What changed in this filing

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Item 1. Financial Statements

2023-04-28 compared with 2022-11-03 · 259 added, 538 removed, 475 unchanged (63% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Current assets:

2 unchanged sentences

Tuition receivable, net 62,953 71,860

Income taxes receivable 313 —

Assets held for sale — 3,793

Other current assets 43,285 54,046

23 unchanged sentences

32,000,000 shares authorized;

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

24,402,891 and 24,591,375 shares issued and outstanding at December 31, 2022 and March 31, 2023, respectively

Additional paid-in capital 1,510,924 1,511,590

Accumulated other comprehensive income (loss) 9,203 ( 66,369 )

Accumulated other comprehensive loss ( 35,068 ) ( 44,300 )

Retained earnings 159,690 142,893

3 unchanged sentences

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share data)

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

2021 2022 2021 2022

For the three months ended March 31,

Revenues $ 258,855 $ 256,606

6 unchanged sentences

Total costs and expenses 245,414 257,955

Income from operations 7,348 7,807 46,048 43,113

Income (loss) from operations 13,441 ( 1,349 )

Other income (expense) ( 1,171 ) 398

Income before income taxes 5,500 7,545 47,124 41,980

Income (loss) before income taxes 12,270 ( 951 )

Provision for income taxes 5,241 1,077

Net income $ 3,854 $ 6,092 $ 33,407 $ 28,341

Earnings per share:

Net income (loss) $ 7,029 $ ( 2,028 )

Earnings (loss) per share:

Basic $ 0.29 $ ( 0.09 )

6 unchanged sentences

(in thousands)

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

2021 2022 2021 2022

Net income $ 3,854 $ 6,092 $ 33,407 $ 28,341

For the three months ended March 31,

Net income (loss) $ 7,029 $ ( 2,028 )

Other comprehensive income (loss):

1 unchanged sentence

Unrealized gains (losses) on marketable securities, net of tax ( 517 ) 108

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

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 September 30, 2021

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shares Par Value

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

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

Repurchase of common stock ( 39,475 ) ( 1 ) ( 2,457 ) ( 543 ) — ( 3,001 )

Common stock dividends ($ 0.60 per share)

— — — ( 14,757 ) — ( 14,757 )

Foreign currency translation adjustment — — — — ( 28,876 ) ( 28,876 )

Unrealized gains on marketable securities, net of tax — — — — 9 9

Net income — — — 3,854 — 3,854

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

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Shares Par Value

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

Issuance of restricted stock, net ( 4,138 ) 1 ( 91 ) — — ( 90 )

Repurchase of common stock ( 178,753 ) ( 2 ) ( 11,121 ) ( 821 ) — ( 11,944 )

Common stock dividends ($ 0.60 per share)

— — — ( 14,749 ) — ( 14,749 )

Foreign currency translation adjustment — — — — ( 38,171 ) ( 38,171 )

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

Net income — — — 6,092 — 6,092

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

Comprehensive income (loss) $ 27,011 $ ( 11,260 )

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

2 unchanged sentences

(in thousands, except share data)

For the nine months ended September 30, 2021

For the three months ended March 31, 2022

Common Stock Additional

5 unchanged sentences

Stock-based compensation — — 5,068 — — 5,068

Exercise of stock options, net 1,632 — 113 — — 113

Issuance of restricted stock, net 437,946 5 ( 2,749 ) — — ( 2,744 )

5 unchanged sentences

Net income — — — 7,029 — 7,029

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

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

For the three months ended March 31, 2023

Common Stock Additional

6 unchanged sentences

Stock-based compensation — — 5,632 — — 5,632

Exercise of stock options, net 1,322 — 55 — — 55

Issuance of restricted stock, net 187,162 2 ( 5,021 ) — — ( 5,019 )

Repurchase of common stock ( 571,789 ) ( 6 ) ( 35,396 ) ( 1,514 ) — ( 36,916 )

Common stock dividends ($ 0.60 per share)

1 unchanged sentence

Foreign currency translation adjustment — — — — ( 9,340 ) ( 9,340 )

Unrealized losses on marketable securities, net of tax — — — — ( 895 ) ( 895 )

Net income — — — 28,341 — 28,341

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

Unrealized gains on marketable securities, net of tax — — — — 108 108

Net loss — — — ( 2,028 ) — ( 2,028 )

Balance at March 31, 2023 24,591,375 $ 246 $ 1,511,590 $ 142,893 $ ( 44,300 ) $ 1,610,429

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

2 unchanged sentences

(in thousands)

For the nine months ended September 30,

For the three months ended March 31,

Cash flows from operating activities:

Net income $ 33,407 $ 28,341

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 ) —

Net income (loss) $ 7,029 $ ( 2,028 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Amortization of deferred financing costs 138 138

14 unchanged sentences

Purchases of property and equipment ( 9,686 ) ( 8,270 )

Purchases of marketable securities — ( 17,103 )

Proceeds from marketable securities 1,100 1,960

Proceeds from sale of property and equipment 4,328 —

Proceeds from other investments — 457

Other investments ( 175 ) ( 118 )

29 unchanged sentences

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

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.

All information as of March 31, 2022 and 2023, and for the three months ended March 31, 2022 and 2023 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, 2022 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, 2022.

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.

The results of operations for the three months ended March 31, 2023 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.

6 unchanged sentences

General and administration expense also includes the facilities occupancy and other related costs attributable to such functions.

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 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.

Amortization of intangible assets consists of amortization and depreciation expense related to intangible assets and software assets acquired through 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 Capella Education Company and the Company’s acquisition of ANZ.

See Note 4 for additional information.

7 unchanged sentences

Equity accounts are translated at historical exchange rates.

The effects of these translation adjustments are reported as a component of accumulated other comprehensive income within shareholders’ equity.

For any transaction that is in a currency different from the entity’s functional currency, the Company records a net gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled), in the unaudited condensed consolidated statements of income.

The effects of these translation adjustments are reported as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

Restricted Cash

3 unchanged sentences

higher education institution during the academic term.

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.

