Financial Data and Key Metrics - Revenue for the fourth quarter grew 12.5% to $304 million, with operating income more than doubling to $57 million and operating margin increasing by 870 basis points [60] - Full-year revenue grew 7.4%, operating expenses grew 4%, operating income grew 43%, and operating margin increased by 280 basis points [17] - Earnings per share more than doubled to $1.70 per share in Q4 [60] - The company generated $159 million in pretax cash from operations and sold a campus property for $6 million, resulting in $165 million in generated cash [10] - $42 million was paid in taxes, $37 million was invested in capital and growth expenditures, and $40 million of debt was paid down, leaving $208 million in cash and marketable securities at year-end [10][23] Business Segment Performance Education Technology and Services (ETS) - ETS revenue grew 31% in Q4 and 26% for the full year, with operating income increasing 119% in Q4 and 51% for the full year [2] - Sophia Learning, a direct-to-consumer portal, grew revenue by 42% in Q4 and achieved a 50% operating margin, up from 22% in the prior year, with paid subscribers increasing 44% to over 35,000 [61] - Workforce Edge enrollments doubled year-over-year, with 65 corporate partners and enrollments growing 112% to nearly 1,500 students [100] U.S. Higher Education - Total enrollment grew 11% in Q4 and 7% for the full year, with employer-affiliated enrollment growing 24% in Q4 and 19% for the full year [21] - Revenue grew 9% in Q4 and 6% for the full year, while operating income grew 149% in Q4 and 55% for the full year [56] - Corporate partnerships accounted for 70% of incremental enrollment growth, with retention stable at 87.4% [56] Australia New Zealand (ANZ) - Revenue grew 20% in Q4 and 6% for the full year on a constant currency basis [100] - Domestic and international enrollment is roughly 50-50, with domestic new student enrollment up 20% year-over-year in Q3, while international new students declined slightly [36][67] - The company plans to make substantial investments in ANZ in 2024 to support growth [32] Market and Strategic Insights - The company attributes strong enrollment growth to its network of over 1,000 corporate partnerships, which drove outperformance in U.S. Higher Education [77] - Labor force participation rates are a key macro indicator for future demand, as they reflect employment confidence, which is a predictor of working adults returning to school [31] - The company expects consolidated margins to settle in the low to mid-20s, with fluctuations based on investments made in any given quarter or year [18] Management Commentary on Environment and Outlook - Management remains confident in the quality of Torrens University and Media Design School in New Zealand, with plans for substantial investments in 2024 [32] - The company expects investments in 2024 to be weighted toward the second half of the year, with the exception of Australia, where investments will be made throughout the year [33] - The company is well-positioned to support academic institutions, fund opportunities, and return capital to shareholders in 2024 [23] Other Important Information - The company returned $74 million to shareholders through dividends and share repurchases, with a focus on opportunistic share repurchases at a significant discount to intrinsic value [59][29] - The company targets cash conversion or distributable cash at the same level as adjusted net income, with plans to pay down the revolver and maintain a payout ratio of roughly one-third for dividends [68][75] Q&A Summary Question: Enrollment Growth Drivers - The primary driver of enrollment growth is the company's corporate partnerships, which have seen accelerated growth in the back half of the year [77] - Workforce Edge enrollments doubled year-over-year, contributing significantly to growth [14] Question: ANZ Enrollment and Visa Changes - The company does not expect tighter student visa qualification rules in Australia to adversely impact enrollments, as it takes a measured approach to international recruitment [67] - Domestic new student enrollment was up in Q4, while international new students declined slightly, with overall growth expected in the future [98] Question: Capital Deployment and Share Repurchases - The company plans to pay down the revolver, maintain dividend payouts, and consider opportunistic share repurchases based on stock price relative to intrinsic value [74][29] - Cash conversion is expected to align with adjusted net income moving forward [75] Question: Operating Margin Sustainability - Management expects margins to settle in the low to mid-20s, with fluctuations based on investments, and remains confident in the sustainability of gains [18][92] Question: 2024 Outlook - The company remains comfortable with the preliminary 2024 outlook provided at Investor Day, with no significant changes to the growth drivers or segment performance [19][93]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-21039 STRATEGIC EDUCATION, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of ...

Exhibit 99.1 STRATEGIC EDUCATION, INC. REPORTS FOURTH QUARTER 2023 RESULTS HERNDON, Va., February 29, 2024 — Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended December 31, 2023. "During 2023, we delivered strong enrollment, revenue, and earnings growth and are proud of the organization's ongoing commitment to the success of our students," said Karl McDonnell, Chief Executive Officer of Strategic Education. "As we begin a new year, we look t ...

Strategic Education Inc. (NASDAQ:STRA) Q3 2023 Earnings Conference Call November 2, 2023 10:00 AM ET Company Participants Terese Wilke - Director of Investor Relations Karl McDonnell - President and Chief Executive Officer Daniel Jackson - Executive Vice President and Chief Financial Officer Conference Call Participants Jeff Silber - BMO Capital Markets Jasper Bibb - Truist Securities Heather Balsky - BofA Operator Good day, and thank you for standing by. Welcome to Strategic Education’s Third Quarter 2023 ...

Table of Contents SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2023 or ☐ Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from to Commission File No. 0-21039 Strategic Education, Inc. (Exact name of registrant as specified in this charter) | Maryland | 52-1975978 | | --- | - ...

