What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-07-29 · 98 added, 100 removed, 286 unchanged (41% of the section changed)

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We have taken measures to provide financial relief to our students and employer partners negatively affected by the COVID-19 crisis, including payment flexibility, scholarship opportunities, and other pricing relief.

We expect that these measures will enable more students to continue pursuing their education during and after the COVID-19 crisis.

We expect that these measures will enable more students to continue pursuing their education during and after the COVID-19 pandemic.

In the third quarter of 2020, we began implementing a restructuring plan that included both voluntary and involuntary employee terminations in an effort to reduce ongoing operating costs to align with changes in enrollment.

These headcount reductions resulted in a 5% decrease to SEI's total workforce.

During the first quarter of 2021, our restructuring efforts included the closure of underutilized campus and corporate office space in response to changes in enrollment trends and as a result of our work-from-home policies.

During 2021, our restructuring efforts have included the closure of underutilized campus and corporate office space in response to changes in enrollment trends and as a result of our work-from-home policies.

Of the campus closures, the majority have an alternative location within relative proximity to support students as campus interactions are needed.

As the pandemic has continued, we have seen sustained weakness in demand, especially in the United States, where total enrollment in our U.S.

Higher Education segment decreased 7% and 10% in the first and second quarters of 2021, respectively, compared to the same periods in 2020.

Higher Education segment decreased 7%, 10%, and 13% in the first, second, and third quarters of 2021, respectively, compared to the same periods in 2020.

Enrollment in ANZ also has been impacted by the pandemic and the related closure of international borders in Australia and New Zealand.

Based on leading indicators for third quarter enrollments in our U.S.

Higher Education segment, and the announcement of continued border closures in Australia and New Zealand, our full-year 2021 financial results could be at or below the low end of the previously provided full-year outlook.

We believe our current financial position and expected operating results, and ability to further control costs, are sufficient to support the ongoing operation of SEI in a manner that protects the health and well-being of our employees, students, and partners.

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We also believe that ANZ provides an attractive platform for future growth, driven by Australia’s status as an attractive destination for international students, as well as the potential to use ANZ as a platform for expansion across the ASEAN region.

Pursuant to the Purchase Agreement, the aggregate consideration paid was approximately $658.4 million in cash, which reflected the original agreed upon purchase price of $642.7 million, plus a $15.7 million adjustment reflecting an estimated $11.0 million of net cash at close, and an estimated $4.7 million related to higher net working capital.

These estimated adjustments are subject to a final true-up of net cash and net working capital, based on the closing accounts to be finalized by both parties.

Pursuant to the Purchase Agreement, the aggregate consideration paid was approximately $658.4 million in cash, which reflected the original agreed upon purchase price of $642.7 million, plus a $15.7 million adjustment reflecting $11.0 million of net cash at close, and $4.7 million related to higher net working capital.

The aggregate consideration paid in the transaction was funded using cash on hand and borrowings under our revolving credit facility.

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• 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, the latter being a unit 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 institutional accrediting agencies recognized by the Department of Education.

USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are units of Strayer University.

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.

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Its primary offering is an intensive 12-week accelerated software development program, together with placement services and coaching.

• In the second quarter, USHE enrollment decreased 10% to 83,923 compared to 93,123 for the same period in 2020.

• In the third quarter, USHE enrollment decreased 13% to 77,574 compared to 89,042 for the same period in 2020.

Alternative Learning Segment

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All enrollments attributed to the Alternative Learning 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, employer affiliated enrollment as a percentage of USHE enrollment was 20.5% compared to 17.2% for the same period in 2020.

• In the third quarter, employer affiliated enrollment as a percentage of USHE enrollment was 21.1% compared to 18.3% for the same period in 2020.

• Sophia Learning provides low-cost online general education courses recommended by the American Council on Education for credit to other colleges and universities.

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Media Design School is accredited in New Zealand by the New Zealand Qualifications Authority, responsible for the quality assurance of non-university tertiary training providers.

• In the second quarter, Australia/New Zealand enrollment increased 1% to 18,800 compared to 18,592 for the same period in 2020.

