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What changed in Strategic Education, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Strategic Education, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+587 added−554 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-27)

Top changes in Strategic Education, Inc.'s 2023 10-K

587 paragraphs added · 554 removed · 463 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

260 edited+76 added−46 removed293 unchanged
Biggest changeDepartment of Energy focused on protecting the environment through energy efficient products and practices. ◦ Torrens University Australia is a part of the Tech Central Sustainability Collaborative Partners Group focused on developing opportunities to improve sustainability. ◦ Our Media Design School campus in Auckland, New Zealand is located in a 6 Star Green Star rated building, which represents leadership in environmentally sustainable building practices. ◦ SEI is investing in energy-saving interior design options, including updated lighting packages with more efficient LED lighting; occupancy sensors to reduce energy consumption in areas that are not being used; and programmable heating and cooling systems that will run only during operating hours. ◦ Within campus locations, many property management teams are equipping spaces with energy-saving features including more efficient LED lighting, motion sensor lighting, and energy efficient HVAC systems. ◦ As a provider of online education, data centers are a critical component of our business operations; one of SEI’s largest power usages from a data center is from a data center powered entirely by renewable wind energy. • Reducing greenhouse gas emissions ◦ In an effort to focus on alternative, green-commuting options, employees are encouraged to consider public transportation; for employees in Minneapolis, MN, SEI covers a portion of public transit costs as an employee benefit. ◦ Vehicle charging stations have been installed at the corporate office in Herndon, VA to support employees that choose to utilize or purchase alternative fuel vehicles. ◦ Many campus city locations are located near mass transportation options. ◦ All campuses in Australia and New Zealand are located near a city center and public transportation hubs. • Reducing water usage ◦ Our Herndon, VA and Minneapolis, MN corporate offices and many campus locations, including Australia and New Zealand campuses, use water efficient fixtures to decrease the amount of water usage. • Reducing waste generation from business operations ◦ SEI has recycling programs within operations in the U.S., Australia, and New Zealand to encourage employees to recycle products, including a national contract with a document management company which provides corporate and campus locations with shredding bins on-site to allow business materials to be recycled. ▪ Between January 2021 and December 2022, the Company securely recycled approximately 50 U.S. short tons of paper resulting in significant environmental benefits, including benefits from not having to generate new paper. 16 Table of Contents • Additional efforts to reduce environmental impacts ◦ Green cleaning products are utilized at both the Herndon, VA and Minneapolis, MN corporate offices to reduce impacts to the environment. ◦ Within certain campus locations, janitorial companies also use green cleaning products to reduce impacts to the environment. ◦ Torrens University Australia, Think Education, and Media Design School are Certified B Corporations, meaning they meet high standards of verified performance, accountability, and transparency on factors including supply chain practices and overall environmental sustainability.
Biggest changeFor employees in Minneapolis, MN, SEI covers a portion of public transit costs as an employee benefit. ◦ Vehicle charging stations have been installed at the corporate office in Herndon, VA to support employees that choose to utilize alternative fuel vehicles. ◦ Many campus city locations are located near mass transportation options. ◦ All campuses in Australia and New Zealand are located near a city center and public transportation hubs. • Reducing water usage ◦ Our Herndon, VA and Minneapolis, MN corporate offices and many campus locations, including Australia and New Zealand campuses, use water efficient fixtures to decrease the amount of water usage. • Reducing waste generation from business operations ◦ SEI has recycling programs within operations in the U.S., Australia, and New Zealand to encourage employees to recycle products, including a national contract with a document management company which provides corporate and campus locations with shredding bins on-site to allow business materials to be recycled. ▪ Between January 2021 and December 2022, the Company securely recycled approximately 50 U.S. short tons of paper resulting in significant environmental benefits, including benefits from not 16 Table of Contents having to generate new paper.
Higher Education (“USHE”) Segment The USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Strayer University and Capella University (the “USHE Universities”), including the Jack Welch Management Institute MBA, which is a unit of Strayer University.
Higher Education (“USHE”) Segment The USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Capella University and Strayer University (the “USHE Universities”), including the Jack Welch Management Institute MBA, which is a unit of Strayer University.
