What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-07-27 compared with 2023-04-28 · 153 added, 86 removed, 210 unchanged (53% of the section changed)

22 unchanged sentences

Segments Overview

As of March 31, 2023, we had the following reportable segments:

As of June 30, 2023, we had the following reportable segments:

Higher Education Segment

3 unchanged sentences

The USHE segment provides academic offerings both online and in physical classrooms, helping working adult students develop specific competencies they can apply in their workplace.

• In the first quarter of 2023, USHE enrollment increased 2.3% to 79,935 compared to 78,172 for the same period in 2022.

• Trailing 4-quarter student persistence within USHE was 87.4% in the fourth quarter of 2022 compared to 86.8% for the same period in 2021.

• In the second quarter of 2023, USHE enrollment increased 4.7% to 80,353 compared to 76,728 for the same period in 2022.

• Trailing 4-quarter student persistence within USHE was 87.4% in the first quarter of 2023 compared to 87.1% for the same period in 2022.

Student persistence is calculated as the rate of students continuing from one quarter to the next, adjusted for graduates, on a trailing 4-quarter basis.

3 unchanged sentences

87.0 % 86.9 % 86.8 % 87.1 % 87.3 % 87.7 % 87.4 % 87.4 %

• Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 6.2% as of the end of the fourth quarter of 2022.

• Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 7.2% as of the end of the first quarter of 2023.

Government provided grants and loans per credit earned includes all Federal loans and grants for students (Title IV hereafter) in our USHE institutions, and is calculated on a trailing 4-quarter basis and reported one quarter in arrears.

8 unchanged sentences

All enrollments attributed to the Education Technology Services division continue to be attributed to the division until the student graduates or withdraws, even if his or her employment status changes or if the partnership contract expires.

• In the first quarter of 2023, employer affiliated enrollment as a percentage of USHE enrollment was 26.3% compared to 23.0% for the same period in 2022.

• In the second quarter of 2023, employer affiliated enrollment as a percentage of USHE enrollment was 27.1% compared to 24.6% for the same period in 2022.

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

4 unchanged sentences

Courses are offered both online and at physical campuses.

Torrens University is registered with the Tertiary Education Quality and Standards Agency (“TEQSA”), the regulator for higher

education providers and universities throughout Australia, as an Australian University that is authorized to self-accredit its courses.

University is registered with the Tertiary Education Quality and Standards Agency (“TEQSA”), the regulator for higher education providers and universities throughout Australia, as an Australian University that is authorized to self-accredit its courses.

• Think Education is a vocational registered training organization and accredited higher education provider in Australia.

4 unchanged sentences

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

• In the first quarter of 2023, Australia/New Zealand enrollment decreased 6.3% to 19,269 compared to 20,575 for the same period in 2022.

• In the second quarter of 2023, Australia/New Zealand enrollment decreased 4.6% to 17,966 compared to 18,834 for the same period in 2022.

We believe we have the right operating strategies in place to provide the most direct path between learning and employment for our students.

21 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.

Approximately 96% of our revenues during the three months ended March 31, 2023 consisted of tuition revenue.

Approximately 96% of our revenues during the six months ended June 30, 2023 consisted of tuition revenue.

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

36 unchanged sentences

Periodic reconciliation and true-ups are undertaken between the relevant government authority and the institution based on actual eligible enrollments, which may result in a net amount being due to or from the government.

Students at Strayer University registering in credit-bearing courses in any undergraduate or graduate program qualify for the Graduation Fund, whereby qualifying students earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program.

Students at Strayer University registering in credit-bearing courses in any undergraduate program qualify for the Graduation Fund, whereby qualifying students earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program.

Students must meet all of Strayer University’s admission requirements and not be eligible for any previously offered scholarship program.

To maintain eligibility, students must be enrolled in a bachelor’s or master’s degree program.

To maintain eligibility, students must be enrolled in a bachelor’s degree program.

Students who have more than one consecutive term of non-attendance lose any Graduation Fund credits earned to date, but may earn and accumulate new credits if the student is reinstated or readmitted by Strayer University in the future.

3 unchanged sentences

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

As of March 31, 2023, we had

deferred $45.9 million for estimated redemptions earned under the Graduation Fund, as compared to $46.8 million at December 31, 2022.

