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 June 30, 2026 ASSETS Current assets: Cash and cash equivalents $ 140,757 $ 123,755 Marketable securities 7,297 4,997 Tuition receivable, net 78,202 100,858 Income taxes receivable 2,511 4,772 Other current assets 49,090 55,738 Total current assets 277,857 290,120 Property and equipment, net 107,373 109,994 Right-of-use lease assets 91,140 86,575 Marketable securities, non-current 5,000 5,000 Intangible assets 249,243 250,782 Goodwill 1,242,413 1,258,536 Other assets 65,514 67,855 Total assets $ 2,038,540 $ 2,068,862 LIABILITIES & STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 105,791 $ 117,169 Contract liabilities 96,247 133,005 Lease liabilities 15,905 14,624 Total current liabilities 217,943 264,798 Deferred income tax liabilities 35,835 33,530 Lease liabilities, non-current 93,216 92,089 Other long-term liabilities 45,140 44,861 Total liabilities 392,134 435,278 Commitments and contingencies Stockholders’ equity: Common stock, par value $ 0.01 ; 32,000,000 shares authorized; 22,968,860 and 22,208,559 shares issued and outstanding at December 31, 2025 and June 30, 2026, respectively 230 222 Additional paid-in capital 1,436,795 1,377,637 Accumulated other comprehensive loss ( 46,115 ) ( 27,528 ) Retained earnings 255,496 283,253 Total stockholders’ equity 1,646,406 1,633,584 Total liabilities and stockholders’ equity $ 2,038,540 $ 2,068,862 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 June 30, For the six months ended June 30, 2025 2026 2025 2026 Revenues $ 321,471 $ 337,264 $ 625,061 $ 643,192 Costs and expenses: Instructional and support costs 166,153 177,872 324,439 332,643 General and administration 106,775 106,447 210,371 214,417 Restructuring costs 2,783 2,465 4,697 4,567 Total costs and expenses 275,711 286,784 539,507 551,627 Income from operations 45,760 50,480 85,554 91,565 Other income (expense) ( 315 ) 1,351 1,896 2,556 Income before income taxes 45,445 51,831 87,450 94,121 Provision for income taxes 13,114 14,672 25,375 24,153 Net income $ 32,331 $ 37,159 $ 62,075 $ 69,968 Earnings per share: Basic $ 1.41 $ 1.74 $ 2.69 $ 3.25 Diluted $ 1.37 $ 1.71 $ 2.61 $ 3.19 Weighted average shares outstanding: Basic 22,906 21,381 23,113 21,501 Diluted 23,516 21,736 23,790 21,954 STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) For the three months ended June 30, For the six months ended June 30, 2025 2026 2025 2026 Net income $ 32,331 $ 37,159 $ 62,075 $ 69,968 Other comprehensive income (loss): Foreign currency translation adjustments 26,353 3,430 29,696 18,587 Unrealized losses on marketable securities, net of tax ( 1 ) — — — Comprehensive income $ 58,683 $ 40,589 $ 91,771 $ 88,555 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 June 30, 2025 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Par Value Balance at March 31, 2025 24,261,716 $ 243 $ 1,502,852 $ 225,440 $ ( 85,221 ) $ 1,643,314 Stock-based compensation — — 5,856 — — 5,856 Exercise of stock options 3,396 — 224 — — 224 Issuance of restricted stock, net 9,494 ( 1 ) ( 134 ) — — ( 135 ) Repurchase of common stock ( 325,844 ) ( 3 ) ( 19,527 ) ( 7,236 ) — ( 26,766 ) Common stock dividends ($ 0.60 per share) — — — ( 14,459 ) — ( 14,459 ) Foreign currency translation adjustment — — — — 26,353 26,353 Unrealized losses on marketable securities, net of tax — — — — ( 1 ) ( 1 ) Net income — — — 32,331 — 32,331 Balance at June 30, 2025 23,948,762 $ 239 $ 1,489,271 $ 236,076 $ ( 58,869 ) $ 1,666,717 For the three months ended June 30, 2026 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shares Par Value Balance at March 31, 2026 22,612,909 $ 226 $ 1,399,393 $ 265,792 $ ( 30,958 ) $ 1,634,453 Stock-based compensation — — 4,873 — — 4,873 Issuance of restricted stock, net 16,274 — — — — — Repurchase of common stock ( 420,624 ) ( 4 ) ( 26,629 ) ( 6,434 ) — ( 33,067 ) Common stock dividends ($ 0.60 per share) — — — ( 13,264 ) — ( 13,264 ) Foreign currency translation adjustment — — — — 3,430 3,430 Net income — — — 37,159 — 37,159 Balance at June 30, 2026 22,208,559 $ 222 $ 1,377,637 $ 283,253 $ ( 27,528 ) $ 1,633,584 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 STOCKHOLDERS’ EQUITY (in thousands, except share data) For the six months ended June 30, 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 — — 11,327 — — 11,327 Exercise of stock options 4,158 — 267 — — 267 Issuance of restricted stock, net 159,365 1 ( 9,451 ) — — ( 9,450 ) Repurchase of common stock ( 717,146 ) ( 7 ) ( 45,286 ) ( 15,173 ) — ( 60,466 ) Common stock dividends ($ 1.20 per share) — — — ( 29,231 ) — ( 29,231 ) Foreign currency translation adjustment — — — — 29,696 29,696 Net income — — — 62,075 — 62,075 Balance at June 30, 2025 23,948,762 $ 239 $ 1,489,271 $ 236,076 $ ( 58,869 ) $ 1,666,717 For the six months ended June 30, 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 — — 10,259 — — 10,259 Exercise of stock options 1,211 — 63 — — 63 Issuance of restricted stock, net 152,217 1 ( 12,568 ) — — ( 12,567 ) Repurchase of common stock ( 913,729 ) ( 9 ) ( 56,912 ) ( 15,352 ) — ( 72,273 ) Common stock dividends ($ 1.20 per share) — — — ( 26,859 ) — ( 26,859 ) Foreign