What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 90 added, 80 removed, 260 unchanged (40% of the section changed)

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We operate primarily through our wholly-owned subsidiaries, Capella University and Strayer University, both accredited post-secondary institutions of higher education located in the United States, and Torrens University, an accredited post-secondary institution of higher education located in Australia.

Our operations emphasize relationships through our Education Technology Services segment with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs.

Our operations

also include the Education Technology Services segment, which primarily 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.

Segments Overview

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Education Technology Services Segment

• Our Education Technology Services segment is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs that provide employees with 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.

• Our Education Technology Services segment primarily 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 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.

Enrollments attributed to the Education Technology Services segment are determined based on a student’s employment status and the existence of a corporate partnership arrangement with SEI.

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

• In 2023, employer affiliated enrollment as a percentage of USHE enrollment was 27.2% compared to 24.4% in 2022.

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

• In 2024, average employer affiliated enrollment as a percentage of USHE average total student enrollment was 29.6% compared to 27.2% in 2023.

low-cost online general education-level courses recommended by the American Council on Education for credit at other colleges and universities.

Australia/New Zealand (“ANZ”) Segment

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Media Design School offers industry-endorsed courses in 3D animation and visual effects, game art, game programming, graphic and motion design, digital media, artificial intelligence, and creative advertising.

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

• In 2023, Australia/New Zealand average total student enrollment decreased 3.6% to 18,692 compared to 19,388 in 2022.

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

• In 2024, Australia/New Zealand average total student enrollment increased 4.8% to 19,585 compared to 18,692 in 2023.

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

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Critical Accounting Policies and Estimates

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities.

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

Capella University also offers its FlexPath program, which allows students to determine their 12-week billing session schedule after they complete their first course.

Capella University

also offers its FlexPath program, which allows students to determine their 12-week billing session schedule after they complete their first course.

Tuition revenue for all students is recognized ratably over the period of instruction as the universities provide academic services, whether delivered in person at a physical campus or online.

Tuition revenue is shown net of any refunds, withdrawals, discounts, and scholarships.

The universities also derive revenue from other sources such as textbook-related income, certificate revenue, certain academic fees, licensing revenue, accommodation revenue, food and beverage fees, and other income, which are all recognized when earned.

The universities also derive revenue from other sources such as textbook-related income, certificate revenue, certain academic fees, licensing revenue, accommodation revenue, and food and beverage fees, which are all recognized when earned.

In accordance with Accounting Standards Codification (“ASC”) 606, Revenue Recognition , materials provided to students in connection with their enrollment in a course are recognized as revenue when control of those materials transfers to the student.

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Any cash received prior to the start of an academic term or program is recorded as a contract liability.

Students at Capella University and Strayer University finance their education in a variety of ways, and historically about 75% of our students have participated in one or more financial aid program provided through Title IV of the Higher Education Act.

Students at Capella University and Strayer University finance their education in a variety of ways, and historically a majority of our students have participated in one or more financial aid programs provided through Title IV of the Higher Education Act.

In addition, many of our working adult students finance their own education or receive full or partial tuition reimbursement from their employers.

Those students who are veterans or active duty military personnel have access to various additional government-funded educational benefit programs.

In Australia, domestic students attending an ANZ institution finance their education themselves or by taking a loan through the national Higher Education Loan Program provided by the Australian government to support higher education.

In Australia, domestic students may finance their education themselves or by taking a loan through the national Higher Education Loan Program provided by the Australian government to support higher education.

In New Zealand, domestic students may utilize government loans to fund tuition and may be eligible for a period of “fees free” study funded by the government.

International students attending an ANZ institution are not eligible for funding from the Australian or New Zealand governments.

International students are not eligible for funding from the Australian or New Zealand governments.

A typical class is offered in weekly increments over a six- to twelve-week period, depending on the university and course type, and is followed by an exam.

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

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

To maintain eligibility, students must be enrolled in a

bachelor’s degree program.