As of June 30, 2023, we had deferred $45.3 million for estimated

redemptions earned under the Graduation Fund, as compared to $46.8 million at December 31, 2022.

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

6 unchanged sentences

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

For the first quarter of 2023, our bad debt expense was 3.8% of revenue, compared to 2.8% for the same period in 2022.

A change in our allowance for credit losses of 1% of gross tuition receivable as of March 31, 2023 would have changed our income (loss) from operations by approximately $1.2 million.

For the second quarter of 2023, our bad debt expense was 4.4% of revenue, compared to 3.2% for the same period in 2022.

A change in our allowance for credit losses of 1% of gross tuition receivable as of June 30, 2023 would have changed our income from operations by approximately $1.3 million.

Goodwill and intangible assets — Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed.

3 unchanged sentences

Goodwill and indefinite-lived intangible assets are assessed at least annually for impairment.

No events or circumstances occurred in the three months ended March 31, 2023 to indicate an impairment to goodwill or indefinite-lived intangible assets.

Accordingly, no impairment charges related to goodwill or indefinite-lived intangible assets were recorded during the three month periods ended March 31, 2023.

No events or circumstances occurred in the three and six months ended June 30, 2023 to indicate an impairment to goodwill or indefinite-lived intangible assets.

Accordingly, no impairment charges related to goodwill or indefinite-lived intangible assets were recorded during the three and six month periods ended June 30, 2023.

Finite-lived intangible assets that are acquired in business combinations are recorded at fair value on their acquisition dates and are amortized on a straight-line basis over the estimated useful life of the asset.

2 unchanged sentences

If such assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets.

No impairment charges related to finite-lived intangible assets were recorded during the three month periods ended March 31, 2023.

No impairment charges related to finite-lived intangible assets were recorded during the three and six month periods ended June 30, 2023.

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

2 unchanged sentences

Results of Operations

In the first quarter of 2023, we generated $256.6 million in revenue compared to $258.9 million in 2022.

Our loss from operations was $1.3 million for the first quarter of 2023 compared to income from operations of $13.4 million in 2022, principally due to lower earnings in the USHE segment, higher losses in the ANZ segment, and higher restructuring costs.

Net loss in the first quarter of 2023 was $2.0 million compared to net income of $7.0 million for the same period in 2022.

Diluted loss per share was $0.09 compared to diluted earnings per share of $0.29 for the same period in 2022.

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Consolidated revenue decreased to $256.6 million in the first quarter of 2023, compared to $258.9 million in the same period in the prior year, primarily due to timing of ANZ academic term start dates and unfavorable foreign currency exchange impacts, partially offset by an increase in USHE enrollment.

In the USHE segment for the three months ended March 31, 2023, total enrollment increased 2.3% to 79,935 from 78,172 for the same period in 2022.

USHE segment revenue increased 0.6% to $196.9 million compared to $195.8 million in 2022 primarily due to the increase in enrollment, partially offset by lower revenue per student.

In the Australia/New Zealand segment for the three months ended March 31, 2023, total enrollment decreased 6.3% to 19,269, compared to 20,575 for the same period in 2022.

Australia/New Zealand segment revenue decreased 14.4% to $41.5 million compared to $48.5 million in 2022, primarily driven by the timing of the first academic term of the year and unfavorable foreign currency exchange impacts.

In the Education Technology Services segment, revenue for the three months ended

March 31, 2023 increased 24.9% to $18.2 million compared to $14.6 million in 2022, primarily as a result of growth in Sophia Learning and higher employer affiliated enrollment.

In the second quarter of 2023, we generated $287.7 million in revenue compared to $273.6 million in 2022.

Our income from operations was $16.8 million for the second quarter of 2023 compared to $21.9 million in 2022, principally due to lower earnings in the USHE segment, higher restructuring costs, and unfavorable foreign currency exchange impacts, partially offset by higher earnings in the ANZ segment.

Net income in the second quarter of 2023 was $14.2 million compared to $15.2 million for the same period in 2022.

Diluted earnings per share was $0.59 compared to $0.63 for the same period in 2022.

For the six months ended June 30, 2023, we generated $544.3 million in revenue, compared to $532.4 million for the same period in 2022.

