What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-07-27 compared with 2022-05-10 · 284 added, 206 removed, 694 unchanged (41% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Current assets:

28 unchanged sentences

32,000,000 shares authorized;

24,592,098 and 24,963,542 shares issued and outstanding at December 31, 2021 and March 31, 2022, respectively

24,592,098 and 24,637,268 shares issued and outstanding at December 31, 2021 and June 30, 2022, respectively

Additional paid-in capital 1,529,969 1,513,509

Accumulated other comprehensive income 9,203 29,185

Accumulated other comprehensive income (loss) 9,203 ( 28,009 )

Retained earnings 174,572 166,175

5 unchanged sentences

(in thousands, except per share data)

For the three months ended March 31,

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

2021 2022 2021 2022

Revenues $ 299,173 $ 273,564 $ 589,509 $ 532,419

18 unchanged sentences

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

For the three months ended March 31,

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

2021 2022 2021 2022

Net income $ 19,976 $ 15,220 $ 29,553 $ 22,249

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustment ( 9,276 ) ( 57,005 ) ( 17,988 ) ( 36,506 )

Unrealized gains (losses) on marketable securities, net of tax 35 ( 189 ) ( 69 ) ( 706 )

Comprehensive income (loss) $ 10,735 $ ( 41,974 ) $ 11,496 $ ( 14,963 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

For the three months ended June 30, 2021

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shares Par Value

Balance at March 31, 2021 24,651,205 $ 247 $ 1,521,145 $ 174,469 $ 40,064 $ 1,735,925

Stock-based compensation — — 4,167 1 — 4,168

Exercise of stock options, net 833 — 43 — — 43

Issuance of restricted stock, net 6,567 ( 1 ) — — — ( 1 )

Repurchase of common stock ( 37,494 ) — ( 2,333 ) ( 571 ) — ( 2,904 )

Common stock dividends ($ 0.60 per share)

— — — ( 14,786 ) — ( 14,786 )

Foreign currency translation adjustment — — — — ( 9,276 ) ( 9,276 )

Unrealized gains on marketable securities, net of tax — — — — 35 35

Net income — — — 19,976 — 19,976

Balance at June 30, 2021 24,621,111 $ 246 $ 1,523,022 $ 179,089 $ 30,823 $ 1,733,180

For the three months ended June 30, 2022

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Shares Par Value

Balance at March 31, 2022 24,963,542 $ 250 $ 1,528,328 $ 166,550 $ 29,185 $ 1,724,313

Stock-based compensation — — 5,529 — — 5,529

Issuance of restricted stock, net 260 ( 1 ) ( 33 ) — — ( 34 )

Repurchase of common stock ( 326,534 ) ( 3 ) ( 20,315 ) ( 693 ) — ( 21,011 )

Common stock dividends ($ 0.60 per share)

— — — ( 14,902 ) — ( 14,902 )

Foreign currency translation adjustment — — — — ( 57,005 ) ( 57,005 )

Unrealized losses on marketable securities, net of tax — — — — ( 189 ) ( 189 )

Comprehensive income $ 761 $ 27,011

Net income — — — 15,220 — 15,220

Balance at June 30, 2022 24,637,268 $ 246 $ 1,513,509 $ 166,175 $ ( 28,009 ) $ 1,651,921

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except share data)

For the three months ended March 31, 2021

For the six months ended June 30, 2021

Common Stock Additional

7 unchanged sentences

Issuance of restricted stock, net 238,034 2 ( 2,342 ) — — ( 2,340 )

Repurchase of common stock ( 37,494 ) — ( 2,333 ) ( 571 ) — ( 2,904 )

Common stock dividends ($ 1.20 per share)

3 unchanged sentences

Net income — — — 29,553 — 29,553

Balance at March 31, 2021 24,651,205 $ 247 $ 1,521,145 $ 174,469 $ 40,064 $ 1,735,925

For the three months ended March 31, 2022

Balance at June 30, 2021 24,621,111 $ 246 $ 1,523,022 $ 179,089 $ 30,823 $ 1,733,180

For the six months ended June 30, 2022

Common Stock Additional

2 unchanged sentences

Comprehensive

Income (Loss) Total

Shares Par Value

8 unchanged sentences

Net income — — — 22,249 — 22,249

Balance at March 31, 2022 24,963,542 $ 250 $ 1,528,328 $ 166,550 $ 29,185 $ 1,724,313

Balance at June 30, 2022 24,637,268 $ 246 $ 1,513,509 $ 166,175 $ ( 28,009 ) $ 1,651,921

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the three months ended March 31,

For the six months ended June 30,

Cash flows from operating activities:

26 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 1,396 ) ( 4,981 )

Net increase in cash, cash equivalents, and restricted cash 50,019 28,103

Net increase (decrease) in cash, cash equivalents, and restricted cash 71,894 ( 2,855 )

Cash, cash equivalents, and restricted cash — beginning of period 202,020 279,212

19 unchanged sentences

All intercompany accounts and transactions have been eliminated in the consolidated financial statements.

All information as of March 31, 2021 and 2022, and for the three months ended March 31, 2021 and 2022 is unaudited but, in the opinion of management, contains all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the condensed consolidated financial position, results of operations, and cash flows of the Company.

All information as of June 30, 2021 and 2022, and for the three and six months ended June 30, 2021 and 2022 is unaudited but, in the opinion of management, contains all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the condensed consolidated financial position, results of operations, and cash flows of the Company.

The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date.

1 unchanged sentence

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year.

Below is a description of the nature of the costs included in the Company’s operating expense categories.

7 unchanged sentences

Amortization of intangible assets consists of amortization and depreciation expense related to intangible assets and software assets acquired through the Company's merger with Capella Education Company (“CEC”) and the Company's acquisition of Torrens University and associated assets in Australia and New Zealand (“ANZ”).

Merger and integration costs include integration expenses associated with the Company's merger with CEC, and transaction and integration expenses associated with the Company's acquisition of ANZ.

Merger and integration costs include integration expenses associated with the Company's merger with CEC and the Company's acquisition of ANZ.

Restructuring costs include severance and other personnel-related expenses from voluntary and involuntary employee terminations, as well as early lease termination costs and impairments of right-of-use lease assets and fixed assets associated with vacating leased space in connection with the Company's restructuring plans.

15 unchanged sentences

higher education institution during the academic term.

The Company had approximately $ 0.7 million and $ 0.9 million of these unpaid obligations as of December 31, 2021 and March 31, 2022, respectively.

The Company had approximately $ 0.7 million and $ 0.9 million of these unpaid obligations as of December 31, 2021 and June 30, 2022, respectively.

In Australia and New Zealand, advance tuition payments from international students are required to be restricted until that student commences his or her course.

In addition, a portion of tuition prepayments from students enrolled in a vocational education and training program are held in trust by a third party law firm to adhere to tuition protection requirements.

As of December 31, 2021 and March 31, 2022, the Company had approximately $ 9.1 million and $ 12.5 million, respectively, of restricted cash related to these requirements in Australia and New Zealand.

As of December 31, 2021 and June 30, 2022, the Company had approximately $ 9.1 million and $ 12.1 million, respectively, of restricted cash related to these requirements in Australia and New Zealand.

These balances are recorded as restricted cash and included in other current assets in the unaudited condensed consolidated balance sheets.

As part of commencing operations in Pennsylvania in 2003, the Company is required to maintain a “minimum protective endowment” of at least $ 0.5 million in an interest-bearing account as long as the Company operates its campuses in the state.

As part of conducting operations in Pennsylvania, the Company is required to maintain a “minimum protective endowment” of at least $ 0.5 million in an interest-bearing account as long as the Company operates its campuses in the state.

The Company holds these funds in an interest-bearing account, which is included in other assets.

The following table illustrates the reconciliation of cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows as of March 31, 2021 and 2022 (in thousands):

As of March 31,

As of June 30,

Cash and cash equivalents $ 261,585 $ 262,941

9 unchanged sentences

In the event that current collection trends differ from historical trends, an adjustment is made to the allowance for credit losses and bad debt expense.

The Company’s tuition receivable and allowance for credit losses were as follows as of December 31, 2021 and March 31, 2022 (in thousands):

December 31, 2021 March 31, 2022

The Company’s tuition receivable and allowance for credit losses were as follows as of December 31, 2021 and June 30, 2022 (in thousands):

December 31, 2021 June 30, 2022

Tuition receivable $ 100,060 $ 119,444

1 unchanged sentence

Tuition receivable, net $ 51,277 $ 75,937

Approximately $ 2.5 million and $ 2.1 million of tuition receivable are included in other assets as of December 31, 2021 and March 31, 2022, respectively, because these amounts are expected to be collected after 12 months.

The following table illustrates changes in the Company’s allowance for credit losses for the three months ended March 31, 2021 and 2022 (in thousands).

For the three months ended March 31,

Approximately $ 2.5 million and $ 1.9 million of tuition receivable are included in other assets as of December 31, 2021 and June 30, 2022, respectively, because these amounts are expected to be collected after 12 months.

The following table illustrates changes in the Company’s allowance for credit losses for the three and six months ended June 30, 2021 and 2022 (in thousands).

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

2021 2022 2021 2022

Allowance for credit losses, beginning of period $ 49,179 $ 44,892 $ 49,773 $ 48,783

13 unchanged sentences

Authorized Stock

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,592,098 and 24,963,542 shares were issued and outstanding as of December 31, 2021 and March 31, 2022, respectively.

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,592,098 and 24,637,268 shares were issued and outstanding as of December 31, 2021 and June 30, 2022, respectively.

The Company also has authorized 8,000,000 shares of preferred stock, no ne of which is issued or outstanding.

Before any preferred stock may be issued in the future, the Board of Directors would need to establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and the terms or conditions of the redemption of the preferred stock.

In February 2022, the Company’s Board of Directors declared a regular, quarterly cash dividend of $ 0.60 per share of common stock.

The dividend was paid on March 14, 2022.

In April 2022, the Company’s Board of Directors declared a regular, quarterly cash dividend of $ 0.60 per share of common stock.

The dividend was paid on June 6, 2022.

Net Income Per Share

6 unchanged sentences

Stock options are not included in the computation of diluted earnings per share when the stock option exercise price of an individual grant exceeds the average market price for the period.

Set forth below is a reconciliation of shares used to calculate basic and diluted earnings per share for the three months ended March 31, 2021 and 2022 (in thousands):

For the three months ended March 31,

Set forth below is a reconciliation of shares used to calculate basic and diluted earnings per share for the three and six months ended June 30, 2021 and 2022 (in thousands):

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

2021 2022 2021 2022

Weighted average shares outstanding used to compute basic earnings per share 23,975 23,796 23,974 23,872

3 unchanged sentences

Anti-dilutive shares excluded from the diluted earnings per share calculation 385 15 252 218

Comprehensive Income

Comprehensive income includes net income and all changes in the Company’s equity during a period from non-owner sources, which for the Company consists of unrealized gains and losses on available-for-sale marketable securities, net of tax, and foreign currency translation adjustments.

As of December 31, 2021 and March 31, 2022, the balance of accumulated other comprehensive income was $ 9.2 million, net of tax of $ 0.2 million, and $ 29.2 million, net of tax of $ 0.1 million, respectively.

There were no reclassifications out of accumulated other comprehensive income to net income for the three months ended March 31, 2021 and 2022.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income and all changes in the Company’s equity during a period from non-owner sources, which for the Company consists of unrealized gains and losses on available-for-sale marketable securities, net of tax, and foreign currency translation adjustments.

As of December 31, 2021, the balance of accumulated other comprehensive income was $ 9.2 million, net of tax of $ 0.2 million, and as of June 30, 2022, the balance of accumulated other comprehensive loss was $ 28.0 million, net of tax of $ 0.1 million.

There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the three and six months ended June 30, 2021 and 2022.

Use of Estimates

1 unchanged sentence

The most significant management estimates include allowances for credit losses, useful lives of property and equipment and intangible assets, incremental borrowing rates, potential sublease income and vacancy periods, accrued expenses, forfeiture rates and the likelihood of achieving performance criteria for stock-based awards, value of free courses earned by students that will be redeemed in the future, valuation of goodwill and intangible assets, and the provision for income taxes.

During the three months ended March 31, 2021 and 2022, management estimates also include potential impacts the COVID-19 pandemic will have on student enrollment, tuition pricing, and collections of tuition receivables in future periods.

The duration and severity of the COVID-19 pandemic and its impact on the Company’s condensed consolidated financial statements is subject to uncertainty.

Actual results could differ from those estimates.

6 unchanged sentences

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.

The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the three months ended March 31, 2021 and 2022 (in thousands):

For the three months ended March 31,

The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the three and six months ended June 30, 2021 and 2022 (in thousands):

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

2021 2022 2021 2022

Higher Education Segment

Tuition, net of discounts, grants and scholarships $ 203,433 $ 181,374 $ 420,910 $ 368,729

8,774 8,652 17,844 17,063

Higher Education Segment 212,207 190,026 438,754 385,792

1 unchanged sentence

Tuition, net of discounts, grants and scholarships 72,340 65,847 122,562 113,383

1,720 1,696 2,763 2,672

Total Australia/New Zealand Segment 74,060 67,543 125,325 116,055

23 unchanged sentences

To be eligible, students must meet all of Strayer University’s admission requirements and must be enrolled in a bachelor’s or master's degree program.

The Company’s employees and their dependents are not eligible for the Graduation Fund.

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 response to the COVID-19 pandemic, Strayer University temporarily allowed students to miss three consecutive terms without losing their Graduation Fund credits.

Revenue from students participating in the Graduation Fund is recorded in accordance with ASC 606.

The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student toward earning the benefit.

The Company’s estimate of the

benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs.

Each quarter, the Company assesses its assumptions underlying these estimates, and to date, any adjustments to the estimates have not been material.

The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs.

Each quarter, the Company assesses its assumptions underlying these

estimates, and to date, any adjustments to the estimates have not been material.

The amount estimated to be redeemed in the next 12 months is $ 19.7 million and is included as a current contract liability in the unaudited condensed consolidated balance sheets.

1 unchanged sentence

The table below presents activity in the contract liability related to the Graduation Fund (in thousands):

For the three months ended March 31,

For the six months ended June 30,

Balance at beginning of period $ 53,314 $ 52,024

13 unchanged sentences

In addition, the 2020 restructuring plan included an evaluation of the Company's owned and leased real estate portfolio, which resulted in the consolidation and sale of underutilized facilities.

During the three months ended March 31, 2021, the Company recorded right-of-use lease asset charges of approximately $ 14.4 million related to facilities consolidated as a result of the restructuring plan.

The Company also recorded fixed asset impairment charges of approximately $ 2.0 million and $ 0.2 million during the three months ended March 31, 2021 and 2022, respectively.

The Company recorded right-of-use lease asset charges of approximately $ 2.6 million and $ 17.0 million during the three and six months ended June 30, 2021, respectively, and approximately $ 1.1 million during the three and six months ended June 30, 2022, related to facilities consolidated as a result of the restructuring plan.

The Company also recorded fixed asset impairment charges of approximately $ 2.0 million during the six months ended June 30, 2021, and approximately $ 2.2 million and $ 2.4 million during the three and six months ended June 30, 2022, respectively.

There were no fixed asset impairment charges during the three months ended June 30, 2021.

All severance and other employee separation charges and right-of-use lease asset and fixed asset impairment charges related to the 2020 restructuring plan are included in Restructuring costs on the unaudited condensed consolidated statements of income.

The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities during the three months ended March 31, 2021 and 2022 (in thousands):

The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities during the six months ended June 30, 2021 and 2022 (in thousands):

Integration Plan (1)

3 unchanged sentences

Payments ( 1,344 ) ( 3,237 ) ( 4,581 )

Balance at March 31, 2021 $ 1,102 $ 354 $ 1,456

Balance at June 30, 2021 $ 491 $ 1,408 $ 1,899

Balance at December 31, 2021 (2)

2 unchanged sentences

Payments — ( 2,815 ) ( 2,815 )

Balance at March 31, 2022 (2)

Balance at June 30, 2022 (2)

$ — $ 409 $ 409

3 unchanged sentences

Marketable Securities

The following is a summary of available-for-sale securities as of March 31, 2022 (in thousands):

The following is a summary of available-for-sale securities as of June 30, 2022 (in thousands):

Amortized Cost Gross Unrealized Gain Gross Unrealized (Losses) Estimated Fair Value

7 unchanged sentences

Total $ 29,444 $ 434 $ — $ 29,878

The unrealized gains and losses on the Company’s investments in corporate debt and municipal securities as of December 31, 2021 and March 31, 2022 were caused by changes in market values primarily due to interest rate changes.