ANZ campuses are located in central business districts of major cities across Australia and New Zealand, with accessibility and proximity to industry partners, and offer a focused and personal learning experience to students. • Established brand names and alumni support. Strayer University and Capella University are established brand names in post-secondary adult education.
ANZ campuses are located in central business districts of major cities across Australia and New Zealand, with accessibility and proximity to industry partners, and offer a focused and personal learning experience to students. • Established brand names and alumni support. Capella University and Strayer University are established brand names in post-secondary adult education.
We are also focused on deploying new, more robust technology innovations, including artificial intelligence and automation, which enable us to lower our operating costs and thus improve our ability to support lower tuition. • Establish new platforms for growth — We are continuously looking for new ways to leverage our existing resources and capabilities to accelerate growth and expand benefits to our students through our best-in-class processes and practices and through opportunistic business combinations.
We are also focused on deploying more robust technology innovations, including artificial intelligence and automation, which enable us to lower our operating costs and thus improve our ability to support lower tuition. • Establish new platforms for growth — We are continuously looking for new ways to leverage our existing resources and capabilities to accelerate growth and expand benefits to our students through our best-in-class processes and practices and through opportunistic business combinations.
We also continue to develop new programs and concentrations. • Build employer relationships — We are actively building relationships with employers to create employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate and degree programs. These relationships are an important source of corporate-funded enrollment for Strayer University and Capella University.
We also continue to develop new programs and concentrations. • Build employer relationships — We are actively building relationships with employers to create employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate and degree programs. These relationships are an important source of corporate-funded enrollment for Capella University and Strayer University.
In 2021, we established a DEI Programs Team; appointed from amongst our leadership a Chief Diversity Officer for the Company; and the presidents of Strayer and Capella Universities appointed university-level Diversity Officers. The DEI Programs Team continues to shape and drive forward our enterprise diversity, equity, and inclusion strategy. The Company is dedicated to attracting, developing and retaining top talent.
In 2021, we established a DEI Programs Team; appointed from amongst our leadership a Chief Diversity Officer for the Company; and the presidents of Capella and Strayer Universities appointed university-level Diversity Officers. The DEI Programs Team continues to shape and drive forward our enterprise diversity, equity, and inclusion strategy. The Company is dedicated to attracting, developing and retaining top talent.
The Company provides opportunities for eligible employees and dependents to attain and enhance their career goals through our Tuition Assistance Program, which provides generous financial support for undergraduate and graduate courses at Strayer University, including the Jack Welch Management Institute, Capella University, and continuing education through Sophia Learning.
The Company provides opportunities for eligible employees and dependents to attain and enhance their career goals through our Tuition Assistance Program, which provides generous financial support for undergraduate and graduate courses at Capella University, Strayer University, including the Jack Welch Management Institute, and continuing education through Sophia Learning.
The Company will continue to pursue additional opportunities when appropriate. • Reducing energy consumption, including from non-renewable energy resources ◦ Strayer University and Capella University offer robust online curriculums, with the majority of instruction delivered online at Strayer University and 100% of instruction delivered online at Capella University; this online curriculum gives students the ability to access and complete coursework online, reducing the need for physical space and commuting, which in turn reduces energy and water usage, greenhouse gas emissions, and waste generation. ◦ Much of SEI’s workforce is accustomed to working remotely, again reducing the need for physical space and commuting, which in turn reduces energy and water usage, greenhouse gas emissions, and waste generation. ◦ Our Minneapolis, MN corporate office is located within a LEED Gold certified building (Leadership in Energy and Environmental Design), which is a U.S.
The Company will continue to pursue additional opportunities when appropriate. • Reducing energy consumption, including from non-renewable energy resources ◦ Capella University and Strayer University offer robust online curriculums, with 100% of instruction delivered online at Capella University and the majority of instruction delivered online at Strayer University; this online curriculum gives students the ability to access and complete coursework online, reducing the need for physical space and commuting, which in turn reduces energy and water usage, greenhouse gas emissions, and waste generation. ◦ Much of SEI’s workforce is accustomed to working remotely, again reducing the need for physical space and commuting, which in turn reduces energy and water usage, greenhouse gas emissions, and waste generation. ◦ Our Minneapolis, MN corporate office is located within a LEED Gold certified building (Leadership in Energy and Environmental Design), which is a U.S.
