What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-07-31 · 137 added, 121 removed, 705 unchanged (27% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

December 31, 2023 June 30, 2024

December 31, 2023 September 30, 2024

Current assets:

27 unchanged sentences

32,000,000 shares authorized;

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

24,406,816 and 24,569,439 shares issued and outstanding at December 31, 2023 and September 30, 2024, respectively

Additional paid-in capital 1,517,650 1,529,594

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,

2023 2024 2023 2024

8 unchanged sentences

Income from operations 25,629 36,326 41,097 119,606

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

Other income 842 2,264 4,411 3,935

Income before income taxes 26,471 38,590 45,508 123,541

8 unchanged sentences

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(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,

2023 2024 2023 2024

3 unchanged sentences

Unrealized gains on marketable securities, net of tax 97 25 243 239

Comprehensive income (loss) $ 7,447 $ 43,561 $ ( 3,813 ) $ 46,756

Comprehensive income $ 6,665 $ 51,601 $ 2,852 $ 98,357

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

2 unchanged sentences

(in thousands, except share data)

For the three months ended June 30, 2023

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 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

For the three months ended June 30, 2024

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

For the three months ended September 30, 2024

Common Stock Additional

4 unchanged sentences

Shares Par Value

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

Stock-based compensation — — 6,887 — — 6,887

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

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

Repurchase of common stock ( 53,555 ) — ( 3,330 ) ( 1,670 ) — ( 5,000 )

Common stock dividends ($ 0.60 per share)

3 unchanged sentences

Net income — — — 27,748 — 27,748

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

Balance at September 30, 2024 24,569,439 $ 246 $ 1,529,594 $ 210,194 $ ( 23,238 ) $ 1,716,796

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, 2023

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

For the six months ended June 30, 2024

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

For the nine months ended September 30, 2024

Common Stock Additional

8 unchanged sentences

Issuance of restricted stock, net 211,314 2 ( 3,833 ) — — ( 3,831 )

Repurchase of common stock ( 53,555 ) — ( 3,330 ) ( 1,670 ) — ( 5,000 )

Common stock dividends ($ 1.80 per share)

3 unchanged sentences

Net income — — — 87,348 — 87,348

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

Balance at September 30, 2024 24,569,439 $ 246 $ 1,529,594 $ 210,194 $ ( 23,238 ) $ 1,716,796

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:

28 unchanged sentences

Common dividends paid ( 44,139 ) ( 44,262 )

Payments on long-term debt ( 40,000 ) ( 61,275 )

Net payments for stock awards ( 4,925 ) ( 3,514 )

24 unchanged sentences

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

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.

All information as of, and for the three and nine months ended, September 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 and six months ended June 30, 2024 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, 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.

25 unchanged sentences

higher education institution during the academic term.

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.

The Company had approximately $ 1.8 million of these unpaid obligations as of December 31, 2023 and September 30, 2024.

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 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.

As of December 31, 2023 and September 30, 2024, the Company had approximately $ 11.1 million and $ 9.4 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 June 30, 2023 and 2024 (in thousands):

As of June 30,

As of September 30,

Cash and cash equivalents $ 167,707 $ 195,889

26 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 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

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

December 31, 2023 September 30, 2024

Tuition receivable $ 123,357 $ 156,068

1 unchanged sentence

Tuition receivable, net $ 76,102 $ 105,795

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,

An additional $ 2.5 million and $ 7.2 million of tuition receivable, net, are included in other assets as of December 31, 2023 and September 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 nine months ended September 30, 2023 and 2024 (in thousands).

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

2023 2024 2023 2024

14 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 24,622,994 shares were issued and outstanding as of December 31, 2023 and June 30, 2024, respectively.

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,406,816 and 24,569,439 shares were issued and outstanding as of December 31, 2023 and September 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 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.

In July 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 September 16, 2024.

Net Income Per Share

5 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 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,

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, 2023 and 2024 (in thousands):

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

2023 2024 2023 2024

4 unchanged sentences

Anti-dilutive shares excluded from the diluted earnings per share calculation 276 — 219 —

Comprehensive Income (Loss)

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

As of December 31, 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.

Comprehensive Income

Comprehensive income 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 September 30, 2024, the balance of accumulated other comprehensive loss was $ 34.2 million, net of tax of $ 0.1 million, and $ 23.2 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, 2023 and 2024.

Use of Estimates

22 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, 2023 and 2024 (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, 2023 and 2024 (in thousands):

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

2023 2024 2023 2024

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 $ 46,842 $ 44,480

7 unchanged sentences

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.

As of December 31, 2023 and September 30, 2024, the Company had $ 11.8 million and $ 14.7 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 $ 6.7 million and is included as a current contract liability in the unaudited condensed consolidated balance sheets.

