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 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.

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; the impairment of our goodwill and indefinite-lived intangible assets in ANZ and any further impairment in the future; 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 …

Excerpt shortened here; the source contains the full paragraph.

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 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.

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.

Previous wording

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

Current wording

•In the third quarter of 2026, USHE enrollment decreased 1.1% to 84,725 compared to 85,640 for the same period in 2025.

Previous wording

•Trailing 4-quarter student persistence within USHE was 89.0% in the first quarter of 2026 compared to 87.4% for the same period in 2025. Student persistence is calculated as the rate of students continuing from one quarter to the next, adjusted for graduates, on a trailing 4-quarter basis. 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 89.2% in the second quarter of 2026 compared to 87.8% for the same period in 2025. Student persistence is calculated as the rate of students continuing from one quarter to the next, adjusted for graduates, on a trailing 4-quarter basis. 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 5.9% as of the end of the first quarter of 2026. Government provided grants and loans per credit earned includes all federal loans and grants for students (Title IV hereafter) in our USHE institutions, and is calculated on a trailing 4-quarter basis and reported one quarter in arrears. 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 5.5% as of the end of the second quarter of 2026. Government provided grants and loans per credit earned includes all federal loans and grants for students (Title IV hereafter) in our USHE institutions, and is calculated on a trailing 4-quarter basis and reported one quarter in arrears. 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 second quarter of 2026, employer affiliated enrollment as a percentage of USHE enrollment was 34.7% compared to 31.8% for the same period in 2025.

Current wording

•In the third quarter of 2026, employer affiliated enrollment as a percentage of USHE enrollment was 34.7% compared to 32.7% for the same period in 2025.

Previous wording

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

Current wording

•In the third quarter of 2026, ANZ enrollment decreased 9.1% to 17,101 compared to 18,808 for the same period in 2025.

Previous wording

On March 19, 2024, the Australian Fair Work Ombudsman (“FWO”) issued a compliance notice to Torrens University (“Torrens”), alleging that Torrens had underpaid an academic employee for work performed between 2018 and 2024 in violation of the Higher Education Industry – Academic Staff Award (the “Award”), which prescribes minimum wages for academic employees under Australian law. The compliance notice interpreted the Award to require that institutions compensate the academic employee for the marking of student assessments separately from and in addition to standard lecture delivery rates. On April 24, 2024, Torrens filed suit in the Federal Court of Australia (“Federal Court”) seeking judicial review of the compliance notice, arguing that FWO’s interpretation of the Award was incorrect and that time spent marking student assessments properly constituted “associated working time” and therefore was included within the lecture delivery rate. On June 16, 2025, the Federal Court set aside the compliance notice, finding that marking student assessments constituted “associated working time” when performed by lecturers in subjects they taught. The FWO appealed that decision to the Full Federal Court (“Full Court”). On March 17, 2026, the Full Court allowed the appeal, overturned the June 2025 judgment, and reinstated the compliance notice. The Full Court concluded that, under the Award, lecture delivery rates compensate only for limited associated working time and that ordinary marking work generally constitutes a separate activity requiring separate payment. Torrens filed an Application for Special Leave to appeal the Full Court’s decision to the High Court of Australia. The Company is unable to predict the final outcome of the litigation.

Current wording

In March 2024, the Australian Fair Work Ombudsman (“FWO”) issued a compliance notice to Torrens University (“Torrens”), alleging that Torrens had underpaid an academic employee in violation of the Higher Education Industry – Academic Staff Award. Torrens sought judicial review of the compliance notice, and in June 2025, the Federal Court of Australia set aside the notice. The FWO appealed, and in March 2026, the Full Federal Court reversed that decision and reinstated the compliance notice. Torrens then sought Special Leave to appeal to the High Court of Australia. On August 6, 2026, the High Court denied that application.

