Strategic Education, Inc. 10-Q

Item 1. Financial Statements STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2025 March 31, 2026 ASSETS Current assets: Cash and cash equivalents $ 140,757 $ 150,350 Marketable securities 7,297 7,275 Tuition receivable, net 78,202 86,190 Income taxes receivable 2,511 — Other current assets 49,090 60,025 Total current assets 277,857 303,840 Property and equipment, net 107,373 106,322 Right-of-use lease assets 91,140 90,319 Marketable securities, non-current 5,000 5,000 Intangible assets 249,243 250,413 Goodwill 1,242,413 1,255,556 Other assets 65,514 66,926 Total assets $ 2,038,540 $ 2,078,376 LIABILITIES & STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 105,791 $ 115,096 Income taxes payable — 1,490 Contract liabilities 96,247 132,024 Lease liabilities 15,905 14,316 Total current liabilities 217,943 262,926 Deferred income tax liabilities 35,835 39,287 Lease liabilities, non-current 93,216 94,884 Other long-term liabilities 45,140 46,826 Total liabilities 392,134 443,923 Commitments and contingencies Stockholders’ equity: Common stock, par value $ 0.01 ; 32,000,000 shares authorized; 22,968,860 and 22,612,909 shares issued and outstanding at December 31, 2025 and March 31, 2026, respectively 230 226 Additional paid-in capital 1,436,795 1,399,393 Accumulated other comprehensive loss ( 46,115 ) ( 30,958 ) Retained earnings 255,496 265,792 Total stockholders’ equity 1,646,406 1,634,453 Total liabilities and stockholders’ equity $ 2,038,540 $ 2,078,376 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) For the three months ended March 31, 2025 2026 Revenues $ 303,590 $ 305,928 Costs and expenses: Instructional and support costs 158,286 154,771 General and administration 103,596 107,970 Restructuring costs 1,914 2,102 Total costs and expenses 263,796 264,843 Income from operations 39,794 41,085 Other income 2,211 1,205 Income before income taxes 42,005 42,290 Provision for income taxes 12,261 9,481 Net income $ 29,744 $ 32,809 Earnings per share: Basic $ 1.28 $ 1.52 Diluted $ 1.24 $ 1.48 Weighted average shares outstanding: Basic 23,320 21,620 Diluted 24,065 22,171 STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) For the three months ended March 31, 2025 2026 Net income $ 29,744 $ 32,809 Other comprehensive income: Foreign currency translation adjustments 3,343 15,157 Unrealized gains on marketable securities, net of tax 1 — Comprehensive income $ 33,088 $ 47,966 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share data) For the three months ended March 31, 2025 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Par Value Balance at December 31, 2024 24,502,385 $ 245 $ 1,532,414 $ 218,405 $ ( 88,565 ) $ 1,662,499 Stock-based compensation — — 5,471 — — 5,471 Exercise of stock options 762 — 43 — — 43 Issuance of restricted stock, net 149,871 2 ( 9,317 ) — — ( 9,315 ) Repurchase of common stock ( 391,302 ) ( 4 ) ( 25,759 ) ( 7,937 ) — ( 33,700 ) Common stock dividends ($ 0.60 per share) — — — ( 14,772 ) — ( 14,772 ) Foreign currency translation adjustment — — — — 3,343 3,343 Unrealized gains on marketable securities, net of tax — — — — 1 1 Net income — — — 29,744 — 29,744 Balance at March 31, 2025 24,261,716 $ 243 $ 1,502,852 $ 225,440 $ ( 85,221 ) $ 1,643,314 For the three months ended March 31, 2026 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Par Value Balance at December 31, 2025 22,968,860 $ 230 $ 1,436,795 $ 255,496 $ ( 46,115 ) $ 1,646,406 Stock-based compensation — — 5,386 — — 5,386 Exercise of stock options 1,211 — 63 — — 63 Issuance of restricted stock, net 135,943 1 ( 12,568 ) — — ( 12,567 ) Repurchase of common stock ( 493,105 ) ( 5 ) ( 30,283 ) ( 8,918 ) — ( 39,206 ) Common stock dividends ($ 0.60 per share) — — — ( 13,595 ) — ( 13,595 ) Foreign currency translation adjustment — — — — 15,157 15,157 Net income — — — 32,809 — 32,809 Balance at March 31, 2026 22,612,909 $ 226 $ 1,399,393 $ 265,792 $ ( 30,958 ) $ 1,634,453 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the three months ended March 31, 2025 2026 Cash flows from operating activities: Net income $ 29,744 $ 32,809 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred financing costs 106 106 Amortization of investment discount/premium ( 86 ) ( 3 ) Depreciation and amortization 11,195 10,926 Deferred income taxes 3,076 3,269 Stock-based compensation 5,471 5,386 Impairment of right-of-use lease assets 79 233 Changes in assets and liabilities: Tuition receivable, net ( 13,385 ) ( 8,025 ) Other assets ( 11,434 ) ( 7,743 ) Accounts payable and accrued expenses 492 10,757 Income taxes payable and income taxes receivable 7,234 3,985 Contract liabilities 37,815 37,465 Other liabilities ( 2,651 ) ( 1,791 ) Net cash provided by operating activities 67,656 87,374 Cash flows from investing activities: Purchases of property and equipment ( 10,318 ) ( 10,066 ) Purchases of marketable securities ( 25,635 ) — Proceeds from marketable securities 34,342 — Proceeds from other investments — 29 Other investments ( 90 ) ( 138 ) Net cash used in investing activities ( 1,701 ) ( 10,175 ) Cash flows from financing activities: Common dividends paid ( 14,797 ) ( 13,577 ) Net payments for stock awards ( 9,273 ) ( 12,504 ) Repurchase of common stock ( 32,025 ) ( 39,995 ) Net cash used in financing activities ( 56,095 ) ( 66,076 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 68 185 Net increase in cash, cash equivalents, and restricted cash 9,928 11,308 Cash, cash equivalents, and restricted cash — beginning of period 146,656 149,511 Cash, cash equivalents, and restricted cash — end of period $ 156,584 $ 160,819 Non-cash transactions: Non-cash additions to property and equipment $ 2,087 $ 4,256 Right-of-use lease assets obtained in exchange for operating lease liabilities $ 677 $ 2,170 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents STRATEGIC EDUCATION, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Nature of Operations Strategic Education, Inc. (“Strategic Education” or the “Company”), a Maryland corporation, is an education services company that provides access to high-quality education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets. Strategic Education’s portfolio of companies is dedicated to closing the skills gap by placing adults on the most direct path between learning and employment. The accompanying condensed consolidated financial statements and footnotes include the results of the Company’s three reportable segments: (1) U.S. Higher Education (“USHE”), which is primarily comprised of Capella University and Strayer University and is focused on providing flexible and affordable certificate and degree programs to working adults; (2) Education Technology Services (“ETS”), which primarily develops and maintains relationships with employers to build education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs, including through Workforce Edge, a full-service education benefits administration solution for employers, and Sophia Learning, which offers low-cost online general education-level courses; 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. 2. Significant Accounting Policies Financial Statement Presentation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidated financial statements. All information as of, and for the three months ended, March 31, 2025 and 2026 is unaudited but, in the opinion of management, contains all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the condensed consolidated statements of financial position, results of operations, and cash flows of the Company. The condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited consolidated financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. 