What changed in this filing

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Item 1. Financial Statements

2024-07-31 compared with 2024-04-25 · 205 added, 143 removed, 621 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

December 31, 2023 March 31, 2024

December 31, 2023 June 30, 2024

Current assets:

27 unchanged sentences

32,000,000 shares authorized;

24,406,816 and 24,607,939 shares issued and outstanding at December 31, 2023 and March 31, 2024, respectively

24,406,816 and 24,622,994 shares issued and outstanding at December 31, 2023 and June 30, 2024, respectively

Additional paid-in capital 1,517,650 1,526,037

5 unchanged sentences

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

For the three months ended March 31,

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

2023 2024 2023 2024

Revenues $ 287,680 $ 312,266 $ 544,286 $ 602,516

6 unchanged sentences

Total costs and expenses 270,863 270,342 528,818 519,236

Income (loss) from operations ( 1,349 ) 41,356

Other income 398 1,794

Income (loss) before income taxes ( 951 ) 43,150

Income from operations 16,817 41,924 15,468 83,280

Other income (expense) 3,171 ( 123 ) 3,569 1,671

Income before income taxes 19,988 41,801 19,037 84,951

Provision for income taxes 5,757 11,903 6,834 25,351

Net income (loss) $ ( 2,028 ) $ 29,702

Earnings (loss) per share:

Net income $ 14,231 $ 29,898 $ 12,203 $ 59,600

Earnings per share:

Basic $ 0.61 $ 1.28 $ 0.52 $ 2.55

6 unchanged sentences

(in thousands)

For the three months ended March 31,

Net income (loss) $ ( 2,028 ) $ 29,702

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

2023 2024 2023 2024

Net income $ 14,231 $ 29,898 $ 12,203 $ 59,600

Other comprehensive income (loss):

6 unchanged sentences

(in thousands, except share data)

For the three months ended March 31, 2023

For the three months ended June 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

Stock-based compensation — — 5,493 — — 5,493

Issuance of restricted stock, net 3,369 — — — — —

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

Common stock dividends ($ 0.60 per share)

— — — ( 14,750 ) — ( 14,750 )

Foreign currency translation adjustment — — — — ( 6,822 ) ( 6,822 )

Unrealized gains on marketable securities, net of tax — — — — 38 38

Net income — — — 14,231 — 14,231

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

For the three months ended June 30, 2024

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Shares Par Value

Balance at March 31, 2024 24,607,939 $ 246 $ 1,519,291 $ 183,800 $ ( 60,754 ) $ 1,642,583

Stock-based compensation — — 6,573 — — 6,573

Exercise of stock options 2,628 — 173 — — 173

Issuance of restricted stock, net 12,427 — — — — —

Common stock dividends ($ 0.60 per share)

— — — ( 14,790 ) — ( 14,790 )

Foreign currency translation adjustment — — — — 13,592 13,592

Unrealized gains on marketable securities, net of tax — — — — 71 71

Net income — — — 29,898 — 29,898

Balance at June 30, 2024 24,622,994 $ 246 $ 1,526,037 $ 198,908 $ ( 47,091 ) $ 1,678,100

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

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

For the six months ended June 30, 2023

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Shares Par Value

Balance at December 31, 2022 24,402,891 $ 244 $ 1,510,924 $ 159,690 $ ( 35,068 ) $ 1,635,790

2 unchanged sentences

Issuance of restricted stock, net 190,531 2 ( 5,021 ) — — ( 5,019 )

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

Common stock dividends ($ 1.20 per share)

2 unchanged sentences

Unrealized gains on marketable securities, net of tax — — — — 146 146

Net loss — — — ( 2,028 ) — ( 2,028 )

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

For the three months ended March 31, 2024

Net income — — — 12,203 — 12,203

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

For the six months ended June 30, 2024

Common Stock Additional

13 unchanged sentences

Net income — — — 59,600 — 59,600

Balance at March 31, 2024 24,607,939 $ 246 $ 1,519,291 $ 183,800 $ ( 60,754 ) $ 1,642,583

Balance at June 30, 2024 24,622,994 $ 246 $ 1,526,037 $ 198,908 $ ( 47,091 ) $ 1,678,100

