Strategic Education(STRA) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Strategic Education, Inc. for the periods ended June 30, 2025, and December 31, 2024, including detailed notes explaining operations, accounting policies, revenue, restructuring, and regulatory updates Unaudited Condensed Consolidated Balance Sheets Total assets increased slightly to $2,091,523 thousand at June 30, 2025, reflecting modest increases in both total liabilities and stockholders' equity | Metric (in thousands) | Dec 31, 2024 | Jun 30, 2025 | Change | % Change | | :-------------------- | :----------- | :----------- | :----- | :------- | | ASSETS | | | | | | Cash and cash equivalents | $137,074 | $133,600 | $(3,474) | -2.53% | | Marketable securities | $46,949 | $31,350 | $(15,599) | -33.23% | | Tuition receivable, net | $76,127 | $97,878 | $21,751 | 28.57% | | Total current assets | $304,943 | $319,943 | $15,000 | 4.92% | | Goodwill | $1,206,883 | $1,231,105 | $24,222 | 2.01% | | Total assets | $2,049,735 | $2,091,523 | $41,788 | 2.04% | | LIABILITIES & STOCKHOLDERS' EQUITY | | | | | | Contract liabilities | $89,563 | $135,179 | $45,616 | 50.93% | | Total current liabilities | $216,460 | $254,480 | $38,020 | 17.56% | | Total liabilities | $387,236 | $424,806 | $37,570 | 9.70% | | Total stockholders' equity | $1,662,499 | $1,666,717 | $4,218 | 0.25% | | Total liabilities and stockholders' equity | $2,049,735 | $2,091,523 | $41,788 | 2.04% | Unaudited Condensed Consolidated Statements of Income For the three months ended June 30, 2025, revenues increased by 2.9% year-over-year, leading to a 9.2% increase in net income, with similar trends for the six-month period | Metric (in thousands, except per share) | Q2 2024 | Q2 2025 | Change | % Change | | :------------------------------------ | :----------- | :----------- | :--------- | :--------- | | Revenues | $312,266 | $321,471 | $9,205 | 2.95% | | Total costs and expenses | $270,342 | $275,711 | $5,369 | 1.99% | | Income from operations | $41,924 | $45,760 | $3,836 | 9.15% | | Net income | $29,898 | $32,331 | $2,433 | 8.14% | | Basic EPS | $1.28 | $1.41 | $0.13 | 10.16% | | Diluted EPS | $1.24 | $1.37 | $0.13 | 10.48% | | Metric (in thousands, except per share) | YTD Q2 2024 | YTD Q2 2025 | Change | % Change | | :------------------------------------ | :----------- | :----------- | :--------- | :--------- | | Revenues | $602,516 | $625,061 | $22,545 | 3.74% | | Total costs and expenses | $519,236 | $539,507 | $20,271 | 3.90% | | Income from operations | $83,280 | $85,554 | $2,274 | 2.73% | | Net income | $59,600 | $62,075 | $2,475 | 4.15% | | Basic EPS | $2.55 | $2.69 | $0.14 | 5.49% | | Diluted EPS | $2.47 | $2.61 | $0.14 | 5.67% | Unaudited Condensed Consolidated Statements of Comprehensive Income Comprehensive income significantly increased for both the three and six months ended June 30, 2025, primarily driven by positive foreign currency translation adjustments | Metric (in thousands) | Q2 2024 | Q2 2025 | Change | % Change | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Net income | $29,898 | $32,331 | $2,433 | 8.14% | | Foreign currency translation adjustments | $13,592 | $26,353 | $12,761 | 93.88% | | Comprehensive income | $43,561 | $58,683 | $15,122 | 34.72% | | Metric (in thousands) | YTD Q2 2024 | YTD Q2 2025 | Change | % Change | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Net income | $59,600 | $62,075 | $2,475 | 4.15% | | Foreign currency translation adjustments | $(13,058) | $29,696 | $42,754 | -327.40% | | Comprehensive income | $46,756 | $91,771 | $45,015 | 96.28% | Unaudited Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased slightly to $1,666,717 thousand at June 30, 2025, influenced by stock-based compensation, common stock repurchases, and foreign currency translation adjustments | Metric (in thousands, except shares) | Dec 31, 2024 | Jun 30, 2025 | | :----------------------------------- | :----------- | :----------- | | Common stock, par value $0.01; shares issued and outstanding | 24,502,385 | 23,948,762 | | Common stock, par value | $245 | $239 | | Additional paid-in capital | $1,532,414 | $1,489,271 | | Accumulated other comprehensive loss | $(88,565) | $(58,869) | | Retained earnings | $218,405 | $236,076 | | Total stockholders' equity | $1,662,499 | $1,666,717 | - For the six months ended June 30, 2025, the company repurchased 