STRA 10-K & 10-Q changes, risk factors and insider trading

The Higher Education Act mandates specific regulatory responsibilities for each of the following components of the higher education regulatory triad: (1) the federal government through the Department of Education; (2) the accrediting agencies recognized by the Secretary of Education; and (3) state education regulatory bodies.bodies (and foreign equivalents).

In addition, other federal agencies such as the CFPB, Federal Trade Commission (“FTC”), and Federal Communications Commission and various state agencies and state attorneys general enforce consumer protection, calling and texting, marketing, privacy and data security, and other laws applicable to post-secondary educational institutions. Findings of noncompliance could result in monetary damages, fines, penalties, injunctions, or restrictions or obligations that could have a material adverse effect on our business. Some of these laws also include private rights of action. The Department of Education has indicated that it may coordinate with other state and federal partners, including the U.S. Department of Justice, CFPB, FTC, state attorneys general, and others, to ensure compliance by institutions that participate in Title IV programs.

On October 6,7, 2021, the FTC announced that it is resurrecting Penalty Offense Authority under Section 5(m) of the FTC Act (the “Act”). Under the Act, the FTC may secure penalties against entities not a party to an original proceeding if the FTC can show that the entity had actual knowledge that the conduct in question was found to be unfair or deceptive. In an effort to establish actual knowledge and create a pathway for penalties in the event of post-notice acts or practices, the FTC issued that same day an informational notice to theCapella 70University, largestStrayer University, and dozens of other for-profit schools (based on enrollment and revenues.revenues) The noticethat included a list of acts and practices that the FTC has determined are unfair or deceptive, including but not limited to acts relating to misrepresentation of employment opportunities and other benefits, together with citation to various prior determinations from cases previously litigated by the FTC. CapellaThe Universitynotices were intended to establish actual knowledge and Strayercreate Universitya receivedpathway for penalties in the FTC’sevent noticeof onpost-notice Octoberacts 7,or 2021,practices althoughunder the Penalty Offense Authority under Section 5(m) of the FTC madeAct clear that receipt of (the notice“Act”). itselfThe doesnotices did not reflect any assessment by the FTC as to whether Capella University or Strayer University has engaged in deceptive or unfair conduct.

The laws, regulations, standards, and policies applicable to our business frequently change, and changes in, or new interpretations of, applicable laws, regulations, standards, or policies could have a material adverse effect on our accreditation, authorization to operate in various states,jurisdictions, permissible activities, ability to communicate with prospective students, receipt of funds under Title IV programs, or costs of doing business. The Department of Education periodically engages in negotiated rulemaking sessions to revise regulations that govern the federal Title IV student financial aid programs. Certain proposals or new rules related to these issues could raise the cost of compliance for Capella University or Strayer University or require changes in the educational programs offered by Capella University and Strayer University. We cannot predict whether the Department of Education will promulgate any regulations that would negatively affect Capella University or Strayer University.

Title IV requirements are enforced by the Department of Education and, in some instances, by private plaintiffs or other third parties. If Capella University and Strayer University are found not to be in compliance with these laws, regulations, standards, or policies, they could lose access to Title IV program funds and face related monetary liability, which would have a material adverse effect on the Company.

Since 2010, Congress has increased its focus on for-profit higher education institutions, including regarding participation in Title IV programs and oversight by the Department of DefenseDOD of tuition assistance and by the VA of veterans education benefits for military service members and veterans, respectively, attending for-profit colleges. The Senate Committee on Health, Education, Labor and Pensions and other congressional committees have held hearings into, among other things, the proprietary education sector and its participation in Title IV programs, the standards and procedures of accrediting agencies, credit hours and program length, the portion of federal student financial aid going to proprietary institutions, and the receipt of military tuition assistance and veterans education benefits by students enrolled at proprietary institutions. Capella University and Strayer University have cooperated with these inquiries. A number of legislators have variously requested the Government Accountability Office to review and make recommendations regarding, among other things, recruitment practices, educational quality, student outcomes, the sufficiency of integrity safeguards against waste, fraud, and abuse in Title IV programs, and the percentage of proprietary institutions’ revenue coming from Title IV and other federal funding sources.

Because Capella University and Strayer University operate in a highly regulated industry, they are subject to compliance reviews and claims of noncompliance and related lawsuits by government agencies, accrediting agencies, and third parties, including claims brought by third parties on behalf of the federal government. For example, the Department of Education regularly conducts program reviews of educational institutions that are participatingparticipate in Title IV programs,programs. and theThe Office of Inspector General of the Department of Educationalso regularly conducts audits and investigations of suchTitle IV institutions. The Department of Education could limit, suspend, or terminate our participation in Title IV programs or impose other penalties such as requiring our universities to make refunds, pay liabilities, or pay an administrative fine upon a material finding of noncompliance.

The loss of Capella University’s institutional accreditation by the Higher Learning Commission or the Higher Learning Commission’s loss of recognition by the Department of Education would render Capella University ineligible to participate in Title IV programs and would have a material adverse effect on our business. Similarly, the loss of Strayer University’s accreditation by Middle States or Middle States’ loss of recognition by the Department of Education would render Strayer University ineligible to participate in Title IV programs and would have a material adverse effect on our business. In addition, an adverse action by the Higher Learning Commission or Middle States other than loss of accreditation, such as issuance of a warning, could have a material adverse effect on our business.

If either Capella University or Strayer University fails to maintain any of its state or foreign authorizations, the University would lose its ability to operate in thatthe staterelevant jurisdiction and to participate in Title IV programs there.

Capella University is registered as a private institution with the Minnesota Office of Higher Education, as required for most post-secondary private institutions thatgranting grant degrees at the associate levelassociate-level or abovehigher degrees in Minnesota and as required by the Higher Education Act to participate in Title IV programs. The lossLoss of state authorization would, among other things,would limit Capella University’s ability to operate in that state, render Capella Universityit ineligible to participate infor Title IV programs, and could have a material adverse effect on our business.

Each Strayer University campus is authorized to operate and to grant degrees, diplomas, or certificates by the applicable education agency or agencies of the state where the campus is located. Such stateThis authorization is required for students at the campus to participate in Title IV programs. The lossLoss of state authorization would, among other things,would limit Strayer University’s ability to operateoperations in that state, render Strayer Universityit ineligible to participate infor Title IV programs at least at those state campus locations, and could have a material adverse effect on our business.

