1 million in the six months ended June 30,
2021, primarily due to $3.5 million of right-of-use lease asset and fixed asset
impairment charges associated with vacating leased space in the first six months
of 2022, compared to $19.0 million in the comparable period in 2021, as well as
higher severance and other personnel-related expenses from employee terminations
in the first six months of 2021.

Income from operations. Consolidated income from operations decreased to $35.3
million in the six months ended June 30, 2022 from $38.7 million in the six
months ended June 30, 2021, principally due to lower earnings in the USHE
segment, partially offset by lower restructuring costs and amortization expense
of intangible assets. USHE segment income from operations decreased 65.8% to
$27.3 million in the six months ended June 30, 2022 from $79.8 million in the
six months ended June 30, 2021, primarily due to lower enrollments and increased
investments in marketing initiatives. Australia/New Zealand segment income from
operations was $11.6 million in the six months ended June 30, 2022, compared to
$12.7 million of income from operations in the six months ended June 30, 2021,
primarily due to lower revenue, partially offset by a $3.6 million purchase
accounting reduction in 2021 related to contract liabilities acquired in the
acquisition. Education Technology Services segment income from operations
decreased 9.5% to $10.0 million for the six months ended June 30, 2022 from
$11.1 million in the six months ended
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June 30, 2021 due to increased investment in outreach to partner companies, partially offset by growth Sophia Learning and an increase in employer affiliate registrations.


Other income (expense). Other income (expense) decreased to $0.9 million of
expense in the six months ended June 30, 2022 from $2.9 million of income in the
six months ended June 30, 2021, primarily due to a decrease in investment income
from our limited partnership investments and an increase in interest expense. We
incurred $2.0 million of interest expense in the six months ended June 30, 2022
compared to $1.8 million in six months ended June 30, 2021.

Provision for income taxes. Income tax expense was $12.2 million in the six
months ended June 30, 2022, compared to $12.1 million in the six months ended
June 30, 2021. Our effective tax rate for the six months ended June 30, 2022 was
35.4%, compared to 29.0% for the six months ended June 30, 2021. The increase in
the effective tax rate in 2022 was primarily due to a $1.4 million tax shortfall
recognized through share-based payment arrangements.

Net revenue. Net profit decreased to $22.2 million within six months
June 30, 2022 compared to $29.6 million within six months June 30, 2021
due to the factors mentioned above.

Cash and capital resources


At June 30, 2022, we had cash, cash equivalents, and marketable securities of
$289.7 million compared to $298.8 million at December 31, 2021 and $293.7
million at June 30, 2021. At June 30, 2022, most of our cash was held in demand
deposit accounts at high credit quality financial institutions.

We are party to a credit facility (the "Amended Credit Facility"), which
provides for a senior secured revolving credit facility (the "Revolving Credit
Facility") in an aggregate principal amount of up to $350 million. The Amended
Credit Facility provides us with an option, subject to obtaining additional loan
commitments and satisfaction of certain conditions, to increase the commitments
under the Revolving Credit Facility or establish one or more incremental term
loans (each, an "Incremental Facility") in an amount up to the sum of (x) the
greater of (A) $300 million and (B) 100% of the Company's consolidated EBITDA
(earnings before interest, taxes, depreciation, amortization, and noncash
charges, such as stock-based compensation) calculated on a trailing four-quarter
basis and on a pro forma basis, and (y) if such Incremental Facility is incurred
in connection with a permitted acquisition or other permitted investment, any
amounts so long as the Company's leverage ratio (calculated on a trailing
four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00. In
addition, the Amended Credit Facility provides for a subfacility for borrowings
in certain foreign currencies in an amount equal to the U.S. dollar equivalent
of $150 million. Borrowings under the Revolving Credit Facility bear interest at
a per annum rate equal to LIBOR or a base rate, plus a margin ranging from 1.50%
to 2.00%, depending on our leverage ratio. An unused commitment fee ranging from
0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused
amounts. We were in compliance with all applicable covenants related to the
Amended Credit Facility as of June 30, 2022. As of June 30, 2022 and 2021, we
had $141.4 million and $141.7 million, respectively, outstanding under our
Revolving Credit Facility. During the six months ended June 30, 2022 and 2021,
we paid $1.2 million and $1.4 million, respectively, of interest and unused
commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities for the six months ended June 30,
2022 was $80.7 million, compared to $125.8 million for the same period in 2021.
The decrease in net cash from operating activities was primarily driven by lower
earnings in the USHE segment, partially offset by favorable timing of payments
of working capital.

Capital expenditures decreased to $22.7 million for the six months ended
June 30, 2022compared to $23.1 million for the same period in 2021, due to the timing of capital projects.


The Board of Directors declared a regular, quarterly cash dividend of $0.60 per
share of common stock for each of the first two quarters of 2022. During the six
months ended June 30, 2022, we paid a total of $29.9 million in cash dividends
on our common stock. During the six months ended June 30, 2022, we paid $25.0
million to repurchase common shares in the open market under our repurchase
program. As of June 30, 2022, we had $225.0 million of share repurchase
authorization remaining to use through December 31, 2022.

For the second quarters of 2022 and 2021, bad debt as a percentage of revenue was 3.2% and 3.3%, respectively.


We believe that existing cash and cash equivalents, cash generated from
operating activities, and if necessary, cash borrowed under our Amended Credit
Facility will be sufficient to meet our requirements for at least the next 12
months. Currently, we maintain our cash primarily in demand deposit bank
accounts and money market funds, which are included in cash and cash equivalents
at June 30, 2022 and 2021. We also hold marketable securities, which primarily
include tax-exempt municipal
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securities and corporate debt securities. In the six months ended June 30, 2022 and 2021, we earned interest income of $0.8 million and $0.6 millionrespectively.

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