717,146 shares of common stock, reducing additional paid-in capital by $45,286 thousand and retained earnings by $15,173 thousand[18] - Foreign currency translation adjustments positively impacted accumulated other comprehensive loss by $29,696 thousand for the six months ended June 30, 2025[18] Unaudited Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities slightly decreased, while net cash used in financing activities significantly increased, primarily due to common stock repurchases | Metric (in thousands) | YTD Q2 2024 | YTD Q2 2025 | Change | % Change | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Net cash provided by operating activities | $101,935 | $98,864 | $(3,071) | -3.01% | | Net cash used in investing activities | $(6,213) | $(4,627) | $1,586 | -25.53% | | Net cash used in financing activities | $(33,021) | $(98,429) | $(65,408) | 198.07% | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $62,167 | $(1,673) | $(63,840) | -102.69% | | Cash, cash equivalents, and restricted cash — end of period | $244,092 | $144,983 | $(99,109) | -40.60% | - The significant increase in net cash used in financing activities was primarily driven by $60.0 million of share repurchases during the six months ended June 30, 2025[20][200] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering business segments, accounting policies, revenue recognition, restructuring, and other financial and regulatory updates 1. Nature of Operations Strategic Education, Inc. is an education services company providing post-secondary education and job-ready skills programs through its U.S. Higher Education, Education Technology Services, and Australia/New Zealand segments - Strategic Education, Inc. provides high-quality education through campus-based and online post-secondary offerings and programs to develop job-ready skills[22] - The company's three reportable segments are U.S. Higher Education (Capella University, Strayer University), Education Technology Services (Workforce Edge, Sophia Learning), and Australia/New Zealand (Torrens University, Think Education, Media Design School)[23] 2. Significant Accounting Policies This note outlines key accounting policies including financial statement presentation, operating expense categories, foreign currency translation, marketable securities, tuition receivable, goodwill, equity awards, and recently issued accounting standards - The company's financial statements are unaudited and include normal recurring adjustments, prepared in accordance with GAAP, and should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[25] - Restructuring costs include severance, asset impairment charges, and gains/losses on early termination of leased facilities[29] - Restricted cash balances for June 30, 2025, include $2.1 million for unpaid U.S. obligations, $8.8 million for advance tuition payments in Australia/New Zealand, and $0.5 million for a minimum protective endowment in Pennsylvania[33][34] | Metric (in thousands) | Dec 31, 2024 | Jun 30, 2025 | | :-------------------- | :----------- | :----------- | | Tuition receivable | $127,012 | $146,249 | | Allowance for credit losses | $(50,885) | $(48,371) | | Tuition receivable, net | $76,127 | $97,878 | - The FASB issued ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), which the company is currently evaluating for impact on its financial statements[54][56] 3. Revenue Recognition Revenue primarily from tuition is recognized ratably over the instruction period, with disaggregation by segment and management of contract liabilities for scholarship programs like 'Learn and Earn' and 'Tuition Cap' | Segment (in thousands) | Q2 2024 | Q2 2025 | YTD Q2 2024 | YTD Q2 2025 | | :--------------------- | :----------- | :----------- | :----------- | :----------- | | U.S. Higher Education | $216,613 | $215,635 | $435,849 | $436,643 | | Australia/New Zealand | $71,130 | $69,144 | $118,505 | $117,404 | | Education Technology Services | $24,523 | $36,692 | $48,162 | $71,014 | | Consolidated revenue | $312,266 | $321,471 | $602,516 | $625,061 | - Strayer University's 'Learn and Earn Scholarship' allows undergraduate students to earn one free course for every three successfully completed, with $38.4 million deferred for estimated redemptions as of June 30, 2025[65][67] - Capella University's 'Tuition Cap' pricing waives tuition once a student reaches