What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-07-29 compared with 2026-04-23 · 169 added, 87 removed, 230 unchanged (53% of the section changed)

36 unchanged sentences

Segments Overview

As of March 31, 2026, we had the following reportable segments:

As of June 30, 2026, we had the following reportable segments:

Higher Education (“USHE”) Segment

4 unchanged sentences

The USHE segment provides academic offerings both online and in physical classrooms, helping working adult students develop specific competencies they can apply in their workplace.

• In the first quarter of 2026, USHE enrollment decreased 0.8% to 87,165 compared to 87,854 for the same period in 2025.

• Trailing 4-quarter student persistence within USHE was 88.5% in the fourth quarter of 2025 compared to 87.2% for the same period in 2024.

• In the second quarter of 2026, USHE enrollment decreased 0.5% to 85,894 compared to 86,339 for the same period in 2025.

• Trailing 4-quarter student persistence within USHE was 89.0% in the first quarter of 2026 compared to 87.4% for the same period in 2025.

Student persistence is calculated as the rate of students continuing from one quarter to the next, adjusted for graduates, on a trailing 4-quarter basis.

3 unchanged sentences

87.0 % 86.9 % 87.2 % 87.4 % 87.8 % 88.3 % 88.5 % 89.0 %

• Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 6.7% as of the end of the fourth quarter of 2025.

• Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 5.9% as of the end of the first quarter of 2026.

Government provided grants and loans per credit earned includes all federal loans and grants for students (Title IV hereafter) in our USHE institutions, and is calculated on a trailing 4-quarter basis and reported one quarter in arrears.

8 unchanged sentences

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

• In the first quarter of 2026, employer affiliated enrollment as a percentage of USHE enrollment was 34.5% compared to 31.2% for the same period in 2025.

• In the second quarter of 2026, employer affiliated enrollment as a percentage of USHE enrollment was 34.7% compared to 31.8% for the same period in 2025.

• 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.

4 unchanged sentences

Courses are offered both online and at physical campuses.

Torrens University is registered with the Tertiary Education Quality and Standards Agency (“TEQSA”), the regulator for higher education providers and universities throughout Australia, as an Australian University that is authorized to self-accredit its courses.

Torrens University is registered with the Tertiary Education Quality and Standards Agency (“TEQSA”), the regulator for higher

education providers and universities throughout Australia, as an Australian University that is authorized to self-accredit its courses.

• Think Education is a vocational registered training organization and accredited higher education provider in Australia.

4 unchanged sentences

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

• In the first quarter of 2026, ANZ enrollment decreased 2.5% to 19,570 compared to 20,082 for the same period in 2025.

• In the second quarter of 2026, ANZ enrollment decreased 5.2% to 17,555 compared to 18,524 for the same period in 2025.

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

4 unchanged sentences

Recent Developments

Cybersecurity Incident

The Company experienced a cybersecurity incident on February 25, 2026 (the “Incident”).

After detecting unusual activity that day within its U.S.-based network environment, the Company promptly isolated the affected portion of the environment and shut off access to contain the threat and minimize impact.

Core business functions remained operational, as the majority of staff and student platforms are hosted in separate environments.

The Company immediately took steps to further secure its systems and initiated a formal investigation of the Incident, with assistance from third-party experts.

By proactively taking certain systems offline, the Company prevented the encryption of its data that could have limited access to its systems, and therefore the Company was able to resume normal operations in less than one week.

The Incident affected only parts of the Company’s U.S.-based network environment and did not affect the Company’s Australia and New Zealand operations or our ETS operations, including Sophia Learning.

The Company continues to work with a third-party vendor to identify individuals whose information was contained in the files involved in the Incident.

Once this work is complete, the Company will notify those individuals and relevant regulatory authorities in accordance with law.

As of the date of this filing, the Company believes that the Incident will not have a material adverse effect on its financial statements or business operations.

On March 19, 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.

Although the compliance notice and related litigation concern a single academic employee, the Full Court’s interpretation of the Award applies broadly to similarly situated casual academic staff.

Following the Full Court’s March 2026 decision, the Company began to compensate its casual academic staff for marking hours related to 2026 academic terms and evaluated this matter, including the likelihood and potential magnitude of loss related to historical periods.

As of March 31, 2026, it was not practicable to determine the financial impact of the matter, and no provision was recognized related to historical periods.

While the Company continues to believe it has strong arguments on the merits, during the second quarter of 2026 it obtained further legal advice assessing the likelihood of the High Court granting Special Leave to hear the case on appeal.

The Company also further evaluated the FWO’s pattern of entering into settlements with other employers in the Australian higher education sector involving similar employee compensation matters.

