What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-04-24 compared with 2024-11-07 · 260 added, 389 removed, 453 unchanged (59% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

December 31, 2023 September 30, 2024

December 31, 2024 March 31, 2025

Current assets:

7 unchanged sentences

Marketable securities, non-current 14,981 14,984

Intangible assets, net 251,623 251,952

Intangible assets 245,098 245,452

Goodwill 1,206,883 1,209,710

8 unchanged sentences

Total current liabilities 216,460 259,436

Long-term debt 61,400 —

Deferred income tax liabilities 27,586 30,701

6 unchanged sentences

32,000,000 shares authorized;

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

24,502,385 and 24,261,716 shares issued and outstanding at December 31, 2024 and March 31, 2025, respectively

Additional paid-in capital 1,532,414 1,502,852

7 unchanged sentences

(in thousands, except per share data)

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

2023 2024 2023 2024

For the three months ended March 31,

Revenues $ 290,250 $ 303,590

2 unchanged sentences

General and administration 96,695 103,596

Amortization of intangible assets 3,382 — 10,364 —

Merger and integration costs 330 — 1,335 —

Restructuring costs ( 5,510 ) 1,914

14 unchanged sentences

(in thousands)

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

2023 2024 2023 2024

For the three months ended March 31,

Net income $ 29,702 $ 29,744

Other comprehensive income (loss):

Foreign currency translation adjustment ( 11,891 ) 23,828 ( 28,053 ) 10,770

Foreign currency translation adjustments ( 26,650 ) 3,343

Unrealized gains on marketable securities, net of tax 143 1

4 unchanged sentences

(in thousands, except share data)

For the three months ended September 30, 2023

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Shares Par Value

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

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

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

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

Common stock dividends ($ 0.60 per share)

— — — ( 14,634 ) — ( 14,634 )

Foreign currency translation adjustment — — — — ( 11,891 ) ( 11,891 )

Unrealized gains on marketable securities, net of tax — — — — 97 97

Net income — — — 18,459 — 18,459

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

For the three months ended September 30, 2024

Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Shares Par Value

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

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

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

Common stock dividends ($ 0.60 per share)

— — — ( 14,792 ) — ( 14,792 )

Foreign currency translation adjustment — — — — 23,828 23,828

Unrealized gains on marketable securities, net of tax — — — — 25 25

Net income — — — 27,748 — 27,748

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

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

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

For the nine months ended September 30, 2023

For the three months ended March 31, 2024

Common Stock Additional

8 unchanged sentences

Issuance of restricted stock, net 198,887 2 ( 3,833 ) — — ( 3,831 )

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

Common stock dividends ($ 0.60 per share)

3 unchanged sentences

Net income — — — 29,702 — 29,702

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

For the nine months ended September 30, 2024

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

For the three months ended March 31, 2025

Common Stock Additional

14 unchanged sentences

Net income — — — 29,744 — 29,744

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

Balance at March 31, 2025 24,261,716 $ 243 $ 1,502,852 $ 225,440 $ ( 85,221 ) $ 1,643,314

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

2 unchanged sentences

(in thousands)

For the nine months ended September 30,

For the three months ended March 31,

Cash flows from operating activities:

1 unchanged sentence

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

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

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

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

Amortization of deferred financing costs 140 106

16 unchanged sentences

Proceeds from marketable securities 8,220 34,342

Proceeds from sale of property and equipment 5,890 —

Proceeds from other investments 457 20

Other investments ( 34 ) ( 90 )

Cash paid for acquisition, net of cash acquired ( 448 ) ( 163 )

Net cash used in investing activities ( 1,002 ) ( 1,701 )

1 unchanged sentence

Common dividends paid ( 14,734 ) ( 14,797 )

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

Net payments for stock awards ( 3,686 ) ( 9,273 )

2 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 2,305 ) 68

Net increase (decrease) in cash, cash equivalents, and restricted cash ( 46,009 ) 25,696

Net increase in cash, cash equivalents, and restricted cash 55,903 9,928

Cash, cash equivalents, and restricted cash — beginning of period 181,925 146,656

13 unchanged sentences

(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.

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

The Company’s reportable segments are discussed further in Note 15.

3 unchanged sentences

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

All information as of, and for the three and nine months ended, September 30, 2023 and 2024 is unaudited but, in the opinion of management, contains all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the condensed consolidated financial position, results of operations, and cash flows of the Company.

All information as of, and for the three months ended, March 31, 2024 and 2025 is unaudited but, in the opinion of management, contains all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the condensed consolidated financial position, results of operations, and cash flows of the Company.

The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements at that date.

2 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

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

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the full fiscal year.

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

6 unchanged sentences

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 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.

4 unchanged sentences

The functional currency of each of the foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business.

Financial statements of foreign subsidiaries are translated into USD using the exchange rates applicable to the dates of the financial statements.

Financial statements of foreign subsidiaries are translated into USD using the exchange rates applicable to the dates of the financial

Assets and liabilities are translated into USD using the period-end spot foreign exchange rates.

8 unchanged sentences

higher education institution during the academic term.

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

The Company had approximately $ 1.8 million and $ 1.9 million of these unpaid obligations as of December 31, 2024 and March 31, 2025, respectively.

In Australia and New Zealand, advance tuition payments from international students are required to be restricted until a student commences his or her course.

In addition, a portion of tuition prepayments from students enrolled in a vocational education and training program are held in trust by a third party law firm to adhere to tuition protection requirements.