As of March 31, 2022, there were no securities in an unrealized loss position for a period longer than twelve months.

The unrealized gains and losses on the Company’s investments in corporate debt and municipal securities as of December 31, 2021 and June 30, 2022 were caused by changes in market values primarily due to interest rate changes.

As of June 30, 2022, there were no securities in an unrealized loss position for a period longer than twelve months.

The Company has no allowance for credit losses related to its available-for-sale securities as all investments are in investment grade securities.

The Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell these securities prior to the recovery of their amortized cost basis, which may be at maturity.

No impairment charges were recorded during the three months ended March 31, 2021 and 2022.

The following table summarizes the maturities of the Company’s marketable securities as of December 31, 2021 and March 31, 2022 (in thousands):

December 31, 2021 March 31, 2022

No impairment charges were recorded during the three and six months ended June 30, 2021 and 2022.

The following table summarizes the maturities of the Company’s marketable securities as of December 31, 2021 and June 30, 2022 (in thousands):

December 31, 2021 June 30, 2022

Due within one year $ 6,501 $ 8,854

1 unchanged sentence

Total $ 29,878 $ 26,793

The following table summarizes the proceeds from the maturities and sales of available-for-sale securities for the three months ended March 31, 2021 and 2022 (in thousands):

For the three months ended March 31,

The following table summarizes the proceeds from the maturities and sales of available-for-sale securities for the three and six months ended June 30, 2021 and 2022 (in thousands):

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

2021 2022 2021 2022

Maturities of marketable securities $ 3,665 $ 1,000 $ 5,595 $ 2,100

1 unchanged sentence

Total $ 3,665 $ 1,000 $ 5,595 $ 2,100

The Company did not record any gross realized gains or losses in net income during the three months ended March 31, 2021 and 2022.

The Company did not record any gross realized gains or losses in net income during the three and six months ended June 30, 2021 and 2022.

Fair Value Measurement

Assets measured at fair value on a recurring basis consist of the following as of March 31, 2022 (in thousands):

Assets measured at fair value on a recurring basis consist of the following as of June 30, 2022 (in thousands):

Fair Value Measurements at Reporting Date Using

March 31, 2022 Quoted Prices in

June 30, 2022 Quoted Prices in

Active Markets

25 unchanged sentences

The Company records any net unrealized gains and losses for changes in fair value as a component of accumulated other comprehensive income in stockholders' equity.

The Company's cash and cash equivalents held at December 31, 2021 and March 31, 2022 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

The Company's cash and cash equivalents held at December 31, 2021 and June 30, 2022 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

• Marketable securities – Classified in Level 2 and valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets.

1 unchanged sentence

• Deferred payments – The Company acquired certain assets and entered into deferred payment arrangements with the sellers in transactions that occurred in 2011.

The deferred payments are classified within Level 3 as there is no liquid market for similarly priced instruments and are valued using discounted cash flow models that encompass significant unobservable inputs.

The assumptions used to prepare the discounted cash flows include estimates for interest rates, enrollment growth, retention rates, and pricing strategies.

These assumptions are subject to change as the underlying data sources evolve and the programs mature.

The deferred payments were classified within Level 3 as there was no liquid market for similarly priced instruments and were valued using discounted cash flow models that encompass significant unobservable inputs.

The assumptions used to prepare the discounted cash flows included estimates for interest rates, enrollment growth, retention rates, and pricing strategies.

The final payment related to the deferred payment arrangements was made in the first quarter of 2022.

The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and did not transfer assets or liabilities between levels of the fair value hierarchy during the three months ended March 31, 2021 and 2022.

Changes in the fair value of the Company’s Level 3 liabilities during the three months ended March 31, 2021 and 2022 are as follows (in thousands):

As of March 31,

Changes in the fair value of the Company’s Level 3 liabilities during the six months ended June 30, 2021 and 2022 are as follows (in thousands):

As of June 30,

Balance as of the beginning of period $ 1,658 $ 658

3 unchanged sentences

Goodwill and Intangible Assets

The following table presents changes in the carrying value of goodwill by segment for the three months ended March 31, 2022 (in thousands):

The following table presents changes in the carrying value of goodwill by segment for the six months ended June 30, 2022 (in thousands):

Higher Education Australia /

5 unchanged sentences

Adjustments to prior acquisitions — — — —

Balance as of March 31, 2022 $ 632,075 $ 571,100 $ 100,000 $ 1,303,175

Balance as of June 30, 2022 $ 632,075 $ 524,353 $ 100,000 $ 1,256,428

The Company assesses goodwill at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount.

No events or circumstances occurred in the three months ended March 31, 2022 to indicate an impairment to goodwill at any of its segments.

There were no impairment charges related to goodwill recorded during the three months ended March 31, 2021 and 2022.

No events or circumstances occurred in the three and six months ended June 30, 2022 to indicate an impairment to goodwill at any of its segments.

There were no impairment charges related to goodwill recorded during the three and six months ended June 30, 2021 and 2022.

Intangible Assets

The following table represents the balance of the Company’s intangible assets as of December 31, 2021 and March 31, 2022 (in thousands):

December 31, 2021 March 31, 2022

The following table represents the balance of the Company’s intangible assets as of December 31, 2021 and June 30, 2022 (in thousands):

December 31, 2021 June 30, 2022

Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

6 unchanged sentences

Straight-line amortization expense for finite-lived intangible assets reflects the pattern in which the economic benefits of the assets are consumed over their estimated useful lives.

Amortization expense related to finite-lived intangible assets was $ 16.9 million and $ 2.9 million for the three months ended March 31, 2021 and 2022, respectively.

Amortization expense related to finite-lived intangible assets was $ 33.8 million and $ 5.8 million for the six months ended June 30, 2021 and 2022, respectively.

Indefinite-lived intangible assets not subject to amortization consist of trade names.

2 unchanged sentences

The Company assesses indefinite-lived intangible assets at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective indefinite-lived intangible asset below its carrying amount.

No events or circumstances occurred in the three months ended March 31, 2022 to indicate an impairment to indefinite-lived intangible assets.

There were no impairment charges related to indefinite-lived intangible assets recorded during the three months ended March 31, 2021 and 2022.

Other assets consist of the following as of December 31, 2021 and March 31, 2022 (in thousands):

December 31, 2021 March 31, 2022

No events or circumstances occurred in the three and six months ended June 30, 2022 to indicate an impairment to indefinite-lived intangible assets.

There were no impairment charges related to indefinite-lived intangible assets recorded during the three and six months ended June 30, 2021 and 2022.

Other assets consist of the following as of December 31, 2021 and June 30, 2022 (in thousands):

December 31, 2021 June 30, 2022

Prepaid expenses, net of current portion $ 19,852 $ 19,277

8 unchanged sentences

In the fourth quarter of 2020, pursuant to the terms of the perpetual license agreement associated with the Jack Welch Management Institute, the Company made a final one-time cash payment of approximately $ 25.3 million for the right to continue to use the Jack Welch name and likeness.

As of December 31, 2021 and March 31, 2022, $ 19.2 million and $ 18.8 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.

As of December 31, 2021 and June 30, 2022, $ 19.2 million and $ 18.4 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.

Equity Method Investments

2 unchanged sentences

The Company's investments range from 3 %- 5 % of any partnership’s interest and are accounted for under the equity method.

The following table illustrates changes in the Company’s limited partnership investments for the three months ended March 31, 2021 and 2022 (in thousands):

For the three months ended March 31,

The following table illustrates changes in the Company’s limited partnership investments for the three and six months ended June 30, 2021 and 2022 (in thousands):

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

2021 2022 2021 2022

Limited partnership investments, beginning of period $ 17,879 $ 13,887 $ 15,795 $ 15,582

Capital contributions 190 48 262 48

Pro-rata share in the net income (loss) of limited partnerships 2,714 ( 313 )

Pro-rata share in the net income of limited partnerships 889 377 3,603 64

Distributions ( 1,557 ) ( 301 ) ( 2,259 ) ( 1,683 )

3 unchanged sentences

Other Investments

The Company's venture fund, SEI Ventures, makes investments in education tech start-ups focused on transformational technologies that improve student success.

The Company's venture fund, SEI Ventures, makes investments in education technology start-ups focused on transformational technologies that improve student success.

These investments are accounted for at cost less impairment as they do not have readily determinable fair value.

3 unchanged sentences

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of December 31, 2021 and March 31, 2022 (in thousands):

December 31, 2021 March 31, 2022

Accounts payable and accrued expenses consist of the following as of December 31, 2021 and June 30, 2022 (in thousands):

December 31, 2021 June 30, 2022

Trade payables $ 45,340 $ 45,667

19 unchanged sentences

Department of Education (the “Department” or “Department of Education”) Financial Responsibility Composite Score of not less than 1.0 for any fiscal year and not less than 1.5 for any two consecutive fiscal years.

The Company was in compliance with all the terms of the Amended Credit Facility as of March 31, 2022.

As of December 31, 2021 and March 31, 2022, the Company had approximately $ 141.6 million and $ 141.7 million, respectively, outstanding under the Revolving Credit Facility.

Approximately $ 3.6 million and $ 3.7 million was denominated in Australian dollars as of December 31, 2021 and March 31, 2022, respectively.

During the three months ended March 31, 2021 and 2022, the Company paid $ 0.7 million and $ 0.4 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.

The Company was in compliance with all the terms of the Amended Credit Facility as of June 30, 2022.

As of December 31, 2021 and June 30, 2022, the Company had approximately $ 141.6 million and $ 141.4 million, respectively, outstanding under the Revolving Credit Facility.

Approximately $ 3.6 million and $ 3.4 million was denominated in Australian dollars as of December 31, 2021 and June 30, 2022, respectively.

During the six months ended June 30, 2021 and 2022, the Company paid $ 1.4 million and $ 1.2 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.

Other Long-Term Liabilities

Other long-term liabilities consist of the following as of December 31, 2021 and March 31, 2022 (in thousands):

December 31, 2021 March 31, 2022

Other long-term liabilities consist of the following as of December 31, 2021 and June 30, 2022 (in thousands):

December 31, 2021 June 30, 2022

Contract liabilities, net of current portion $ 34,704 $ 35,629

8 unchanged sentences

Equity Awards

The following table sets forth the amount of stock-based compensation expense recorded in each of the expense line items for the three months ended March 31, 2021 and 2022 (in thousands):

For the three months ended March 31,

The following table sets forth the amount of stock-based compensation expense recorded in each of the expense line items for the three and six months ended June 30, 2021 and 2022 (in thousands):

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

2021 2022 2021 2022

Instructional and support costs $ 1,281 $ 1,781 $ 2,506 $ 3,388

General and administration 3,368 3,748 6,043 7,209

Restructuring costs ( 481 ) — ( 481 ) —

Stock-based compensation expense included in operating expense 4,168 5,529 8,068 10,597

1 unchanged sentence

Stock-based compensation expense, net of tax $ 3,037 $ 4,073 $ 5,937 $ 7,807

During the three months ended March 31, 2021 and 2022, the Company recognized a $ 0.1 million windfall tax benefit and a $ 1.3 million tax shortfall, respectively, related to share-based payment arrangements, which was recorded as an adjustment to the provision for income taxes.

During the three months ended March 31, 2021 and 2022, the Company recorded income tax expense of $ 4.6 million and $ 5.2 million, reflecting an effective tax rate of 32.4 % and 42.7 %, respectively.

The Company had $ 1.0 million of unrecognized tax benefits as of December 31, 2021 and March 31, 2022.

During the six months ended June 30, 2021 and 2022, the Company recognized an $ 18,000 and $ 1.4 million tax shortfall, respectively, related to share-based payment arrangements, which was recorded as an adjustment to the provision for income taxes.

During the six months ended June 30, 2021 and 2022, the Company recorded income tax expense of $ 12.1 million and $ 12.2 million, reflecting an effective tax rate of 29.0 % and 35.4 %, respectively.

The Company had $ 1.0 million of unrecognized tax benefits as of December 31, 2021 and June 30, 2022.

Interest and penalties, including those related to uncertain tax positions, are included in the provision for income taxes in the unaudited condensed consolidated statements of income.

The Company paid $ 0.4 million and $ 0.5 million in income taxes during the three months ended March 31, 2021 and 2022, respectively.

The Company paid $ 17.0 million and $ 13.8 million in income taxes during the six months ended June 30, 2021 and 2022, respectively.

The tax years since 2018 remain open for federal, state, and local taxing jurisdictions in which the Company is subject to taxation.

8 unchanged sentences

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.

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 lower cost education benefits programs through the use of low-cost online general education courses recommended by the American Council on Education for credit at other colleges and universities.

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.

The Australia/New Zealand segment is comprised of Torrens University, Think Education and Media Design School in Australia and New Zealand, which collectively offer certificate and degree programs in business, design, education, hospitality, healthcare, and technology through campuses in Australia, New Zealand, and online.

2 unchanged sentences

The Company’s Chief Operating Decision Maker does not evaluate operating segments using asset information.

A summary of financial information by reportable segment for the three months ended March 31, 2021 and 2022 is presented in the following table (in thousands):

For the three months ended March 31,

A summary of financial information by reportable segment for the three and six months ended June 30, 2021 and 2022 is presented in the following table (in thousands):

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

2021 2022 2021 2022

Higher Education $ 212,207 $ 190,026 $ 438,754 $ 385,792

2 unchanged sentences

Consolidated revenues $ 299,173 $ 273,564 $ 589,509 $ 532,419

Income (loss) from operations

Income from operations

Higher Education $ 32,059 $ 11,851 $ 79,813 $ 27,334

10 unchanged sentences

The Company accrues for estimated costs related to existing lawsuits, claims and proceedings when it is probable that it will incur these costs in the future and the costs are reasonably estimable.

The Company currently believes that the ultimate outcome of such

matters will not, individually or in the aggregate, have a material adverse effect on its consolidated financial position, results of operations or cash flows.

The Company currently believes that the ultimate outcome of such matters will not, individually or in the aggregate, have a material adverse effect on its consolidated financial position, results of operations or cash flows.

However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could materially affect future results of operations in a particular period.

On April 20, 2021, Capella University received a letter from the Department of Education referencing the Wright matter (described below), and indicating that the Department will require a fact-finding process pursuant to the borrower defense to repayment regulations to determine the validity of more than 1,000 borrower defense applications that have been submitted regarding Capella University.

On April 20, 2021, Capella University received a letter from the Department of Education referencing the Wright matter (described below) and indicating that the Department would require a fact-finding process pursuant to the borrower defense to repayment regulations to determine the validity of more than 1,000 borrower defense applications that have been submitted regarding Capella University.

According to the Department, some of the applications allege similar claims as in the Wright matter concerning alleged misrepresentations of the length of time to complete doctoral programs.

Capella University has since received approximately 500 applications for borrower defense to repayment and is cooperating with the Department’s fact-finding process.

At this time, the Company is unable to predict the outcome of the Department's fact-finding process or the resolution of the borrower defense applications.

Capella University subsequently received approximately 500 applications for borrower defense to repayment.

Capella University contested each claim for defense to repayment in individualized responses with supporting evidence, the last of which was sent to the Department in August 2021.

Since that time, Capella University has not received any communication from the Department related to the set of borrower defense claims, nor has Capella University received indication that any such claim has been evaluated on the facts presented and adjudicated on the merits.

On June 22, 2022, in litigation in which Capella University is not a party, Sweet, et al.

Miguel Cardona and the United States Department of Education , United States District Court for the Northern District of California, Case No.