Previous wording

Although the compliance notice and related litigation concern a single academic employee, the Full Court’s interpretation of the Award applies broadly to similarly situated casual academic staff. Following the Full Court’s March 2026 decision, the Company began to compensate its casual academic staff for marking hours related to 2026 academic terms and evaluated this matter, including the likelihood and potential magnitude of loss related to historical periods. As of March 31, 2026, it was not practicable to determine the financial impact of the matter, and no provision was recognized related to historical periods. While the Company continues to believe it has strong arguments on the merits, during the second quarter of 2026 it obtained further legal advice assessing the likelihood of the High Court granting Special Leave to hear the case on appeal. The Company also further evaluated the FWO’s pattern of entering into settlements with other employers in the Australian higher education sector involving similar employee compensation matters. Drawing on its understanding of these settlements, the Company has explored whether remediation could be performed solely on a prospective basis, but ultimately concluded that retrospective remediation was likely to be required. Based on these factors, the Company concluded that a loss was probable as of June 30, 2026. In addition, the Company gathered data and completed an analysis of historical marking hours that provided a reliable basis for estimating its back-pay exposure for the period from 2020 through 2025, reflecting the period for which amounts may be payable to casual academic staff, and concluded that the loss was reasonably estimable. Accordingly, during the second quarter of 2026, the Company recorded a reserve of $13.9 million, consisting of estimated back pay, related payroll taxes and benefits, and interest, within accounts payable and accrued expenses in the unaudited condensed consolidated balance sheets, with a corresponding charge to instructional and support costs in the unaudited condensed consolidated statements of operations (“back-pay reserve”).

Current wording

During the second quarter of 2026, based on further legal advice regarding the likelihood of success on appeal, the FWO’s pattern of settlements with other employers in the Australian higher education sector involving similar employee compensation matters, and the Company’s conclusion that retrospective remediation was likely to be required, the Company concluded that a loss was probable and reasonably estimable as of June 30, 2026. Accordingly, the Company recorded a reserve of $13.9 million, consisting of estimated back pay, related payroll taxes and benefits, and interest within accounts payable and accrued expenses in the unaudited condensed consolidated balance sheets, with a corresponding charge to instructional and support costs in the unaudited condensed consolidated statements of operations (“back-pay reserve”). The $13.9 million back-pay reserve reflects the Company’s best estimate of the potential loss for the period from 2020 through 2025. The Company did not adjust the reserve during the third quarter of 2026. With the denial of Torrens’ Application for Special Leave, the Company is preparing to commence remediation and is in discussions with the FWO regarding that process.

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 six months ended June 30, 2026 consisted of tuition revenue. Capella University offers monthly start options for new students, who then transition to a quarterly schedule. 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 nine months ended September 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.

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 June 30, 2026, we had deferred $38.6 million for estimated redemptions earned under the Learn and Earn Scholarship, as compared to $38.1 million at December 31, 2025. Each quarter, we assess our assumptions underlying our estimates for persistence and estimated redemptions based on actual experience. 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 September 30, 2026, we had deferred $37.1 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 second quarter of 2026, our bad debt expense was 3.3% of revenue compared to 4.0% for the same period in 2025. A change in our allowance for credit losses of 1% of gross tuition receivable as of June 30, 2026 would have changed our income from operations by approximately $1.5 million.

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 third quarter of 2026, our bad debt expense was 4.6% of revenue compared to 4.7% for the same period in 2025. A change in our allowance for credit losses of 1% of gross tuition receivable as of September 30, 2026 would have changed our income (loss) from operations by approximately $1.6 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 six months ended June 30, 2026 to indicate an impairment to goodwill or indefinite-lived intangible assets. Accordingly, no impairment charges related to goodwill or indefinite-lived intangible assets were recorded during the three and six months ended June 30, 2026.

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.

Previous wording

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

Current wording

In the first quarter of 2026, student enrollment within ANZ decreased 2.5% to 19,570 compared to 20,082 for the same period in 2025, and in the second quarter of 2026, student enrollment within ANZ decreased 5.2% to 17,555 compared to 18,524 for the same period in 2025, reflecting continued constraints on international enrollment. These developments reflect a softening of the improving enrollment trends observed at the end of 2025 and are primarily due to the Australian government applying a more stringent visa approval process for international students, resulting in a higher rate of visa refusals for applicants from certain countries. This decline continued through the third quarter of 2026, where student enrollment within ANZ decreased 9.1% to 17,101 compared to 18,808 for the same period in 2025. While lower international enrollment has been partially offset by growth in domestic enrollment, it has not been enough to offset the continued decline in international enrollment. These continued enrollment declines have impacted ANZ’s operating and financial performance. Further, during the third quarter of 2026, the Australian government announced additional migration-related policies that extended uncertainty regarding the duration of existing international enrollment regulatory constraints in Australia, with no indication of whether or when these constraints will be eased.

Previous wording

In the second quarter of 2026, we generated $337.3 million in revenue compared to $321.5 million for the same period in 2025. Our income from operations was $50.5 million in the second quarter of 2026 compared to $45.8 million for the same period in 2025, primarily due to higher revenue, partially offset by higher instructional and support costs, which include the $13.9 million ANZ back-pay reserve. Net income in the second quarter of 2026 was $37.2 million compared to $32.3 million for the same period in 2025, and diluted earnings per share was $1.71 in the second quarter of 2026 compared to $1.37 for the same period in 2025. For the six months ended June 30, 2026, we generated $643.2 million in revenue compared to $625.1 million for the same period in 2025. Our income from operations was $91.6 million for the six months ended June 30, 2026 compared to $85.6 million for the same period in 2025, primarily due to higher revenue, partially offset by higher operating expenses, which include the $13.9 million ANZ back-pay reserve. Net income was $70.0 million for the six months ended June 30, 2026 compared to $62.1 million for the same period in 2025, and diluted earnings per share was $3.19 for the six months ended June 30, 2026 compared to $2.61 for the same period in 2025.

Current wording

In the third quarter of 2026, we generated $325.1 million in revenue compared to $319.9 million for the same period in 2025. Our loss from operations was $87.6 million in the third quarter of 2026 compared to income from operations of $37.0 million for the same period in 2025, primarily due to a $134.1 million goodwill and intangible asset impairment charge, partially offset by lower restructuring costs and higher revenue. Net loss in the third quarter of 2026 was $98.3 million compared to net income of $26.6 million for the same period in 2025, and diluted loss per share was $4.68 in the third quarter of 2026 compared to diluted earnings per share of $1.15 for the same period in 2025. For the nine months ended September 30, 2026, we generated $968.3 million in revenue compared to $945.0 million for the same period in 2025. Our income from operations was $4.0 million for the nine months ended September 30, 2026 compared to $122.6 million for the same period in 2025, primarily due to a $134.1 million goodwill and intangible asset impairment charge and higher operating expenses, which include the $13.9 million ANZ back-pay reserve, partially offset by lower restructuring costs and higher revenue. Net loss was $28.3 million for the nine months ended September 30, 2026 compared to net income of $88.7 million for the same period in 2025, and diluted loss per share was $1.33 for the nine months ended September 30, 2026 compared to diluted earnings per share of $3.76 for the same period in 2025.

Previous wording

86,339 for the same period in 2025. USHE segment revenue increased 2.3% to $220.5 million in the second quarter of 2026 compared to $215.6 million in the second quarter of 2025, primarily due to higher revenue per student, partially offset by lower enrollment. In the ANZ segment for the three months ended June 30, 2026, total enrollment decreased 5.2% to 17,555 from 18,524 for the same period in 2025. ANZ segment revenue increased 7.6% to $74.4 million in the second quarter of 2026 compared to $69.1 million in the second quarter of 2025, primarily due to favorable foreign currency impacts and higher revenue per student, partially offset by lower enrollment. ETS segment revenue increased 15.4% to $42.4 million in the second quarter of 2026 compared to $36.7 million in the second quarter of 2025, primarily due to growth in Sophia Learning subscriptions, an increase in Workforce Edge revenue from employer partnerships, and higher employer affiliated enrollment.

Current wording

Revenues. Consolidated revenue increased 1.6% to $325.1 million in the third quarter of 2026 compared to $319.9 million in the third quarter of 2025, primarily due to favorable foreign currency impacts and higher revenue in our ETS segment. In the USHE segment for the three months ended September 30, 2026, total enrollment decreased 1.1% to 84,725 from 85,640 for the same period in 2025. USHE segment revenue increased 0.3% to $213.7 million in the third quarter of 2026 compared to $213.1 million in the third quarter of 2025, primarily due to higher revenue per student, partially offset by lower enrollment. In the ANZ segment for the three months ended September 30, 2026, total enrollment decreased 9.1% to 17,101 from 18,808 for the same period in 2025. ANZ segment revenue was flat at $68.6 million in the third quarter of 2026 compared to the third quarter of 2025, primarily due to favorable foreign currency impacts and higher revenue per student, offset by lower enrollment. ETS segment revenue increased 11.9% to $42.8 million in the third quarter of 2026 compared to $38.3 million in the third quarter of 2025, primarily due to growth in Sophia Learning subscriptions and higher employer affiliated enrollment.