As of December 31, 2023 and September 30, 2024, the Company had approximately $ 11.1 million and $ 9.4 million, respectively, of restricted cash related to these requirements in Australia and New Zealand.

As of December 31, 2024 and March 31, 2025, the Company had approximately $ 7.3 million and $ 9.9 million, respectively, of restricted cash related to these requirements in Australia and New Zealand.

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

1 unchanged sentence

The Company holds these funds in an interest-bearing account, which is included in other assets in the unaudited condensed consolidated balance sheets.

The following table illustrates the reconciliation of cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows as of September 30, 2023 and 2024 (in thousands):

As of September 30,

As of March 31,

Cash and cash equivalents $ 222,116 $ 144,215

8 unchanged sentences

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

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

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

Management reviews the fair value of the portfolio at least quarterly, and evaluates individual securities with fair value below amortized cost at the balance sheet date for impairment.

2 unchanged sentences

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

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 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.

10 unchanged sentences

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

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

December 31, 2023 September 30, 2024

The Company’s current tuition receivable and allowance for credit losses were as follows as of December 31, 2024 and March 31, 2025 (in thousands):

December 31, 2024 March 31, 2025

Tuition receivable $ 127,012 $ 139,818

1 unchanged sentence

Tuition receivable, net $ 76,127 $ 90,314

An additional $ 2.5 million and $ 7.2 million of tuition receivable, net, are included in other assets as of December 31, 2023 and September 30, 2024, respectively, because these amounts are expected to be collected after 12 months.

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

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

2023 2024 2023 2024

An additional $ 7.0 million and $ 6.2 million of tuition receivable, net, are included in other assets as of December 31, 2024 and March 31, 2025, respectively, because these amounts are expected to be collected after 12 months.

The following table illustrates changes in the Company’s current and non-current allowance for credit losses for the three months ended March 31, 2024 and 2025 (in thousands).

For the three months ended March 31,

Allowance for credit losses, beginning of period $ 47,605 $ 46,185

8 unchanged sentences

The Company identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available, and management regularly reviews the operating results of those components.

Finite-lived intangible assets that are acquired in business combinations are recorded at fair value on their acquisition dates and are amortized on a straight-line basis over the estimated useful life of the asset.

Finite-lived intangible assets consist of student relationships.

The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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

Authorized Stock

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,406,816 and 24,569,439 shares were issued and outstanding as of December 31, 2023 and September 30, 2024, respectively.

The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 24,502,385 and 24,261,716 shares

were issued and outstanding as of December 31, 2024 and March 31, 2025, respectively.

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

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

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

The dividend was paid on September 16, 2024.

In February 2025, the Company’s Board of Directors declared a regular, quarterly cash dividend of $ 0.60 per share of common stock.

The dividend was paid on March 17, 2025.

Net Income Per Share

5 unchanged sentences

Stock awards are excluded from the computation of diluted earnings per share when their effect would be anti-dilutive.

Set forth below is a reconciliation of shares used to calculate basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2024 (in thousands):

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

2023 2024 2023 2024

Set forth below is a reconciliation of shares used to calculate basic and diluted earnings per share for the three months ended March 31, 2024 and 2025 (in thousands):

For the three months ended March 31,

Weighted average shares outstanding used to compute basic earnings per share 23,391 23,320

5 unchanged sentences

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

As of December 31, 2023 and September 30, 2024, the balance of accumulated other comprehensive loss was $ 34.2 million, net of tax of $ 0.1 million, and $ 23.2 million, net of tax of $ 0.1 million, respectively.

There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the three and nine months ended September 30, 2023 and 2024.

As of December 31, 2024 and March 31, 2025, the balance of accumulated other comprehensive loss was $ 88.6 million, net of tax of $ 0.1 million, and $ 85.2 million, net of tax of $ 0.1 million, respectively.

There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the three months ended March 31, 2024 and 2025.

Use of Estimates

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

The most significant management estimates include allowances for credit losses, useful lives of property and equipment and intangible assets, incremental borrowing rates, potential sublease income and vacancy periods,

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

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

Actual results could differ from those estimates.

Recently Issued Accounting Standards Not Yet Adopted

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

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss.

The standard also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources.

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.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

4 unchanged sentences

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

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

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

2023 2024 2023 2024

The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the three months ended March 31, 2024 and 2025 (in thousands):

For the three months ended March 31,

Higher Education Segment

Tuition, net of discounts, grants and scholarships $ 209,731 $ 211,746

8,978 8,836 25,677 27,383

Higher Education Segment 219,236 221,008

1 unchanged sentence

Tuition, net of discounts, grants and scholarships 45,634 46,446

1,597 1,975 4,384 5,842

Total Australia/New Zealand Segment 47,375 48,260

4 unchanged sentences

(1) Other revenue is primarily comprised of academic fees, sales of course materials, placement fees and other non-tuition revenue streams.

(2) Education Technology Services revenue is primarily derived from tuition revenue.

(2) Education Technology Services revenue is primarily derived from tuition revenue and administrative fees.

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

The Company applies the

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

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

Arrangements with students may have multiple performance obligations.

10 unchanged sentences

Revenues also include certain academic fees recognized within the quarter of instruction, and certificate revenue and licensing revenue, which are recognized as the services are provided.

Contract Liabilities – Graduation Fund

Strayer University offers the Graduation Fund, which allows undergraduate students to earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program.

Contract Liabilities – Learn and Earn Scholarship

Strayer University offers the Learn and Earn Scholarship (formerly known as the Graduation Fund), which allows undergraduate students to earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program.

Students registering in credit-bearing courses in any undergraduate degree program receive one free course for every three courses that the student successfully completes.

To be eligible, students must meet all of Strayer University’s admission requirements and must be enrolled in a bachelor’s degree program.

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

Revenue from students participating in the Graduation Fund is recorded in accordance with ASC 606.

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

Revenue from students participating in the Learn and Earn Scholarship is recorded in accordance with ASC 606.

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

3 unchanged sentences

The remainder is expected to be redeemed within two to four years .

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

For the nine months ended September 30,

The table below presents activity in the contract liability related to the Learn and Earn Scholarship (in thousands):

For the three months ended March 31,

Balance at beginning of period $ 44,480 $ 37,118

3 unchanged sentences

Contract Liabilities – Tuition Cap

Students in certain programs at Capella University and Strayer University may be eligible for tuition cap pricing, wherein their tuition is waived once the student has reached the designated dollar cap threshold for their program.

Students in certain programs at Capella University may be eligible for tuition cap pricing, wherein their tuition is waived once the student has reached the designated dollar cap threshold for their program.

The Company defers the value of the related performance obligation associated with this tuition benefit estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student towards reaching the tuition cap.

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 these programs or similar programs.

Each quarter, the Company assesses its assumptions underlying these

As of December 31, 2023 and September 30, 2024, the Company had $ 11.8 million and $ 14.7 million, respectively, of contract liabilities in the unaudited condensed consolidated balance sheets related to tuition cap benefits that are estimated to be redeemed in the future.

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

As of December 31, 2024 and March 31, 2025, the Company had $ 14.7 million and $ 15.6 million, respectively, of contract liabilities in the unaudited condensed consolidated balance sheets related to tuition cap benefits that are estimated to be redeemed in the future.

The amount estimated to be redeemed in the next 12 months is $ 5.9 million and is included as a current contract liability in the unaudited condensed consolidated balance sheets.

Unbilled Receivables – Student Tuition

Academic materials may be shipped to certain new undergraduate students in advance of the term of enrollment.

Under ASC 606, the materials represent a performance obligation to which the Company allocates revenue based on the fair value of the materials relative to the total fair value of all performance obligations in the arrangement with the student.

When control of the materials passes to the student in advance of the term of enrollment, an unbilled receivable and related revenue are recorded.

Costs to Obtain a Contract

3 unchanged sentences

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

The Company incurred $ 2.9 million and $ 11.3 million of severance and other employee separation charges during the three and nine months ended September 30, 2023, respectively, and $ 0.6 million and $ 1.9 million during the three and nine months ended September 30, 2024, respectively, related to the elimination of certain positions.

The Company incurred $ 0.3 million and $ 1.5 million of severance and other employee separation charges during the three months ended March 31, 2024 and 2025, respectively, related to the elimination of certain positions.

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

The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities during the nine months ended September 30, 2023 and 2024 (in thousands):

The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities during the three months ended March 31, 2024 and 2025 (in thousands):

Severance Restructuring Liability

Balance at December 31, 2022 $ —

Balance as of December 31, 2023 $ 795

Restructuring and other charges 259

Payments ( 937 )

Balance at September 30, 2023

Balance at December 31, 2023 (1)

Balance as of March 31, 2024 $ 117

Balance as of December 31, 2024 (1)

Restructuring and other charges 1,537

Payments ( 1,285 )

Balance at September 30, 2024 (1)

Balance as of March 31, 2025 (1)

____________________________________

1 unchanged sentence

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

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

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

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

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

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

The Company recorded approximately $ 0.1 million of right-of-use lease asset charges during the three months ended March 31, 2025 related to facilities that were consolidated during the period.

The Company also recorded fixed asset impairment charges of approximately $ 0.1 million during the three months ended March 31, 2025.

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

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

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

Marketable Securities

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

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

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

Available-for-sale securities:

Balance as of December 31, 2024

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

Held-to-maturity securities:

Term deposits $ 24,192 $ — $ — $ 24,192

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

Total $ 500 $ — $ ( 1 ) $ 499

The Company did not have any marketable securities classified as available-for-sale as of March 31, 2025.

The following is a summary of held-to-maturity securities, which are carried at amortized cost, as of December 31, 2024 and March 31, 2025 (in thousands):

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

Available-for-sale securities:

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

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

Held-to-maturity securities:

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

Balance as of March 31, 2025

Term deposits $ 23,543 $ — $ — $ 23,543

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

As of September 30, 2024, the fair value of the Company’s securities which were in an unrealized loss position for a period longer than twelve months was $ 2.0 million.

treasury securities 9,865 30 — 9,895

Corporate debt securities 20,000 5 ( 15 ) 19,990

Total $ 53,408 $ 35 $ ( 15 ) $ 53,428

The unrealized gains and losses on the Company’s investments in marketable securities as of December 31, 2024 and March 31, 2025 were caused by changes in market values primarily due to interest rate changes.

As of March 31, 2025, there were no securities which were in an unrealized loss position for a period longer than twelve months.

The Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell these securities prior to the recovery of their amortized cost basis, which may be at maturity.

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

The Company has no allowance for credit losses related to its available-for-sale or held-to-maturity securities as all investments are in investment grade securities.

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

December 31, 2023 September 30, 2024

As such, no impairment charges were recorded during the three months ended March 31, 2024 and 2025.

The Company has no allowance for credit losses related to its marketable securities as all investments are in investment grade securities.

The following table summarizes the maturities of the Company’s marketable securities as of December 31, 2024 and March 31, 2025 (in thousands):

December 31, 2024 March 31, 2025

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

Due within one year $ 499 $ 46,450 $ — $ 38,424

Due after one year through three years 483 — — —

Total $ 13,036 $ 27,175 $ 1,990 $ 24,192

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

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

2023 2024 2023 2024

Maturities of marketable securities $ 3,215 $ 7,000 $ 8,175 $ 29,525

Sales of marketable securities — — — —

Due after one year through five years — 14,981 — 14,984

Total $ 499 $ 61,431 $ — $ 53,408

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

The following table summarizes the purchases of and proceeds from marketable securities for the three months ended March 31, 2024 and 2025 (in thousands):

For the three months ended March 31,

Purchases of marketable securities

Purchases of held-to-maturity securities $ — $ 25,635

Total purchases of marketable securities $ — $ 25,635

Proceeds from marketable securities

Maturities of available-for-sale securities $ — $ 500

Maturities of held-to-maturity securities 8,220 33,842

Total proceeds from marketable securities $ 8,220 $ 34,342

The Company did not sell any available-for-sale or held-to-maturity securities during the three months ended March 31, 2024 and 2025.

The Company did not record any gross realized gains or losses in net income during the three months ended March 31, 2024 and 2025.

Fair Value Measurement

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

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

Fair Value Measurements at Reporting Date Using

September 30, 2024 Quoted Prices in

December 31, 2024 Quoted Prices in

Active Markets

4 unchanged sentences

Money market funds $ 92,416 $ 92,416 $ — $ —

treasury bills 29,860 29,860 — —

Available-for-sale securities :

1 unchanged sentence

Total assets at fair value on a recurring basis $ 92,915 $ 92,416 $ 499 $ —

Assets measured at fair value on a recurring basis consist of the following as of December 31, 2023 (in thousands):

Assets measured at fair value on a recurring basis consist of the following as of March 31, 2025 (in thousands):

Fair Value Measurements at Reporting Date Using

December 31, 2023 Quoted Prices in

March 31, 2025 Quoted Prices in

Active Markets

4 unchanged sentences

Money market funds $ 87,543 $ 87,543 $ — $ —

treasury bills 5,000 5,000 — —

Available-for-sale securities :

Tax-exempt municipal securities 9,913 — 9,913 —

Corporate debt securities 3,123 — 3,123 —

Total assets at fair value on a recurring basis $ 87,543 $ 87,543 $ — $ —

The Company measures the above items on a recurring basis at fair value as follows:

• Money market funds and U.S.

treasury bills – Classified in Level 1 is excess cash the Company holds in money market funds and U.S.

treasury bills with original maturities of three months or less, which are included in cash and cash equivalents in the accompanying unaudited condensed 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, 2023 and September 30, 2024 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

• Money market funds – Classified in Level 1 is excess cash the Company holds in money market funds, which are included in cash and cash equivalents in the accompanying unaudited condensed consolidated balance sheets.

The Company’s other cash and cash equivalents at December 31, 2024 and March 31, 2025 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

• Available-for-sale securities – Classified in Level 2 and valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets.

The Company does not hold securities in inactive markets.

The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and did not transfer assets or liabilities between levels of the fair value hierarchy during the nine months ended September 30, 2023 and 2024.

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, 2024 and March 31, 2025 was $ 61.4 million and $ 53.4 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.

Goodwill and Intangible Assets

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

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

Higher Education Australia /

4 unchanged sentences

Currency translation adjustments — ( 22,006 ) — ( 22,006 )

Adjustments to prior acquisitions — — — —

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

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

The following table presents changes in the carrying value of goodwill by segment for the three months ended March 31, 2025 (in thousands):

Higher Education Australia /

New Zealand Education Technology Services Total

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

Additions — — — —

Impairments — — — —

Currency translation adjustments — 2,827 — 2,827

Balance as of March 31, 2025 $ 632,075 $ 477,635 $ 100,000 $ 1,209,710

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

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

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

No events or circumstances occurred in the three months ended March 31, 2025 to indicate an impairment to goodwill at any of the Company’s segments.

There were no impairment charges related to goodwill recorded during the three months ended March 31, 2024 and 2025.

Intangible Assets

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

December 31, 2023 September 30, 2024

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

Subject to amortization

Student relationships $ 200,002 $ ( 200,002 ) $ — $ 200,002 $ ( 200,002 ) $ —

Not subject to amortization

Trade names 251,623 — 251,623 251,952 — 251,952

Total $ 451,625 $ ( 200,002 ) $ 251,623 $ 451,954 $ ( 200,002 ) $ 251,952

The Company’s finite-lived intangible assets were 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 were consumed over their estimated useful lives.

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

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

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

1 unchanged sentence

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 (in thousands):

For the three months ended March 31,

Balance at beginning of period $ 251,623 $ 245,098

Additions — —

Impairments — —

Currency translation adjustments ( 2,768 ) 354

Balance at end of period $ 248,855 $ 245,452

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

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

No events or circumstances occurred in the three months ended March 31, 2025 to indicate an impairment to indefinite-lived intangible assets.

There were no impairment charges related to indefinite-lived intangible assets recorded during the three months ended March 31, 2024 and 2025.

Other Current Assets

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

December 31, 2023 September 30, 2024

Other current assets consist of the following as of December 31, 2024 and March 31, 2025 (in thousands):

December 31, 2024 March 31, 2025

Prepaid expenses $ 20,841 $ 29,047

3 unchanged sentences

Other current assets $ 44,793 $ 55,334

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

December 31, 2023 September 30, 2024

Other assets consist of the following as of December 31, 2024 and March 31, 2025 (in thousands):

December 31, 2024 March 31, 2025

Cloud computing arrangements, net of current portion $ 18,328 $ 21,951

Prepaid expenses, net of current portion 15,678 15,806

Equity method investments 13,428 13,514

Cloud computing arrangements, net of current portion 12,806 14,111

Tuition receivable, net, non-current 7,040 6,216

2 unchanged sentences

Other assets $ 62,910 $ 65,815

Cloud Computing Arrangements

The Company defers implementation costs incurred in cloud computing arrangements and amortizes these costs over the term of the arrangement.

Prepaid Expenses

1 unchanged sentence

In 2020, pursuant to the terms of the perpetual license agreement associated with the Jack Welch Management Institute, the Company made a final one-time cash payment of approximately $ 25.3 million for the right to continue to use the Jack Welch name and likeness.

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

As of December 31, 2024 and March 31, 2025, $ 14.7 million and $ 14.3 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.

Equity Method Investments

2 unchanged sentences

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

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

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

2023 2024 2023 2024

The following table illustrates changes in the Company’s limited partnership investments for the three months ended March 31, 2024 and 2025 (in thousands):

For the three months ended March 31,

Limited partnership investments, beginning of period $ 16,068 $ 13,428

3 unchanged sentences

Limited partnership investments, end of period $ 15,889 $ 13,514

Cloud Computing Arrangements

The Company defers implementation costs incurred in cloud computing arrangements and amortizes these costs over the term of the arrangement.

Tuition Receivable

Non-current tuition receivable, net, represents tuition that the Company expects to collect, but not within the next 12 months.

Other Investments

1 unchanged sentence

These investments are accounted for at cost less impairment as they do not have readily determinable fair value.

Tuition Receivable

Non-current tuition receivable, net, represents tuition that the Company expects to collect, but not within the next 12 months.

Other is comprised primarily of deferred financing costs associated with the Company’s credit facility, deferred contract costs related to commissions paid in the Australia/New Zealand segment to third party international recruitment agents, and refundable security deposits associated with the Company’s leased campus and office space.

Accounts Payable and Accrued Expenses

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

December 31, 2023 September 30, 2024

Accounts payable and accrued expenses consist of the following as of December 31, 2024 and March 31, 2025 (in thousands):

December 31, 2024 March 31, 2025

Trade payables $ 55,733 $ 57,975

3 unchanged sentences

Long-Term Debt

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

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.

1 unchanged sentence

dollar equivalent of $ 150 million.

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

7 unchanged sentences

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 terms of the Amended Credit Facility as of September 30, 2024.

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

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

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

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

Debt Amendment

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

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

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

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

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

As of December 31, 2024 and March 31, 2025, the Company was in compliance with all covenants of the Amended Credit Facility and had no borrowings outstanding under the Revolving Credit Facility.

During the three months ended March 31, 2024 and 2025, the Company paid $ 1.2 million and $ 0.1 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.

Other Long-Term Liabilities

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

December 31, 2023 September 30, 2024

Other long-term liabilities consist of the following as of December 31, 2024 and March 31, 2025 (in thousands):

December 31, 2024 March 31, 2025

Contract liabilities, net of current portion $ 34,505 $ 35,401

8 unchanged sentences

Equity Awards

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

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

2023 2024 2023 2024

The following table sets forth the amount of stock-based compensation expense recorded in each of the expense line items for the three months ended March 31, 2024 and 2025 (in thousands):

For the three months ended March 31,

Instructional and support costs $ 1,233 $ 2,287

4 unchanged sentences

Stock-based compensation expense, net of tax $ 3,904 $ 4,036

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

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

Income tax expense for the nine months ended September 30, 2023 and 2024 include shortfall tax impacts of approximately $ 1.4 million and $ 1.2 million, respectively, related to share-based payment arrangements.

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

During the three months ended March 31, 2024 and 2025, the Company recognized shortfall tax impacts of approximately $ 1.3 million and windfall tax impacts of approximately $ 0.5 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes.

During the three months ended March 31, 2024 and 2025, the Company recorded income tax expense of $ 13.4 million and $ 12.3 million, respectively.

Income tax expense for the three months ended March 31, 2024 and 2025 include shortfall tax impacts of approximately $ 1.3 million and windfall tax impacts of approximately $ 0.5 million, respectively, related to share-based payment arrangements.

The Company had no unrecognized tax benefits as of December 31, 2024 and March 31, 2025.

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

The Company paid $ 35.6 million and $ 39.5 million in income taxes during the nine months ended September 30, 2023 and 2024, respectively.

The Company paid $ 2.4 million and $ 1.9 million in income taxes during the three months ended March 31, 2024 and 2025, respectively.

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.

6 unchanged sentences

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 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 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.

1 unchanged sentence

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 three and nine months ended September 30, 2023 and 2024 is presented in the following table (in thousands):

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

2023 2024 2023 2024

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

Higher Education Australia/New Zealand Education Technology Services Total

Revenues $ 219,236 $ 47,375 $ 23,639 $ 290,250

Segment expenses

Direct segment expenses 175,695 45,209 12,429 233,333

Enterprise shared services allocation 15,528 4,421 1,122 21,071

Segment income (loss) from operations $ 28,013 $ ( 2,255 ) $ 10,088 $ 35,846

Unallocated expenses

Restructuring costs 5,510

Consolidated income from operations $ 41,356

Other income 1,794

Consolidated income before income taxes $ 43,150

A summary of financial information by reportable segment for the three months ended March 31, 2025 is presented in the following table (in thousands):

Higher Education Australia/New Zealand Education Technology Services Total

Revenues $ 221,008 $ 48,260 $ 34,322 $ 303,590

Segment expenses

Direct segment expenses 175,538 45,251 18,808 239,597

Enterprise shared services allocation 15,514 5,105 1,666 22,285

Segment income (loss) from operations $ 29,956 $ ( 2,096 ) $ 13,848 $ 41,708

Unallocated expenses

Restructuring costs ( 1,914 )

Consolidated income from operations $ 39,794

Other income 2,211

Consolidated income before income taxes $ 42,005

The following table presents a schedule of significant non-cash items included in segment income (loss) from operations by reportable segment for the three months ended March 31, 2024 and 2025 (in thousands):

For the three months ended March 31,

Depreciation and amortization

Higher Education $ 7,828 $ 7,625

1 unchanged sentence

Education Technology Services 795 1,114

Consolidated revenues $ 285,936 $ 305,958 $ 830,222 $ 908,474

Income from operations

Restructuring costs — 118

Consolidated depreciation and amortization $ 11,069 $ 11,195

Stock-based compensation

Higher Education $ 3,910 $ 4,380

1 unchanged sentence

Education Technology Services 389 629

Amortization of intangible assets ( 3,382 ) — ( 10,364 ) —

Merger and integration costs ( 330 ) — ( 1,335 ) —

Restructuring costs 136 107

Consolidated income from operations $ 25,629 $ 36,326 $ 41,097 $ 119,606

Consolidated stock-based compensation $ 5,329 $ 5,471

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

Except as described below, there have been no material developments in the litigation and other legal proceedings that are described in our Annual Report on Form 10-K for the year ended December 31, 2023.

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.

On February 1, 2024, Strayer University received notice that the Department received approximately 1,900 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.

In the notices received, the Department indicated that:

(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;

(3) it is optional for institutions to respond to the applications;

and (4) not responding will result in no negative inference by the Department.

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

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

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

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

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

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

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

Our higher education institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition, and results of operations.

Other than as set forth below, there have been no material changes to the laws and regulations affecting our higher education institutions that are described in our Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no material developments in the litigation and other legal proceedings that are described in our Annual Report on Form 10-K for the year ended December 31, 2024.

The Company’s higher education institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition, and results of operations.

Other than as set forth below, there have been no material changes to the laws and regulations affecting the Company’s higher education institutions that are described in our Annual Report on Form 10-K for the year ended December 31, 2024.

United States Regulation

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.

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

The regulation went into effect on July 1, 2015 (“2015 Regulations”), with the exception of new disclosure requirements, which generally went into effect January 1, 2017, although some portions of those requirements were delayed until July 1, 2019.

The 2015 Regulations included two debt-to-earnings measures, consisting of an annual income rate and a discretionary income rate.

The annual income rate measured student debt in relation to earnings, and the discretionary income rate measured student debt in relation to discretionary income.

A program passed if the program’s graduates:

• have an annual income rate ratio that does not exceed 8%;

• have a discretionary income rate that does not exceed 20%.

In addition, a program that did not pass either of the debt-to-earnings metrics and had an annual income rate between 8% and 12% or a discretionary income rate between 20% and 30% was considered to be in a warning zone.

A program failed if the program’s graduates had an annual income rate of 12% or greater and a discretionary income rate of 30% or greater.

A program became Title IV-ineligible for three years if it failed both metrics for two out of three consecutive years or failed to pass at least one metric for four consecutive award years.

On January 8, 2017, Capella University and Strayer University received their final 2015 debt-to-earnings measures.

None of their programs failed the debt-to-earnings metrics.

One active Capella University program, the Masters of Science in Marriage and Family Counseling/Therapy, was “in the zone” and two active Strayer University programs, the Associate in Arts in Accounting and Associate in Arts in Business Administration, were “in the zone.” Each of those three programs remained fully eligible.

The Department has not released any subsequent debt-to-earnings measures under the 2015 Regulations.

On July 1, 2019, the Department of Education released final gainful employment regulations, which contain a full repeal of the 2015 Regulations, including all debt measures, reporting, disclosure, and certification requirements, effective July 1, 2020.

On December 8, 2021, the Department of Education announced its intention to establish a negotiated rulemaking committee to prepare proposed regulations for, among other topics, gainful employment, via the Institutional and Programmatic Eligibility rulemaking.

Meetings of the negotiated rulemaking committee occurred in spring 2022 with the committee failing to reach consensus.

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

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

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

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

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

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

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

The final rule also includes the requirement that, beginning July 1, 2026, all schools provide a link to a Department of Education-hosted website that includes

information on cost, earnings, and licensure information, and the gainful employment metrics.

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

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

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

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

On 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 lawsuits.

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

In a March 29, 2024 Electronic Announcement (GE-24-01), the Department released additional information and updates to help institutions prepare for complying with the Financial Value Transparency (“FVT”) and Gainful Employment (“GE”) Regulations, including that the deadline for initial institutional data reporting has been extended 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 has been further extended from October 1, 2024 to January 15, 2025.

Borrower Defenses to Repayment

Pursuant to the Higher Education Act and following negotiated rulemaking, on November 1, 2016, the Department of Education released a final regulation specifying the acts or omissions of an institution that a borrower may assert as a defense to repayment of a loan made under the Direct Loan Program and the consequences of such borrower defenses for borrowers, institutions, and the Secretary of Education (the “2016 BDTR Rule”).

Under the 2016 BDTR Rule, for Direct Loans disbursed after July 1, 2017, a student borrower may assert a defense to repayment if:

(1) the student borrower obtained a state or federal court judgment against the institution;

(2) the institution failed to perform on a contract with the student;

and/or (3) the institution committed a “substantial misrepresentation” on which the borrower reasonably relied to his or her detriment.

These defenses are asserted through claims submitted to the Department of Education, and the Department has the authority to issue a final decision.

In addition, the regulation permits the Department to grant relief to an individual or group of individuals, including individuals who have not applied to the Department seeking relief.

If a defense is successfully raised, the Department has discretion to initiate action to collect from an institution the amount of losses incurred based on the borrower defense.

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.

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.

However, in October 2018, a judge denied a request to delay implementation of portions of the regulations, and as a result the 2016 BDTR Rule went into effect as of October 16, 2018.

On September 23, 2019, the Department published final Borrower Defense to Repayment regulations (the “2019 BDTR Rule”), which governs borrower defense to repayment claims in connection with loans first disbursed on or after July 1, 2020.

Under the 2019 BDTR Rule, an individual borrower can assert a defense to repayment and be eligible for relief if she or he establishes, by a preponderance of the evidence, that (1) the institution at which the borrower enrolled made a misrepresentation of material fact upon which the borrower reasonably relied in deciding to obtain a Direct Loan or a loan repaid by a Direct Consolidation Loan;

(2) the misrepresentation directly and clearly related to the borrower’s enrollment or continuing enrollment at the institution or the institution’s provision of education services for which the loan was made;

and (3) the borrower was financially harmed by the misrepresentation.

The Department will grant forbearance on all loans related to a claim at the time the claim is made.

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

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

“Financial harm” does not include damages for nonmonetary loss,

and the act of taking out a Direct Loan, alone, does not constitute evidence of financial harm.

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

The 2019 BDTR Rule contains certain limitations and procedural protections.

Among the most prominent of these restrictions, the regulation contains a three-year limitation period of claims, measured from the student’s separation from the institution, does not permit claims to be filed on behalf of groups, and requires that institutions receive access to any evidence in the Department’s possession to inform its response.

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.

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.

Institutions are required to accept responsibility for the repayment of amounts discharged by the Secretary pursuant to the borrower defense to repayment, closed school discharge (associated with closure of a school or an additional location or branch campus), false certification discharge, and unpaid refund discharge regulations.

If the Secretary discharges a loan in whole or in part, the Department of Education may require the school to repay the amount of the discharged loan.

On August 10, 2021, the Department of Education announced its intention to establish a rulemaking committee to develop proposed regulations on, among other things, Borrower Defense to Repayment.

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 (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;

establishes a presumption that borrowers reasonably relied upon misrepresentations or omissions;

establishes a reconsideration process for borrowers whose claims are not approved for a full discharge, including based on a state law standard;

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

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 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) response to the Department’s petition is due December 12, 2024.

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

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

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

State Authorization Reciprocity Agreement (SARA)

2 unchanged sentences

Each of the universities applies separately to non-SARA member states (i.e., California) for authorization to enroll students, if such authorization is required by the state.

On January 16, 2024, SARA’s coordinating entity, the National Council for State Authorization Reciprocity Agreements (“NC-SARA”), initiated its 2024 policy

manual modification process with a call for proposals for SARA policy changes.

On January 21, 2025, SARA’s coordinating entity, the National Council for State Authorization Reciprocity Agreements (“NC-SARA”), initiated its 2025 policy manual modification process with a call for proposals for SARA policy changes.

The call for proposals ended February 7, 2025 and yielded 32 proposed changes to NC-SARA policies, some of which, if adopted, could significantly alter the distance education reciprocity agreements.

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

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

On April 26, 2024, NC-SARA 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.

Such proposals included circumstances under which an institution may be denied participation in SARA or have its participation limited as a result of investigations or adverse actions against it related to the institution’s academic quality, financial stability, or student consumer protection issues.

On April 25, 2025, NC-SARA will hold its public comment forum to seek input on these potential changes.

In addition to the public comment forum, NC-SARA permitted submission of written comments in two rounds:

between March 6, 2025 and April 7, 2025 (now closed), and between June 9, 2025 and July 7, 2025.

NC-SARA’s regional compacts/regional steering committees and the NC-SARA board of directors will vote on each proposal presented by September 2, 2025, and October 23, 2025, respectively.

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

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.

Negotiated rulemaking committee meetings concluded in March 2024 with no consensus reached on the topics.

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

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

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.

Negotiated rulemaking committee meetings concluded in March 2024.

Consensus was reached on TRIO programs but no other topics.

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

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

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

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

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

The Department accepted public comments through August 23, 2024.

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

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

On April 4, 2025, the Department announced its intention to host public hearings and convene one or more negotiated rulemaking committees to prepare proposed Title IV regulations.

The Department is hosting public hearings on April 29, 2025 and May 1, 2025 and will accept written comments through May 5, 2025.

The Department is seeking public comments on the following topics:

(1) refining definitions of a qualifying employer for the purposes of determining eligibility for the Public Service Loan Forgiveness program;

(2) Pay As You Earn (PAYE) and Income Contingent Repayment (ICR) plans;

and (3) potential topics that would streamline current federal student financial assistance program regulations while maintaining or improving program integrity and institutional quality.

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 new rule applies to all forms of sex-based harassment (not only sexual harassment);

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.

Multiple states have joined lawsuits against the Department challenging the 2024 Title IX Rule, 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;

2 unchanged sentences

5:24-cv-4041 (D.

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

Australia Regulation

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

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

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

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

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

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.

The Department did not appeal this decision before the March 10, 2025 appeal deadline passed;

however, a nonprofit legal organization is seeking to intervene in support of the 2024 Title IX Rule.

On February 4, 2025, the Department’s Office for Civil Rights issued a Dear Colleague Letter (“DCL”) 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.

On January 20, 2025, President Trump issued Executive Order 14168 “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government” ordering, among other matters, all agencies to enforce laws governing sex-based rights, protections, opportunities, and accommodations consistent with definitions provided in the executive order.

The executive order defines “sex” as a binary classification that does not include “gender identity” and requires agencies to take various actions consistent with that position.

On April 4, 2025, the Department and the U.S.

Department of Justice jointly announced a “Title IX Special Investigations Team” (the “Title IX SIT”) in response to what the agencies describe as a “staggering” volume of Title IX complaints.

The Title IX SIT is intended to streamline Title IX investigations conducted by the federal government by leveraging teams with personnel from both agencies to coordinate on investigation and enforcement.

Under Title VI of the Civil Rights Act of 1964, institutions receiving federal financial assistance are prohibited from discriminating on the basis of race, color, or national origin.

On January 21, 2025, President Trump issued Executive Order 14173 “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” ordering, among other matters, all agencies to enforce civil rights laws and combat illegal private sector Diversity, Equity, and Inclusion (“DEI”) preferences, mandates, policies, programs and activities.

The executive order further directed the U.S.

Attorney General and the Secretary of Education to issue guidance to all institutions of higher education that receive federal financial assistance regarding measures and practices required to comply with the U.S.

Supreme Court’s decision in Students for Fair Admissions, Inc.

President and Fellows of Harvard College , 600 U.S.

181 (2023) (“ SFFA ”), in which the Court significantly altered the existing legal framework relevant to race-conscious admissions to achieve student body diversity.

On February 5, 2025, the U.S.

Attorney General issued a memorandum to all Department of Justice employees stating that the Department of Justice’s Civil Rights Division will investigate, eliminate, and penalize illegal DEI as well as diversity, equity, inclusion and accessibility (“DEIA”) preferences, mandates, policies, programs and activities in the private sector and educational institutions that receive federal funds.

The Attorney General further stated that by March 1, 2025, the Civil Rights Division and Office of Legal Policy would jointly prepare a report containing recommendations for enforcement and address:

key sectors of concern within the Department of Justice’s jurisdiction;

the most egregious illegal DEI/DEIA practitioners in each sector of concern;

plans to deter the use of illegal DEI/DEIA, including proposals for criminal investigations and up to nine potential civil compliance investigations of publicly traded corporations and certain other organizations;

potential litigation activities, regulatory actions, and sub-regulatory guidance;

and other strategies to end illegal DEI and DEIA discrimination and preferences and comply with federal civil rights laws.

Litigation challenging Executive Order 14173 was brought in federal district court;

after a preliminary injunction was granted enjoining portions of the executive order, an appeals court stayed the injunction pending appeal.

On February 14, 2025, the Department of Education issued a DCL setting forth the anti-discrimination obligations of institutions that receive federal financial assistance.

The DCL asserts that the SFFA decision applies more broadly to prohibit using race in decisions related to admissions, hiring, promotion, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies, and all other aspects of student, academic, and campus life.

The DCL further states that programs and activities that treat students differently on the basis of race to achieve “nebulous” diversity, racial balancing, social justice, or equity goals are illegal.

The Department informed institutions that the Department intended to take appropriate measures to assess compliance with the applicable statutes and regulations beginning February 28, 2025.

The DCL further noted that institutions that fail to comply with federal civil rights law may, consistent with applicable law, face potential loss of federal funding.

On February 28, 2025, the Department issued additional guidance in a Frequently Asked Questions (“FAQs”) document clarifying aspects of the DCL.

Multiple lawsuits have been filed seeking to enjoin and vacate the DCL and FAQs alleging that they are unconstitutional, violate the Administrative Procedure Act, and are vague and disrupt educational practices, including by limiting academic freedom.

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

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

On March 14, 2025, the Department announced that its Office for Civil Rights has opened investigations into dozens of higher education institutions for alleged Title VI violations.

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

What changed 10-Q

Item 1. Financial Statements