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, 2025. The results of operations for the three months ended March 31, 2026 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. Instructional and support costs generally contain items of expense directly attributable to activities that support students. This expense category includes salaries and benefits of faculty and academic administrators, as well as admissions and administrative personnel who support and serve student interests. Instructional and support costs also include course development costs and costs associated with delivering course content, including educational supplies, facilities, and all other physical plant and occupancy costs, with the exception of costs attributable to the corporate offices. Bad debt expense incurred on delinquent student account balances is also included in instructional and support costs. General and administration expenses include salaries and benefits of management and employees engaged in finance, human resources, legal, regulatory compliance, marketing and other corporate functions. Also included are the costs of advertising and production of marketing materials. General and administration expense also includes the facilities occupancy and other related costs attributable to such functions. Restructuring costs include severance and other personnel-related expenses from employee terminations, asset impairment charges, gains/losses on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities. See Note 4 for additional information. Foreign Currency Translation and Transaction Gains and Losses The United States Dollar (“USD”) is the functional currency of the Company and its subsidiaries operating in the United States. The financial statements of its foreign subsidiaries are maintained in their functional currencies. The functional currency of each of the foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business. Financial 7 Table of Contents statements of foreign subsidiaries are translated into USD using the exchange rates applicable to the dates of the financial statements. Assets and liabilities are translated into USD using the period-end spot foreign exchange rates. Income and expenses are translated at the weighted-average exchange rates in effect during the period. Equity accounts are translated at historical exchange rates. The effects of these translation adjustments are reported as a component of accumulated other comprehensive income (loss) within stockholders’ equity. For any transaction that is in a currency different from the entity’s functional currency, the Company records a net gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) in the unaudited condensed consolidated statements of income. Restricted Cash In the United States, a significant portion of the Company’s revenues are funded by various federal and state government programs. The Company generally does not receive funds from these programs prior to the start of the corresponding academic term. The Company may be required to return certain funds for students who withdraw from a U.S. higher education institution during the academic term. The Company had approximately $ 0.3 million and $ 0.3 million of these unpaid obligations as of December 31, 2025 and March 31, 2026, 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, 2025 and March 31, 2026, the Company had approximately $ 8.0 million and $ 9.6 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. As part of conducting operations in Pennsylvania, the Company is required to maintain a “minimum protective endowment” of at least $ 0.5 million in an interest-bearing account as long as the Company operates its campuses in the state. The Company holds these funds in an interest-bearing account, which is included in other assets in the unaudited condensed consolidated balance sheets. The following table illustrates the reconciliation of cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows as of March 31, 2025 and 2026 (in thousands): As of March 31, 2025 2026 Cash and cash equivalents $ 144,215 $ 150,350 Restricted cash included in other current assets 11,869 9,969 Restricted cash included in other assets 500 500 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 156,584 $ 160,819 Marketable Securities Investments in marketable securities are carried at either amortized cost or fair value. Investments in marketable securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in marketable securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Management determines the appropriate designation of marketable securities at the time of purchase and re-evaluates such designation as of each balance sheet date. As of December 31, 2025 and March 31, 2026, all of the Company’s marketable securities are designated as held-to-maturity. 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. 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. In order to determine whether there is an impairment, management evaluates whether the Company intends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. If management intends to sell an impaired debt security, or it is more likely than not the Company will be required to sell the security prior to recovering its amortized cost basis, an impairment is deemed to have occurred. The amount of an impairment related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings. The cost of securities sold is based on the specific identification method. Amortization of premiums, accretion of discounts, interest, dividend income and realized gains and losses are included in other income. The Company classifies marketable 8 Table of Contents securities as either current or non-current assets based on management’s intent with regard to usage of those funds, which is dependent upon the security’s maturity date and liquidity considerations based on current market conditions. If management intends to hold the securities for longer than one year as of the balance sheet date, they are classified as non-current. Tuition Receivable and Allowance for Credit Losses The Company records tuition receivable and contract liabilities for its students upon the start of the academic term or program. Tuition receivables are not collateralized; however, credit risk is minimized as a result of the diverse nature of the Company’s student bases and through the participation of the majority of the students in federally funded financial aid programs. An allowance for credit losses is established based upon historical collection rates by age of receivable and adjusted for reasonable expectations of future collection performance, net of estimated recoveries. These collection rates incorporate historical performance based on a student’s current enrollment status, likelihood of future enrollment, degree mix trends and changes in the overall economic and regulatory environment. 