Previous wording

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

Current wording

Instructional and support costs. Consolidated instructional and support costs increased to $163.6 million in the third quarter of 2026 compared to $162.7 million in the third quarter of 2025, primarily due to higher technology-related costs, student materials costs, depreciation expense, and unfavorable foreign currency impacts, partially offset by lower personnel-related costs and facility expenses. Consolidated instructional and support costs as a percentage of revenues decreased to 50.3% in the third quarter of 2026 from 50.9% in the third quarter of 2025.

Previous wording

General and administration expenses. Consolidated general and administration expenses decreased to $106.4 million in the second quarter of 2026 compared to $106.8 million in the second quarter of 2025, primarily due to lower international agent commissions, personnel-related costs, and facility expenses, partially offset by unfavorable foreign currency impacts and increased investments in branding initiatives. Consolidated general and administration expenses as a percentage of revenues decreased to 31.6% in the second quarter of 2026 from 33.2% in the second quarter of 2025.

Current wording

General and administration expenses. Consolidated general and administration expenses increased to $110.4 million in the third quarter of 2026 compared to $105.9 million in the third quarter of 2025, primarily due to increased investments in branding initiatives, higher technology-related and corporate costs, and unfavorable foreign currency impacts, partially offset by lower international agent commissions, personnel-related costs, and facility expenses. Consolidated general and administration expenses as a percentage of revenues increased to 34.0% in the third quarter of 2026 from 33.1% in the third quarter of 2025.

Previous wording

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

Current wording

Restructuring costs. Restructuring costs decreased to $4.5 million in the third quarter of 2026 compared to $14.3 million in the third quarter of 2025, primarily due to a $5.0 million decrease in asset impairment charges associated with the consolidation of underutilized facilities, a $4.4 million decrease in severance and other personnel-related expenses from employee terminations, and a $0.3 million loss related to assets classified as held for sale in the third quarter of 2025 that did not recur in the third quarter of 2026.

Previous wording

Other income (expense). Other income (expense) increased to $1.4 million of income in the second quarter of 2026 compared to $0.3 million of expense in the second quarter of 2025, primarily due to a $2.6 million increase in investment income related to our limited partnership investments, partially offset by a $0.9 million decrease in interest income. We incurred $0.3 million of interest expense in the three months ended June 30, 2026 compared to $0.3 million in the three months ended June 30, 2025.

Current wording

Other income (expense). Other income (expense) increased to $0.3 million of income in the third quarter of 2026 compared to $0.3 million of expense in the third quarter of 2025, primarily due to a $1.0 million decrease in investment losses related to our limited partnership investments, partially offset by a $0.5 million decrease in interest income. We incurred $0.3 million of interest expense in the three months ended September 30, 2026 compared to $0.3 million in the three months ended September 30, 2025.

Previous wording

Provision for income taxes. Income tax expense was $14.7 million in the second quarter of 2026 compared to $13.1 million in the second quarter of 2025. Our effective tax rate for the second quarter of 2026 was 28.3% compared to 28.9% in the second quarter of 2025.

Current wording

Provision for income taxes. Income tax expense was $11.0 million in the third quarter of 2026 compared to $10.1 million in the third quarter of 2025. Our effective tax rate for the third quarter of 2026 was (12.6)% compared to 27.6% in the third quarter of 2025. The rate for the three months ended September 30, 2026 reflects income tax expense recognized on a pre-tax loss, primarily attributable to a non-deductible goodwill impairment charge recorded during the quarter.

Previous wording

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

Current wording

Net income (loss). Net income (loss) decreased to $98.3 million of net loss in the third quarter of 2026 compared to $26.6 million of net income in the third quarter of 2025 due to the factors discussed above.