The Company had approximately $ 1.4 million and $ 1.5 million of these unpaid obligations as of December 31, 2022 and March 31, 2023, respectively.

In Australia and New Zealand, advance tuition payments from international students are required to be restricted until a 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 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.

As of December 31, 2022 and March 31, 2023, the Company had approximately $ 11.9 million and $ 14.0 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 September 30, 2021 and 2022 (in thousands):

As of September 30,

As of March 31,

Cash and cash equivalents $ 293,419 $ 202,824

2 unchanged sentences

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 307,315 $ 218,805

Marketable Securities

Investments in marketable securities are carried at either amortized cost or fair value.

Investments in marketable securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity.

Investments in marketable securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale.

Management determines the appropriate designation of marketable securities at the time of purchase and reevaluates such designation as of each balance sheet date.

All of the Company’s marketable securities are designated as either held-to-maturity or available-for-sale.

The Company’s available-for-sale marketable securities consist of tax-exempt municipal securities and corporate debt securities, which are carried at fair value as determined by quoted market prices or other inputs either directly or indirectly observable in the marketplace for identical or similar assets, with unrealized gains and losses, net of tax, recognized as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

Management reviews the fair value of the portfolio at least quarterly, and evaluates individual securities with fair value below amortized cost at the balance sheet date for impairment.

In order to determine whether there is an impairment, management evaluates whether the Company intends to sell the impaired

security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis.

If management intends to sell an impaired debt security, or it is more likely than not the Company will be required to sell the security prior to recovering its amortized cost basis, an impairment is deemed to have occurred.

The amount of an impairment related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings.

The amount of an impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

The cost of securities sold is based on the specific identification method.

Amortization of premiums, accretion of discounts, interest, dividend income and realized gains and losses are included in other income.

The contractual maturity date of available-for-sale securities is based on the days remaining to the effective maturity.

The Company classifies marketable securities as either current or non-current assets based on management’s intent with regard to usage of those funds, which is dependent upon the security’s maturity date and liquidity considerations based on current market conditions.

If management intends to hold the securities for longer than one year as of the balance sheet date, they are classified as non-current.

Tuition Receivable and Allowance for Credit Losses

5 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 September 30, 2022 (in thousands):

December 31, 2021 September 30, 2022

The Company’s tuition receivable and allowance for credit losses were as follows as of December 31, 2022 and March 31, 2023 (in thousands):

December 31, 2022 March 31, 2023

Tuition receivable $ 110,066 $ 117,146

1 unchanged sentence

Tuition receivable, net $ 62,953 $ 71,860

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

Approximately $ 2.7 million and $ 2.5 million of tuition receivable, net, are included in other assets as of December 31, 2022 and March 31, 2023, 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, 2022 and 2023 (in thousands).

For the three months ended March 31,

Allowance for credit losses, beginning of period $ 48,783 $ 47,113

2 unchanged sentences

Allowance for credit losses, end of period $ 44,892 $ 45,286

Assets Held for Sale

The Company classifies assets and liabilities as held for sale (“disposal group”) when management, having the authority to approve the action, commits to a plan to sell the disposal group, the sale is probable to be completed within one year, and the disposal group is available for immediate sale in its present condition.

The Company also considers whether an active program to locate a buyer has been initiated, whether the disposal group is marketed actively for sale at a price that is reasonable in relation to its current fair value, and whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying amount or fair value less costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Gains are not recognized until the date of sale.

Assets are not depreciated

or amortized while they are classified as held for sale.

Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group as assets held for sale and liabilities held for sale in its unaudited condensed consolidated balance sheets.

Over the last several years, the Company has been evaluating its owned and leased real estate portfolio to identify underutilized facilities to either downsize or exit.

One facility identified is an owned U.S.

Higher Education campus, which the Company began marketing for sale in the fourth quarter of 2022.

The long-lived assets being marketed for sale consist of land, buildings, and building improvements.

The Company determined that it met all of the criteria to classify these assets as held for sale as of March 31, 2023.

No impairment charge was recorded as the carrying amount of the net assets was less than the fair value less costs to sell.

Fair value was determined based upon the anticipated sales price of these assets.

Upon close, the Company will record any gain related to the sale of these assets in its consolidated statements of income (loss).

Goodwill and Intangible Assets

9 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 24,454,377 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.

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,402,891 and 24,591,375 shares were issued and outstanding as of December 31, 2022 and March 31, 2023, respectively.

The Company also has authorized 8,000,000 shares of preferred stock, none 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 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

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods.

In February 2023, 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 13, 2023.

Net Income (Loss) Per Share

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the periods.

Diluted earnings per share reflects the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options, restricted stock, and restricted stock units.

The dilutive effect of stock awards

was determined using the treasury stock method.

The dilutive effect of stock awards was determined using the treasury stock method.

Under the treasury stock method, all of the following are assumed to be used to repurchase shares of the Company’s common stock:

1 unchanged sentence

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

Weighted average shares outstanding used to compute basic earnings per share 23,948 23,550 23,966 23,765

Set forth below is a reconciliation of shares used to calculate basic and diluted earnings (loss) per share for the three months ended March 31, 2022 and 2023 (in thousands):

For the three months ended March 31,

Weighted average shares outstanding used to compute basic earnings (loss) per share 23,948 23,430

Incremental shares issuable upon the assumed exercise of stock options 2 —

Unvested restricted stock and restricted stock units 164 —

Shares used to compute diluted earnings per share 24,113 23,902 24,131 24,026

Anti-dilutive shares excluded from the diluted earnings per share calculation 377 11 293 149

Shares used to compute diluted earnings (loss) per share 24,114 23,430

Anti-dilutive shares excluded from the diluted earnings (loss) per share calculation 420 593

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 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.

Comprehensive income (loss) includes net income (loss) 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, 2022 and March 31, 2023, the balance of accumulated other comprehensive loss was $ 35.1 million, net of tax of $ 0.1 million and $ 44.3 million, net of tax of $ 0.1 million, respectively.

There were no reclassifications out of accumulated other comprehensive income (loss) to net income (loss) for the three months ended March 31, 2022 and 2023.

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 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

The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the three months ended March 31, 2022 and 2023 (in thousands):

For the three months ended March 31,

Higher Education Segment

Tuition, net of discounts, grants and scholarships $ 187,355 $ 188,780

7,767 7,821 25,611 24,884

Higher Education Segment 195,766 196,895

1 unchanged sentence

Tuition, net of discounts, grants and scholarships 47,536 40,422

768 939 3,531 3,611

Total Australia/New Zealand Segment 48,512 41,503

32 unchanged sentences

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

For the nine months ended September 30,

For the three months ended March 31,

Balance at beginning of period $ 52,024 $ 46,842

12 unchanged sentences

Under this plan, the Company incurred severance and other employee separation costs related to voluntary and involuntary employee terminations.

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 $ 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)

Restructuring Plan Total

Balance at December 31, 2020 $ 1,835 $ 1,287 $ 3,122

Restructuring and other charges — 3,737 3,737

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

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

The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities related to the 2020 restructuring plan during the three months ended March 31, 2022 (in thousands):

Restructuring Plan

Balance at December 31, 2021 $ 1,612

$ — $ 1,612 $ 1,612

Restructuring and other charges 1,462

Payments ( 2,382 )

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

_____________________________________

(1) Restructuring plan implemented following the Company's merger with CEC.

(2) Restructuring liabilities are included in accounts payable and accrued expenses.

Balance at March 31, 2022 $ 692

The final severance payments under the 2020 restructuring plan were made in the third quarter of 2022.

From time to time, the Company also incurs severance and other employee separation costs related to reduction in force actions that are not tied to a formal restructuring plan.

During the first quarter of 2023, the Company incurred severance and other employee separation costs related to involuntary employee terminations due to the elimination of certain positions.

As a result, the Company recorded $ 2.3 million of severance and other employee separation charges during the three months ended March 31, 2023.

Substantially all severance charges related to this action were paid during the first quarter of 2023.

The Company has also been evaluating its owned and leased real estate portfolio, which has resulted in the consolidation and sale of underutilized facilities.

During the three months ended March 31, 2023, the Company recorded right-of-use lease asset charges of approximately $ 3.6 million related to facilities that were consolidated during the quarter.

There were no right-of-use lease asset charges during the three months ended March 31, 2022.

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

There were no fixed asset impairment charges recorded during the three months ended March 31, 2023.

All severance and other employee separation charges and right-of-use lease asset and fixed asset impairment charges are included in Restructuring costs on the unaudited condensed consolidated statements of income (loss).

Marketable Securities

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

The following is a summary of available-for-sale and held-to-maturity securities as of March 31, 2023 (in thousands):

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

Available-for-sale securities:

Tax-exempt municipal securities $ 14,793 $ 2 $ ( 400 ) $ 14,395

Corporate debt securities 6,237 — ( 170 ) 6,067

Total $ 26,815 $ 1 $ ( 781 ) $ 26,035

Total available-for sale securities $ 21,030 $ 2 $ ( 570 ) $ 20,462

Held-to-maturity securities:

Term deposits $ 16,727 $ — $ — $ 16,727

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

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

Available-for-sale securities:

Tax-exempt municipal securities $ 15,852 $ 2 $ ( 507 ) $ 15,347

1 unchanged sentence

Total $ 22,992 $ 2 $ ( 715 ) $ 22,279

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 had no held-to-maturity securities as of December 31, 2022.

The unrealized gains and losses on the Company’s investments in corporate debt and municipal securities as of December 31, 2022 and March 31, 2023 were caused by changes in market values primarily due to interest rate changes.

As of March 31, 2023, the fair value of the Company’s securities which were in an unrealized loss position for a period longer than twelve months was $ 19.5 million.

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 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

As such, no impairment charges were recorded during the three months ended March 31, 2022 and 2023.

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

The following table summarizes the maturities of the Company’s marketable securities as of December 31, 2022 and March 31, 2023 (in thousands):

December 31, 2022 March 31, 2023

Available-for-sale securities Held-to-maturity securities Available-for-sale securities Held-to-maturity securities

Due within one year $ 9,156 $ — $ 7,763 $ 16,727

Due after one year through five years 23,377 14,648

Due after one year through three years 13,123 — 12,699 —

Total $ 22,279 $ — $ 20,462 $ 16,727

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

The following table summarizes the proceeds from the maturities and sales of available-for-sale securities for the three months ended March 31, 2022 and 2023 (in thousands):

For the three months ended March 31,

Maturities of marketable securities $ 1,100 $ 1,960

1 unchanged sentence

Total $ 1,100 $ 1,960

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.

The Company did not record any gross realized gains or losses in net income (loss) during the three months ended March 31, 2022 and March 31, 2023.

Fair Value Measurement

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

Assets measured at fair value on a recurring basis consist of the following as of March 31, 2023 (in thousands):

Fair Value Measurements at Reporting Date Using

September 30, 2022 Quoted Prices in

March 31, 2023 Quoted Prices in

Active Markets

4 unchanged sentences

Money market funds $ 100,323 $ 100,323 $ — $ —

Marketable securities:

Available-for-sale securities:

Tax-exempt municipal securities 14,395 — 14,395 —

10 unchanged sentences

Money market funds $ 217 $ 217 $ — $ —

Marketable securities:

Available-for-sale securities:

Tax-exempt municipal securities 15,347 — 15,347 —

1 unchanged sentence

Total assets at fair value on a recurring basis $ 22,496 $ 217 $ 22,279 $ —

Deferred payments $ 658 $ — $ — $ 658

The Company measures the above items on a recurring basis at fair value as follows:

1 unchanged sentence

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.

The Company’s cash and cash equivalents and held-to-maturity securities held at December 31, 2022 and March 31, 2023 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

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

The Company does not hold securities in inactive markets.

• 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 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 nine months ended September 30, 2021 and 2022.

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,

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

As of March 31, 2022

Balance as of the beginning of period $ 658

3 unchanged sentences

Goodwill and Intangible Assets

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

The following table presents changes in the carrying value of goodwill by segment for the three months ended March 31, 2023 (in thousands):

Higher Education Australia /

5 unchanged sentences

Adjustments to prior acquisitions — — — —

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

Balance as of March 31, 2023 $ 632,075 $ 511,255 $ 100,000 $ 1,243,330

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 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.

No events or circumstances occurred in the three months ended March 31, 2023 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, 2022 and 2023.

Intangible Assets

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

The following table represents the balance of the Company’s intangible assets as of December 31, 2022 and March 31, 2023 (in thousands):

December 31, 2022 March 31, 2023

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 $ 41.4 million and $ 8.5 million for the nine months ended September 30, 2021 and 2022, respectively.

Amortization expense related to finite-lived intangible assets was $ 2.9 million and $ 2.7 million for the three months ended March 31, 2022 and 2023, respectively.

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

1 unchanged sentence

In addition, there are no legal, regulatory, contractual, economic, or other factors to limit the useful life of the trade name intangibles.

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 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

the respective indefinite-lived intangible asset below its carrying amount.

No events or circumstances occurred in the three months ended March 31, 2023 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, 2022 and 2023.

Other Current Assets

Other current assets consist of the following as of December 31, 2022 and March 31, 2023 (in thousands):

December 31, 2022 March 31, 2023

Prepaid expenses $ 19,073 $ 27,650

Restricted cash 13,287 15,481

Cloud computing arrangements 7,859 7,587

Other 3,066 3,328

Other current assets $ 43,285 $ 54,046

Other assets consist of the following as of December 31, 2022 and March 31, 2023 (in thousands):

December 31, 2022 March 31, 2023

Prepaid expenses, net of current portion $ 18,192 $ 17,975

Equity method investments 13,879 14,874

Cloud computing arrangements 5,957 6,835

Cloud computing arrangements, net of current portion 7,507 9,032

Other investments 3,396 2,806

4 unchanged sentences

Long-term prepaid expenses primarily relate to payments that have been made for future services to be provided after one year.

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 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.

In 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, 2022 and March 31, 2023, $ 17.7 million and $ 17.3 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 $ 2.6 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 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

The following table illustrates changes in the Company’s limited partnership investments for the three months ended March 31, 2022 and 2023 (in thousands):

For the three months ended March 31,

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

6 unchanged sentences

Other Investments

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

The Company holds 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.

1 unchanged sentence

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.

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.

Accounts Payable and Accrued Expenses

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

Accounts payable and accrued expenses consist of the following as of December 31, 2022 and March 31, 2023 (in thousands):

December 31, 2022 March 31, 2023

Trade payables $ 45,826 $ 54,497

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.

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.

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 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.

The Company was in compliance with all the terms of the Amended Credit Facility as of March 31, 2023.

As of December 31, 2022 and March 31, 2023, the Company had approximately $ 101.4 million and $ 101.3 million, respectively, outstanding under the Revolving Credit Facility.

Approximately $ 3.4 million and $ 3.3 million was denominated in Australian dollars as of December 31, 2022 and March 31, 2023, respectively.

During the three months ended March 31, 2022 and 2023, the Company paid $ 0.4 million and $ 2.4 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 September 30, 2022 (in thousands):

December 31, 2021 September 30, 2022

Other long-term liabilities consist of the following as of December 31, 2022 and March 31, 2023 (in thousands):

December 31, 2022 March 31, 2023

Contract liabilities, net of current portion $ 36,540 $ 34,881

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 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

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, 2022 and 2023 (in thousands):

For the three months ended March 31,

Instructional and support costs $ 1,607 $ 1,866

General and administration 3,461 3,766

Restructuring costs ( 222 ) — ( 703 ) —

Stock-based compensation expense included in operating expense 5,068 5,632

1 unchanged sentence

Stock-based compensation expense, net of tax $ 3,734 $ 4,153

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 $ 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.

During the three months ended March 31, 2022 and 2023, the Company recognized shortfall tax impacts of approximately $ 1.3 million and $ 1.4 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes.

During the three months ended March 31, 2022 and 2023, the Company recorded income tax expense of $ 5.2 million and $ 1.1 million, respectively.

Income tax expense for the three months ended March 31, 2022 and 2023 include shortfall tax impacts of approximately $ 1.3 million and $ 1.4 million, respectively, related to share-based payment arrangements.

The Company had $ 0.9 million of unrecognized tax benefits as of December 31, 2022 and March 31, 2023.

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 (loss).

The Company paid $ 0.5 million and $ 3.8 million in income taxes during the three months ended March 31, 2022 and 2023, respectively.

The tax years since 2019 remain open for federal tax examination, the tax years since 2018 remain open to examination by certain states, and the tax years since 2017 remain open to examination by foreign taxing jurisdictions in which the Company is subject to taxation.

Segment Reporting

12 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 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

A summary of financial information by reportable segment for the three months ended March 31, 2022 and 2023 is presented in the following table (in thousands):

For the three months ended March 31,

Higher Education $ 195,766 $ 196,895

9 unchanged sentences

Restructuring costs ( 1,858 ) ( 5,595 )

Consolidated income from operations $ 7,348 $ 7,807 $ 46,048 $ 43,113

Consolidated income (loss) from operations $ 13,441 $ ( 1,349 )

The Company is involved in litigation and other legal proceedings arising out of the ordinary course of its business.

5 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.

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.

(subsequently captioned Ornelas, et al.

Capella, et al.) , United States District Court for the District of Minnesota, Case No.

18-cv-1062, 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.

1 unchanged sentence

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.

Since that time, Capella University has not received any communication from the Department related to the set of borrower defense claims received in 2021, nor has Capella University received indication that any of these claims 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.

3:19-cv-03674-WHA, the Department joined a proposed class settlement agreement that 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.

The 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 applied during the period after execution of the settlement and before final 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.

A joint motion for final approval was filed on September 22, 2022, which multiple intervening higher education institutions and companies opposed.

Following a fairness hearing, the court granted final approval of the settlement on November 16, 2022.

Intervenors appealed the court’s order and moved to stay the court’s final judgment approving the settlement pending resolution of the appeal.

Intervenors’ attempts to stay the judgment pending full consideration of appeal have been denied.

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.

Our higher education institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition, and results of operations.

Other than as set forth below, there have been no material changes to the laws and regulations affecting our higher education institutions that are described in our Annual Report on Form 10-K for the year ended December 31, 2022.

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

Among other things, the CARES Act 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, 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.

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.

Through a series of administrative actions, student loan relief has been extended, including on November 22, 2022, when the Department announced an extension to “alleviate uncertainty for borrowers” as the U.S.

Supreme Court prepared to decide the legality of broad debt relief.

In that announcement, the Department indicated that payments will resume 60 days after the Department is permitted to implement the program or the litigation is resolved.

If the litigation has not been resolved by June 30, 2023, payments will resume 60 days after that.

Supreme Court heard oral arguments on February 28, 2023 and has yet to issue a decision.

American Rescue Plan Act of 2021

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021.

Similar to previous stimulus packages, this legislation provided additional funding for the Higher Education Emergency Relief Fund.

A small portion of the $39.6 billion allocated for institutions of higher education was made available for student emergency aid for students at for-profit institutions.

Capella University disbursed $ 184,323 to students of the highest need in June 2021, and Strayer University disbursed $ 2,554,682 to students of the highest need in July 2021.

The legislation also amended the “90/10 Rule” to include “all federal education assistance” in the “90” side of the ratio calculation.

Among other things, the legislation amended the “90/10 Rule” to include “all federal education assistance” in the “90” side of the ratio calculation.

Business – Regulation – U.S.

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

Regulatory Environment – The 90/10 Rule” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a description of the 90/10 Rule.

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

In March 2022, the Institutional and Programmatic Eligibility negotiated rulemaking committee reached consensus on changes to the 90/10 Rule, which may result in a definition of “federal education assistance” that will include tuition assistance programs offered by the U.S.

Department of Defense and U.S.

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

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.

In March 2022, the Institutional and Programmatic Eligibility negotiated rulemaking committee reached consensus on changes to the 90/10 Rule.

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

The final regulations provided for an expanded definition of “federal education assistance” that will be periodically defined by the Secretary of Education.

On December 20, 2022, the Department published guidance indicating that non-Title IV eligible programs offered in part or in whole via distance education are not eligible to be counted in the “10” side of the ratio calculation.

On December 21, 2022, the Department released a non-exhaustive list of federal agencies and federal education assistance programs that must be included as federal revenue in the 90/10 calculation.

Such agencies include the U.S.

Department of Defense (military tuition assistance) and the Department of Veterans Affairs (veterans education benefits), in addition to the Title IV programs already covered by the 90/10 Rule.

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.

We cannot predict whether or how legislative or regulatory changes will affect the 90/10 Rule.

Consolidated Appropriations Act, 2021

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

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.

The legislation includes a number of tax provisions, including replacing the tuition deduction with an expanded Lifetime Learning Credit, which now shares the higher income limitations of the American Opportunity Tax Credit.

The legislation also extends until January 1, 2026 expanded employer-provided educational assistance permitting employers to pay up to $5,250 toward an employee’s federal student loans as a tax-free benefit.

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

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;

restoring quarters/semesters of Pell eligibility to students who have successfully asserted a borrower defense to repayment;

repealing the limitation on lifetime subsidized loan eligibility (known as “Subsidized Usage Limit Applies,” or SULA);

and significantly simplifying the FAFSA form.

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.

In January 2021, the Department released a table of institutional allocation of funds, which indicated that Capella University was eligible for $ 328,602 and Strayer University was eligible for $ 5,831,606 , all of which was disbursed to students with the highest need in the form of direct grants in spring 2021.

Veterans Health Care and Benefits Improvement Act of 2020

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.

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 VA for overpaid tuition benefits;

and establishes a number of institutional requirements, including:

providing clear disclosures about cost, loan debt, graduation and job placement rates, and acceptance of transfer credit;

ensuring institutions are accommodating short absences due to service;

prohibiting same-day recruitment and registration;

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.

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.

The law requires the U.S.

Department of Labor and VA to collaborate on a list of high-demand occupations for a rapid retraining assistance program.

Additionally, the law requires the Government Accountability Office to report on the outcomes and effectiveness of retraining programs.

The THRIVE Act amended the Veterans Health Care and Benefits Improvement Act by clarifying that programs pursued solely through distance education on a half-time basis or less are not eligible for the housing stipend that is generally available for retraining programs.

As noted above, the Veterans Health Care and Benefits Improvement Act prohibits certain high-pressure recruiting tactics.

The THRIVE Act requires the VA to take disciplinary action if a person with whom an institution has a recruiting or educational services agreement violates the VA’s incentive compensation bans.

On December 21, 2021, President Biden signed into law the Responsible Education Mitigating Options and Technical Extensions (“REMOTE”) Act, which amended provisions of the Veterans Health Care and Benefits Improvement Act, the American Rescue Plan Act, and the THRIVE Act.

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 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

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 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 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.

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 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.

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.

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

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

In January 2023, the Department indicated its intention to establish one or more rulemaking committees in 2023 to propose new regulations on distance education, improving the use of deferments and forbearances, third-party servicers and related issues, cash management, return of federal funds, state authorization, accreditation and related issues, and TRIO programs.

The Department invited interested parties to comment on the topics suggested by the Department at three public hearings held from April 11-13, 2023.

The Department also accepted written comments through April 24, 2023.

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

If the negotiated rulemaking committee reaches 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 generally take effect July 1 of the following year.

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 (“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;

(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.

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

The 2019 BDTR Rule defines “financial harm” as the amount of monetary loss that a borrower incurs as a consequence of a misrepresentation.

The Department will determine financial harm based upon individual earnings and circumstances, which must include consideration of the individual borrower’s career experience subsequent to enrollment and may include, among other factors, evidence of program-level median or mean earnings.

“Financial harm” does not include damages for non-monetary loss, and the act of taking out a Direct Loan, alone, does not constitute evidence of financial harm.

Financial harm also cannot be predominantly due to intervening local, regional, national economic or labor market conditions, nor can it arise from the borrower’s voluntary change in occupation or decision to pursue less than full-time work or decision not to work.

The 2019 BDTR Rule contains certain limitations and procedural protections.

Among the most prominent of these restrictions, the regulation contains a three-year limitation period of claims, measured from the student’s separation from the institution, does not permit claims to be filed on behalf of groups, and requires that institutions receive access to any evidence in the Department’s possession to inform its response.

The 2019 BDTR Rule permits the usage of pre-dispute arbitration agreements and class action waivers as conditions of enrollment, so long as the institution provides plain-language disclosures to students and the disclosures are placed on the institution’s website.

The regulations also allow for a borrower to choose whether to apply for a closed school loan discharge or accept a teach-out opportunity.

In addition, the closed school discharge window is expanded from 120 days to 180 days prior to the school’s closure, though the final rule does not allow for an automatic closed school loan discharge.

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 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.

This formula analyzed a borrower’s earnings as compared to median earnings of comparable programs to determine the amount of loans that would be discharged.

Under this formula, even successful BDTR applicants may receive only a partial loan discharge.

On March 11, 2020, the 116th Congress passed a joint resolution providing for Congressional disapproval of the 2019 BDTR Rule.

Former President Trump vetoed the joint resolution on May 29, 2020, and the House subsequently failed to override the veto during a vote on June 26, 2020.

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

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.

These borrowers will no longer be required to provide proof of insufficient income for the relief program for the three years after discharge of their loans.

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 in October 2021 and concluded in December 2021, with the committee failing to reach consensus on Borrower Defense to Repayment.

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 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.

On March 16, 2022, Federal Student Aid (“FSA”) announced that it is monitoring complaints and borrower defense to repayment (“BDTR”) applications from veterans, service members and their family members who report claims of deceptive recruitment and enrollment practices, including misrepresentations related to cost, financing, and application of military and veteran benefits.

The Department indicated that it will seek all appropriate corrective measures pursuant to the BDTR regulations if it finds that an institution has engaged in substantial misrepresentation or fraudulent conduct, and that it will share information and complaints with the Department of Defense and Department of Veterans Affairs.

On March 14, 2023, the Department of Education announced that the Office of Enforcement of FSA will use “secret shoppers” to monitor post-secondary institutions’ compliance with the laws and regulations governing participation in federal student aid programs.

The Department indicated that secret shoppers will evaluate recruitment, enrollment, financial aid, and other practices of post-secondary institutions to help identify potentially deceptive or predatory practices used to recruit and enroll students.

The Department noted that findings from secret shopping may serve as evidence in ongoing investigations and reviews or serve as the basis for opening new investigations and reviews.

The Department further noted that, where appropriate and permissible, FSA may refer secret shopping findings to other offices within the Department, as well as other state and federal enforcement agencies.

Accrediting Agencies and State Authorization

On November 1, 2019, the Department of Education published final rules amending regulations governing the recognition of accrediting agencies, certain student assistance provisions including state authorization rules, and institutional eligibility.

Among other changes, the final rules revise the definition of “state authorization reciprocity agreement” such that member states may enforce their own general-purpose state laws and regulations, but may not impose additional requirements related to state authorization of distance education directed at all or a subgroup of educational institutions.

The regulations also clarify that state authorization requirements related to distance education courses are based on the state where a student is “located,” as determined by the institution, and not the state of the student’s “residence.” In addition, the final rules remove certain disclosure requirements related to programs offered solely through distance education, and they replace those requirements with certain disclosure requirements applicable to all programs that lead to professional licensure or certification, regardless of the delivery modality of those programs.

The Department’s new rules also refine the process for recognition and review of accrediting agencies, the criteria used by the Department to recognize accrediting agencies, and the Department’s requirements for accrediting agencies in terms of their oversight of accredited institutions and programs.

The final regulations became effective on July 1, 2020, excepting certain provisions which were eligible to be implemented early by institutions, and certain provisions relating to recognition of accrediting agencies effective January 1 and July 1, 2021.

On July 29, 2020, the National Advisory Committee on Institutional Quality and Integrity (“NACIQI”) held a meeting to review compliance by the Higher Learning Commission (“HLC”) with Department of Education requirements for recognized accrediting agencies.

HLC is the institutional accreditor for Capella University.

On June 30, 2020, the Department released a staff report that outlined HLC’s alleged noncompliance with its own policies and the Department’s regulations with regard to a change of ownership approval process for the acquisition of the Art Institute of Colorado and the Illinois Institute of Art, by Dream Center Educational Holdings.

On June 30, 2020, the Department released a staff report that

outlined HLC’s alleged noncompliance with its own policies and the Department’s regulations with regard to a change of ownership approval process for the acquisition of the Art Institute of Colorado and the Illinois Institute of Art, by Dream Center Educational Holdings.

The staff report noted noncompliance in the areas of due process, consistency in decision making, and proper appeals procedures.

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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 and already has solicited written comments from the public (which were due January 2022).

Distance Education and Innovation

On August 24, 2020, the Department of Education published final rules related to distance education and innovation to amend the sections of the institutional eligibility regulations issued under the HEA regarding establishing eligibility, maintaining eligibility, and losing eligibility.

Among other changes, the final rules established an updated definition of distance education;

amended the existing definition of the credit hour;

created a definition of academic engagement;

and updated eligibility and program design, for programs offered through the direct assessment of learning.

The final rules also made operational changes to several financial aid awarding, disbursing and refunding rules, including how aid can be delivered to students enrolled in subscription period programs, such as Capella University’s FlexPath offerings.

The final rule became effective July 1, 2021.

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.

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.

The final rule became effective August 14, 2020.

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, 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.

Both Middle States and HLC appeared before NACIQI in February-March 2023 as part of the recognition process.

NACIQI voted to recommend renewal of recognition for five years in the case of both HLC and Middle States.

The Senior Department Official will review NACIQI’s recommendations and make final determinations on agency recognition within 90 days of the NACIQI meeting.

State Authorization Reciprocity Agreement (SARA)

Strayer University and Capella University participate in the State Authorization Reciprocity Agreement (“SARA”), which allows the Universities to enroll students in distance education programs in each SARA member state, including 49 states, the District of Columbia, Puerto Rico, and the U.S.

Virgin Islands.

Each of the Universities applies separately to non-SARA member states (i.e., California) for authorization to enroll students, if such authorization is required by the state.

On March 1, 2023, SARA’s coordinating entity, the National Council for State Authorization Reciprocity Agreements (“NC-SARA”), held its first of two public comment forums to seek input on potential changes to NC-SARA policies.

The forum included a discussion of 63 proposed policy changes, some of which, if adopted, would significantly alter the distance education reciprocity agreements, including a proposal that NC-SARA permit states to apply more stringent standards to for-profit institutions or to eliminate the ability of for-profit institutions to participate in the agreements altogether.

In addition to the public comment forums, written comments are accepted through May 17, 2023.

NC-SARA’s four regional compacts and the NC-SARA board of directors will vote on each proposal presented by September 1, 2023, and October 25, 2023, respectively.

We cannot predict whether NC-SARA will adopt any of these proposals.

The adoption of certain proposals, including the proposal to alter standards or to eliminate the ability of for-profit institutions to participate in the agreements, could have a material adverse effect on Strayer University, Capella University, and the Company.

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

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

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

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 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.

The Department selected negotiators in September 2021, with negotiations occurring October-December 2021.

In December 2021, the Affordability and Student Loans committee reached consensus on four of twelve topics:

discharges for false certification of student eligibility, Pell Grant eligibility for prison education programs, discharges for borrowers with total and permanent disability, and interest capitalization.

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

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.

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

On December 8, 2021, the Department announced its intention to establish the Institutional and Programmatic Eligibility committee, to prepare proposed regulations to address the following topics:

90/10, ability to benefit, certification procedures for participating in Title IV programs, change of ownership and change in control of institutions of higher education, financial responsibility for participating institutions of higher education, gainful employment, and standards of administrative capability.

Committee meetings occurred January-March 2022.

In March 2022, the committee reached consensus on two of seven topics:

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

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 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 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.

The proposal included new mandatory and discretionary triggers that would require the posting of financial protections.

Among other things, the Department proposed a discretionary trigger in the event of significant fluctuations in Title IV aid;

a discretionary trigger for pending borrower defense claims;

and a discretionary trigger for when institutions close most or all on-ground locations but maintain an online presence.

The Department also proposed as part of the negotiated rulemaking process the reestablishment of gainful employment regulations, which would apply to all programs (including non-degree programs) at proprietary institutions and non-degree programs at public and private nonprofit institutions.

Among other items, the Department proposed to use the first four digits of the CIP (Classification of Instructional Program) code to identify gainful employment programs;

to remove the “zone” concept pertaining to debt-to-earnings rates;

and to establish that a program would fail the debt-to-earnings rate measure if, among other measures, its debt-to-earnings rate is greater than 8 percent and its discretionary earnings rate is greater than 20 percent.

The Department also proposed including Parent PLUS loans when determining student debt load, and included a new “earnings threshold” measure comparing the median annual earnings for students who completed the program to the median earnings for a working adult aged 25-34 with only a high school diploma in the state in which the institution is located (or nationally based on the percentage of students located in the same state as the institution).

The Department’s proposal would deem a program ineligible for Title IV funding if the program failed either metric (debt-to-earnings or earnings threshold) two out of three consecutive years.

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.

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

Strayer University and Capella University are subject to announced and unannounced compliance reviews and audits by various external agencies, including the Department, its Office of Inspector General, state licensing agencies, guaranty agencies, and accrediting agencies.

In June 2019, the Department conducted an announced, on-site program review at Capella University, focused on Capella University’s FlexPath program.

The review covered the 2017-2018 and 2018-2019 federal student financial aid years.

The Department issued its preliminary report on November 13, 2020, and Capella University responded to the report.

On February 9, 2021, Capella University received the Department’s Final Program Review Determination, which closed the Program Review without further action required on the part of Capella University.

On March 17, 2021, the Department informed Strayer University that it planned to conduct an announced, remote program review.

The review commenced on April 19, 2021 and covered the 2019-2020 and 2020-2021 federal student financial aid years.

On September 21, 2021, Strayer University received the Department’s Final Program Review Determination, which closed the Program Review without further action required on the part of Strayer University.

The public comment period on the proposed rule ended on September 12, 2022, and the Department has indicated its intention to publish a final Title IX rule in May 2023.

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

Third-Party Servicers

Department of Education regulations permit an institution to enter into a written contract with a third-party servicer for the administration of any aspect of the institution’s participation in Title IV programs.

The third-party servicer must, among other obligations, comply with Title IV requirements and be jointly and severally liable with the institution to the Secretary of Education for any violation by the servicer of any Title IV provision.

An institution must report to the Department of Education new contracts or any significant modifications to contracts with third-party servicers as well as other matters related to third-party servicers.

On February 15, 2023 the Department released a Dear Colleague Letter (“DCL”) (GEN 23-03) with updated guidance expanding the definition of third-party servicers and covered activities to include vendors providing student recruitment and retention services, software products and services related to Title IV administration activities, and educational content and instruction, initially requiring institutions to be in compliance with the new guidance by May 1, 2023.

On February 28, 2023, the Department extended the effective date of the updated guidance and reporting requirements from May 1, 2023 to September 1, 2023.

On April 11, 2023, the Department again delayed the effective date until six months after the Department publishes a new, revised final guidance letter on the topic.

Until that time, DCLs GEN 12-08, GEN 15-01, and GEN 16-15 (as amended by the March 8, 2017, electronic announcement) remain in effect.

Additionally, in March 2023, the Department indicated via Federal Register publication its intention to establish a negotiated rulemaking committee in 2023 to consider new proposed regulations on third-party servicers and related issues.

There is also litigation challenging the Department’s guidance because the Department did not use the negotiated rulemaking process;

the complaint was filed on April 4, 2023.

Program Participation Agreement

Each institution participating in Title IV programs must enter into a Program Participation Agreement with the Department.

Under the agreement, the institution agrees to follow the Department’s rules and regulations governing Title IV programs.

On December 13, 2021, the Department and Strayer University executed a new Program Participation Agreement, approving Strayer University’s continued participation in Title IV programs with full certification through September 30, 2025.

As a result of the August 1, 2018 merger, Capella University experienced a change of ownership, with the Company as its new owner.

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

Office of Enforcement

On October 8, 2021, the Department of Education announced establishment of an Office of Enforcement within the Department's Office of Federal Student Aid, designed to strengthen oversight over and enforcement against postsecondary schools that participate in federal student loan, grant, and work-study programs.

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

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.

The Department intends the Office of Enforcement to coordinate with other state and federal partners, including the Department of Justice, Consumer Financial Protection Bureau, Federal Trade Commission, and state attorneys general.

Federal Trade Commission

On October 6, 2021 the Federal Trade Commission (“FTC”) announced that it is resurrecting Penalty Offense Authority under Section 5(m) of the FTC Act (the “Act”).

Under the Act, the FTC may secure penalties against entities not a party to an original proceeding if the FTC can show that the entity had actual knowledge that the conduct in question was found to be unfair or deceptive.

Entities that have actual knowledge of acts or practices the FTC has found to be unlawful and that subsequently engage in such unlawful acts or practices may be held liable for civil penalties up to $43,792 per violation.

Also on October 6, 2021, in an effort to establish actual knowledge and create a pathway for penalties in the event of post-notice acts or practices, the FTC issued notice to the 70 largest for-profit schools based on enrollment and revenues.

The notice included a list of acts and practices that the FTC has determined are unfair or deceptive, including but not limited to acts relating to misrepresentation of employment opportunities and other benefits, together with citation to various prior determinations from cases previously litigated by the FTC.

Strayer University and Capella University received the FTC’s notice on October 7, 2021.

The FTC made clear that receipt of the notice itself does not reflect any assessment as to whether Strayer University or Capella University has engaged in deceptive or unfair conduct.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (“CFPB”) is a U.S.

government agency established to protect the interests of consumers in their dealings with banks, lenders and other financial institutions.

On April 4, 2022, the Company received correspondence from the CFPB, in which the CFPB took the position that it has supervisory authority over the Company as a covered person that offers or provides private education loans pursuant to 12 U.S.C.

5514(a)(1)(D) and further indicated the CFPB is considering whether to cite violations based on preliminary findings that the Company may have violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C.

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.

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 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.

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

The Company operates two post-secondary educational institutions in Australia, Torrens University Australia Limited (“Torrens”) and Think:

Colleges Pty Ltd (“Think”).

In Australia, a distinction is made between higher education and vocational education organizations.

Higher education providers consist of public and private universities, Australian branches of overseas universities and other higher education providers.

Higher education qualifications consist of undergraduate awards (bachelor’s degrees, associate degrees and diplomas) and postgraduate awards (graduate certificates and diplomas, master’s degrees and doctoral degrees).

The regulation of higher education providers is undertaken at a national level by the Tertiary Education Quality and Standards Agency (“TEQSA”).

All organizations that offer higher education qualifications in or from Australia must be registered by TEQSA.

Higher education providers that have not been granted self-accrediting status must also have their courses of study accredited by TEQSA.

Registration as a higher education provider is for a fixed period of up to seven years.

TEQSA regularly reviews the conduct and operation of accredited higher education providers.

The vocational education and training (“VET”) sector consists of technical and further education institutes, agricultural colleges, adult and community education providers, community organizations, industry skill centers and private providers.

VET qualifications include certificates, diplomas and advanced diplomas.

The regulation of VET providers is undertaken at a national level by the Australian Skills Quality Authority (“ASQA”).

Organizations providing VET courses in Australia must be registered by ASQA as a Registered Training Organisation (“RTO”).

Courses offered by RTOs need to be accredited by ASQA.

Registration as an RTO is for a fixed period of up to seven years.

ASQA regularly reviews the conduct and operations of RTOs.

Torrens is one of 44 universities in Australia.

It is a for-profit entity and registered as a university by TEQSA.

As a self-accrediting university, it is not required to have its courses of study accredited by TEQSA.

Torrens is also registered by ASQA as an RTO and is thus entitled to offer vocational and training courses.

Think is one of approximately 5,000 RTOs in Australia and in that capacity is regulated by ASQA.

It is also registered as a higher education provider by TEQSA.

Its higher education courses require, and have received, accreditation by TEQSA.

Australia also maintains a Commonwealth Register of Institutions and Courses for Overseas Students (“CRICOS”) for Australian education providers that recruit, enroll and teach overseas students.

Registration in CRICOS allows providers to offer courses to overseas students studying on Australian student visas.

Both Torrens and Think are so registered.

The Commonwealth government has established income-contingent loan schemes that assist eligible fee-paying students to pay all or part of their tuition fees (separate schemes exist for higher education and vocational courses).

Under the schemes, the relevant fees are paid directly to the institutions.

A corresponding obligation then exists from the participating student to the Commonwealth government.

Neither Torrens nor Think have any responsibility in connection with the repayment of these loans by students and, generally, this assistance is not available to international students.

Both Torrens and Think are registered for the purposes of these plans (a precondition to their students being eligible to receive such loans).

New Zealand Regulation

The Company operates a post-secondary educational institution in New Zealand, Media Design School Limited (“MDS”).

MDS is a Private Training Establishment (“PTE”);

a private organization offering education or training.

It is a globally renowned and specialist provider of design and creative technology education with qualifications ranging from diplomas to postgraduate degrees.

MDS also has access to New Zealand Government student finance where study loans are offered to students who are New Zealand citizens or ordinarily resident in New Zealand, subject to certain conditions.

As is typical, the Provisional Program Participation Agreement subjected 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, and on April18, 2023, Capella University and the Department of Education executed a fully certified Program Participation Agreement, approving Capella University’s continued participation in Title IV programs through September 30, 2025.

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