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, 2025 and March 31, 2026 (in thousands): December 31, 2025 March 31, 2026 Tuition receivable $ 127,634 $ 134,155 Allowance for credit losses ( 49,432 ) ( 47,965 ) Tuition receivable, net $ 78,202 $ 86,190 An additional $ 6.2 million and $ 6.2 million of tuition receivable, net, are included in other assets as of December 31, 2025 and March 31, 2026, 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, 2025 and 2026 (in thousands). For the three months ended March 31, 2025 2026 Allowance for credit losses, beginning of period $ 46,185 $ 45,465 Additions charged to expense 12,774 11,433 Write-offs, net of recoveries ( 13,389 ) ( 12,978 ) Allowance for credit losses, end of period $ 45,570 $ 43,920 Goodwill and Intangible Assets Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed in a business combination. Indefinite-lived intangible assets, which include trade names, are recorded at fair value on their acquisition date. An indefinite life was assigned to the trade names because they have the continued ability to generate cash flows indefinitely. Goodwill and the indefinite-lived intangible assets are assessed at least annually for impairment on the first day of 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 or indefinite-lived intangible asset below its carrying amount. 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. Authorized Stock The Company has authorized 32,000,000 shares of common stock, par value $ 0.01 , of which 22,968,860 and 22,612,909 shares were issued and outstanding as of December 31, 2025 and March 31, 2026, 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. 9 Table of Contents In February 2026, 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 16, 2026. Net Income Per Share Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share reflects the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options, restricted stock, and restricted stock units (“stock awards”). The dilutive effect of stock awards was determined using the treasury stock method. Under the treasury stock method, the following are assumed to be used to repurchase shares of the Company’s common stock: (1) the proceeds received from the exercise of stock options and (2) the amount of compensation cost associated with the stock awards for future service not yet recognized by the Company. 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 months ended March 31, 2025 and 2026 (in thousands): For the three months ended March 31, 2025 2026 Weighted average shares outstanding used to compute basic earnings per share 23,320 21,620 Incremental shares issuable upon the assumed exercise of stock options 2 — Unvested restricted stock and restricted stock units 743 551 Shares used to compute diluted earnings per share 24,065 22,171 Anti-dilutive shares excluded from the diluted earnings per share calculation 95 4 Comprehensive Income Comprehensive income includes net income and all changes in the Company’s equity during a period from non-owner sources, which for the Company consists of foreign currency translation adjustments and unrealized gains and losses on available-for-sale marketable securities, net of tax. As of December 31, 2025 and March 31, 2026, the balance of accumulated other comprehensive loss was $ 46.1 million and $ 31.0 million, respectively. There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the three months ended March 31, 2025 and 2026. 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, income tax provisions, the useful lives of property and equipment, redemption rates for scholarship programs and valuation of contract liabilities, the fair value of right-of-use lease assets for facilities that have been vacated, incremental borrowing rates, valuation of deferred tax assets, goodwill, and intangible assets, forfeiture rates and achievability of performance targets for stock-based compensation plans and accrued expenses. Actual results could differ from those estimates. Recently Issued Accounting Standards Not Yet Adopted In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). ASU 2025-06 eliminates the existing guidance that categorizes software development into distinct project stages and replaces it with a recognition threshold based on management’s authorization and commitment to fund the project, along with the probability of completion and intended 10 Table of Contents use. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual periods. Early adoption is permitted, and the amendments can be applied prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2025-06 will have on its consolidated financial statements and related 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. 3. Revenue Recognition The Company’s revenues primarily consist of tuition revenue arising from educational services provided in the form of classroom instruction and online courses. Tuition revenue is deferred and recognized ratably over the period of instruction, which varies depending on the course format and chosen program of study. Capella University’s GuidedPath classes and Strayer University’s educational programs typically are offered on a quarterly basis, and such periods coincide with the Company’s quarterly financial reporting periods, while Capella University’s FlexPath courses are delivered over a twelve-week subscription period. Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within the calendar year. The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the three months ended March 31, 2025 and 2026 (in thousands): For the three months ended March 31, 2025 2026 U.S. Higher Education Segment Tuition, net of discounts, grants and scholarships $ 211,746 $ 202,814 Other (1) 9,262 9,777 Total U.S. Higher Education Segment 221,008 212,591 Australia/New Zealand Segment Tuition, net of discounts, grants and scholarships 46,446 51,084 Other (1) 1,814 736 Total Australia/New Zealand Segment 48,260 51,820 Education Technology Services Segment (2) 34,322 41,517 Consolidated revenue $ 303,590 $ 305,928 _________________________________________ (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 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. Arrangements with students may have multiple performance obligations. For such arrangements, the Company allocates net tuition revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers and observable market prices. The standalone selling price of material rights to receive free classes or scholarships in the future is estimated based on class tuition prices or amounts of scholarships, and likelihood of redemption based on historical student attendance and completion behavior. At the start of each academic term or program, a contract liability is recorded for academic services to be provided, and a tuition receivable is recorded for the portion of the tuition not paid in advance. Any cash received prior to the start of an academic term or program is recorded as a contract liability. Some students may be eligible for scholarship awards, the estimated value of which will be realized in the future and is deducted from revenue when earned, based on historical student attendance and completion behavior. Contract liabilities are recorded as a current or long-term liability in the unaudited condensed consolidated balance sheets based on when the benefits are expected to be realized. Course materials are available to enable students to access electronically all required materials for courses in which they enroll during the quarter. Revenue derived from course materials is recognized ratably over the duration of the course as the Company provides the student with continuous access to these materials during the term. For sales of certain other course materials, the Company is considered the agent in the transaction, and as such, the Company recognizes revenue net of amounts owed to the 11 Table of Contents vendor at the time of sale. 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 – 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 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. The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs. Each quarter, the Company assesses its assumptions underlying these estimates, and to date, any adjustments to the estimates have not been material. The amount estimated to be redeemed in the next 12 months is $ 17.3 million and is included as a current contract liability in the unaudited condensed consolidated balance sheets. The remainder is expected to be redeemed within two to four years . 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, 2025 2026 Balance at beginning of period $ 37,118 $ 38,125 Revenue deferred 5,334 5,381 Benefit redeemed ( 4,746 ) ( 4,443 ) Balance at end of period $ 37,706 $ 39,063 Contract Liabilities – Tuition Cap 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 estimates. The table below presents activity in the contract liability related to Tuition Cap (in thousands): For the three months ended March 31, 2025 2026 Balance at beginning of period $ 14,672 $ 18,483 Revenue deferred 1,323 3,124 Benefit redeemed ( 441 ) ( 811 ) Balance at end of period $ 15,554 $ 20,796 The amount estimated to be redeemed in the next 12 months is $ 8.1 million and is included as a current contract liability in the unaudited condensed consolidated balance sheets. Costs to Obtain a Contract Certain commissions earned by third-party international agents are considered incremental and recoverable costs of obtaining a contract with customers in the ANZ segment. These costs are deferred and then amortized over the period of benefit which ranges from one year to two years . 12 Table of Contents 4. Restructuring and Related Charges 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 $ 1.5 million and $ 1.6 million of severance and other employee separation charges during the three months ended March 31, 2025 and 2026, 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 three months ended March 31, 2025 and 2026 (in thousands): Severance Restructuring Liability Balance as of December 31, 2024 $ 534 Restructuring and other charges 1,537 Payments ( 1,285 ) Balance as of March 31, 2025 $ 786 Balance as of December 31, 2025 (1) $ 860 Restructuring and other charges 1,552 Payments ( 1,309 ) Balance as of March 31, 2026 (1) $ 1,103 ____________________________________ (1) Restructuring liabilities are included in accounts payable and accrued expenses in the unaudited condensed consolidated balance sheets. The Company evaluates its real estate portfolio on an ongoing basis, which has resulted in the consolidation and sale of underutilized facilities. The Company recorded approximately $ 0.1 million and $ 0.2 million of right-of-use lease asset impairment charges during the three months ended March 31, 2025 and 2026, respectively, related to facilities that were consolidated during the period. The Company also recorded fixed asset impairment charges of approximately $ 0.1 million and $ 0.2 million during the three months ended March 31, 2025 and 2026, respectively. These right-of-use lease asset impairments and fixed asset impairments are included in Restructuring costs on the unaudited condensed consolidated statements of income. 5. Marketable Securities The following is a summary of held-to-maturity securities, which are carried at amortized cost, as of December 31, 2025 and March 31, 2026 (in thousands): Amortized Cost Gross Unrealized Gain Gross Unrealized (Losses) Estimated Fair Value Balance as of December 31, 2025 Term deposits $ 2,306 $ — $ — $ 2,306 U.S. treasury securities 4,991 30 — 5,021 Corporate debt securities 5,000 12 — 5,012 Total $ 12,297 $ 42 $ — $ 12,339 Balance as of March 31, 2026 Term deposits $ 2,281 $ — $ — $ 2,281 U.S. treasury securities 4,994 15 — 5,009 Corporate debt securities 5,000 13 — 5,013 Total $ 12,275 $ 28 $ — $ 12,303 The unrealized gains and losses on the Company’s investments in marketable securities as of December 31, 2025 and March 31, 2026 were caused by changes in market values primarily due to interest rate changes. As of March 31, 2026, there were no securities which were in an unrealized loss position for a period longer than 12 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 13 Table of Contents amortized cost basis, which may be at maturity. As such, no impairment charges were recorded during the three months ended March 31, 2025 and 2026. 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 held-to-maturity securities as of December 31, 2025 and March 31, 2026 (in thousands): December 31, 2025 March 31, 2026 Due within one year $ 7,297 $ 7,275 Due after one year through five years 5,000 5,000 Total $ 12,297 $ 12,275 The following table summarizes the purchases of and proceeds from marketable securities for the three months ended March 31, 2025 and 2026 (in thousands): For the three months ended March 31, 2025 2026 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 33,842 — Total proceeds from marketable securities $ 34,342 $ — The Company did not sell any available-for-sale or held-to-maturity securities during the three months ended March 31, 2025 and 2026. The Company did not record any gross realized gains or losses in net income during the three months ended March 31, 2025 and 2026. 6. Fair Value Measurement Assets measured at fair value on a recurring basis consist of the following as of December 31, 2025 (in thousands): Fair Value Measurements at Reporting Date Using December 31, 2025 Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Money market funds $ 88,239 $ 88,239 $ — $ — Total assets at fair value on a recurring basis $ 88,239 $ 88,239 $ — $ — Assets measured at fair value on a recurring basis consist of the following as of March 31, 2026 (in thousands): Fair Value Measurements at Reporting Date Using March 31, 2026 Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Money market funds $ 94,135 $ 94,135 $ — $ — Total assets at fair value on a recurring basis $ 94,135 $ 94,135 $ — $ — 14 Table of Contents The Company measures the above items on a recurring basis at fair value as follows: • 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 as of December 31, 2025 and March 31, 2026 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments. 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 as of December 31, 2025 and March 31, 2026 was $ 12.3 million and $ 12.3 million, respectively. These securities are valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets and are classified in Level 2 of the fair value hierarchy. The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and did not transfer assets or liabilities between levels of the fair value hierarchy during the three months ended March 31, 2025 and 2026. 7. Goodwill and Intangible Assets Goodwill The following table presents changes in the carrying value of goodwill by segment for the three months ended March 31, 2025 (in thousands): U.S. 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 following table presents changes in the carrying value of goodwill by segment for the three months ended March 31, 2026 (in thousands): U.S. Higher Education Australia / New Zealand Education Technology Services Total Balance as of December 31, 2025 $ 632,075 $ 510,338 $ 100,000 $ 1,242,413 Additions — — — — Impairments — — — — Currency translation adjustments — 13,143 — 13,143 Balance as of March 31, 2026 $ 632,075 $ 523,481 $ 100,000 $ 1,255,556 The Company assesses goodwill at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount. No events or circumstances occurred in the three months ended March 31, 2026 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, 2025 and 2026. Intangible Assets Indefinite-lived intangible assets not subject to amortization consist of trade names. The Company assigned an indefinite useful life to its trade name intangible assets, as it is believed these assets have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic, or other factors to limit the useful life of the trade name intangibles. 15 Table of Contents The following table presents changes in the carrying value of indefinite-lived intangible assets (in thousands): For the three months ended March 31, 2025 2026 Balance at beginning of period $ 245,098 $ 249,243 Additions — — Impairments — — Disposals — ( 476 ) Currency translation adjustments 354 1,646 Balance at end of period $ 245,452 $ 250,413 The Company assesses indefinite-lived intangible assets at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective indefinite-lived intangible asset below its carrying amount. No events or circumstances occurred in the three months ended March 31, 2026 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, 2025 and 2026. 8. Other Current Assets Other current assets consist of the following as of December 31, 2025 and March 31, 2026 (in thousands): December 31, 2025 March 31, 2026 Prepaid expenses $ 22,970 $ 27,997 Cloud computing arrangements 11,074 13,252 Restricted cash 8,254 9,969 Deferred contract costs 4,714 6,361 Other 2,078 2,446 Other current assets $ 49,090 $ 60,025 9. Other Assets Other assets consist of the following as of December 31, 2025 and March 31, 2026 (in thousands): December 31, 2025 March 31, 2026 Cloud computing arrangements, net of current portion $ 24,941 $ 24,507 Prepaid expenses, net of current portion 14,973 14,906 Equity method investments 9,472 9,508 Tuition receivable, net, non-current 6,217 6,169 Deferred contract costs, net of current portion 2,149 3,052 Other investments 2,786 2,766 Other 4,976 6,018 Other assets $ 65,514 $ 66,926 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 Long-term prepaid expenses primarily relate to payments that have been made for future services to be provided after one year. 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, 2025 and March 31, 2026, $ 13.2 million and $ 12.8 million, respectively, of this payment 16 Table of Contents 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 The Company holds investments in certain limited partnerships that invest in various innovative companies in the health care and education-related technology fields. The Company has commitments to invest up to an additional $ 1.6 million across these partnerships through 2031. The Company’s investments range from 3 % to 5 % of any partnership’s interest and are accounted for under the equity method. The following table illustrates changes in the Company’s limited partnership investments for the three months ended March 31, 2025 and 2026 (in thousands): For the three months ended March 31, 2025 2026 Limited partnership investments, beginning of period $ 13,428 $ 9,472 Capital contributions 90 138 Pro-rata share in the net income (loss) of limited partnerships ( 4 ) ( 102 ) Distributions — — Limited partnership investments, end of period $ 13,514 $ 9,508 Tuition Receivable Non-current tuition receivable, net, represents tuition that the Company expects to collect, but not within the next 12 months. Deferred Contract Costs The Company defers certain commissions paid in the ANZ segment to third-party international recruitment agents and amortizes these costs over the period of benefit. Other Investments The Company holds investments in education technology start-ups focused on transformational technologies that improve student success. These investments are accounted for at cost less impairment as they do not have readily determinable fair value. Other Other is comprised primarily of deferred financing costs associated with the Company’s credit facility, deferred accreditation costs associated with the ANZ segment, and refundable security deposits associated with the Company’s leased campus and office space. 10. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following as of December 31, 2025 and March 31, 2026 (in thousands): December 31, 2025 March 31, 2026 Trade payables $ 55,986 $ 67,013 Accrued compensation and benefits 42,083 39,346 Accrued student obligations and other 7,722 8,737 Accounts payable and accrued expenses $ 105,791 $ 115,096 11. Long-Term Debt On October 18, 2024, the Company entered into an amended credit facility (the “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 17 Table of Contents (A) $ 300 million and (B) 100 % of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75 :1.00. In addition, the Amended Credit Facility provides for a subfacility for borrowings in certain foreign currencies in an amount equal to the U.S. dollar equivalent of $ 150 million. 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. 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. The Company also is subject to a quarterly unused commitment fee ranging from 0.20 % to 0.30 % per annum depending on the Company’s leverage ratio, times the daily unused amount under the Revolving Credit Facility. The Amended Credit Facility is guaranteed by all domestic subsidiaries, subject to certain exceptions, and secured by substantially all of the assets of the Company and its subsidiary guarantors. The Amended Credit Facility contains customary affirmative and negative covenants, representations, warranties, events of default, and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Amended Credit Facility. In addition, the Amended Credit Facility requires that the Company satisfy certain financial maintenance covenants, including: • A leverage ratio of not greater than 2.00 to 1.00. Leverage ratio is defined as the ratio of total debt (net of unrestricted cash in an amount not to exceed $ 150 million) to trailing four-quarter EBITDA. • A coverage ratio of not less than 1.75 to 1.00. Coverage ratio is defined as the ratio of trailing four-quarter EBITDA and rent expense to trailing four-quarter interest and rent expense. As of December 31, 2025 and March 31, 2026, 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, 2025 and 2026, the Company paid $ 0.1 million and $ 0.1 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility. 12. Other Long-Term Liabilities Other long-term liabilities consist of the following as of December 31, 2025 and March 31, 2026 (in thousands): December 31, 2025 March 31, 2026 Contract liabilities, net of current portion $ 35,577 $ 37,366 Asset retirement obligations 3,874 3,830 Other 5,689 5,630 Other long-term liabilities $ 45,140 $ 46,826 Contract Liabilities In connection with its student tuition contracts, the Company has an obligation to provide free or discounted tuition in the future should certain eligibility conditions be maintained. Long-term contract liabilities represent the amount of revenue under these arrangements that the Company expects will be realized after one year. Asset Retirement Obligations Certain of the Company’s lease agreements require the leased premises to be returned in a predetermined condition. Other Other is comprised primarily of employee-related obligations and other long-term liabilities. 18 Table of Contents 13. Equity Awards The following table sets forth the amount of stock-based compensation expense recorded in each of the expense line items for the three months ended March 31, 2025 and 2026 (in thousands): For the three months ended March 31, 2025 2026 Instructional and support costs $ 2,287 $ 1,744 General and administration 3,077 3,546 Restructuring costs 107 96 Stock-based compensation expense included in operating expense 5,471 5,386 Tax benefit 1,435 1,405 Stock-based compensation expense, net of tax $ 4,036 $ 3,981 14. Income Taxes During the three months ended March 31, 2025 and 2026, the Company recorded income tax expense of $ 12.3 million and $ 9.5 million, respectively. Income tax expense for the three months ended March 31, 2025 and 2026 include windfall tax impacts of approximately $ 0.5 million and $ 2.6 million, respectively, related to share-based payment arrangements. The Company had no unrecognized tax benefits as of December 31, 2025 and March 31, 2026. 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 $ 1.9 million and $ 2.4 million in income taxes during the three months ended March 31, 2025 and 2026, respectively. The tax years since 2022 remain open for federal tax examination, the tax years since 2021 remain open to examination by certain states, and the tax years since 2021 remain open to examination by foreign taxing jurisdictions in which the Company is subject to taxation. 15. Segment Reporting Strategic Education is an educational services company that provides access to high-quality education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets. Strategic Education’s portfolio of companies is dedicated to closing the skills gap by placing adults on the most direct path between learning and employment. The Company’s organizational structure includes three operating and reportable segments: U.S. Higher Education, Education Technology Services, and Australia/New Zealand. The USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Capella University and Strayer University, including the Jack Welch Management Institute MBA, which is an offering of Strayer University. USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are offerings of Strayer University. The ETS 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 ETS segment are an important source of student enrollment for Capella University and Strayer University, and a significant portion of the revenue attributed to the ETS segment is driven by the volume of enrollment derived from these employer relationships. ETS also supports employer partners through Workforce Edge, a platform which provides employers a full-service education benefits administration solution, and Sophia Learning, which offers low-cost online general education-level courses recommended by the American Council on Education for credit at other colleges and universities. The ANZ segment is comprised of Torrens University, Think Education, and Media Design School at Strayer (“MDS”) 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. 19 Table of Contents 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 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, 2025 is presented in the following table (in thousands): U.S. 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 A summary of financial information by reportable segment for the three months ended March 31, 2026 is presented in the following table (in thousands): U.S. Higher Education Australia/New Zealand Education Technology Services Total Revenues $ 212,591 $ 51,820 $ 41,517 $ 305,928 Segment expenses Direct segment expenses 171,619 48,316 19,708 239,643 Enterprise shared services allocation 15,470 5,511 2,117 23,098 Segment income (loss) from operations $ 25,502 $ ( 2,007 ) $ 19,692 $ 43,187 Unallocated expenses Restructuring costs ( 2,102 ) Consolidated income from operations $ 41,085 Other income 1,205 Consolidated income before income taxes $ 42,290 20 Table of Contents 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, 2025 and 2026 (in thousands): For the three months ended March 31, 2025 2026 Depreciation and amortization U.S. Higher Education $ 7,625 $ 7,115 Australia/New Zealand 2,338 2,215 Education Technology Services 1,114 1,424 Restructuring costs 118 172 Consolidated depreciation and amortization $ 11,195 $ 10,926 Stock-based compensation U.S. Higher Education $ 4,380 $ 4,604 Australia/New Zealand 355 241 Education Technology Services 629 445 Restructuring costs 107 96 Consolidated stock-based compensation $ 5,471 $ 5,386 16. Litigation The Company is involved in litigation and other legal proceedings arising out of the ordinary course of its business. 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, 2025, other than as described below. On June 22, 2022, in litigation in which Capella University is not a party, Sweet, et al. v. Miguel Cardona and the United States Department of Education , United States District Court for the Northern District of California, Case No. 3:19-cv-03674-WHA, the Department joined a proposed class settlement agreement that resulted in a blanket grant of automatic, presumptive relief for all borrower defense to repayment applications filed by students at any of approximately 150 different listed institutions, including Capella University, through June 22, 2022. The class settlement agreement also provided certain expedited review of borrower defense claims related to schools excluded from the automatic relief list, as well as for borrowers who applied during the period after execution of the settlement and before final approval (“Post-Class Applicants”). The district court granted final approval of the settlement on November 16, 2022. Intervenors, including multiple intervening higher education institutions and companies, appealed the district court’s order. Intervenors’ request to stay the district court’s final judgment approving the settlement pending resolution of the appeal was denied. It is unclear whether the Department might seek recovery for the amounts of loans discharged pursuant to the automatic relief provision in the Sweet settlement. In a July 25, 2022 filing in the same litigation, the Department stated that providing automatic relief to such borrowers “does not constitute the granting or adjudication of a borrower defense pursuant to the Borrower Defense Regulations, and therefore provides no basis to the Department for initiating a borrower defense recoupment proceeding against any institution identified” on the list. The Department has indicated that any recoupment against institutions “could be imposed only after the Department initiated a separate, future proceeding, in accordance with regulations that require the Department to prove a sufficient basis for liability and provide schools with notice and an opportunity to be heard.” If the Department were to seek recovery for the amounts of automatically discharged loans of Capella University students under the Sweet settlement, Capella University would dispute and defend against such efforts. At this time, the Company is unable to predict the ultimate outcome of Capella-related borrower defense applications. If the Department were to successfully seek recovery for the amounts of discharged loans from Capella University in future proceedings, any such recovery could have a material adverse effect on our business. As a result of the Fifth Circuit’s August 7, 2023 nationwide injunction of the 2022 Borrower Defense to Repayment (“BDTR”) Regulations, the Department announced that while it would not adjudicate any borrower defense applications under the 2022 Borrower Defense to Repayment Regulations unless and until the effective date is reinstated, it will continue to adjudicate applications under a prior version of the rule if required pursuant to a court ordered settlement. For the Sweet Post-Class Applicants, the Department agreed to adjudicate such claims under the 2016 BDTR Rule, and pursuant to the Sweet settlement terms, if the Department did not adjudicate the applications by January 28, 2026, it would provide the applicants “Full Settlement Relief” (i.e., federal student loan(s) associated with the borrower’s attendance at the school will be discharged, the Department will refund any amounts paid to the Department on those loans, and the credit tradeline for those loans will be deleted from the 21 Table of Contents borrower’s credit report). In November 2025, the Department requested an 18-month extension of the January 28, 2026 deadline for the Post-Class Applicants, which was denied by the district court; the Department requested reconsideration in January 2026, which was also denied. The Department has appealed to the Ninth Circuit; an emergency motion to stay the district court order pending appeal was denied in March 2026, and the appeal is proceeding on the merits. In 2023, the Department informed institutions that it would be notifying most schools of all applications received by the Department from June 23, 2022 to November 15, 2022 (constituting Sweet Post-Class Applicants) in a single send (and anticipated completing notification to all schools by approximately April 2024). For further discussion of the Sweet litigation, please refer to Note 21, Litigation, in the consolidated financial statements appearing in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2025. In March 2024, the Australian Fair Work Ombudsman (“FWO”) issued a compliance notice to Torrens University (“Torrens”), alleging that Torrens had underpaid an academic employee for work performed between 2018 and 2024 in violation of the Higher Education Industry – Academic Staff Award (the “Award”), which prescribes minimum wages for academic employees under Australian law. The compliance notice interpreted the Award to require that institutions compensate the academic employee for the marking of student assessments separately from and in addition to standard lecture delivery rates. On April 24, 2024, Torrens filed suit in the Federal Court of Australia (“Federal Court”) seeking judicial review of the compliance notice, arguing that FWO’s interpretation of the Award was incorrect and that time spent marking student assessments properly constituted “associated working time” and therefore was included within the lecture delivery rate. On June 16, 2025, the Federal Court set aside the compliance notice, finding that marking student assessments constituted “associated working time” when performed by lecturers in subjects they taught. The FWO appealed that decision to the Full Federal Court (“Full Court”). On March 17, 2026, the Full Court allowed the appeal, overturned the June 2025 judgment, and reinstated the compliance notice. The Full Court concluded that, under the Award, lecture delivery rates compensate only for limited associated working time and that ordinary marking work generally constitutes a separate activity requiring separate payment. Torrens filed an Application for Special Leave to appeal the Full Court’s decision to the High Court of Australia. The Company is unable to predict the final outcome of the litigation. At the date of this report, it is not practicable to determine the financial impact arising from this matter. Accordingly, no provision has been recognized in the condensed consolidated financial statements. The Company will continue to assess the matter and will recognize a provision if an obligation becomes probable and can be reliably measured. 17. Regulation 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, 2025. United States Regulation U.S. Accreditation On March 16, 2026, the Department of Education announced the continued recognition of the Middle States Commission on Higher Education (“Middle States” or “Middle States Commission”) until May 31, 2028. Middle States accredits Strayer University. The Middle States Commission will be required to submit two monitoring reports due six and 12 months from the March 16, 2026 letter date. These monitoring reports are tied to Middle States’s suspended standards and references to diversity, equity, and inclusion. Borrower Defenses to Repayment On March 30, 2026, the Department issued an Electronic Announcement regarding borrower defense applications that institutions recently had begun to receive. The Department informed institutions that these borrower defense applications are unrelated to the Sweet settlement and will be adjudicated under the relevant BDTR rule based on the date loans were first disbursed to the borrower. Specifically, the Department indicated that it is notifying institutions of applications that will be adjudicated under the 1994 BDTR Rule or the 2016 BDTR Rule. Under the 1994 BDTR Rule, for Direct Loans disbursed prior to July 1, 2017, a borrower may assert a defense to repayment if the institution committed an act or omission that relates to the making of the loan for enrollment at the school or the provision of educational services for which the loan was provided, and would give rise to a cause of action against the institution under applicable state law. Under the 2016 BDTR Rule, for Direct Loans disbursed after July 1, 2017, a borrower may assert a defense to repayment if the institution committed an act or omission that relates to the 22 Table of Contents making of the loan for enrollment at the school or the provision of educational services for which the loan was provided and: (1) the 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. The Department indicated in the Electronic Announcement it has attempted to batch the applications in a single send and to issue batches of notifications periodically. State Authorization Reciprocity Agreement (SARA) Capella University and Strayer University participate in the State Authorization Reciprocity Agreement (“SARA”), enabling enrollment of distance education students in SARA member states. The universities apply separately to non-SARA states (e.g., California) for required authorization. Failure to comply with SARA requirements or state licensing for distance education in non-SARA states could result in loss of SARA participation or state authorization for distance education there. The National Council for State Authorization Reciprocity Agreements (“NC-SARA”) considers potential policy changes each year. Past proposals, including more stringent standards for participation of for-profit institutions or exclusion of for-profit institutions from participation, were not adopted, but illustrate the risk that future changes could materially adversely affect Capella University, Strayer University, and the Company. For example, exclusion from SARA would require seeking authorization in each state, increasing costs and risking denials in some jurisdictions. On January 21, 2026, NC-SARA initiated its 2026 policy manual modification process with a call for proposals for SARA policy changes. The call for proposals ended February 10, 2026 and yielded 33 proposed changes to NC-SARA policies, some of which, if adopted, could significantly alter the distance education reciprocity agreements. 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 24, 2026, NC-SARA will hold its public comment forum to seek input on these proposed changes. In addition to the public comment forum, NC-SARA permits submission of written comments in two rounds: between March 10, 2026 and April 9, 2026 (now closed), and between June 9, 2026 and July 7, 2026. NC-SARA’s regional compacts/regional steering committees and the NC-SARA board of directors will vote on each proposal presented by September 2, 2026, and October 28, 2026, 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. Negotiated Rulemaking The Accountability in Higher Education and Access through Demand-driven Workforce Pell (“AHEAD”) Committee addressed Workforce Pell, institutional and programmatic accountability, and other issues, and met for two multi-day sessions between December 2025 and January 2026. The committee reached consensus on the Workforce Pell and accountability packages. On March 9, 2026, the Department published proposed Workforce Pell regulations consistent with the consensus language and accepted public comment through April 8, 2026. The proposed regulations implement the One Big Beautiful Bill Act’s (“OBBBA”) provisions regarding establishment of a new Workforce Pell program beginning July 1, 2026, that will permit Pell Grants to be used for certain short-term workforce training programs offered by eligible institutions; and changes to the Pell Grant program such that effective July 1, 2026, eligible students will be ineligible for a Pell Grant if their non-federal aid equals or exceeds their cost of attendance. The proposed regulations also invite public comment on certain topics, including the framework for measuring workforce program outcomes and approaches to prevent an institution’s “gaming” of the Pell Grant limitation provision. On April 17, 2026, the Department released proposed regulations on the accountability packages consistent with the consensus language and will accept public comment until May 20, 2026. The accountability packages implement the OBBBA’s separate accountability framework, effective July 2026, for Federal Direct Loan eligibility at the program level, with separate frameworks based on program type and in certain cases cohort size. One-year failures of the relevant metrics trigger risk notifications; the Department is required to provide an appeals process for institutions, with eligibility continuing during appeals. Programs that fail the relevant metrics in two out of three consecutive years become ineligible for Federal Direct Loans, and ineligible programs may reapply after two years per Secretary-established rules. The proposed regulations permit an institution with a one-year failure of the relevant metrics to seek a “voluntary program closeout” under which it would meet certain program discontinuation requirements in exchange for retaining Direct Loan eligibility for no more than three years while currently enrolled students complete their program. Under the proposed regulations, if more than half of an institution’s Title IV recipients or more than half of its Title IV, HEA funds are from low-earning programs in two out of any three consecutive award years, the Department would place the institution on a provisional program participation status and each of the institution’s low-earning outcome programs would be ineligible for all Title IV, HEA funds. 23 Table of Contents The Company is unable to predict the ultimate outcome of the rulemaking process or what guidance the Department may issue regarding how schools are to implement OBBBA’s legislative changes. On January 26, 2026, the Department announced its intent to establish the Accreditation, Innovation, and Modernization negotiated rulemaking committee to develop proposed regulations on accreditation-related topics. The committee convened April 13-17, 2026 and will reconvene May 18-22, 2026. Title VI 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. v. 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 ensure compliance with federal civil rights laws. On July 29, 2025, the Attorney General released “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination,” which describes “the significant legal risks of initiatives that involve discrimination based on protected characteristics” and provides “non-binding best practices to help entities avoid the risk of violations.” Separately, the Department of Justice has indicated that, in certain contexts, compliance with federal anti-discrimination laws may be treated as material to the government’s payment decisions for purposes of the False Claims Act in connection with federal grants and contracts.” Various lawsuits challenging Executive Order 14173 were filed in federal district court; although the U.S. District Court for the District of Maryland initially granted a preliminary injunction enjoining portions of the executive order, the U.S. Court of Appeals for the Fourth Circuit stayed the injunction and, on February 6, 2026, vacated the injunction and remanded the case to the district court. 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 what the Department characterized as “nebulous” diversity, racial balancing, social justice, or equity goals are illegal. The Department informed institutions that it 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. In August 2025, the U.S. District Court for the District of Maryland vacated the DCL, FAQs, and a related certification requirement. On October 15, 2025, the Department filed a notice of appeal to the U.S. Court of Appeals for the Fourth Circuit, but the appeal was dismissed at the Department’s request on January 22, 2026. Following the dismissal of the appeal, the vacatur of the DCL, FAQs and certification requirement is final and the guidance is unenforceable. 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. The Department has continued to initiate additional Title VI investigations, which are not predicated on the vacated DCL or FAQs, but instead are based on the Department’s interpretation of existing statutory and regulatory authority. 24 Table of Contents Australian and New Zealand Regulation Torrens University of Australia (“Torrens”) is one of 44 universities in Australia. It is a private, for-profit entity and is registered with the Tertiary Education Quality and Standards Agency (“TEQSA”). As a self-accrediting university, it is not required to have its individual courses of study accredited by TEQSA. Torrens is also registered with the Australian Skills Quality Authority (“ASQA”) as a Registered Training Organisation (“RTO”) and is thus entitled to offer vocational and training courses. On September 3, 2025, Torrens completed its re-registration process with TEQSA and received a registration renewal from TEQSA for the maximum period of seven years , with two conditions. On December 19, 2024, the Australian Federal Government introduced Ministerial Direction 111, which seeks to limit the number of international students, and is expected to draw student allocations determined by the Government on a prioritization approach. On August 4, 2025, the Australian Federal Government announced that the National Planning Level for international students for 2026 would be increased over 2025, contingent upon institutions fulfilling certain conditions, and that Ministerial Direction 111 would be replaced with an updated ministerial direction to reflect 2026 arrangements. On October 9, 2025, the Education Legislation Amendment (Integrity and Other Measures) Bill 2025 was introduced into the House of Representatives of the Australian Parliament, and passed both houses of Parliament on November 28, 2025. The legislation, which does not address numerical limits on international students, contains several measures to reform key legislative frameworks for education providers and aims to strengthen the integrity and regulation of the international education sector within Australia as well as transnational education and offshore delivery. 25 Table of Contents