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

2 unchanged sentences

(in thousands)

For the three months ended March 31,

For the six months ended June 30,

Cash flows from operating activities:

Net income (loss) $ ( 2,028 ) $ 29,702

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

Net income $ 12,203 $ 59,600

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

Gain on sale of property and equipment ( 2,136 ) —

Gain on early termination of operating leases ( 98 ) ( 6,166 )

17 unchanged sentences

Proceeds from marketable securities 4,960 22,525

Proceeds from sale of property and equipment 5,890 —

Proceeds from other investments 457 20

5 unchanged sentences

Net payments for stock awards ( 4,964 ) ( 3,514 )

Repurchase of common stock ( 9,999 ) —

Net cash used in financing activities ( 44,431 ) ( 33,021 )

22 unchanged sentences

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

All information as of, and for the three months ended, March 31, 2023 and 2024 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, and for the three and six months ended, June 30, 2023 and 2024 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, 2023 has been derived from the audited consolidated financial statements at that date.

2 unchanged sentences

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, 2023.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year.

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

8 unchanged sentences

Merger and integration costs include integration expenses associated with the Company’s merger with Capella Education Company and the Company’s acquisition of ANZ.

Restructuring costs include severance and other personnel-related expenses from voluntary and involuntary employee terminations, right-of-use 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.

Restructuring costs include severance and other personnel-related expenses from voluntary and involuntary employee terminations, 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.

See Note 4 for additional information.

8 unchanged sentences

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

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

Restricted Cash

3 unchanged sentences

higher education institution during the academic term.

The Company had approximately $ 1.8 million of these unpaid obligations as of December 31, 2023 and March 31, 2024.

The Company had approximately $ 1.8 million and $ 2.1 million of these unpaid obligations as of December 31, 2023 and June 30, 2024, 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, 2023 and March 31, 2024, the Company had approximately $ 11.1 million and $ 13.4 million, respectively, of restricted cash related to these requirements in Australia and New Zealand.

As of December 31, 2023 and June 30, 2024, the Company had approximately $ 11.1 million and $ 11.4 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 in the unaudited condensed consolidated balance sheets.

The following table illustrates the reconciliation of cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows as of March 31, 2023 and 2024 (in thousands):

As of March 31,

As of June 30,

Cash and cash equivalents $ 181,024 $ 230,111

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 stockholders’ 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, 2023 and March 31, 2024 (in thousands):

December 31, 2023 March 31, 2024

The Company’s current tuition receivable and allowance for credit losses were as follows as of December 31, 2023 and June 30, 2024 (in thousands):

December 31, 2023 June 30, 2024

Tuition receivable $ 123,357 $ 141,024

1 unchanged sentence

Tuition receivable, net $ 76,102 $ 89,639

Approximately $ 2.5 million of tuition receivable, net, are included in other assets as of December 31, 2023 and March 31, 2024 because these amounts are expected to be collected after 12 months.

The following table illustrates changes in the Company’s allowance for credit losses for the three months ended March 31, 2023 and 2024 (in thousands).

For the three months ended March 31,

An additional $ 2.5 million and $ 7.3 million of tuition receivable, net, are included in other assets as of December 31, 2023 and June 30, 2024, respectively, because these amounts are expected to be collected after 12 months.

The following table illustrates changes in the Company’s current and non-current allowance for credit losses for the three and six months ended June 30, 2023 and 2024 (in thousands).

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

2023 2024 2023 2024

Allowance for credit losses, beginning of period $ 45,708 $ 47,275 $ 47,586 $ 47,605

13 unchanged sentences

Authorized Stock

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,406,816 and 24,607,939 shares were issued and outstanding as of December 31, 2023 and March 31, 2024, respectively.

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,406,816 and 24,622,994 shares were issued and outstanding as of December 31, 2023 and June 30, 2024, 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, the Board of Directors must establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and the terms or conditions of the redemption of the preferred stock.

In February 2024, the Company’s Board of Directors declared a regular, quarterly cash dividend of $ 0.60 per share of common stock.

The dividend was paid on March 18, 2024.