Drawing on its understanding of these settlements, the Company has explored whether remediation could be performed solely on a prospective basis, but ultimately concluded that retrospective remediation was likely to be required.

Based on these factors, the Company concluded that a loss was probable as of June 30, 2026.

In addition, the Company gathered data and completed an analysis of historical marking hours that provided a reliable basis for estimating its back-pay exposure for the period from 2020 through 2025, reflecting the period for which amounts may be payable to casual academic staff, and concluded that the loss was reasonably estimable.

Accordingly, during the second quarter of 2026, the Company recorded a reserve of $13.9 million, consisting of estimated back pay, related payroll taxes and benefits, and interest, within accounts payable and accrued expenses in the unaudited condensed consolidated balance sheets, with a corresponding charge to instructional and support costs in the unaudited condensed consolidated statements of operations (“back-pay reserve”).

The $13.9 million reserve reflects the Company’s best estimate of the potential loss for the period from 2020 through 2025.

The ultimate resolution of the litigation, including the outcome of Torrens’ Application for Special Leave and any subsequent proceedings before the High Court, remains uncertain, and the actual loss could differ materially from the amount reserved.

The Company will continue to monitor developments, including the status of the underlying litigation, and will adjust the reserve as additional information becomes available.

Critical Accounting Policies and Estimates

16 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.

Approximately 94% of our revenues during the three months ended March 31, 2026 consisted of tuition revenue.

Approximately 94% of our revenues during the six months ended June 30, 2026 consisted of tuition revenue.

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

18 unchanged sentences

Our specific refund policies vary across the universities and non-degree programs.

For students attending Capella University, our refund policy varies based on course format.

For students attending Capella University, our refund policy varies based

on course format.

GuidedPath students are allowed a 100% refund through the first five days of the course, a 75% refund from six to twelve days, and 0% refund for the remainder of the period.

14 unchanged sentences

Using the enrollment forecast provided as well as the requesting institution’s historical enrollment trends, the government approves a fixed amount, which is then funded to the institution evenly on a monthly basis.

reconciliation and true-ups are undertaken between the relevant government authority and the institution based on actual eligible enrollments, which may result in a net amount being due to or from the government.

Periodic reconciliation and true-ups are undertaken between the relevant government authority and the institution based on actual eligible enrollments, which may result in a net amount being due to or from the government.

Students at Strayer University registering in credit-bearing courses in any undergraduate program qualify for the Learn and Earn Scholarship (formerly known as the Graduation Fund), whereby qualifying students 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.

6 unchanged sentences

Estimated redemption rates of eligible students vary based on their term of enrollment.

As of March 31, 2026, we had deferred $39.1 million for estimated redemptions earned under the Learn and Earn Scholarship, as compared to $38.1 million at December 31, 2025.

As of June 30, 2026, we had deferred $38.6 million for estimated redemptions earned under the Learn and Earn Scholarship, as compared to $38.1 million at December 31, 2025.

Each quarter, we assess our assumptions underlying our estimates for persistence and estimated redemptions based on actual experience.

6 unchanged sentences

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

For the first quarter of 2026, our bad debt expense was 3.7% of revenue compared to 4.2% for the same period in 2025.

A change in our allowance for credit losses of 1% of gross tuition receivable as of March 31, 2026 would have changed our income from operations by approximately $1.3 million.

For the second quarter of 2026, our bad debt expense was 3.3% of revenue compared to 4.0% for the same period in 2025.

A change in our allowance for credit losses of 1% of gross tuition receivable as of June 30, 2026 would have changed our income from operations by approximately $1.5 million.

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.

Indefinite-lived intangible assets, which include trade names, are recorded at fair market value on their acquisition date.

Indefinite-lived intangible assets, which include trade names, are recorded

at fair market value on their acquisition date.

At the time of acquisition, goodwill and indefinite-lived intangible assets are allocated to reporting units.

1 unchanged sentence

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

No events or circumstances occurred in the three months ended March 31, 2026 to indicate an impairment to goodwill or indefinite-lived intangible assets.

Accordingly, no impairment charges related to goodwill or indefinite-lived intangible assets were recorded during the three months ended March 31, 2026.

No events or circumstances occurred in the three and six months ended June 30, 2026 to indicate an impairment to goodwill or indefinite-lived intangible assets.

Accordingly, no impairment charges related to goodwill or indefinite-lived intangible assets were recorded during the three and six months ended June 30, 2026.

In the second quarter of 2024, the Australian government introduced proposed legislation seeking to limit the number of international students enrolled at Australian institutions.

5 unchanged sentences

In addition, we enrolled up to the international student cap in 2025, and it was subsequently announced that our international enrollment cap would increase in 2026.