3:19-cv-03674-WHA, the Department joined a proposed class settlement agreement that, if approved, would result in a blanket grant of automatic, presumptive relief for all borrower defense to repayment applications filed by students at any of approximately 150 different listed institutions, including Capella University, through June 22, 2022.

In a July 25, 2022 filing in the same litigation, the Department stated that providing automatic relief to such borrowers “does not constitute the granting or adjudication of a borrower defense pursuant to the Borrower Defense Regulations, and therefore provides no basis to the Department for initiating a borrower defense recoupment proceeding against any institution identified” on the list.

The proposed class settlement agreement would also provide certain expedited review of borrower defense claims related to schools excluded from the automatic relief list, as well as for borrowers who apply during the period after execution of the settlement and before final approval.

The Sweet settlement will not be effective unless and until it achieves final court approval.

If the settlement agreement ultimately becomes effective and all Capella University borrower defense applications are forgiven in this manner, it is unclear whether the Department would attempt to seek recovery from Capella University for the amounts of discharged loans.

The Department has indicated that any recoupment against institutions “could be imposed only after the Department initiated a separate, future proceeding, in accordance with regulations that require the Department to prove a sufficient basis for liability and provide schools with notice and an opportunity to be heard.” If the Department were to seek recovery for the amounts of discharged loans, Capella University would dispute and defend against such efforts.

At this time, the Company is unable to predict the ultimate outcome of Capella-related borrower defense applications.

Wright, et al.

1 unchanged sentence

(now captioned Ornelas, et al.

Capella, et al.) was filed several years ago in the United States District Court for the District of Minnesota.

Capella, et al.) was filed several years ago in the United States District Court for the District of Minnesota, Case No.

After the court granted Capella’s motion to dismiss in relation to all but one plaintiff, the plaintiff filed a motion for leave to file a second amended complaint on October 5, 2020, seeking to add six named plaintiffs as well as additional sub-classes and causes of action to the lawsuit.

1 unchanged sentence

The parties entered into a confidential settlement which became effective on April 20, 2022, and on April 25, 2022 the parties filed a joint stipulation of dismissal with prejudice.

On May 17, 2022, the court entered an order of dismissal with prejudice.

United States Regulation

On March 27, 2020, former President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Among other things, the $2.2 trillion bill established some flexibilities related to the processing of federal student financial aid, established a higher education emergency fund, and created relief for some federal student loan borrowers.

Through the CARES Act, institutions of higher education were provided relief from conducting a return to Title IV (R2T4) calculation in cases where the student withdrew because of the COVID-19 pandemic, including removing the requirement that the institution return unearned funds to the Department of Education and providing loan cancellation for the portion of the Direct Loan associated with a payment period that the student did not complete due to the COVID-19 pandemic.

The CARES Act also allows institutions to exclude from satisfactory academic progress calculations any attempted credits that the student did not complete due to the

COVID-19 pandemic, without requiring an appeal from the student.

Additionally, under the legislation, institutions are permitted to transfer up to 100% of Federal Work-Study (“FWS”) funds into their Federal Supplemental Educational Opportunity Grant (“FSEOG”) allocation and are granted a waiver of the 2019/2020 and 2020/2021 non-federal share institutional match.

Institutions may continue to make FWS payments to student employees who are unable to meet their employment obligations due to the COVID-19 pandemic.

The Department issued sub-regulatory guidance to institutions regarding implementation of the provisions included in the CARES Act.

The CARES Act also suspended payments and interest accrual on federal student loans until September 30, 2020, in addition to suspending involuntary collections such as wage garnishment, tax refund reductions, and reductions of federal benefits like Social Security benefits during the same timeframe.

On March 30, 2021, the Secretary of Education also extended student loan relief to all Federal Family Education Loans (“FFEL”) not previously covered.

Through a series of administrative actions, student loan relief has been extended through August 31, 2022.

Finally, the CARES Act allocated $14 billion to higher education through the creation of the Education Stabilization Fund.

Fifty percent of the emergency funds received by institutions must go directly to students in the form of emergency financial aid grants to cover expenses related to the disruption of campus operations due to the COVID-19 pandemic.

Students who were previously enrolled in exclusively online courses prior to March 13, 2020 are not eligible for these grants.

Institutions may use remaining emergency funds not given to students for costs associated with significant changes to the delivery of instruction due to the COVID-19 pandemic, as long as such costs do not include payment to contractors for the provision of pre-enrollment recruitment activities, including marketing and advertising;

or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship.

Institutions received funds under the Education Stabilization Fund based on a formula that factors in their relative percentage of full-time, Federal Pell Grant-eligible students who were not exclusively enrolled in online education prior to the emergency period.

On April 9, 2020, the Department published guidance and funding levels for the Education Stabilization Fund, indicating that Strayer University was eligible to receive $ 5,792,122 .

Given that Strayer University is predominantly online, and very few students take only on-ground classes, Strayer University declined to accept the funds allocated to it because most students would not have expenses related to the disruption of campus operations.

Instead, Strayer University provided a $ 500 tuition grant for all students who had enrolled in on-ground classes for the Spring term, prior to the classes being converted to online.

Because Capella University’s students are exclusively online, Capella University was ineligible for Education Stabilization funding.

American Rescue Plan Act of 2021

10 unchanged sentences

Department of Defense and U.S.

Department of Veterans Affairs, in addition to the Title IV programs already covered by the 90/10 Rule.

Department of Veterans Affairs (“VA”), in addition to the Title IV programs already covered by the 90/10 Rule.

The Department of Education released draft 90/10 regulations consistent with this consensus on July 26, 2022, allowing for a 30 day comment period following publication in the Federal Register.

Other legislation has been introduced in both chambers of Congress that seeks to modify the 90/10 Rule further, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue), or to eliminate the 90/10 Rule.

2 unchanged sentences

On December 27, 2020, former President Trump signed into law the Consolidated Appropriations Act of 2021.

Among other things, this package funded the government through September 2021, provided additional COVID-related relief, and made a number of U.S.

Among other things, this package funded the federal government through September 2021, provided additional COVID-related relief, and made a number of U.S.

higher education changes.

2 unchanged sentences

In addition, the legislation includes a number of higher education-related provisions, including:

eliminating the “expected family contribution” from the Free Application for Federal Student Aid (“FAFSA”) and replacing it with a “Student Aid Index;”

expanding eligibility for Pell Grants;

eliminating the “expected family contribution” from the Free Application for Federal Student Aid (“FAFSA”) and replacing it with a “Student Aid Index;” expanding eligibility for Pell Grants;

restoring Pell Grant eligibility for incarcerated students attending non-profit institutions;

9 unchanged sentences

The legislation also restores veterans benefits to students whose school closed, as long as the student transferred fewer than 12 credits from the closed school or program;

protects students from debt collection by the U.S.

Department of Veterans Affairs (“VA”) for overpaid tuition benefits;

protects students from debt collection by the VA for overpaid tuition benefits;

and establishes a number of institutional requirements, including:

2 unchanged sentences

prohibiting same-day recruitment and registration;

and prohibiting more than three unsolicited recruiting contacts during any 1-month period.

and prohibiting more than three unsolicited recruiting contacts during any one-month period.

Most provisions became effective August 1, 2021.

Institutions were permitted to seek waivers for certain sections of the new law if they were not able to satisfy compliance requirements by August 1, 2021, but neither Strayer University nor Capella University sought a waiver.

The legislation requires further guidance from the VA.

On June 8, 2021, President Biden signed into law the Training in High-Demand Roles to Improve Veteran Employment Act (the “THRIVE Act”), which amended provisions of the Veterans Health Care and Benefits Improvement Act and the American Rescue Plan Act.

8 unchanged sentences

The law also extends remote learning waivers, simplifies the VA verification process for tuition reimbursement, and fixes a technical error to ensure U.S.

institutions of higher education can continue to recruit foreign students without losing GI bill funding for their students.

On March 27, 2020, Congress passed and former President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Through the CARES Act, Congress provided institutions of higher education relief from conducting a return to Title IV (R2T4) calculation in cases where the student withdrew because of COVID-19, including removing the requirement that the institution return unearned funds to the Department of Education and providing loan cancellation for the portion of the Direct

Loan associated with a payment period that the student did not complete due to COVID-19.