currency translation adjustment — — — — 18,587 18,587 Net income — — — 69,968 — 69,968 Balance at June 30, 2026 22,208,559 $ 222 $ 1,377,637 $ 283,253 $ ( 27,528 ) $ 1,633,584 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents STRATEGIC EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the six months ended June 30, 2025 2026 Cash flows from operating activities: Net income $ 62,075 $ 69,968 Adjustments to reconcile net income to net cash provided by operating activities: Gain on early termination of operating leases — ( 190 ) Amortization of deferred financing costs 212 212 Amortization of investment discount/premium ( 140 ) ( 5 ) Depreciation and amortization 23,198 22,121 Deferred income taxes ( 4 ) ( 2,781 ) Stock-based compensation 11,327 10,259 Impairment of right-of-use lease assets 802 338 Changes in assets and liabilities: Tuition receivable, net ( 20,398 ) ( 23,548 ) Other assets ( 13,007 ) ( 5,359 ) Accounts payable and accrued expenses ( 3,643 ) 12,833 Income taxes payable and income taxes receivable ( 3,785 ) ( 2,278 ) Contract liabilities 44,861 37,275 Other liabilities ( 2,634 ) ( 2,295 ) Net cash provided by operating activities 98,864 116,550 Cash flows from investing activities: Purchases of property and equipment ( 21,151 ) ( 24,198 ) Purchases of marketable securities ( 25,804 ) ( 5,802 ) Proceeds from marketable securities 42,575 8,306 Proceeds from other investments — 29 Other investments ( 231 ) ( 138 ) Cash paid for acquisition, net of cash acquired ( 16 ) — Other investing activities — ( 71 ) Net cash used in investing activities ( 4,627 ) ( 21,874 ) Cash flows from financing activities: Common dividends paid ( 29,215 ) ( 26,924 ) Net payments for stock awards ( 9,182 ) ( 12,504 ) Repurchase of common stock ( 60,032 ) ( 72,745 ) Net cash used in financing activities ( 98,429 ) ( 112,173 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 2,519 132 Net decrease in cash, cash equivalents, and restricted cash ( 1,673 ) ( 17,365 ) Cash, cash equivalents, and restricted cash — beginning of period 146,656 149,511 Cash, cash equivalents, and restricted cash — end of period $ 144,983 $ 132,146 Non-cash transactions: Non-cash additions to property and equipment $ 2,797 $ 4,973 Right-of-use lease assets obtained in exchange for operating lease liabilities $ 2,219 $ 2,189 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 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 and six months ended, June 30, 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 and six months ended June 30, 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 8 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 June 30, 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 June 30, 2026, the Company had approximately $ 8.0 million and $ 7.5 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 June 30, 2025 and 2026 (in thousands): As of June 30, 2025 2026 Cash and cash equivalents $ 133,600 $ 123,755 Restricted cash included in other current assets 10,883 7,891 Restricted cash included in other assets 500 500 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 144,983 $ 132,146 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 June 30, 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 securities as either current or non-current assets based on management’s intent with regard to usage of those funds, which is 9 Table of Contents 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 June 30, 2026 (in thousands): December 31, 2025 June 30, 2026 Tuition receivable $ 127,634 $ 147,136 Allowance for credit losses ( 49,432 ) ( 46,278 ) Tuition receivable, net $ 78,202 $ 100,858 An additional $ 6.2 million and $ 6.0 million of tuition receivable, net, are included in other assets as of December 31, 2025 and June 30, 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 and six months ended June 30, 2025 and 2026 (in thousands). For the three months ended June 30, For the six months ended June 30, 2025 2026 2025 2026 Allowance for credit losses, beginning of period $ 45,570 $ 43,920 $ 46,185 $ 45,465 Additions charged to expense 12,806 11,226 25,580 22,659 Write-offs, net of recoveries ( 14,051 ) ( 13,096 ) ( 27,440 ) ( 26,074 ) Allowance for credit losses, end of period $ 44,325 $ 42,050 $ 44,325 $ 42,050 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 22,208,559 shares were issued and outstanding as of December 31, 2025 and June 30, 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. In April 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 June 1, 2026. 10 Table of Contents 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 and six months ended June 30, 2025 and 2026 (in thousands): For the three months ended June 30, For the six months ended June 30, 2025 2026 2025 2026 Weighted average shares outstanding used to compute basic earnings per share 22,906 21,381 23,113 21,501 Incremental shares issuable upon the assumed exercise of stock options 1 — 2 — Unvested restricted stock and restricted stock units 609 355 675 453 Shares used to compute diluted earnings per share 23,516 21,736 23,790 21,954 Anti-dilutive shares excluded from the diluted earnings per share calculation 256 4 175 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 June 30, 2026, the balance of accumulated other comprehensive loss was $ 46.1 million and $ 27.5 million, respectively. There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the three and six months ended June 30, 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 11 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 and six months ended June 30, 2025 and 2026 (in thousands): For the three months ended June 30, For the six months ended June 30, 2025 2026 2025 2026 U.S. Higher Education Segment Tuition, net of discounts, grants and scholarships $ 206,714 $ 207,340 $ 418,460 $ 410,154 Other (1) 8,921 13,186 18,183 22,963 Total U.S. Higher Education Segment 215,635 220,526 436,643 433,117 Australia/New Zealand Segment Tuition, net of discounts, grants and scholarships 67,849 73,407 114,295 124,491 Other (1) 1,295 977 3,109 1,713 Total Australia/New Zealand Segment 69,144 74,384 117,404 126,204 Education Technology Services Segment (2) 36,692 42,354 71,014 83,871 Consolidated revenue $ 321,471 $ 337,264 $ 625,061 $ 643,192 _________________________________________ (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 12 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 $ 18.1 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 six months ended June 30, 2025 2026 Balance at beginning of period $ 37,118 $ 38,125 Revenue deferred 10,883 9,841 Benefit redeemed ( 9,603 ) ( 9,404 ) Balance at end of period $ 38,398 $ 38,562 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 six months ended June 30, 2025 2026 Balance at beginning of period $ 14,672 $ 18,483 Revenue deferred 2,986 5,126 Benefit redeemed ( 1,385 ) ( 2,113 ) Balance at end of period $ 16,273 $ 21,496 The amount estimated to be redeemed in the next 12 months is $ 8.4 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 . 13 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 $ 1.3 million and $ 2.8 million of severance and other employee separation charges during the three and six months ended June 30, 2025, respectively, and $ 2.0 million and $ 3.5 million during the three and six months ended June 30, 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 six months ended June 30, 2025 and 2026 (in thousands): Severance Restructuring Liability Balance as of December 31, 2024 $ 534 Restructuring and other charges 2,837 Payments ( 2,833 ) Balance as of June 30, 2025 $ 538 Balance as of December 31, 2025 (1) $ 860 Restructuring and other charges 3,531 Payments ( 2,687 ) Balance as of June 30, 2026 (1) $ 1,704 ____________________________________ (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 $ 0.7 million and $ 0.8 million of right-of-use lease asset impairment charges during the three and six months ended June 30, 2025, respectively, and $ 0.1 million and $ 0.3 million during the three and six months ended June 30, 2026, respectively, related to facilities that were consolidated during the period. The Company also recorded fixed asset impairment charges of approximately $ 0.7 million and $ 0.8 million during the three and six months ended June 30, 2025, respectively, and $ 0.3 million and $ 0.5 million during the three and six months ended June 30, 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 June 30, 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 June 30, 2026 U.S. treasury securities $ 4,997 $ 6 $ — $ 5,003 Corporate debt securities 5,000 — ( 5 ) 4,995 Total $ 9,997 $ 6 $ ( 5 ) $ 9,998 The unrealized gains and losses on the Company’s investments in marketable securities as of December 31, 2025 and June 30, 2026 were caused by changes in market values primarily due to interest rate changes. As of June 30, 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 14 Table of Contents securities, and it is not more likely than not that the Company will be required to sell these securities prior to the recovery of their amortized cost basis, which may be at maturity. As such, no impairment charges were recorded during the three and six months ended June 30, 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 June 30, 2026 (in thousands): December 31, 2025 June 30, 2026 Due within one year $ 7,297 $ 4,997 Due after one year through five years 5,000 5,000 Total $ 12,297 $ 9,997 The following table summarizes the purchases of and proceeds from marketable securities for the six months ended June 30, 2025 and 2026 (in thousands): For the six months ended June 30, 2025 2026 Purchases of marketable securities Purchases of held-to-maturity securities $ 25,804 $ 5,802 Total purchases of marketable securities $ 25,804 $ 5,802 Proceeds from marketable securities Maturities of available-for-sale securities $ 500 $ — Maturities of held-to-maturity securities 42,075 8,306 Total proceeds from marketable securities $ 42,575 $ 8,306 The Company did not sell any available-for-sale or held-to-maturity securities during the three and six months ended June 30, 2025 and 2026. The Company did not record any gross realized gains or losses in net income during the three and six months ended June 30, 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 June 30, 2026 (in thousands): Fair Value Measurements at Reporting Date Using June 30, 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 $ 52,481 $ 52,481 $ — $ — Total assets at fair value on a recurring basis $ 52,481 $ 52,481 $ — $ — 15 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 June 30, 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 June 30, 2026 was $ 12.3 million and $ 10.0 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 six months ended June 30, 2025 and 2026. 7. Goodwill and Intangible Assets Goodwill The following table presents changes in the carrying value of goodwill by segment for the six months ended June 30, 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 — 24,222 — 24,222 Balance as of June 30, 2025 $ 632,075 $ 499,030 $ 100,000 $ 1,231,105 The following table presents changes in the carrying value of goodwill by segment for the six months ended June 30, 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 — 16,123 — 16,123 Balance as of June 30, 2026 $ 632,075 $ 526,461 $ 100,000 $ 1,258,536 The Company assesses goodwill at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount. No events or circumstances occurred in the three and six months ended June 30, 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 and six months ended June 30, 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. 16 Table of Contents The following table presents changes in the carrying value of indefinite-lived intangible assets (in thousands): For the six months ended June 30, 2025 2026 Balance at beginning of period $ 245,098 $ 249,243 Additions — — Impairments — — Disposals — ( 476 ) Currency translation adjustments 3,074 2,015 Balance at end of period $ 248,172 $ 250,782 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 and six months ended June 30, 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 and six months ended June 30, 2025 and 2026. 8. Other Current Assets Other current assets consist of the following as of December 31, 2025 and June 30, 2026 (in thousands): December 31, 2025 June 30, 2026 Prepaid expenses $ 22,970 $ 26,849 Cloud computing arrangements 11,074 11,854 Restricted cash 8,254 7,891 Deferred contract costs 4,714 6,812 Other 2,078 2,332 Other current assets $ 49,090 $ 55,738 9. Other Assets Other assets consist of the following as of December 31, 2025 and June 30, 2026 (in thousands): December 31, 2025 June 30, 2026 Cloud computing arrangements, net of current portion $ 24,941 $ 25,856 Prepaid expenses, net of current portion 14,973 14,792 Equity method investments 9,472 9,818 Tuition receivable, net, non-current 6,217 5,997 Other investments 2,786 2,766 Deferred contract costs, net of current portion 2,149 2,588 Other 4,976 6,038 Other assets $ 65,514 $ 67,855 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 June 30, 2026, $ 13.2 million and $ 12.4 million, respectively, of this payment is 17 Table of Contents 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 and six months ended June 30, 2025 and 2026 (in thousands): For the three months ended June 30, For the six months ended June 30, 2025 2026 2025 2026 Limited partnership investments, beginning of period $ 13,514 $ 9,508 $ 13,428 $ 9,472 Capital contributions 141 — 231 138 Pro-rata share in the net income (loss) of limited partnerships ( 2,258 ) 310 ( 2,262 ) 208 Distributions — — — — Limited partnership investments, end of period $ 11,397 $ 9,818 $ 11,397 $ 9,818 Tuition Receivable Non-current tuition receivable, net, represents tuition that the Company expects to collect, but not within the next 12 months. 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. 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 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 June 30, 2026 (in thousands): December 31, 2025 June 30, 2026 Trade payables $ 55,986 $ 56,744 Accrued compensation and benefits (1) 42,083 50,825 Accrued student obligations and other 7,722 9,600 Accounts payable and accrued expenses $ 105,791 $ 117,169 _________________________________________ (1) Accrued compensation and benefits as of June 30, 2026 includes a $ 13.9 million casual academic employee back-pay reserve related to the ANZ segment. Refer to Note 16 for additional information on the reserve. 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. 18 Table of Contents The Amended Credit Facility provides the Company with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in the future in an aggregate amount of up to the sum of (x) the greater of (A) $ 300 million and (B) 100 % of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75 :1.00. 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 June 30, 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 six months ended June 30, 2025 and 2026, the Company paid $ 0.3 million and $ 0.3 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 June 30, 2026 (in thousands): December 31, 2025 June 30, 2026 Contract liabilities, net of current portion $ 35,577 $ 36,113 Asset retirement obligations 3,874 3,839 Other 5,689 4,909 Other long-term liabilities $ 45,140 $ 44,861 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. 19 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 and six months ended June 30, 2025 and 2026 (in thousands): For the three months ended June 30, For the six months ended June 30, 2025 2026 2025 2026 Instructional and support costs $ 1,969 $ 1,147 $ 4,256 $ 2,891 General and administration 3,846 3,726 6,923 7,272 Restructuring costs 41 — 148 96 Stock-based compensation expense included in operating expense 5,856 4,873 11,327 10,259 Tax benefit 1,539 1,234 2,974 2,639 Stock-based compensation expense, net of tax $ 4,317 $ 3,639 $ 8,353 $ 7,620 14. Income Taxes During the six months ended June 30, 2025 and 2026, the Company recorded income tax expense of $ 25.4 million and $ 24.2 million, respectively. Income tax expense for the six months ended June 30, 2025 and 2026 include windfall tax benefits of approximately $ 0.4 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 June 30, 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 $ 29.2 million and $ 29.1 million in income taxes during the six months ended June 30, 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. 20 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 June 30, 2025 is presented in the following table (in thousands): U.S. Higher Education Australia/New Zealand Education Technology Services Total Revenues $ 215,635 $ 69,144 $ 36,692 $ 321,471 Segment expenses Direct segment expenses 179,840 50,873 19,949 250,662 Enterprise shared services allocation 15,036 5,515 1,715 22,266 Segment income from operations $ 20,759 $ 12,756 $ 15,028 $ 48,543 Unallocated expenses Restructuring costs ( 2,783 ) Consolidated income from operations $ 45,760 Other expense ( 315 ) Consolidated income before income taxes $ 45,445 A summary of financial information by reportable segment for the three months ended June 30, 2026 is presented in the following table (in thousands): U.S. Higher Education Australia/New Zealand (1) Education Technology Services Total Revenues $ 220,526 $ 74,384 $ 42,354 $ 337,264 Segment expenses Direct segment expenses 174,122 67,834 20,883 262,839 Enterprise shared services allocation 14,029 5,548 1,903 21,480 Segment income from operations $ 32,375 $ 1,002 $ 19,568 $ 52,945 Unallocated expenses Restructuring costs ( 2,465 ) Consolidated income from operations $ 50,480 Other income 1,351 Consolidated income before income taxes $ 51,831 ________________________________________ (1) Australia/New Zealand direct segment expenses and segment income from operations for the three months ended June 30, 2026 include a $ 13.9 million charge related to a casual academic employee back-pay reserve. Refer to Note 16 for additional information on the reserve. 21 Table of Contents A summary of financial information by reportable segment for the six months ended June 30, 2025 is presented in the following table (in thousands): U.S. Higher Education Australia/New Zealand Education Technology Services Total Revenues $ 436,643 $ 117,404 $ 71,014 $ 625,061 Segment expenses Direct segment expenses 355,378 96,124 38,757 490,259 Enterprise shared services allocation 30,550 10,620 3,381 44,551 Segment income from operations $ 50,715 $ 10,660 $ 28,876 $ 90,251 Unallocated expenses Restructuring costs ( 4,697 ) Consolidated income from operations $ 85,554 Other income 1,896 Consolidated income before income taxes $ 87,450 A summary of financial information by reportable segment for the six months ended June 30, 2026 is presented in the following table (in thousands): U.S. Higher Education Australia/New Zealand (1) Education Technology Services Total Revenues $ 433,117 $ 126,204 $ 83,871 $ 643,192 Segment expenses Direct segment expenses 345,741 116,150 40,591 502,482 Enterprise shared services allocation 29,499 11,059 4,020 44,578 Segment income (loss) from operations $ 57,877 $ ( 1,005 ) $ 39,260 $ 96,132 Unallocated expenses Restructuring costs ( 4,567 ) Consolidated income from operations $ 91,565 Other income 2,556 Consolidated income before income taxes $ 94,121 ________________________________________ (1) Australia/New Zealand direct segment expenses and segment loss from operations for the six months ended June 30, 2026 include a $ 13.9 million charge related to a casual academic employee back-pay reserve. Refer to Note 16 for additional information on the reserve. 22 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 and six months ended June 30, 2025 and 2026 (in thousands): For the three months ended June 30, For the six months ended June 30, 2025 2026 2025 2026 Depreciation and amortization U.S. Higher Education $ 7,625 $ 7,204 $ 15,250 $ 14,319 Australia/New Zealand 2,486 2,208 4,824 4,423 Education Technology Services 1,239 1,494 2,353 2,918 Restructuring costs 653 289 771 461 Consolidated depreciation and amortization $ 12,003 $ 11,195 $ 23,198 $ 22,121 Stock-based compensation U.S. Higher Education $ 4,655 $ 4,630 $ 9,035 $ 9,234 Australia/New Zealand 407 ( 453 ) 762 ( 212 ) Education Technology Services 753 696 1,382 1,141 Restructuring costs 41 — 148 96 Consolidated stock-based compensation $ 5,856 $ 4,873 $ 11,327 $ 10,259 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. As disclosed in its Quarterly Report on Form 10-Q for the period ended March 31, 2026, 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 worked with a third-party vendor to identify individuals whose information was contained in the files involved in the Incident and notified those individuals and relevant regulatory authorities in accordance with law. In connection with the Incident, the Company is aware of the filing of a number of putative class action lawsuits in which the Company has been named as a defendant. The complaints advance a range of common-law claims stemming from the alleged exposure of personal information contained in the files involved in the cybersecurity incident. On June 26, 2026, the suits were consolidated under the matter Courtney Hampton v. Strategic Education, Inc. (In re Strategic Education, Inc. Data Breach Litigation) , No. 1:26-cv-01526-AJT-WEF, in the U.S. District Court for the Eastern District of Virginia. The Company intends to defend against these claims vigorously. Because of the many questions of fact and law that may arise, 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. Further, the Company maintains insurance coverage that is expected to apply to potential losses related to this matter. The Company will continue to assess the matter and will recognize a provision if an obligation becomes probable and can be reliably measured. On April 20, 2021, Capella University received a letter from the U.S. Department of Education (“Department of Education” or the “Department”) referencing Wright, et al. v. Capella Education Co., et al. (subsequently captioned Ornelas, et al. v. Capella, et al. ), United States District Court for the District of Minnesota, Case No. 18-cv-1062, and indicating that the Department would require a fact-finding process pursuant to the borrower defense to repayment regulations to determine the validity of more than 23 Table of Contents 1,000 borrower defense applications that have been submitted regarding Capella University. According to the Department, some of the applications allege similar claims as in the Wright matter concerning alleged misrepresentations of the length of time to complete doctoral programs. Capella University subsequently received approximately 500 applications for borrower defense to repayment. Capella University contested each claim for defense to repayment in individualized responses with supporting evidence, the last of which was sent to the Department in August 2021. Since that time, Capella University has not received any communication from the Department related to the set of borrower defense claims received in 2021, nor has Capella University received indication that any of these claims has been evaluated on the facts presented and adjudicated on the merits. 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 BDTR 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 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 appealed to the Ninth Circuit; an emergency motion to stay the district court order pending appeal was denied in March 2026, and the Ninth Circuit affirmed the district court’s decision in July 2026. On January 25, 2024, Capella University received notice that the Department received approximately 6,700 borrower defense to repayment applications with claims for forgiveness of loans taken out at the university and filed between June 23, 2022 and November 15, 2022. On February 1, 2024, Strayer University received notice that the Department received approximately 1,900 borrower defense to repayment applications with claims for forgiveness of loans taken out at the university and filed between June 23, 2022 and November 15, 2022. In the notices received, the Department indicated that: (1) the notification was occurring prior to any substantive review of the applications as well as their adjudication; (2) it would send the applications to Capella University and Strayer University in batches of 500 per week; (3) it is optional for institutions to respond to the applications; and (4) not responding will result in no negative inference by the Department. The Department has also explained that it will separately decide whether to seek recoupment on any approved claim and that any recoupment actions the Department chooses to initiate will have their own notification and response processes, which include providing additional evidence to the institution. The Department has indicated that an institution will learn of the Department’s determination only if it approves a BDTR application and the Department seeks recoupment. In relation to the separate 2021 notice received by Capella University, the Department indicated there were more than 1,000 applications pending, but the Company only ever received approximately 500 actual claims, and after an exhaustive review and 24 Table of Contents response process the Company believes that none properly stated a claim for loan forgiveness. Following the Department’s 2024 notices, Capella University received approximately 6,770 applications, and Strayer University received approximately 1,870 applications. Each university provided a response to the applications it received within the time allowed by the Department. In March 2026, the Department announced it would resume notifying institutions of borrower defense to repayment applications. The Department subsequently informed Capella University that it would be receiving 2,126 borrower defense claims between May and July 2026 and informed Strayer University that it would be receiving 2,125 borrower defense claims between May and July 2026. For further discussion of the Department’s March 2026 announcement, please refer to the “Borrower Defenses to Repayment” section of Note 17, Regulation, of this report. At this time, the Company is unable to predict whether the Department will grant BDTR relief for the claims noticed on January 25, 2024, February 1, 2024, May-July 2026, or at any other time, or if so, whether it will seek recoupment from Capella University or Strayer University. If the Department were to seek recoupment, Capella University and Strayer University would dispute and defend against such efforts. However, if the Department were to successfully seek recovery for the amounts of discharged loans from Strayer University and Capella University in future proceedings, any such recovery could have a material adverse effect on our business. 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, which remains pending. 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. 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. 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 25 Table of Contents 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 as of March 30, 2026 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 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. The Department indicated that “[w]hen [the Department] begins notifying institutions of cases that fall under the 2019 Regulation, we will issue a future announcement with additional details around the notification and adjudication process.” 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 held its public comment forum to seek input on these proposed changes. In addition to the public comment forum, NC-SARA permitted submission of written comments in two rounds: between March 10, 2026 and April 9, 2026, 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. 26 Table of Contents Negotiated Rulemaking On July 24, 2025, the Department announced its intention to establish two negotiated rulemaking committees to prepare proposed regulations implementing the One Big Beautiful Bill Act (“OBBBA”) and related Trump administration priorities. One committee, the Reimagining and Improving Student Education (“RISE”) Committee, addressed federal student loan-related changes and met for two multi-day sessions between September 2025 and November 2025; the committee reached consensus on draft regulatory language, and the Department released final regulations on May 1, 2026. Specifically, the final regulations implement the statutory loan-related changes reflected in OBBBA which among other things includes, with limited grandfathering, new annual, aggregate and lifetime loan limits for graduate students and professional students, proportional adjustment of annual loan limits for students enrolled less than full time, and the phasing out of Federal Direct PLUS loans for graduate students and professional students. The final regulations define “graduate student” and “professional student” for purposes of such changes. “Graduate student” is defined as “[a] student enrolled in a program of study that is above the baccalaureate level and awards a graduate credential (other than a professional degree) upon completion of the program.” “Professional student” is defined as “[a] student enrolled in a program of study that awards a professional degree upon completion of the program,” and the final regulations clarify that a professional degree is a degree that: (1) signifies both completion of the academic requirements for beginning practice in a given profession and a level of professional skill beyond that normally required for a bachelor’s degree; (2) is generally at the doctoral level, and that requires at least six academic years of postsecondary education coursework for completion, including at least two years of post-baccalaureate level coursework; (3) generally requires professional licensure to begin practice; and (4) includes a four-digit program CIP code in certain specified fields (pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, theology, and clinical psychology). On June 29, 2026, following litigation challenging the Department’s approved list of professional degree programs which resulted in a preliminary stay ( American Association of Nurse Practitioners et al v. McMahon et al (D.D.C.)), the Department released via Electronic Announcement an interim updated list of programs that are considered “professional,” including some graduate-level nursing programs. The Department stated in the Electronic Announcement that it “is confident that the professional degree definition in the RISE Final rule is lawful and will continue to defend it,” and indicated that “[t]hese interim administrative designations are provided solely to facilitate implementation of the Court’s order [granting a preliminary stay] and may change as litigation in the case proceeds.” 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 May 19, 2026, the Department published final Workforce Pell regulations. The regulations implement 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. On June 29, 2026, the Department released final regulations on the accountability packages, which it named the Student Tuition and Transparency System (STATS) and Earnings Accountability rule. Most provisions take effect July 1, 2027. Certain changes take effect earlier, including changes relating to reporting obligations beginning July 1, 2026, and, effective August 31, 2026, amendments to program participation agreements to incorporate the STATS and Earnings Accountability framework as a condition of Direct Loan eligibility. The accountability packages implement the OBBBA’s separate accountability framework 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 (i.e., warnings to students and prospective students that the program could become ineligible for the Direct Loan program based on future earnings premium measures). 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. Institutions may appeal Department determinations that a program has failed on the basis of an error in the Department’s calculation of the program’s earnings premium measure, and program eligibility continues during the appeal process. The final regulations also permit an institution with a one-year failure of the relevant metrics to conduct a voluntary “orderly program closure” with the Secretary’s approval under which it would meet certain program discontinuation requirements in exchange for retaining Direct Loan eligibility for the lesser of three years or the program’s full-time length, while currently enrolled students complete their program. If more than half of an institution’s Title IV recipients or more than half of its Title IV, HEA funds are from failing programs in two out of any three consecutive award years, the Department will place the institution on a provisional program participation status and each of the institution’s failing programs will be ineligible for all Title IV, HEA funds (including, for example, Pell Grants). The Department has indicated it intends to publish the first round of metrics in the 2027-2028 award year, with program sanctions first going into effect in 2028-2029. Additionally, to harmonize with existing rules, the final regulations rescind some aspects of the existing gainful employment regulation, including the debt/earnings calculations. 27 Table of Contents 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 for two multi-day sessions in April 2026 and May 2026 and reached consensus on a package of rules. The consensus draft reflects a reorientation of federal accreditation policy, including expansion of federal oversight and policy direction, introduction of competitive dynamics among accreditors, and an emphasis on student outcomes, cost effectiveness and transparency. The rules will be subject to public comment and are expected to be effective July 1, 2027 (assuming proposed regulations are published by November 1, 2026). In July 2026, the Department published an updated regulatory agenda, which identifies 19 areas of focus at various stages of the rulemaking process. Anticipated future regulatory actions may address, among other topics, accreditation (discussed above); Title IV eligibility issues (including change of ownership, cash management, administrative capability standards, program length requirements, financial responsibility requirements, and 90/10); Title VI topics, and Title IX. 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. After the district court denied another injunction, plaintiffs voluntarily dismissed the complaint without prejudice “in light of specific representations made by the government . . . about the narrow scope of the Executive Orders challenged in this case and the decision of the Fourth Circuit accepting those representations and recognizing that narrow scope” (i.e., that the Executive Orders did not seek to establish new law related to DEI). The district court terminated the case on June 30, 2026. 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 28 Table of Contents 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. On June 16, 2026, the Department announced a Civil Rights Partnership with the U.S. Department of Justice. The interagency agreement would: “(1) reinforce and strengthen respective enforcement processes and procedures to ensure vigorous enforcement of laws; (2) increase cross-agency administrative alignment of civil rights enforcement policies and programmatic requirements; and (3) provide process improvements by leveraging the expertise and capacity of both agencies to provide aggressive and focused civil rights expert oversight of America’s education institutions.” 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. On July 3, 2026 the Australian Government announced that the 2027 National Planning Level would be consistent with 2026, with no increase in numbers. 29 Table of Contents