What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-03 compared with 2022-07-27 · 200 added, 165 removed, 813 unchanged (31% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

December 31, 2021 June 30, 2022

December 31, 2021 September 30, 2022

Current assets:

28 unchanged sentences

32,000,000 shares authorized;

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

24,592,098 and 24,454,377 shares issued and outstanding at December 31, 2021 and September 30, 2022, respectively

Additional paid-in capital 1,529,969 1,507,902

7 unchanged sentences

(in thousands, except per share data)

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

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

21 unchanged sentences

(in thousands)

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

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

3 unchanged sentences

Unrealized gains (losses) on marketable securities, net of tax 9 ( 189 ) ( 60 ) ( 895 )

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

Comprehensive loss $ ( 25,013 ) $ ( 32,268 ) $ ( 13,517 ) $ ( 47,231 )

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 June 30, 2021

For the three months ended September 30, 2021

Common Stock Additional

3 unchanged sentences

Shares Par Value

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

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

Stock-based compensation — — 4,624 22 — 4,646

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

Issuance of restricted stock, net 18,843 1 — — — 1

5 unchanged sentences

Net income — — — 3,854 — 3,854

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

Balance at September 30, 2021 24,600,479 $ 246 $ 1,525,189 $ 167,665 $ 1,956 $ 1,695,056

For the three months ended September 30, 2022

Common Stock Additional

4 unchanged sentences

Shares Par Value

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

Stock-based compensation — — 5,605 7 — 5,612

6 unchanged sentences

Net income — — — 6,092 — 6,092

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

Balance at September 30, 2022 24,454,377 $ 245 $ 1,507,902 $ 156,704 $ ( 66,369 ) $ 1,598,482

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

2 unchanged sentences

(in thousands, except share data)

For the six months ended June 30, 2021

For the nine months ended September 30, 2021

Common Stock Additional

13 unchanged sentences

Net income — — — 33,407 — 33,407

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

Balance at September 30, 2021 24,600,479 $ 246 $ 1,525,189 $ 167,665 $ 1,956 $ 1,695,056

For the nine months ended September 30, 2022

Common Stock Additional

13 unchanged sentences

Net income — — — 28,341 — 28,341

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

Balance at September 30, 2022 24,454,377 $ 245 $ 1,507,902 $ 156,704 $ ( 66,369 ) $ 1,598,482

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

2 unchanged sentences

(in thousands)

For the six months ended June 30,

For the nine months ended September 30,

Cash flows from operating activities:

1 unchanged sentence

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

Loss on sale of marketable securities 781 —

Gain on sale of property and equipment ( 681 ) —

Amortization of deferred financing costs 414 414

15 unchanged sentences

Proceeds from marketable securities 9,300 2,600

Proceeds from sale of property and equipment 4,328 —

Other investments ( 589 ) ( 223 )

Cash paid for acquisition, net of cash acquired — ( 193 )

Net cash used in investing activities ( 20,593 ) ( 30,324 )

27 unchanged sentences

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

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.

All information as of September 30, 2021 and 2022, and for the three and nine months ended September 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 and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year.

The results of operations for the three and nine months ended September 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.

8 unchanged sentences

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.

with vacating leased space in connection with the Company's restructuring plans.

See Note 4 for additional information.

14 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 June 30, 2022, respectively.

The Company had approximately $ 0.7 million and $ 1.3 million of these unpaid obligations as of December 31, 2021 and September 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 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.

As of December 31, 2021 and September 30, 2022, the Company had approximately $ 9.1 million and $ 13.9 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.

1 unchanged sentence

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 June 30, 2021 and 2022 (in thousands):

As of June 30,

As of September 30,

Cash and cash equivalents $ 274,774 $ 262,757

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 June 30, 2022 (in thousands):

December 31, 2021 June 30, 2022

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

December 31, 2021 September 30, 2022

Tuition receivable $ 100,060 $ 126,616

1 unchanged sentence

Tuition receivable, net $ 51,277 $ 81,676

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,

Approximately $ 2.5 million and $ 2.7 million of tuition receivable, net, are included in other assets as of December 31, 2021 and September 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 nine months ended September 30, 2021 and 2022 (in thousands).

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

14 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 24,637,268 shares were issued and outstanding as of December 31, 2021 and June 30, 2022, respectively.

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,592,098 and 24,454,377 shares were issued and outstanding as of December 31, 2021 and September 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 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.

In July 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 September 12, 2022.

Net Income Per Share

5 unchanged sentences

(1) the proceeds received from the exercise of stock options, and (2) the amount of compensation cost associated with the stock awards for future service not yet recognized by the Company.

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 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,

Stock options, restricted stock, and restricted stock units are excluded from the computation of diluted earnings per share when their effect would be anti-dilutive.

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

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

6 unchanged sentences

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.

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 September 30, 2022, the balance of accumulated other comprehensive loss was $ 66.4 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 nine months ended September 30, 2021 and 2022.

Use of Estimates

9 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 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,

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

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

40 unchanged sentences

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

For the six months ended June 30,

For the nine months ended September 30,

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

7 unchanged sentences

Costs to Obtain a Contract

Certain commissions earned by third party international agents are considered incremental and recoverable costs of obtaining a contract with customers of ANZ.

Certain commissions earned by third party international agents are considered incremental and recoverable costs of obtaining a contract with customers of our ANZ segment.

These costs are deferred and then amortized over the period of benefit which ranges from one year to two years .

3 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.

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 six months ended June 30, 2021 and 2022 (in thousands):

The Company recorded right-of-use lease asset charges of approximately $ 1.9 million and $ 18.9 million during the three and nine months ended September 30, 2021, respectively, and approximately $ 0.1 million and $ 1.2 million during the three and nine months ended September 30, 2022, respectively, related to facilities consolidated as a result of the restructuring plan.

The Company also recorded fixed asset impairment charges of approximately $ 0.6 million and $ 2.6 million during the three and nine months ended September 30, 2021, respectively, and approximately $ 0.1 million and $ 2.5 million during the three and nine months ended September 30, 2022, respectively.

During the three and nine months ended September 30, 2021, the Company recorded a $ 0.7 million gain from the sale of property and equipment of an owned campus that was closed in connection with the 2020 restructuring plan.

All severance and other employee separation charges, right-of-use lease asset and fixed asset impairment charges, and gains on the sale of property and equipment 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 nine months ended September 30, 2021 and 2022 (in thousands):

Integration Plan (1)

3 unchanged sentences

Payments ( 1,835 ) ( 4,227 ) ( 6,062 )

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

Balance at September 30, 2021 $ — $ 797 $ 797

Balance at December 31, 2021 (2)

2 unchanged sentences

Payments — ( 2,853 ) ( 2,853 )

Balance at June 30, 2022 (2)

$ — $ 409 $ 409

Balance at September 30, 2022 $ — $ — $ —

_____________________________________

2 unchanged sentences

Marketable Securities

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

The following is a summary of available-for-sale securities as of September 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 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 unrealized gains and losses on the Company’s investments in corporate debt and municipal securities as of December 31, 2021 and September 30, 2022 were caused by changes in market values primarily due to interest rate changes.

As of September 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 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

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

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

December 31, 2021 September 30, 2022

Due within one year $ 6,501 $ 11,387

1 unchanged sentence

Total $ 29,878 $ 26,035

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,

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

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

2 unchanged sentences

Total $ 3,705 $ 500 $ 9,300 $ 2,600

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.

The Company recorded approximately $ 0.8 million in gross realized losses in net income during the three and nine months ended September 30, 2021 related to the sale of marketable securities.

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

Fair Value Measurement

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

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

Fair Value Measurements at Reporting Date Using

June 30, 2022 Quoted Prices in

September 30, 2022 Quoted Prices in

Active Markets

24 unchanged sentences

• Money market funds – Classified in Level 1 is excess cash the Company holds in money market funds, which are included in cash and cash equivalents in the accompanying unaudited condensed consolidated balance sheets.

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 June 30, 2022 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

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

The Company's cash and cash equivalents held at December 31, 2021 and September 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.

4 unchanged sentences

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 six months ended June 30, 2021 and 2022.

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,

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

As of September 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 six months ended June 30, 2022 (in thousands):

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

Higher Education Australia /

5 unchanged sentences

Adjustments to prior acquisitions — — — —

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

Balance as of September 30, 2022 $ 632,075 $ 494,424 $ 100,000 $ 1,226,499

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 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.

No events or circumstances occurred in the three and nine months ended September 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 nine months ended September 30, 2021 and 2022.

Intangible Assets

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

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

December 31, 2021 September 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 $ 33.8 million and $ 5.8 million for the six months ended June 30, 2021 and 2022, respectively.

Amortization expense related to finite-lived intangible assets was $ 41.4 million and $ 8.5 million for the nine months ended September 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 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

No events or circumstances occurred in the three and nine months ended September 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 nine months ended September 30, 2021 and 2022.

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

December 31, 2021 September 30, 2022

Prepaid expenses, net of current portion $ 19,852 $ 18,753

2 unchanged sentences

Other investments 3,576 3,896

Tuition receivable, non-current 2,466 1,894

Tuition receivable, net, non-current 2,466 2,716

Other 4,864 4,168

3 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 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.

As of December 31, 2021 and September 30, 2022, $ 19.2 million and $ 18.0 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

The Company holds investments in certain limited partnerships that invest in various innovative companies in the health care and education-related technology fields.

The Company has commitments to invest up to an additional $ 2.8 million across these partnerships through 2031.

The Company has commitments to invest up to an additional $ 2.8 million across these

partnerships through 2031.

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 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,

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

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

1 unchanged sentence

Capital contributions 327 — 589 48

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

Pro-rata share in the net income (loss) of limited partnerships ( 610 ) ( 32 ) 2,993 32

Distributions ( 2,586 ) — ( 4,845 ) ( 1,683 )

6 unchanged sentences

Tuition Receivable

Non-current tuition receivable represents tuition that the Company expects to collect, but not within the next 12 months.

Other is comprised primarily of deferred financing costs associated with the Company's credit facility, deferred contract costs related to commissions paid by ANZ to third party international agents, and refundable security deposits associated with the Company's leased campus and office space.

Non-current tuition receivable, net, represents tuition that the Company expects to collect, but not within the next 12 months.

Other is comprised primarily of deferred financing costs associated with the Company's credit facility, deferred contract costs related to commissions paid by our ANZ segment to third party international agents, and refundable security deposits associated with the Company's leased campus and office space.

Accounts Payable and Accrued Expenses

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

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

December 31, 2021 September 30, 2022

Trade payables $ 45,340 $ 54,736

4 unchanged sentences

On November 3, 2020, the Company entered into an amended credit facility (“Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $ 350 million.

The Amended Credit Facility provides the Company with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in the future in an aggregate amount of up to the sum of (x) the greater of (A) $ 300 million and (B) 100 % of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company's leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75 :1.00.

will be no greater than 1.75 :1.00.

In addition, the Amended Credit Facility provides for a subfacility for borrowings in certain foreign currencies in an amount equal to the U.S.

12 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 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.

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

As of December 31, 2021 and September 30, 2022, the Company had approximately $ 141.6 million and $ 141.2 million, respectively, outstanding under the Revolving Credit Facility.

Approximately $ 3.6 million and $ 3.2 million was denominated in Australian dollars as of December 31, 2021 and September 30, 2022, respectively.

During the nine months ended September 30, 2021 and 2022, the Company paid $ 2.1 million and $ 3.0 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 June 30, 2022 (in thousands):

December 31, 2021 June 30, 2022

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

December 31, 2021 September 30, 2022

Contract liabilities, net of current portion $ 34,704 $ 34,369

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 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,

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

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

5 unchanged sentences

Stock-based compensation expense, net of tax $ 3,418 $ 4,152 $ 9,355 $ 11,959

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.

During the nine months ended September 30, 2021 and 2022, the Company recognized a $ 26,000 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 nine months ended September 30, 2021 and 2022, the Company recorded income tax expense of $ 13.7 million and $ 13.6 million, reflecting an effective tax rate of 29.1 % and 32.5 %, respectively.

The Company had $ 1.0 million of unrecognized tax benefits as of December 31, 2021 and September 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 $ 17.0 million and $ 13.8 million in income taxes during the six months ended June 30, 2021 and 2022, respectively.

The Company paid $ 21.8 million and $ 20.2 million in income taxes during the nine months ended September 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.

13 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 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,

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

For the three months ended September 30, For the nine months ended September 30,

2021 2022 2021 2022

3 unchanged sentences

Consolidated revenues $ 270,078 $ 263,123 $ 859,587 $ 795,542

Income from operations

Income (loss) from operations

Higher Education $ 5,168 $ ( 1,948 ) $ 84,981 $ 25,386

12 unchanged sentences

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 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.

Wright, et al.

Capella Education Co., et al.

(now captioned Ornelas, et al.

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.

On September 22, 2021, the court affirmed a magistrate’s order granting plaintiff’s motion to amend, and plaintiffs subsequently filed their second amended complaint.

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.

On April 20, 2021, Capella University received a letter from the Department of Education referencing Wright, et al.

Capella Education Co., et al.

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.

4 unchanged sentences

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.

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.

The Sweet settlement received preliminary court approval on August 4, 2022.

A joint motion for final approval was filed on September 22, 2022, which multiple intervening higher education institutions and companies opposed, and a fairness hearing for final approval is scheduled for November 3, 2022.

The 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.

1 unchanged sentence

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

Wright, et al.

Capella Education Co., et al.

(now captioned Ornelas, et al.

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

On September 22, 2021, the court affirmed a magistrate’s order granting plaintiff’s motion to amend, and plaintiffs subsequently filed their second amended complaint.

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

2 unchanged sentences

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.

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.

3 unchanged sentences

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.

Through a series of administrative actions, student loan relief has been extended, including on August 24, 2022, when the Department announced, “a final extension of the pause on student loan repayment, interest, and collections through December 31, 2022.”

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

5 unchanged sentences

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.

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.

8 unchanged sentences

Regulatory Environment – The 90/10 Rule” of the Company’s Annual Report on Form 10-K for a description of the 90/10 Rule.

Under the legislation, these revisions to the 90/10 Rule would apply to institutional fiscal years beginning on or after January 1, 2023.

The legislation required the Department to conduct a negotiated rulemaking process to modify related Department regulations, which the Department began in January 2022.

2 unchanged sentences

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.

The Department of Education released proposed 90/10 regulations consistent with this consensus language on July 26, 2022, allowing for a 30 day comment period that ended August 26, 2022.

On October 27, 2022, the Department of Education released final 90/10 regulations, which are consistent with the consensus language.

The new 90/10 regulations are effective for fiscal years beginning on or after January 1, 2023.

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.

7 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;

adopting the FAFSA Simplification Act, which includes 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;

2 unchanged sentences

and significantly simplifying the FAFSA form.

The Department is expected to provide, but has not yet provided, institutions with guidance on the higher education provisions included in the Consolidated Appropriations Act of 2021, which take effect on July 1, 2023.

The Department published a FAFSA Simplification Information webpage on October 14, 2022 and is expected to provide institutions with guidance on the higher education provisions included in the Consolidated Appropriations Act of 2021, which take effect on July 1, 2023.

The bill also provided $22.7 billion for higher education institutions and students impacted by COVID-19, including $680.9 million (3 percent of the total) for student emergency aid for students at for-profit institutions.

2 unchanged sentences

On January 5, 2021, former President Trump signed into law the Veterans Health Care and Benefits Improvement Act of 2020, which expanded student veterans’ protections.

Among other things, the legislation requires a risk-based review of schools if an institution is operating under Heightened Cash Monitoring 2 or provisional approval status by the Department of Education, is subject to any punitive action by a federal or state entity, faces the loss or risk of loss of accreditation, or has converted from for-profit to non-profit status.

subject to any punitive action by a federal or state entity, faces the loss or risk of loss of accreditation, or has converted from for-profit to non-profit status.

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;

16 unchanged sentences

The law includes changes to help institutions satisfy the Veterans Health Care and Benefits Improvement Act’s requirements by using the College Financing Plan template, in addition to extending some COVID-related flexibilities previously granted amid the pandemic.

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

The law also extended remote learning waivers through June 1, 2022, simplified the VA verification process for tuition reimbursement, and fixed a technical error to ensure U.S.

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

Ensuring the Best Schools for Veterans Act of 2022

On August 26, 2022, President Biden signed into law the Ensuring the Best Schools for Veterans Act of 2022, which amended prior statutory language and made modifications to how the VA operationalizes the 85/15 requirement (that is, the rule that generally forbids use of Department of Veterans Affairs benefits for students enrolling in a program in which more than 85% of students enrolled in the program have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA).

Among other things, the law clarifies that reporting associated with the 85/15 requirement does not apply to institutions at which 35% or fewer students receive GI bill benefits.

The law also exempts programs for which fewer than 10 students have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA.

Consolidated Appropriations Act, 2022

2 unchanged sentences

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 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.

In addition to the increases in federal student aid funding, the bill provided $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 dictated 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 made 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.

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:

28 unchanged sentences

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 HEA.

Negotiated rulemaking committee

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

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.

We cannot predict what a future gainful employment regulation may include.

3 unchanged sentences

(2) the misrepresentation directly and clearly related to the borrower’s enrollment or continuing enrollment at the institution or the institution’s provision of education services for which the loan was made;

and (3) the borrower was financially harmed by the misrepresentation.

and (3) the borrower was

financially harmed by the misrepresentation.

The Department will grant forbearance on all loans related to a claim at the time the claim is made.

21 unchanged sentences

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;

On October 31, 2022, the Department released final BDTR regulations.

Among other things, the final rule sets a single standard and streamlined process for relief that will 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 reconsideration process for borrowers whose claims are not approved for a full discharge;

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.

The final 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 final 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.

On October 31, 2022, the Department published final rules updating the eligibility criteria for and the process by which borrowers can be eligible to receive a closed school loan discharge.

The updated rules allow the Secretary to process automatic closed school discharges and establishes a discharge window of 180 days prior to the school’s closure.

The regulation also states that eligible borrowers may receive a discharge if the borrower does not complete either a teach-out or the continuation of their program at another location of the school, and gives the Secretary the authority to adjust the closures date in cases where the institution discontinues the programs in which most borrowers were enrolled.

The new regulation is effective July 1, 2023.

Accrediting Agencies and State Authorization

24 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.

2 unchanged sentences

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 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 June 2021 notice of interpretation is currently under legal challenge in Tennessee et al.

United States Department of Education et al.

, United States District Court for the Eastern District of Tennessee, Case No.

3:21-cv-00308-CEA-DCP.

A July 15, 2022 court-issued preliminary injunction prohibits the Department of Education from enforcing the challenged guidance in the plaintiff states.

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

2 unchanged sentences

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

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

The public comment period on the proposed rule ended on September 12, 2022.

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

On October 4, 2022, OCR released a resource document for students and institutions in which it reinforced that current Title IX regulations prohibit discrimination based on pregnancy, childbirth, false pregnancy, termination of pregnancy or recovery therefrom.

The resource document further emphasized that Title IX requires institutions to treat pregnancy, childbirth, false pregnancy, termination of pregnancy and recovery therefrom the same as other temporary disabilities with respect to medical benefits, services, plans, and policies, and detailed requirements for leave and reinstatement for both students and employees.

Affordability and Student Loans Committee

6 unchanged sentences

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

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

On July 6, 2022, the Department released proposed rules governing student loan discharges and processes, including 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.

The public comment period on the proposed rules ended on August 12, 2022.

As discussed above, the Department published final rules on October 31, 2022.

Institutional and Programmatic Eligibility Committee

4 unchanged sentences

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

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.

On July 26, 2022, the Department released proposed regulations related to the 90/10 rule, and change of ownership and change in control of institutions of higher education.

On October 27, 2022, the Department of Education released final 90/10 regulations, which are consistent with the consensus language.

The 90/10 rule’s final regulations include changes to requirements impacting non-Title IV program revenue, and the treatment of “Federal funds” within the calculation.

The final regulations indicate 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:

Department of Defense and the VA given the Department’s confirmation that institutions no longer would be permitted to count federal aid for veterans and service members toward the “10” portion of the 90/10 calculation.

The final regulations also include modifications to the criteria for revenue generated from non-Title IV programs, allowing 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.

(2) are provided by the institution and taught by one of

the institution’s instructors;

and (3) are located at the institution’s main campus, one of its approved additional locations, at another school facility approved by the appropriate State agency or accrediting agency, or at an employer facility.

In the preamble to the final 90/10 regulations, the Department indicated that non-Title IV programs that are offered online are not eligible to be included in the “10” portion of the calculation.

The final regulations establish new disclosure requirements for institutions that fail 90/10, including a student notification requirement, and clarify reporting requirements and liabilities for institutions that lose access to Title IV because of failing 90/10.

The new 90/10 regulations are effective for fiscal years beginning on or after January 1, 2023.

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.

12 unchanged sentences

We cannot predict the outcome of the negotiated rulemaking process.

Student Loan Relief

On August 24, 2022, the Department announced that it would provide student loan relief to eligible borrowers to address financial hardships in connection with the COVID-19 pandemic.

Under the relief measures, up to $10,000 in student debt will be forgiven for individual borrowers earning less than $125,000 or married couples or heads of household earning less than $250,000, and up to $20,000 will be forgiven for such borrowers who formerly received Pell Grants.

In a memorandum prepared by the Department’s General Counsel, the Department stated that it has interpreted provisions of the Higher Education Relief Opportunities for Students Act of 2003 to authorize the Secretary to exercise broad discretion in granting student loan relief.

Since the Department’s student loan relief announcement, multiple lawsuits have been filed against the Department challenging its authority to grant such relief.

We cannot predict the outcome of these lawsuits.

The Department also announced its intent to publish a proposed rule to create a new income-driven repayment plan to reduce future monthly payments for lower- and middle-income borrowers.

The new plan would include a lower payment cap, coverage of unpaid monthly interest, and loan forgiveness after 10 years of payment for borrowers with original loan balances under a certain threshold.

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.

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

Capella University filed its application for recertification in advance of the September 30, 2022 deadline.

Office of Enforcement

18 unchanged sentences

5301 et seq., due to alleged student loan servicing and collections practices or policies.

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.

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.

The Company had already discontinued its historical practice prior to the CFPB’s notice and informed the CFPB that it completed 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.

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.

The examination started on June 13, 2022.

Fieldwork concluded on August 5, 2022, but the examination is ongoing.

On September 12, 2022, the CFPB informed the Company of a preliminary finding related to a product that is no longer utilized, and invited the Company’s response.

The Company timely responded to the CFPB’s letter, disagreeing with the preliminary finding and noting that the product to which it related is no longer utilized.

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