We also claim rights to certain marks and have obtained or have pending applications in the U.S. and select foreign jurisdictions for registration of the marks, including the marks “STRAYER” and “CAPELLA” for educational services, and certain other distinctive logos, along with various other trademarks, service marks and domain names related to our offerings.
We also claim rights to certain marks and have obtained or have pending applications in the U.S. and select foreign jurisdictions for registration of the marks, including the marks “CAPELLA” and “STRAYER” for educational services, and certain other distinctive logos, along with various other trademarks, service marks and domain names related to our offerings.
Regulatory Environment As institutionally accredited institutions of higher education operating in multiple jurisdictions, Strayer University and Capella University are subject to accreditation rules and varying state licensing and regulatory requirements.
Regulatory Environment As institutionally accredited institutions of higher education operating in multiple jurisdictions, Capella University and Strayer University are subject to accreditation rules and varying state licensing and regulatory requirements.
In addition, the Higher Education Act and the regulations promulgated thereunder require all higher education institutions that participate in the various Title IV programs, including Strayer University and Capella University, to comply with detailed substantive and reporting requirements and to undergo periodic regulatory scrutiny.
In addition, the Higher Education Act and the regulations promulgated thereunder require all higher education institutions that participate in the various Title IV programs, including Capella University and Strayer University, to comply with detailed substantive and reporting requirements and to undergo periodic regulatory scrutiny.
The regulations, standards, and policies of these regulatory agencies are subject to frequent change. We cannot predict the actions that the Administration, Congress, accreditors, or states may take or their effect on Strayer University, Capella University, or the Company. Among other things, Congress may reauthorize the Higher Education Act and adopt, repeal or amend other legislation affecting higher education institutions.
The regulations, standards, and policies of these regulatory agencies are subject to frequent change. We cannot predict the actions that the Administration, Congress, accreditors, or states may take or their effect on Capella University, Strayer University, or the Company. Among other things, Congress may reauthorize the Higher Education Act and adopt, repeal or amend other legislation affecting higher education institutions.
If an institution’s or program’s performance does not meet its accrediting agency’s (or possibly other regulators’) expectations or applicable standards, then its operations may be conditioned or severely constrained, or the institution’s accreditation may be withdrawn, depending on the severity of the noncompliance. Accreditation is an important attribute of Strayer University and Capella University.
If an institution’s or program’s performance does not meet its accrediting agency’s (or possibly other regulators’) expectations or applicable standards, then its operations may be conditioned or severely constrained, or the institution’s accreditation may be withdrawn, depending on the severity of the noncompliance. Accreditation is an important attribute of Capella University and Strayer University.
Shared-Services Agreements Strategic Education, Inc. has entered into shared-services agreements with both Strayer University and Capella University to provide certain services, including but not limited to finance, legal, human resources, information technology, financial aid, and marketing.
Shared-Services Agreements Strategic Education, Inc. has entered into shared-services agreements with both Capella University and Strayer University to provide certain services, including but not limited to finance, legal, human resources, information technology, financial aid, and marketing.
State Education Licensure Licensure of Physical Campuses The Higher Education Act and certain state laws require Strayer University and Capella University to be legally authorized to provide educational programs in the states in which the universities are physically located or otherwise have a physical presence as defined by the state.
State Education Licensure Licensure of Physical Campuses The Higher Education Act and certain state laws require Capella University and Strayer University to be legally authorized to provide educational programs in the states in which the universities are physically located or otherwise have a physical presence as defined by the state.
On October 29, 2010, the Department of Education adopted regulations, effective July 1, 2011, that set requirements on states for their authorization of schools for purposes of Title IV eligibility. We believe that every state above in which Strayer University and Capella University are authorized has processes in place that comply with these requirements.
On October 29, 2010, the Department of Education adopted regulations, effective July 1, 2011, that set requirements on states for their authorization of schools for purposes of Title IV eligibility. We believe that every state above in which Capella University and Strayer University are authorized has processes in place that comply with these requirements.
Financing Student Education Students finance their education at Strayer University and Capella University in a variety of ways, and historically about 75% of students participated in one or more Title IV programs. Many financial aid programs are designed to assist eligible students whose financial resources are inadequate to meet the cost of education.