The CARES Act also allows institutions to exclude from satisfactory academic progress calculations any attempted credits that the student did not complete due to COVID-19, without requiring an appeal from the student.

Additionally, under the legislation, institutions are permitted to transfer up to 100% of Federal Work Study funds into their Federal Supplemental Educational Opportunity Grant allocation and are granted a waiver of the 2019/2020 and 2020/2021 non-federal share institutional match.

Institutions may continue to make Federal Work Study payments to student employees who are unable to meet their employment obligations due to COVID-19.

The Department issued sub-regulatory guidance to institutions regarding implementation of the provisions included in the CARES Act.

On March 30, 2021, the Secretary of Education also extended student loan relief to all Federal Family Education Loans (“FFEL”) not previously covered.

Through a series of administrative actions, student loan relief has been extended through August 31, 2022.

Finally, the CARES Act allocated $14 billion to higher education through the creation of the Education Stabilization Fund.

Students who were previously enrolled in exclusively online courses prior to March 13, 2020 are not eligible for these grants.

Institutions may use remaining emergency funds not given to students for costs associated with significant changes to the delivery of instruction due to COVID-19, as long as such costs do not include payment to contractors for the provision of pre-enrollment recruitment activities, including marketing and advertising;

or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship.

On April 9, 2020, the Department published guidance and funding levels for the Education Stabilization Fund, indicating that Strayer University was eligible to receive $ 5,792,122 .

Given that Strayer University is predominantly online, and very few students take only on-ground classes, Strayer declined to accept the funds allocated to it because most students would not have expenses related to the disruption of campus operations.

Instead, Strayer University provided a $ 500 tuition grant for all students who had enrolled in on-ground classes for the Spring term, prior to the classes being converted to online.

Because Capella University’s students are exclusively online, Capella University was ineligible for Education Stabilization funding.

institutions of higher education can continue to use incentive compensation to recruit foreign students without losing GI Bill funding for their students.

Consolidated Appropriations Act, 2022

On March 15, 2022 President Biden signed into law the Consolidated Appropriations Act of 2022.

The bill allocated $76.4 billion to the Department of Education and its programs, including a $400 increase to the maximum Pell Grant award, bringing the total to $6,895 for the 2022-23 award year.

In addition, campus-based aid programs were increased, with $895 million allocated for the Federal Supplemental Educational Opportunity Grant (FSEOG) program, an increase of $15 million above the FY 2021 enacted level, and $1.21 billion allocated for Federal Work-Study (FWS), an increase of $20 million above the FY 2021 enacted level.

The bill allocated $76.4 billion to the Department of Education and its programs, including an increase to the maximum Pell Grant award, bringing the total to $6,895 for the 2022-23 award year.

In addition, campus-based aid programs were increased, with $895 million allocated for the FSEOG program, an increase of $15 million above the FY 2021 enacted level, and $1.21 billion allocated for FWS, an increase of $20 million above the FY 2021 enacted level.

In addition to the increases in federal student aid funding, the bill provides $2.1 billion for career, technical, and adult education, $61 million above the FY 2021 enacted level, and an additional $3 billion for higher education programs, $452 million more than the FY 2021 enacted level.

The bill also dictates the Department requirements related to federal loan servicing, including appropriations for just over $2 billion for expenses related to the administration of the federal loan program, and makes a number of changes to the FAFSA Simplification Act.

The bill also dictates Department requirements related to federal loan servicing, including appropriations for just over $2 billion for expenses related to the administration of the federal loan program, and makes a number of changes to the FAFSA Simplification Act.

Current Negotiated Rulemaking

On May 26, 2021, the Department first announced its intention to establish negotiated rulemaking committees to prepare proposed regulations for programs authorized under Title IV of the Higher Education Act of 1965, as amended.

As part of the notice, the Department suggested the following topics for regulation:

change of ownership and change in control of institutions of higher education under 34 CFR § 600.31;

certification procedures for participation in Title IV, HEA programs under 34 CFR § 668.13;

standards of administrative capability under 34 CFR § 668.16;

ability to benefit under 34 CFR § 668.156;

borrower defense to repayment under 34 CFR §§ 682.410, 668.411, 685.206, and 685.222;

discharges for borrowers with a total and permanent disability under 34 CFR §§ 674.61, 682.402, and 685.213;

closed school discharges under 34 CFR §§ 685.214 and 682.402;

discharges for false certification of student eligibility under 34 CFR §§ 685.215(a)(1) and 682.402;

loan repayment plans under 34 CFR §§ 682.209, 682.215, 685.208, and 685.209;

the Public Service Loan Forgiveness program under 34 CFR § 685.219;

mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements (formerly under 34 CFR § 685.300) and associated counseling about such arrangements under 34 CFR § 685.304;

financial responsibility for participating institutions of higher education under 34 CFR subpart L, such as events that indicate heightened financial risk;

gainful employment (formerly located in 34 CFR subpart Q);

and Pell Grant eligibility for prison education programs under 34 CFR part 690.

Additionally, the Department invited public input on how it could address, through regulations, gaps in postsecondary outcomes such as retention, completion, loan repayment, and student loan default by race, ethnicity, gender, and other key student characteristics.

To support this work, the Department held a series of virtual public hearings in June 2021, as well as accepted written comments.

At the virtual public hearings and via written comments, members of the public discussed proposed changes for all of the issues noted above, as well as comments addressing data transparency, including disclosures of outcomes for veteran students.

The Department indicated its intention to convene multiple committees, including the Affordability and Student Loans committee and the Institutional and Programmatic Eligibility committee.

See “Affordability and Student Loans Committee” and “Institutional and Programmatic Eligibility Committee” below.

Following completion of a negotiated rulemaking process, the Department of Education issues proposed rules for public comment.

If the negotiated rulemaking committee reached consensus on a topic, the Department of Education is bound to propose a rule consistent with the consensus.

Following public comment, the Department issues final regulations, which, if published by November 1, would take effect July 1 of the following year.

Gainful Employment

Under the Higher Education Act (“HEA”), a proprietary institution offering programs of study other than a baccalaureate degree in liberal arts (for which there is a limited statutory exception) must prepare students for gainful employment in a recognized occupation.

The Department of Education published final regulations related to gainful employment that went into effect on July 1, 2015, with the additional disclosure requirements that became effective January 1, 2017 and July 1, 2019 (the “2015 Regulations”).

On July 1, 2019, the Department of Education released final gainful employment regulations, which contained a full repeal of the 2015 Regulations and became effective on July 1, 2020 (the “2019 Regulations”).

Both Strayer University and Capella University implemented the 2019 Regulations early, by means permitted by the Secretary of the Department of Education, and accordingly were not required to report gainful employment data for the 2018-2019 award year.

For the period between July 2019 and July 1, 2020, Strayer University and Capella University were not required to comply with gainful employment disclosure and template

publication requirements and were not required to comply with the regulation’s certification requirements with respect to programmatic accreditation and program satisfaction of prerequisites for professional licensure/state certification.

On December 8, 2021, the Department announced its intention to establish negotiated rulemaking committees to develop proposed regulations for gainful employment and other topics related to programs authorized under Title IV of the Higher Education Act of 1965.

Negotiated rulemaking committee sessions occurred January-March 2022, and the Institutional and Programmatic Eligibility committee failed to reach consensus on the Gainful Employment topic.

Under the Higher Education Act of 1965, as amended (“HEA”), a proprietary institution offering programs of study other than a baccalaureate degree in liberal arts (for which there is a limited statutory exception) must prepare students for gainful employment in a recognized occupation.

The Department of Education published final regulations related to gainful employment that went into effect on July 1, 2015, with additional disclosure requirements that became effective January 1, 2017 and July 1, 2019 (the “2015 Regulations”).

On July 1, 2019, the Department of Education updated gainful employment final regulations, which contained a full repeal of the 2015 Regulations and became effective on July 1, 2020 (the “2019 Regulations”).

Both Strayer University and Capella University implemented the 2019 Regulations early, by means permitted by the Secretary of Education, and accordingly were not required to report gainful employment data for the 2018-2019 award year.