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Strategic Education, Inc.'s unaudited condensed consolidated financial statements, reflecting declines in total assets, stockholders' equity, net income, and cash from operations for the first half of 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 | June 30, 2023 | | :--- | :--- | :--- | | **Total current assets** | $329,061 | $350,914 | | **Total assets** | $2,161,747 | $2,142,112 | | **Total current liabilities** | $209,944 | $242,087 | | **Total liabilities** | $525,957 | $543,506 | | **Total stockholders' equity** | $1,635,790 | $1,598,606 | Condensed Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2022 | Q2 2023 | H1 2022 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $273,564 | $287,680 | $532,419 | $544,286 | | **Income from operations** | $21,865 | $16,817 | $35,306 | $15,468 | | **Net income** | $15,220 | $14,231 | $22,249 | $12,203 | | **Diluted EPS** | $0.63 | $0.59 | $0.92 | $0.51 | Condensed Consolidated Cash Flow Highlights (in thousands) | Cash Flow Activity | Six months ended June 30, 2022 | Six months ended June 30, 2023 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $80,676 | $40,737 | | **Net cash used in investing activities** | ($20,811) | ($23,754) | | **Net cash used in financing activities** | ($57,739) | ($44,431) | | **Net decrease in cash** | ($2,855) | ($29,372) | [Nature of Operations](index=8&type=section&id=1.%20Nature%20of%20Operations) Strategic Education, Inc. provides post-secondary education and job-skill development programs through its U.S. Higher Education, Education Technology Services, and Australia/New Zealand segments - The company's mission is to close the skills gap by providing a direct path between learning and employment[21](index=21&type=chunk) - The three reportable segments are U.S. Higher Education (USHE), Education Technology Services, and Australia/New Zealand[22](index=22&type=chunk) [Revenue Recognition](index=12&type=section&id=3.%20Revenue%20Recognition) Revenue is primarily tuition, recognized ratably, with U.S. Higher Education as the largest segment, and a **$45.3 million** contract liability for the Graduation Fund as of June 30, 2023 Revenue by Segment (in thousands) | Segment | Q2 2022 | Q2 2023 | H1 2022 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | **U.S. Higher Education** | $190,026 | $202,679 | $385,792 | $399,574 | | **Australia/New Zealand** | $67,543 | $65,472 | $116,055 | $106,975 | | **Education Technology Services** | $15,995 | $19,529 | $30,572 | $37,737 | | **Consolidated Revenue** | **$273,564** | **$287,680** | **$532,419** | **$544,286** | - The contract liability for the Graduation Fund, which provides free courses to eligible students, was **$45.3 million** at the end of the period, down from **$46.8 million** at the beginning of the year[63](index=63&type=chunk)[65](index=65&type=chunk) [Restructuring and Related Charges](index=14&type=section&id=4.%20Restructuring%20and%20Related%20Charges) The company incurred **$8.4 million** in severance and **$5.1 million** in lease impairment charges for the first half of 2023, partially offset by a **$2.1 million** gain from a campus sale - For the six months ended June 30, 2023, the company incurred **$8.4 million** in severance charges and **$5.1 million** in right-of-use lease asset impairment charges[70](index=70&type=chunk)[71](index=71&type=chunk) - A gain of **$2.1 million** was recognized in Q2 2023 from the sale of property and equipment of a closed campus[71](index=71&type=chunk) [Goodwill and Intangible Assets](index=17&type=section&id=7.%20Goodwill%20and%20Intangible%20Assets) As of June 30, 2023, the company held **$1.24 billion** in goodwill and **$253.4 million** in net intangible assets, with no impairment charges recorded for the first half of 2023 Goodwill by Segment as of June 30, 2023 (in thousands) | Segment | Goodwill Balance | | :--- | :--- | | U.S. Higher Education | $632,075 | | Australia / New Zealand | $505,907 | | Education Technology Services | $100,000 | | **Total** | **$1,237,982** | - No impairment charges for goodwill or intangible assets were recorded during the three and six months ended June 30, 2023[79](index=79&type=chunk)[82](index=82&type=chunk) [Long-Term Debt](index=20&type=section&id=11.%20Long-Term%20Debt) The company has a **$350 million** revolving credit facility with **$101.3 million** outstanding as of June 30, 2023, amended to replace LIBOR, and remains in compliance with all financial covenants - As of June 30, 2023, the company had **$101.3 million** outstanding under its **$350 million** Revolving Credit Facility[97](index=97&type=chunk) - In June 2023, the credit facility was amended to replace LIBOR with alternative benchmark rates, including Term SOFR, for U.S. dollar-denominated loans[98](index=98&type=chunk) [Segment Reporting](index=21&type=section&id=15.%20Segment%20Reporting) This note details segment performance, showing U.S. Higher Education as the largest revenue contributor but with declining operating income, while Education Technology Services grew in both revenue and operating income for the first half of 2023 Segment Income from Operations (in thousands) | Segment | H1 2022 | H1 2023 | | :--- | :--- | :--- | | **U.S. Higher Education** | $27,334 | $16,330 | | **Australia/New Zealand** | $11,572 | $7,109 | | **Education Technology Services** | $10,015 | $11,962 | | **Consolidated Income from Operations** | **$35,306** | **$15,468** | [Regulation](index=23&type=section&id=17.%20Regulation) This section details regulatory updates including the resumption of federal student loan repayments, the amended 90/10 Rule, proposed Gainful Employment and Financial Responsibility rules, and potential changes to SARA - Federal student loan interest began accruing on September 1, 2023, with repayments resuming in October 2023[117](index=117&type=chunk) - The new 90/10 regulations, effective for fiscal years starting January 1, 2023, expand the definition of federal revenue to include military and veterans' education benefits, increasing compliance risk[118](index=118&type=chunk)[119](index=119&type=chunk) - The Department of Education has proposed new rules on Financial Value Transparency and Gainful Employment, which would establish debt-to-earnings and earnings premium tests for programs to maintain Title IV eligibility[123](index=123&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting Q2 2023 revenue growth driven by USHE enrollment, but a decline in operating income due to lower USHE earnings and restructuring costs, alongside strong liquidity and decreased operating cash flow - Q2 2023 USHE enrollment increased **4.7%** to **80,353**, while Australia/New Zealand enrollment decreased **4.6%** to **17,966** compared to Q2 2022[141](index=141&type=chunk)[144](index=144&type=chunk) - For Q2 2023, bad debt expense was **4.4%** of revenue, compared to **3.2%** for the same period in 2022[158](index=158&type=chunk)[203](index=203&type=chunk) Adjusted (Non-GAAP) Results | Metric | Q2 2022 | Q2 2023 | H1 2022 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | **Adjusted Income from Operations ($M)** | $29.5 | $27.2 | $48.9 | $35.4 | | **Adjusted Net Income ($M)** | $20.5 | $19.7 | $33.5 | $25.5 | | **Adjusted