8 unchanged sentences

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.

The Company incurred $ 2.9 million and $ 11.3 million of severance and other employee separation charges during the three and nine months ended September 30, 2023, respectively, and $ 0.6 million and $ 1.9 million during the three and nine months ended September 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):

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 and 2024 (in thousands):

Severance Restructuring Liability

2 unchanged sentences

Payments ( 8,731 )

Balance at June 30, 2023 $ 2,341

Balance at September 30, 2023

Balance at December 31, 2023 (1)

1 unchanged sentence

Payments ( 2,593 )

Balance at June 30, 2024 (1)

Balance at September 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 $ 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.

The Company recorded approximately $ 5.1 million of right-of-use lease asset charges 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 $ 0.4 million during the three and nine months ended September 30, 2023.

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.

The Company recorded a net benefit related to the early termination and related extinguishment of lease liabilities of approximately $ 6.2 million during the nine months ended September 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 June 30, 2024 (in thousands):

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

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

Available-for-sale securities:

Tax-exempt municipal securities $ 6,993 $ — $ ( 15 ) $ 6,978

Corporate debt securities $ 2,000 $ — $ ( 10 ) $ 1,990

Total available-for sale securities $ 8,993 $ — $ ( 45 ) $ 8,948

Held-to-maturity securities:

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

As of September 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 $ 2.0 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, 2023 and 2024.

As such, no impairment charges were recorded during the three and nine months ended September 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 June 30, 2024 (in thousands):

December 31, 2023 June 30, 2024

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

December 31, 2023 September 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 $ 1,990 $ 24,192

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,

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

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

2023 2024 2023 2024

2 unchanged sentences

Total $ 3,215 $ 7,000 $ 8,175 $ 29,525

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.

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

Fair Value Measurement

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

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

Fair Value Measurements at Reporting Date Using

June 30, 2024 Quoted Prices in

September 30, 2024 Quoted Prices in

Active Markets

6 unchanged sentences

Available-for-sale securities :

Tax-exempt municipal securities 6,978 — 6,978 —

Corporate debt securities 1,990 — 1,990 —

19 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 June 30, 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 September 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 six months ended June 30, 2023 and 2024.

Goodwill and Intangible Assets

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

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

Higher Education Australia /

5 unchanged sentences

Adjustments to prior acquisitions — — — —

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

Balance as of September 30, 2024 $ 632,075 $ 528,524 $ 100,000 $ 1,260,599

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, 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.

No events or circumstances occurred in the three and nine months ended September 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 nine months ended September 30, 2023 and 2024.

Intangible Assets

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

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

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

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

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

4 unchanged sentences

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.

There were no other impairment charges related to indefinite-lived intangible assets recorded during the three and nine months ended September 30, 2023 and 2024.

Other Current Assets

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

December 31, 2023 June 30, 2024

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

December 31, 2023 September 30, 2024

Prepaid expenses $ 20,028 $ 26,530

3 unchanged sentences

Other current assets $ 44,758 $ 55,648

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

December 31, 2023 June 30, 2024

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

December 31, 2023 September 30, 2024

Prepaid expenses, net of current portion $ 16,679 $ 15,634

8 unchanged sentences

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 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.

As of December 31, 2023 and September 30, 2024, $ 16.2 million and $ 15.0 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.

Equity Method Investments

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

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

2023 2024 2023 2024

13 unchanged sentences

Accounts Payable and Accrued Expenses

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

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

December 31, 2023 September 30, 2024

Trade payables $ 49,247 $ 56,642

3 unchanged sentences

Long-Term Debt

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

On November 3, 2020, the Company entered into an amended credit facility (“Amended Credit Facility”), which, prior to the Amendment (as defined below) in October 2024, provided for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $ 350 million.

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

1 unchanged sentence

dollar equivalent of $ 150 million.

The maturity date of the Amended Credit Facility is November 3, 2025.

Prior to the Amendment, the maturity date of the Amended Credit Facility was November 3, 2025.

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.

12 unchanged sentences

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

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

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

As of December 31, 2023, the Company had approximately $ 61.4 million outstanding under the Revolving Credit Facility, of which approximately $ 3.4 million was denominated in Australian dollars.

In July 2024, the Company repaid the remaining $ 61.3 million outstanding balance under the Revolving Credit Facility.

The Company had no borrowings outstanding under the Revolving Credit Facility as of September 30, 2024.

During the nine months ended September 30, 2023 and 2024, the Company paid $ 5.4 million and $ 3.1 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.

Debt Amendment

On October 18, 2024, the Company entered into a Sixth Amendment to Second Amended and Restated Revolving Credit and Term Loan Agreement and Amendment to Other Loan Documents (the “Amendment”) with certain of its subsidiaries party thereto as subsidiary guarantors, Truist Bank, as administrative agent, and the other lenders party thereto.

The Amendment, among other things, (i) extends the maturity date of the Revolving Credit Facility from November 3, 2025 to October 18, 2029 and (ii) reduces the total commitments under the Revolving Credit Facility from $ 350 million to $ 250 million.

Except as amended by the Amendment, the remaining terms of the Amended Credit Facility remain in full force and effect.

The foregoing descriptions of the Amendment do not purport to be complete and are qualified in their entirety by reference to the full text of the Amendment which is filed as Exhibit 10.1 to this Quarterly Report and incorporated by reference herein.

The Amendment had no impact on the unaudited condensed consolidated financial statements included in this report.

Other Long-Term Liabilities

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

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

December 31, 2023 September 30, 2024

Contract liabilities, net of current portion $ 37,188 $ 35,532

8 unchanged sentences

Equity Awards

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

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

2023 2024 2023 2024

5 unchanged sentences

Stock-based compensation expense, net of tax $ 3,023 $ 5,052 $ 11,214 $ 13,787

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.

During the nine months ended September 30, 2023 and 2024, the Company recognized shortfall tax impacts of approximately $ 1.4 million and $ 1.2 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes.

During the nine months ended September 30, 2023 and 2024, the Company recorded income tax expense of $ 14.8 million and $ 36.2 million, respectively.

Income tax expense for the nine months ended September 30, 2023 and 2024 include shortfall tax impacts of approximately $ 1.4 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 September 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 $ 35.6 million and $ 39.5 million in income taxes during the nine months ended September 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 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, 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,

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

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

2023 2024 2023 2024

24 unchanged sentences

Since the Department’s 2024 notices, Capella University has received approximately 6,770 applications, and Strayer University has received approximately 1,870 applications.

Each university provided a response to the applications it received.

Each university has provided or will provide a response to the applications it received within the time allowed by the Department.

At this time, the Company is unable to predict whether the Department will grant BDTR relief for the claims noticed on January 25, 2024 and February 1, 2024, or if so, whether it will seek recoupment from Capella University or Strayer University.

30 unchanged sentences

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 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 took effect July 1, 2024.

2 unchanged sentences

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, and the motion for preliminary injunction was denied on June 20, 2024.

4 unchanged sentences

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.

In a September 13, 2024 Electronic Announcement (GE-24-08), the Department announced the deadline for initial institutional data reporting has been further extended from October 1, 2024 to January 15, 2025.

Borrower Defenses to Repayment

18 unchanged sentences

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.

“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.

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

2 unchanged sentences

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.

21 unchanged sentences

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.

On October 10, 2024, the Department timely filed a petition for a writ of certiorari, seeking review by the Supreme Court of the United States.

The Respondent’s (i.e., Career Colleges and Schools of Texas) response to the Department’s petition is due December 12, 2024.

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.

5 unchanged sentences

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 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.

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.

3 unchanged sentences

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.

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

The adoption of certain proposals, including those described above, could have a material adverse effect on Capella University, Strayer University, and the Company.

On September 10, 2024, NC-SARA announced that the four regional compacts/regional steering committees approved 10 policy change proposals, which include proposed changes related to when an institution may be placed on provisional status and when a state must deny or may exercise its discretion to deny an institution’s participation in SARA.

The NC-SARA board of directors approved the proposals on October 23-25, 2024, concluding the 2024 policy modification process.

The adoption of certain proposals, including those described above to the extent they affect the ability of institutions to participate in the agreements, could have a material adverse effect on Capella University, Strayer University, and the Company.

Beginning in January 2024, the Department convened a negotiated rulemaking committee to consider new proposed regulations on, among other things, state authorization and state authorization reciprocity agreements.

11 unchanged sentences

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.

The Department accepted 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.

5 unchanged sentences

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

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.

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 Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.

Certain courts have issued orders expanding the injunction to named schools, irrespective of where those schools are located;

Capella University and Strayer University were named among nearly 700 schools in one such order on July 15, 2024.

Dep’t of Educ.

5:24-cv-4041 (D.

Except where enjoined, the new rules otherwise became effective on August 1, 2024.

Australia Regulation

On May 16, 2024, the Education Services for Overseas Students Amendment (Quality and Integrity) Bill 2024 , which would amend the Education Services for Overseas Students Act 2000 , was introduced into the House of Representatives of the Australian Parliament.

On August 15, 2024, the Bill was introduced into the Senate of the Australian Parliament.

The Bill contains several measures that would authorize the Minister for Education to regulate the provision of education to overseas students, including, among other things, by limiting the enrollments of overseas students.

These limits would apply to Torrens University and to Think Education.

The Company is unable to predict the final specific limits or their effect at this time.

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