Our income from operations was $15.5 million for the six months ended June 30, 2023 compared to $35.3 million for the same period in 2022, principally due to lower earnings in the USHE and ANZ segments, higher restructuring costs, and unfavorable foreign currency exchange impacts.

Net income was $12.2 million for the six months ended June 30, 2023 compared to $22.2 million for the same period in 2022, and diluted earnings per share was $0.51 in the six months ended June 30, 2023 compared to $0.92 for the same period in 2022.

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Consolidated revenue increased to $287.7 million in the second quarter of 2023, compared to $273.6 million in the same period in the prior year, primarily due to an increase in USHE enrollment and revenue per student and growth in Sophia Learning subscriptions, partially offset by unfavorable foreign currency exchange impacts.

In the USHE segment for the three

months ended June 30, 2023, total enrollment increased 4.7% to 80,353 from 76,728 for the same period in 2022.

USHE segment revenue increased 6.7% to $202.7 million compared to $190.0 million in 2022 primarily due to the increase in enrollment and higher revenue per student.

In the Australia/New Zealand segment for the three months ended June 30, 2023, total enrollment decreased 4.6% to 17,966, compared to 18,834 for the same period in 2022.

Australia/New Zealand segment revenue decreased 3.1% to $65.5 million compared to $67.5 million in 2022, primarily due to unfavorable foreign currency exchange impacts.

In the Education Technology Services segment, revenue for the three months ended June 30, 2023 increased 22.1% to $19.5 million compared to $16.0 million in 2022, primarily as a result of growth in Sophia Learning subscriptions and higher employer affiliated enrollment.

Instructional and support costs.

Consolidated instructional and support costs increased to $152.9 million, compared to $144.6 million in the same period in the prior year, principally due to increases in bad debt expense, student material costs, and technology-related costs, partially offset by lower facility costs and favorable foreign currency exchange impacts.

Consolidated instructional and support costs as a percentage of revenues increased to 59.6% in the first quarter of 2023 from 55.9% in the first quarter of 2022.

Consolidated instructional and support costs increased to $161.5 million, compared to $147.4 million in the same period in the prior year, principally due to increases in bad debt expense and technology-related costs, partially offset by lower facility costs and favorable foreign currency exchange impacts.

Consolidated instructional and support costs as a percentage of revenues increased to 56.1% in the second quarter of 2023 from 53.9% in the second quarter of 2022.

General and administration expenses .

Consolidated general and administration expenses increased to $95.5 million in the first quarter of 2023 compared to $94.8 million in the prior year, principally due to increased investments in branding initiatives and partnerships with brand ambassadors, partially offset by favorable foreign currency exchange impacts.

Consolidated general and administration expenses as a percentage of revenues increased to 37.2% in the first quarter of 2023 from 36.6% in the first quarter of 2022.

Consolidated general and administration expenses increased to $99.0 million in the second quarter of 2023 compared to $96.7 million in the prior year, principally due to increased investments in branding initiatives and partnerships with brand ambassadors, partially offset by favorable foreign currency exchange impacts.

Consolidated general and administration expenses as a percentage of revenues decreased to 34.4% in the second quarter of 2023 from 35.4% in the second quarter of 2022.

Amortization of intangible assets .

Amortization of intangible assets decreased to $3.5 million in the first quarter of 2023 compared to $3.7 million in 2022, due to foreign currency exchange impacts.

Amortization of intangible assets decreased to $3.5 million in the second quarter of 2023 compared to $3.7 million in 2022, due to favorable foreign currency exchange impacts.

Merger and integration costs.

Merger and integration costs were $0.4 million in the first quarter of 2023 and 2022, and are primarily related to integration expenses associated with the Company's acquisition of ANZ.

Merger and integration costs were $0.6 million in the second quarter of 2023 compared to $0.3 million in 2022, and are primarily related to integration expenses associated with the Company’s acquisition of ANZ.

Restructuring costs .

Restructuring costs increased to $5.6 million in the first quarter of 2023 compared to $1.9 million in 2022, primarily due to a $3.6 million right-of-use lease asset impairment charge associated with vacating leased space in the first quarter of 2023 and higher severance and other personnel-related expenses from involuntary employee terminations.

Income (loss) from operations .

Consolidated income (loss) from operations decreased to a loss from operations of $1.3 million in the first quarter of 2023 compared to income from operations of $13.4 million in the first quarter of 2022, principally due to lower earnings in the USHE segment, higher losses in the ANZ segment, and higher restructuring costs.

In the USHE segment, income from operations was $9.6 million in the first quarter of 2023, compared to $15.5 million in the first quarter of 2022, primarily due to increased investments in marketing initiatives, partially offset by higher revenue due to an increase in enrollments.

In the Australia/New Zealand segment, loss from operations was $7.2 million in the first quarter of 2023, compared to $0.7 million in the first quarter of 2022, primarily driven by lower revenue due to the timing of the first academic term of the year, increased investments in marketing initiatives, and unfavorable foreign currency impacts.

In the Education Technology Services segment, income from operations increased 23.0% to $5.8 million in the first quarter of 2023, compared to $4.7 million in 2022 as a result of growth in Sophia Learning and an increase in employer affiliated enrollment, partially offset by increased investment in outreach to corporate partners.

Restructuring costs increased to $6.4 million in the second quarter of 2023 compared to $3.7 million in 2022, primarily due to higher severance and other personnel-related expenses from employee terminations, partially offset by a $2.1 million gain from the sale of property and equipment of an owned campus and lower right-of-use lease asset and fixed asset impairment charges associated with vacating leased space in the second quarter of 2023.

Income from operations .

Consolidated income from operations decreased to $16.8 million in the second quarter of 2023 compared to $21.9 million in the second quarter of 2022, principally due to lower earnings in the USHE segment, higher restructuring costs, and unfavorable foreign currency exchange impacts, partially offset by higher earnings in the ANZ segment.

In the USHE segment, income from operations decreased 43.1% to $6.7 million in the second quarter of 2023, compared to $11.9 million in the second quarter of 2022, primarily due to increased investments in marketing initiatives and higher bad debt expense, partially offset by higher revenue due to an increase in enrollment and revenue per student.

In the Australia/New Zealand segment, income from operations increased 16.0% to $14.3 million in the second quarter of 2023, compared to $12.3 million in the second quarter of 2022, primarily driven by personnel cost savings due to headcount reductions, partially offset by lower revenue due to unfavorable foreign currency exchange impacts.

In the Education Technology Services segment, income from operations increased 16.3% to $6.2 million in the second quarter of 2023, compared to $5.3 million in 2022 as a result of growth in Sophia Learning subscriptions and an increase in employer affiliated enrollment, partially offset by increased investment in outreach to corporate partners.

Other income.

Other income increased to $3.2 million in the second quarter of 2023 compared to $0.3 million in the second quarter of 2022, as a result of an increase in investment income from our limited partnership investments and an increase in interest income, partially offset by an increase in interest expense due to higher interest rates.

We incurred $2.0 million of interest expense in the three months ended June 30, 2023 compared to $1.1 million in the three months ended June 30, 2022.

Provision for income taxes.

Income tax expense was $5.8 million in the second quarter of 2023, compared to $6.9 million in the second quarter of 2022.

Our effective tax rate for the quarter was 28.8%, compared to 31.3% for the same period in 2022.

Net income decreased to $14.2 million in the second quarter of 2023 compared to $15.2 million in the second quarter of 2022 due to the factors discussed above.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Consolidated revenue increased to $544.3 million in the six months ended June 30, 2023, compared to $532.4 million in the same period in the prior year, primarily due to an increase in USHE enrollment, partially offset by a decrease in ANZ revenue due to the timing of academic term start dates and unfavorable foreign currency exchange impacts.

revenue increased 3.6% to $399.6 million compared to $385.8 million in 2022 primarily due to the increase in enrollment.

Australia/New Zealand segment revenue decreased 7.8% to $107.0 million compared to $116.1 million in 2022, primarily due to the timing of the academic term start dates and unfavorable foreign currency exchange impacts.

In the Education Technology Services segment, revenue for the six months ended June 30, 2023 increased 23.4% to $37.7 million compared to $30.6 million in 2022, primarily as a result of growth in Sophia Learning and higher employer affiliated enrollment.

Instructional and support costs.

Consolidated instructional and support costs increased to $314.4 million in the six months ended June 30, 2023 from $292.0 million in the six months ended June 30, 2022, principally due to increases in bad debt expense, student material costs, and technology-related costs, partially offset by lower facility costs and favorable foreign currency exchange impacts.

Consolidated instructional and support costs as a percentage of revenues increased to 57.8% in the six months ended June 30, 2023 from 54.8% in the six months ended June 30, 2022.

General and administration expenses .

Consolidated general and administration expenses increased to $194.5 million in the six months ended June 30, 2023 from $191.5 million in the six months ended June 30, 2022, principally due to increased investments in branding initiatives and partnerships with brand ambassadors, partially offset by favorable foreign currency exchange impacts.

Consolidated general and administration expenses as a percentage of revenues decreased to 35.7% in the six months ended June 30, 2023 from 36.0% in the six months ended June 30, 2022.

Amortization of intangible assets .

Amortization of intangible assets decreased to $7.0 million in the six months ended June 30, 2023 from $7.4 million in the six months ended June 30, 2022, due to favorable foreign currency exchange impacts.

Merger and integration costs.

Merger and integration costs increased to $1.0 million in the six months ended June 30, 2023 from $0.7 million in the six months ended June 30, 2022, and are primarily related to integration expenses associated with the Company’s acquisition of ANZ.

Restructuring costs .

Restructuring costs increased to $11.9 million in the six months ended June 30, 2023 from $5.5 million in the six months ended June 30, 2022, primarily due to higher severance and other personnel-related expenses from employee terminations, partially offset by a $2.1 million gain from the sale of property and equipment of an owned campus and lower right-of-use lease asset and fixed asset impairment charges associated with vacating leased space in the six months ended June 30, 2023.

Income from operations .

Consolidated income from operations decreased to $15.5 million in the six months ended June 30, 2023 from $35.3 million in the six months ended June 30, 2022, principally due to lower earnings in the USHE and ANZ segments, higher restructuring costs, and unfavorable foreign currency exchange impacts.

USHE segment income from operations decreased 40.3% to $16.3 million in the six months ended June 30, 2023 from $27.3 million in the six months ended June 30, 2022, primarily due to increased investments in marketing initiatives, partially offset by higher revenue due to an increase in enrollments.

Australia/New Zealand segment income from operations decreased 38.6% to $7.1 million in the six months ended June 30, 2023 from $11.6 million in the six months ended June 30, 2022, primarily driven by lower revenue due to the timing of academic term start dates, increased investments in marketing initiatives, and unfavorable foreign currency impacts, partially offset by personnel cost savings due to headcount reductions.

Education Technology Services segment income from operations increased 19.4% to $12.0 million in the six months ended June 30, 2023 from $10.0 million in the six months ended June 30, 2022 as a result of growth in Sophia Learning and an increase in employer affiliated enrollment, partially offset by increased investment in outreach to corporate partners.

Other income (expense).

Other income (expense) was $0.4 million of income in the first quarter of 2023 compared to $1.2 million of expense in the first quarter of 2022, as a result of an increase in investment income from our limited partnership investments and an increase in interest income, partially offset by an increase in interest expense due to higher interest rates.

We incurred $1.8 million of interest expense in the three months ended March 31, 2023 compared to $0.9 million in the three months ended March 31, 2022.

Other income (expense) increased to $3.6 million of income in the six months ended June 30, 2023 from $0.9 million of expense in the six months ended June 30, 2022, as a result of an increase in investment income from our limited partnership investments and an increase in interest income, partially offset by an increase in interest expense due to higher interest rates.

We incurred $3.8 million of interest expense in the six months ended June 30, 2023 compared to $2.0 million in the six months ended June 30, 2022.

Provision for income taxes.

Income tax expense was $1.1 million in the first quarter of 2023, compared to $5.2 million in the first quarter of 2022.

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

Net income (loss) .

Net income (loss) decreased to $2.0 million of net loss in the first quarter of 2023 compared to $7.0 million of net income in the first quarter of 2022 due to the factors discussed above.

Income tax expense was $6.8 million in the six months ended June 30, 2023, compared to $12.2 million in the six months ended June 30, 2022.

Income tax expense for the six months ended June 30, 2023 and 2022 include shortfall tax impacts of approximately $1.3 million and $1.4 million, respectively, related to share-based payment arrangements.

Net income decreased to $12.2 million in the six months ended June 30, 2023 from $22.2 million in the six months ended June 30, 2022 due to the factors discussed above.

Non-GAAP Financial Measures

3 unchanged sentences

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

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

• severance costs, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with our restructuring activities;

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

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

To illustrate currency impacts to operating results, Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the three months ended March 31, 2023 are also presented on a constant currency basis.

To illustrate currency impacts to operating results, Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the three and six months ended June 30, 2023 are also presented on a constant currency basis.

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

2 unchanged sentences

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

Adjusted income from operations was $8.2 million in the first quarter of 2023 compared to $19.4 million in 2022.

Adjusted net income was $5.8 million in the first quarter of 2023 compared to $13.1 million in 2022, and adjusted diluted earnings per share was $0.24 in the first quarter of 2023 compared to $0.54 in 2022.

Adjusted income from operations was $27.2 million in the second quarter of 2023 compared to $29.5 million in 2022.

Adjusted net income was $19.7 million in the second quarter of 2023 compared to $20.5 million in 2022, and adjusted diluted earnings per share was $0.82 in the second quarter of 2023 compared to $0.85 in 2022.

Adjusted income from operations was $35.4 million for the six months ended June 30, 2023 compared to $48.9 million for the same period in 2022.

Adjusted net income was $25.5 million for the six months ended June 30, 2023 compared to $33.5 million for the same period in 2022, and adjusted diluted earnings per share was $1.06 for the six months ended June 30, 2023 compared to $1.39 for the same period in 2022.

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

Reconciliation of Reported to Adjusted Results of Operations for the three months ended March 31, 2023

Reconciliation of Reported to Adjusted Results of Operations for the three months ended June 30, 2023

Non-GAAP Adjustments

6 unchanged sentences

Total costs and expenses $ 270,863 $ (3,450) $ (580) $ (6,351) $ — $ — $ 260,482

Income (loss) from operations $ (1,349) $ 3,532 $ 425 $ 5,595 $ — $ — $ 8,203

Income from operations $ 16,817 $ 3,450 $ 580 $ 6,351 $ — $ — $ 27,198

Operating margin 5.8% 9.5%

Income (loss) before income taxes $ (951) $ 3,532 $ 425 $ 5,595 $ (325) $ — $ 8,276

Net income (loss) $ (2,028) $ 3,532 $ 425 $ 5,595 $ (325) $ (1,406) $ 5,793

Diluted earnings (loss) per share $ (0.09) $ 0.24

Income before income taxes $ 19,988 $ 3,450 $ 580 $ 6,351 $ (2,286) $ — $ 28,083

Net income $ 14,231 $ 3,450 $ 580 $ 6,351 $ (2,286) $ (2,668) $ 19,658

Diluted earnings per share $ 0.59 $ 0.82

Weighted average diluted shares outstanding 23,964 23,964

23,430 24,023

Reconciliation of Reported to Adjusted Results of Operations for the three months ended March 31, 2022

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

Non-GAAP Adjustments

2 unchanged sentences

Restructuring costs (3)

Loss from other investments (4)

Income from other investments (4)

adjustments (5)

7 unchanged sentences

Weighted average diluted shares outstanding 24,063 24,063

Reconciliation of Reported to Adjusted Results of Operations for the six months ended June 30, 2023

Non-GAAP Adjustments

(GAAP) Amortization of intangible assets (1)

Merger and integration costs (2)

Restructuring costs (3)

Income from other investments (4)

adjustments (5)

Revenues $ 544,286 $ — $ — $ — $ — $ — $ 544,286

Total costs and expenses $ 528,818 $ (6,982) $ (1,005) $ (11,946) $ — $ — $ 508,885

Income from operations $ 15,468 $ 6,982 $ 1,005 $ 11,946 $ — $ — $ 35,401

Operating margin 2.8% 6.5%

Income before income taxes $ 19,037 $ 6,982 $ 1,005 $ 11,946 $ (2,611) $ — $ 36,359

Net income $ 12,203 $ 6,982 $ 1,005 $ 11,946 $ (2,611) $ (4,074) $ 25,451

Diluted earnings per share $ 0.51 $ 1.06

Weighted average diluted shares outstanding 23,993 23,993

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

Non-GAAP Adjustments

(GAAP) Amortization of intangible assets (1)

Merger and integration costs (2)

Restructuring costs (3)

Income from other investments (4)

adjustments (5)

Revenues $ 532,419 $ — $ — $ — $ — $ — $ 532,419

Total costs and expenses $ 497,113 $ (7,432) $ (664) $ (5,519) $ — $ — $ 483,498

Income from operations $ 35,306 $ 7,432 $ 664 $ 5,519 $ — $ — $ 48,921

Operating margin 6.6% 9.2%

Income before income taxes $ 34,435 $ 7,432 $ 664 $ 5,519 $ (139) $ — $ 47,911

Net income $ 22,249 $ 7,432 $ 664 $ 5,519 $ (139) $ (2,187) $ 33,538

Diluted earnings per share $ 0.92 $ 1.39

Weighted average diluted shares outstanding 24,089 24,089

__________________________________________________________________________________________

1 unchanged sentence

(2) Reflects integration expenses associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

(3) Reflects severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring.

(3) Reflects severance costs, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities.

(4) Reflects income/loss recognized from the Company’s investments in partnership interests and other investments.

(5) Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted effective tax rate of 30.0% for the three months ended March 31, 2023 and 2022.

(6) For the three months ended March 31, 2023, 593 shares issuable in connection with stock options, restricted stock and restricted stock units were excluded from the diluted loss per share calculation because the effect would have been anti-dilutive due to the Company's net loss during the period.

The table below presents our adjusted results of operations on a constant currency basis for the three months ended March 31, 2023 (amounts in thousands, except per share data):

For the three months ended March 31, 2023

The table below presents our adjusted results of operations on a constant currency basis for the three and six months ended June 30, 2023 (amounts in thousands, except per share data):

For the three months ended June 30, 2023 For the six months ended June 30, 2023

(Non-GAAP) Constant currency adjustment (1)

As Adjusted with Constant Currency

(Non-GAAP) As Adjusted

(Non-GAAP) Constant currency adjustment (1)

As Adjusted with Constant Currency

Revenues $ 287,680 $ 4,584 $ 292,264 $ 544,286 $ 7,562 $ 551,848

7 unchanged sentences

__________________________________________________________________________________________

(1) Reflects an adjustment to translate foreign currency results for the three months ended March 31, 2023 at a constant exchange rate of 0.72 Australian Dollars to U.S.

Dollars, respectively, which was the average exchange rate for the same period in 2022.

(1) Reflects an adjustment to translate foreign currency results for the three and six months ended June 30, 2023 at a constant exchange rate of 0.72 Australian Dollars to U.S.

Dollars, which was the average exchange rate for the same periods in 2022.

Liquidity and Capital Resources

At March 31, 2023, we had cash, cash equivalents, and marketable securities of $240.0 million compared to $235.9 million at December 31, 2022 and $321.5 million at March 31, 2022.

We maintain our cash and cash equivalents primarily in demand deposit bank accounts and money market funds at high credit quality financial institutions, which are included in cash and cash equivalents at March 31, 2023 and 2022.

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

During the three months ended March 31, 2023 and 2022, we earned interest income of $1.8 million and $0.2 million, respectively.

At June 30, 2023, we had cash, cash equivalents, and marketable securities of $215.1 million compared to $235.9 million at December 31, 2022 and $289.7 million at June 30, 2022.

We maintain our cash and cash equivalents primarily in money market funds and demand deposit bank accounts at high credit quality financial institutions, which are included in cash and cash equivalents at June 30, 2023 and 2022.

In addition, we invest excess cash in U.S.

treasury bills with maturities of three months or less, which are included in cash and cash equivalents.

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

During the six months ended June 30, 2023 and 2022, we earned interest income of $4.6 million and $0.8 million, respectively.

We are party to a credit facility (the “Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $350 million.

The Amended Credit Facility provides us

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

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

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

2 unchanged sentences

An unused commitment fee ranging from 0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused amounts.

We were in compliance with all applicable covenants related to the Amended Credit Facility as of March 31, 2023.

As of March 31, 2023 and 2022, we had $101.3 million and $141.7 million, respectively, outstanding under our Revolving Credit Facility.

During the three months ended March 31, 2023 and 2022, we paid $2.4 million and $0.4 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities for the three months ended March 31, 2023 decreased to $35.2 million, compared to $56.6 million for the same period in 2022.

We were in compliance with all applicable covenants related to the Amended Credit Facility as of June 30, 2023.

As of June 30, 2023 and 2022, we had $101.3 million and $141.4 million, respectively, outstanding under our Revolving Credit Facility.

During the six months ended June 30, 2023 and 2022, we paid $4.2 million and $1.2 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

On June 13, 2023, the Company amended its Revolving Credit Facility to replace references to LIBOR with alternative benchmark rates, including Term SOFR with respect to loans denominated in U.S.

dollars, beginning on June 30, 2023.

Our net cash provided by operating activities for the six months ended June 30, 2023 decreased to $40.7 million, compared to $80.7 million for the same period in 2022.

The decrease in net cash from operating activities was primarily driven by lower earnings, an increase in cash used for working capital, and higher tax payments.

Our net cash used in investing activities for the three months ended March 31, 2023 increased to $23.3 million, compared to $8.8 million for the same period in 2022.

The increase in net cash used in investing activities was primarily driven by $17.1 million in purchases of marketable securities, partially offset by a decrease in capital expenditures and higher cash proceeds from marketable securities and other investments.

Capital expenditures decreased to $8.3 million for the three months ended March 31, 2023, compared to $9.7 million for the same period in 2022, primarily due to the timing of capital projects.

Our net cash used in financing activities for the three months ended March 31, 2023 decreased to $19.7 million, compared to $21.8 million for the same period in 2022.

Our net cash used in investing activities for the six months ended June 30, 2023 increased to $23.8 million, compared to $20.8 million for the same period in 2022.

The increase in net cash used in investing activities was primarily driven by $16.9 million in purchases of marketable securities, partially offset by $5.9 million of cash proceeds related to the sale of property and equipment, higher cash proceeds from marketable securities and other investments and lower capital expenditures for the six months ended

June 30, 2023.

Capital expenditures decreased to $17.8 million for the six months ended June 30, 2023, compared to $22.7 million for the same period in 2022, primarily due to the timing of capital projects.

Our net cash used in financing activities for the six months ended June 30, 2023 decreased to $44.4 million, compared to $57.7 million for the same period in 2022.

The decrease in net cash used in financing activities was primarily driven by a $15.0 million decrease in repurchases of common stock, partially offset by an increase in net payments for employee stock awards.

The Board of Directors declared a regular, quarterly cash dividend of $0.60 per share of common stock in the first quarter of 2023.

During the three months ended March 31, 2023, we paid a total of $14.8 million in cash dividends on our common stock, compared to $15.0 million for the same period in 2022.

During the three months ended March 31, 2023, we did not repurchase any shares of common stock in the open market under our repurchase program.

As of March 31, 2023, we had $246.8 million of share repurchase authorization remaining to use through December 31, 2023.

For the first quarter of 2023 and 2022, bad debt expense as a percentage of revenue was 3.8% and 2.8%, respectively.

The Board of Directors declared a regular, quarterly cash dividend of $0.60 per share of common stock for each of the first two quarters of 2023.

During the six months ended June 30, 2023, we paid a total of $29.5 million in cash dividends on our common stock, compared to $29.9 million for the same period in 2022.

During the six months ended June 30, 2023, we paid $10.0 million to repurchase shares of common stock in the open market under our repurchase program, compared to $25.0 million for the same period in 2022.

As of June 30, 2023, we had $236.8 million of share repurchase authorization remaining to use through December 31, 2023.

For the second quarter of 2023 and 2022, bad debt expense as a percentage of revenue was 4.4% and 3.2%, respectively.

Our recurring cash requirements consist primarily of general operating expenses, capital expenditures, discretionary dividend payments, and contractual obligations related to our lease agreements, limited partnership investments, and Revolving Credit Facility.

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis