What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-27 compared with 2024-02-29 · 333 added, 223 removed, 1139 unchanged (33% of the section changed)

41 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessment – Strayer University Reporting Unit

As described in Notes 1 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1,252 million as of December 31, 2023, and the goodwill associated with the U.S.

Higher Education segment, which includes the Strayer University reporting unit, is $632.1 million.

Goodwill Impairment Assessment – Australia/New Zealand (ANZ) Reporting Unit

As described in Note 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1,206.9 million as of December 31, 2024, of which $474.8 million relates to the ANZ reporting unit.

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.

Given the length of time since the last valuation, in 2023 the Company elected to bypass a qualitative annual impairment assessment for goodwill assigned to the Strayer University reporting unit and proceeded directly to a quantitative impairment assessment using the first day of the fourth quarter of 2023 as the assessment date.

Management used an income-based approach which consisted of a discounted cash flow model to determine the fair value of the Strayer University reporting unit.

The assumptions and estimates used in determining the estimated fair value of the Strayer University reporting unit include, but are not limited to, the amounts and timing of expected future cash flows, student enrollment growth, operating margins, the discount rate, and the terminal growth rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Strayer University reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Strayer University reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to student enrollment growth, operating margins, and the discount rate;

In 2024, the Company elected to bypass a qualitative annual impairment assessment for goodwill assigned to the ANZ reporting unit and proceeded directly to a quantitative impairment assessment using the first day of the fourth quarter of 2024 as the assessment date.

Management used an income-based approach which consisted of a discounted cash flow model to determine the fair value of the ANZ reporting unit.

The assumptions and estimates used in determining the estimated fair value of the ANZ reporting unit include, but are not limited to, the amounts and timing of expected future cash flows, revenue growth, operating margins, the discount rate, and the terminal growth rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the ANZ reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the ANZ reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth, operating margins, the discount rate, and the terminal growth rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Strayer University reporting unit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Strayer University reporting unit;

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the ANZ reporting unit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the ANZ reporting unit;

(ii) evaluating the appropriateness of the discounted cash flow model used by management;

(iii) testing the completeness and accuracy of the underlying data used in the discounted cash flow model;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to student enrollment growth, operating margins, and the discount rate.

Evaluating management’s assumptions related to the student enrollment growth and operating margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Strayer University reporting unit;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth, operating margins, the discount rate, and the terminal growth rate.

Evaluating management’s assumptions related to revenue growth and operating margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the ANZ reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow model and (ii) the reasonableness of the discount rate assumption.

Strayer University Graduation Fund Liability – Undergraduate Degree Programs

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the

determination of the Strayer University Graduation Fund liability for undergraduate degree programs.

These procedures also included, among others (i) evaluating the appropriateness of the methodology used by management to determine the Strayer University Graduation Fund liability for undergraduate degree programs;

These procedures included testing the effectiveness of controls relating to the determination of the Strayer University graduation fund liability for undergraduate degree programs.

These procedures also included, among others (i) evaluating the appropriateness of the methodology used by management to determine the Strayer

University graduation fund liability for undergraduate degree programs;

(ii) recalculating the Strayer University graduation fund liability for undergraduate degree programs;

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Foreign currency translation adjustment — — — — 533 533

Unrealized losses on marketable securities, net of tax — — — — ( 846 ) ( 846 )

Unrealized gains on marketable securities, net of tax — — — — 288 288

Net income — — — 69,791 — 69,791

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

Loss on sale of marketable securities 781 — —

Gain on sale of property and equipment ( 2,886 ) ( 2,136 ) —

Gain on early termination of operating leases, net ( 1,187 ) ( 141 ) ( 6,166 )

Amortization of deferred financing costs 552 557 674

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Net payments for stock awards ( 3,004 ) ( 4,828 ) ( 3,318 )

Payments of deferred financing costs — — ( 1,698 )

Repurchase of common stock ( 40,116 ) ( 9,999 ) ( 11,510 )

1 unchanged sentence

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 4,090 ) ( 496 ) ( 3,468 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 77,192 ( 51,758 ) ( 45,529 )

Net decrease in cash, cash equivalents, and restricted cash ( 51,758 ) ( 45,529 ) ( 35,269 )

Cash, cash equivalents, and restricted cash — beginning of period 279,212 227,454 181,925

Cash, cash equivalents, and restricted cash — end of period $ 227,454 $ 181,925 $ 146,656

Noncash transactions:

Non-cash transactions:

Non-cash additions to property and equipment $ 1,718 $ 3,066 $ 2,488

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Higher Education (“USHE”), which is primarily comprised of Capella University and Strayer University and is focused on providing flexible and affordable certificate and degree programs to working adults;

(2) Education Technology Services, which is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs;

(2) Education Technology Services, 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;

and (3) Australia/New Zealand, which through Torrens University and associated assets, provides certificate and degree programs in Australia and New Zealand.

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General and administration expense also includes the facilities occupancy and other related costs attributable to such functions.

Amortization of intangible assets consists of amortization and depreciation expense related to intangible assets and software assets acquired through the Company’s merger with Capella Education Company (“CEC”) and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand (“ANZ”).

Merger and integration costs include integration expenses associated with the Company’s merger with CEC, and transaction and integration expenses associated with the Company’s acquisition of ANZ.

Restructuring costs include severance and other personnel-related expenses from voluntary and involuntary employee terminations, right-of-use lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities.

Amortization of intangible assets consists of amortization and depreciation expense related to intangible assets and software assets acquired through the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand (“ANZ”).

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

Restructuring costs include severance and other personnel-related expenses from voluntary and involuntary employee terminations, asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities.

See Note 4 for additional information.

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

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

date (or rate at period end, if unsettled) in the consolidated statements of income.

Cash and Cash Equivalents

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higher education institution during the academic term.

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

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

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All of the Company’s marketable securities are designated as either held-to-maturity or available-for-sale.

The Company’s held-to-maturity marketable securities consist of term deposits, U.S.

treasury securities, and corporate debt securities, which are carried at amortized cost.

The Company’s available-for-sale marketable securities consist of tax-exempt municipal securities and corporate debt securities, which are carried at fair value as determined by quoted market prices or other inputs either directly or indirectly observable in the marketplace for identical or similar assets, with unrealized gains and losses, net of tax, recognized as a component of accumulated other comprehensive income (loss) within stockholders’ equity.

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The amount of an impairment related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings.

amount of an impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of accumulated other comprehensive income (loss) within stockholders’ equity.

The amount of an impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of accumulated other comprehensive income (loss) within stockholders’ equity.

The cost of securities sold is based on the specific identification method.

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In the event that current collection trends differ from historical trends, an adjustment is made to the allowance for credit losses and bad debt expense.

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

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

December 31, 2023 December 31, 2024

2 unchanged sentences

Tuition receivable, net $ 76,102 $ 76,127

Approximately $ 2.7 million and $ 2.5 million of tuition receivable, net, are included in other assets as of December 31, 2022 and 2023, respectively, because these amounts are expected to be collected after 12 months.

The following table illustrates changes in the Company’s allowance for credit losses for each of the three years ended December 31, 2023 (in thousands):

An additional $ 2.5 million and $ 7.0 million of tuition receivable, net, are included in other assets as of December 31, 2023 and 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 each of the three years ended December 31, 2024 (in thousands):

2022 2023 2024

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Property and equipment are stated at cost, less accumulated depreciation and amortization.

In accordance with ASC 360 Property, Plant, and Equipment , the carrying values of the Company’s assets are re-evaluated when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In accordance with Accounting Standards Codification (“ASC”) 360 Property, Plant, and Equipment , the carrying values of the Company’s assets are re-evaluated when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If it is determined that an impairment loss has occurred based on expected undiscounted future cash flows, then a loss is recognized using a fair value-based model.

1 unchanged sentence

Depreciation and amortization of property and equipment is calculated using the straight-line method over the estimated useful lives ranging from three years to 40 years.

Depreciation and amortization expense was $ 59.1 million, $ 52.0 million and $ 48.4 million for the years ended December 31, 2021, 2022, and 2023, respectively.

Included in the 2021, 2022, and 2023 depreciation and amortization expense amount is $ 7.2 million, $ 3.2 million and $ 2.6 million of depreciation expense, respectively, related to computer software acquired in the CEC merger and content acquired in the ANZ acquisition, which is included in Amortization of intangible assets on the consolidated statements of income.

Depreciation and amortization expense of property and equipment was $ 52.0 million, $ 48.4 million and $ 44.4 million for the years ended December 31, 2022, 2023, and 2024, respectively.

Included in the 2022 and 2023 depreciation and amortization expense amount is $ 3.2 million and $ 2.6 million of depreciation expense,

respectively, related to content acquired in the ANZ acquisition, which is included in Amortization of intangible assets on the consolidated statements of income.

Repairs and maintenance costs are expensed as incurred.

Over the last several years, the Company has been evaluating its owned and leased real estate portfolio to identify underutilized facilities to either downsize or exit.

The Company sold two of its owned U.S.

Higher Education campuses in 2021 and sold one owned U.S.

The Company sold one owned U.S.

Higher Education campus in both 2022 and 2023.

The Company sold the long-lived assets, consisting of land, buildings, and building improvements, related to these owned campuses and recognized a $ 2.7 million, $ 2.9 million and $ 2.1 million gain on sale during the years ended December 31, 2021, 2022, and 2023, respectively, which is included in Restructuring costs on the consolidated statements of income.

The Company sold the long-lived assets, consisting of land, buildings, and building improvements, related to these owned campuses and recognized a $ 2.9 million and $ 2.1 million gain on sale during the years ended December 31, 2022 and 2023, respectively, which is included in Restructuring costs on the consolidated statements of income.

Construction in progress includes costs of computer software developed for internal use, which is accounted for in accordance with ASC 350-40, Internal-Use Software .

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The Company’s assets and liabilities that are subject to fair value measurement are categorized in one of the three levels above.

Fair values are based on the inputs available at the measurement dates, and may rely on certain assumptions that may affect the valuation of fair value for certain assets or liabilities.

Fair values are based on the inputs available at the measurement dates, and may rely on certain assumptions that may

affect the valuation of fair value for certain assets or liabilities.

Goodwill and Intangible Assets

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The Company also has authorized 8,000,000 shares of preferred stock, none of which is issued or outstanding.

Before any preferred stock may be issued in the future, the Board of Directors would need to establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and the terms or conditions of the redemption of the preferred stock.

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.

The Board of Directors declared a quarterly cash dividend of $ 0.60 per common share for each quarter of 2024.

The Company paid these quarterly cash dividends in each of March, June, September and December of 2023.

The Company paid these quarterly cash dividends in March, June, September and December of 2024.

Advertising Costs

9 unchanged sentences

The forfeiture rate used is based on historical experience.

The Company also assesses

the likelihood that performance criteria associated with performance-based awards will be met.

The Company also assesses the likelihood that performance criteria associated with performance-based awards will be met.

If it is determined that it is more likely than not that performance criteria will not be achieved, the Company revises its estimate of the number of shares it believes will ultimately vest.

14 unchanged sentences

Anti-dilutive shares excluded from the diluted earnings per share calculation 114 174 —

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, 2021, the balance of accumulated other comprehensive income was $ 9.2 million, net of tax of $ 0.2 million, and as of December 31, 2022 and 2023, the balance of accumulated comprehensive loss was $ 35.1 million, net of tax of $ 0.1 million, and $ 34.2 million, net of tax of $ 0.1 million, respectively.

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, 2022, 2023, and 2024, the balance of accumulated other comprehensive loss was $ 35.1 million, net of tax of $ 0.1 million, $ 34.2 million, net of tax of $ 0.1 million, and $ 88.6 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 years ended December 31, 2022, 2023, and 2024.

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The tax years since 2021 remain open for federal tax examination, the tax years since 2020 remain open to examination by certain states, and the tax years since 2019 remain open to examination by foreign taxing jurisdictions in which the Company is subject to taxation.

In December 2021, the Organization for Economic Cooperation and Development (“OECD”) introduced Pillar Two Model Rules to establish a global minimum tax rate of 15% on a per-country basis.

Countries where the Company operates, such as

Australia and New Zealand, have enacted domestic legislation to implement these global corporate minimum tax rules for fiscal years beginning after January 1, 2024, and January 1, 2025, respectively.

The Company has evaluated the impact of the OECD’s Pillar Two framework on its financial statements and determined that Pillar Two did not have a material impact on its 2024 financial statements.

We remain compliant with all relevant regulations and will continue to monitor any future developments that may affect our financial reporting.

Other Investments

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The Company accounts for the investments in limited partnerships under the equity method.

The Company’s pro-rata share in the net income (loss) of the limited partnerships is included in Other income (loss) on the consolidated statements of income.

The Company’s pro-rata share in the net income (loss) of the limited partnerships is included in Other income on the consolidated statements of income.

The Company also holds investments accounted for at cost less impairment as these investments do not have readily determinable fair value.

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Actual results could differ from those estimates.

Recently Issued Accounting Standards Not Yet Adopted

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 , Segment Reporting (Topic 280):

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Additionally, ASU 2023-07 requires all segment disclosures to be provided on an annual and interim basis.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted and the amendments must be applied retrospectively.

We are currently evaluating the impact that the standard will have on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires disclosure of specific categories in the effective tax rate reconciliation.

The Company adopted ASU 2023-07 for its annual reporting period ended on December 31, 2024 and applied the amendments retrospectively.

See Note 20 for the required segment disclosures.

Recently Issued Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires disclosure of specific categories in the effective tax rate reconciliation.

Further, the standard requires certain disclosures of state versus federal income tax expense and taxes paid.

1 unchanged sentence

Early adoption is permitted and the amendments should be applied on a prospective basis although retrospective application is permitted.

We are currently evaluating the impact that the standard will have on our financial statement disclosures.

The Company is currently evaluating the impact that ASU 2023-09 will have on its consolidated financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”).

ASU 2024-03 requires the disclosure of amounts related to purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion within each income statement expense line item that contains any of these expenses.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027.

Early adoption is permitted and the amendments can be applied prospectively or retrospectively.

The Company is currently evaluating the impact that ASU 2024-03 will have on its consolidated financial statement disclosures.

Other ASUs recently issued by the FASB but not yet effective are not expected to have a material effect on the Company’s consolidated financial statements.

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Tuition revenue is deferred and recognized ratably over the period of instruction, which varies depending on the course format and chosen program of study.

Capella University’s GuidedPath classes and Strayer University’s educational programs typically are offered on a quarterly basis, and such periods coincide with the Company’s quarterly financial reporting periods, while Capella University’s FlexPath courses are delivered over a twelve-week subscription period.

Capella University’s GuidedPath classes and

Strayer University’s educational programs typically are offered on a quarterly basis, and such periods coincide with the Company’s quarterly financial reporting periods, while Capella University’s FlexPath courses are delivered over a twelve-week subscription period.

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.

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

Each quarter, the Company assesses its assumptions underlying

these estimates, and to date, any adjustments to the estimates have not been material.

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

The amount estimated to be redeemed in the next 12 months is $ 15.9 million and is included as a current contract liability in the consolidated balance sheets.

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Restructuring and Related Charges

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

During the year ended December 31, 2023, the Company incurred $ 12.0 million of severance and other employee separation charges related to the elimination of certain positions.

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

During the years ended December 31, 2023 and 2024, the Company incurred $ 12.0 million and $ 4.9 million, respectively, of severance and other employee separation charges related to the elimination of certain positions.

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

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Severance Restructuring Liability

Balance at December 31, 2022 $ —

Balance as of December 31, 2022 $ —

Restructuring and other charges 12,015

Payments ( 11,220 )

Balance at December 31, 2023 (1)

Balance as of December 31, 2023 (1)

Restructuring and other charges 4,902

Payments ( 5,163 )

Balance as of December 31, 2024 (1)

_________________________________________________________

(1) Restructuring liabilities are included in accounts payable and accrued expenses.

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

During the years ended December 31, 2021, 2022, and 2023, the Company recorded right-of-use lease asset charges of approximately $ 18.9 million, $ 1.2 million, and $ 5.1 million, respectively, related to facilities consolidated during the period.

The Company recorded net benefits related to the early termination and related extinguishment of lease liabilities of approximately $ 0.2 million, $ 1.2 million and $ 0.1 million during the years ended December 31, 2021, 2022, and 2023, respectively.

During the years ended December 31, 2021, 2022, and 2023, the Company recorded gains from the sale of property and equipment of owned campuses that were previously closed of approximately $ 2.7 million, $ 2.9 million and $ 2.1 million, respectively.

(1) Restructuring liabilities are included in accounts payable and accrued expenses in the consolidated balance sheets.

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.

During the years ended December 31, 2022, 2023, and 2024, the Company recorded right-of-use lease asset charges of approximately $ 1.2 million, $ 5.1 million, and $ 0.7 million, respectively, related to facilities that were consolidated during the period.

The Company also recorded fixed asset impairment charges of approximately $ 2.5 million, $ 0.4 million and $ 0.2 million during the years ended December 31, 2022, 2023, and 2024, respectively.

The Company recorded net benefits related to the early termination and related extinguishment of lease liabilities of approximately $ 1.2 million, $ 0.1 million and $ 6.2 million during the years ended December 31, 2022, 2023, and 2024, respectively.

During the years ended December 31, 2022 and 2023 the Company recorded gains from the sale of property and equipment of owned campuses that were previously closed of approximately $ 2.9 million and $ 2.1 million, respectively.

These right-of-use lease asset and fixed asset impairment charges, net benefits from early lease terminations, and gains on the sale of property and equipment are included in Restructuring costs on the consolidated statements of income.

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

The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities related to restructuring plans for the years ended December 31, 2021 and 2022 (in thousands):

Integration Plan (1)

Restructuring Plan Total

Balance at December 31, 2020 $ 1,835 $ 1,287 $ 3,122

Restructuring and other charges — 4,618 4,618

Payments ( 1,835 ) ( 4,293 ) ( 6,128 )

The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities related to the 2020 Restructuring Plan for the year ended December 31, 2022 (in thousands):

Restructuring Plan

Balance at December 31, 2021 $ 1,612

2 unchanged sentences

Balance at December 31, 2022 —

___________________________________________________________

(1) Restructuring plan implemented following the Company’s merger with CEC.

The final severance payments under the CEC integration plan and the 2020 restructuring plan were made in the third quarter of 2021 and 2022, respectively.

The final severance payments under the 2020 Restructuring Plan were made in the third quarter of 2022.

Marketable Securities

The following is a summary of available-for-sale and held-to-maturity securities as of December 31, 2023 (in thousands):

The following is a summary of available-for-sale securities, which are carried at fair value, as of December 31, 2023 and 2024 (in thousands):

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

Available-for-sale securities:

Balance as of December 31, 2023

Tax-exempt municipal securities $ 10,055 $ 2 $ ( 144 ) $ 9,913

Corporate debt securities 3,202 — ( 79 ) 3,123

Total available-for-sale securities $ 13,257 $ 2 $ ( 223 ) $ 13,036

Held-to-maturity securities:

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

The following is a summary of available-for-sale securities as of December 31, 2022 (in thousands):

Total $ 13,257 $ 2 $ ( 223 ) $ 13,036

Balance as of December 31, 2024

Corporate debt securities $ 500 $ — $ ( 1 ) $ 499

Total $ 500 $ — $ ( 1 ) $ 499

The following is a summary of held-to-maturity securities, which are carried at amortized cost, as of December 31, 2023 and 2024 (in thousands):

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

Available-for-sale securities:

Tax-exempt municipal securities $ 15,852 $ 2 $ ( 507 ) $ 15,347

Balance as of December 31, 2023

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

Total $ 27,175 $ — $ — $ 27,175

Balance as of December 31, 2024

Term deposits $ 21,653 $ — $ — $ 21,653

treasury securities 19,778 18 — 19,796

Corporate debt securities 20,000 — ( 26 ) 19,974

Total $ 61,431 $ 18 $ ( 26 ) $ 61,423

The Company had no held-to-maturity securities as of December 31, 2022.

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

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

As of December 31, 2024, the fair value of the Company’s securities which were in an unrealized loss position for a period longer than twelve months was $ 0.5 million.

6 unchanged sentences

Due within one year $ 12,553 $ 27,175 $ 499 $ 46,450

Due after one year through three years 13,123 — 483 —

Due after one year through five years 483 — — 14,981

Total $ 13,036 $ 27,175 $ 499 $ 61,431

The following table summarizes the proceeds from the maturities and sales of available-for-sale securities for the years ended December 31, 2021, 2022, and 2023 (in thousands):

The following table summarizes the purchases of and proceeds from marketable securities for the years ended December 31, 2022, 2023, and 2024 (in thousands):

December 31, 2022 December 31, 2023 December 31, 2024

Maturities of marketable securities $ 7,495 $ 6,420 $ 9,800

Sales of marketable securities 1,805 — —

Total $ 9,300 $ 6,420 $ 9,800

The Company recorded approximately $ 0.8 million in gross realized losses in net income during the year ended December 31, 2021 related to the sale of marketable securities.

The Company did no t record any gross realized gains or losses in net income during the years ended December 31, 2022 and 2023.

Purchases of marketable securities

Purchases of available-for-sale securities $ — $ — $ —

Purchases of held-to-maturity securities — 26,905 54,117

Total purchases of marketable securities $ — $ 26,905 $ 54,117

Proceeds from marketable securities

Maturities of available-for-sale securities $ 6,420 $ 9,800 $ 12,805

Maturities of held-to-maturity securities — — 18,220

Total proceeds from marketable securities $ 6,420 $ 9,800 $ 31,025

The Company did not sell any available-for-sale or held-to-maturity securities during the years ended December 31, 2022, 2023, and 2024.

The Company did not record any gross realized gains or losses in net income during the years ended December 31, 2022, 2023, and 2024.

Property and Equipment

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(1) During the years ended December 31, 2022 , 2023, and 2024, operating lease cost includes $ 1.2 million, $ 5.1 million, and $ 0.7 million of right-of-use lease asset impairment charges, respectively, related to redundant leased space that was vacated during the year.

During the years ended December 31, 2022 , 2023 and 2024, operating lease cost includes $ 1.2 million, $ 0.1 million, and $ 6.2 million, respectively, of net benefits related to the early termination and related extinguishment of lease liabilities.

The following table provides a summary of the Company’s average lease term and discount rate as of December 31, 2023 and 2024:

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Available-for-sale securities :

Tax-exempt municipal securities 15,347 — 15,347 —

Corporate debt securities 499 — 499 —

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treasury bills with original maturities of three months or less, which are included in cash and cash equivalents in the accompanying consolidated balance sheets.

The Company records any net unrealized gains and losses for changes in fair value as a component of accumulated other comprehensive income (loss) in stockholders’ equity.

The Company’s cash and cash equivalents and held-to-maturity securities held at December 31, 2022 and 2023, approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

The Company’s cash and cash equivalents at December 31, 2023 and 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 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 held-to-maturity marketable securities, which consist of term deposits, U.S.

treasury securities, and corporate debt securities, are not included in the tables above as they are carried at amortized cost and not measured at fair value on a recurring basis.

The estimated fair value of the Company’s held-to-maturity marketable securities at December 31, 2023 and 2024 was $ 27.2 million and $ 61.4 million, respectively.

These securities are valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets and are classified in Level 2 of the fair value hierarchy.

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 years ended December 31, 2023 or 2024.

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

The deferred payments were classified within Level 3 as there was no liquid market for similarly priced instruments and were valued using discounted cash flow models that encompassed significant unobservable inputs.

The assumptions used to prepare the discounted cash flows included estimates for interest rates, enrollment growth, retention rates, and pricing strategies.

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

Changes in the fair value of the Company’s Level 3 liabilities during the year ended December 31, 2022 were as follows (in thousands):

December 31, 2022

Balance as of the beginning of period $ 658

Amounts paid ( 658 )

Balance at end of period $ —

Goodwill and Intangible Assets

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Currency translation adjustments — 611 — 611

Adjustments to prior acquisitions — 87 — 87

Balance as of December 31, 2023 632,075 519,813 100,000 1,251,888

2 unchanged sentences

Currency translation adjustments — ( 45,005 ) — ( 45,005 )

Adjustments to prior acquisitions — — — —

Balance as of December 31, 2024 $ 632,075 $ 474,808 $ 100,000 $ 1,206,883

In 2023, the Company performed a qualitative impairment assessment of goodwill assigned to all reporting units, except for the goodwill assigned to the Capella University and Strayer University reporting units, using the first day of the fourth quarter of 2023 as the assessment date.

In 2024, the Company performed a qualitative impairment assessment of goodwill assigned to all reporting units, except for the goodwill assigned to the ANZ reporting unit, using the first day of the fourth quarter of 2024 as the assessment date.

The Company evaluated the likelihood of impairment by considering qualitative factors relevant to the reporting units, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value.

Based on the results of its qualitative impairment analysis, the Company determined that no impairment indicators existed for these reporting units as of the assessment date.

Given the length of time since the last valuation, in 2023 the Company elected to bypass a qualitative annual impairment assessment for goodwill assigned to the Capella University and Strayer University reporting units and proceeded directly to a quantitative impairment assessment using the first day of the fourth quarter of 2023 as the assessment date.

The Company used an income-based approach to determine the fair value of the Capella University and Strayer University reporting units.

The income approach 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.

Due to potential adverse financial impacts of proposed international student enrollment cap regulations in Australia, in 2024 the Company elected to bypass a qualitative annual impairment assessment for goodwill assigned to the ANZ reporting unit and proceeded directly to a quantitative impairment assessment using the first day of the fourth quarter of 2024 as the assessment date.

The Company used an income-based approach to determine the fair value of the ANZ reporting unit.

The income approach 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.

The determination of fair value consists of using unobservable inputs under the fair value measurement standards.

The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the Capella University and Strayer University reporting units include, but are not limited to, the amounts and timing of expected future cash flows, student enrollment growth, operating margins, the discount rate, and the terminal growth rate.

The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ reporting unit include, but are not limited to, the amounts and timing of expected future cash flows, revenue growth, operating margins, the discount rate, and the terminal growth rate.

The assumptions used in determining the expected future cash flows consider various factors such as historical operating trends, particularly in student enrollment and pricing, anticipated economic and regulatory conditions, reasonable expectations for planned business expansion opportunities, and long-term operating strategies and initiatives.

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The Company believes that these assumptions are consistent with a reasonable market participant view while employing the concept of highest and best use of the asset.

Based on the results of its quantitative impairment assessment, the Company concluded that the fair values of its Capella University and Strayer University reporting units exceeded their carrying values.

Based on the results of its quantitative impairment assessment, the Company concluded that the fair value of its ANZ reporting unit exceeded its carrying value.

Accordingly, no goodwill impairment charges were recorded during the years ended December 31, 2022, 2023, and 2024.

Intangible Assets

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

December 31, 2022 December 31, 2023

Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

Subject to amortization

Student relationships $ 200,185 $ ( 191,125 ) $ 9,060 $ 200,002 $ ( 200,002 ) $ —

Not subject to amortization

Trade names 251,481 — 251,481 251,623 — 251,623

Total $ 451,666 $ ( 191,125 ) $ 260,541 $ 451,625 $ ( 200,002 ) $ 251,623

The Company’s finite-lived intangible assets are comprised of student relationships, which were amortized on a straight-line basis over a three-year useful life.

Straight-line amortization expense for finite-lived intangible assets reflects the pattern in which the economic benefits of the assets are consumed over their estimated useful lives.

Amortization expense related to finite-lived intangible assets was $ 44.3 million, $ 11.1 million, and $ 8.9 million for the years ended December 31, 2021, 2022 and 2023, respectively.

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

The Company’s finite-lived intangible assets are comprised of approximately $ 200.0 million of student relationships, which were amortized on a straight-line basis over a three-year useful life.

Straight-line amortization expense for finite-lived intangible assets reflected the pattern in which the economic benefits of the assets were consumed over their estimated useful

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

Amortization expense related to finite-lived intangible assets was $ 11.1 million and $ 8.9 million for the years ended December 31, 2022 and 2023, respectively.

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

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In addition, there are no legal, regulatory, contractual, economic, or other factors to limit the useful life of the trade name intangibles.

The following table presents changes in the carrying value of indefinite-lived intangible assets for the years ended December 31, 2023 and 2024 (in thousands):

Indefinite-Lived Intangible Assets

Balance as of December 31, 2022 $ 251,481

Impairments —

Currency translation adjustments 142

Balance as of December 31, 2023 251,623

Impairments (1)

Currency translation adjustments ( 5,725 )

Balance as of December 31, 2024 $ 245,098

_________________________________________________________

(1) 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 consolidated statements of income.

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

In 2023, the Company performed a qualitative impairment assessment related to its indefinite-lived intangible assets, except for the Capella University trade name, using the first day of the fourth quarter of 2023 as the assessment date.

There were no impairment charges related to indefinite-lived intangible assets recorded during the years ended December 31, 2022 and 2023.

In 2024, the Company performed a qualitative impairment assessment related to its indefinite-lived intangible assets, except for the ANZ trade name, using the first day of the fourth quarter of 2024 as the assessment date.

The Company evaluated the likelihood of impairment by considering qualitative factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value.

Based on the results of its qualitative impairment analysis, the Company determined that no impairment indicators existed for these indefinite-lived intangible assets as of the assessment date.

In 2023, the Company elected to perform a quantitative impairment assessment for indefinite-lived intangible assets related to the Capella University trade name using the first day of the fourth quarter of 2023 as the assessment date.

The Company used an income-based approach to determine the fair value of the Capella University trade name.

The income approach consisted of a discounted cash flow model, using the relief from royalty method, which 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

The determination of fair value of the Capella University trade name primarily consists of using unobservable inputs under the fair value measurement standards.

The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the Capella University trade name include, but are not limited to, the amounts and timing of future revenue growth rates, the royalty rate, the discount rate, and the terminal growth rate.

In 2024, the Company elected to perform a quantitative impairment assessment for indefinite-lived intangible assets related to the ANZ trade name using the first day of the fourth quarter of 2024 as the assessment date.

The Company used an income-based approach to determine the fair value of the ANZ trade name.

The income approach consisted of a discounted cash flow model, using the relief from royalty method, which 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.

The determination of fair value of the ANZ trade name primarily consists of using unobservable inputs under the fair value measurement standards.

The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ trade name include, but are not limited to, the amounts and timing of future revenue growth rates, the royalty rate, the discount rate, and the terminal growth rate.

The assumptions used in determining the expected future revenue growth rates consider various factors such as historical operating trends, particularly in student enrollment and pricing, anticipated economic and regulatory conditions, reasonable expectations for planned business expansion opportunities, and long-term operating strategies and initiatives.

The royalty rate is based on the Company’s assumption of what a reasonable market participant would pay to license the Capella University trade name, expressed as a percentage of revenues.

The royalty rate is based on the Company’s assumption of what a reasonable market participant would pay to license the ANZ trade name, expressed as a percentage of revenues.

The discount rate is based on the Company’s assumption of a prudent investor’s required rate of return for assuming the risk of investing in a particular company.

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The Company believes that these assumptions are consistent with a reasonable market participant view while employing the concept of highest and best use of the asset.

Based on the results of its quantitative impairment assessment, the Company concluded that the fair value of the Capella University trade name exceeded its carrying value.

Accordingly, there were no impairment charges related to indefinite-lived intangible assets recorded during the years ended December 31, 2021, 2022, and 2023.

Based on the results of its quantitative impairment assessment, the Company concluded that the fair value of the ANZ trade name exceeded its carrying value.

Other Current Assets

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Prepaid expenses $ 20,028 $ 20,841

Restricted cash 13,287 12,944

Cloud computing arrangements 6,870 9,402

Restricted cash 12,944 9,082

Other 4,916 5,468

2 unchanged sentences

December 31, 2023 December 31, 2024

Cloud computing arrangements, net of current portion $ 12,806 $ 18,328

Prepaid expenses, net of current portion 16,679 15,678

Equity method investments 16,068 13,428

Cloud computing arrangements, net of current portion 7,507 12,806

Other investments 3,396 2,806

Tuition receivable, net, non-current 2,516 7,040

Other investments 2,806 2,786

Other 3,544 5,650

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Capital contributions 314 531

Pro-rata share in the net income of limited partnerships 348 2,953

Pro-rata share in the net income (loss) of limited partnerships 2,953 ( 2,699 )

Distributions ( 1,078 ) ( 472 )

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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 October 18, 2024, 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 $ 250 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.

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dollar equivalent of $ 150 million.

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

The maturity date of the Amended Credit Facility is October 18, 2029.

The Company paid approximately $ 1.7 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.

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

dollars, beginning on June 30, 2023.

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

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

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Coverage ratio is defined as the ratio of trailing four-quarter EBITDA and rent expense to trailing four-quarter interest and rent expense.

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 covenants of the Amended Credit Facility as of December 31, 2023.

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

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

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

The Company was in compliance with all covenants of the Amended Credit Facility as of December 31, 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.

During the third quarter of 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 December 31, 2024.

During the years ended December 31, 2022, 2023 and 2024, the Company paid $ 4.2 million, $ 6.8 million and $ 3.2 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.

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As of December 31, 2024, 498,862 shares were available for issuance under the 2018 Plan.

As of December 31, 2023, the Company has issued and outstanding awards under the 2018 Plan, the Capella Education Company 2005 Stock Incentive Plan, and the Capella Education Company 2014 Equity Incentive Plan.

As of December 31, 2024, the Company has issued and outstanding awards under the 2018 Plan and the 2014 Capella Plan.

Dividends paid on unvested restricted stock are reimbursed to the Company, and dividend equivalents accumulated on unvested restricted stock units are forfeited, if the recipient forfeits his or her shares as a result of termination of employment prior to vesting in the award, other than as a result of the recipient’s death, disability, or certain qualifying terminations in connection with a change in control of the Company, or unless waived by the Company.

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The amount of intrinsic value will change based on the fair market value of the Company’s common stock.

The Company received $ 0.1 million, $ 14 thousand, and $ 0.2 million of net cash proceeds related to stock options exercised during the years ended December 31, 2021, 2022, and 2023, respectively.

The aggregate intrinsic value of the stock options exercised during the years ended December 31, 2021, 2022, and 2023 was $ 24 thousand, $ 15 thousand, and $ 0.1 million, respectively.

The Company received $ 14 thousand, $ 0.2 million, and $ 0.5 million of net cash proceeds related to stock options exercised during the years ended December 31, 2022, 2023, and 2024, respectively.

The aggregate intrinsic value of the stock options exercised during the years ended December 31, 2022, 2023, and 2024 was $ 15 thousand, $ 0.1 million, and $ 0.3 million, respectively.

Valuation and Expense Information under ASC 718, Stock Compensation

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Approximately 804,000 shares of restricted stock awards and restricted stock units are subject to performance conditions.

The accrual for stock-based compensation for performance awards is based on the Company’s estimates that such performance criteria are probable of being achieved over the respective vesting periods.

The stock-based compensation expense for performance awards is based on the Company’s estimates that such performance criteria are probable of being achieved over the respective vesting periods.

Such a determination involves judgment surrounding the Company’s ability to maintain regulatory compliance.

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Stock-based compensation expense, net of tax $ 16,304 $ 14,616 $ 18,747

During the years ended December 31, 2021, 2022, and 2023, the Company recognized shortfall tax impacts of approximately $ 18 thousand, $ 1.5 million, and $ 1.4 million, respectively, related to share-based payment arrangements, which were recorded as adjustments to the provision for income taxes.

During the years ended December 31, 2022, 2023, and 2024, the Company recognized shortfall tax impacts of approximately $ 1.5 million, $ 1.4 million, and $ 1.2 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes.

Other Employee Benefit Plans

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Higher Education institutions participate in various federal student financial assistance programs which are subject to audit by agencies, including the Department of Education, the Veterans Administration, and the Department of Defense.

Management believes that the potential effects of audit adjustments, if any, for the periods currently

under audit will not have a material adverse effect, individually or in the aggregate, on the Company’s consolidated financial position, results of operations, or cash flows.

Management believes that the potential effects of audit adjustments, if any, for the periods currently under audit will not have a material adverse effect, individually or in the aggregate, on the Company’s consolidated financial position, results of operations, or cash flows.

The income tax provision for the years ended December 31, 2022, 2023 and 2024 is summarized below (in thousands):

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Allowance for credit losses 13,056 12,465

Contract liabilities 9,527 9,669

Stock-based compensation 8,816 9,758

Contract liabilities 9,669 8,972

Other 4,715 4,189

Other facility-related costs 1,313 1,109

Loss carryforward 2,976 3,088

Other facility-related costs 1,109 1,033

Intangible assets ( 70,135 ) ( 69,712 )

Property and equipment ( 9,968 ) ( 4,890 )

Right-of-use lease assets ( 10,522 ) ( 9,397 )

Valuation allowance ( 2,653 ) ( 2,991 )

Property and equipment ( 4,890 ) ( 173 )

Net deferred tax liability $ ( 28,338 ) $ ( 27,586 )

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The company has state net operating loss carryforwards of $ 36.1 million which will expire from 2027 through 2045 and $ 32.6 million which have an indefinite carryover period.

The change in the valuation allowance for

deferred tax assets as of December 31, 2022 and 2023 was $ 1.2 million and $ 0.8 million, respectively, and is primarily related to net operating loss carryforwards in states where the Company does not file a consolidated tax return.

The change in the valuation allowance for deferred tax assets as of December 31, 2023 and 2024 was $ 0.8 million and $ 0.3 million, respectively, and is primarily related to net operating loss carryforwards in states where the Company does not file a consolidated tax return.

The Company concluded that it was more likely than not that the deferred tax asset for the net operating loss carryforwards would not be realized due to negative evidence outweighing the positive evidence regarding the realization of the deferred tax assets.

The Company will continue to evaluate its ability to realize its net deferred tax assets on a quarterly basis.

As of December 31, 2022 and 2023, the Company’s liabilities for unrecognized tax benefits are included in other long-term liabilities in the consolidated balance sheets.

As of December 31, 2023, the Company’s liabilities for unrecognized tax benefits are included in other long-term liabilities in the consolidated balance sheets.

As of December 31, 2024, the Company has no unrecognized tax benefits recorded on its consolidated balance sheets.

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

The Company recognized approximately $ 55,000 and $ 47,000 of expense related to interest and penalties in 2022 and 2023, respectively.

The total amount of interest and penalties included in the consolidated balance sheets was approximately $ 59,000 and $ 107,000 as of December 31, 2022 and 2023, respectively.

The Company recognized approximately $ 47 thousand of expense and $ 107 thousand of benefit related to interest and penalties in 2023 and 2024, respectively.

The total amount of interest and penalties included in the consolidated balance sheets was approximately $ 107 thousand as of December 31, 2023.

The Company had no interest and penalties included in the consolidated balance sheets as of December 31, 2024.

The following table summarizes changes in unrecognized tax benefits, excluding interest and penalties, for the respective periods (in thousands):

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Ending unrecognized tax benefits $ 948 $ —

The Company anticipates a significant decrease in unrecognized tax benefits within the next 12 months as the statute of limitations on all positions will expire in 2024.

As of December 31, 2023, $ 0.9 million of the Company’s total unrecognized tax benefits would favorably affect the Company’s effective tax rate, if recognized.

The Company does not anticipate significant changes to unrecognized tax benefits within the next 12 months.

During the year ended December 31, 2024, the Company did not record any unrecognized tax benefits.

A reconciliation between the Company’s statutory tax rate and the effective tax rate for the years ended December 31, 2022, 2023, and 2024 is as follows:

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USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are units of Strayer University.

The 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.

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

The 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.

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

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

The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer.

Revenue and operating expenses are generally directly attributable to the segments.

Inter-segment revenues are not presented separately, as these amounts are immaterial.

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 years ended December 31, 2021, 2022, and 2023 is presented in the following table (in thousands):

2021 2022 2023

Higher Education $ 829,270 $ 770,979 $ 818,953

Australia/New Zealand 250,124 230,747 233,518

Education Technology Services 52,292 63,754 80,453

Consolidated revenues $ 1,131,686 $ 1,065,480 $ 1,132,924

Income from operations

Higher Education $ 104,914 $ 38,605 $ 59,628

Australia/New Zealand 35,855 30,473 35,862

Education Technology Services 21,311 19,264 29,088

The Company’s CODM does not evaluate operating segments using asset information.

The Company’s CODM assesses the segments’ performance by using each segment’s income from operations, which includes certain enterprise shared services allocations attributable to each of the segments.

The Company’s CODM uses income from operations for each segment in the annual budget and forecasting process.

On a monthly basis, the CODM reviews budget-to-actual, latest forecast-to-actual, and year-over-year actual variances when reviewing segment performance and making decisions about the allocation of resources to each segment.

A summary of financial information by reportable segment for the year ended December 31, 2022 is presented in the following table (in thousands):

Higher Education Australia/New Zealand Education Technology Services Total

Revenues $ 770,979 $ 230,747 $ 63,754 $ 1,065,480

Segment expenses

Direct segment expenses 676,895 177,657 40,876 895,428

Enterprise shared services allocation 55,479 22,617 3,614 81,710

Segment income from operations $ 38,605 $ 30,473 $ 19,264 $ 88,342

Unallocated expenses

Amortization of intangible assets ( 14,350 )

2 unchanged sentences

Consolidated income from operations $ 70,760

Other expense ( 1,191 )

Consolidated income before income taxes $ 69,569

A summary of financial information by reportable segment for the year ended December 31, 2023 is presented in the following table (in thousands):

Higher Education Australia/New Zealand Education Technology Services Total

Revenues $ 818,953 $ 233,518 $ 80,453 $ 1,132,924

Segment expenses

Direct segment expenses 703,035 178,922 47,283 929,240

Enterprise shared services allocation 56,290 18,734 4,082 79,106

Segment income from operations $ 59,628 $ 35,862 $ 29,088 $ 124,578

Unallocated expenses

Amortization of intangible assets ( 11,457 )

Merger and integration costs ( 1,544 )

Restructuring costs ( 16,256 )

Consolidated income from operations $ 95,321

Other income 5,405

Consolidated income before income taxes $ 100,726

A summary of financial information by reportable segment for the year ended December 31, 2024 is presented in the following table (in thousands):

Higher Education Australia/New Zealand Education Technology Services Total

Revenues $ 857,890 $ 257,119 $ 104,921 $ 1,219,930

Segment expenses

Direct segment expenses 719,214 200,776 57,910 977,900

Enterprise shared services allocation 61,511 18,949 4,294 84,754

Segment income from operations $ 77,165 $ 37,394 $ 42,717 $ 157,276

Unallocated expenses

Amortization of intangible assets —

Merger and integration costs —

Restructuring costs ( 1,648 )

Consolidated income from operations $ 155,628

Other income 5,804

Consolidated income before income taxes $ 161,432

The following table presents a schedule of significant non-cash items included in segment income from operations by reportable segment for the years ended December 31, 2022, 2023, and 2024 (in thousands):

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Geographic Information

The Company’s revenues by geographic area, which are primarily generated by students enrolled at institutions in those areas, for the years ended December 31, 2022, 2023, and 2024 were as follows (in thousands):

2022 2023 2024

United States $ 834,733 $ 899,406 $ 962,811

Australia/New Zealand 230,747 233,518 257,119

The Company’s long-lived assets are comprised of Property and equipment, net and Right-of-use lease assets.

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United States $ 115,453 $ 108,418

International 125,914 122,278

Australia/New Zealand 122,278 106,502

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

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If the Department were to successfully seek recovery for the amounts of discharged loans from Capella University in future proceedings, any such recovery could have a material adverse effect on our business.

As a result of the Fifth Circuit’s August 7, 2023 nationwide injunction of the 2022 Borrower Defense to Repayment Regulations, the Department announced that while it will not adjudicate any borrower defense applications under the 2022 Borrower Defense to Repayment Regulations unless and until the effective date is reinstated, it will continue to adjudicate

applications under a prior version of the rule if required pursuant to a court ordered settlement.

For the Sweet Post-Class Applicants, the Department agreed to adjudicate such claims under the 2016 BDTR Rule, and, if the Department does not adjudicate the applications by January 28, 2026, it will provide the applicants “Full Settlement Relief” (i.e., federal student loan(s) associated with the borrower’s attendance at the school will be discharged, the Department will refund any amounts paid to the Department on those loans, and the credit tradeline for those loans will be deleted from the borrower’s credit report).

The Department has informed institutions that:

it is notifying most schools of all applications received by the Department from June 23, 2022 to November 15, 2022 (constituting Sweet Post-Class Applicants) in a single send (and anticipates completing notification to all schools by approximately April 2024).

As a result of the Fifth Circuit’s August 7, 2023 nationwide injunction of the 2022 Borrower Defense to Repayment (“BDTR”) Regulations, the Department announced that while it will not adjudicate any borrower defense applications under the 2022 Borrower Defense to Repayment Regulations unless and until the effective date is reinstated, it will continue to adjudicate applications under a prior version of the rule if required pursuant to a court ordered settlement.

For the Sweet Post-Class Applicants, the Department agreed to adjudicate such claims under the 2016 BDTR Rule, and, if the Department does not

adjudicate the applications by January 28, 2026, it will provide the applicants “Full Settlement Relief” (i.e., federal student loan(s) associated with the borrower’s attendance at the school will be discharged, the Department will refund any amounts paid to the Department on those loans, and the credit tradeline for those loans will be deleted from the borrower’s credit report).

In 2023, the Department informed institutions that:

it would be notifying most schools of all applications received by the Department from June 23, 2022 to November 15, 2022 (constituting Sweet Post-Class Applicants) in a single send (and anticipates completing notification to all schools by approximately April 2024).

On January 25, 2024, Capella University received notice that the Department received approximately 6,700 borrower defense to repayment applications with claims for forgiveness of loans taken out at the university and filed between June 23, 2022 and November 15, 2022.

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In the notices received, the Department indicated that:

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

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

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

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

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

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

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

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 has provided 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, February 1, 2024, or at any other time, or if so, whether it will seek recoupment from Capella University or Strayer University.

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

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and (3) the federal government through the Department of Education.

Our business activities are planned and implemented to achieve compliance with the rules and regulations of the state, regional and federal agencies that regulate our activities.

The Company’s business activities are planned and implemented to achieve compliance with the rules and regulations of the state, regional and federal agencies that regulate its activities.

The regulations, standards, and policies of these regulatory agencies are subject to frequent change.

Students finance their education at Capella University and Strayer University in a variety of ways, and historically about 75 % of students participated in one or more Title IV programs.

Students finance their education at Capella University and Strayer University in a variety of ways, and historically a majority of students have participated in one or more Title IV programs.

Title IV Programs

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For Capella University and Strayer University, the Department evaluates financial responsibility at the parent level, based on review of SEI’s financial statements.

The Company has applied the financial responsibility standards to it’s financial statements as of and for the year ended December 31, 2023, and based on it’s calculated composite score and other relevant factors, it believes the Company met the Department of Education’s financial responsibility standards.

The Company has applied the financial responsibility standards to its financial statements as of and for the year ended December 31, 2024, and based on its calculated composite score and other relevant factors, it believes the Company met the Department of Education’s financial responsibility standards.

On November 1, 2016, the Department of Education released a new regulation, which after a series of delays became effective as of October 16, 2018, under which an institution may no longer be considered financially responsible if one or more of a list of triggering events occurs.

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Capella University’s and Strayer University’s official three-year cohort default rates for 2019, 2020, and 2021, as well as the average official three-year cohort default rates for proprietary institutions nationally, were as follows:

Cohort Year Capella

University Strayer

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As part of the return to repayment, the Department has also announced a 12 month “on-ramp” during which time delinquent borrowers will not be reported to credit bureaus or be counted as in default for the purpose of cohort default rate calculations.

On January 10, 2023, the Department proposed regulations to create a new income-driven repayment plan to reduce future monthly payments for lower- and middle-income borrowers.

Among other things, the proposed regulation would revise the Revised Pay As You Earn (REPAYE) regulations, eliminate negative amortization, and offer $0 monthly payments for any individual borrower who makes less than roughly $30,600 annually and any borrower in a family of four who makes less than about $62,400.

While it is too early to know the entirety of the impact that COVID and COVID-related repayment flexibility will have on the cohort default rate, the Company expects that the next one or more cohort years will be affected.

On July 10, 2023, the Department issued final regulations to create a new income-driven repayment plan to reduce future monthly payments for lower- and middle-income borrowers.

Among other things, this new regulation—known as the Saving on a Valuable Education (SAVE) Plan—revised the Revised Pay As You Earn (REPAYE) regulations, eliminated negative amortization, and offered $0 monthly payments for any individual borrower who makes less than roughly $32,800 annually and any borrower in a family of four who makes less than about $67,500 annually (using the 2023 Federal poverty guidelines).

The SAVE Plan was scheduled to be fully implemented in July 2024, but a federal appeals court paused implementation of the entire SAVE Plan pending resolution of legal challenges brought by several states.

Meanwhile, the Department published an interim final rule to allow borrowers to enroll in the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) repayment plans, designated for early implementation on December 16, 2024, through July 1, 2027, while the SAVE Plan is paused.

Although it is too early to know the entirety of the impact that COVID and COVID-related repayment flexibility will have on the cohort default rate, the Company expects that the next one or more cohort years will be affected.

The 90/10 Rule

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Historically, by statute, only Title IV funds have been considered within the 90% metric;

however as described below, that will change for fiscal years beginning on or after January 1, 2023.

however as described below, that changed for fiscal years beginning on or after January 1, 2023.

A proprietary institution of higher education that violates the 90/10 Rule for any fiscal year will be placed on provisional certification for up to two fiscal years.

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In addition, the Department of Education discloses on its website any proprietary institution of higher education that fails to meet the 90/10 requirement, and reports annually to Congress the relevant ratios for each proprietary institution of higher education.

Using the statutory formula under the definition of federal funds included within the 90% metric then in effect, Capella University derived approximately 65.30 % of its cash-basis revenues from Title IV program funds in fiscal year 2022.

Strayer University derived approximately 80.57 % of its cash-basis revenues from Title IV program funds in fiscal year 2022.

Our computation for 2023, which will be the first year under the new 90/10 requirements, has not yet been finalized and audited;

however, we believe we will remain in compliance with the 90/10 Rule requirement.

The key components of non-Title IV revenue for Capella University and Strayer University are individual student payments, employer tuition reimbursement payments, veterans’ education benefits, military tuition assistance, vocational rehabilitation funds, private loans, state grants, and scholarships.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021, which included a change to the 90/10 methodology to include all federal funding.

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In addition, certain members of Congress have proposed to revise the 90/10 Rule to reduce the limit on federal funding to 85% of total revenue.

In the context of Higher Education Act reauthorization, defense bills and appropriations bills, other

members of Congress have proposed legislation that would eliminate the 90/10 Rule.

In the context of Higher Education Act reauthorization, defense bills and appropriations bills, other members of Congress have proposed legislation that would eliminate the 90/10 Rule.

The Company cannot predict whether or how legislative or regulatory changes will affect the 90/10 Rule.

Gainful Employment

Under the Higher Education Act, a proprietary institution offering programs of study other than a baccalaureate degree in liberal arts (for which there is a limited statutory exception) must prepare students for gainful employment in a recognized occupation.

Under the Higher Education Act, a proprietary institution offering programs of study other than a baccalaureate degree in

liberal arts (for which there is a limited statutory exception) must prepare students for gainful employment in a recognized occupation.

On October 31, 2014, the Department of Education published final regulations related to gainful employment.

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

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

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

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

The final gainful employment regulations took effect July 1, 2024.

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

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

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

On 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 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.

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

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

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

In a March 29, 2024 Electronic Announcement (GE-24-01), the Department released additional information and updates to help institutions prepare for complying with the Financial Value Transparency (“FVT”) and Gainful Employment (“GE”) Regulations, including that the deadline for initial institutional data reporting was extended from July 31, 2024 to October 1, 2024.

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

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

Capella University and Strayer University submitted the appropriate data ahead of the extended deadline.

On January 17, 2025, the Department reopened the reporting process for debt reporting until February 18, 2025.

On February 14, 2025, the Department announced that it would further extend the deadline for all reporting data associated with FVT/GE to September 30, 2025;

it does not plan to produce any FVT/GE metrics prior to the new deadline and will take no enforcement or other punitive actions against institutions that had not completed reporting to date;

and it anticipates that there will be no additional extensions of the reporting deadline beyond September 30, 2025.

Misrepresentation

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Misrepresentation also includes the dissemination of a student endorsement or testimonial that a student gives either under duress or because the institution required such an endorsement or testimonial to participate in a program.

On September 25, 2024, the Department issued a Federal Student Aid Enforcement Bulletin (Electronic Announcement GENERAL-24-115) with examples of “conduct that creates a risk of engaging in a substantial misrepresentation” which could form the basis of a BDTR complaint or otherwise result in adverse administrative action by the Department, including a fine or limitation of an institution’s participation in the Title IV programs.

Topics identified included certain claims related to general

salary information (including use of Bureau of Labor Statistics salary data), job placement rates, rankings, licensure, faculty qualifications, for- or non-profit status, and cost of attendance or price.

On January 16, 2025, the Department issued a Federal Student Aid Notice of Interpretation (Dear Colleague Letter GEN-25-01) reminding institutions that misrepresentation requirements “apply with equal force to statements made by a third-party entity engaged by the eligible institution” and that “institutions may be responsible for the consequences of any misrepresentation committed by any external service provider that they engage.” The Department gave examples of statements that are “likely” to qualify as a misrepresentation, including inaccurately identifying an individual employed by an external servicer provider as being employed by the eligible institution;

inaccurately presenting a sales representative or recruiter as an academic advisor, such as by referring to them as a “counselor”;

and describing a program provided in substantial part by an external service provider as “the same as” a corollary residential- or campus-based program.

Borrower Defenses to Repayment

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The 2016 BDTR Rule also amends the rules concerning discharge of federal student loans when a school or campus closes and prohibits pre-dispute arbitration agreements and class action waivers for borrower defense-type claims.

On January 19, 2017, the Department of Education issued a final rule, updating the hearing procedures for actions to establish liability

against an institution of higher education and establishing procedures for recovery proceedings under the borrower defense regulations.

On January 19, 2017, the Department of Education issued a final rule, updating the hearing procedures for actions to establish liability against an institution of higher education and establishing procedures for recovery proceedings under the borrower defense regulations.

Several times between June 2017 and February 2018, the Department of Education announced delays until July 1, 2019 of implementation of certain portions of the 2016 BDTR Rule, including those portions of the regulations that establish a new federal standard and a process for determining whether a Direct Loan borrower has a defense to repayment of a Direct Loan based on an act or omission of an institution.

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

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

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

loan discharge or accept a teach-out opportunity.

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

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Negotiated rulemaking committee meetings completed in December 2021 with no consensus reached on the topic.

On July 6, 2022, the Department released proposed Borrower Defense to Repayment regulations for public comment and subsequently published a final rule on October 31, 2022.

Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending Borrower Defense to Repayment claims as of July 1, 2023, regardless of the date of a borrower’s loan disbursement;

On July 6, 2022, the Department released proposed Borrower Defense to Repayment regulations for public comment and subsequently published a final rule on October 31, 2022 (the “2022 BDTR Rule”).

Among other things, the 2022 BDTR Rule sets a single standard and streamlined process for relief that will apply to all future and pending Borrower Defense to Repayment claims as of July 1, 2023, regardless of the date of a borrower’s loan disbursement;

defines the types of misconduct that could lead to borrower defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final Department of Education actions that could give rise to a Borrower Defense to Repayment claim;

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and creates a process for the adjudication of group claims based on common facts.

The final rule permits nonprofit legal assistance organizations to request group claims.

The final rule also establishes a recoupment process separate from the approval of Borrower Defense to Repayment claims.

In addition, the final rule prohibits institutions from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class action waivers for claims related to the making of a Federal Direct Loan or the provision of educational services for which the loan was obtained.

The rule also modified the closed school discharge rule to provide an automatic discharge one year after an institution or location’s closure date for borrowers who were enrolled at the time of closure or left 180 days before closure and who do not accept an approved teach-out agreement or continuation of the program at another location of the school;

The 2022 BDTR Rule permits nonprofit legal assistance organizations to request group claims.

The 2022 BDTR Rule also establishes a recoupment process separate from the approval of Borrower Defense to Repayment claims.

In addition, the 2022 BDTR Rule prohibits institutions from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class action waivers for claims related to the making of a Federal Direct Loan or the provision of educational services for which the loan was obtained.

The 2022 BDTR Rule also modified the closed school discharge rule to provide an automatic discharge one year after an institution or location’s closure date for borrowers who were enrolled at the time of closure or left 180 days before closure and who do not accept an approved teach-out agreement or continuation of the program at another location of the school;

those who accept but do not complete a teach-out agreement or program continuation will receive a discharge one year after their last date of attendance.

The final rule became effective July 1, 2023.

On August 7, 2023, the U.S.

Court of Appeals for the Fifth Circuit granted a nationwide emergency injunction preventing the Department of Education’s enforcement of the final BDTR

and closed school discharge rules.

The matter was heard by the Fifth Circuit panel on November 6, 2023, and the previous versions of the BDTR and closed school discharge rules remain in effect until further determination.

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

the Department will continue to adjudicate borrower defense applications using an earlier version of the regulations where required under a court settlement (the Sweet case discussed above).

The 2022 BDTR Rule became effective July 1, 2023.

On August 7, 2023, in the matter of Career Colleges and Schs.

Dep’t of Educ.

23-50491), the U.S.

Court of Appeals for the Fifth Circuit granted a nationwide emergency injunction preventing the Department of Education’s enforcement of the 2022 BDTR Rule.

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

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

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) filed a response to the Department’s petition on December 12, 2024, and the Department filed a reply on December 23, 2024.

On January 10, 2025, the Supreme Court agreed to hear arguments on the Department’s appeal, and on February 6, 2025, at the Department’s request, the Supreme Court agreed to pause the briefing schedule.

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

The Department will continue to adjudicate borrower defense applications using an earlier version of the regulations, including where required under a court settlement (the Sweet case discussed above).

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

State Authorization Reciprocity Agreement (SARA)

Capella University and Strayer University participate in the State Authorization Reciprocity Agreement (“SARA”), which allows the universities to enroll students in distance education programs in each SARA member state, including 49 states, the District of Columbia, Puerto Rico, and the U.S.

Virgin Islands.

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.

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

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

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

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

In addition to the public

comment forum, NC-SARA accepted written comments between April 15, 2024 and May 17, 2024.

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.

In December 2024, the Department terminated the state authorization negotiated rulemaking process, prior to issuing any draft regulations.

Negotiated Rulemaking

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

On December 30, 2024, the Department released final regulations on distance education, return of federal funds and the TRIO program, which all make modest changes to existing regulatory language requiring additional data collection and reporting, or, in the case of the TRIO program, make technical changes.

Also in December 2024, the Department officially terminated the negotiated rulemaking process for cash management, state authorization and accreditation, prior to releasing any draft rules.

On April 19, 2024, the U.S.

Department of Education released its final rule regarding the implementation of Title IX, which prohibits discrimination on the basis of sex in education programs that receive funding from the federal government (the “2024 Title IX Rule”).

The 2024 Title IX Rule applies to all forms of sex-based harassment (not only sexual harassment);

clarifies that Title IX’s prohibition against sex discrimination includes discrimination on the basis of sex stereotypes, sex characteristics, pregnancy or related conditions, sexual orientation, and gender identity;

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 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 2024 Title IX Rule otherwise became effective on August 1, 2024.

On January 9, 2025, in State of Tennessee et al v.

Cardona , 2:24-cv-00072, the U.S.

District Court for the Eastern District of Kentucky granted summary judgment against the U.S.

Department of Education, vacating the 2024 Title IX Rule as unlawful.

On February 4, 2025, the Department’s Office for Civil Rights issued a Dear Colleague Letter confirming that it will enforce Title IX under the 2020 Title IX Rule, and that open investigations initiated under the 2024 Title IX Rule should be reevaluated for consistency with the 2020 Title IX Rule.

Australian and New Zealand Regulation

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The vocational education and training (“VET”) sector consists of technical and further education institutes, agricultural colleges, adult and community education providers, community organizations, industry skill centers and private providers.

VET qualifications include certificates, diplomas and advanced diplomas.

qualifications include certificates, diplomas and advanced diplomas.

The regulation of VET providers is undertaken at a national level by the Australian Skills Quality Authority (“ASQA”).

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Both Torrens and Think are registered for the purposes of these plans (a precondition to their students being eligible to receive such loans).

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 contained 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 and to Think.

The Bill has not passed the Senate;

however, on December 19, 2024, the Australian Federal Government introduced Ministerial Direction 111, which, like the Bill, seeks to limit the number of international students, and is expected to draw student allocations determined by the Government on a prioritization approach.

The Company operates a post-secondary educational institution in New Zealand, Media Design School Limited (“MDS”).

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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 8. Financial Statements and Supplementary Data