For the first quarter of 2026, student enrollment within ANZ decreased 2.5% to 19,570 compared to 20,082 for the same period in 2025, reflecting continued constraints on international enrollment.

These developments reflect a softening of the improving enrollment trends observed at the end of 2025.

In the first quarter of 2026, student enrollment within ANZ decreased 2.5% to 19,570 compared to 20,082 for the same period in 2025, and in the second quarter of 2026, student enrollment within ANZ decreased 5.2% to 17,555 compared to 18,524 for the same period in 2025, reflecting continued constraints on international enrollment.

These developments reflect a softening of the improving enrollment trends observed at the end of 2025 and are primarily due to the Australian government applying a more stringent visa approval process for international students, resulting in a higher rate of visa refusals for applicants from certain countries.

While lower international enrollment was partially offset by growth in domestic enrollment, this growth did not fully offset the decline.

If the regulatory constraints on international students continue permanently and are not offset by growth in domestic enrollment, the goodwill and indefinite-lived intangible assets associated with the ANZ reporting unit could become impaired in the future.

As of March 31, 2026, the ANZ reporting unit had $523.5 million of goodwill and $65.8 million of indefinite-lived intangible assets.

We believe the fair value of the ANZ reporting unit remains in excess of carrying value and that the fair value of the indefinite-lived intangible assets remains in excess of carrying value as of March 31, 2026.

If the regulatory constraints on international students continue and are not offset by growth in domestic enrollment, the goodwill and indefinite-lived intangible assets associated with the ANZ reporting unit could become impaired in the future.

As of June 30, 2026, the ANZ reporting unit had $526.5 million of goodwill and $66.2 million of indefinite-lived intangible assets.

Based on qualitative evaluations performed each reporting period since our last quantitative assessment, we believe the fair value of the ANZ reporting unit remains in excess of carrying value and that the fair value of the indefinite-lived intangible assets remains in excess of carrying value as of June 30, 2026.

Management will continue to assess goodwill and indefinite-lived intangible assets for impairment in future quarters.

3 unchanged sentences

Results of Operations

In the first quarter of 2026, we generated $305.9 million in revenue compared to $303.6 million for the same period in 2025.

Our income from operations was $41.1 million in the first quarter of 2026 compared to $39.8 million for the same period in 2025, primarily due to higher revenue in our ETS segment, partially offset by lower revenue in our USHE segment and higher operating costs.

Net income in the first quarter of 2026 was $32.8 million compared to $29.7 million for the same period in 2025, and diluted earnings per share was $1.48 in the first quarter of 2026 compared to $1.24 for the same period in 2025.

Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Consolidated revenue increased 0.8% to $305.9 million in the first quarter of 2026 compared to $303.6 million in the first quarter of 2025, primarily due to higher revenue in our ETS and ANZ segments, partially offset by lower revenue in our USHE segment.

In the USHE segment for the three months ended March 31, 2026, total enrollment decreased 0.8% to 87,165 from 87,854 for the same period in 2025.

USHE segment revenue decreased 3.8% to $212.6 million in the first quarter of 2026 compared to $221.0 million in the first quarter of 2025, primarily due to a decrease in enrollment and lower revenue per student.

In the ANZ segment for the three months ended March 31, 2026, total enrollment decreased 2.5% to 19,570 from 20,082 for the same period in 2025.

ANZ segment revenue increased 7.4% to $51.8 million in the first quarter of 2026 compared to $48.3 million in the first quarter of 2025, primarily due to favorable foreign currency exchange impacts, partially offset by a decrease in enrollment.

ETS segment revenue increased 21.0% to $41.5 million in the first quarter of 2026 compared to $34.3 million in the first quarter of 2025, primarily due to growth in Sophia Learning subscriptions, an increase in Workforce Edge revenue from employer partnerships, and higher employer affiliated enrollment.

In the second quarter of 2026, we generated $337.3 million in revenue compared to $321.5 million for the same period in 2025.

Our income from operations was $50.5 million in the second quarter of 2026 compared to $45.8 million for the same period in 2025, primarily due to higher revenue, partially offset by higher instructional and support costs, which include the $13.9 million ANZ back-pay reserve.

Net income in the second quarter of 2026 was $37.2 million compared to $32.3 million for the same period in 2025, and diluted earnings per share was $1.71 in the second quarter of 2026 compared to $1.37 for the same period in 2025.

For the six months ended June 30, 2026, we generated $643.2 million in revenue compared to $625.1 million for the same period in 2025.

Our income from operations was $91.6 million for the six months ended June 30, 2026 compared to $85.6 million for the same period in 2025, primarily due to higher revenue, partially offset by higher operating expenses, which include the $13.9 million ANZ back-pay reserve.