Diluted EPS** | $0.85 | $0.82 | $1.39 | $1.06 | - Net cash provided by operating activities for H1 2023 decreased to **$40.7 million** from **$80.7 million** in H1 2022, driven by lower earnings and working capital changes[198](index=198&type=chunk) - In H1 2023, the company paid **$29.5 million** in dividends and repurchased **$10.0 million** of common stock[202](index=202&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk from its **$101.3 million** variable-rate debt and foreign currency risk, with **19.7%** of H1 2023 revenue in foreign currencies, where a 10% adverse change would reduce revenue by **$10.7 million** - The company had **$101.3 million** in variable-rate debt outstanding at June 30, 2023. A **100 basis point** rate increase would add **$3.5 million** in annual interest expense if the full **$350 million** facility were utilized[206](index=206&type=chunk) - Revenues from foreign currencies (primarily Australian Dollar) accounted for **19.7%** of consolidated revenues for the first six months of 2023[208](index=208&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the quarter[210](index=210&type=chunk) - No material changes to internal control over financial reporting were identified during the quarter[210](index=210&type=chunk) [PART II — OTHER INFORMATION](index=41&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation, with management believing the outcomes will not materially adversely affect its financial position, results, or cash flows - The company states that the ultimate outcome of current legal matters is not expected to have a material adverse effect on its consolidated financial position[211](index=211&type=chunk) [Risk Factors](index=41&type=page&id=Item%201A.%20Risk%20Factors) This section updates key regulatory risks, including the amended 90/10 Rule which now includes all federal education assistance, and potential changes to SARA that could restrict for-profit institutions' participation - The 90/10 Rule was amended to include all federal education assistance, such as military tuition assistance and veterans' benefits, in the 90% revenue calculation, effective for fiscal years starting on or after January 1, 2023[213](index=213&type=chunk) - In 2022, Strayer University's 90/10 ratio was **80.57%** and Capella University's was **65.30%** under the old formula[213](index=213&type=chunk) - Proposed changes to the State Authorization Reciprocity Agreement (SARA) could eliminate the ability of for-profit institutions to participate, which would require seeking authorization in each state individually and could materially harm the business[221](index=221&type=chunk)[222](index=222&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2023, the company repurchased **129,073** shares for **$10.0 million**, with **$236.8 million** remaining for repurchases through December 31, 2023 Share Repurchases in Q2 2023 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2023 | — | $— | | May 2023 | 44,371 | $78.87 | | June 2023 | 84,702 | $76.73 | | **Total** | **129,073** | **$77.47** | - As of June 30, 2023, **$236.8 million** remained under the share repurchase authorization, which expires on December 31, 2023[223](index=223&type=chunk) [Other Information](index=44&type=section&id=Item%205.%20Other%20Information) The company will hold annual 'Say-on-Pay' votes, amended CEO Karl McDonnell's employment agreement for a five-year term with a base salary of **$961,175**, and reported no Rule 10b5-1 trading plan changes by directors or officers - The company will hold annual 'Say-on-Pay' advisory votes based on the results of the 2023 Annual Meeting of Stockholders[224](index=224&type=chunk) - CEO Karl McDonnell's employment agreement was amended on July 26, 2023, extending his term for five years with a base salary of **$961,175**[225](index=225&type=chunk) - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2023[226](index=226&type=chunk) [Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the amended employment agreement for CEO Karl McDonnell, the revolving credit facility amendment, and CEO/CFO certifications - Key exhibits filed include the amended employment agreement for CEO Karl McDonnell (Exhibit 10.3) and the Fourth Amendment to the Revolving Credit Agreement (Exhibit 10.2)[227](index=227&type=chunk)

Strategic Education Inc. (NASDAQ:STRA) Q2 2023 Earnings Call Transcript July 27, 2023 10:00 AM ET Company Participants Terese Wilke - Director of Investor Relations Karl McDonnell - President and Chief Executive Officer Daniel Jackson - Executive VP and CFO Robert Silberman - Chairman Conference Call Participants Jeff Silber - BMO Capital Markets Jasper Bibb - Truist Securities Alex Paris - Barrington Research Heather Balsky - BofA Operator Welcome to Strategic Education's Second Quarter 2023 Results Confer ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Strategic Education, Inc., including the balance sheets, statements of income (loss), comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes explaining the company's operations, significant accounting policies, and specific financial line items [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Unaudited Condensed Consolidated Balance Sheets (in thousands) | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $2,161,747 | $2,165,768 | +$4,021 | | Total Liabilities | $525,957 | $555,339 | +$29,382 | | Total Stockholders' Equity | $1,635,790 | $1,610,429 | -$25,361 | | Cash and cash equivalents | $213,667 | $202,824 | -$10,843 | | Marketable securities (current) | $9,156 | $24,490 | +$15,334 | | Tuition receivable, net | $62,953 | $71,860 | +$8,907 | | Contract liabilities (current) | $88,488 | $122,984 | +$34,496 | [Unaudited Condensed Consolidated Statements of Income (Loss)](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) Unaudited Condensed Consolidated Statements of Income (Loss) (in thousands) | Metric | 3 Months Ended Mar 31, 2022 (in thousands) | 3 Months Ended Mar 31, 2023 (in thousands) | Change (in thousands) | YoY Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------------- | :--------- | | Revenues | $258,855 | $256,606 | -$2,249 | -0.9% | | Total costs and expenses | $245,414 | $257,955 | +$12,541 | +5.1% | | Income (loss) from operations | $13,441 | $(1,349) | -$14,790 | -110.0% | | Net income (loss) | $7,029 | $(2,028) | -$9,057 | -128.8% | | Basic EPS | $0.29 | $(0.09) | -$0.38 | -131.0% | | Diluted EPS | $0.29 | $(0.09) | -$0.38 | -131.0% | [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | 3 Months Ended Mar 31, 2022 (in thousands) | 3 Months Ended Mar 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------------- | | Net income (loss) | $7,029 | $(2,028) | -$9,057 | | Foreign currency translation adjustment | $20,499 | $(9,340) | -$29,839 | | Unrealized gains (losses) on marketable securities, net of tax | $(517) | $108 | +$625 | | Comprehensive income (loss) | $27,011 | $(11,260) | -$38,271 | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Unaudited Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Stockholders' Equity | $1,635,790 | $1,610,429 | -$25,361 | | Retained earnings | $159,690 | $142,893 | -$16,797 | | Common stock dividends paid | N/A | $(14,769) | N/A | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 3 Months Ended Mar 31, 2022 (in thousands) | 3 Months Ended Mar 31, 2023 (in thousands) | Change (in thousands) | | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------------- | | Net cash provided by operating activities | $56,595 | $35,242 | -$21,353 | | Net cash used in investing activities | $(8,761) | $(23,285) | -$14,524 | | Net cash used in financing activities | $(21,828) | $(19,719) | +$2,109 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $28,103 | $(8,649) | -$36,752 | | Cash, cash equivalents, and restricted cash — end of period | $307,315 | $218,805 | -$88,510 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Nature of Operations](index=7&type=section&id=Note%201.