• In the third quarter, Australia/New Zealand enrollment decreased 4% to 18,188 compared to 18,985 for the same period in 2020.

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.

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.

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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, 2021 consisted of tuition revenue.

Approximately 96% of our revenues during the nine months ended September 30, 2021 consisted of tuition revenue.

Capella University offers monthly start options for new students, who then transition to a quarterly schedule.

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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).

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.

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Estimated redemption rates of eligible students vary based on their term of enrollment.

As of June 30, 2021, we had deferred $53.6 million for estimated redemptions earned under the Graduation Fund, as compared to $53.3 million at December 31, 2020.

Each quarter, we assess our methodologies and assumptions underlying our estimates for persistence and estimated redemptions based on actual

As of September 30, 2021, we had deferred $51.6 million for estimated redemptions earned under the Graduation Fund, as compared to $53.3 million at December 31, 2020.

Each quarter, we assess our methodologies and assumptions underlying our estimates for persistence and estimated redemptions based on actual experience.

To date, any adjustments to our estimates have not been material.

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If the financial condition of our students were to deteriorate based on current or expected future events resulting in evidence of impairment of their ability to make required payments for tuition payable to us, additional allowances or write-offs may be required.

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

A change in our allowance for credit losses of 1% of gross tuition receivable as of June 30, 2021 would have changed our income from operations by approximately $1.3 million.

For the third quarter of 2021, our bad debt expense was 3.8% of revenue, compared to 4.7% for the same period in 2020.

A change in our allowance for credit losses of 1% of gross tuition receivable as of September 30, 2021 would have changed our income from operations by approximately $1.4 million.

Business combinations — We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, the purchase price be allocated to all tangible assets and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.

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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, 2021 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, 2021.

No events or circumstances occurred in the three and nine months ended September 30, 2021 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 nine month periods ended September 30, 2021.

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.

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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, 2021.

No impairment charges related to finite-lived intangible assets were recorded during the three and nine month periods ended September 30, 2021.

Other estimates — We record estimates for certain of our accrued expenses and for income tax liabilities.

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As discussed above, we completed our acquisition of ANZ on November 3, 2020.

Our results of operations for the three and six months ended June 30, 2021 include the results of ANZ, but the results of operations for the three and six months ended June 30, 2020 do not include the financial results of ANZ.

Our results of operations for the three and nine months ended September 30, 2021 include the results of ANZ, but the results of operations for the three and nine months ended September 30, 2020 do not include the financial results of ANZ.

Accordingly, the financial results of each period presented are not directly comparable.

In the second quarter of 2021, we generated $299.2 million in revenue compared to $255.8 million in 2020.

Our income from operations was $26.7 million for the second quarter of 2021 compared to $46.4 million in 2020 primarily due to lower earnings in

the USHE segment and restructuring costs incurred in the second quarter of 2021, partially offset by the inclusion of ANZ's income from operations.

Net income in the second quarter of 2021 was $20.0 million compared to $34.2 million for the same period in 2020.

In the third quarter of 2021, we generated $270.1 million in revenue compared to $239.0 million in 2020.

Our income from operations was $7.3 million for the third quarter of 2021 compared to $15.4 million in 2020, primarily due to lower earnings in the USHE segment, partially offset by the inclusion of ANZ's income from operations and lower amortization expense of intangible assets.

Net income in the third quarter of 2021 was $3.9 million compared to $11.0 million for the same period in 2020.

Diluted earnings per share was $0.16 compared to $0.47 for the same period in 2020.

For the six months ended June 30, 2021, we generated $589.5 million in revenue, compared to $521.1 million for the same period in 2020.

Our income from operations was $38.7 million for the six months ended June 30, 2021 compared to $90.4 million for the same period in 2020 primarily due to lower earnings in the USHE segment and restructuring costs incurred in the first six months of 2021, partially offset by the inclusion of ANZ's income from operations.

Net income was $29.6 million for the six months ended June 30, 2021 compared to $69.4 million for the same period in 2020, and diluted earnings per share was $1.22 in the six months ended June 30, 2021 compared to $3.15 for the same period in 2020.

For the nine months ended September 30, 2021, we generated $859.6 million in revenue, compared to $760.2 million for the same period in 2020.

Our income from operations was $46.0 million for the nine months ended September 30, 2021 compared to $105.8 million for the same period in 2020, primarily due to lower earnings in the USHE segment and higher restructuring costs incurred in the first nine months of 2021, partially offset by the inclusion of ANZ's income from operations.

Net income was $33.4 million for the nine months ended September 30, 2021 compared to $80.4 million for the same period in 2020, and diluted earnings per share was $1.38 in the nine months ended September 30, 2021 compared to $3.58 for the same period in 2020.

In the accompanying analysis of financial information for 2021 and 2020, 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”).

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• severance costs and right-of-use lease asset impairment charges associated with our restructuring;

• income from partnership and other investments that are not part of our core operations;

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

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

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A reconciliation of these measures to the most directly comparable GAAP measures is provided below.

Adjusted income from operations was $53.7 million in the second quarter of 2021 compared to $63.0 million in 2020.

Adjusted net income was $37.5 million in the second quarter of 2021 compared to $45.4 million in 2020, and adjusted diluted earnings per share was $1.55 in the second quarter of 2021 compared to $2.06 in 2020.

Adjusted income from operations was $106.7 million for the six months ended June 30, 2021 compared to $126.1 million for the same period in 2020.

Adjusted net income was $74.5 million for the six months ended June 30, 2021 compared to $91.9 million for the same period in 2020, and adjusted diluted earnings per share was $3.09 for the six months ended June 30, 2021 compared to $4.17 for the same period in 2020.

Adjusted income from operations was $20.8 million in the third quarter of 2021 compared to $37.8 million in 2020.

Adjusted net income was $14.2 million in the third quarter of 2021 compared to $27.4 million in 2020, and adjusted diluted earnings per share was $0.59 in the third quarter of 2021 compared to $1.18 in 2020.

Adjusted income from operations was $127.4 million for the nine months ended September 30, 2021 compared to $163.9 million for the same period in 2020.

Adjusted net income was $88.7 million for the nine months ended September 30, 2021 compared to $119.3 million for the same period in 2020, and adjusted diluted earnings per share was $3.67 for the nine months ended September 30, 2021 compared to $5.32 for the same period in 2020.

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

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

Reconciliation of Reported to Adjusted Results of Operations for the three months ended September 30, 2021

Non-GAAP Adjustments

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Restructuring costs (3)

Income from other investments (4)

Loss from other investments (4)

adjustments (5)

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Weighted average diluted shares outstanding 24,113 24,113

Rec onciliation of Reported to Adjusted Results of Operations for the three months ended June 30, 2020

Rec onciliation of Reported to Adjusted Results of Operations for the three months ended September 30, 2020

Non-GAAP Adjustments

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Weighted average diluted shares outstanding 23,214 23,214

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

Reconciliation of Reported to Adjusted Results of Operations for the nine months ended September 30, 2021

Non-GAAP Adjustments

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Weighted average diluted shares outstanding 24,131 24,131

Reconciliation of Reported to Adjusted Results of Operations for the six months ended June 30, 2020

Reconciliation of Reported to Adjusted Results of Operations for the nine months ended September 30, 2020

Non-GAAP Adjustments

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(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 an adjusted effective tax rate of 28.5% for the three and six months ended June 30, 2020 and an adjusted effective tax rate of 29.5% and 29.3% for the three and six months ended June 30, 2021, respectively.

(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 28.5% for the three and nine months ended September 30, 2020 and an adjusted effective tax rate of 29.7% and 29.4% for the three and nine months ended September 30, 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.

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

Consolidated revenue increased to $270.1 million, compared to $239.0 million in the same period in the prior year, primarily due to the inclusion of ANZ.

In the USHE segment for the three months ended June 30, 2021, total enrollment decreased 10% to 83,923 from 93,123 for the same period in 2020.