Net Income (Loss) Per Share

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

In April 2024, 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 3, 2024.

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 (“stock awards”).

3 unchanged sentences

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 (loss) per share for the three months ended March 31, 2023 and 2024 (in thousands):

For the three months ended March 31,

Weighted average shares outstanding used to compute basic earnings (loss) per share 23,430 23,391

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, 2023 and 2024 (in thousands):

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

2023 2024 2023 2024

Weighted average shares outstanding used to compute basic earnings per share 23,450 23,442 23,440 23,416

Incremental shares issuable upon the assumed exercise of stock options 4 6 5 6

Unvested restricted stock and restricted stock units 510 731 548 697

Shares used to compute diluted earnings (loss) per share 23,430 24,060

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

Shares used to compute diluted earnings per share 23,964 24,179 23,993 24,119

Anti-dilutive shares excluded from the diluted earnings per share calculation 272 — 190 —

Comprehensive Income (Loss)

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

As of December 31, 2023 and March 31, 2024, the balance of accumulated other comprehensive loss was $ 34.2 million, net of tax of $ 0.1 million, and $ 60.8 million, net of tax of $ 0.1 million, respectively.

There were no reclassifications out of accumulated other comprehensive income (loss) to net income (loss) for the three months ended March 31, 2023 and 2024.

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, 2023 and June 30, 2024, the balance of accumulated other comprehensive loss was $ 34.2 million, net of tax of $ 0.1 million, and $ 47.1 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, 2023 and 2024.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the period reported.

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

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the period reported.

accrued expenses, forfeiture rates and the likelihood of achieving performance criteria for stock-based awards, value of free courses earned by students that will be redeemed in the future, valuation of goodwill and intangible assets, and the provision for income taxes.

Actual results could differ from those estimates.

18 unchanged sentences

Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within the calendar year.

The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the three months ended March 31, 2023 and 2024 (in thousands):

For the three months ended March 31,

The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the three and six months ended June 30, 2023 and 2024 (in thousands):

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

2023 2024 2023 2024

Higher Education Segment

Tuition, net of discounts, grants and scholarships $ 194,362 $ 207,571 $ 382,875 $ 417,302

8,317 9,042 16,699 18,547

Higher Education Segment 202,679 216,613 399,574 435,849

1 unchanged sentence

Tuition, net of discounts, grants and scholarships 63,766 69,004 104,188 114,638

1,706 2,126 2,787 3,867

Total Australia/New Zealand Segment 65,472 71,130 106,975 118,505

6 unchanged sentences

Revenues are recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods and services.

The Company applies the five-step revenue model under Accounting Standards Codification (“ASC”) 606, Revenue Recognition (“ASC 606”) to determine when revenue is earned and recognized.

The Company applies the

five-step revenue model under Accounting Standards Codification (“ASC”) 606, Revenue Recognition (“ASC 606”) to determine when revenue is earned and recognized.

Arrangements with students may have multiple performance obligations.

17 unchanged sentences

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

The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a

course of study within this program and similar programs.

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

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

2 unchanged sentences

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

For the three months ended March 31,

For the six months ended June 30,

Balance at beginning of period $ 46,842 $ 44,480

6 unchanged sentences

Each quarter, the Company assesses its assumptions underlying these estimates.

As of December 31, 2023 and March 31, 2024, the Company had $ 11.8 million and $ 13.5 million, respectively, of contract liabilities in the unaudited condensed consolidated balance sheets related to tuition cap benefits that are estimated to be redeemed in the future.

Each quarter, the Company assesses its assumptions underlying these

As of December 31, 2023 and June 30, 2024, the Company had $ 11.8 million and $ 14.5 million, respectively, of contract liabilities in the unaudited condensed consolidated balance sheets related to tuition cap benefits that are estimated to be redeemed in the future.

The amount estimated to be redeemed in the next 12 months is $ 5.2 million and is included as a current contract liability in the unaudited condensed consolidated balance sheets.

7 unchanged sentences

Restructuring and Related Charges

The Company 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 months ended March 31, 2023 and 2024, the Company incurred $ 2.3 million and $ 0.3 million, respectively, 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 (loss).