a designated dollar threshold, with $16.3 million in related contract liabilities as of June 30, 2025[68] 4. Restructuring and Related Charges Restructuring costs for the six months ended June 30, 2025, totaled $4.7 million, primarily due to increased severance and asset impairment charges, contrasting with a prior year net benefit | Metric (in thousands) | Q2 2024 | Q2 2025 | YTD Q2 2024 | YTD Q2 2025 | | :-------------------- | :------ | :------ | :---------- | :---------- | | Severance and other employee separation charges | $1,000 | $1,300 | $1,300 | $2,800 | | Right-of-use lease asset charges | $0 | $700 | $0 | $800 | | Fixed asset impairment charges | $0 | $700 | $0 | $800 | | Net benefit from early lease terminations | $0 | $0 | $(6,200) | $0 | | Total Restructuring costs | $1,995 | $2,783 | $(3,515) | $4,697 | 5. Marketable Securities The company's marketable securities portfolio primarily consists of held-to-maturity securities carried at amortized cost, totaling $46.3 million as of June 30, 2025, with no available-for-sale securities | Held-to-Maturity Securities (in thousands) | Dec 31, 2024 Amortized Cost | Jun 30, 2025 Amortized Cost | | :----------------------------------------- | :-------------------------- | :-------------------------- | | Term deposits | $21,653 | $16,418 | | U.S. treasury securities | $19,778 | $9,918 | | Corporate debt securities | $20,000 | $20,000 | | Total | $61,431 | $46,336 | - The company did not have any marketable securities classified as available-for-sale as of June 30, 2025[72] - Purchases of held-to-maturity securities increased to $25.8 million for the six months ended June 30, 2025, from $8.6 million in the prior year, while proceeds from maturities also increased[75] 6. Fair Value Measurement Certain assets, primarily money market funds (Level 1), are measured at fair value on a recurring basis, while held-to-maturity marketable securities are carried at amortized cost with estimated fair value classified as Level 2 | Assets at Fair Value (in thousands) | Dec 31, 2024 | Jun 30, 2025 | | :---------------------------------- | :----------- | :----------- | | Money market funds (Level 1) | $92,416 | $85,271 | | Available-for-sale securities (Level 2) | $499 | $0 | | Total assets at fair value on a recurring basis | $92,915 | $85,271 | - The estimated fair value of held-to-maturity marketable securities was $46.4 million as of June 30, 2025, classified in Level 2[78] 7. Goodwill and Intangible Assets Goodwill and indefinite-lived intangible assets are annually assessed for impairment, with total goodwill increasing to $1,231,105 thousand at June 30, 2025, mainly due to currency translation adjustments in the ANZ segment | Segment Goodwill (in thousands) | Dec 31, 2024 | Jun 30, 2025 | | :------------------------------ | :----------- | :----------- | | U.S. Higher Education | $632,075 | $632,075 | | Australia / New Zealand | $474,808 | $499,030 | | Education Technology Services | $100,000 | $100,000 | | Total Goodwill | $1,206,883 | $1,231,105 | - Goodwill for the Australia/New Zealand segment increased by $24,222 thousand due to currency translation adjustments for the six months ended June 30, 2025[81] - Indefinite-lived intangible assets (trade names) increased to $248,172 thousand as of June 30, 2025, also influenced by currency translation adjustments, with no impairment charges in the current period[83] 8. Other Current Assets Other current assets increased to $56,353 thousand at June 30, 2025, primarily driven by increases in prepaid expenses and restricted cash | Other Current Assets (in thousands) | Dec 31, 2024 | Jun 30, 2025 | | :---------------------------------- | :----------- | :----------- | | Prepaid expenses | $20,841 | $30,616 | | Restricted cash | $9,082 | $10,883 | | Cloud computing arrangements | $9,402 | $9,036 | | Other | $5,468 | $5,818 | | Total Other current assets | $44,793 | $56,353 | 9. Other Assets Other assets increased to $66,241 thousand at June 30, 2025, mainly due to higher cloud computing arrangements and other miscellaneous assets | Other Assets (in thousands) | Dec 31, 2024 | Jun 30, 2025 | | :-------------------------- | :----------- | :----------- | | Cloud computing arrangements, net of current portion | $18,328 | $23,925 | | Prepaid expenses, net of current portion | $15,678 | $15,343 | | Equity method investments | $13,428 | $11,397 | | Tuition receivable, net, non-current | $7,040 | $6,443 | | Other investments | $2,786 | $2,786 | | Other | $5,650 | $6,347 | | Total Other assets | $62,910 | $66,241 | - Equity method investments, primarily in limited partnerships focused on health care and education-related technology, decreased to $11,397 thousand at June 30, 2025, due to pro-rata share in net losses[88][90] 10. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses slightly decreased to $99,189 thousand at June 30, 2025, primarily due to lower accrued compensation and benefits, partially offset by higher trade payables | Accounts Payable and Accrued Expenses (in thousands) | Dec 31, 2024 | Jun 30, 2025 | | :--------------------------------------------------- | :----------- | :----------- | | Trade payables | $55,733 | $59,115 | | Accrued compensation and benefits | $38,843 | $32,040 | | Accrued student obligations and other | $7,173 | $8,034 | | Total Accounts payable and accrued expenses | $101,749 | $99,189 | 11. Long-Term Debt The company has an Amended Credit Facility providing a senior secured revolving credit facility of up to $250 million, with no outstanding borrowings as of June 30, 2025, and compliance with all covenants - The Amended Credit Facility provides a $250 million senior secured revolving credit facility, with an option to increase commitments up to the greater of $300 million or 100% of consolidated EBITDA[95][195][197] - As of June 30, 2025, the company had no borrowings outstanding under the Revolving Credit Facility and was in compliance with all covenants[97][197] - The facility includes financial maintenance covenants: a leverage ratio not greater than 2.00 to 1.00 and a coverage ratio not less than 1.75 to 1.00[104] 12. Other Long-Term Liabilities Other long-term liabilities increased to $42,211 thousand at June 30, 2025, primarily due to an increase in long-term contract liabilities related to future free classes | Other Long-Term Liabilities (in thousands) | Dec 31, 2024 | Jun 30, 2025 | | :----------------------------------------- | :----------- | :----------- | | Contract liabilities, net of current portion | $34,505 | $36,070 | | Asset retirement obligations | $3,876 | $4,059 | | Other | $1,805 | $2,082 | | Total Other long-term liabilities | $40,186 | $42,211 | - Long-term contract liabilities represent revenue deferred for future free classes, expected to be realized after one year[100] 13. Equity Awards Stock-based compensation expense, net of tax, for the six months ended June 30, 2025, was $8,353 thousand, a slight decrease from the prior year | Stock-based Compensation (in thousands) | Q2 2024 | Q2 2025 | YTD Q2 2024 | YTD Q2 2025 | | :-------------------------------------- | :------ | :------ | :---------- | :---------- | | Instructional and support costs | $1,822 | $1,969 | $3,055 | $4,256 | | General and administration | $4,682 | $3,846 | $8,642 | $6,923 | | Restructuring costs | $69 | $41 | $205 | $148 | | Total stock-based compensation expense | $6,573 | $5,856 | $11,902 | $11,327 | | Tax benefit | $1,742 | $1,539 | $3,167 | $2,974 | | Stock-based compensation expense, net of tax | $4,831 | $4,317 | $8,735 | $8,353 | 14. Income Taxes Income tax expense for the six months ended June 30, 2025, remained consistent at $25.4 million, including a windfall tax impact of $0.4 million, with no material impact expected from the OBBB Act | Metric (in thousands) | YTD Q2 2024 | YTD Q2 2025 | | :-------------------- | :----------- | :----------- | | Income tax expense | $25,351 | $25,375 | | Shortfall tax impacts | $1,200 | $0 | | Windfall tax impacts | $0 | $400 | | Income taxes paid | $25,900 | $29,200 | - The company does not expect the One Big Beautiful Bill Act (OBBB), signed on July 4, 2025, to have a material impact on its 2025 annual effective tax rate[107] 15. Segment Reporting Strategic Education operates through three segments: U.S. Higher Education (USHE), Education Technology Services (ETS), and Australia/New Zealand (ANZ), with performance assessed by the CEO based on income from operations - USHE segment includes Capella University, Strayer University, Jack Welch Management Institute MBA, Hackbright Academy, and Devmountain[109] - ETS segment focuses on employer partnerships for education benefits, including Workforce Edge and Sophia Learning, driving student enrollment