USHE segment revenue decreased 14.2% to $212.2 million compared to $247.4 million in 2020 as a result of declines in enrollment and revenue-per-student due to higher scholarships and discounts we are offering in response to the COVID-19 pandemic.

In the USHE segment for the three months ended September 30, 2021, total enrollment decreased 13% to 77,574 from 89,042 for the same period in 2020.

USHE segment revenue decreased 16.7% to $191.9 million compared to $230.3 million in 2020 as a result of declines in enrollment and revenue-per-student due to higher scholarships and discounts.

Near term revenue in the USHE segment is expected to continue to be impacted negatively by the ongoing COVID-19 pandemic with weaker demand for enrollments and higher scholarships and discounts.

In the Alternative Learning segment, revenue for the three months ended June 30, 2021 increased 52.2% to $12.9 million compared to $8.5 million in 2020 as a result of rapid growth in Sophia Learning and increasing employer affiliated enrollment.

Revenues for the Australia/New Zealand segment were $74.1 million and included a $1.4 million purchase accounting reduction related to contract liabilities acquired in the acquisition.

In the Alternative Learning segment, revenue for the three months ended September 30, 2021 increased 48.7% to $13.0 million compared to $8.7 million in 2020 as a result of rapid growth in Sophia Learning and higher employer affiliated enrollment.

Revenues for the Australia/New Zealand segment were $65.2 million.

Instructional and support costs.

Consolidated instructional and support costs increased to $152.9 million, compared to $125.5 million in the same period in the prior year, principally due to the inclusion of $35.1 million of instructional and support costs related to ANZ, partially offset by cost savings implemented as a result of the impact of the COVID-19 pandemic, which included lower expenses associated with travel and facilities costs, as well as savings from the employee restructuring plan implemented in the third quarter of 2020.

Consolidated instructional and support costs as a percentage of revenues increased to 51.1% in the second quarter of 2021 from 49.1% in the second quarter of 2020.

Consolidated instructional and support costs increased to $153.7 million, compared to $127.2 million in the same period in the prior year, principally due to the inclusion of $33.7 million of instructional and support costs related to ANZ, partially offset by lower expenses associated with facility costs as well as savings from the employee restructuring plan implemented in the third quarter of 2020.

Consolidated instructional and support costs as a percentage of revenues increased to 56.9% in the third quarter of 2021 from 53.2% in the third quarter of 2020.

General and administration expenses .

Consolidated general and administration expenses increased to $93.4 million in the second quarter of 2021 compared to $67.3 million in the prior year, principally due to the inclusion of $23.4 million of general and administration expenses related to ANZ, as well as increased investments in branding initiatives and partnerships with brand ambassadors.

Consolidated general and administration expenses as a percentage of revenues increased to 31.2% in the second quarter of 2021 from 26.3% in the second quarter of 2020.

Consolidated general and administration expenses increased to $95.7 million in the third quarter of 2021 compared to $74.1 million in the prior year, principally due to the inclusion of $21.2 million of general and administration expenses related to ANZ, as well as 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 third quarter of 2021 from 31.0% in the third quarter of 2020.

Amortization of intangible assets .

Amortization of intangible assets increased to $19.4 million in the second quarter of 2021 compared to $15.4 million in 2020, due to the additional amortization expense of intangible assets acquired in the acquisition of ANZ in November 2020.

Amortization of intangible assets decreased to $8.9 million in the third quarter of 2021 compared to $15.4 million in 2020, due to lower amortization expense associated with intangible assets acquired through the merger with Capella Education Company, offset by additional amortization expense of intangible assets acquired in the acquisition of ANZ in November 2020.

Merger and integration costs.

Merger and integration costs increased to $1.9 million in the second quarter of 2021 compared to $1.2 million for the same period in 2020, as a result of transaction and integration expenses associated with the acquisition of ANZ.

Merger and integration costs decreased to $1.1 million in the third quarter of 2021 compared to $2.9 million for the same period in 2020, as a result of lower transaction and integration expenses associated with the acquisition of ANZ.

Restructuring costs .