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

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Therefore, we monitor outstanding tuition receivable balances through subsequent terms, increasing the reserve on such balances over time as the likelihood of returning to the institution diminishes and our historical experience indicates collection is less likely.

We periodically assess our methodologies for estimating credit losses in consideration of actual

We periodically assess our methodologies for estimating credit losses in consideration of actual experience.

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

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

In 2023, we performed a qualitative impairment assessment, consistent with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), of goodwill assigned to all reporting units, except for goodwill assigned to the Capella University and Strayer University reporting units, as well as for indefinite-lived intangible assets, except for the Capella University trade name, to evaluate the recoverability of the related amounts.

In 2024, we performed a qualitative impairment assessment, consistent with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), of goodwill assigned to all reporting units, except for goodwill assigned to the ANZ reporting unit, as well as for indefinite-lived intangible assets, except for the ANZ trade name, to evaluate the recoverability of the related amounts.

The qualitative factors considered included macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value.

Given the length of time since the last valuation, in 2023 we elected to bypass a qualitative annual impairment assessment for goodwill assigned to the Capella University and Strayer University reporting units and for the Capella University indefinite-lived intangible assets and proceeded directly to a quantitative impairment assessment, consistent with ASC 350.

To assess goodwill, we used an income-based approach to determine the fair value of the Capella University and Strayer University reporting units, which consisted of a discounted cash flow model that included projections of future cash flows for the two reporting units, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.

To assess the indefinite-lived intangible assets, we used an income-based approach to determinate the fair value of the Capella University trade name, which consisted of a discounted cash flow model, using the relief from royalty method, that included a projection of future revenues for Capella University, identifying a royalty rate, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.

Due to potential adverse financial impacts of proposed international student enrollment cap regulations in Australia, in 2024 we elected to bypass a qualitative annual impairment assessment for goodwill assigned to the ANZ reporting unit and for the ANZ indefinite-lived intangible assets and proceeded directly to a quantitative impairment assessment, consistent with ASC 350.

To assess goodwill, we used an income-based approach to determine the fair value of the ANZ reporting unit, which consisted of a discounted cash flow model that included projections of future cash flows for the reporting unit, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.

To assess the indefinite-lived intangible assets, we used an income-based approach to determinate the fair value of the ANZ trade name, which consisted of a discounted cash flow model, using the relief from royalty method, that included a projection of future revenues for ANZ, identifying a royalty rate, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.

Based on the qualitative and quantitative impairment assessments performed, we concluded that no goodwill or indefinite-lived intangible asset impairments had been incurred during the years ended December 31, 2023 or 2024.

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We review our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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

No impairment charges related to finite-lived intangible assets were recorded during the years ended December 31, 2022 or 2023.

As of December 31, 2023, all finite-lived intangible assets related to student relationships were fully amortized.

If such assets are not recoverable, a potential impairment

loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets.

No impairment charges related to finite-lived intangible assets were recorded during the year ended December 31, 2023.

All finite-lived intangible assets related to student relationships were fully amortized by the end of 2023.

Other estimates — We record estimates for income tax liabilities and estimate the useful lives of our property and equipment and intangible assets.

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In 2024, we generated $1,219.9 million in revenue compared to $1,132.9 million in 2023.

Our income from operations increased to $95.3 million in 2023 compared to $70.8 million in 2022, primarily due to higher revenue driven by student enrollment growth in the USHE segment and growth in Sophia Learning subscriptions in the Education Technology Services segment, and lower amortization expense of intangible assets, partially offset by higher restructuring costs, bad debt expense, and unfavorable foreign currency exchange impacts.

Our income from operations increased to $155.6 million in 2024 compared to $95.3 million in 2023, primarily due to higher revenue driven by enrollment growth in the USHE and Australia/New Zealand segments and growth in Sophia Learning subscriptions in the Education Technology Services segment, lower restructuring costs, and lower amortization expense of intangible assets, partially offset by higher operating expenses.

Our net income in 2024 was $112.7 million compared to $69.8 million in 2023, and diluted earnings per share was $4.67 in 2024 compared to $2.91 in 2023.