%20Nature%20of%20Operations) Strategic Education, Inc. provides campus-based and online post-secondary education and job-ready skills programs - Strategic Education, Inc. is an education services company providing campus-based and online post-secondary education and job-ready skills programs[18](index=18&type=chunk) - The company operates through three reportable segments: U.S. Higher Education (USHE), Education Technology Services, and Australia/New Zealand[19](index=19&type=chunk) [Note 2. Significant Accounting Policies](index=7&type=section&id=Note%202.%20Significant%20Accounting%20Policies) This note details the company's critical accounting policies, including revenue recognition, expense classification, and asset valuation methodologies - The financial statements are unaudited and include normal recurring adjustments, condensed or omitting certain GAAP disclosures[21](index=21&type=chunk) - Instructional and support costs include faculty salaries, academic administration, admissions, course development, facilities, and bad debt expense[23](index=23&type=chunk) - General and administration expenses include management salaries, finance, HR, legal, regulatory, marketing, advertising, and corporate facility costs[24](index=24&type=chunk) - Amortization of intangible assets relates to intangible assets and software from the Torrens University (ANZ) acquisition[25](index=25&type=chunk) - Merger and integration costs include expenses from the Capella Education Company merger and ANZ acquisition[25](index=25&type=chunk) - Restructuring costs include severance, personnel-related expenses, early lease termination, and impairment of right-of-use lease assets and fixed assets due to restructuring plans[26](index=26&type=chunk) - As of March 31, 2023, restricted cash totaled **$15.481 million** (current) and **$0.5 million** (non-current), primarily for advance tuition payments from international students in ANZ and a Pennsylvania protective endowment[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - Marketable securities are classified as held-to-maturity (amortized cost) or available-for-sale (fair value, unrealized gains/losses in OCI), with no impairment charges recorded for the three months ended March 31, 2022 and 2023[32](index=32&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk)[71](index=71&type=chunk) - Tuition receivable, net, increased from **$62.953 million** (Dec 31, 2022) to **$71.860 million** (Mar 31, 2023), while allowance for credit losses decreased from **$47.113 million** to **$45.286 million** in the same period[38](index=38&type=chunk) - Goodwill and indefinite-lived intangible assets (trade names) are assessed annually for impairment, with no impairment charges for goodwill or indefinite-lived intangibles in Q1 2023, and finite-lived intangible assets (student relationships) are amortized over three years[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - The company has **32,000,000** shares of common stock authorized, with **24,591,375** shares issued and outstanding as of March 31, 2023[48](index=48&type=chunk) - A regular quarterly cash dividend of **$0.60 per share** was declared in February 2023 and paid on March 13, 2023[49](index=49&type=chunk) - For Q1 2023, **593 thousand** anti-dilutive shares were excluded from the diluted EPS calculation due to net loss[51](index=51&type=chunk) - Accumulated other comprehensive loss was **$44.3 million** (net of tax of **$0.1 million**) as of March 31, 2023, compared to **$35.1 million** (net of tax of **$0.1 million**) as of December 31, 2022[52](index=52&type=chunk) [Note 3. Revenue Recognition](index=11&type=section&id=Note%203.%20Revenue%20Recognition) This note outlines the company's revenue recognition policies, primarily focusing on tuition revenue and segment-specific contributions - Revenues primarily consist of tuition, recognized ratably over the instruction period[55](index=55&type=chunk) Segment Revenue (in thousands) | Segment | 3 Months Ended Mar 31, 2022 (in thousands) | 3 Months Ended Mar 31, 2023 (in thousands) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | | U.S. Higher Education | $195,766 | $196,895 | | Australia/New Zealand | $48,512 | $41,503 | | Education Technology Services | $14,577 | $18,208 | | **Consolidated Revenue** | **$258,855** | **$256,606** | - Strayer University's Graduation Fund allows students to earn tuition credits (one free course for every three completed), redeemable in the final year, with a contract liability of **$45.920 million** at March 31, 2023, down from **$46.842 million** at December 31, 2022[61](index=61&type=chunk)[63](index=63&type=chunk) [Note 4. Restructuring and Related Charges](index=13&type=section&id=Note%204.%20Restructuring%20and%20Related%20Charges) This note details the restructuring costs incurred, including impairment charges and severance expenses, reflecting strategic adjustments - Restructuring costs increased to **$5.6 million** in Q1 2023 from **$1.9 million** in Q1 2022[160](index=160&type=chunk) - Q1 2023 costs include a **$3.6 million** right-of-use lease asset impairment charge and higher severance expenses[69](index=69&type=chunk)[160](index=160&type=chunk) - The final severance payments under the 2020 restructuring plan were made in Q3 2022[67](index=67&type=chunk) [Note 5. Marketable Securities](index=14&type=section&id=Note%205.%20Marketable%20Securities) This note provides a breakdown of marketable securities, their fair value measurements, and related unrealized gains or losses Marketable Securities (in thousands) | Type | Amortized Cost (in thousands) | Gross Unrealized Gain (in thousands) | Gross Unrealized Losses (in thousands) | Estimated Fair Value (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Available-for-sale | $21,030 | $2 | $(570) | $20,462 | | Held-to-maturity | $16,727 | $0 | $0 | $16,727 | - Unrealized losses are primarily due to interest rate changes; no impairment charges recorded as the company does not intend to sell these securities before recovery[71](index=71&type=chunk) - Proceeds from maturities of marketable securities were **$1.960 million** in Q1 2023, up from **$1.100 million** in Q1 2022[72](index=72&type=chunk) [Note 6. Fair Value Measurement](index=15&type=section&id=Note%206.