Restructuring costs of $4.8 million in the second quarter of 2021 primarily include impairments of right-of-use lease assets associated with vacating leased space, as well as severance and other personnel-related expenses from employee terminations in connection with a restructuring plan implemented in 2020.

Restructuring costs decreased to $3.3 million in the third quarter of 2021 compared to $4.0 million in 2020, primarily due to lower severance and other personnel-related expenses from employee terminations in connection with the restructuring plan implemented in the third quarter of 2020, partially offset by impairments of right-of-use lease assets associated with vacating leased space in the third quarter of 2021.

Income from operations .

Consolidated income from operations decreased to $26.7 million in the second quarter of 2021 compared to $46.4 million in the second quarter of 2020, principally due to lower earnings in the USHE segment and restructuring costs incurred in the second quarter of 2021, partially offset by the inclusion of ANZ's income from operations.

USHE segment income from operations decreased 45.4% to $32.1 million in the second quarter of 2021, compared to $58.8 million in the second quarter of 2020, primarily due to lower enrollments and increased scholarship offerings during the COVID-19 pandemic, as well as increased investments in marketing initiatives.

In the Alternative Learning segment, income from operations for the three months ended June 30, 2021 increased 22.7% to $5.2 million compared to $4.2 million in 2020 as a result of rapid growth in Sophia Learning and an increase in employer affiliated enrollment, partially offset by increased investment in outreach to corporate partners.

Income from operations for the Australia/New Zealand segment was $15.6 million, which included a $1.4 million purchase accounting reduction related to contract liabilities acquired in the acquisition.

Other income .

Other income decreased to $0.8 million in the second quarter of 2021 compared to $1.6 million in the second quarter of 2020, as a result of an increase in interest expense due to the $141.7 million balance outstanding on our revolving credit facility which was used to partially fund the ANZ acquisition in November 2020.

We incurred $0.9 million of interest expense in the three months ended June 30, 2021 compared to $0.2 million in 2020.

Consolidated income from operations decreased to $7.3 million in the third quarter of 2021 compared to $15.4 million in the third quarter of 2020, principally due to lower earnings in the USHE segment, partially offset by the inclusion of ANZ's income from operations and lower amortization expense of intangible assets.

USHE segment income from operations decreased 84.7% to $5.2 million in the third quarter of 2021, compared to $33.7 million in the third quarter of 2020, primarily due to lower enrollments, higher scholarship and discount offerings, and increased investments in marketing initiatives.

In the Alternative Learning segment, income from operations for the three months ended September 30, 2021 increased 26.0% to $5.2 million compared to $4.1 million in 2020 as a result of rapid growth in Sophia Learning and an increase in employer affiliated enrollment, partially offset by increased investment in outreach to corporate partners.

Income from operations for the Australia/New Zealand segment was $10.4 million.

Other income (expense) .

Other income (expense) decreased to $1.8 million of expense in the third quarter of 2021 compared to $0.9 million of income in the third quarter of 2020, as a result of an $0.8 million loss on the sale of marketable securities, a $0.6 million loss from limited partnership investments, as well as an increase in interest expense due to the $141.6 million balance outstanding on our revolving credit facility which was used to partially fund the ANZ acquisition in November 2020.

We incurred $0.9 million of interest expense in the three months ended September 30, 2021 compared to $0.2 million in 2020.

Provision for income taxes.

Income tax expense was $7.5 million in the second quarter of 2021, compared to $13.9 million in the second quarter of 2020.

Income tax expense was $1.6 million in the third quarter of 2021, compared to $5.4 million in the third quarter of 2020.

Our effective tax rate for the quarter was 29.9%, compared to 32.9% for the same period in 2020.

Net income decreased to $20.0 million in the second quarter of 2021 compared to $34.2 million in the second quarter of 2020 due to the factors discussed above.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

increase in the effective tax rate in 2020 was primarily due to non-deductible transaction expenses incurred in that period.

Net income decreased to $3.9 million in the third quarter of 2021 compared to $11.0 million in the third quarter of 2020 due to the factors discussed above.

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

Consolidated revenue increased to $859.6 million, compared to $760.2 million in the same period in the prior year, primarily due to the inclusion of ANZ.