for USHE institutions[110] - ANZ segment comprises Torrens University, Think Education, and Media Design School, offering certificate and degree programs in Australia and New Zealand[111] | Segment (in thousands) | Q2 2024 Revenue | Q2 2025 Revenue | Q2 2024 Income from Operations | Q2 2025 Income from Operations | | :--------------------- | :-------------- | :-------------- | :----------------------------- | :----------------------------- | | U.S. Higher Education | $216,613 | $215,635 | $19,825 | $20,759 | | Australia/New Zealand | $71,130 | $69,144 | $14,060 | $12,756 | | Education Technology Services | $24,523 | $36,692 | $10,034 | $15,028 | | Consolidated | $312,266 | $321,471 | $41,924 | $45,760 | | Segment (in thousands) | YTD Q2 2024 Revenue | YTD Q2 2025 Revenue | YTD Q2 2024 Income from Operations | YTD Q2 2025 Income from Operations | | :--------------------- | :------------------ | :------------------ | :--------------------------------- | :--------------------------------- | | U.S. Higher Education | $435,849 | $436,643 | $47,838 | $50,715 | | Australia/New Zealand | $118,505 | $117,404 | $11,805 | $10,660 | | Education Technology Services | $48,162 | $71,014 | $20,122 | $28,876 | | Consolidated | $602,516 | $625,061 | $83,280 | $85,554 | 16. Litigation The company is involved in ordinary course litigation and legal proceedings, with no material developments reported since the Annual Report on Form 10-K for the year ended December 31, 2024 - No material developments in litigation and other legal proceedings have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024[116] 17. Regulation This note details significant regulatory changes and their potential impact, including the OBBB Act, the 90/10 Rule, SARA policy modifications, negotiated rulemaking, and developments concerning Title IX and Title VI - The One Big Beautiful Bill Act (OBBB), signed July 4, 2025, eliminates Federal Direct PLUS loans for graduate students effective July 2026, sets new loan limits, and creates an accountability framework for programs based on earning outcomes[118][119][120][121] - OBBB also introduces Workforce Pell Grants for eligible short-term, career-focused programs and delays the effective date of the 2022 borrower defense to repayment rules until July 1, 2035, reinstating the 2019 version[123][124] - The 90/10 Rule now includes all federal education assistance funds in the '90' metric for fiscal years beginning on or after January 1, 2023, including military tuition assistance and veterans education benefits[127] - NC-SARA is considering 32 proposed policy changes in 2025, some of which could significantly alter distance education reciprocity agreements and potentially affect institutions' participation[129] - The 2024 Title IX Rule, effective August 1, 2024 (except where enjoined), expands sex discrimination to include sex stereotypes, characteristics, pregnancy, sexual orientation, and gender identity, and eliminates live hearings with cross-examination at the post-secondary level[132] - Executive Order 14173 and subsequent Department of Justice guidance direct agencies to enforce civil rights laws and combat illegal DEI/DEIA preferences, potentially impacting institutions receiving federal funds[136] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, including revenue and income performance, critical accounting policies, segment performance, non-GAAP measures, and liquidity and capital resources Background and Segments Overview Strategic Education, Inc. is an education services company operating through USHE, ETS, and ANZ segments, aiming to close the skills gap by connecting learning and employment - USHE enrollment decreased 0.8% to 86,339 in Q2 2025 compared to Q2 2024[148] - Trailing 4-quarter student persistence within USHE was 87.4% in Q1 2025, up from 86.9% in Q1 2024[148] - Employer-affiliated enrollment as a percentage of USHE enrollment increased to 31.8% in Q2 2025 from 29.3% in Q2 2024[149] - Australia/New Zealand enrollment decreased 3.1% to 18,524 in Q2 2025 compared to Q2 2024, primarily due to constraints on international enrollment[155] Critical Accounting Policies and Estimates Management's discussion emphasizes estimates for revenue recognition, tuition receivable allowances, and goodwill/intangible asset impairment, with potential future impairment for the ANZ segment due to