For the period between July 2019 and July 1, 2020, Strayer University and Capella University were not required to comply with gainful employment disclosure and template publication requirements and were not required to comply with the regulation’s certification requirements with respect to programmatic accreditation and program satisfaction of prerequisites for professional licensure/state certification.

Negotiated rulemaking committee

sessions occurred January-March 2022, and the Institutional and Programmatic Eligibility committee failed to reach consensus on the Gainful Employment topic.

The Department has indicated its intention to publish draft Gainful Employment rules in April 2023, which would be effective no earlier than July 2024.

See “Current Negotiated Rulemaking” below.

1 unchanged sentence

Borrower Defenses to Repayment

On September 23, 2019, the Department published final Borrower Defense to Repayment regulations (the “2019 BDTR Rule”), which governs borrower defense to repayment claims in connection with loans first disbursed on or after July 1, 2020, the date the 2019 BDTR Rule became effective.

On September 23, 2019, the Department published final Borrower Defense to Repayment regulations (the “2019 BDTR Rule”), which governs borrower defense to repayment (“BDTR”) claims in connection with loans first disbursed on or after July 1, 2020, the date the 2019 BDTR Rule became effective.

Under the 2019 BDTR Rule, an individual borrower can assert a defense to repayment and be eligible for relief if she or he establishes, by a preponderance of the evidence, that (1) the institution at which the borrower enrolled made a misrepresentation of material fact upon which the borrower reasonably relied in deciding to obtain a Direct Loan or a loan repaid by a Direct Consolidation Loan;

12 unchanged sentences

Institutions are required to accept responsibility for the repayment of amounts discharged by the Secretary pursuant to the borrower defense to repayment, closed school discharge, false certification discharge, and unpaid refund discharge regulations.

If the Secretary discharges a loan in whole or in part, the Department of Education may require the school to repay the amount of the discharged loan.

If the Secretary discharges a loan in whole or in part in compliance with the terms of the regulations, the Department of Education may require the school to repay the amount of the discharged loan.

On December 10, 2019, the Secretary of Education released a formula to calculate the amount of relief a borrower may receive for a successful BDTR application.

4 unchanged sentences

On March 18, 2021, the Department revised its BDTR review process and repealed the previous administration’s partial relief formula.

Under the new BDTR procedures, the Department will grant full loan relief to borrowers with approved BDTR applications.

Under the updated BDTR procedures, the Department will grant full loan relief to borrowers with approved BDTR applications.

Additionally, the Department has eliminated certain evidentiary requirements for borrowers who have received a loan cancellation due to total or permanent disability.

1 unchanged sentence

On August 10, 2021, the Department announced its intention to establish a negotiated rulemaking committee to develop proposed regulations for borrower defenses to repayment and other topics related to programs authorized under Title IV of the HEA.

Negotiated rulemaking for the Affordability and Student Loans Committee began October 4, 2021 and concluded December 10, 2021, with the committee failing to reach consensus on Borrower Defense to Repayment.

On April 22, 2022, the draft BDTR rule

arrived at the Office of Information and Regulatory Affairs;

the Department has indicated it intends to release the draft rule for public comment in May, 2022.

See “Current Negotiated Rulemaking” below.

We cannot predict what a future BDTR regulation may include.

Negotiated rulemaking for the Affordability and Student Loans Committee began in October 2021 and concluded in December 2021, with the committee failing to reach consensus on Borrower Defense to Repayment.

On July 6, 2022, the Department released proposed BDTR regulations for public comment.

Among other things, the proposed rule would set a single standard and streamlined process for relief that would apply to all future and pending BDTR claims as of July 1, 2023, instead of various standards based on the date of the borrower’s first loan disbursement;

define what kinds of misconduct could lead to borrower

defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final Department of Education actions that could give rise to a BDTR claim;

establish a presumption that borrowers reasonably relied upon misrepresentations or omissions;

establish a reconsideration process for borrowers whose claims are not approved for a full discharge, including based on a state law standard;

and create a process for forming groups of borrowers and adjudicating claims based on the common facts of those group claims.

The proposed rule also sets the expectation that the Department will hold colleges accountable for the cost of discharges, including establishing a recoupment process separate from the approval of BDTR claims.

In addition, the proposed rule prohibits institutions from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class action waivers for claims related to the making of a Federal Direct Loan or the provision of educational services for which the loan was obtained.

Comments on the proposed rule are due August 12, 2022.

If the Department publishes a final BDTR rule by November 1, 2022, the rule would become effective July 1, 2023.

Accrediting Agencies and State Authorization

14 unchanged sentences

Both HLC and Middle States Commission on Higher Education (“Middle States”), the institutional accreditor for Strayer University, have applied for renewal of their recognition by the Department.

NACIQI is scheduled to consider their applications in winter 2023.

NACIQI is scheduled to consider their applications in winter 2023 and already has solicited written comments from the public (which were due January 2022).

Distance Education and Innovation

7 unchanged sentences

On May 6, 2020, the Department of Education published final rules related to implementation of Title IX of the Education Amendments of 1972 (“Title IX”), which prohibits discrimination on the basis of sex in education programs that receive funding from the federal government.

The final rules defined what constitutes sexual harassment for purposes of Title IX in the administrative enforcement context, described what actions trigger an institution’s obligation to respond to incidents of alleged sexual harassment, and specified how an institution must respond to allegations of sexual harassment.

The final rules defined what constitutes sexual harassment for purposes of Title IX in the

administrative enforcement context, described what actions trigger an institution’s obligation to respond to incidents of alleged sexual harassment, and specified how an institution must respond to allegations of sexual harassment.

Among other things, the rules include a requirement for live hearings on Title IX sexual harassment claims, which includes direct and cross-examination of parties, university-provided advisors (in the event a student or party does not obtain its own advisor), rulings on questions of relevance by decision-makers, and the creation and maintenance of a record of the live hearing proceedings.

1 unchanged sentence

On March 8, 2021, President Biden signed an executive order that requires the Secretary of Education and the Attorney General to review the previous administration’s rulemakings and guidance documents related to Title IX.

In June 2021, the Department of Education held virtual public hearings to gather information for providing enforcement of Title IX, as part of the Office for Civil

Rights’ (“OCR”) comprehensive review of the regulation.

On June 16, 2021, the OCR issued a notice of interpretation clarifying that the Department interprets Title IX and its enforcement authority under the regulation to include the prohibition of sex discrimination based on sexual orientation and gender identity.

On July 20, 2021, the Department of Education released a Questions and Answers document outlining the OCR's interpretation of the Title IX regulations related to sexual harassment.

In June 2021, the Department of Education held virtual public hearings to gather information for providing enforcement of Title IX, as part of the Office for Civil Rights’ (“OCR”) comprehensive review of the regulation.

On June 16, 2021, OCR issued a notice of interpretation clarifying that the Department interprets Title IX and its enforcement authority under the regulation to include the prohibition of sex discrimination based on sexual orientation and gender identity.

On July 20, 2021, the Department of Education released a Questions and Answers document outlining OCR's interpretation of the Title IX regulations related to sexual harassment.

On August 24, 2021, OCR, in alignment with recent federal court decisions, issued guidance indicating it would cease enforcement of Title IX’s current prohibition against consideration of statements made by individuals failing to submit to cross-examination.

The Department of Education has indicated that it plans to publish proposed rule changes for Title IX in May 2022.

Current Negotiated Rulemaking

On May 26, 2021, the Department announced its intention to establish negotiated rulemaking committees to prepare proposed regulations for programs authorized under Title IV of the Higher Education Act of 1965, as amended.

As part of the notice, the Department suggested the following topics for regulation:

change of ownership and change in control of institutions of higher education under 34 CFR § 600.31;

certification procedures for participation in Title IV, HEA programs under 34 CFR § 668.13;

standards of administrative capability under 34 CFR § 668.16;

ability to benefit under 34 CFR § 668.156;

borrower defense to repayment under 34 CFR §§ 682.410, 668.411, 685.206, and 685.222;

discharges for borrowers with a total and permanent disability under 34 CFR §§ 674.61, 682.402, and 685.213;

closed school discharges under 34 CFR §§ 685.214 and 682.402;

discharges for false certification of student eligibility under 34 CFR §§ 685.215(a)(1) and 682.402;

loan repayment plans under 34 CFR §§ 682.209, 682.215, 685.208, and 685.209;

the Public Service Loan Forgiveness program under 34 CFR § 685.219;

financial responsibility for participating institutions of higher education under 34 CFR subpart L, such as events that indicate heightened financial risk;

gainful employment (formerly located in 34 CFR subpart Q);

and Pell Grant eligibility for prison education programs under 34 CFR part 690.