USHE segment revenue decreased 13% to $438.8 million compared to $502.9 million in 2020 as a result of declines in enrollment and revenue-per-student due to higher scholarships and discounts we are offering in response to the COVID-19 pandemic.

USHE segment revenue decreased 14.0% to $630.6 million compared to $733.2 million in 2020 as a result of declines in enrollment and revenue-per-student due to higher scholarships and discounts we offered in response to the COVID-19 pandemic.

Near term revenue in the USHE segment is expected to continue to be impacted negatively by the ongoing COVID-19 pandemic with weaker demand for enrollments and higher scholarships and discounts.

In the Alternative Learning segment, revenue for the six months ended June 30, 2021 increased 39% to $25.4 million compared to $18.3 million in 2020 as a result of rapid growth in Sophia Learning, and increasing employer affiliated enrollment.

In the Alternative Learning segment, revenue for the nine months ended September 30, 2021 increased 42.3% to $38.4 million compared to $27.0 million in 2020 as a result of rapid growth in Sophia Learning, and higher employer affiliated enrollment.

Revenues for the Australia/New Zealand segment were $190.5 million and included a $3.6 million purchase accounting reduction related to contract liabilities acquired in the acquisition.

Instructional and support costs.

Consolidated instructional and support costs increased to $305.7 million in the six months ended June 30, 2021 from $258.5 million in the six months ended June 30, 2020, principally due to the inclusion of $68.0 million of instructional and support costs related to ANZ, partially offset by cost savings implemented as a result of the impact of the COVID-19 pandemic, which included lower expenses associated with travel and facilities costs, as well as savings from the employee restructuring plan implemented in the third quarter of 2020.

Consolidated instructional and support costs as a percentage of revenues increased to 51.9% in the six months ended June 30, 2021 from 49.6% in the six months ended June 30, 2020.

Consolidated instructional and support costs increased to $459.4 million in the nine months ended September 30, 2021 from $385.7 million in the nine months ended September 30, 2020, principally due to the inclusion of $101.7 million of instructional and support costs related to ANZ, partially offset by cost savings implemented as a result of the impact of the COVID-19 pandemic, which included lower expenses associated with travel and facilities costs, as well as savings from the employee restructuring plan implemented in the third quarter of 2020.

Consolidated instructional and support costs as a percentage of revenues increased to 53.4% in the nine months ended September 30, 2021 from 50.7% in the nine months ended September 30, 2020.

General and administration expenses .

Consolidated general and administration expenses increased to $180.2 million in the six months ended June 30, 2021 from $136.5 million in the six months ended June 30, 2020, principally due to the inclusion of $44.7 million of general and administration expenses related to ANZ.

Consolidated general and administration expenses as a percentage of revenues increased to 30.6% in the six months ended June 30, 2021 from 26.2% in the six months ended June 30, 2020.

Consolidated general and administration expenses increased to $276.0 million in the nine months ended September 30, 2021 from $210.6 million in the nine months ended September 30, 2020, principally due to the inclusion of $65.9 million of general and administration expenses related to ANZ.

Consolidated general and administration expenses as a percentage of revenues increased to 32.1% in the nine months ended September 30, 2021 from 27.7% in the nine months ended September 30, 2020.

Amortization of intangible assets .

Amortization of intangible assets increased to $38.8 million in the six months ended June 30, 2021 from $30.8 million in the six months ended June 30, 2020, due to the additional amortization expense of intangible assets acquired in the acquisition of ANZ in November 2020.

Amortization of intangible assets increased to $47.7 million in the nine months ended September 30, 2021 from $46.3 million in the nine months ended September 30, 2020, due to additional amortization expense of intangible assets acquired in the acquisition of ANZ in November 2020, partially offset by lower amortization expense associated with intangible assets acquired through the merger with Capella Education Company.

Merger and integration costs.

Merger and integration costs decreased to $2.9 million in the six months ended June 30, 2021 from $4.9 million in the six months ended June 30, 2020, as a result of lower expenses for integration support services and severance costs related to the merger with Capella Education Company, partially offset by transaction and integration expenses associated with the acquisition of ANZ.