international student regulatory constraints - Revenue is primarily tuition, recognized ratably over the instruction period, with approximately 94% of revenues from tuition for the six months ended June 30, 2025[154] - Bad debt expense as a percentage of revenue decreased to 4.0% in Q2 2025 from 4.3% in Q2 2024[163] - No impairment charges related to goodwill or indefinite-lived intangible assets were recorded for the three and six months ended June 30, 2025[164] - The ANZ reporting unit had $499.0 million of goodwill and $63.6 million of indefinite-lived intangible assets as of June 30, 2025, with potential future impairment if regulatory constraints on international students are not offset by domestic enrollment growth[166] Results of Operations Consolidated revenue increased for both the three and six months ended June 30, 2025, primarily driven by strong ETS segment performance, leading to increases in net income and diluted EPS despite higher operating expenses Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 Consolidated revenue increased by 2.9% to $321.5 million, primarily due to ETS segment growth, resulting in an 8.1% rise in net income and a 10.5% increase in diluted EPS - Consolidated revenue increased 2.9% to $321.5 million, driven by Workforce Edge and Sophia Learning subscriptions in the ETS segment[170] - ETS segment revenue increased 49.6% to $36.7 million[170] - USHE segment revenue decreased 0.5% to $215.6 million due to enrollment decline[170] - ANZ segment revenue decreased 2.8% to $69.1 million due to unfavorable foreign currency and enrollment decline[170] - Consolidated income from operations increased to $45.8 million, up 9.2% YoY[174] Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024 Consolidated revenue increased by 3.7% to $625.1 million, largely due to the ETS segment, with net income growing by 4.1% and diluted EPS by 5.7% - Consolidated revenue increased to $625.1 million, primarily due to ETS segment growth[177] - ETS segment revenue increased 47.4% to $71.0 million[177] - Restructuring costs increased to $4.7 million, compared to a $3.5 million net benefit in the prior year, mainly due to a $6.2 million gain on early lease terminations in 2024 not recurring[180] - Consolidated income from operations increased to $85.6 million, up 2.7% YoY[181] Non-GAAP Financial Measures The company uses non-GAAP financial measures, including Adjusted Total Costs and Expenses, Adjusted Income from Operations, and Adjusted Diluted Earnings per Share, to provide additional insight into business performance by excluding specific adjustments and presenting on a constant currency basis - Adjusted diluted EPS for Q2 2025 was $1.52, up from $1.33 in Q2 2024[188] - Adjusted diluted EPS for YTD Q2 2025 was $2.82, up from $2.44 in YTD Q2 2024[188] | Non-GAAP Metric (in thousands, except per share) | Q2 2025 (As Adjusted) | YTD Q2 2025 (As Adjusted) | | :----------------------------------------------- | :-------------------- | :------------------------ | | Total costs and expenses | $272,928 | $534,810 | | Income from operations | $48,543 | $90,251 | | Operating margin | 15.1% | 14.4% | | Income before income taxes | $50,487 | $94,410 | | Net income | $35,846 | $67,031 | | Diluted earnings per share | $1.52 | $2.82 | Liquidity and Capital Resources The company's cash, cash equivalents, and marketable securities decreased to $179.9 million at June 30, 2025, with net cash used in financing activities significantly increasing due to $60.0 million in share repurchases | Metric (in millions) | Dec 31, 2024 | Jun 30, 2025 | | :------------------- | :----------- | :----------- | | Cash, cash equivalents, and marketable securities | $199.0 | $179.9 | - Net cash provided by operating activities for the six months ended June 30, 2025, decreased to $98.9 million from $101.9 million in the prior year, primarily due to unfavorable changes in working capital[198] - Net cash used in financing activities for the six months ended June 30, 2025, increased to $98.4 million from $33.0 million, driven by $60.0 million of share repurchases[200] - The company paid $29.2 million in cash dividends and repurchased $60.0 million of common stock during the six months ended June 30, 2025, with $168.5 million remaining in share repurchase authorization[201] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk on investments and borrowings, and foreign currency risk, primarily from the Australian dollar, which accounted for 18.8% of consolidated revenues for the six months ended June 30, 2025 - 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 as of June 30, 2025[204] - For every 100 basis points increase in Term SOFR, the company would incur an incremental $2.5 million in annual interest expense if the entire $250 million Revolving Credit Facility was utilized[205] - Revenues denominated in foreign currencies (primarily AUD) accounted for 18.8% of consolidated revenues for the six months ended June 30, 2025[206] - A hypothetical 10% adverse change in average foreign currency exchange rates would decrease consolidated revenues by approximately $11.7 million for the six months ended June 30, 2025[206] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The company's disclosure controls and procedures were effective as of June 30, 2025[207] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[207] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business, with management believing the ultimate outcome will not materially adversely affect its financial position, results of operations, or cash flows - The company believes that the ultimate outcome of current legal proceedings will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows[208] Item 1A. Risk Factors This section updates risk factors, focusing on regulatory changes that could significantly impact the company, including federal student aid eligibility, state authorization, Title IX compliance, student loan defaults, and the OBBB Act's effects on funding and loan programs - Capella University (67.88%) and Strayer University (89.64%) derived significant portions of their cash-basis revenues from federal education assistance in fiscal year 2024, making them susceptible to changes in the 90/10 Rule[210] - The 2024 Title IX Rule, effective August 1, 2024 (except where enjoined), expands sex discrimination definitions and eliminates live hearings with cross-examination at the post-secondary level, with multiple states challenging its lawfulness[224][225] - The OBBB, signed July 4, 2025, eliminates Federal Direct PLUS loans for graduate students effective July 2026, sets new annual and aggregate loan limits, and could affect borrowers' ability to repay, potentially increasing default rates[231][251] - The 2022 Borrower Defense to Repayment (BDTR) Rule's effective date is delayed until July 1, 2035, by the OBBB, reinstating the 2019 version[241][238][239] - New gainful employment regulations, effective July 1, 2024, and OBBB's accountability framework, effective July 2026, establish metrics (debt-to-earnings ratio, earnings premium test) that programs must pass to maintain Title IV eligibility, potentially increasing administrative burdens and affecting enrollment[244][246][247][249] - OBBB also creates Workforce Pell Grants and makes changes to Pell Grant eligibility, which could impact students' ability to fund their education and thus affect enrollment and financial results[252][253] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2025, the company repurchased 325,844 shares of common stock for $28.0 million, with $168.5 million remaining authorized for repurchases through December 31, 2025 | Period | Total shares purchased | Average price paid per share | | :---------------------- | :--------------------- | :--------------------------- | | April 1 to April 30, 2025 | 119,794 | $82.45 | | May 1 to May 31, 2025 | 136,262 | $87.82 | | June 1 to June 30, 2025 | 69,788 | $88.32 | | Total | 325,844 | $85.95 | - As of June 30, 2025, $168.5 million remained authorized for common stock repurchases through December 31, 2025[254] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[255] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, CEO and CFO certifications, and XBRL-related documents - Exhibits include Amended and Restated Articles of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications (Rule 13a-14(a) and 18 U.S.C. Section 1350), and various Inline XBRL documents[257] SIGNATURES The report was duly signed on behalf of Strategic Education, Inc. by Daniel W. Jackson, Executive Vice President and Chief Financial Officer, on July 30, 2025 - The report was signed by Daniel W. Jackson, Executive Vice President and Chief Financial Officer, on July 30, 2025[261]