Year Ended December 31, 2024 Compared To Year Ended December 31, 2023

Consolidated revenues increased to $1,219.9 million in 2024 compared to $1,132.9 million in 2023, primarily due to enrollment growth in the USHE and Australia/New Zealand segments and growth in Sophia Learning subscriptions, partially offset by lower revenue per student in the USHE segment and unfavorable foreign currency exchange impacts.

In the USHE segment for the year ended December 31, 2024, average total student enrollment increased 6.4% to 87,550 from 82,267 in 2023.

USHE segment revenues increased 4.8% to $857.9 million in 2024 compared to $819.0 million in 2023, primarily due to the increase in student enrollment, partially offset by lower revenue per student.

In the Australia/New Zealand segment for the year ended December 31, 2024, average total student enrollment increased 4.8% to 19,585 from 18,692 in 2023.

Australia/New Zealand segment revenues increased 10.1% to $257.1 million in 2024 compared to $233.5 million in 2023, primarily due to the increase in enrollment and higher revenue per student as a result of students taking higher course loads, partially offset by unfavorable foreign currency exchange impacts.

Education Technology Services segment revenues increased 30.4% to $104.9 million in 2024 compared to $80.5 million in 2023, primarily as a result of growth in Sophia Learning subscriptions, higher employer affiliated enrollment, and an increase in Workforce Edge revenue from new employer partnerships.

Instructional and support costs.

Consolidated instructional and support costs increased to $650.5 million in 2024 compared to $623.9 million in 2023, principally due to increases in personnel-related costs, bad debt expense, technology-related expenses, and stock-based compensation expense, partially offset by lower student material costs and favorable foreign currency exchange impacts.

Consolidated instructional and support costs as a percentage of revenues decreased to 53.3% in 2024 from 55.1% in 2023.

General and administration expenses.

Consolidated general and administration expenses increased to $412.2 million in 2024 compared to $384.4 million in 2023, principally due to higher personnel-related costs, increased investments in branding initiatives and partnerships with brand ambassadors, and higher stock-based compensation expense, partially offset by favorable foreign currency exchange impacts.

Consolidated general and administration expenses as a percentage of revenues decreased to 33.8% in 2024 from 33.9% in 2023.

Amortization of intangible assets.

There was no amortization of intangible assets in 2024 compared to $11.5 million in 2023, due to the finite-lived intangible assets acquired through the acquisition of ANZ becoming fully amortized in the fourth quarter of 2023.

Merger and integration costs.

There were no merger and integration costs in 2024 compared to $1.5 million in 2023.

These costs primarily related to integration expenses associated with the acquisition of ANZ.

Restructuring costs.

Restructuring costs decreased to $1.6 million in 2024 from $16.3 million in 2023, primarily due to a $6.9 million decrease in severance and other personnel-related expenses from employee terminations, a $6.1 million increase in net gains related to the early termination of operating leases, and a $3.8 million decrease in asset impairment charges, partially offset by a $2.1 million gain from the sale of property and equipment of an owned campus in 2023.

Income from operations .

Consolidated income from operations increased to $155.6 million in 2024 compared to $95.3 million in 2023, primarily due to higher revenue driven by enrollment growth in the USHE and Australia/New Zealand

segments and growth in Sophia Learning subscriptions in the Education Technology Services segment, lower restructuring costs, and lower amortization expense of intangible assets, partially offset by higher operating expenses.

USHE segment income from operations increased 29.4% to $77.2 million in 2024 compared to $59.6 million in 2023, primarily driven by higher revenue due to an increase in student enrollment, decreased investments in branding initiatives, and lower student material costs, partially offset by higher personnel-related costs, bad debt expense, and technology-related expenses.

Australia/New Zealand segment income from operations increased 4.3% to $37.4 million in 2024 compared to $35.9 million in 2023, primarily driven by higher revenue due to an increase in enrollment and higher revenue per student as a result of students taking higher course loads, partially offset by increased investments in branding initiatives, higher personnel-related costs, and higher stock-based compensation expense.

Education Technology Services segment income from operations increased 46.9% to $42.7 million in 2024 compared to $29.1 million in 2023, primarily due to higher revenue as a result of growth in Sophia Learning subscriptions, an increase in employer affiliated enrollment, and an increase in Workforce Edge revenue from new employer partnerships, partially offset by higher personnel-related costs.

Other income.

Other income increased to $5.8 million in 2024 compared to $5.4 million in 2023, primarily due to a $3.4 million decrease in interest expense and a $2.1 million increase in interest income, partially offset by a $5.1 million decrease in investment income from our limited partnerships.

We incurred $3.8 million of interest expense in 2024 compared to $7.2 million in 2023.

Provision for income taxes.

Income tax expense was $48.7 million in 2024 compared to $30.9 million in 2023.

Our effective tax rate for 2024 was 30.2%, compared to 30.7% in 2023.

Income tax expense for the years ended December 31, 2024 and 2023 includes shortfall tax impacts related to share-based payment arrangements of approximately $1.2 million and $1.4 million, respectively.

Our effective tax rate, excluding these and other discrete tax adjustments, was 29.0% for 2024.

Net income increased to $112.7 million in 2024 compared to $69.8 million in 2023 due to the factors discussed above.

Year Ended December 31, 2023 Compared To Year Ended December 31, 2022

Consolidated revenues increased to $1,132.9 million in 2023 compared to $1,065.5 million in 2022, primarily due to an increase in USHE student enrollment, growth in Sophia Learning subscriptions, and higher ANZ revenue per student, partially offset by unfavorable foreign currency exchange impacts.

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Our effective tax rate for 2023 was 30.7%, compared to 32.9% in 2022.

Income tax expense for the years ended December 31, 2023 and 2022 include shortfall tax impacts related to share-based payment arrangements of approximately $1.4 million and $1.5 million, respectively.

Income tax expense for the years ended December 31, 2023 and 2022 includes shortfall tax impacts related to share-based payment arrangements of approximately $1.4 million and $1.5 million, respectively.

Our effective tax rate, excluding these and other discrete tax adjustments, was 30.0% for 2023.

Net income increased to $69.8 million in 2023 compared to $46.7 million in 2022 due to the factors discussed above.

Year Ended December 31, 2022 Compared To Year Ended December 31, 2021

Consolidated revenues decreased to $1,065.5 million in 2022 compared to $1,131.7 million in 2021, primarily due to declines in enrollment and unfavorable foreign currency exchange impacts.

In the USHE segment for the year ended December 31, 2022, average total student enrollment decreased 6.5% to 77,027 from 82,425 in 2021.

USHE segment revenues decreased 7.0% to $771.0 million in 2022 compared to $829.3 million in 2021, primarily as a result of declines in enrollment.

In the Australia/New Zealand segment for the year ended December 31, 2022, average total student enrollment increased to 19,388 from 19,350 in 2021.

Australia/New Zealand segment revenues decreased 7.7% to $230.7 million in 2022 compared to $250.1 million in 2021, primarily due to unfavorable foreign currency exchange impacts and lower revenue per student.

In the Education Technology Services segment, revenues for the year ended December 31, 2022 increased 21.9% to $63.8 million compared to $52.3 million in 2021, primarily as a result of growth in Sophia Learning and higher employer affiliated enrollment.

Instructional and support costs.

Consolidated instructional and support costs decreased to $597.3 million in 2022 compared to $608.3 million in 2021, principally due to lower facility costs and bad debt expense.

Consolidated instructional and support costs as a percentage of revenues increased to 56.1% in 2022 from 53.7% in 2021.

General and administration expenses.

Consolidated general and administration expenses increased to $379.8 million in 2022 compared to $361.3 million in 2021, principally due to increased investments in branding initiatives and partnerships with brand ambassadors.

Consolidated general and administration expenses as a percentage of revenues increased to 35.6% in 2022 from 31.9% in 2021.

Amortization of intangible assets .

Amortization of intangible assets decreased to $14.4 million in 2022 compared to $51.5 million in 2021, due to the finite-lived intangible assets acquired through the merger with Capella Education Company being fully amortized as of the third quarter of 2021.

Merger and integration costs.

Merger and integration costs decreased to $1.1 million in 2022 compared to $11.2 million in 2021, as a result of lower integration expenses associated with the acquisition of ANZ.

Restructuring costs.

Restructuring costs decreased to $2.1 million in 2022 from $25.5 million in 2021, principally due to $3.7 million of right-of-use lease asset and fixed asset impairment charges associated with vacating leased space in 2022, compared to $21.6 million in 2021, as well as higher severance and other personnel-related expenses from employee terminations in 2021.

Income from operations.

Consolidated income from operations decreased to $70.8 million in 2022 compared to $73.9 million in 2021, primarily due to lower earnings in the USHE segment, partially offset by lower amortization expense of intangible assets, restructuring costs, and merger and integration costs.

USHE segment income from operations decreased 63.2% to $38.6 million in 2022 compared to $104.9 million in 2021, primarily due to declines in enrollment, lower revenue per student, and increased investments in marketing initiatives.

Australia/New Zealand segment income from operations decreased 15.0% to $30.5 million in 2022 compared to $35.9 million in 2021, primarily due to lower revenues and unfavorable foreign currency exchange impacts.

Education Technology Services segment income from operations decreased 9.6% to $19.3 million in 2022 compared to $21.3 million in 2021 as a result of increased investment in outreach to corporate partners, partially offset by growth in Sophia Learning and an increase in employer affiliated enrollment.

Other income (expense).

Other income (expense) decreased to $1.2 million of expense in 2022 compared to $2.7 million of income in 2021, primarily due to a decrease in investment income from our limited partnership investments and an increase in interest expense, partially offset by an increase in interest income due to higher interest rates.

We incurred $5.7 million of interest expense in 2022 compared to $3.6 million in 2021.

Provision for income taxes.

Income tax expense was $22.9 million in 2022 compared to $21.5 million in 2021.

Our effective tax rate for 2022 was 32.9% compared to 28.1% in 2021.

The increase in the effective tax rate in 2022 was primarily due to a $1.5 million tax shortfall recognized through share-based payment arrangements.

Our effective tax rate, excluding these and other discrete tax adjustments, was 30.4% for 2022.

Net income decreased to $46.7 million in 2022 compared to $55.1 million in 2021 due to the factors discussed above.

Non-GAAP Financial Measures

In the accompanying analysis of financial information for the three years ended December 31, 2023, we use certain financial measures including Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share that are not required by or prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

In the accompanying analysis of financial information for the three years ended December 31, 2024, we use certain financial measures including Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share that are not required by or prepared in accordance with GAAP.

These measures, which are considered “non-GAAP financial measures” under SEC rules, are defined by us to exclude the following:

• purchase accounting adjustments to record acquired contract liabilities at fair value as a result of our acquisition of Torrens University and associated assets in Australia and New Zealand and to record amortization and depreciation expense related to intangible assets and software assets acquired through our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand;

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

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

• amortization and depreciation expense related to intangible assets and software assets acquired through our acquisition of Torrens University and associated assets in Australia and New Zealand;

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

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

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

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Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with other similarly titled measures of other companies.

Non-GAAP financial measures may be considered in addition to, but not as a substitute for or superior to, GAAP results.

Non-GAAP financial measures may be considered in addition to, but not as a

substitute for or superior to, GAAP results.

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

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Non-GAAP Adjustments

As Reported (GAAP) Purchase accounting adjustments (1)

As Reported (GAAP) Amortization of intangible assets (1)

Merger and integration costs (2)

Restructuring costs (3)

Income from other investments (4)

Loss from other investments (4)

Tax adjustments (5)

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Non-GAAP Adjustments

As Reported (GAAP) Purchase accounting adjustments (1)

As Reported (GAAP) Amortization of intangible assets (1)

Merger and integration costs (2)

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Non-GAAP Adjustments

As Reported (GAAP) Purchase accounting adjustments (1)

As Reported (GAAP) Amortization of intangible assets (1)

Merger and integration costs (2)

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__________________________________________________________________________________________

(1) Reflects a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

(2) Reflects transaction and integration expenses associated with the Company’s merger with Capella Education Company, including premerger litigation settlement, net of insurance recovery, and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

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

(1) Reflects amortization and depreciation expense of intangible assets and software assets acquired through the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

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

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

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

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

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

We also hold marketable securities, which primarily include corporate debt securities, U.S.

treasury securities with maturities greater than three months, and term deposits.

We earned interest income of $12.5 million, $10.4 million, and $3.8 million in each of the years ended December 31, 2024, 2023, and 2022, respectively.

We are party to a 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 $250 million.

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

The Amended Credit Facility provides us with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase

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

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

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We were in compliance with all applicable covenants related to the Amended Credit Facility as of December 31, 2024.

As of December 31, 2023 and 2022, we had $61.4 million and $101.4 million, respectively, outstanding under our Revolving Credit Facility.

During each of the years ended December 31, 2023 and 2022, we repaid $40.0 million of the outstanding balance under our Revolving Credit Facility.

During the third quarter of 2024, we repaid the remaining $61.3 million outstanding balance under the Revolving Credit Facility.

We had no borrowings outstanding under the Revolving Credit Facility as of December 31, 2024 and $61.4 million outstanding under our Revolving Credit Facility as of December 31, 2023.

During each of the years ended December 31, 2024 and 2023, we paid $3.2 million and $6.8 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities decreased to $117.1 million in 2023 compared to $126.1 million in 2022.

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

Our net cash provided by operating activities increased to $169.3 million in 2024 compared to $117.1 million in 2023.

The increase in net cash from operating activities was primarily driven by higher earnings and favorable changes in working capital.

Our net cash used in investing activities increased to $64.4 million in 2024 compared to $48.5 million in 2023.

The increase in net cash used in investing activities was primarily driven by $26.9 million in purchases of marketable securities and lower cash proceeds related to the sale of property and equipment, partially offset by higher cash proceeds from marketable securities and other investments and lower capital expenditures in 2023.

Capital expenditures decreased to $36.9 million in 2023 compared to $43.2 million in 2022, primarily due to a shift towards cloud computing investments and timing of capital projects.

Our net cash used in financing activities decreased to $113.6 million in 2023 compared to $142.4 million in 2022.

The decrease in net cash used in financing activities was primarily driven by a $30.1 million decrease in repurchases of common stock, partially offset by an increase in net payments for employee stock awards.

The increase in net cash used in investing activities was primarily driven by a $27.2 million increase in purchases of marketable securities, a $5.9 million decrease in cash proceeds related to the sale of property and equipment, and higher capital expenditures, partially offset by a $21.2 million increase in cash proceeds from marketable securities.

Capital expenditures increased to $40.6 million in 2024 compared to $36.9 million in 2023, primarily due to the timing of capital projects.

Our net cash used in financing activities increased to $136.8 million in 2024 compared to $113.6 million in 2023.

The increase in net cash used in financing activities was primarily driven by a $61.3 million long-term debt payment in 2024 compared to a $40.0 million long-term debt payment in 2023, a $1.7 million payment of debt financing costs in 2024, and a $1.5 million increase in share repurchases, partially offset by a $1.5 million decrease in net payments for employee stock awards.

The Board of Directors declared an annual cash dividend of $2.40 per common share, payable in equal parts quarterly.

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As of December 31, 2024, we had $228.5 million remaining in share repurchase authorization to use through December 31, 2025.

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

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

We believe that the combination of our existing cash, cash equivalents, and marketable securities, cash generated from operating activities, and if necessary, cash available under our Amended Credit Facility will be sufficient to meet our cash requirements for the next 12 months and beyond.

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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-K

Item 7. Management’s Discussion and Analysis