Merger and integration costs decreased to $4.1 million in the nine months ended September 30, 2021 from $7.9 million in the nine months ended September 30, 2020, as a result of lower expenses for integration support services and severance costs related to the merger with Capella Education Company, partially offset by integration expenses associated with the acquisition of ANZ.

Restructuring costs .

Restructuring costs of $23.1 million in the six months ended June 30, 2021 primarily include impairments of right-of-use lease assets and fixed assets associated with vacating leased space based on an assessment of our real estate portfolio completed in the six months ended June 30, 2021, as well as severance and other personnel-related expenses from employee terminations in connection with a restructuring plan implemented in 2020.

Restructuring costs increased to $26.4 million in the nine months ended September 30, 2021 from $4.0 million in the nine months ended September 30, 2020, as a result of right-of-use lease assets and fixed assets impairments associated with vacating leased space based on an assessment of our real estate portfolio.

Income from operations .

Consolidated income from operations decreased to $38.7 million in the six months ended June 30, 2021 from $90.4 million in the six months ended June 30, 2020, principally due to lower earnings in the USHE segment and restructuring costs incurred in 2021, partially offset by the inclusion of ANZ's income from operations.

USHE segment income from operations decreased 31% to $79.8 million in the six months ended June 30, 2021 from $115.5 million in the six months ended June 30, 2020, primarily due to lower enrollments and increased scholarship offerings during the COVID-19 pandemic.

Alternative Learning segment income from operations increased 4% to $11.1 million in the six months ended June 30, 2021 from $10.6 million in the six months ended June 30, 2020 as a result of rapid growth in Sophia Learning, partially offset by increased investment in outreach to corporate partners.

Consolidated income from operations decreased to $46.0 million in the nine months ended September 30, 2021 from $105.8 million in the nine months ended September 30, 2020, principally due to lower earnings in the USHE segment and restructuring costs incurred in 2021, partially offset by the inclusion of ANZ's income from operations.

USHE segment income from operations decreased 43.0% to $85.0 million in the nine months ended September 30, 2021 from $149.2 million in the nine months ended September 30, 2020, primarily due to lower enrollments and increased scholarship offerings during the COVID-19 pandemic.

Alternative Learning segment income from operations increased 10.3% to $16.2 million in the nine months ended September 30, 2021 from $14.7 million in the nine months ended September 30, 2020 as a result of rapid growth in Sophia Learning, partially offset by increased investment in outreach to corporate partners.

Income from operations for the Australia/New Zealand segment was $23.0 million, which included a $3.6 million purchase accounting reduction related to contract liabilities acquired in the acquisition.

Other income .

Other income decreased to $2.9 million in the six months ended June 30, 2021 from $3.8 million in the six months ended June 30, 2020, as a result of an increase in interest expense due to the $141.7 million balance outstanding on our revolving credit facility which was used to partially fund the ANZ acquisition in November 2020.

We incurred $1.8 million of interest expense in the six months ended June 30, 2021 compared to $0.4 million in the six months ended June 30, 2020.

Other income (expense) .

Other income (expense) decreased to $1.1 million of income in the nine months ended September 30, 2021 from $4.7 million of income in the nine months ended September 30, 2020, as a result of an $0.8 million loss on the sale of marketable securities and an increase in interest expense due to the $141.6 million balance outstanding on our revolving credit facility which was used to partially fund the ANZ acquisition in November 2020.

We incurred $2.7 million of interest expense in the nine months ended September 30, 2021 compared to $0.7 million in the nine months ended September 30, 2020.

Provision for income taxes.

Income tax expense was $12.1 million in the six months ended June 30, 2021, compared to $24.7 million in the six months ended June 30, 2021.

Our effective tax rate for the quarter was 29.0%, compared to 26.3% in the six months ended June 30, 2020.

The effective tax rate in 2020 includes higher windfall tax benefits recognized through share-based payment arrangements.

Net income decreased to $29.6 million in the six months ended June 30, 2021 compared to $69.4 million in the six months ended June 30, 2021 due to the factors discussed above.