Previous wording

Revenues. Consolidated revenue increased to $643.2 million in the six months ended June 30, 2026 compared to $625.1 million in the same period in 2025, primarily due to favorable foreign currency impacts and higher revenue in our ETS segment, partially offset by lower revenue in our USHE segment. USHE segment revenue decreased 0.8% to $433.1 million in the six months ended June 30, 2026 compared to $436.6 million in the same period in 2025, primarily due to lower enrollment, partially offset by higher revenue per student. ANZ segment revenue increased 7.5% to $126.2 million in the six months ended June 30, 2026 compared to $117.4 million in the same period in 2025, primarily due to favorable foreign currency impacts, partially offset by lower enrollment. ETS segment revenue increased 18.1% to $83.9 million in the six months ended June 30, 2026 compared to $71.0 million in the same period in 2025, primarily due to growth in Sophia Learning subscriptions, an increase in Workforce

Current wording

Revenues. Consolidated revenue increased to $968.3 million in the nine months ended September 30, 2026 compared to $945.0 million in the same period in 2025, primarily due to favorable foreign currency impacts and higher revenue in our ETS segment, partially offset by lower revenue in our USHE segment. USHE segment revenue decreased 0.5% to $646.8 million in the nine months ended September 30, 2026 compared to $649.7 million in the same period in 2025, primarily due to lower enrollment, partially offset by higher revenue per student. ANZ segment revenue increased 4.7% to $194.8 million in the nine months ended September 30, 2026 compared to $186.0 million in the same period in 2025, primarily due to favorable foreign currency impacts, partially offset by lower enrollment. ETS segment revenue increased 15.9% to $126.7 million in the nine months ended September 30, 2026 compared to $109.3 million in the same period in 2025, primarily due to growth in Sophia Learning subscriptions, an increase in Workforce Edge revenue from employer partnerships, and higher employer affiliated enrollment.

Previous wording

Instructional and support costs. Consolidated instructional and support costs increased to $332.6 million in the six months ended June 30, 2026 compared to $324.4 million in the same period in 2025, primarily due to the ANZ back-pay reserve, higher technology-related and student materials costs, and unfavorable foreign currency impacts, partially offset by lower bad debt expense, facility expenses, personnel-related costs, and stock-based compensation expense. Consolidated instructional and support costs as a percentage of revenues decreased to 51.7% in the six months ended June 30, 2026 from 51.9% in the six months ended June 30, 2025.

Current wording

Instructional and support costs. Consolidated instructional and support costs increased to $496.3 million in the nine months ended September 30, 2026 compared to $487.2 million in the same period in 2025, primarily due to the ANZ back-pay reserve, higher technology-related and student materials costs, and unfavorable foreign currency impacts, partially offset by lower personnel-related costs, facility expenses, bad debt expense, and stock-based compensation expense. Consolidated instructional and support costs as a percentage of revenues decreased to 51.3% in the nine months ended September 30, 2026 from 51.6% in the nine months ended September 30, 2025.

Previous wording

General and administration expenses. Consolidated general and administration expenses increased to $214.4 million in the six months ended June 30, 2026 compared to $210.4 million in the same period in 2025, primarily due to increased investments in branding initiatives, higher technology-related costs, higher stock-based compensation expense, and unfavorable foreign currency impacts, partially offset by lower personnel-related costs, international agent commissions, and facility expenses. Consolidated general and administration expenses as a percentage of revenues decreased to 33.3% in the six months ended June 30, 2026 from 33.7% in the six months ended June 30, 2025.

Current wording

General and administration expenses. Consolidated general and administration expenses increased to $324.8 million in the nine months ended September 30, 2026 compared to $316.3 million in the same period in 2025, primarily due to increased investments in branding initiatives, higher technology-related costs, higher stock-based compensation expense, and unfavorable foreign currency impacts, partially offset by lower personnel-related costs, international agent commissions, and facility expenses. Consolidated general and administration expenses as a percentage of revenues was 33.5% in the nine months ended September 30, 2026 and 33.5% in the nine months ended September 30, 2025.