On December 19, 2016, the Department of Education published final regulations addressing, among other issues, state authorization of programs offered through distance education. Theissued final regulations, which became effective on May 26, 2019, requirerequiring an institutioninstitutions offering distance education programs to be authorized by each state in which the institution enrolls students (other than the state(s) in which the institution is physically located), if such authorization is required by the state, in order to award Title IV aid to such students. AnAuthorization institutioncan couldbe obtain such authorizationobtained directly from the state or (except in California) through a state authorization reciprocity agreement. Under those rules, if one of our universities should failFailure to obtain or maintain required state authorization to provide post-secondaryfor distance education in a specific state in which the institution is not physically located, the institutionlocated could loseresult itsin loss of the ability to provideoffer distance education in that statethere and to award Title IV aid to online students in that state. The 2016 rule, and rules issued on November 1, 2019 and effective July 1, 2020, require thatdisclosures schoolsof disclosestate all applicablelicensure prerequisites for licensure for professional programs and whether the school’s programs satisfymeet those prerequisitesthem in each state where enrolled students reside.are Thelocated, institution must makewith direct disclosures to students and /prospective students if the institution determines that a program does not meet arequirements state’s(or professionalgeneral licensurepublic requirements.disclosure Ifif anno institutiondetermination has notbeen made), theseand determinations, it must make a general disclosurenotification to the public to that effect. The disclosure rules have been modified by U.S. Department of Education regulations effective July 1, 2024, as described below. An institution must also notify students within 14 days ifof it determinesdetermining that a program does not meet a state’s requirements. IfNoncompliance onecould of our universities failed to make any of these disclosures,lead the Department of Education couldto limit, suspend, or terminate its participation in Title IV programsparticipation or impose other penalties such as requiring our universities to make refunds, pay liabilities, or pay an administrative fine upon a material finding of noncompliance.fines.

Pursuant to new U.S. Department ofregulations Education regulations, beginningeffective July 1, 2024, in each state where an institution is located, students enrolled by the institution are located, or students attest that they intend to seek employment, the institution must determine that each program eligible for Title IVIV-eligible program: (i) is programmatically accredited if required by the state or a Federalfederal agency requires such accreditation, (including as a condition for employment in the prepared occupation for which the program prepares the student and); (ii) satisfies the applicable educational requirements for professional licensure or /certification requirements in the state so thatgraduates aqualify studentto whotake enrollsrequired inexams thefor program,relevant andpractice seeksor employment in that state after completing the program, qualifies to take any licensure or certification exam that is needed for the student to practice or find employment in an occupation that the program prepares students to enter; and (iii) complies with all state laws related to closure, including record retention, teach-out plans or /agreements, and tuition recovery funds or /surety bonds. Institutions may not enroll for Title IV purposes a student locatedstudents in a state in whichwhere the program doesfails notthese meet such requirements,requirements unless at the time of initial enrollment the student attests theirat intentinitial enrollment to seekseeking employment in another state that wouldsatisfies satisfy such requirements.them.

An institution generally must seek recertification from the Department of Education at least every six years and possibly more frequently depending on various factors, such as whether it is provisionally certified. The Department of Education may also review an institution’s continued eligibility and certification to participate in Title IV programs, or scope of eligibility and certification, in the event the institution undergoes a change in ownership resulting in a change of control or expands its activities in certain ways, such as the addition of certain types of new programs, or, in certain cases, changes to the academic credentials that it offers. In certain circumstances, the Department of Education must provisionally certify an institution. The Department of Education may withdraw either university’s certification if the Department determines that the university is not fulfilling material requirements for continued participation in Title IV programs. Both Capella University and Strayer University currently participate in Title IV programs under full certification and are undergoing the recertification process. If the Department of Education does not renew or withdraws either university’s certification to participate in Title IV programs, its students would no longer be able to receive Title IV program funds. Such a loss would have a material adverse effect on our business.

To be eligible to participate in Title IV programs, Capella University and Strayer University must comply with specific standards and procedures set forth in the Higher Education Act and the regulations issued thereunder by the Department of Education, including, among other things, certain standards of financial responsibility and administrative capability. If one of the universities fails to demonstrate financial responsibility or maintain administrative capability under the Department of Education’sDepartment’s regulations, the university could lose its eligibility to participate in Title IV programs or have that eligibility adversely conditioned. Such developments could have a material adverse effect on our business.

If Capella University or Strayer University loses eligibility to participate in Title IV programs because of high student loan default rates, the loss would have a material adverse effect on our business. Because of Covid-era loan forbearance, Capella University’sUniversity’s, three-yearStrayer cohort default rates for federal fiscal years 2019, 2020,University’s, and 2021 were 1.1%, 0.0%, and 0.0%, respectively. Strayer University’s three-year cohort default rates for federal fiscal years 2019, 2020, and 2021 were 2.2%, 0.0%, and 0.0%, respectively. Thethe average official cohort default rates for proprietary institutions nationally were 3.1%,0.0%, 0.0%, and 0.0% for federal fiscal years 2019,2020, 2020,2021, and 2021,2022, respectively. The Federalfederal government’s eliminationcessation of the pause on federal student loan payments could result in an increase in the number of borrowers defaulting on their student loans, including among our graduates.

A proprietary institution may lose its eligibility to participate in the federal Title IV student financial aid program if it derives more than 90% of its revenues, on a cash basis, from “federal education assistance” (definedi.e., belowall federal funds, including DOD military tuition assistance and VA veterans education benefits funds) for two consecutive fiscal years. A proprietary institution of higher education that violates the 90/10 Rule for any fiscal year will be placed on provisional status for up to two fiscal years. For fiscal year 2023,2024, Capella University derived approximately 66.79%67.88% of its cash-basis revenues from federal education assistance. For fiscal year 2023,2024, Strayer University derived approximately 89.48%89.64% of its cash-basis revenues from federal education assistance. On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which amends the 90/10 Rule to include “all federal education assistance” in the “90” side of the ratio calculation. The legislation required the Department to conduct a negotiated rulemaking process to modify related Department regulations, which was considered by the Institutional and Programmatic Eligibility negotiated rulemaking committee. The Department of Education released final 90/10 regulations on October 27, 2022. The final regulations provided for an expanded definition of “federal education assistance” that will be periodically defined by the Secretary. In addition, the preamble to the final rule and subsequent sub-regulatory guidance prohibit the inclusion of non-Title IV eligible programs offered in part or in full through distance education in the 10% calculation. On December 21, 2022, the Department released a list of federal agencies and federal education assistance programs that must be included as federal revenue in the 90/10 calculation. Such agencies include the U.S. Department of Defense (military tuition assistance) and the Department of Veterans Affairs (veterans education benefits) in addition to the Title IV programs already covered by the 90/10 Rule. These revisions to the 90/10 Rule apply to institutional fiscal years beginning on or after January 1, 2023. From time to time, legislation has been introduced in both chambers of Congress that seeks to modify or eliminate the 90/10 Rule further, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue).Rule. We cannot predict whether Congress will pass any of these legislative proposals. If oneViolation of the universities were to violate the 90/10 Rule,Rule may result in the loss of eligibility to participate in theTitle federalIV studentprograms, financial aid programswhich would have a material adverse effect on our business. Certain states have also proposed legislation that would prohibit enrollment of their residents based on a state and federal funding threshold that is more restrictive than the federal 90/10 Rule. If such legislation were to be enacted, and Capella University or Strayer University were unable to meet the threshold, loss of eligibility to enroll students in certain states would have a material adverse effect on our business.