The following details the changes in the Company's severance and other employee separation costs restructuring liabilities during the three months ended March 31, 2023 and 2024 (in thousands):

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

The Company incurred $ 6.1 million and $ 8.4 million of severance and other employee separation charges during the three and six months ended June 30, 2023, respectively, and $ 1.0 million and $ 1.3 million during the three and six months ended June 30, 2024, respectively, 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 and 2024 (in thousands):

Severance Restructuring Liability

2 unchanged sentences

Payments ( 6,023 )

Balance at March 31, 2023 $ 371

Balance at June 30, 2023 $ 2,341

Balance at December 31, 2023 (1)

1 unchanged sentence

Payments ( 1,630 )

Balance at March 31, 2024 (1)

Balance at June 30, 2024 (1)

____________________________________

1 unchanged sentence

The Company evaluates its owned and leased real estate portfolio on an ongoing basis, which has resulted in the consolidation and sale of underutilized facilities.

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

There were no right-of-use lease asset charges during the three months ended March 31, 2024.

The Company recorded a net benefit related to the early termination and related extinguishment of lease liabilities of approximately $ 6.2 million during the three months ended March 31, 2024.

These right-of-use lease asset charges and net benefits from early lease terminations are included in Restructuring costs on the unaudited condensed consolidated statements of income (loss).

The Company recorded approximately $ 1.5 million and $ 5.1 million of right-of-use lease asset charges 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 $ 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 a net benefit related to the early termination and related extinguishment of lease liabilities of approximately $ 6.2 million during the six months ended June 30, 2024.

These right-of-use lease asset and fixed asset impairment charges, gains on the sale of property and equipment, and net benefits from early lease terminations 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 March 31, 2024 (in thousands):

The following is a summary of available-for-sale and held-to-maturity securities as of June 30, 2024 (in thousands):

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

13 unchanged sentences

Term deposits $ 27,175 $ — $ — $ 27,175

The unrealized gains and losses on the Company’s investments in corporate debt and municipal securities as of December 31, 2023 and March 31, 2024 were caused by changes in market values primarily due to interest rate changes.

As of March 31, 2024, the fair value of the Company’s securities which were in an unrealized loss position for a period longer than twelve months was $ 12.1 million.

The unrealized gains and losses on the Company’s investments in corporate debt and municipal securities as of December 31, 2023 and June 30, 2024 were caused by changes in market values primarily due to interest rate changes.

As of June 30, 2024, the fair value of the Company’s securities which were in an unrealized loss position for a period longer than twelve months was $ 4.9 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 months ended March 31, 2023 and 2024.

As such, no impairment charges were recorded during the three and six months ended June 30, 2023 and 2024.

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, 2023 and March 31, 2024 (in thousands):

December 31, 2023 March 31, 2024

The following table summarizes the maturities of the Company’s marketable securities as of December 31, 2023 and June 30, 2024 (in thousands):

December 31, 2023 June 30, 2024

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

2 unchanged sentences

Total $ 13,036 $ 27,175 $ 8,948 $ 17,180

The following table summarizes the proceeds from the maturities and sales of marketable securities for the three months ended March 31, 2023 and 2024 (in thousands):

For the three months ended March 31,

The following table summarizes the proceeds from the maturities and sales of marketable securities for the three and six months ended June 30, 2023 and 2024 (in thousands):

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

2023 2024 2023 2024

Maturities of marketable securities $ 3,000 $ 14,305 $ 4,960 $ 22,525

1 unchanged sentence

Total $ 3,000 $ 14,305 $ 4,960 $ 22,525

The Company did not record any gross realized gains or losses in net income (loss) during the three months ended March 31, 2023 and March 31, 2024.

The Company did not record any gross realized gains or losses in net income during the three and six months ended June 30, 2023 and June 30, 2024.

Fair Value Measurement

Assets measured at fair value on a recurring basis consist of the following as of March 31, 2024 (in thousands):

Assets measured at fair value on a recurring basis consist of the following as of June 30, 2024 (in thousands):

Fair Value Measurements at Reporting Date Using

March 31, 2024 Quoted Prices in

June 30, 2024 Quoted Prices in

Active Markets

28 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, 2023 and March 31, 2024 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, 2023 and June 30, 2024 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 three months ended March 31, 2023 and 2024.