Previous wording

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

Current wording

Restructuring costs. Restructuring costs decreased to $9.0 million in the nine months ended September 30, 2026 compared to $18.9 million in the same period in 2025, primarily due to a $5.9 million decrease in asset impairment charges associated with the consolidation of underutilized facilities, a $3.7 million decrease in severance and other personnel-related expenses from employee terminations, and a $0.3 million loss related to assets classified as held for sale in the third quarter of 2025 that did not recur in 2026.

Previous wording

Income from operations. Consolidated income from operations increased to $91.6 million in the six months ended June 30, 2026 compared to $85.6 million in the same period in 2025, primarily due to higher revenue, partially offset by higher operating expenses, which include the $13.9 million ANZ back-pay reserve. USHE segment income from operations increased 14.1% to $57.9 million in the six months ended June 30, 2026 compared to $50.7 million in the same period in 2025, primarily due to lower personnel-related costs, bad debt expense, and facility expenses, partially offset by higher technology-related and student materials costs, and increased investments in branding initiatives. ANZ segment income (loss) from operations decreased to $1.0 million of loss from operations in the six months ended June 30, 2026 compared to $10.7 million of income from operations in the same period in 2025, primarily due to the $13.9 million back-pay reserve and higher instructional costs and technology-related costs, partially offset by lower international agent commissions, stock-based compensation expense and facility expenses. ETS segment income from operations increased 36.0% to $39.3 million in the six months ended June 30, 2026 compared to $28.9 million in the same period in 2025, primarily due to higher revenue, partially offset by higher technology-related costs and increased investments in branding initiatives.

Current wording

Income from operations. Consolidated income from operations decreased to $4.0 million in the nine months ended September 30, 2026 compared to $122.6 million in the same period in 2025, primarily due to a $134.1 million goodwill and intangible asset impairment charge and higher operating expenses, which include the $13.9 million ANZ back-pay reserve, partially offset by lower restructuring costs and higher revenue. USHE segment income from operations increased 8.6% to $79.9 million in the nine months ended September 30, 2026 compared to $73.6 million in the same period in 2025, primarily due to lower personnel-related costs, facility expenses, and bad debt expense, partially offset by increased investments in branding initiatives and higher technology-related and student materials costs. ANZ segment income from operations decreased to $9.8 million in the nine months ended September 30, 2026 compared to $23.1 million in the same period in 2025, primarily due to the $13.9 million back-pay reserve, increased investments in branding initiatives, and higher technology-related costs, partially offset by lower international agent commissions, depreciation expense, stock-based compensation expense, and facility expenses. ETS segment income from operations increased 28.1% to $57.4 million in the nine months ended September 30, 2026 compared to $44.8 million in the same period in 2025, primarily due to higher revenue, partially offset by higher technology-related costs, corporate expenses, and increased investments in branding initiatives.

Previous wording

Other income. Other income increased to $2.6 million in the six months ended June 30, 2026 compared to $1.9 million in the same period in 2025, primarily due to a $2.5 million increase in investment income related to our limited partnership investments, partially offset by a $1.7 million decrease in interest income. We incurred $0.5 million of interest expense in the six months ended June 30, 2026 compared to $0.5 million in the same period in 2025.

Current wording

Other income. Other income increased to $2.8 million in the nine months ended September 30, 2026 compared to $1.6 million in the same period in 2025, primarily due to a $3.6 million decrease in investment losses related to our limited partnership investments, partially offset by a $2.3 million decrease in interest income. We incurred $0.8 million of interest expense in the nine months ended September 30, 2026 compared to $0.8 million in the same period in 2025.

Previous wording

Provision for income taxes. Income tax expense was $24.2 million and $25.4 million in the six months ended June 30, 2026 and 2025, respectively. Income tax expense for the six months ended June 30, 2026 and 2025 include windfall tax benefits of approximately $2.6 million and $0.4 million, respectively, related to share-based payment arrangements.

Current wording

Provision for income taxes. Income tax expense was $35.2 million and $35.5 million in the nine months ended September 30, 2026 and 2025, respectively. Our effective tax rate for the nine months ended September 30, 2026 was 514.8% compared to 28.6% for the nine months ended September 30, 2025. The higher rate for the nine months ended September 30, 2026 is primarily attributable to a non-deductible goodwill impairment charge recorded during the third quarter of 2026. Income tax expense for the nine months ended September 30, 2026 and 2025 includes windfall tax benefits of approximately $2.5 million and $0.4 million, respectively, related to share-based payment arrangements, which partially offset the higher effective tax rate in 2026.