%20Fair%20Value%20Measurement) This note details the fair value measurements of financial assets, categorized by valuation hierarchy levels Fair Value Measurement (in thousands) | Asset | Total Fair Value (in thousands) | Level 1 (Quoted Prices) (in thousands) | Level 2 (Observable Inputs) (in thousands) | Level 3 (Unobservable Inputs) (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Money market funds | $100,323 | $100,323 | $0 | $0 | | Available-for-sale securities | $20,462 | $0 | $20,462 | $0 | | **Total** | **$120,785** | **$100,323** | **$20,462** | **$0** | - No changes in valuation techniques or transfers between fair value hierarchy levels occurred during the three months ended March 31, 2022 and 2023[74](index=74&type=chunk) [Note 7. Goodwill and Intangible Assets](index=16&type=section&id=Note%207.%20Goodwill%20and%20Intangible%20Assets) This note provides an overview of goodwill and intangible assets by segment, including currency translation adjustments and amortization expenses Goodwill by Segment (in thousands) | Segment | Balance Dec 31, 2022 (in thousands) | Currency Translation Adjustments (in thousands) | Balance Mar 31, 2023 (in thousands) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | U.S. Higher Education | $632,075 | $0 | $632,075 | | Australia / New Zealand | $519,202 | $(7,947) | $511,255 | | Education Technology Services | $100,000 | $0 | $100,000 | | **Total** | **$1,251,277** | **$(7,947)** | **$1,243,330** | - No impairment charges for goodwill or indefinite-lived intangible assets were recorded in Q1 2023[76](index=76&type=chunk)[80](index=80&type=chunk) - Finite-lived intangible assets (student relationships) are amortized on a straight-line basis over a three-year useful life, with amortization expense at **$2.7 million** in Q1 2023, down from **$2.9 million** in Q1 2022[77](index=77&type=chunk) [Note 8. Other Current Assets](index=17&type=section&id=Note%208.%20Other%20Current%20Assets) This note details the composition of other current assets, including prepaid expenses, restricted cash, and cloud computing arrangements Other Current Assets (in thousands) | Item | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Prepaid expenses | $19,073 | $27,650 | | Restricted cash | $13,287 | $15,481 | | Cloud computing arrangements | $7,859 | $7,587 | | Other | $3,066 | $3,328 | | **Total** | **$43,285** | **$54,046** | [Note 9. Other Assets](index=17&type=section&id=Note%209.%20Other%20Assets) This note outlines the components of other non-current assets, such as long-term prepaid expenses, equity method investments, and non-current tuition receivable Other Assets (in thousands) | Item | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Prepaid expenses, net of current portion | $18,192 | $17,975 | | Equity method investments | $13,879 | $14,874 | | Cloud computing arrangements, net of current portion | $7,507 | $9,032 | | Other investments | $3,396 | $2,806 | | Tuition receivable, net, non-current | $2,673 | $2,539 | | Other | $4,005 | $3,954 | | **Total** | **$49,652** | **$51,180** | - Equity method investments increased from **$13.879 million** to **$14.874 million**, with a pro-rata share in net income of **$0.877 million** in Q1 2023[84](index=84&type=chunk)[85](index=85&type=chunk) [Note 10. Accounts Payable and Accrued Expenses](index=18&type=section&id=Note%2010.%20Accounts%20Payable%20and%20Accrued%20Expenses) This note details the composition of accounts payable and accrued expenses, including trade payables and accrued compensation Accounts Payable and Accrued Expenses (in thousands) | Item | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Trade payables | $45,826 | $54,497 | | Accrued compensation and benefits | $32,608 | $28,330 | | Accrued student obligations and other | $12,154 | $10,320 | | **Total** | **$90,588** | **$93,147** | [Note 11. Long-Term Debt](index=18&type=section&id=Note%2011.%20Long-Term%20Debt) This note provides information on the company's long-term debt, including the Revolving Credit Facility and compliance with its terms - Outstanding debt under the Revolving Credit Facility was **$101.3 million** as of March 31, 2023, slightly down from **$101.4 million** at December 31, 2022[95](index=95&type=chunk) - Interest and unused commitment fees paid increased significantly to **$2.4 million** in Q1 2023 from **$0.4 million** in Q1 2022[96](index=96&type=chunk) - The company was in compliance with all Amended Credit Facility terms as of March 31, 2023[95](index=95&type=chunk) [Note 12. Other Long-Term Liabilities](index=19&type=section&id=Note%2012.%20Other%20Long-Term%20Liabilities) This note outlines the components of other long-term liabilities, such as non-current contract liabilities and asset retirement obligations Other Long-Term Liabilities (in thousands) | Item | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Contract liabilities, net of current portion | $36,540 | $34,881 | | Asset retirement obligations | $6,283 | $5,966 | | Other | $3,183 | $3,193 | | **Total** | **$46,006** | **$44,040** | [Note 13. Equity Awards](index=19&type=section&id=Note%2013.%20Equity%20Awards) This note details stock-based compensation expenses and related tax benefits from equity award arrangements - Stock-based compensation expense increased to **$5.632 million** in Q1 2023 from **$5.068 million** in Q1 2022[100](index=100&type=chunk) - Tax benefit related to share-based payment arrangements was **$1.479 million** in Q1 2023, up from **$1.334 million** in Q1 2022[100](index=100&type=chunk) [Note 14. Income Taxes](index=19&type=section&id=Note%2014.%20Income%20Taxes) This note provides information on income tax expense, tax payments, and unrecognized tax benefits - Income tax expense decreased to **$1.1 million** in Q1 2023 from **$5.2 million** in Q1 2022[101](index=101&type=chunk) - Tax payments increased to **$3.8 million** in Q1 2023 from **$0.5 million** in Q1 2022[103](index=103&type=chunk) - Unrecognized tax benefits remained at **$0.9 million** as of March 31, 2023[102](index=102&type=chunk) [Note 15. Segment Reporting](index=20&type=section&id=Note%2015.%20Segment%20Reporting) This note presents financial data by reportable segment, including revenues and income (loss) from operations, highlighting performance variations Segment Revenues (in thousands) | Segment | 3 Months Ended Mar 31, 2022 (in thousands) | 3 Months Ended Mar 31, 2023 (in thousands) | YoY Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :--------- | | U.S. Higher Education | $195,766 | $196,895 | +0.6% | | Australia/New Zealand | $48,512 | $41,503 | -14.4% | | Education Technology Services | $14,577 | $18,208 | +24.9% | | **Consolidated Revenues** | **$258,855** | **$256,606** | **-0.9%** | Segment Income (Loss) from Operations (in thousands) | Segment | 3 Months Ended Mar 31, 2022 (in thousands) | 3 Months Ended Mar 31, 2023 (in thousands) | YoY Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :--------- | | U.S. Higher Education | $15,483 | $9,589 | -38.0% | | Australia/New Zealand | $(749) | $(7,182) | -859.0% | | Education Technology Services | $4,713 | $5,796 | +23.0% | | **Consolidated Income (Loss) from Operations** | **$13,441** | **$(1,349)** | **-110.0%** | [Note 16. Litigation](index=21&type=section&id=Note%2016.