Goodwill and Intangible Assets

The following table presents changes in the carrying value of goodwill by segment for the three months ended March 31, 2024 (in thousands):

The following table presents changes in the carrying value of goodwill by segment for the six months ended June 30, 2024 (in thousands):

Higher Education Australia /

5 unchanged sentences

Adjustments to prior acquisitions — — — —

Balance as of March 31, 2024 $ 632,075 $ 497,807 $ 100,000 $ 1,229,882

Balance as of June 30, 2024 $ 632,075 $ 508,887 $ 100,000 $ 1,240,962

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

No events or circumstances occurred in the three months ended March 31, 2024 to indicate an impairment to goodwill at any of the Company’s segments.

There were no impairment charges related to goodwill recorded during the three months ended March 31, 2023 and 2024.

No events or circumstances occurred in the three and six months ended June 30, 2024 to indicate an impairment to goodwill at any of the Company’s segments.

There were no impairment charges related to goodwill recorded during the three and six months ended June 30, 2023 and 2024.

Intangible Assets

The following table represents the balance of the Company’s intangible assets as of December 31, 2023 and March 31, 2024 (in thousands):

December 31, 2023 March 31, 2024

The following table represents the balance of the Company’s intangible assets as of December 31, 2023 and June 30, 2024 (in thousands):

December 31, 2023 June 30, 2024

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 were consumed over their estimated useful lives.

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

Amortization expense related to finite-lived intangible assets was $ 5.4 million for the six months ended June 30, 2023.

All finite-lived intangible assets were fully amortized by the end of 2023.

3 unchanged sentences

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

No events or circumstances occurred in the three months ended March 31, 2024 to indicate an impairment to indefinite-lived intangible assets.

There were no impairment charges related to indefinite-lived intangible assets recorded during the three months ended March 31, 2023 and 2024.

In the second quarter of 2024, the Company recorded a $ 0.8 million indefinite-lived intangible asset impairment charge, which is included in Restructuring costs on the unaudited condensed consolidated statements of income.

There were no impairment charges related to indefinite-lived intangible assets recorded during the three and six months ended June 30, 2023.

Other Current Assets

Other current assets consist of the following as of December 31, 2023 and March 31, 2024 (in thousands):

December 31, 2023 March 31, 2024

Other current assets consist of the following as of December 31, 2023 and June 30, 2024 (in thousands):

December 31, 2023 June 30, 2024

Prepaid expenses $ 20,028 $ 27,029

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Other current assets $ 44,758 $ 52,990

Other assets consist of the following as of December 31, 2023 and March 31, 2024 (in thousands):

December 31, 2023 March 31, 2024

Other assets consist of the following as of December 31, 2023 and June 30, 2024 (in thousands):

December 31, 2023 June 30, 2024

Prepaid expenses, net of current portion $ 16,679 $ 16,172

1 unchanged sentence

Cloud computing arrangements, net of current portion 12,806 14,392

Other investments 2,806 2,806

Tuition receivable, net, non-current 2,516 7,328

Other investments 2,806 2,786

Other 3,544 5,079

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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, 2023 and March 31, 2024, $ 16.2 million and $ 15.8 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.

As of December 31, 2023 and June 30, 2024, $ 16.2 million and $ 15.4 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.

Equity Method Investments

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

The following table illustrates changes in the Company’s limited partnership investments for the three months ended March 31, 2023 and 2024 (in thousands):

For the three months ended March 31,

The following table illustrates changes in the Company’s limited partnership investments for the three and six months ended June 30, 2023 and 2024 (in thousands):

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

2023 2024 2023 2024

Limited partnership investments, beginning of period $ 14,874 $ 15,889 $ 13,879 $ 16,068

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Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of December 31, 2023 and March 31, 2024 (in thousands):

December 31, 2023 March 31, 2024

Accounts payable and accrued expenses consist of the following as of December 31, 2023 and June 30, 2024 (in thousands):

December 31, 2023 June 30, 2024

Trade payables $ 49,247 $ 54,624

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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 March 31, 2024.