To support this work, the Department held a series of virtual public hearings in June 2021, as well as accepted written comments.

The Department indicated its intention to convene multiple committees, including the Affordability and Student Loans committee and the Institutional and Programmatic Eligibility committee.

See “Affordability and Student Loans Committee” and “Institutional and Programmatic Eligibility Committee” below.

Following completion of a negotiated rulemaking process, the Department of Education issues proposed rules for public comment.

If the negotiated rulemaking committee reached consensus on a topic, the Department of Education is bound to propose a rule consistent with the consensus.

Following public comment, the Department issues final regulations, which, if published by November 1, would take effect July 1 of the following year.

On June 23, 2022, the Department of Education released proposed Title IX regulations for public comment.

Among other changes, the proposed rule would address all forms of sex-based harassment (not only sexual harassment);

clarify that Title IX’s prohibition against sex discrimination includes discrimination on the basis of sex stereotypes, sex characteristics, pregnancy or related conditions, sexual orientation and gender identity;

and eliminate the requirement for live hearings at the post-secondary level.

Comments on the proposed rule are due September 12, 2022.

When the Department publishes a final Title IX rule, it will indicate an effective date.

Affordability and Student Loans Committee

On August 10, 2021, the Department announced its intention to establish the Affordability and Student Loans committee, to prepare proposed regulations to address the following topics:

borrower defense to repayment, closed school discharges, discharges for borrowers with a total and permanent disability, discharges for false certification of student eligibility, loan repayment plans, interest capitalization, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements and associated counseling about such arrangements, Pell Grant eligibility for prison education programs, and the Public Service Loan Forgiveness program.

borrower defense to repayment, closed school discharges, discharges for borrowers with a total and permanent disability, discharges for false certification by a school of a student’s eligibility to receive a loan, loan repayment plans, interest capitalization, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements and associated counseling about such arrangements, Pell Grant eligibility for prison education programs, and the Public Service Loan Forgiveness program.

The Department also announced the formation of a Prison Education Program Subcommittee.

3 unchanged sentences

It did not reach consensus on borrower defenses to repayment and other topics.

We cannot predict the outcome of the negotiated rulemaking process.

As discussed above, on July 6, 2022, the Department released proposed rules regarding borrower defense to repayment.

The proposed rules also addressed closed school discharges, arbitration proceedings, public service loan forgiveness, interest capitalization, total and permanent disability discharges, and false certification.

Comments on the proposed rules are due August 12, 2022.

If the Department publishes final rules by November 1, 2022, the new regulations will be effective July 1, 2023.

We cannot predict the outcome of the rulemaking process.

Institutional and Programmatic Eligibility Committee

4 unchanged sentences

ability to benefit and changes to the 90/10 rule.

The consensus language on 90/10 includes changes to requirements impacting non-Title IV program revenue, and the treatment of “Federal funds” within the calculation.

The consensus language indicates that the Secretary of Education will identify via Federal Register notice, the federal agencies and educational assistance funds provided by that agency that will count toward the “90” portion of the 90/10 calculation.

On July 26, 2022, the Department released draft regulatory language on 90/10, and change of ownership and change in control of institutions of higher education.

The draft language on 90/10 includes changes to requirements impacting non-Title IV program revenue, and the treatment of “Federal funds” within the calculation.

The draft language indicates that the Secretary of Education will identify via Federal Register notice, the federal agencies and educational assistance funds provided by that agency that will count toward the “90” portion of the 90/10 calculation.

Such agencies may include the U.S.

Department of Defense and the VA.

The draft 90/10 language also includes modifications to the criteria for revenue generated from non-Title IV programs.

Described as an additional guardrail to help with the oversight of ineligible programs, the proposed rule would allow institutions to count funds as non-

Federal revenue only for programs that:

(1) do not include any courses offered in an eligible program that is provided by the institution;

(2) are taught by one of its instructors of an eligible program;

and (3) are located at its main campus, one of its approved additional locations, a location approved by the State agency or accrediting agency, or at an employer facility.

Additionally, under the proposed rule, the Department would establish new disclosure requirements for institutions that fail 90/10, including sending notification to students, and clarifies reporting requirements and liabilities for institutions that lose access to Title IV because of failing 90/10.

The Department will accept public comments for 30 days on the draft language, following publication in the Federal Register.

During the negotiated rulemaking process, the Department also proposed a number of changes to financial responsibility regulations, but did not reach consensus on the language.

10 unchanged sentences

Among other topics, the Department proposed a number of additional changes to regulations regarding administrative capability, change of control and certification issues, none of which reached consensus.

In June 2022, the Department indicated its intention to publish proposed rules regarding gainful employment, ability to benefit, financial responsibility, administrative capability, and certification procedures in April 2023.

We cannot predict the outcome of the negotiated rulemaking process.

Public Service Loan Forgiveness Program

On October 6, 2021, the Department of Education announced new changes and initiatives related to the Public Service Loan Forgiveness (“PSLF”) program.

This announcement aimed to make discharge of federal student loans easier for those who participate in the PSLF.

One way the Department of Education is streamlining the PSLF process is by implementing a time-limited waiver, which gives borrowers flexibility in counting prior payments towards PSLF, even if the previous payments were for different loan programs such as FFEL or if the payments were partial payments.

Borrowers with Direct Loans will be able to seek this waiver until October 31, 2022.

The Department of Education announced that the waiver will help over 550,000 borrowers progress towards loan relief under PSLF.

Additionally, the Department of Education plans to automate aspects of the PSLF process for federal employees and military service members.

The Department of Education plans to pair these changes to the program with increased support and communications to borrowers who may benefit from PSLF.

Compliance Reviews

13 unchanged sentences

On January 18, 2019, consistent with standard procedure upon a Title IV institution’s change of ownership, the Department and Capella University executed a new Provisional Program Participation Agreement, approving Capella’s continued participation in Title IV programs with provisional certification through December 31, 2022.

As is typical, the Provisional Program Participation Agreement subjects Capella University to certain requirements during the period of provisional certification, including that Capella University must apply for and receive approval from the Department in connection with new locations or the addition of new Title IV-eligible educational programs.

As is typical, the Provisional

Program Participation Agreement subjects Capella University to certain requirements during the period of provisional certification, including that Capella University must apply for and receive approval from the Department in connection with new locations or the addition of new Title IV-eligible educational programs.

Capella University will be required to apply for recertification by September 30, 2022.

2 unchanged sentences

The Office of Enforcement restores an office first established by the Department in 2016.

The Office of Enforcement will be comprised of four existing divisions:

The Department announced the Office of Enforcement would comprise four existing divisions:

Administrative Actions and Appeals Services Group, Borrower Defense Group, Investigations Group, and Resolution and Referral Management Group.

15 unchanged sentences

Specifically, the CFPB referred to Capella University and Strayer University’s historical practice of withholding official transcripts from students who were delinquent in paying amounts due, a practice which both universities discontinued prior to receipt of the correspondence.

The CFPB subsequently sent a letter on July 8, 2022, indicating that it believed the withholding of transcripts was a violation, and requiring the Company to cease withholding transcripts for those with an outstanding balance and to take other remedial actions.

The Company had already discontinued its historical practice prior to the CFPB’s notice and intends to complete the remedial actions in the allotted thirty days.

While the Company disagrees with CFPB’s position as to its supervisory authority and disputes any alleged legal or regulatory violations, SEI is cooperating with CFPB’s inquiry and responded to CFPB as requested on April 25, 2022.

The CFPB has further informed the Company that it intends to conduct an announced education loan exam in June 2022.

On April 26, 2022, the CFPB informed the Company that it intended to conduct an announced education loan exam in June 2022;

the examination started on June 13, 2022 and the CFPB has indicated that it is expected to last into August.

Australian Regulation

38 unchanged sentences

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 1. Financial Statements