%20Litigation) This note discusses ongoing legal proceedings, including borrower defense applications against Capella University, and the company's assessment of potential financial impact - The company is involved in ordinary course litigation, with outcomes uncertain but not expected to have a material adverse effect on financial position, results of operations, or cash flows[109](index=109&type=chunk) - Capella University is subject to borrower defense applications related to alleged misrepresentations of doctoral program length, with the Department of Education joining a proposed class settlement in June 2022 for automatic relief for students at listed institutions, including Capella[110](index=110&type=chunk)[111](index=111&type=chunk) - The Department stated automatic relief does not initiate recoupment proceedings against institutions, but Capella would dispute any future recovery attempts[112](index=112&type=chunk) [Note 17. Regulation](index=21&type=section&id=Note%2017.%20Regulation) This note outlines significant regulatory developments impacting the education sector, including student loan relief, the '90/10 Rule,' and proposed Title IX changes - Student loan relief under the CARES Act has been extended, with payments resuming 60 days after program implementation or litigation resolution, or by June 30, 2023 if unresolved[115](index=115&type=chunk) - The American Rescue Plan Act of 2021 amended the '90/10 Rule' to include 'all federal education assistance' in the '90' side, with new regulations effective for fiscal years beginning on or after January 1, 2023, expanding the definition of federal revenue to include military tuition assistance and veteran benefits[116](index=116&type=chunk) - The Department of Education intends to establish rulemaking committees in 2023 to propose new regulations on distance education, deferments/forbearances, third-party servicers, cash management, return of federal funds, state authorization, and accreditation[117](index=117&type=chunk) - Federal Student Aid (FSA) is monitoring complaints and borrower defense applications from veterans/service members regarding deceptive recruitment and will use 'secret shoppers' to monitor compliance and identify predatory practices[119](index=119&type=chunk)[120](index=120&type=chunk) - The Higher Learning Commission (HLC) and Middle States Commission on Higher Education (Middle States), accreditors for Capella and Strayer Universities, respectively, received NACIQI recommendations for five-year recognition renewal[122](index=122&type=chunk) - The National Council for State Authorization Reciprocity Agreements (NC-SARA) is considering policy changes, including proposals to apply more stringent standards to for-profit institutions or eliminate their participation, which could materially adversely affect Strayer and Capella Universities[123](index=123&type=chunk) - Proposed Title IX regulations, released in June 2022, clarify sex discrimination to include sex stereotypes, characteristics, pregnancy, sexual orientation, and gender identity, and eliminate live hearing requirements at the post-secondary level, with a final rule expected in May 2023[124](index=124&type=chunk) - Department guidance expanded the definition of third-party servicers and covered activities, with the effective date delayed until six months after new, revised final guidance, and litigation challenging this guidance is ongoing[125](index=125&type=chunk) - Capella University executed a fully certified Program Participation Agreement with the Department of Education, approving continued participation in Title IV programs through September 30, 2025[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and operational results for the three months ended March 31, 2023, compared to the prior year, detailing segment performance, critical accounting policies, and liquidity, highlighting a consolidated net loss driven by lower USHE earnings, higher ANZ losses, and increased restructuring costs [Background](index=26&type=section&id=Background) Strategic Education, Inc. is an education services company focused on high-quality education and job-ready skills, operating through its various university and technology service segments - Strategic Education, Inc. (SEI) is an education services company focused on high-quality education and job-ready skills, operating through Strayer University, Capella University (US), and Torrens University (Australia)[131](index=131&type=chunk) - The Education Technology Services segment builds employer education benefits programs, serving as a key source of student enrollment for USHE institutions[131](index=131&type=chunk) [Segments Overview](index=27&type=section&id=Segments%20Overview) This overview details enrollment trends, persistence rates, and strategic initiatives across the U.S. Higher Education, Education Technology Services, and Australia/New Zealand segments - U.S. Higher Education (USHE) enrollment increased **2.3%** to **79,935** in Q1 2023 (vs. **78,172** in Q1 2022)[136](index=136&type=chunk) - Trailing 4-quarter student persistence within USHE was **87.4%** in Q4 2022, up from **86.8%** in Q4 2021[136](index=136&type=chunk) - Trailing 4-quarter government grants and loans per credit earned decreased **6.2%** as of Q4 2022, influenced by growing employer-affiliated enrollment and alternative pathways[133](index=133&type=chunk) - Employer-affiliated enrollment as a percentage of USHE enrollment increased to **26.3%** in Q1 2023 (vs. **23.0%** in Q1 2022)[137](index=137&type=chunk) - Education Technology Services supports employer partners via Workforce Edge and Sophia Learning, offering education benefits administration and low-cost online courses[137](index=137&type=chunk) - Australia/New Zealand (ANZ) enrollment decreased **6.3%** to **19,269** in Q1 2023 (vs. **20,575** in Q1 2022)[138](index=138&type=chunk) - The ANZ segment comprises Torrens University, Think Education, and Media Design School, offering certificate and degree programs across various fields[107](index=107&type=chunk)[138](index=138&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the significant management estimates and judgments involved in preparing the financial statements, including allowances, tax provisions, and asset valuations - Management makes significant estimates for allowance for credit losses, income tax provisions, useful lives of property and equipment and intangible assets, redemption rates for scholarship programs and valuation of contract liabilities, fair value of right-of-use lease assets, incremental borrowing rates, valuation of deferred tax assets, goodwill, and intangible assets, forfeiture rates and achievability of performance targets for stock-based compensation plans, and accrued expenses[140](index=140&type=chunk) - Approximately **96%** of Q1 2023 revenues were tuition-related, recognized ratably over the course of instruction[142](index=142&type=chunk) - Bad debt expense was **3.8%** of revenue in Q1 2023, up from **2.8%** in Q1 2022, with a **1%** change in allowance for credit losses impacting income from operations by approximately **$1.2 million**[150](index=150&type=chunk) - No impairment charges for goodwill or finite-lived intangible assets were recorded in Q1 2023[151](index=151&type=chunk)[152](index=152&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the quarter, detailing revenue, expenses, and segment-specific income (loss) from operations Key Financial Metrics (in millions, except EPS) | Metric | Q1 2022 (in millions) | Q1 2023 (in millions) | YoY Change | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Revenue | $258.9 | $256.6 | -0.9% | | Income (loss) from operations | $13.4 | $(1.3) | -110.0% | | Net income (loss) | $7.0 | $(2.0) | -128.8% | | Diluted EPS | $0.29 | $(0.09) | -131.0% | - Consolidated revenue decreased primarily due to timing of ANZ academic terms and unfavorable foreign currency, partially offset by USHE enrollment growth[155](index=155&type=chunk) - USHE revenue increased **0.6%** to **$196.9 million**, driven by **2.3%** enrollment growth, despite lower revenue per student[155](index=155&type=chunk) - ANZ revenue decreased **14.4%** to **$41.5 million**, due to academic term timing and unfavorable foreign currency impacts[155](index=155&type=chunk) - Education Technology Services revenue increased **24.9%** to **$18.2 million**, due to Sophia Learning growth and higher employer-affiliated enrollment[156](index=156&type=chunk) - Instructional and support costs increased to **$152.9 million** (**59.6%** of revenue) from **$144.6 million** (**55.9%** of revenue), due to higher bad debt, student material, and technology costs[157](index=157&type=chunk) - General and administration expenses increased to **$95.5 million** (**37.2%** of revenue) from **$94.8 million** (**36.6%** of revenue), due to increased investments in branding initiatives[158](index=158&type=chunk) - Restructuring costs increased to **$5.6 million** from **$1.9 million**, primarily due to a **$3.6 million** right-of-use lease asset impairment charge and higher severance expenses[160](index=160&type=chunk) - USHE income from operations decreased to **$9.6 million** from **$15.5 million**, due to increased marketing investments[161](index=161&type=chunk) - ANZ loss from operations increased to **$7.2 million** from **$0.7 million**, due to lower revenue, increased marketing, and unfavorable foreign currency impacts[161](index=161&type=chunk) - Education Technology Services income from operations increased **23.0%** to **$5.8 million** from **$4.7 million**, due to growth in Sophia Learning and employer-affiliated enrollment[161](index=161&type=chunk) - Other income (expense) shifted from a **$1.2 million** expense to a **$0.4 million** income, driven by increased investment and interest income, partially offset by higher interest expense[162](index=162&type=chunk) [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial measures, providing adjusted insights into the company's operational performance by excluding certain non-recurring or non-cash items Adjusted Financial Metrics (in millions, except EPS) | Metric | Q1 2022 (Adjusted) (in millions, except EPS) | Q1 2023 (Adjusted) (in millions, except EPS) | YoY Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :--------- | | Adjusted Income from Operations | $19.4 | $8.2 | -57.7% | | Adjusted Operating Margin | 7.5% | 3.2% | -4.3 pp | | Adjusted Net Income | $13.1 | $5.8 | -55.7% | | Adjusted Diluted EPS | $0.54 | $0.24 | -55.6% | - Non-GAAP adjustments exclude amortization of intangible assets, merger/integration costs, restructuring costs, income/loss from partnership and other investments, and discrete tax adjustments[172](index=172&type=chunk) - On a constant currency basis, Q1 2023 adjusted revenue would be **$259.584 million** and adjusted net income **$5.902 million**[177](index=177&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, cash flow activities, and capital allocation strategies, including dividends and share repurchases - Cash, cash equivalents, and marketable securities totaled **$240.0 million** at March 31, 2023, compared to **$235.9 million** at December 31, 2022, and **$321.5 million** at March 31, 2022[178](index=178&type=chunk) - Net cash provided by operating activities decreased to **$35.2 million** in Q1 2023 from **$56.6 million** in Q1 2022, due to lower earnings, increased working capital use, and higher tax payments[181](index=181&type=chunk) - Net cash used in investing activities increased to **$23.3 million** in Q1 2023 from **$8.8 million** in Q1 2022, primarily due to **$17.1 million** in marketable securities purchases[182](index=182&type=chunk) - Net cash used in financing activities decreased to **$19.7 million** in Q1 2023 from **$21.8 million** in Q1 2022, mainly due to a **$4.0 million** decrease in common stock repurchases[183](index=183&type=chunk) - The company paid **$14.8 million** in cash dividends in Q1 2023 (**$0.60/share**)[184](index=184&type=chunk) - **$246.8 million** of share repurchase authorization remained as of March 31, 2023, valid through December 31, 2023[184](index=184&type=chunk) - The company believes existing cash, operating cash flow, and the Amended Credit Facility will be sufficient to meet its cash requirements for the next 12 months and beyond[186](index=186&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section assesses the company's exposure to market risks, specifically interest rate risk and foreign currency risk, and outlines potential impacts on financial performance [Interest Rate Risk](index=35&type=section&id=Interest%20Rate%20Risk) This section analyzes the company's exposure to fluctuations in interest rates and their potential impact on earnings and debt obligations - A **1%** increase or decrease in interest rates would not materially impact future earnings, fair values, or cash flows related to cash equivalents or interest-earning marketable securities[187](index=187&type=chunk) - Outstanding debt under the Amended Credit Facility was **$101.3 million** at March 31, 2023, bearing LIBOR-based interest plus a margin[188](index=188&type=chunk) - A **100 basis point** increase in LIBOR would result in an incremental **$3.5 million** in annual interest expense if the entire **$350 million** Revolving Credit Facility were utilized[189](index=189&type=chunk) - The Revolving Credit Facility includes mechanisms for replacing LIBOR, with no expected material difference[190](index=190&type=chunk) [Foreign Currency Risk](index=36&type=section&id=Foreign%20Currency%20Risk) This section evaluates the company's exposure to foreign currency exchange rate fluctuations, particularly for revenues denominated in non-USD currencies - Revenues denominated in non-USD currencies (primarily AUD) accounted for **16.2%** of consolidated revenues in Q1 2023[191](index=191&type=chunk) - A hypothetical **10%** adverse change in average foreign currency exchange rates would decrease consolidated revenues by approximately **$4.2 million**[191](index=191&type=chunk) - The effect of exchange rate changes on cash, cash equivalents, and restricted cash was a decrease of **$0.9 million** in Q1 2023[191](index=191&type=chunk) - The company does not use foreign exchange contracts or derivatives to hedge foreign currency exposures[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2023, concluding they were effective, with no material changes to internal control over financial reporting occurring during the quarter - Disclosure controls and procedures were deemed effective as of March 31, 2023, ensuring timely and accurate reporting[193](index=193&type=chunk) - No material changes in internal control over financial reporting occurred during Q1 2023[193](index=193&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business, including borrower defense applications against Capella University, and while outcomes are uncertain, management believes these matters will not have a material adverse effect on the company's financial position, results of operations, or cash flows - The company accrues for estimated costs when probable and estimable, and currently believes no material adverse effect from litigation[194](index=194&type=chunk) - Refers to Note 16 for additional details on legal proceedings, including borrower defense applications against Capella University[194](index=194&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section highlights potential risks that could materially affect the company's business, stock price, or investment value, emphasizing the importance of maintaining state authorizations for its universities and the potential impact of proposed changes to the State Authorization Reciprocity Agreement (SARA) - No material changes to risk factors from the 2022 Form 10-K, except for a revised risk factor regarding state authorizations[195](index=195&type=chunk) - Failure of Strayer University or Capella University to maintain state authorizations could limit operations and Title IV program participation, materially adversely affecting the business[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - Proposed changes to NC-SARA policies, such as applying more stringent standards to for-profit institutions or eliminating their participation, could have a material adverse effect on Strayer University, Capella University, and the Company[203](index=203&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any common stock under its repurchase program during the three months ended March 31, 2023, with **$246.8 million** remaining authorization through December 31, 2023 - No common stock repurchases were made in Q1 2023[204](index=204&type=chunk) - **$246.8 million** of share repurchase authorization remained as of March 31, 2023, valid through December 31, 2023[204](index=204&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities were reported[205](index=205&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[205](index=205&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) This section details the results of the 2023 Annual Meeting of Stockholders, where all four proposals, including the election of directors and advisory votes on executive compensation, were passed, and notes an amendment to Robert S. Silberman's employment agreement in connection with his transition to Chairman - All four proposals submitted at the 2023 Annual Meeting of Stockholders on April 26, 2023, were passed[206](index=206&type=chunk) - Robert S. Silberman's employment agreement was amended and restated for his transition from Executive Chairman to Chairman, setting a five-year term, an annual base salary of **$800,000**, and eligibility for equity incentive compensation[210](index=210&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including amended articles of incorporation, bylaws, an amended employment agreement, and various certifications - Includes Amended and Restated Articles of Incorporation, Amended and Restated Bylaws, and Amended and Restated Employment Agreement for Robert S. Silberman[211](index=211&type=chunk) - Certifications from CEO and CFO (Rule 13a-14(a), 18 U.S.C. Section 1350) are included[211](index=211&type=chunk) - Inline XBRL documents are also listed[211](index=211&type=chunk) [SIGNATURES](index=41&type=section&id=SIGNATURES) The report was duly signed on behalf of Strategic Education, Inc. by Daniel W. Jackson, Executive Vice President and Chief Financial Officer, on April 28, 2023 - The report was signed by Daniel W. Jackson, Executive Vice President and Chief Financial Officer, on April 28, 2023[215](index=215&type=chunk)

Financial Data and Key Metrics - Revenue in U.S. Higher Education increased by just over 0.5% to $197 million, with revenue per student decreasing slightly due to strong employer-affiliated enrollments [2] - Education, Technology & Services (ETS) division saw a 25% increase in revenue and a 23% increase in operating income, though operating margin contracted slightly to 31.8% from 32.3% [3] - Restructuring costs in the quarter were $5.6 million, primarily due to lease impairment charges [22] Business Line Data and Key Metrics - U.S. Higher Education division grew total enrollment by 2.3%, with employer-affiliated enrollments growing 13% at Capella, 25% at Strayer, and 17% across all U.S. higher education [2] - Sophia total paid subscribers grew 24%, and Sophia revenue increased 36% [3] - SEI enrollments from Workforce Edge increased 230% to 986 enrollments [3] Market Data and Key Metrics - Revenue in Australia and New Zealand decreased by 8% on a constant currency basis due to adjustments in the academic calendar at Torrens University [4] - Enrollment in Australia and New Zealand was down 6.3%, with revenues down 14% (8% on constant currency) [26] Company Strategy and Industry Competition - The company continues to invest in Sophia and Workforce Edge, which are driving growth in the ETS division [3] - The company expects the Australian government's decision to require students on active visas to attend classes full-time by June to be a positive catalyst for ANZ enrollment in the second half of the year [21] Management Commentary on Operating Environment and Future Outlook - The company expects revenue to grow mid-single digits for the full year, with expenses increasing no more than 3% [7] - The company is optimistic about the second half of the year in Australia, as it will be the first fully normalized period for international student immigration since the pandemic [4] Other Important Information - The company announced an Investor Day to be held on November 7 at the Palace Hotel in New York City [5] - The company does not expect to be impacted by regulatory changes related to online program management companies (OPMs) [33] Q&A Session Summary Question: Guidance for 2023 revenues and enrollments - The company expects revenue to grow mid-single digits, with expenses increasing no more than 3% [7] Question: U.S. higher education enrollment trends by program type - FlexPath at Capella continues to be a major source of growth, while Strayer's growth is predominantly at the undergraduate level [8] Question: Enrollment trends in Australia and New Zealand - The company expects the bulk of revenue from ANZ to hit in the back half of the year, particularly in the fourth quarter [20] Question: Impact of restructuring costs - The $5.6 million restructuring costs were in line with expectations, primarily due to lease impairment charges [22] Question: Exposure to VA and TA at Strayer and Capella - The company has more exposure to VA at Strayer than at Capella but does not expect any compliance-related issues on 90-10 [35] Question: Regulatory changes related to OPMs - The company does not work with OPMs and does not expect to be impacted by any regulatory changes [33]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Exact name of registrant as specified in its charter) FORM 10-K (State or other jurisdiction of incorporation or organization) Maryland 52-1975978 (Mark One) (I.R.S. Employer Identification Number) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 F ...