As of December 31, 2023 and March 31, 2024, the Company had approximately $ 61.4 million and $ 61.3 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, 2023 and March 31, 2024, respectively.

During the three months ended March 31, 2023 and 2024, the Company paid $ 2.4 million and $ 1.2 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.

The Company was in compliance with all the terms of the Amended Credit Facility as of June 30, 2024.

As of December 31, 2023 and June 30, 2024, the Company had approximately $ 61.4 million and $ 61.3 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, 2023 and June 30, 2024, respectively.

During the six months ended June 30, 2023 and 2024, the Company paid $ 4.2 million and $ 2.4 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.

Other Long-Term Liabilities

Other long-term liabilities consist of the following as of December 31, 2023 and March 31, 2024 (in thousands):

December 31, 2023 March 31, 2024

Other long-term liabilities consist of the following as of December 31, 2023 and June 30, 2024 (in thousands):

December 31, 2023 June 30, 2024

Contract liabilities, net of current portion $ 37,188 $ 36,979

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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 months ended March 31, 2023 and 2024 (in thousands):

For the three months ended March 31,

The following table sets forth the amount of stock-based compensation expense recorded in each of the expense line items for the three and six months ended June 30, 2023 and 2024 (in thousands):

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

2023 2024 2023 2024

Instructional and support costs $ 1,665 $ 1,822 $ 3,531 $ 3,055

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Stock-based compensation expense, net of tax $ 4,038 $ 4,831 $ 8,191 $ 8,735

During the three months ended March 31, 2023 and 2024, 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 three months ended March 31, 2023 and 2024, the Company recorded income tax expense of $ 1.1 million and $ 13.4 million, respectively.

Income tax expense for the three months ended March 31, 2023 and 2024 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, 2023 and March 31, 2024.

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

The Company paid $ 3.8 million and $ 2.4 million in income taxes during the three months ended March 31, 2023 and 2024, respectively.

During the six months ended June 30, 2023 and 2024, the Company recognized shortfall tax impacts of approximately $ 1.3 million and $ 1.2 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes.

During the six months ended June 30, 2023 and 2024, the Company recorded income tax expense of $ 6.8 million and $ 25.4 million, respectively.

Income tax expense for the six months ended June 30, 2023 and 2024 include shortfall tax impacts of approximately $ 1.3 million and $ 1.2 million, respectively, related to share-based payment arrangements.

The Company had $ 0.9 million of unrecognized tax benefits as of December 31, 2023 and June 30, 2024.

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 $ 26.7 million and $ 25.9 million in income taxes during the six months ended June 30, 2023 and 2024, respectively.

The tax years since 2020 remain open for federal tax examination, the tax years since 2019 remain open to examination by certain states, and the tax years since 2018 remain open to examination by foreign taxing jurisdictions in which the Company is subject to taxation.

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The Education Technology Services segment develops and maintains relationships with employers to build employee education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs.

The employer relationships developed by the Education Technology Services segment are an important source of student

enrollment for Capella University and Strayer University, and the majority of the revenue attributed to the Education Technology Services segment is driven by the volume of enrollment derived from these employer relationships.

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

The employer relationships developed by the Education Technology Services segment are an important source of student enrollment for Capella University and Strayer University, and a significant portion of the revenue attributed to the Education Technology Services segment is driven by the volume of enrollment derived from these employer relationships.

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

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

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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 months ended March 31, 2023 and 2024 is presented in the following table (in thousands):

For the three months ended March 31,

A summary of financial information by reportable segment for the three and six months ended June 30, 2023 and 2024 is presented in the following table (in thousands):

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

2023 2024 2023 2024

Higher Education $ 202,679 $ 216,613 $ 399,574 $ 435,849

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Consolidated revenues $ 287,680 $ 312,266 $ 544,286 $ 602,516

Income (loss) from operations

Income from operations

Higher Education $ 6,741 $ 19,825 $ 16,330 $ 47,838

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Restructuring costs ( 6,351 ) ( 1,995 ) ( 11,946 ) 3,515

Consolidated income (loss) from operations $ ( 1,349 ) $ 41,356

Consolidated income from operations $ 16,817 $ 41,924 $ 15,468 $ 83,280

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

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In the notices received, the Department indicated that:

(1) the notification was occurring prior to any substantive review of the application as well as its adjudication;

(1) the notification was occurring prior to any substantive review of the applications as well as their adjudication;

(2) it would send the applications to Capella University and Strayer University in batches of 500 per week;

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The Department has also explained that it will separately decide whether to seek recoupment on any approved claim and that any recoupment actions the Department chooses to initiate will have their own notification and response processes, which include providing additional evidence to the institution.

The Department has indicated that an institution will learn of the Department’s determination only if it approves a BDTR application and the Department seeks recoupment.

The Department has indicated that an institution will learn of the Department’s determination only if it approves a Borrower Defense to Repayment (“BDTR”) application and the Department seeks recoupment.

In relation to the separate 2021 notice received by Capella University, the Department indicated there were more than 1,000 applications pending, but the Company only ever received approximately 500 actual claims, and after an exhaustive review and response process the Company believes that none properly stated a claim for loan forgiveness.

To date, Capella University has received approximately 6,000 applications, and Strayer University has received approximately 1,850 applications.

Each university is providing a response to the applications it receives.

At this time, the Company is unable to predict whether the Department will grant BDTR relief for the claims noticed on January 25 and February

1, or if so, whether it will seek recoupment from Capella University or Strayer University.

Since the Department’s 2024 notices, Capella University has received approximately 6,750 applications, and Strayer University has received approximately 1,850 applications.

Each university provided a response to the applications it received.

At this time, the Company is unable to predict whether the Department will grant BDTR relief for the claims noticed on January 25 and February 1, or if so, whether it will seek recoupment from Capella University or Strayer University.

If the Department were to seek recoupment, Capella University and Strayer University would dispute and defend against such efforts.

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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.

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 final gainful employment regulations took effect July 1, 2024.

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

1 unchanged sentence

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

On December 22, 2023, a lawsuit was filed against the Department in the United States District Court for the Northern District of Texas alleging that the rulemaking process and final rule were based on arbitrary and capricious decisions made by the Department, and that the rule violates constitutional rights related to speech, equal protection, and due process.

On March 20, 2024, another lawsuit was filed against the Department in the United States District Court for the Northern District of Texas seeking a preliminary and permanent injunction enjoining the Department from enforcing the final rule on the grounds that the rule exceeds the Department’s statutory authority, and is arbitrary, capricious, an abuse of discretion, and otherwise is not in accordance with law.

equal protection, and due process.

On July 2, 2024, the court consolidated the two Gainful Employment cases into one.

Capella University and Strayer University are not parties to the lawsuits.

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

In a March 29, 2024 Electronic Announcement (GE-24-01), the Department released additional information and updates to help institutions prepare for complying with the Financial Value Transparency (“FVT”) and Gainful Employment (“GE”) Regulations, including that the deadline for initial institutional data reporting has been extended to October 1, 2024 (originally:

July 31, 2024).

The Department indicated that in early 2025, it plans to publish the FVT/GE metrics and notify institutions of failing GE programs, as well as provide additional information on the program eligibility effects of the metrics on failing GE programs.

18 unchanged sentences

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

The Department will determine financial harm based upon individual earnings and circumstances, which must

include consideration of the individual borrower’s career experience subsequent to enrollment and may include, among other factors, evidence of program-level median or mean earnings.

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

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

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The 2019 BDTR Rule permits the usage of pre-dispute arbitration agreements as a condition of enrollment, so long as the institution provides plain-language disclosures to students and the disclosure is placed on the institution’s website.

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

The regulations also allow for a borrower to choose whether to apply for a closed school loan discharge or

accept a teach-out opportunity.

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

20 unchanged sentences

On April 4, 2024, the Fifth Circuit reversed the underlying district court decision denying injunctive relief and remanded the case to the district court with instructions to enjoin and postpone the effective date of the 2022 BDTR Rule pending final judgment.

The Department petitioned the Fifth Circuit for panel rehearing, which the Fifth Circuit denied on June 12, 2024.

The Department now has until at least September 10, 2024 to seek review by the Supreme Court of the United States.

The Department has previously stated that it will not adjudicate any borrower defense applications under the latest rule unless and until the effective date is reinstated.

The Department will continue to adjudicate borrower defense applications using an earlier version of the regulations where required under the court settlement in the Sweet matter discussed in Note 21, Litigation, to the consolidated financial statements appearing in our Annual Report on Form 10-K for the year ended December 31, 2023.

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

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On January 16, 2024, SARA’s coordinating entity, the National Council for State Authorization Reciprocity Agreements (“NC-SARA”), initiated its 2024 policy manual modification process with a call for proposals for SARA policy changes.

The call for proposals ended February 2, 2024 and yielded 50 proposed changes to NC-SARA policies, some of which, if adopted, could significantly alter the distance

education reciprocity agreements.

The call for proposals ended February 2, 2024 and yielded 50 proposed changes to NC-SARA policies, some of which, if adopted, could significantly alter the distance education reciprocity agreements.

Such proposals include that an institution may be denied participation in SARA if it violates any requirement related to state authorization, accreditation, or participation in federal Title IV financial aid programs;

and that an institution may be denied participation in SARA or have its participation limited as a result of adverse actions against it related to the institution’s academic quality, financial stability, or student consumer protection issues.

On April 26, 2024, NC-SARA will hold its public comment forum to seek input on these potential changes.

In addition to the public comment forum, written comments will be accepted between April 15, 2024 and May 17, 2024.

On April 26, 2024, NC-SARA held its public comment forum to seek input on these potential changes.

In addition to the public comment forum, NC-SARA accepted written comments between April 15, 2024 and May 17, 2024.

NC-SARA’s regional compacts/regional steering committees and the NC-SARA board of directors will vote on each proposal presented by September 6, 2024, and October 25, 2024, respectively.

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Negotiated Rulemaking

Beginning January 2024, the Department convened negotiated rulemaking committee meetings to consider new proposed regulations on distance education, cash management, return of federal funds, state authorization (discussed above), accreditation and related issues, and TRIO programs.

Beginning January 2024, the Department convened negotiated rulemaking committee meetings to consider new proposed regulations on distance education, cash management, return of federal funds, state authorization, accreditation and related issues, and TRIO programs.

Negotiated rulemaking committee meetings concluded in March 2024.

1 unchanged sentence

In the absence of consensus, the Department of Education has discretion to propose a rule for public comment.

On July 17, 2024, the Department released proposed rules on distance education, return of federal funds, and TRIO programs.

The proposed rules related to distance education would, among other things, establish a “virtual location” as a distinct type of additional location for Title IV purposes and define “distance education course” to include courses that are offered exclusively through distance education, notwithstanding in-person non-instructional requirements (such as orientation, testing, academic support services, or residency experiences).

The proposed rules also would require institutions to report each Title IV recipient’s enrollment in distance education or correspondence courses.

The proposed rules would also require an institution to take attendance, for the purposes of the Title IV return calculation (“R2T4”), for each course offered entirely through distance education, except for doctoral dissertation research courses.

The Department is accepting public comments through August 23, 2024.

On July 17, 2024, the Department of Education also announced that it intends to publish proposed regulations related to state authorization (including state authorization reciprocity agreements), cash management and accreditation by the end of the year, and that the Department intends to convene a negotiated rulemaking process to consider regulations related to third party servicers broadly.

We cannot predict whether the Department of Education will promulgate any regulations that would negatively affect Capella University or Strayer University.

4 unchanged sentences

and eliminates the requirement for live hearings with an opportunity for cross-examination at the post-secondary level.

The new rules are effective on August 1, 2024.

Multiple states have joined lawsuits against the Department challenging the new rules, and federal district courts have granted preliminary injunctions enjoining the Department from enforcing the final rule in Alaska, Arkansas, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.

On July 15, 2024, the scope of one of these orders was expanded to nearly 700 schools nationwide, irrespective of where those schools are located, including both Capella University and Strayer University.

The new rules are otherwise effective on August 1, 2024.

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