Net income was $70.0 million for the six months ended June 30, 2026 compared to $62.1 million for the same period in 2025, and diluted earnings per share was $3.19 for the six months ended June 30, 2026 compared to $2.61 for the same period in 2025.

Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

Consolidated revenue increased 4.9% to $337.3 million in the second quarter of 2026 compared to $321.5 million in the second quarter of 2025, primarily due to favorable foreign currency impacts and higher revenue in our USHE and ETS segments.

In the USHE segment for the three months ended June 30, 2026, total enrollment decreased 0.5% to 85,894 from

86,339 for the same period in 2025.

USHE segment revenue increased 2.3% to $220.5 million in the second quarter of 2026 compared to $215.6 million in the second quarter of 2025, primarily due to higher revenue per student, partially offset by lower enrollment.

In the ANZ segment for the three months ended June 30, 2026, total enrollment decreased 5.2% to 17,555 from 18,524 for the same period in 2025.

ANZ segment revenue increased 7.6% to $74.4 million in the second quarter of 2026 compared to $69.1 million in the second quarter of 2025, primarily due to favorable foreign currency impacts and higher revenue per student, partially offset by lower enrollment.

ETS segment revenue increased 15.4% to $42.4 million in the second quarter of 2026 compared to $36.7 million in the second quarter of 2025, primarily due to growth in Sophia Learning subscriptions, an increase in Workforce Edge revenue from employer partnerships, and higher employer affiliated enrollment.

Instructional and support costs.

Consolidated instructional and support costs decreased to $154.8 million in the first quarter of 2026 compared to $158.3 million in the first quarter of 2025, principally due to lower bad debt expense, facility expenses, personnel-related costs, and stock-based compensation expense, partially offset by higher technology-related costs and unfavorable foreign currency exchange impacts.

Consolidated instructional and support costs as a percentage of revenues decreased to 50.6% in the first quarter of 2026 from 52.1% in the first quarter of 2025.

Consolidated instructional and support costs increased to $177.9 million in the second quarter of 2026 compared to $166.2 million in the second quarter of 2025, primarily due to the ANZ back-pay reserve, higher technology-related and student materials costs, and unfavorable foreign currency impacts, partially offset by lower personnel-related costs, bad debt expense, facility expenses, and stock-based compensation expense.

Consolidated instructional and support costs as a percentage of revenues increased to 52.7% in the second quarter of 2026 from 51.7% in the second quarter of 2025.

General and administration expenses .

Consolidated general and administration expenses increased to $108.0 million in the first quarter of 2026 compared to $103.6 million in the first quarter of 2025, principally due to increased investments in branding initiatives, higher stock-based compensation expense, higher professional services costs, and unfavorable foreign currency exchange impacts, partially offset by lower personnel-related costs.

Consolidated general and administration expenses as a percentage of revenues increased to 35.3% in the first quarter of 2026 from 34.1% in the first quarter of 2025.

Consolidated general and administration expenses decreased to $106.4 million in the second quarter of 2026 compared to $106.8 million in the second quarter of 2025, primarily due to lower international agent commissions, personnel-related costs, and facility expenses, partially offset by unfavorable foreign currency impacts and increased investments in branding initiatives.

Consolidated general and administration expenses as a percentage of revenues decreased to 31.6% in the second quarter of 2026 from 33.2% in the second quarter of 2025.

Restructuring costs .

Restructuring costs increased to $2.1 million in the first quarter of 2026 compared to $1.9 million in the first quarter of 2025, primarily due to a $0.2 million increase in asset impairment charges associated with the consolidation of underutilized facilities.

Restructuring costs decreased to $2.5 million in the second quarter of 2026 compared to $2.8 million in the second quarter of 2025, primarily due to a $1.0 million decrease in asset impairment charges associated with the consolidation of underutilized facilities, partially offset by a $0.7 million increase in severance and other personnel-related expenses from employee terminations.

Income from operations .

Consolidated income from operations increased to $41.1 million in the first quarter of 2026 compared to $39.8 million in the first quarter of 2025, primarily due to higher revenue in our ETS segment, partially offset by lower revenue in our USHE segment and higher operating costs.

USHE segment income from operations decreased 14.9% to $25.5 million in the first quarter of 2026 compared to $30.0 million in the first quarter of 2025, primarily driven by lower revenue due to a decrease in enrollment, increased investments in branding initiatives and higher technology-related and professional services costs, partially offset by lower bad debt expense, personnel-related costs, facility expenses, and depreciation expense.

ANZ segment loss from

operations decreased to $2.0 million in the first quarter of 2026 compared to a loss from operations of $2.1 million in the first quarter of 2025, primarily driven by higher revenue, lower facility expenses, and decreased investments in branding initiatives, partially offset by higher personnel-related costs and technology-related costs.

ETS segment income from operations increased 42.2% to $19.7 million in the first quarter of 2026 compared to $13.8 million in the first quarter of 2025, primarily due to higher revenue as a result of growth in Sophia Learning subscriptions, an increase in Workforce Edge revenue from employer partnerships, and higher employer affiliated enrollment, partially offset by increased investments in branding initiatives.

Consolidated income from operations increased to $50.5 million in the second quarter of 2026 compared to $45.8 million in the second quarter of 2025, primarily due to higher revenue, partially offset by higher instructional and support costs, which include the $13.9 million ANZ back-pay reserve.

USHE segment income from operations increased 56.0% to $32.4 million in the second quarter of 2026 compared to $20.8 million in the second quarter of 2025, primarily due to higher revenue and lower personnel-related costs, bad debt expense, and facility expenses, partially offset by higher technology-related costs and student materials costs.

ANZ segment income from operations decreased to $1.0 million in the second quarter of 2026 compared to $12.8 million in the second quarter of 2025, primarily due to the $13.9 million back-pay reserve and higher instructional costs and technology-related costs, partially offset by lower facility expenses, international agent commissions, and stock-based compensation expense.

ETS segment income from operations increased 30.2% to $19.6 million in the second quarter of 2026 compared to $15.0 million in the second quarter of 2025, primarily due to higher revenue, partially offset by higher technology-related costs and increased investments in branding initiatives.

Other income (expense).

Other income (expense) increased to $1.4 million of income in the second quarter of 2026 compared to $0.3 million of expense in the second quarter of 2025, primarily due to a $2.6 million increase in investment income related to our limited partnership investments, partially offset by a $0.9 million decrease in interest income.

We incurred $0.3 million of interest expense in the three months ended June 30, 2026 compared to $0.3 million in the three months ended June 30, 2025.

Provision for income taxes.

Income tax expense was $14.7 million in the second quarter of 2026 compared to $13.1 million in the second quarter of 2025.

Our effective tax rate for the second quarter of 2026 was 28.3% compared to 28.9% in the second quarter of 2025.

Net income increased to $37.2 million in the second quarter of 2026 compared to $32.3 million in the second quarter of 2025 due to the factors discussed above.

Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

Consolidated revenue increased to $643.2 million in the six months ended June 30, 2026 compared to $625.1 million in the same period in 2025, primarily due to favorable foreign currency impacts and higher revenue in our ETS segment, partially offset by lower revenue in our USHE segment.

USHE segment revenue decreased 0.8% to $433.1 million in the six months ended June 30, 2026 compared to $436.6 million in the same period in 2025, primarily due to lower enrollment, partially offset by higher revenue per student.

ANZ segment revenue increased 7.5% to $126.2 million in the six months ended June 30, 2026 compared to $117.4 million in the same period in 2025, primarily due to favorable foreign currency impacts, partially offset by lower enrollment.

ETS segment revenue increased 18.1% to $83.9 million in the six months ended June 30, 2026 compared to $71.0 million in the same period in 2025, primarily due to growth in Sophia Learning subscriptions, an increase in Workforce

Edge revenue from employer partnerships, and higher employer affiliated enrollment.

Instructional and support costs.

Consolidated instructional and support costs increased to $332.6 million in the six months ended June 30, 2026 compared to $324.4 million in the same period in 2025, primarily due to the ANZ back-pay reserve, higher technology-related and student materials costs, and unfavorable foreign currency impacts, partially offset by lower bad debt expense, facility expenses, personnel-related costs, and stock-based compensation expense.

Consolidated instructional and support costs as a percentage of revenues decreased to 51.7% in the six months ended June 30, 2026 from 51.9% in the six months ended June 30, 2025.

General and administration expenses .

Consolidated general and administration expenses increased to $214.4 million in the six months ended June 30, 2026 compared to $210.4 million in the same period in 2025, primarily due to increased investments in branding initiatives, higher technology-related costs, higher stock-based compensation expense, and unfavorable foreign currency impacts, partially offset by lower personnel-related costs, international agent commissions, and facility expenses.

Consolidated general and administration expenses as a percentage of revenues decreased to 33.3% in the six months ended June 30, 2026 from 33.7% in the six months ended June 30, 2025.

Restructuring costs .

Restructuring costs decreased to $4.6 million in the six months ended June 30, 2026 compared to $4.7 million in the same period in 2025, primarily due to a $0.8 million decrease in asset impairment charges, partially offset by a $0.7 million increase in severance and other personnel-related expenses from employee terminations.

Income from operations .

Consolidated income from operations increased to $91.6 million in the six months ended June 30, 2026 compared to $85.6 million in the same period in 2025, primarily due to higher revenue, partially offset by higher operating expenses, which include the $13.9 million ANZ back-pay reserve.

USHE segment income from operations increased 14.1% to $57.9 million in the six months ended June 30, 2026 compared to $50.7 million in the same period in 2025, primarily due to lower personnel-related costs, bad debt expense, and facility expenses, partially offset by higher technology-related and student materials costs, and increased investments in branding initiatives.

ANZ segment income (loss) from operations decreased to $1.0 million of loss from operations in the six months ended June 30, 2026 compared to $10.7 million of income from operations in the same period in 2025, primarily due to the $13.9 million back-pay reserve and higher instructional costs and technology-related costs, partially offset by lower international agent commissions, stock-based compensation expense and facility expenses.

ETS segment income from operations increased 36.0% to $39.3 million in the six months ended June 30, 2026 compared to $28.9 million in the same period in 2025, primarily due to higher revenue, partially offset by higher technology-related costs and increased investments in branding initiatives.

Other income.

Other income decreased to $1.2 million in the first quarter of 2026 compared to $2.2 million in the first quarter of 2025, primarily due to a $0.9 million decrease in interest income and a $0.1 million decrease in investment income related to our limited partnership investments.

We incurred $0.3 million of interest expense in the three months ended March 31, 2026 compared to $0.3 million in the three months ended March 31, 2025.

Other income increased to $2.6 million in the six months ended June 30, 2026 compared to $1.9 million in the same period in 2025, primarily due to a $2.5 million increase in investment income related to our limited partnership investments, partially offset by a $1.7 million decrease in interest income.

We incurred $0.5 million of interest expense in the six months ended June 30, 2026 compared to $0.5 million in the same period in 2025.

Provision for income taxes.

Income tax expense was $9.5 million in the first quarter of 2026 compared to $12.3 million in the first quarter of 2025.

Income tax expense for the three months ended March 31, 2026 and 2025 include windfall tax impacts of approximately $2.6 million and $0.5 million, respectively, related to share-based payment arrangements.

Our effective tax rate for the first quarter of 2026 was 22.4% compared to 29.2% in the first quarter of 2025.

Net income increased to $32.8 million in the first quarter of 2026 compared to $29.7 million in the first quarter of 2025 due to the factors discussed above.

Income tax expense was $24.2 million and $25.4 million in the six months ended June 30, 2026 and 2025, respectively.

Income tax expense for the six months ended June 30, 2026 and 2025 include windfall tax benefits of approximately $2.6 million and $0.4 million, respectively, related to share-based payment arrangements.

Net income increased to $70.0 million in the six months ended June 30, 2026 compared to $62.1 million in the same period in 2025 due to the factors discussed above.

Non-GAAP Financial Measures

4 unchanged sentences

• discrete tax adjustments related to stock-based compensation and other adjustments.

To illustrate currency impacts to operating results, Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the three months ended March 31, 2026 are also presented on a constant currency basis.

To illustrate currency impacts to operating results, Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the three and six months ended June 30, 2026 are also presented on a constant currency basis.

When considered together with GAAP financial results, we believe these measures provide management and investors with an additional understanding of our business and operating results, including underlying trends associated with our ongoing operations.

2 unchanged sentences

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

Adjusted income from operations was $43.2 million in the first quarter of 2026 compared to $41.7 million for the same period in 2025.

Adjusted net income was $31.6 million in the first quarter of 2026 compared to $31.2 million for the same period in 2025, and adjusted diluted earnings per share was $1.42 in the first quarter of 2026 compared to $1.30 for the same period in 2025.

Adjusted income from operations was $52.9 million in the second quarter of 2026 compared to $48.5 million for the same period in 2025.

Adjusted net income was $38.3 million in the second quarter of 2026 compared to $35.8 million for the same period in 2025, and adjusted diluted earnings per share was $1.76 in the second quarter of 2026 compared to $1.52 for the same period in 2025.

Adjusted income from operations was $96.1 million for the six months ended June 30, 2026 compared to $90.3 million for the same period in 2025.

Adjusted net income was $69.9 million for the six months ended June 30, 2026 compared to $67.0 million for the same period in 2025, and adjusted diluted earnings per share was $3.18 for the six months ended June 30, 2026 compared to $2.82 for the same period in 2025.

The tables below reconcile our reported results of operations to adjusted results:

Reconciliation of Reported to Adjusted Results of Operations for the three months ended March 31, 2026 (in thousands, except per share data)

Reconciliation of Reported to Adjusted Results of Operations for the three months ended June 30, 2026 (in thousands, except per share data)

Non-GAAP Adjustments

(GAAP) Restructuring costs (1)

Income from other investments (2)

adjustments (3)

Total costs and expenses $ 286,784 $ (2,465) $ — $ — $ 284,319

Income from operations $ 50,480 $ 2,465 $ — $ — $ 52,945

Operating margin 15.0% 15.7%

Income before income taxes $ 51,831 $ 2,465 $ (311) $ — $ 53,985

Net income $ 37,159 $ 2,465 $ (311) $ (984) $ 38,329

Diluted earnings per share $ 1.71 $ 1.76

Weighted average diluted shares outstanding 21,736 21,736

Reconciliation of Reported to Adjusted Results of Operations for the three months ended June 30, 2025 (in thousands, except per share data)

Non-GAAP Adjustments

(GAAP) Restructuring costs (1)

Loss from other investments (2)

7 unchanged sentences

Weighted average diluted shares outstanding 23,516 23,516

Reconciliation of Reported to Adjusted Results of Operations for the three months ended March 31, 2025 (in thousands, except per share data)

Reconciliation of Reported to Adjusted Results of Operations for the six months ended June 30, 2026 (in thousands, except per share data)

Non-GAAP Adjustments

(GAAP) Restructuring costs (1)

Income from other investments (2)

adjustments (3)

Total costs and expenses $ 551,627 $ (4,567) $ — $ — $ 547,060

Income from operations $ 91,565 $ 4,567 $ — $ — $ 96,132

Operating margin 14.2% 14.9%

Income before income taxes $ 94,121 $ 4,567 $ (217) $ — $ 98,471

Net income $ 69,968 $ 4,567 $ (217) $ (4,404) $ 69,914

Diluted earnings per share $ 3.19 $ 3.18

Weighted average diluted shares outstanding 21,954 21,954

Reconciliation of Reported to Adjusted Results of Operations for the six months ended June 30, 2025 (in thousands, except per share data)

Non-GAAP Adjustments

(GAAP) Restructuring costs (1)

Loss from other investments (2)

10 unchanged sentences

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

(3) Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted effective tax rate of 29.0% for the three months ended March 31, 2026 and 29.0% for the three months ended March 31, 2025.

The table below reconciles our reported results of operations to adjusted results of operations on a constant currency basis:

Reconciliation of Reported to Adjusted Results of Operations on a Constant Currency Basis for the three months ended March 31, 2026 (in thousands, except per share data):

(3) Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted effective tax rate of 29.0% for the three and six months ended June 30, 2026 and 29.0% for the three and six months ended June 30, 2025.

The tables below reconcile our reported results of operations to adjusted results of operations on a constant currency basis:

Reconciliation of Reported to Adjusted Results of Operations on a Constant Currency Basis for the three months ended June 30, 2026 (in thousands, except per share data):

(GAAP) Non-GAAP adjustments (1)

11 unchanged sentences

Diluted 21,736 21,736

Reconciliation of Reported to Adjusted Results of Operations on a Constant Currency Basis for the six months ended June 30, 2026 (in thousands, except per share data):

(GAAP) Non-GAAP adjustments (1)

Constant currency adjustment (2)

As Adjusted with Constant Currency

Revenues $ 643,192 $ — $ (12,515) $ 630,677

Total costs and expenses $ 551,627 $ (4,567) $ (11,954) $ 535,106

Income from operations $ 91,565 $ 4,567 $ (561) $ 95,571

Operating margin 14.2% 15.2%

Income before income taxes $ 94,121 $ 4,350 $ (608) $ 97,863

Net income $ 69,968 $ (54) $ (431) $ 69,483

Earnings per share:

Diluted $ 3.19 $ 3.16

Weighted average shares outstanding:

Diluted 21,954 21,954

_________________________________________________________________________________________

(1) Reflects non-GAAP adjustments related to restructuring costs, income/loss from other investments, and tax adjustments as described further in the Reconciliation of Reported to Adjusted Results of Operations table above.

(2) Reflects an adjustment to translate foreign currency results after the non-GAAP adjustments for the three months ended March 31, 2026 at a constant exchange rate of 0.63 Australian Dollars to U.S.

Dollars, which was the average exchange rate for the same period in 2025.

(2) Reflects an adjustment to translate foreign currency results after the non-GAAP adjustments for the three and six months ended June 30, 2026 at a constant exchange rate of 0.64 and 0.63 Australian Dollars to U.S.

Dollars, which were the average exchange rates for the same periods in 2025.

Liquidity and Capital Resources

At March 31, 2026, we had cash, cash equivalents, and marketable securities of $162.6 million compared to $153.1 million at December 31, 2025 and $197.6 million at March 31, 2025.

We maintain our cash and cash equivalents primarily in money market funds and demand deposit bank accounts at high credit quality financial institutions, which are included in cash and cash equivalents at March 31, 2026 and 2025.

At June 30, 2026, we had cash, cash equivalents, and marketable securities of $133.8 million compared to $153.1 million at December 31, 2025 and $179.9 million at June 30, 2025.

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

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

During the three months ended March 31, 2026 and 2025, we earned interest income of $1.6 million and $2.5 million, respectively.

During the six months ended June 30, 2026 and 2025, we earned interest income of $2.9 million and $4.6 million, respectively.

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

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

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

2 unchanged sentences

An unused commitment fee ranging from 0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused amounts.

We were in compliance with all applicable covenants related to the Amended Credit Facility as of March 31, 2026.

We had no borrowings outstanding under the Revolving Credit Facility as of March 31, 2026 and March 31, 2025.

During the three months ended March 31, 2026 and 2025, we paid $0.1 million and $0.1 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities for the three months ended March 31, 2026 increased to $87.4 million, compared to $67.7 million for the same period in 2025.

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

Our net cash used in investing activities for the three months ended March 31, 2026 increased to $10.2 million, compared to $1.7 million for the same period in 2025.

The increase in net cash used in investing activities was primarily driven by a $34.3 million

decrease in cash proceeds from marketable securities and other investments, partially offset by a $25.6 million decrease in purchases of marketable securities and a $0.3 million decrease in capital expenditures.

Capital expenditures decreased to $10.1 million for the three months ended March 31, 2026, compared to $10.3 million for the same period in 2025, primarily due to the timing of capital projects.

Our net cash used in financing activities for the three months ended March 31, 2026 increased to $66.1 million, compared to $56.1 million for the same period in 2025.

The increase in net cash used in financing activities was primarily driven by an $8.0 million increase in share repurchases and a $3.2 million increase in net payments for employee stock awards, partially offset by a $1.2 million decrease in cash dividend payments.

The Board of Directors declared a regular, quarterly cash dividend of $0.60 per share of common stock in the first quarter of 2026.

During the three months ended March 31, 2026, we paid a total of $13.6 million in cash dividends on our common stock, compared to $14.8 million for the same period in 2025.

During the three months ended March 31, 2026, we paid $40.0 million to repurchase shares of common stock in the open market under our repurchase program, compared to $32.0 million for the same period in 2025.

As of March 31, 2026, we had $173.5 million remaining in share repurchase authorization to use through December 31, 2026.

For the first quarter of 2026 and 2025, bad debt expense as a percentage of revenue was 3.7% and 4.2%, respectively.

We were in compliance with all applicable covenants related to the Amended Credit Facility as of June 30, 2026.

We had no borrowings outstanding under the Revolving Credit Facility as of June 30, 2026 and June 30, 2025.

During the six months ended June 30, 2026 and 2025, we paid $0.3 million and $0.3 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities for the six months ended June 30, 2026 increased to $116.6 million, compared to $98.9 million for the same period in 2025.

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

Our net cash used in investing activities for the six months ended June 30, 2026 increased to $21.9 million, compared to $4.6 million for the same period in 2025.

The increase in net cash used in investing activities was primarily due to a $34.2 million decrease in cash proceeds from marketable securities and other investments and a $3.0 million increase in capital expenditures, partially offset by a $20.0 million decrease in purchases of marketable securities.

Capital expenditures increased to $24.2 million for the six months ended June 30, 2026, compared to $21.2 million for the same period in 2025, primarily due to increased technology investments.

Our net cash used in financing activities for the six months ended June 30, 2026 increased to $112.2 million, compared to $98.4 million for the same period in 2025.

The increase in net cash used in financing activities was primarily due to a $12.7 million increase in share repurchases and a $3.3 million increase in net payments for employee stock awards, partially offset by a $2.3 million decrease in cash dividend payments.

The Board of Directors declared a regular, quarterly cash dividend of $0.60 per share of common stock in the first two quarters of 2026.

During the six months ended June 30, 2026, we paid a total of $26.9 million in cash dividends on our common stock, compared to $29.2 million for the same period in 2025.

During the six months ended June 30, 2026, we paid $72.7 million to repurchase shares of common stock in the open market under our repurchase program, compared to $60.0 million for the same period in 2025.

As of June 30, 2026, we had $140.7 million remaining in share repurchase authorization to use through December 31, 2026.

For the second quarter of 2026 and 2025, bad debt expense as a percentage of revenue was 3.3% and 4.0%, respectively.

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

1 unchanged sentence

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 2. Management’s Discussion and Analysis