Previous wording

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

Current wording

Net income (loss). Net income (loss) decreased to $28.3 million of net loss in the nine months ended September 30, 2026 compared to $88.7 million of net income in the same period in 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 six months ended June 30, 2026 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 and nine months ended September 30, 2026 are also presented on a constant currency basis.

Previous wording

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

Current wording

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

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 six months ended June 30, 2026 and 29.0% for the three and six months ended June 30, 2025.

Current wording

(4)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, 2026 and 29.0% for the three and nine months ended September 30, 2025.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

(2)Reflects an adjustment to translate foreign currency results after the non-GAAP adjustments for the three and nine months ended September 30, 2026 at a constant exchange rate of 0.65 and 0.64 Australian Dollars to U.S. Dollars, which were the average exchange rates for the same periods in 2025.

Previous wording

At June 30, 2026, we had cash, cash equivalents, and marketable securities of $133.8 million compared to $153.1 million at December 31, 2025 and $179.9 million at June 30, 2025. We 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 June 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 six months ended June 30, 2026 and 2025, we earned interest income of $2.9 million and $4.6 million, respectively.

Current wording

At September 30, 2026, we had cash, cash equivalents, and marketable securities of $138.6 million compared to $153.1 million at December 31, 2025 and $182.6 million at September 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 September 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 nine months ended September 30, 2026 and 2025, we earned interest income of $4.2 million and $6.5 million, respectively.

Previous wording

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 June 30, 2026. We had no borrowings outstanding under the Revolving Credit Facility as of June 30, 2026 and June 30, 2025. During the six months ended June 30, 2026 and 2025, we paid $0.3 million and $0.3 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

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 September 30, 2026. We had no borrowings outstanding under the Revolving Credit Facility as of September 30, 2026 and September 30, 2025. During the nine months ended September 30, 2026 and 2025, we paid $0.4 million and $0.4 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 six months ended June 30, 2026 increased to $116.6 million, compared to $98.9 million for the same period in 2025. The increase in net cash from operating activities was primarily due to higher earnings and favorable changes in working capital.

Current wording

Our net cash provided by operating activities for the nine months ended September 30, 2026 increased to $173.5 million, compared to $159.0 million for the same period in 2025. The increase in net cash from operating activities was primarily due to favorable changes in working capital.

Previous wording

Our net cash used in investing activities for the six months ended June 30, 2026 increased to $21.9 million, compared to $4.6 million for the same period in 2025. The increase in net cash used in investing activities was primarily due to a $34.2 million decrease in cash proceeds from marketable securities and other investments and a $3.0 million increase in capital expenditures, partially offset by a $20.0 million decrease in purchases of marketable securities. Capital expenditures increased to $24.2 million for the six months ended June 30, 2026, compared to $21.2 million for the same period in 2025, primarily due to increased technology investments.

Current wording

Our net cash used in investing activities for the nine months ended September 30, 2026 increased to $36.6 million, compared to $0.5 million for the same period in 2025. The increase in net cash used in investing activities was primarily due to a $49.2 million decrease in cash proceeds from marketable securities and other investments and a $4.8 million increase in capital expenditures, partially offset by a $18.0 million decrease in purchases of marketable securities. Capital expenditures increased to $36.8 million for the nine months ended September 30, 2026, compared to $32.0 million for the same period in 2025, primarily due to increased technology investments.

Previous wording

Our net cash used in financing activities for the six months ended June 30, 2026 increased to $112.2 million, compared to $98.4 million for the same period in 2025. The increase in net cash used in financing activities was primarily due to a $12.7 million increase in share repurchases and a $3.3 million increase in net payments for employee stock awards, partially offset by a $2.3 million decrease in cash dividend payments.

Current wording

Our net cash used in financing activities for the nine months ended September 30, 2026 increased to $153.8 million, compared to $147.4 million for the same period in 2025. The increase in net cash used in financing activities was primarily due to a $7.0 million increase in share repurchases and a $2.8 million increase in net payments for employee stock awards, partially offset by a $3.3 million decrease in cash dividend payments.