If Capella University or Strayer University pays a bonus, commission, or other incentive payment in violation of applicable Department of Education rules or if the Department of Education or other third parties interpret a university’s compensation practices as noncompliant, the university could be subject to sanctions or other liability. Such penalties could have a material adverse effect on our business.

In the event of substantial misrepresentation, the Department of Education may revoke or terminate an institution’s program participation agreement, limit the institution’s participation in Title IV programs, deny applications from the institution, such as to add new programs or locations, initiate proceedings to fine the institution or limit, suspend, or terminate its eligibility to participate in Title IV programs; relieve the borrower of the obligation to repay federal education loans in whole or in part under the BDTR Rule and require the institution to reimburse the Department of Education for those amounts. If the Department of Education or other third parties interpret statements made by one of the universities or on the university’s behalf to be in violation of the new regulations, the Universityuniversity could be subject to sanctions and other liability, which could have a material adverse effect on our business. As described in Note 21, Litigation, and in the consolidated financial statements appearing in Part II, Item 8 of this report, the Department of Education has begun to adjudicate BDTR claims and in some cases may seek recoupment of discharged claims from institutions. On January 25, 2024, Capella University received notice from the Department of BDTR applications, and on February 1, 2024, Strayer University received notice from the Department of BDTR applications.

Our failure to comply with the Department of Education’s gainful employment regulations effective July 1, 20242024, as well as Congressionally legislated accountability metrics effective July 2026, could result in heightened disclosure requirements and loss of Title IV eligibility.

To be eligible for Title IV funding, academic programs offered byat proprietary institutions of higher education generally must prepare students for gainful employment in a recognized occupation.

On September 27, 2023, the Department of Education releasedissued final regulations on gainful employment,employment regulations, effective July 1, 2024.2024 (the “2023 Gainful Employment Rule”). The gainful employment final rule establishesrequires programs to pass two independent metrics, both of which must be passed by a gainful employment program in ordermetrics to maintain Title IV eligibility.eligibility: The two metrics are (1) a debt-to-earnings ratioratio, thatwhere comparesannual thedebt payments must not exceed 8% of median annual earnings andor 20% of median discretionary earnings of graduates who received federal financial aid to the median annual payments on loan debt borrowed for the program (a program passes if the annual debt-to-earnings ratio is less than or equal to 8% of annual earnings or 20% of discretionary earnings),; and (2) an earnings premium testtest, that compares thewhere median annual earnings of such graduates frommust exceed a program that received federal financial aid to an “earnings threshold” based on a typical high school graduategraduates in theirthe state (or,or nationally in some cases, nationallycases) and within a certainspecified age range in the labor force (a program passes if the median annual earnings exceed the earnings threshold).range.

Beginning onStarting July 1, 2026, anyprograms gainful employment program that failsfailing either or both metricsmetric in a single year wouldmust beissue required to provide a warning to allwarnings to current and prospective studentsstudents, that meets certain minimum requirements specified bydetailing the Department of Education, including that the program failed one or both metrics for the yearfailure and may be subject topotential loss of Title IV eligibility. AnyPrograms such program that failsfailing the same metric in two out of three consecutive years for which the program’s metrics are calculated wouldwill lose its access to Title IV funding. The Department hashad indicated that it willwould release metrics beginningstarting in the 2025 financial aid award year, and,year; if so, we expect that the earliest a program could lose eligibility is 2026.

The requirements associated with the gainful employment regulations and OBBBA’s accountability framework (which is distinct from and in addition to the gainful employment regulations) may substantially increase our administrative burdens and could affect our program offerings, student enrollment, persistence and retention. At this time, itIt is difficult to predict whether our programs will satisfy the gainful employment metrics or OBBBA accountability metrics. Further, the continuing eligibility of our academic programs will be affected by factors beyond management’s control such as changes in our graduates’ employment and income levels, changes in student borrowing levels, increases in interest rates, and various other factors. Even if we were able to correct any deficiency in the gainful employment or OBBBA accountability metrics in a timely manner, the disclosure requirements associated with a program’s failure to meet at least one metric may adversely affect student enrollments in that program and may adversely affect the reputation of our institution.

Title IV regulations define the term “credit hour” and require accrediting agencies and state authorization agencies to review the reliability and accuracy of an institution’s credit hour assignments. If an accreditor does not comply with this requirement, its recognition by the Department of Education could be jeopardized. If an accreditor identifies systematic or significant noncompliance in one or more of an institution’s programs, the accreditor must notify the Secretary of Education. In addition to the credit hour model, the Department of Education has granted approvals for a small number of institutions, including Capella University, to operate direct assessment academic programs. Instead of measuring student progress through the number of credit hours spent in the course, these direct assessment programs allow students to progress through courses by showing mastery over material through the completion of assessments, sometimes in less time than it would take to complete a course under a credit hour model. If the Department of Education determines that an institution is out of compliance with the credit hour definition or direct assessment requirements, the Department of Education could impose liabilities or other sanctions. Such penalties could have a material adverse effect on our business.

The failure by Capella University or Strayer University to comply with theFederal Clerycivil Actrights or Title IXlaws could result in sanctions and other liability.

The Higher Education Act and Department of Education regulations require Capella University and Strayer University to calculate refunds of unearned Title IV program funds disbursed to students who withdraw from their educational program before completing it. If refunds are not properly calculated or timely paid, the university may be required to post a letter of credit with the Department of Education or be subject to sanctions or other adverse actions by the Department of Education.Department. Such consequences could have a material adverse effect on our business.

The Higher Education Act regulates relationships between lenders to students and post-secondary education institutions. In 2009, the Department of Education promulgated regulations that address these relationships, and state legislators have also passed or may be considering legislation related to relationships between lenders and institutions. In addition, new procedures introduced and recommendations made by the CFPB createactivity creates uncertainty about whether Congress will impose new burdens on private student lenders. These developments, as well as legislative and regulatory changes, such as those relating to gainful employment and repayment rates, create uncertainty in the industry, and general credit market conditions may cause some lenders to decide not to provide certain loan products and may impose increased administrative and regulatory costs. Such actions could reduce demand for and/or availability of private education loans, decrease Capella University’s or Strayer University’s non-Title IV revenue, and thereby increase Capella University’s or Strayer University’s 90/10 ratio, and have a material adverse effect on our business.

We rely on one or more third parties for software and services necessary to administer Capella University’s and Strayer University’sour participation in Title IV programs and failure of such a third party to provide compliant software and services, or by us in our use of the software, could cause Capella University or Strayer University to lose eligibility to participate in Title IV programs.

Strategic Education, Inc. (“SEI,” “we,” “us,” “our,” or “the Company”) 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. We operate primarily through our wholly-owned subsidiaries, Capella University and Strayer University, both accredited post-secondary institutions of higher education located in the United States, and Torrens University, an accredited post-secondary institution of higher education located in Australia. Our operations also include the Education Technology Services segment, which primarily develops and maintains relationships with employers to build employee education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs.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.

•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 aan unit ofoffering Strayer University. USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are unitsofferings of Strayer University.

•In 2024,2025, USHE average total student enrollment increaseddecreased 6.4%1.4% to 86,285 compared to 87,550 compared to 82,267 in 2023.2024.

•Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 2.5%9.6% as of the end of the third quarter of 2024.2025. Government provided grants and loans per credit earned includes all Federalfederal loans and grants for students (Title IV hereafter) in our USHE institutions, and is calculated on a trailing 4-quarter basis and reported one quarter in arrears. Title IV per credit earned has been declining as employer-affiliatedemployer affiliated enrollment has grown, and as more students earn credit through Sophia Learning and other affordable alternative pathways. The table below summarizes the percentage change in USHE trailing 4-quarter Title IV per credit earned for the past 8 quarters.

Education Technology Services (“ETS”) Segment

•Our Education Technology ServicesETS segment primarily develops and maintains relationships with employers to build employee education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs. The employer relationships developed by the Education Technology ServicesETS segment are an important source of student enrollment for Capella University and Strayer University, and a significant portion of the revenue attributed to the Education Technology ServicesETS segment is driven by the volume of enrollment derived from these employer relationships. Enrollments attributed to the Education Technology ServicesETS segment are determined based on a student’s employment status and the existence of a corporate partnership arrangement with SEI. All enrollments attributed to the Education Technology ServicesETS segment continue to be attributed to the segment until the student graduates or withdraws, even if his or her employment status changes or if the partnership contract expires.

•Education Technology ServicesETS 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.

•Media Design School at Strayer (“MDS”) is a private tertiarytraining institutionestablishment for creative and technology qualifications in New Zealand. Media Design SchoolMDS offers industry-endorsed courses in 3D animation and visual effects, game art, game programming, graphic and motion design, digital media, artificial intelligence, and creative advertising. Media Design SchoolMDS is accredited in New Zealand by the New Zealand Qualifications Authority,Authority (“NZQA”), the organization responsible for the quality assurance of non-university tertiary training providers. On September 8, 2025, MDS became a wholly owned subsidiary and international additional location of Strayer University and is included within Strayer University’s Middle States Commission on Higher Education accreditation. NZQA approved the transaction and MDS continues to operate as a New Zealand private tertiary institution. MDS continues to be part of our ANZ reportable segment.

•In 2024,2025, Australia/New Zealand average total student enrollment increaseddecreased 4.8%1.8% to 19,232 compared to 19,585 compared to 18,692 in 2023.2024.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and judgments related to its allowance for credit losses; income tax provisions; the useful lives of property and equipment and intangible assets; redemption rates for scholarship programs and valuation of contract liabilities; 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. Management bases its estimates and judgments on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly reviews its estimates and judgments for reasonableness and may modify them in the future. Actual results may differ from these estimates under different assumptions or conditions.

Students at Strayer University registering in credit-bearing courses in any undergraduate program qualify for the Learn and Earn Scholarship (formerly known as the Graduation Fund,Fund), whereby qualifying students earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program. Students must meet all of Strayer University’s admission requirements and not be eligible for any previously offered scholarship program. To maintain eligibility, students must be enrolled in a bachelor’s degree program. Students who have more than one consecutive term of non-attendance lose any GraduationLearn Fundand 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. In their final academic year, qualifying students will receive one free course for every three courses that the student successfully completed in prior years. StrayerThe University’sCompany defers the value of the related performance obligation associated with the free coursescredits thatestimated mayto be redeemed in the future is valued based on a systematic and rational allocation of the cost of honoring the benefit earned to each of the underlying revenue transactions that result in progress by the student toward earning the benefit. The estimated value of awards under the GraduationLearn Fundand Earn Scholarship that will be recognized in the future is based on historical experience of students’ persistence in completing their course of study and earning a degree and the tuition rate in effect at the time it was associated with the transaction. Estimated redemption rates of eligible students vary based on their term of enrollment. As of December 31, 2024,2025, we had deferred $37.1$38.1 million for estimated redemptions earned under the GraduationLearn Fund,and Earn Scholarship, as compared to $44.5$37.1 million at December 31, 2023.2024. Each quarter, we assess our assumptions underlying our estimates for persistence and estimated redemptions based on actual experience. To date, any adjustments to our estimates have not been material. However, if actual persistence or redemption rates change, adjustments to the reserve may be necessary and could be material.

Goodwill and indefinite-lived intangible assets are assessed at least annually for impairment, 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. In 2024,2025, we performed a qualitative impairment assessment, consistent with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), of goodwill assignedand toindefinite-lived allintangible reporting units, except for goodwillassets assigned to the ANZour reporting unit, as well as for indefinite-lived intangible assets, except for the ANZ trade name,units to evaluate the recoverability of the related amounts. The qualitative factors considered included macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value. Based on the qualitative impairment assessments performed, we concluded that no goodwill or indefinite-lived intangible asset impairments had been incurred during the year ended December 31, 2025.

Finite-lived intangible assets that are acquired in business combinations are recorded at fair value on their acquisition dates and are amortized on a straight-line basis over the estimated useful life of the asset. Finite-lived intangible assets consist of student relationships. We review our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets. No impairment charges related toOur finite-lived intangible assets wereconsisted recorded during the year ended December 31, 2023. All finite-lived intangible assets related toof student relationshipsrelationships, which were fully amortized by the end of 2023.

In 2024,2025, we generated $1,219.9$1,268.2 million in revenue compared to $1,132.9$1,219.9 million in 2023.2024. Our income from operations increased to $174.2 million in 2025 compared to $155.6 million in 2024 compared to $95.3 million in 2023,2024, primarily duedriven toby higher revenue driven by enrollment growth in theour USHE and Australia/NewETS Zealand segments and growth in Sophia Learning subscriptions in the Education Technology Services segment, lower restructuring costs, and lower amortization expense of intangible assets,segments, partially offset by higher operating expenses.expenses and restructuring costs. Our net income in 20242025 was $112.7$126.6 million compared to $69.8$112.7 million in 2023,2024, and diluted earnings per share was $4.67$5.41 in 20242025 compared to $2.91$4.67 in 2023.2024.

Revenues. Consolidated revenues increased to $1,219.9 million in 2024 compared to $1,132.9 million in 2023, primarily due to enrollment growth in the USHE and Australia/New ZealandANZ segments and growth in Sophia Learning subscriptions, partially offset by lower revenue per student in the USHE segment and unfavorable foreign currency exchange impacts. In the USHE segment for the year ended December 31, 2024, average total student enrollment increased 6.4% to 87,550 from 82,267 in 2023. USHE segment revenues increased 4.8% to $857.9 million in 2024 compared to $819.0 million in 2023, primarily due to the increase in student enrollment, partially offset by lower revenue per student. In the Australia/New ZealandANZ segment for the year ended December 31, 2024, average total student enrollment increased 4.8% to 19,585 from 18,692 in 2023. Australia/New ZealandANZ segment revenues increased 10.1% to $257.1 million in 2024 compared to $233.5 million in 2023, primarily due to the increase in enrollment and higher revenue per student as a result of students taking higher course loads, partially offset by unfavorable foreign currency exchange impacts. Education Technology ServicesETS segment revenues increased 30.4% to $104.9 million in 2024 compared to $80.5 million in 2023, primarily as a result of growth in Sophia Learning subscriptions, higher employer affiliated enrollment, and an increase in Workforce Edge revenue from new employer partnerships.

Income from operations. Consolidated income from operations increased to $155.6 million in 2024 compared to $95.3 million in 2023, primarily due to higher revenue driven by enrollment growth in the USHE and Australia/New ZealandANZ segments and growth in Sophia Learning subscriptions in the Education Technology ServicesETS segment, lower restructuring costs, and lower amortization expense of intangible assets, partially offset by higher operating expenses. USHE segment income from operations increased 29.4% to $77.2 million in 2024 compared to $59.6 million in 2023, primarily driven by higher revenue due to an increase in student enrollment, decreased investments in branding initiatives, and lower student material costs, partially offset by higher personnel-related costs, bad debt expense, and technology-related expenses. Australia/New ZealandANZ segment income from operations increased 4.3% to $37.4 million in 2024 compared to $35.9 million in 2023, primarily driven by higher revenue due to an increase in enrollment and higher revenue per student as a result of students taking higher course loads, partially offset by increased investments in branding initiatives, higher personnel-related costs, and higher stock-based compensation expense. Education Technology ServicesETS segment income from operations increased 46.9% to $42.7 million in 2024 compared to $29.1 million in 2023, primarily due to higher revenue as a result of growth in Sophia Learning subscriptions, an increase in employer affiliated enrollment, and an increase in Workforce Edge revenue from new employer partnerships, partially offset by higher personnel-related costs.

In the accompanying analysis of financial information for the three years ended December 31, 2024, weWe use certain financial measures including Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share that are not required by or prepared in accordance with GAAP. These measures, which are considered “non-GAAP financial measures” under SEC rules, are defined by us to exclude the following:

•integration expenses associated with our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand;

•severance costs, asset impairment charges, gains/losses on sale of real estate and early termination of leased facilities, and other costs associated with our restructuring activities;

To illustrate currency impacts to operating results, Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the year ended December 31, 20242025 are also presented on a constant currency basis.

The tables below reconcile our reported results of operations to adjusted results (amounts in thousands, except per share data):

(2)Reflects integration expenses associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

(3)Reflects severance costs, 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.

__________________________________________________________________________________________ (1)Reflects annon-GAAP adjustmentadjustments related to translaterestructuring foreigncosts, currencyincome/loss resultsfrom forother investments, and tax adjustments as described further in the year ended December 31, 2024 at a constant exchange rateReconciliation of 0.66 Australian DollarsReported to U.S.Adjusted Dollars,Results whichof wasOperations thetables average exchange rate for the same period in 2023.above.

At December 31, 2024,2025, we had cash, cash equivalents, and marketable securities of $199.0$153.1 million compared to $208.7$199.0 million at December 31, 2023.2024. We maintain our cash and cash equivalents primarily in money market funds and demand deposit bank accounts at high credit quality financial institutions, which are included in cash and cash equivalents at December 31, 20242025 and 2023. In addition, we invest excess cash in U.S. treasury bills with maturities of three months or less, which are included in cash and cash equivalents.2024. We also hold marketable securities, which primarily include corporate debt securities, U.S. treasury securities with maturities greater than three months, and term deposits. We earned interest income of $12.5$8.2 million, $10.4$12.5 million, and $3.8$10.4 million in each of the years ended December 31, 2025, 2024, and 2023, and 2022, respectively.

We are party to a credit facility (the “Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $250 million. The Amended Credit Facility provides us with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in an amount up to the sum of (x) the greater of (A) $300 million and (B) 100% of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00. 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. 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 our leverage ratio. An unused commitment fee ranging from 0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused amounts. WeAs of December 31, 2025 and 2024, we were in compliance with all applicable covenants related toof the Amended Credit Facility as of December 31, 2024. During the third quarter of 2024, we repaid the remaining $61.3 million outstanding balance under the Revolving Credit Facility. Weand had no borrowings outstanding under the Revolving Credit Facility as of December 31, 2024 and $61.4 million outstanding under our Revolving Credit Facility as of December 31, 2023.Facility. During each of the years ended December 31, 20242025 and 2023,2024, we paid $3.2$0.5 million and $6.8$3.2 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities increased to $198.2 million in 2025 compared to $169.3 million in 2024 compared to $117.1 million in 2023.2024. The increase in net cash from operating activities was primarily driven by higher earnings and favorablenon-cash adjustments, partially offset by unfavorable changes in working capital.

Our net cash provided by (used in) investing activities increased to $64.4$8.5 million of cash provided in 20242025 compared to $48.5$64.4 million in 2023. The increase in netof cash used in investing2024. activitiesThe increase was primarily driven by a $27.2 million increase in purchases of marketable securities, a $5.9 million decrease in cash proceeds related to the sale of property and equipment, and higher capital expenditures, partially offset by a $21.2$48.1 million increase in cash proceeds from marketable securities.securities and other investments, a $26.0 million decrease in purchases of marketable securities, and $2.2 million of cash proceeds from the sale of property and equipment in 2025, partially offset by a $3.7 million increase in capital expenditures. Capital expenditures increased to $44.3 million in 2025 compared to $40.6 million in 2024 compared to $36.9 million in 2023,2024, primarily due to the timing of capital projects.

Our net cash used in financing activities increased to $206.2 million in 2025 compared to $136.8 million in 2024 compared to $113.6 million in 2023.2024. The increase in net cash used in financing activities was primarily driven by a $127.4 million increase in share repurchases and a $6.4 million increase in net payments for employee stock awards, partially offset by the non-recurrence in 2025 of a $61.3 million long-term debt payment in 2024 compared to a $40.0 million long-term debt payment in 2023,and a $1.7 million payment of debt financing costs made in 2024, andas awell $1.5 million increase in share repurchases, partially offset byas a $1.5 million decrease in netcash dividend payments forin employee stock awards.2025.

Our recurring cash requirements consist primarily of general operating expenses, capital expenditures, discretionary dividend payments, income tax payments, and contractual obligations related to our lease agreements, marketing-related vendor subscription agreements, limited partnership investments, and Revolving Credit Facility. We believe that the combination of our existing cash, cash equivalents, and marketable securities, cash generated from operating activities, and if necessary, cash available under our Amended Credit Facility will be sufficient to meet our cash requirements for the next 12 months and beyond.

Our material contractual cash commitments include minimum lease payments required under our lease agreements, multi-year marketing spend commitments under a marketing agreement, capital commitments related to our four limited partnership investments and commitment fees associated with our Revolving Credit Facility.

The table below sets forthpresents our contractual lease cash commitmentscommitments, associatedincluding withminimum leasepayments liabilitiesfor leases signed but not yet commenced as of December 31, 20242025 (in thousands):

The National Council for State Authorization Reciprocity Agreements (“NC-SARA”) considers potential policy changes each year. Past proposals, including more stringent standards for participation of for-profit institutions or exclusion of for-profit institutions from participation, were not adopted, but illustrate the risk that future changes could materially adversely affect Capella University, Strayer University, and the Company. For example, exclusion from SARA would require seeking authorization in each state, increasing costs and risking denials in some jurisdictions. On January 21, 2026, NC-SARA initiated its 2026 policy manual modification process with a call for proposals for SARA policy changes. The call for proposals ended February 10, 2026 and yielded 33 proposed changes to NC-SARA policies, some of which, if adopted, could significantly alter the distance education reciprocity agreements. Such proposals included circumstances under which an institution may be denied participation in SARA or have its participation limited as a result of investigations or adverse actions against it related to the institution’s academic quality, financial stability, or student consumer protection issues. On April 24, 2026, NC-SARA will hold its public comment forum to seek input on these proposed changes. In addition to the public comment forum, NC-SARA permitspermitted submission of written comments in two rounds: between March 10, 2026 and April 9, 2026 (now closed),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.

As of MarchJune 31,30, 2026, we had the following reportable segments:

•In the firstsecond quarter of 2026, USHE enrollment decreased 0.8%0.5% to 87,16585,894 compared to 87,85486,339 for the same period in 2025.

•Trailing 4-quarter student persistence within USHE was 88.5%89.0% in the fourthfirst quarter of 20252026 compared to 87.2%87.4% for the same period in 2024.2025. Student persistence is calculated as the rate of students continuing from one quarter to the next, adjusted for graduates, on a trailing 4-quarter basis. Student persistence is reported one quarter in arrears. The table below summarizes USHE trailing 4-quarter student persistence for the past 8 quarters.

•Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 6.7%5.9% as of the end of the fourthfirst quarter of 2025.2026. Government provided grants and loans per credit earned includes all federal loans and grants for students (Title IV hereafter) in our USHE institutions, and is calculated on a trailing 4-quarter basis and reported one quarter in arrears. Title IV per credit earned has been declining as employer-affiliated enrollment has grown, and as more students earn credit through Sophia Learning and other affordable alternative pathways. The table below summarizes the percentage change in USHE trailing 4-quarter Title IV per credit earned for the past 8 quarters.

•In the firstsecond quarter of 2026, employer affiliated enrollment as a percentage of USHE enrollment was 34.5%34.7% compared to 31.2%31.8% for the same period in 2025.

•In the firstsecond quarter of 2026, ANZ enrollment decreased 2.5%5.2% to 19,57017,555 compared to 20,08218,524 for the same period in 2025.

Revenue recognition — Capella University and Strayer University offer educational programs primarily on a quarter system having four academic terms, which generally coincide with our quarterly financial reporting periods. Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within the calendar year. Approximately 94% of our revenues during the threesix months ended MarchJune 31,30, 2026 consisted of tuition revenue. Capella University offers monthly start options for new students, who then transition to a quarterly schedule. Capella University also offers its FlexPath program, which allows students to determine their 12-week billing session schedule after they complete their first course. Tuition revenue for all students is recognized ratably over the period of instruction as the universities provide academic services, whether delivered in person at a physical campus or online. Tuition revenue is shown net of any refunds, withdrawals, discounts, and scholarships. The universities also derive revenue from other sources such as textbook-related income, certificate revenue, certain academic fees, licensing revenue, accommodation revenue, and food and beverage fees, which are all recognized when earned. In accordance with Accounting Standards Codification 606, Revenue Recognition, materials provided to students in connection with their enrollment in a course are recognized as revenue when control of those materials transfers to the student. 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.

Students at Strayer University registering in credit-bearing courses in any undergraduate program qualify for the Learn and Earn Scholarship (formerly known as the Graduation Fund), whereby qualifying students earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program. Students must meet all of Strayer University’s admission requirements and not be eligible for any previously offered scholarship program. To maintain eligibility, students 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. In their final academic year, qualifying students will receive one free course for every three courses that the student successfully completed in prior years. The Company defers the value of the related performance obligation associated with the free 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 estimated value of awards under the Learn and Earn Scholarship that will be recognized in the future is based on historical experience of students’ persistence in completing their course of study and earning a degree and the tuition rate in effect at the time it was associated with the transaction. Estimated redemption rates of eligible students vary based on their term of enrollment. As of MarchJune 31,30, 2026, we had deferred $39.1$38.6 million for estimated redemptions earned under the Learn and Earn Scholarship, as compared to $38.1 million at December 31, 2025. Each quarter, we assess our assumptions underlying our estimates for persistence and estimated redemptions based on actual experience. To date, any adjustments to our estimates have not been material. However, if actual persistence or redemption rates change, adjustments to the reserve may be necessary and could be material.

Tuition receivable — We record estimates for our allowance for credit losses related to tuition receivable from students primarily based on our historical collection rates by age of receivable and adjusted for reasonable expectations of future collection performance, net of recoveries. Our experience is that payment of outstanding balances is influenced by whether the student returns to the institution, as we require students to make payment arrangements for their outstanding balances prior to enrollment. Therefore, we monitor outstanding tuition receivable balances through subsequent terms, increasing the reserve on such balances over time as the likelihood of returning to the institution diminishes and our historical experience indicates collection is less likely. We periodically assess our methodologies for estimating credit losses in consideration of actual experience. If the financial condition of our students were to deteriorate based on current or expected future events resulting in evidence of impairment of their ability to make required payments for tuition payable to us, additional allowances or write-offs may be required. For the firstsecond quarter of 2026, our bad debt expense was 3.7%3.3% of revenue compared to 4.2%4.0% for the same period in 2025. A change in our allowance for credit losses of 1% of gross tuition receivable as of MarchJune 31,30, 2026 would have changed our income from operations by approximately $1.3$1.5 million.

Goodwill and intangible assets — Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed. Indefinite-lived intangible assets, which include trade names, are recorded at fair market value on their acquisition date. At the time of acquisition, goodwill and indefinite-lived intangible assets are allocated to reporting units. Management 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. Goodwill and indefinite-lived intangible assets are assessed at least annually for impairment. No events or circumstances occurred in the three and six months ended MarchJune 31,30, 2026 to indicate an impairment to goodwill or indefinite-lived intangible assets. Accordingly, no impairment charges related to goodwill or indefinite-lived intangible assets were recorded during the three and six months ended MarchJune 31,30, 2026.

ForIn the first quarter of 2026, student enrollment within ANZ decreased 2.5% to 19,570 compared to 20,082 for the same period in 2025, and in the second quarter of 2026, student enrollment within ANZ decreased 5.2% to 17,555 compared to 18,524 for the same period in 2025, reflecting continued constraints on international enrollment. These developments reflect a softening of the improving enrollment trends observed at the end of 2025.2025 and are primarily due to the Australian government applying a more stringent visa approval process for international students, resulting in a higher rate of visa refusals for applicants from certain countries. While lower international enrollment was partially offset by growth in domestic enrollment, this growth did not fully offset the decline. If the regulatory constraints on international students continue permanently and are not offset by growth in domestic enrollment, the goodwill and indefinite-lived intangible assets associated with the ANZ reporting unit could become impaired in the future. As of MarchJune 31,30, 2026, the ANZ reporting unit had $523.5$526.5 million of goodwill and $65.8$66.2 million of indefinite-lived intangible assets. WeBased on qualitative evaluations performed each reporting period since our last quantitative assessment, we believe the fair value of the ANZ reporting unit remains in excess of carrying value and that the fair value of the indefinite-lived intangible assets remains in excess of carrying value as of MarchJune 31,30, 2026. Management will continue to assess goodwill and indefinite-lived intangible assets for impairment in future quarters.

In the firstsecond quarter of 2026, we generated $305.9$337.3 million in revenue compared to $303.6$321.5 million for the same period in 2025. Our income from operations was $41.1$50.5 million in the firstsecond quarter of 2026 compared to $39.8$45.8 million for the same period in 2025, primarily due to higher revenue in our ETS segment,revenue, partially offset by lowerhigher revenue in our USHE segmentinstructional and highersupport operatingcosts, costs.which include the $13.9 million ANZ back-pay reserve. Net income in the firstsecond quarter of 2026 was $32.8$37.2 million compared to $29.7$32.3 million for the same period in 2025, and diluted earnings per share was $1.48$1.71 in the firstsecond quarter of 2026 compared to $1.24$1.37 for the same period in 2025. For the six months ended June 30, 2026, we generated $643.2 million in revenue compared to $625.1 million for the same period in 2025. Our income from operations was $91.6 million for the six months ended June 30, 2026 compared to $85.6 million for the same period in 2025, primarily due to higher revenue, partially offset by higher operating expenses, which include the $13.9 million ANZ back-pay reserve. Net income was $70.0 million for the six months ended June 30, 2026 compared to $62.1 million for the same period in 2025, and diluted earnings per share was $3.19 for the six months ended June 30, 2026 compared to $2.61 for the same period in 2025.

Three Months Ended MarchJune 31,30, 2026 Compared to the Three Months Ended MarchJune 31,30, 2025

Revenues. Consolidated revenue increased 0.8%4.9% to $305.9$337.3 million in the firstsecond quarter of 2026 compared to $303.6$321.5 million in the firstsecond quarter of 2025, primarily due to higherfavorable revenueforeign incurrency our ETSimpacts and ANZ segments, partially offset by lowerhigher revenue in our USHE segment.and ETS segments. In the USHE segment for the three months ended MarchJune 31,30, 2026, total enrollment decreased 0.8%0.5% to 87,16585,894 from 87,85486,339 for the same period in 2025. USHE segment revenue decreasedincreased 3.8%2.3% to $212.6$220.5 million in the firstsecond quarter of 2026 compared to $221.0$215.6 million in the firstsecond quarter of 2025, primarily due to a decrease in enrollment and lowerhigher revenue per student.student, partially offset by lower enrollment. In the ANZ segment for the three months ended MarchJune 31,30, 2026, total enrollment decreased 2.5%5.2% to 19,57017,555 from 20,08218,524 for the same period in 2025. ANZ segment revenue increased 7.4%7.6% to $51.8$74.4 million in the firstsecond quarter of 2026 compared to $48.3$69.1 million in the firstsecond quarter of 2025, primarily due to favorable foreign currency exchangeimpacts impacts,and higher revenue per student, partially offset by a decrease inlower enrollment. ETS segment revenue increased 21.0%15.4% to $41.5$42.4 million in the firstsecond quarter of 2026 compared to $34.3$36.7 million in the firstsecond quarter of 2025, primarily due to growth in Sophia Learning subscriptions, an increase in Workforce Edge revenue from employer partnerships, and higher employer affiliated enrollment.

Instructional and support costs. Consolidated instructional and support costs decreasedincreased to $154.8$177.9 million in the firstsecond quarter of 2026 compared to $158.3$166.2 million in the firstsecond quarter of 2025, principallyprimarily due to the ANZ back-pay reserve, higher technology-related and student materials costs, and unfavorable foreign currency impacts, partially offset by lower personnel-related costs, bad debt expense, facility expenses, personnel-related costs, and stock-based compensation expense, partially offset by higher technology-related costs and unfavorable foreign currency exchange impacts.expense. Consolidated instructional and support costs as a percentage of revenues decreasedincreased to 50.6%52.7% in the firstsecond quarter of 2026 from 52.1%51.7% in the firstsecond quarter of 2025.

General and administration expenses. Consolidated general and administration expenses increaseddecreased to $108.0$106.4 million in the firstsecond quarter of 2026 compared to $103.6$106.8 million in the firstsecond quarter of 2025, principallyprimarily due to lower international agent commissions, personnel-related costs, and facility expenses, partially offset by unfavorable foreign currency impacts and increased investments in branding initiatives, higher stock-based compensation expense, higher professional services costs, and unfavorable foreign currency exchange impacts, partially offset by lower personnel-related costs.initiatives. Consolidated general and administration expenses as a percentage of revenues increaseddecreased to 35.3%31.6% in the firstsecond quarter of 2026 from 34.1%33.2% in the firstsecond quarter of 2025.

Restructuring costs. Restructuring costs increaseddecreased to $2.1$2.5 million in the firstsecond quarter of 2026 compared to $1.9$2.8 million in the firstsecond quarter of 2025, primarily due to a $0.2$1.0 million increasedecrease in asset impairment charges associated with the consolidation of underutilized facilities.facilities, partially offset by a $0.7 million increase in severance and other personnel-related expenses from employee terminations.

Other income.income (expense). Other income decreased(expense) increased to $1.2$1.4 million of income in the firstsecond quarter of 2026 compared to $2.2$0.3 million of expense in the firstsecond quarter of 2025, primarily due to a $0.9$2.6 million decrease in interest income and a $0.1 million decreaseincrease in investment income related to our limited partnership investments.investments, partially offset by a $0.9 million decrease in interest income. We incurred $0.3 million of interest expense in the three months ended MarchJune 31,30, 2026 compared to $0.3 million in the three months ended MarchJune 31,30, 2025.

Provision for income taxes. Income tax expense was $9.5$14.7 million in the firstsecond quarter of 2026 compared to $12.3$13.1 million in the firstsecond quarter of 2025. Income tax expense for the three months ended March 31, 2026 and 2025 include windfall tax impacts of approximately $2.6 million and $0.5 million, respectively, related to share-based payment arrangements. Our effective tax rate for the firstsecond quarter of 2026 was 22.4%28.3% compared to 29.2%28.9% in the firstsecond quarter of 2025.

Net income. Net income increased to $32.8$37.2 million in the firstsecond quarter of 2026 compared to $29.7$32.3 million in the firstsecond quarter of 2025 due to the factors discussed above.

To illustrate currency impacts to operating results, Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the three and six months ended MarchJune 31,30, 2026 are also presented on a constant currency basis.

Adjusted income from operations was $43.2$52.9 million in the firstsecond quarter of 2026 compared to $41.7$48.5 million for the same period in 2025. Adjusted net income was $31.6$38.3 million in the firstsecond quarter of 2026 compared to $31.2$35.8 million for the same period in 2025, and adjusted diluted earnings per share was $1.42$1.76 in the firstsecond quarter of 2026 compared to $1.30$1.52 for the same period in 2025. Adjusted income from operations was $96.1 million for the six months ended June 30, 2026 compared to $90.3 million for the same period in 2025. Adjusted net income was $69.9 million for the six months ended June 30, 2026 compared to $67.0 million for the same period in 2025, and adjusted diluted earnings per share was $3.18 for the six months ended June 30, 2026 compared to $2.82 for the same period in 2025.

Reconciliation of Reported to Adjusted Results of Operations for the three months ended MarchJune 31,30, 2026 (in thousands, except per share data)

Reconciliation of Reported to Adjusted Results of Operations for the three months ended MarchJune 31,30, 2025 (in thousands, except per share data)

_________________________________________________________________________________________ (1)Reflects severance costs, 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.

(3)Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted effective tax rate of 29.0% for the three and six months ended MarchJune 31,30, 2026 and 29.0% for the three and six months ended MarchJune 31,30, 2025.

The tabletables below reconcilesreconcile our reported results of operations to adjusted results of operations on a constant currency basis:

Reconciliation of Reported to Adjusted Results of Operations on a Constant Currency Basis for the three months ended MarchJune 31,30, 2026 (in thousands, except per share data):

(2)Reflects an adjustment to translate foreign currency results after the non-GAAP adjustments for the three and six months ended MarchJune 31,30, 2026 at a constant exchange rate of 0.64 and 0.63 Australian Dollars to U.S. Dollars, which waswere the average exchange raterates for the same periodperiods in 2025.

At MarchJune 31,30, 2026, we had cash, cash equivalents, and marketable securities of $162.6$133.8 million compared to $153.1 million at December 31, 2025 and $197.6$179.9 million at MarchJune 31,30, 2025. We maintain our cash and cash equivalents primarily in money market funds and demand deposit bank accounts at high credit quality financial institutions, which are included in cash and cash equivalents at MarchJune 31,30, 2026 and 2025. We also hold marketable securities, which primarily include corporate debt securities, U.S. treasury securities with maturities greater than three months, and term deposits. During the threesix months ended MarchJune 31,30, 2026 and 2025, we earned interest income of $1.6$2.9 million and $2.5$4.6 million, respectively.

We are party to a credit facility (the “Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $250 million. The Amended Credit Facility provides us with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in an amount up to the sum of (x) the greater of (A) $300 million and (B) 100% of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00. 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. 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 our leverage ratio. An unused commitment fee ranging from 0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused amounts. We were in compliance with all applicable covenants related to the Amended Credit Facility as of MarchJune 31,30, 2026. We had no borrowings outstanding under the Revolving Credit Facility as of MarchJune 31,30, 2026 and MarchJune 31,30, 2025. During the threesix months ended MarchJune 31,30, 2026 and 2025, we paid $0.1$0.3 million and $0.1$0.3 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities for the threesix months ended MarchJune 31,30, 2026 increased to $87.4$116.6 million, compared to $67.7$98.9 million for the same period in 2025. The increase in net cash from operating activities was primarily drivendue byto higher earnings and favorable changes in working capital.

Our net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 increased to $10.2$21.9 million, compared to $1.7$4.6 million for the same period in 2025. The increase in net cash used in investing activities was primarily drivendue byto a $34.3$34.2 million decrease in cash proceeds from marketable securities and other investments,investments and a $3.0 million increase in capital expenditures, partially offset by a $25.6$20.0 million decrease in purchases of marketable securities and a $0.3 million decrease in capital expenditures.securities. Capital expenditures decreasedincreased to $10.1$24.2 million for the threesix months ended MarchJune 31,30, 2026, compared to $10.3$21.2 million for the same period in 2025, primarily due to theincreased timingtechnology of capital projects.investments.

Our net cash used in financing activities for the threesix months ended MarchJune 31,30, 2026 increased to $66.1$112.2 million, compared to $56.1$98.4 million for the same period in 2025. The increase in net cash used in financing activities was primarily drivendue byto ana $8.0$12.7 million increase in share repurchases and a $3.2$3.3 million increase in net payments for employee stock awards, partially offset by a $1.2$2.3 million decrease in cash dividend payments.

The Board of Directors declared a regular, quarterly cash dividend of $0.60 per share of common stock in the first quartertwo quarters of 2026. During the threesix months ended MarchJune 31,30, 2026, we paid a total of $13.6$26.9 million in cash dividends on our common stock, compared to $14.8$29.2 million for the same period in 2025. During the threesix months ended MarchJune 31,30, 2026, we paid $40.0$72.7 million to repurchase shares of common stock in the open market under our repurchase program, compared to $32.0$60.0 million for the same period in 2025. As of MarchJune 31,30, 2026, we had $173.5$140.7 million remaining in share repurchase authorization to use through December 31, 2026.

For the firstsecond quarter of 2026 and 2025, bad debt expense as a percentage of revenue was 3.7%3.3% and 4.2%,4.0%, respectively.