Income tax expense was $13.7 million in the nine months ended September 30, 2021, compared to $30.1 million in the nine months ended September 30, 2021.

Our effective tax rate for the nine months ended September 30, 2021

was 29.1%, compared to 27.3% for the nine months ended September 30, 2020.

The effective tax rate in 2020 included higher windfall tax benefits recognized through share-based payment arrangements.

Net income decreased to $33.4 million in the nine months ended September 30, 2021 compared to $80.4 million in the nine months ended September 30, 2021 due to the factors discussed above.

Liquidity and Capital Resources

At June 30, 2021, we had cash, cash equivalents, and marketable securities of $293.7 million compared to $225.3 million at December 31, 2020 and $525.3 million at June 30, 2020.

At June 30, 2021, most of our cash was held in demand deposit accounts at high credit quality financial institutions.

At September 30, 2021, we had cash, cash equivalents, and marketable securities of $305.0 million compared to $225.3 million at December 31, 2020 and $768.9 million at September 30, 2020.

At September 30, 2021, 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.

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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, 2021.

At June 30, 2021, we had $141.7 million outstanding on our Revolving Credit Facility.

We had no borrowings outstanding as of June 30, 2020.

During the six months ended June 30, 2021 and 2020, we paid $1.4 million and $0.3 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, 2021 was $125.8 million, compared to $111.9 million for the same period in 2020.

The increase in net cash from operating activities was largely driven by the inclusion of ANZ and timing of working capital payments, partially offset by lower earnings in the USHE segment.

Capital expenditures decreased to $23.1 million for the six months ended June 30, 2021, compared to $25.5 million for the same period in 2020, due to lower capital investments in new and closed campuses, partially offset by the inclusion of ANZ.

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 2021.

During the six months ended June 30, 2021, we paid a total of $29.5 million in cash dividends on our common stock.

During the six months ended June 30, 2021, we paid $2.9 million to repurchase common shares in the open market under our repurchase program.

As of June 30, 2021, we had $247.1 million of share repurchase authorization remaining to use through December 31, 2021.

For the second quarter of 2021 and 2020, bad debt expense as a percentage of revenue was 3.3% and 4.7%, respectively.

We were in compliance with all applicable covenants related to the Amended Credit Facility as of September 30, 2021.

At September 30, 2021, we had $141.6 million outstanding on our Revolving Credit Facility.

We had no borrowings outstanding as of September 30, 2020.

During the nine months ended September 30, 2021 and 2020, we paid $2.1 million and $0.4 million, respectively of interest and unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities for the nine months ended September 30, 2021 was $161.2 million, compared to $158.8 million for the same period in 2020.

The increase in net cash from operating activities was driven by the inclusion of ANZ, offset by lower earnings in the USHE segment.

Capital expenditures decreased to $33.6 million for the nine months ended September 30, 2021, compared to $34.8 million for the same period in 2020, due to lower capital investments in new and closed campuses, partially offset by the inclusion of ANZ.

The Board of Directors declared a regular, quarterly cash dividend of $0.60 per share of common stock for each of the first three quarters of 2021.

During the nine months ended September 30, 2021, we paid a total of $44.3 million in cash dividends on our common stock.

During the nine months ended September 30, 2021, we paid $5.9 million to repurchase common shares in the open market under our repurchase program.

As of September 30, 2021, we had $244.1 million of share repurchase authorization remaining to use through December 31, 2021.

For the third quarter of 2021 and 2020, bad debt expense as a percentage of revenue was 3.8% and 4.7%, 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, 2021 and 2020.

Currently, we maintain our cash primarily in demand deposit bank accounts and money market funds, which are included in cash and cash equivalents at September 30, 2021 and 2020.

We also hold marketable securities, which primarily include tax-exempt municipal securities and corporate debt securities.

During the six months ended June 30, 2021 and 2020, we earned interest income of $0.6 million and $2.9 million, respectively.

During the nine months ended September 30, 2021 and 2020, we earned interest income of $0.9 million and $3.6 million, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis