What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-07-27 · 147 added, 130 removed, 673 unchanged (29% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Current assets:

28 unchanged sentences

32,000,000 shares authorized;

24,402,891 and 24,465,671 shares issued and outstanding at December 31, 2022 and June 30, 2023, respectively

24,402,891 and 24,419,092 shares issued and outstanding at December 31, 2022 and September 30, 2023, respectively

Additional paid-in capital 1,510,924 1,513,023

7 unchanged sentences

(in thousands, except per share data)

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

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

2022 2023 2022 2023

21 unchanged sentences

(in thousands)

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

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

2022 2023 2022 2023

8 unchanged sentences

(in thousands, except share data)

For the three months ended June 30, 2022

For the three months ended September 30, 2022

Common Stock Additional

4 unchanged sentences

Shares Par Value

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

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

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

6 unchanged sentences

Net income — — — 6,092 — 6,092

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

For the three months ended June 30, 2023

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

For the three months ended September 30, 2023

Common Stock Additional

4 unchanged sentences

Shares Par Value

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

Balance at June 30, 2023 24,465,671 $ 245 $ 1,509,077 $ 140,368 $ ( 51,084 ) $ 1,598,606

Stock-based compensation — — 3,905 172 — 4,077

Exercise of stock options, net 1,382 — 71 — — 71

Issuance of restricted stock, net ( 47,961 ) ( 1 ) ( 30 ) — — ( 31 )

Repurchase of common stock ( 129,073 ) ( 1 ) ( 8,006 ) ( 2,006 ) — ( 10,013 )

Common stock dividends ($ 0.60 per share)

3 unchanged sentences

Net income — — — 18,459 — 18,459

Balance at June 30, 2023 24,465,671 $ 245 $ 1,509,077 $ 140,368 $ ( 51,084 ) $ 1,598,606

Balance at September 30, 2023 24,419,092 $ 244 $ 1,513,023 $ 144,365 $ ( 62,878 ) $ 1,594,754

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

2 unchanged sentences

(in thousands, except share data)

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

Common Stock Additional

13 unchanged sentences

Net income — — — 28,341 — 28,341

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

For the six months ended June 30, 2023

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

For the nine months ended September 30, 2023

Common Stock Additional

14 unchanged sentences

Net income — — — 30,662 — 30,662

Balance at June 30, 2023 24,465,671 $ 245 $ 1,509,077 $ 140,368 $ ( 51,084 ) $ 1,598,606

Balance at September 30, 2023 24,419,092 $ 244 $ 1,513,023 $ 144,365 $ ( 62,878 ) $ 1,594,754

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

2 unchanged sentences

(in thousands)

For the six months ended June 30,

For the nine months ended September 30,

Cash flows from operating activities:

27 unchanged sentences

Common dividends paid ( 44,600 ) ( 44,139 )

Payments on long-term debt — ( 40,000 )

Net payments for stock awards ( 2,973 ) ( 4,925 )

24 unchanged sentences

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

All information as of June 30, 2022 and 2023, and for the three and six months ended June 30, 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.

All information as of September 30, 2022 and 2023, and for the three and nine months ended September 30, 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.

Certain year-to-date amounts have been reclassified to conform to the current period’s presentation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted.

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 six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full fiscal year.

The results of operations for the three and nine months ended September 30, 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.

25 unchanged sentences

higher education institution during the academic term.

The Company had approximately $ 1.4 million and $ 1.8 million of these unpaid obligations as of December 31, 2022 and June 30, 2023, respectively.

The Company had approximately $ 1.4 million and $ 2.1 million of these unpaid obligations as of December 31, 2022 and September 30, 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, 2022 and June 30, 2023, the Company had approximately $ 11.9 million and $ 14.8 million, respectively, of restricted cash related to these requirements in Australia and New Zealand.

As of December 31, 2022 and September 30, 2023, the Company had approximately $ 11.9 million and $ 11.2 million, respectively, of restricted cash related to these requirements in Australia and New Zealand.

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

1 unchanged sentence

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

The following table illustrates the reconciliation of cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows as of June 30, 2022 and 2023 (in thousands):

As of June 30,

As of September 30,

Cash and cash equivalents $ 262,757 $ 167,707

8 unchanged sentences

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.

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.

15 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, 2022 and June 30, 2023 (in thousands):

December 31, 2022 June 30, 2023

The Company’s tuition receivable and allowance for credit losses were as follows as of December 31, 2022 and September 30, 2023 (in thousands):

December 31, 2022 September 30, 2023

Tuition receivable $ 110,066 $ 145,775

1 unchanged sentence

Tuition receivable, net $ 62,953 $ 97,429

Approximately $ 2.7 million and $ 2.5 million of tuition receivable, net, are included in other assets as of December 31, 2022 and June 30, 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 and six months ended June 30, 2022 and 2023 (in thousands).

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

Approximately $ 2.7 million and $ 2.6 million of tuition receivable, net, are included in other assets as of December 31, 2022 and September 30, 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 and nine months ended September 30, 2022 and 2023 (in thousands).

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

2022 2023 2022 2023

5 unchanged sentences

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.

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.

4 unchanged sentences

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 to be marketed for sale is an owned U.S.

One facility identified to be marketed for sale was an owned U.S.

Higher Education campus consisting of land, buildings, and building improvements.

15 unchanged sentences

Authorized Stock

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,402,891 and 24,465,671 shares were issued and outstanding as of December 31, 2022 and June 30, 2023, respectively.

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,402,891 and 24,419,092 shares were issued and outstanding as of December 31, 2022 and September 30, 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 April 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 June 5, 2023.

In July 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 September 11, 2023.

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.

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.

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 (“stock awards”).

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

1 unchanged sentence

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

Stock options, 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 six months ended June 30, 2022 and 2023 (in thousands):

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

Stock awards 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, 2022 and 2023 (in thousands):

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

2022 2023 2022 2023

6 unchanged sentences

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

As of December 31, 2022 and June 30, 2023, the balance of accumulated other comprehensive loss was $ 35.1 million, net of tax of $ 0.1 million, and $ 51.1 million, net of tax of $ 0.1 million, respectively.

There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the three and six months ended June 30, 2022 and 2023.

As of December 31, 2022 and September 30, 2023, the balance of accumulated other comprehensive loss was $ 35.1 million, net of tax of $ 0.1 million, and $ 62.9 million, net of tax of $ 0.1 million, respectively.

There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the three and nine months ended September 30, 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 six months ended June 30, 2022 and 2023 (in thousands):

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

The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the three and nine months ended September 30, 2022 and 2023 (in thousands):

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

2022 2023 2022 2023

40 unchanged sentences

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

For the six months ended June 30,

For the nine months ended September 30,

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

7 unchanged sentences

Costs to Obtain a Contract

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

Certain commissions earned by third party international agents are considered incremental and recoverable costs of obtaining a contract with customers in the Australia/New Zealand segment.

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

2 unchanged sentences

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

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

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 nine months ended September 30, 2022 (in thousands):

Restructuring Plan

2 unchanged sentences

Payments ( 2,853 )

Balance at June 30, 2022 $ 409

Balance at September 30, 2022 $ —

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

The Company also incurs severance and other employee separation costs related to voluntary and involuntary employee terminations that are not tied to a formal restructuring plan.

During the three and six months ended June 30, 2023, the Company incurred $ 6.1 million and $ 8.4 million of severance and other employee separation charges related to the elimination of certain positions.

During the three and nine months ended September 30, 2023, the Company incurred $ 2.9 million and $ 11.3 million of severance and other employee separation charges related to the elimination of certain positions.

These severance and other employee separation charges are included in Restructuring costs on the unaudited condensed consolidated statements of income.

The following details the changes in the Company's severance and other employee separation costs restructuring liabilities during the six months ended June 30, 2023 (in thousands):

The following details the changes in the Company's severance and other employee separation costs restructuring liabilities during the nine months ended September 30, 2023 (in thousands):

Severance Restructuring Liability

2 unchanged sentences

Payments ( 8,731 )

Balance at June 30, 2023 (1)

Balance at September 30, 2023 (1)

____________________________________

1 unchanged sentence

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

The Company recorded approximately $ 1.1 million of right-of-use lease asset charges during the three and six months ended June 30, 2022, and approximately $ 1.5 million and $ 5.1 million during the three and six months ended June 30, 2023, respectively, related to facilities that were consolidated during the period.

The Company also recorded fixed asset impairment charges of approximately $ 2.2 million and $ 2.4 million during the three and six months ended June 30, 2022, respectively, and approximately $ 0.3 million during the three and six months ended June 30, 2023.

During the three and six months ended June 30, 2023, the Company recorded a $ 2.1 million gain from the sale of property and equipment of an owned campus that was previously closed.

The Company recorded approximately $ 0.1 million and $ 1.2 million of right-of-use lease asset charges during the three and nine months ended September 30, 2022, respectively, and approximately $ 5.1 million during the nine months ended September 30, 2023, related to facilities that were consolidated during the period.

The Company also recorded fixed asset impairment charges of approximately $ 0.1 million and $ 2.5 million during the three and nine months ended September 30, 2022, respectively, and approximately $ 0.1 million and $ 0.4 million during the three and nine months ended September 30, 2023, respectively.

During the nine months ended September 30, 2023, the Company recorded a $ 2.1 million gain from the sale of property and equipment of an owned campus that was previously closed.

These right-of-use lease asset and fixed asset impairment charges and gains on the sale of property and equipment are included in Restructuring costs on the unaudited condensed consolidated statements of income.

Marketable Securities

The following is a summary of available-for-sale and held-to-maturity securities as of June 30, 2023 (in thousands):

The following is a summary of available-for-sale and held-to-maturity securities as of September 30, 2023 (in thousands):

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

12 unchanged sentences

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 June 30, 2023 were caused by changes in market values primarily due to interest rate changes.

As of June 30, 2023, the fair value of the Company’s securities which were in an unrealized loss position for a period longer than twelve months was $ 16.5 million.

The unrealized gains and losses on the Company’s investments in corporate debt and municipal securities as of December 31, 2022 and September 30, 2023 were caused by changes in market values primarily due to interest rate changes.

As of September 30, 2023, the fair value of the Company’s securities which were in an unrealized loss position for a period longer than twelve months was $ 13.5 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.

As such, no impairment charges were recorded during the three and six months ended June 30, 2022 and 2023.

As such, no impairment charges were recorded during the three and nine months ended September 30, 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 June 30, 2023 (in thousands):

December 31, 2022 June 30, 2023

The following table summarizes the maturities of the Company’s marketable securities as of December 31, 2022 and September 30, 2023 (in thousands):

December 31, 2022 September 30, 2023

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

2 unchanged sentences

Total $ 22,279 $ — $ 14,474 $ 16,400

The following table summarizes the proceeds from the maturities and sales of available-for-sale securities for the three and six months ended June 30, 2022 and 2023 (in thousands):

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

The following table summarizes the proceeds from the maturities and sales of available-for-sale securities for the three and nine months ended September 30, 2022 and 2023 (in thousands):

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

2022 2023 2022 2023

2 unchanged sentences

Total $ 500 $ 3,215 $ 2,600 $ 8,175

The Company did not record any gross realized gains or losses in net income during the three and six months ended June 30, 2022 and June 30, 2023.

The Company did not record any gross realized gains or losses in net income during the three and nine months ended September 30, 2022 and September 30, 2023.

Fair Value Measurement

Assets measured at fair value on a recurring basis consist of the following as of June 30, 2023 (in thousands):

Assets measured at fair value on a recurring basis consist of the following as of September 30, 2023 (in thousands):

Fair Value Measurements at Reporting Date Using

June 30, 2023 Quoted Prices in

September 30, 2023 Quoted Prices in

Active Markets

27 unchanged sentences

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 and held-to-maturity securities held at December 31, 2022 and June 30, 2023 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

The Company’s cash and cash equivalents and held-to-maturity securities held at December 31, 2022 and September 30, 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.

The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and did not transfer assets or liabilities between levels of the fair value hierarchy during the six months ended June 30, 2022 and 2023.

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

2 unchanged sentences

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

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

As of June 30, 2022

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

As of September 30, 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 six months ended June 30, 2023 (in thousands):

The following table presents changes in the carrying value of goodwill by segment for the nine months ended September 30, 2023 (in thousands):

Higher Education Australia /

5 unchanged sentences

Adjustments to prior acquisitions — — — —

Balance as of June 30, 2023 $ 632,075 $ 505,907 $ 100,000 $ 1,237,982

Balance as of September 30, 2023 $ 632,075 $ 496,356 $ 100,000 $ 1,228,431

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

No events or circumstances occurred in the three and six months ended June 30, 2023 to indicate an impairment to goodwill at any of its segments.

There were no impairment charges related to goodwill recorded during the three and six months ended June 30, 2022 and 2023.

No events or circumstances occurred in the three and nine months ended September 30, 2023 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, 2022 and 2023.

Intangible Assets

The following table represents the balance of the Company’s intangible assets as of December 31, 2022 and June 30, 2023 (in thousands):

December 31, 2022 June 30, 2023

The following table represents the balance of the Company’s intangible assets as of December 31, 2022 and September 30, 2023 (in thousands):

December 31, 2022 September 30, 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 $ 5.8 million and $ 5.4 million for the six months ended June 30, 2022 and 2023, respectively.

Amortization expense related to finite-lived intangible assets was $ 8.5 million and $ 8.0 million for the nine months ended September 30, 2022 and 2023, respectively.

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

2 unchanged sentences

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

No events or circumstances occurred in the three and six months ended June 30, 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 and six months ended June 30, 2022 and 2023.

No events or circumstances occurred in the three and nine months ended September 30, 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 and nine months ended September 30, 2022 and 2023.

Other Current Assets

Other current assets consist of the following as of December 31, 2022 and June 30, 2023 (in thousands):

December 31, 2022 June 30, 2023

Other current assets consist of the following as of December 31, 2022 and September 30, 2023 (in thousands):

December 31, 2022 September 30, 2023

Prepaid expenses $ 19,073 $ 23,685

3 unchanged sentences

Other current assets $ 43,285 $ 48,689

Other assets consist of the following as of December 31, 2022 and June 30, 2023 (in thousands):

December 31, 2022 June 30, 2023

Other assets consist of the following as of December 31, 2022 and September 30, 2023 (in thousands):

December 31, 2022 September 30, 2023

Prepaid expenses, net of current portion $ 18,192 $ 17,321

7 unchanged sentences

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

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 June 30, 2023, $ 17.7 million and $ 16.9 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 September 30, 2023, $ 17.7 million and $ 16.5 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.

Equity Method Investments

2 unchanged sentences

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

The following table illustrates changes in the Company’s limited partnership investments for the three and six months ended June 30, 2022 and 2023 (in thousands):

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

The following table illustrates changes in the Company’s limited partnership investments for the three and nine months ended September 30, 2022 and 2023 (in thousands):

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

2022 2023 2022 2023

11 unchanged sentences

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 ANZ 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 in the Australia/New Zealand segment to third party international agents, and refundable security deposits associated with the Company’s leased campus and office space.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of December 31, 2022 and June 30, 2023 (in thousands):

December 31, 2022 June 30, 2023

Accounts payable and accrued expenses consist of the following as of December 31, 2022 and September 30, 2023 (in thousands):

December 31, 2022 September 30, 2023

Trade payables $ 45,826 $ 54,856

9 unchanged sentences

The Company paid approximately $ 1.9 million in debt financing costs associated with the Amended Credit Facility, and these costs are being amortized on a straight-line basis over the five-year term of the Amended Credit Facility.

Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to LIBOR or a base rate, plus a margin ranging from 1.50 % to 2.00 % depending on the Company’s leverage ratio.

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.

There were no other significant changes to the Revolving Credit Facility related to the amendment.

Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to Term SOFR or a base rate, plus a margin ranging from 1.50 % to 2.00 % depending on the Company’s leverage ratio.

The Company also is subject to a quarterly unused commitment fee ranging from 0.20 % to 0.30 % per annum depending on the Company’s leverage ratio, times the daily unused amount under the Revolving Credit Facility.

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

The Company was in compliance with all the terms of the Amended Credit Facility as of June 30, 2023.

As of December 31, 2022 and June 30, 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 June 30, 2023, respectively.

During the six months ended June 30, 2022 and 2023, the Company paid $ 1.2 million and $ 4.2 million, respectively, of interest and unused commitment fees related to its 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.

There were no other significant changes to the Revolving Credit Facility related to the amendment.

The Company was in compliance with all the terms of the Amended Credit Facility as of September 30, 2023.

In September 2023, the Company repaid $ 40.0 million of the outstanding balance under the Revolving Credit Facility.

As of December 31, 2022 and September 30, 2023, the Company had approximately $ 101.4 million and $ 61.2 million, respectively, outstanding under the Revolving Credit Facility.

Approximately $ 3.4 million and $ 3.2 million was denominated in Australian dollars as of December 31, 2022 and September 30, 2023, respectively.

During the nine months ended September 30, 2022 and 2023, the Company paid $ 3.0 million and $ 5.4 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, 2022 and June 30, 2023 (in thousands):

December 31, 2022 June 30, 2023

Other long-term liabilities consist of the following as of December 31, 2022 and September 30, 2023 (in thousands):

December 31, 2022 September 30, 2023

Contract liabilities, net of current portion $ 36,540 $ 34,738

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Equity Awards

The following table sets forth the amount of stock-based compensation expense recorded in each of the expense line items for the three and six months ended June 30, 2022 and 2023 (in thousands):

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

The following table sets forth the amount of stock-based compensation expense recorded in each of the expense line items for the three and nine months ended September 30, 2022 and 2023 (in thousands):

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

2022 2023 2022 2023

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Stock-based compensation expense, net of tax $ 4,152 $ 3,023 $ 11,959 $ 11,214

During the six months ended June 30, 2022 and 2023, the Company recognized shortfall tax impacts of approximately $ 1.4 million and $ 1.3 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes.

During the six months ended June 30, 2022 and 2023, the Company recorded income tax expense of $ 12.2 million and $ 6.8 million, reflecting an effective tax rate of 35.4 % and 35.9 %, respectively.

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

The Company had $ 0.9 million of unrecognized tax benefits as of December 31, 2022 and June 30, 2023.

During the nine months ended September 30, 2022 and 2023, the Company recognized shortfall tax impacts of approximately $ 1.4 million related to share-based payment arrangements, which were adjustments to the provision for income taxes.

During the nine months ended September 30, 2022 and 2023, the Company recorded income tax expense of $ 13.6 million and $ 14.8 million, reflecting an effective tax rate of 32.5 % and 32.6 %, respectively.

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

The Company had $ 0.9 million of unrecognized tax benefits as of December 31, 2022 and September 30, 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.

The Company paid $ 13.8 million and $ 26.7 million in income taxes during the six months ended June 30, 2022 and 2023, respectively.

The Company paid $ 20.2 million and $ 35.6 million in income taxes during the nine months ended September 30, 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.

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

A summary of financial information by reportable segment for the three and six months ended June 30, 2022 and 2023 is presented in the following table (in thousands):

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

A summary of financial information by reportable segment for the three and nine months ended September 30, 2022 and 2023 is presented in the following table (in thousands):

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

2022 2023 2022 2023

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Consolidated revenues $ 263,123 $ 285,936 $ 795,542 $ 830,222

Income from operations

Income (loss) from operations

Higher Education $ ( 1,948 ) $ 10,412 $ 25,386 $ 26,742

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

In June 2023, the Department of Education announced that student loan interest will begin accruing September 1, 2023, and student loan repayment will resume in October 2023.

In June 2023, the Department of Education announced that student loan interest would begin to accrue on September 1, 2023, and student loan repayment resumed in October 2023.

American Rescue Plan Act of 2021

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The Department held a public hearing on July 18, and accepted written comments through July 20, 2023.

In September 2023, the Department announced its selection of non-federal negotiators and the first round of rulemaking meetings were held on October 10 and 11, 2023.

The rulemaking committee is also scheduled to meet in November and December 2023.

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

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On May 17, 2023, the Department released proposed rules on financial value transparency and gainful employment, financial responsibility, administrative capability, certification procedures, and ability to benefit.

The proposed gainful employment rule would establish two independent metrics, both of which must be passed by a program subject to the rule in order to maintain Title IV eligibility.

Any program that fails either or both metrics in a single year would be required to provide a disclosure to students, and any program that fails the same metric in two of three consecutive years would lose its access to federal financial aid.

The two metrics are 1) a debt-to-earnings ratio that compares the median earnings of graduates who received federal financial aid to the median annual payments on loan debt borrowed for the program, and 2) an earnings premium test that measures whether the typical graduate from a program that received federal financial aid is earning at least as much as a typical high school graduate in their state (or, in some cases, nationally) and within a certain age range in the labor force.

A program that fails in two out of three consecutive years, or is voluntarily discontinued by the institution, would not be eligible to have Title IV reinstated for a minimum of three years.

The proposed rule also includes the requirement that all schools provide a link to a Department of Education-hosted website that includes information on cost, earnings, and licensure information.

The Department’s proposed rules regarding financial responsibility would establish new mandatory triggers that would allow the Department to seek financial protection or recalculate the institution’s financial composite score to determine whether an institution’s financial condition has materially weakened.

The proposal would also establish new discretionary triggers that would result in the Department conducting case-by-case analysis to see if additional protection is needed.

In general, institutions would be required to report triggering events within 10 days of occurrence.

According to the proposed rule, such triggering events may result in a financial protection requirement that would most likely take the form of a letter of credit or cash escrow and provisional certification to participate in Title IV.

Additionally, the Department described that its proposed changes to administrative capability regulations would strengthen how the Department administers requirements that institutions demonstrate they are capable of administering Title IV funds.

Under the proposed rule, institutions would be required to offer adequate services to students, including financial aid counseling and career services support.

The proposed language also includes a new requirement that institutions provide students with geographically accessible clinical or externship opportunities as required for licensure.

The Department described that its proposed changes to certification procedures would strengthen the Department’s ability to assess and in some cases impose additional conditions on institutions undergoing the recertification process.

Among other things, the Department would consider withdrawal rates, gainful employment rates, licensure passage rates, and instructional and advertising spend when making institutional eligibility determinations.

The Department has also proposed that the Secretary be required to sign off on all marketing materials in cases where the institution is provisionally certified and is alleged to have engaged in misrepresentation or aggressive recruitment.

Additionally, the Department has proposed changes regarding licensure-

track programs, including limits on program length and a student’s ability to access federal financial aid funds in cases where a program doesn’t meet educational prerequisites for licensure in the state in which the student is located.

The Department accepted public comments on the proposed rules through June 20, 2023.

On September 27, 2023, the Department released final regulations on financial value transparency and gainful employment, which are largely consistent with the proposed rule.

The gainful employment final rule establishes two independent metrics, both of which must be passed by a gainful employment program subject to the rule in order to maintain Title IV eligibility.

Any gainful employment program that fails either or both metrics in a single year would be required to provide a disclosure to current and prospective students, and any such program that fails the same metric in two out of three consecutive years for which the program’s metrics are calculated would lose its access to federal financial aid.

The two metrics are 1) a debt-to-earnings ratio that compares the median earnings of graduates who received federal financial aid to the median annual payments on loan debt borrowed for the program, which must be less than or equal to 8% of annual earnings or 20% of discretionary earnings, and 2) an earnings premium test that measures whether the typical graduates from a program that received federal financial aid earn more than a typical high school graduate in their state (or, in some cases, nationally) and within a certain age range in the labor force.

A program that fails in two out of three consecutive years, or is voluntarily discontinued by the institution, would not be eligible to have Title IV reinstated for the program or launch and receive Title IV for a “substantially similar program” (generally defined as a program with the same four-digit CIP code) for a minimum of three years.

The final rule describes that the Department will now measure earnings six years after graduation (instead of the proposed rule’s three years after graduation) for certain qualifying graduate programs such as clinical psychology, marriage and family therapy, clinical social work, and clinical counseling.

The final rule also includes the requirement that, beginning July 1, 2026, all schools provide a link to a Department of Education-hosted website that includes information on cost, earnings, and licensure information, and the gainful employment metrics.

The final gainful employment regulations will take effect July 1, 2024.

The Department has indicated that it will release metrics beginning in the 2025 financial aid award year.

Beginning July 1, 2026, if a program fails a metric, an institution must provide warnings to students and prospective students meeting certain minimum requirements to be specified by the Department;

programs that fail the same metric in the first two years the rates are issued will lose eligibility in 2026.

On October 23, 2023, the Department released final rules on financial responsibility, administrative capability, certification procedures, and ability to benefit.

The Department’s final rules regarding financial responsibility establish new mandatory triggers—including but not limited to failing 90/10, receiving at least 50% of funds from programs that are failing gainful employment, or being subject to a Department action to recover losses from approved Borrower Defense to Repayment claims that would cause a recalculated composite score to fall below 1.0—that allow the Department to seek financial protection or recalculate the institution’s financial composite score to determine whether an institution’s financial condition has materially weakened.

rules also establish new discretionary triggers that will result in the Department conducting case-by-case analysis to see if additional protection is needed.

In general, institutions will be required to report triggering events within 21 days of occurrence.

According to the regulation, such triggering events may result in a financial protection requirement that would most likely take the form of a letter of credit or cash escrow and provisional certification to participate in Title IV.

Under the final administrative capability rule, institutions will be required to offer adequate services to students, including financial aid counseling and career services support.

The final language also includes a new requirement that institutions provide students with geographically accessible clinical or externship opportunities as required for licensure.

In final rules regarding certification procedures, the Department indicates, among other things, that it will consider withdrawal rates, gainful employment rates, licensure passage rates, and instructional and advertising spend when making institutional eligibility determinations.

The regulation also provides the Secretary authority to require institutions to submit all marketing materials in cases where the institution is provisionally certified and is found to have engaged in substantial misrepresentation, aggressive recruitment, or a failure to comply with incentive compensation rules.

The final regulation also makes changes regarding licensure-track programs, including preventing an institution from offering Title IV aid to a student enrolled in a program that does not meet educational prerequisites for licensure in the state in which the student is located.

The Department’s final regulation also requires institutions to comply with all State laws related to closure, including record retention, teach-out plans or agreements and tuition recovery funds or surety bonds for each state in which the institution is located and in each state in which students enrolled by the institution in distance education courses are located.

Borrower Defenses to Repayment

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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.

The Department of Education’s final BDTR rules that took effect on July 1, 2023 are currently being challenged in litigation, to which we are not a party.

The litigation alleges that the new rules are unconstitutional, arbitrary and capricious, and that the Department has exceeded its authority in adopting them.

On August 7, 2023, the U.S.

Court of Appeals for the Fifth Circuit granted a nationwide emergency injunction preventing the Department of Education’s enforcement of the final BDTR and closed school discharge rules.

The matter will be heard by the Fifth Circuit panel during the sitting commencing November 6, 2023, and the previous versions of the BDTR and closed school discharge rules remain in effect until at least then.

The Company is unable to predict the ultimate outcome of the litigation.

Accrediting Agencies and State Authorization

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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.

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 have significantly altered 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 were 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.

In September 2023, NC-SARA’s four regional compacts completed evaluation of the proposed policy changes and unanimously approved six proposed policy changes to be voted upon by the NC-SARA board of directors on October 24, 2023.

The remaining proposed policy changes to be voted upon do not include the proposals to permit states to apply more stringent standards to for-profit institutions or exclude for-profit institutions from NC-SARA participation.

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

18 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements