Strategic Education, Inc.

Previous wording

Certain of the statements included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as elsewhere in this Quarterly Report on Form 10-Q are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995 (“Reform Act”). Such statements may be identified by the use of words such as “expect,” “estimate,” “assume,” “believe,” “anticipate,” “may,” “will,” “forecast,” “outlook,” “plan,” “project,” “potential” or similar words, and include, without limitation, statements relating to future enrollment, revenues, revenues per student, earnings growth, operating expenses, and capital expenditures. These statements are based on the Company’s current expectations and are subject to a number of assumptions, risks and uncertainties. In accordance with the Safe Harbor provisions of the Reform Act, the Company has identified important factors that could cause the actual results to differ materially from those expressed in or implied by such statements. The assumptions, risks and uncertainties include the pace of student enrollment; our continued compliance with Title IV of the Higher Education Act, and the regulations thereunder, as well as other federal laws and regulations, institutional accreditation standards and state regulatory requirements, legislation and other actions by the U.S. Congress, actions by the current administration, rulemaking and other action by the U.S. Department of Education or other governmental entities, including without limitation action related to Title IV programs, U.S. Department of Education staffing levels, borrower defense to repayment applications, gainful employment or similar measures, 90/10, increased focus by governmental entities on for-profit education institutions, and including actions by governmental entities in Australia and New Zealand; competitive factors; risks associated with the opening of new campuses; risks associated with the offering of new educational programs and adapting to other changes; risks associated with the acquisition of existing educational institutions including our acquisition of Torrens University and associated assets in Australia and New Zealand; the risk that the benefits of our acquisition of Torrens University and associated assets in Australia and New Zealand may not be fully realized or may take longer to realize than expected; the risk that our acquisition of Torrens University and associated assets in Australia and New Zealand may not advance our business strategy and growth strategy; risks related to the timing of regulatory approvals; our ability to implement our growth strategy; the risk that the combined company may experience difficulty integrating employees or operations; risks associated with the ability of our students to finance their education in a timely manner; and general economic and market conditions. You should not put undue reliance on any forward-looking statements. Further inform…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain of the statements included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as elsewhere in this Quarterly Report on Form 10-Q are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995 (“Reform Act”). Such statements may be identified by the use of words such as “expect,” “estimate,” “assume,” “believe,” “anticipate,” “may,” “will,” “forecast,” “outlook,” “plan,” “project,” “potential” or similar words, and include, without limitation, statements relating to future enrollment, revenues, revenues per student, earnings growth, operating expenses, and capital expenditures. These statements are based on the Company’s current expectations and are subject to a number of assumptions, risks and uncertainties. In accordance with the Safe Harbor provisions of the Reform Act, the Company has identified important factors that could cause the actual results to differ materially from those expressed in or implied by such statements. The assumptions, risks and uncertainties include the pace of student enrollment; our continued compliance with Title IV of the Higher Education Act, and the regulations thereunder, as well as other federal laws and regulations, institutional accreditation standards and state regulatory requirements, legislation and other actions by the U.S. Congress, actions by the current administration, rulemaking and other action by the U.S. Department of Education or other governmental entities, including without limitation action related to Title IV programs, U.S. Department of Education staffing levels, borrower defense to repayment applications, gainful employment or similar measures, 90/10, increased focus by governmental entities on for-profit education institutions, and including actions by governmental entities in Australia and New Zealand; competitive factors; risks associated with the opening of new campuses; risks associated with the offering of new educational programs and adapting to other changes; risks associated with the acquisition of other businesses, including existing educational institutions; risks related to the timing of regulatory approvals; our ability to implement our growth strategy; risks associated with the ability of our students to finance their education in a timely manner; risks associated with cybersecurity incidents, including but not limited to reputational risks and possible liability under U.S. state and federal privacy statutes and legal actions; risks associated with the use of artificial intelligence and related tools; and general economic and market conditions. You should not put undue reliance on any forward-looking statements. Further information about these and other relevant risks and uncertainties may be found in Part II, “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q, Part I, “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K and in the Company’s other filings wi…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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 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 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.

Current wording

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 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.

Previous wording

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

Current wording

•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.

Previous wording

•In the third quarter of 2025, USHE enrollment decreased 1.0% to 85,640 compared to 86,533 for the same period in 2024.

Current wording

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

Previous wording

•Trailing 4-quarter student persistence within USHE was 87.8% in the second quarter of 2025 compared to 87.0% for the same period in 2024. 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.

Current wording

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

Previous wording

•Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 7.1% as of the end of the second quarter of 2025. 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.

Current wording

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

Previous wording

•In the third quarter of 2025, employer affiliated enrollment as a percentage of USHE enrollment was 32.7% compared to 29.8% for the same period in 2024.

Current wording

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

Previous wording

•Media Design School at Strayer (“MDS”) is a private tertiary institution for creative and technology qualifications in New Zealand. MDS 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. MDS is accredited in New Zealand by the New Zealand Qualifications 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 included within Strayer’s Middle States Commission on Higher Education accreditation. NZQA approved the transaction and MDS will continue to operate as a New Zealand private tertiary institution. This change does not affect our segment reporting.

Current wording

•Media Design School at Strayer (“MDS”) is a private training establishment for creative and technology qualifications in New Zealand. MDS 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. MDS is accredited in New Zealand by the New Zealand Qualifications Authority, the organization responsible for the quality assurance of non-university tertiary training providers.

Previous wording

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 nine months ended September 30, 2025 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.

Current wording

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 three months ended March 31, 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.

Previous wording

If a student withdraws from a course prior to completion, a portion of the tuition may be refundable depending on when the withdrawal occurs. We use the student’s withdrawal date or last date of attendance for this purpose. Our specific refund policies vary across the universities and non-degree programs. For students attending Capella University, our refund policy varies based on course format. GuidedPath students are allowed a 100% refund through the first five days of the course, a 75% refund from six to twelve days, and 0% refund for the remainder of the period. FlexPath students receive a 100% refund through the 12th calendar day of the course for their first billing session only and a 0% refund after that date and for all subsequent billing sessions. For students attending Strayer University, our refund policy typically permits students who complete less than half of a course to receive a partial refund of tuition for that course. For domestic students attending an ANZ institution, refunds are typically provided to students that withdraw within the first 20% of a course term. For international students attending an ANZ institution, refunds are provided to students that withdraw prior to the course commencement date. In limited circumstances, refunds to students attending an ANZ institution may be granted after these cut-offs subject to an application for special consideration by the student and approval of that application by the institution. Refunds reduce the tuition revenue that otherwise would have been recognized for that student. Since the academic terms coincide with our financial reporting periods for most programs, nearly all refunds are processed and recorded in the same quarter as the corresponding revenue. For certain programs where courses may overlap a quarter-end date, we estimate a refund or withdrawal rate and do not recognize the related revenue until the uncertainty related to the refund is resolved. The portion of tuition revenue refundable to students may vary based on the student’s state of residence.

Current wording

If a student withdraws from a course prior to completion, a portion of the tuition may be refundable depending on when the withdrawal occurs. We use the student’s withdrawal date or last date of attendance for this purpose. Our specific refund policies vary across the universities and non-degree programs. For students attending Capella University, our refund policy varies based on course format. GuidedPath students are allowed a 100% refund through the first five days of the course, a 75% refund from six to twelve days, and 0% refund for the remainder of the period. FlexPath students receive a 100% refund through the 12th calendar day of the course for their first billing session only and a 0% refund after that date and for all subsequent billing sessions. For students attending Strayer University, our refund policy typically permits students who complete less than half of a course to receive a partial refund of tuition for that course. For domestic students attending an ANZ institution, refunds are typically provided to students that withdraw within the first 20% of a course term. For international students attending an ANZ institution, refunds are provided to students that withdraw prior to the course commencement date. In limited circumstances, refunds to students attending an ANZ institution may be granted after these cut-offs subject to an application for special consideration by the student and approval of that application by the institution. Refunds reduce the tuition revenue that otherwise would have been recognized for that student. Since the academic terms coincide with our financial reporting periods for most programs, nearly all refunds are processed and recorded in the same quarter as the corresponding revenue. For certain programs where courses may overlap with a quarter-end date, we estimate a refund or withdrawal rate and do not recognize the related revenue until the uncertainty related to the refund is resolved. The portion of tuition revenue refundable to students may vary based on the student’s state of residence.

Previous wording

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 September 30, 2025, we had deferred $37.7 million for estimated redemptions earned under the Learn and Earn Scholarship, as compared to $37.1 million at December 31, 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.

Current wording

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

Previous wording

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 third quarter of 2025, our bad debt expense was 4.7% of revenue compared to 4.5% for the same period in 2024. A change in our allowance for credit losses of 1% of gross tuition receivable as of September 30, 2025 would have changed our income from operations by approximately $1.6 million.

Current wording

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 first quarter of 2026, our bad debt expense was 3.7% of revenue compared to 4.2% for the same period in 2025. A change in our allowance for credit losses of 1% of gross tuition receivable as of March 31, 2026 would have changed our income from operations by approximately $1.3 million.

Previous wording

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 nine months ended September 30, 2025 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 nine months ended September 30, 2025.

Current wording

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

Previous wording

For the third quarter of 2025, student enrollment within ANZ decreased 2.1% to 18,808 compared to 19,205 for the same period in 2024, largely due to constraints on international enrollment. Lower international enrollment was partially offset by growth in domestic enrollment, which is expected to be a bigger driver of future growth. 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 September 30, 2025, the ANZ reporting unit had $505.0 million of goodwill and $64.3 million of indefinite-lived intangible assets. We believe the fair value of the ANZ reporting unit remains in excess of carrying value and that the fair value of indefinite-lived intangible assets remains in excess of carrying value as of September 30, 2025. Management will continue to assess goodwill and indefinite-lived intangible assets for impairment in future quarters.

Current wording

For the first quarter of 2026, student enrollment within ANZ decreased 2.5% to 19,570 compared to 20,082 for the same period in 2025, reflecting continued constraints on international enrollment. These developments reflect a softening of the improving enrollment trends observed at the end of 2025. While lower international enrollment was partially offset by growth in domestic enrollment, this growth did not fully offset the decline. If the regulatory constraints on international students continue permanently and are not offset by growth in domestic enrollment, the goodwill and indefinite-lived intangible assets associated with the ANZ reporting unit could become impaired in the future. As of March 31, 2026, the ANZ reporting unit had $523.5 million of goodwill and $65.8 million of indefinite-lived intangible assets. We believe the fair value of the ANZ reporting unit remains in excess of carrying value and that the fair value of the indefinite-lived intangible assets remains in excess of carrying value as of March 31, 2026. Management will continue to assess goodwill and indefinite-lived intangible assets for impairment in future quarters.

Previous wording

Revenues. Consolidated revenue increased 4.6% to $319.9 million in the third quarter of 2025 compared to $306.0 million in the third quarter of 2024, primarily due to higher revenue in our ETS segment, which was driven by an increase in Workforce Edge revenue from new employer partnerships and growth in Sophia Learning subscriptions, and higher revenue in our USHE segment due to higher revenue per student, partially offset by lower revenue in our ANZ segment primarily due to unfavorable foreign currency exchange impacts and a decrease in enrollment. In the USHE segment for the three months ended September 30, 2025, total enrollment decreased 1.0% to 85,640 from 86,533 for the same period in 2024. USHE segment revenue increased 2.6% to $213.1 million in the third quarter of 2025 compared to $207.7 million in the third quarter of 2024, primarily due to higher revenue per student. In the Australia/New Zealand segment for the three months ended September 30, 2025, total enrollment decreased 2.1% to 18,808 from 19,205 for the same period in 2024. Australia/New Zealand segment revenue decreased 4.7% to $68.6 million in the third quarter of 2025 compared to $71.9 million in the third quarter of 2024, primarily due to unfavorable foreign currency exchange impacts and a decrease in enrollment. ETS segment revenue increased 45.6% to $38.3 million in the third quarter of 2025 compared to $26.3 million in the third quarter of 2024, primarily due to an increase in Workforce Edge revenue from new employer partnerships, growth in Sophia Learning subscriptions, and higher employer affiliated enrollment.

Current wording

Revenues. Consolidated revenue increased 0.8% to $305.9 million in the first quarter of 2026 compared to $303.6 million in the first quarter of 2025, primarily due to higher revenue in our ETS and ANZ segments, partially offset by lower revenue in our USHE segment. In the USHE segment for the three months ended March 31, 2026, total enrollment decreased 0.8% to 87,165 from 87,854 for the same period in 2025. USHE segment revenue decreased 3.8% to $212.6 million in the first quarter of 2026 compared to $221.0 million in the first quarter of 2025, primarily due to a decrease in enrollment and lower revenue per student. In the ANZ segment for the three months ended March 31, 2026, total enrollment decreased 2.5% to 19,570 from 20,082 for the same period in 2025. ANZ segment revenue increased 7.4% to $51.8 million in the first quarter of 2026 compared to $48.3 million in the first quarter of 2025, primarily due to favorable foreign currency exchange impacts, partially offset by a decrease in enrollment. ETS segment revenue increased 21.0% to $41.5 million in the first quarter of 2026 compared to $34.3 million in the first quarter of 2025, primarily due to growth in Sophia Learning subscriptions, an increase in Workforce Edge revenue from employer partnerships, and higher employer affiliated enrollment.

Previous wording

Instructional and support costs. Consolidated instructional and support costs were $162.7 million in the third quarter of 2025 compared to $162.7 million in the third quarter of 2024. Higher technology-related costs and bad debt expense in the third quarter of 2025 compared to the third quarter of 2024 were offset by lower personnel-related costs and facility expenses and favorable foreign currency exchange impacts. Consolidated instructional and support costs as a percentage of revenues decreased to 50.9% in the third quarter of 2025 from 53.2% in the third quarter of 2024.

Current wording

Instructional and support costs. Consolidated instructional and support costs decreased to $154.8 million in the first quarter of 2026 compared to $158.3 million in the first quarter of 2025, principally due to lower bad debt expense, facility expenses, personnel-related costs, and stock-based compensation expense, partially offset by higher technology-related costs and unfavorable foreign currency exchange impacts. Consolidated instructional and support costs as a percentage of revenues decreased to 50.6% in the first quarter of 2026 from 52.1% in the first quarter of 2025.

Previous wording

General and administration expenses. Consolidated general and administration expenses decreased to $105.9 million in the third quarter of 2025 compared to $106.2 million in the third quarter of 2024, principally due to lower stock-based compensation expense and depreciation expense and favorable foreign currency exchange impacts, partially offset by increased investments in branding initiatives and higher personnel-related costs. Consolidated general and administration expenses as a percentage of revenues decreased to 33.1% in the third quarter of 2025 from 34.7% in the third quarter of 2024.

Current wording

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

Previous wording

Income from operations. Consolidated income from operations increased to $37.0 million in the third quarter of 2025 compared to $36.3 million in the third quarter of 2024, primarily due to higher revenue in our USHE and ETS segments, partially offset by higher restructuring costs. USHE segment income from operations increased 99.7% to $22.9 million in the third quarter of 2025 compared to $11.4 million in the third quarter of 2024, primarily driven by lower personnel-related costs, depreciation expense, facility expenses, and stock-based compensation expense, partially offset by higher bad debt expense and technology-related costs. Australia/New Zealand segment income from operations decreased 15.9% to $12.5 million in the third quarter of 2025 compared to $14.8 million in the third quarter of 2024, primarily driven by lower revenue and higher technology-related costs, partially offset by decreased investments in branding initiatives and lower stock-based compensation expense. ETS segment income from operations increased 47.8% to $16.0 million in the third quarter of 2025 compared to $10.8 million in the third quarter of 2024, primarily due to higher revenue as a result of an increase in Workforce Edge revenue from new employer partnerships, growth in Sophia Learning subscriptions, and higher employer affiliated enrollment, partially offset by higher personnel-related costs and increased investments in branding initiatives.

Current wording

Income from operations. Consolidated income from operations increased to $41.1 million in the first quarter of 2026 compared to $39.8 million in the first quarter of 2025, primarily due to higher revenue in our ETS segment, partially offset by lower revenue in our USHE segment and higher operating costs. USHE segment income from operations decreased 14.9% to $25.5 million in the first quarter of 2026 compared to $30.0 million in the first quarter of 2025, primarily driven by lower revenue due to a decrease in enrollment, increased investments in branding initiatives and higher technology-related and professional services costs, partially offset by lower bad debt expense, personnel-related costs, facility expenses, and depreciation expense. ANZ segment loss from operations decreased to $2.0 million in the first quarter of 2026 compared to a loss from operations of $2.1 million in the first quarter of 2025, primarily driven by higher revenue, lower facility expenses, and decreased investments in branding initiatives, partially offset by higher personnel-related costs and technology-related costs. ETS segment income from operations increased 42.2% to $19.7 million in the first quarter of 2026 compared to $13.8 million in the first quarter of 2025, primarily due to higher revenue as a result of growth in Sophia Learning subscriptions, an increase in Workforce Edge revenue from employer partnerships, and higher employer affiliated enrollment, partially offset by increased investments in branding initiatives.

Previous wording

Other income (expense). Other income (expense) decreased to $0.3 million of expense in the third quarter of 2025 compared to $2.3 million of income in the third quarter of 2024, primarily due to a $1.5 million decrease in investment income primarily related to our limited partnership investments and a $1.4 million decrease in interest income, partially offset by a $0.4 million decrease in interest expense. We incurred $0.3 million of interest expense in the three months ended September 30, 2025 compared to $0.7 million in the three months ended September 30, 2024.

Current wording

Other income. Other income decreased to $1.2 million in the first quarter of 2026 compared to $2.2 million in the first quarter of 2025, primarily due to a $0.9 million decrease in interest income and a $0.1 million decrease in investment income related to our limited partnership investments. We incurred $0.3 million of interest expense in the three months ended March 31, 2026 compared to $0.3 million in the three months ended March 31, 2025.

Previous wording

Provision for income taxes. Income tax expense was $35.5 million and $36.2 million in the nine months ended September 30, 2025 and 2024, respectively. Income tax expense for the nine months ended September 30, 2025 and 2024 include windfall tax impacts of approximately $0.4 million and shortfall tax impacts of approximately $1.2 million, respectively, related to share-based payment arrangements.

Current wording

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

Previous wording

Net income. Net income decreased to $26.6 million in the third quarter of 2025 compared to $27.7 million in 2024 due to the factors discussed above.

Current wording

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

Previous wording

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 nine months ended September 30, 2025 are also presented on a constant currency basis.

Current wording

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

Previous wording

(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 nine months ended September 30, 2025 and 29.5% for the three and nine months ended September 30, 2024.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(2)Reflects an adjustment to translate foreign currency after the non-GAAP adjustments for the three and nine months ended September 30, 2025 at a constant exchange rate of 0.67 and 0.66 Australian Dollars to U.S. Dollars, which were the average exchange rates for the same periods in 2024.

Current wording

(2)Reflects an adjustment to translate foreign currency results after the non-GAAP adjustments for the three months ended March 31, 2026 at a constant exchange rate of 0.63 Australian Dollars to U.S. Dollars, which was the average exchange rate for the same period in 2025.

Previous wording

At September 30, 2025, we had cash, cash equivalents, and marketable securities of $182.6 million compared to $199.0 million at December 31, 2024 and $222.1 million at September 30, 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 September 30, 2025 and 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. During the nine months ended September 30, 2025 and 2024, we earned interest income of $6.5 million and $9.7 million, respectively.

Current wording

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

Previous wording

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 September 30, 2025. We had no borrowings outstanding under the Revolving Credit Facility as of September 30, 2025 and September 30, 2024. During the nine months ended September 30, 2025 and 2024, we paid $0.4 million and $3.1 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Current wording

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 March 31, 2026. We had no borrowings outstanding under the Revolving Credit Facility as of March 31, 2026 and March 31, 2025. During the three months ended March 31, 2026 and 2025, we paid $0.1 million and $0.1 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Previous wording

Our net cash provided by operating activities for the nine months ended September 30, 2025 increased to $159.0 million, compared to $153.4 million for the same period in 2024. The increase in net cash from operating activities was primarily driven by higher earnings and non-cash adjustments, partially offset by unfavorable changes in working capital.

Current wording

Our net cash provided by operating activities for the three months ended March 31, 2026 increased to $87.4 million, compared to $67.7 million for the same period in 2025. The increase in net cash from operating activities was primarily driven by higher earnings and favorable changes in working capital.

Previous wording

Our net cash used in investing activities for the nine months ended September 30, 2025 decreased to $0.5 million, compared to $15.2 million for the same period in 2024. The decrease in net cash used in investing activities was primarily driven by a $28.0 million increase in cash proceeds from marketable securities and other investments, partially offset by a $11.1 million increase in purchases of marketable securities and a $2.7 million increase in capital expenditures. Capital expenditures increased to $32.0 million for the nine months ended September 30, 2025, compared to $29.3 million for the same period in 2024, primarily due to the timing of capital projects.

Current wording

Our net cash used in investing activities for the three months ended March 31, 2026 increased to $10.2 million, compared to $1.7 million for the same period in 2025. The increase in net cash used in investing activities was primarily driven by a $34.3 million decrease in cash proceeds from marketable securities and other investments, partially offset by a $25.6 million decrease in purchases of marketable securities and a $0.3 million decrease in capital expenditures. Capital expenditures decreased to $10.1 million for the three months ended March 31, 2026, compared to $10.3 million for the same period in 2025, primarily due to the timing of capital projects.

Previous wording

Our net cash used in financing activities for the nine months ended September 30, 2025 increased to $147.4 million, compared to $114.1 million for the same period in 2024. The increase in net cash used in financing activities was primarily driven by a $89.3 million increase in share repurchases and a $6.2 million increase in net payments for employee stock awards, partially offset by a $61.3 million long-term debt payment during the nine months ended September 30, 2024 and a $0.9 million decrease in cash dividend payments.

Current wording

Our net cash used in financing activities for the three months ended March 31, 2026 increased to $66.1 million, compared to $56.1 million for the same period in 2025. The increase in net cash used in financing activities was primarily driven by an $8.0 million increase in share repurchases and a $3.2 million increase in net payments for employee stock awards, partially offset by a $1.2 million decrease in cash dividend payments.

Previous wording

The Board of Directors declared a regular, quarterly cash dividend of $0.60 per share of common stock in the first three quarters of 2025. During the nine months ended September 30, 2025, we paid a total of $43.4 million in cash dividends on our common stock, compared to $44.3 million for the same period in 2024. During the nine months ended September 30, 2025, we paid $94.3 million to repurchase shares of common stock in the open market under our repurchase program, compared to $5.0 million for the same period in 2024. As of September 30, 2025, we had $134.2 million remaining in share repurchase authorization to use through December 31, 2025.

Current wording

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

Previous wording

For the third quarter of 2025 and 2024, bad debt expense as a percentage of revenue was 4.7% and 4.5%, respectively.

Current wording

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

Previous wording

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

Current wording

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