Financing Student Education Students finance their education at Capella University and Strayer University in a variety of ways, and historically about 75% of students participated in one or more Title IV programs. Many financial aid programs are designed to assist eligible students whose financial resources are inadequate to meet the cost of education.
Under the Memorandum of Understanding, Strayer University and Capella University agree to comply with DOD rules and procedures regarding the receipt of tuition assistance on behalf of active duty military personnel (and qualifying family members) in attendance at the University.
Under the Memorandum of Understanding, Capella University and Strayer University agree to comply with DOD rules and procedures regarding the receipt of tuition assistance on behalf of active duty military personnel (and qualifying family members) in attendance at the University.
Title IV Programs Strayer University and Capella University maintain eligibility for their students to participate in the following Title IV programs: • Federal Grants. Grants under the Federal Pell Grant program are available to eligible students based on financial need and other factors. • Campus-Based Programs.
Title IV Programs Capella University and Strayer University maintain eligibility for their students to participate in the following Title IV programs: • Federal Grants. Grants under the Federal Pell Grant program are available to eligible students based on financial need and other factors. • Campus-Based Programs.
The campus-based Title IV programs include the Federal Supplemental Educational Opportunity Grant program, the Federal Perkins Loan, and the Federal Work-Study Program. Neither Strayer University nor Capella University actively participates in the Federal Perkins Loan program, which expired on September 30, 2017. In addition, Strayer University does not actively participate in the Federal Work-Study Program. • Federal Direct Student Loans.
The campus-based Title IV programs include the Federal Supplemental Educational Opportunity Grant program, the Federal Perkins Loan, and the Federal Work-Study Program. Neither Capella University nor Strayer University actively participates in the Federal Perkins Loan program, which expired on September 30, 2017. In addition, Strayer University does not actively participate in the Federal Work-Study Program. • Federal Direct Student Loans.
An institution’s financial ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible without alternative measures and further federal oversight. For Strayer University and Capella University, the Department evaluates financial responsibility at the parent level, based on review of SEI’s financial statements.
An institution’s financial ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible without alternative measures and further federal oversight. For Capella University and Strayer University, the Department evaluates financial responsibility at the parent level, based on review of SEI’s financial statements.
The 90/10 Rule A requirement of the Higher Education Act, commonly referred to as the 90/10 Rule, applies only to proprietary institutions of higher education, which include Strayer University and Capella University.
The 90/10 Rule A requirement of the Higher Education Act, commonly referred to as the 90/10 Rule, applies only to proprietary institutions of higher education, which include Capella University and Strayer University.
Strayer University’s and Capella University’s systems allow for measurement on this basis. The institution must return to the appropriate Title IV programs, in a specified order, the lesser of the unearned Title IV program funds or the institutional charges incurred by the student for the period multiplied by the percentage of unearned Title IV program funds.
Capella University’s and Strayer University’s systems allow for measurement on this basis. The institution must return to the appropriate Title IV programs, in a specified order, the lesser of the unearned Title IV program funds or the institutional charges incurred by the student for the period multiplied by the percentage of unearned Title IV program funds.
An institution must report to the Department of Education new contracts or any significant modifications to contracts with third-party servicers as well as other matters related to third-party servicers. Strayer University and Capella University have written contracts with third-party servicers to perform activities related to Strayer University’s and Capella University’s participation in Title IV programs.
An institution must report to the Department of Education new contracts or any significant modifications to contracts with third-party servicers as well as other matters related to third-party servicers. Capella University and Strayer University have written contracts with third-party servicers to perform activities related to Capella University’s and Strayer University’s participation in Title IV programs.
Strayer University and Capella University have a code of conduct that we believe complies with the provisions of the Higher Education Act in all material respects. Additionally, Strayer University complies with all private lender requirements.
Capella University and Strayer University have a code of conduct that we believe complies with the provisions of the Higher Education Act in all material respects. Additionally, Strayer University complies with all private lender requirements.
Restrictions on Adding Locations and Educational Programs State requirements and accrediting agency standards can limit, slow, or halt the ability of Strayer University and Capella University to establish legally authorized additional locations and programs. Most states require approval before institutions can add new programs, campuses, or teaching locations.
Restrictions on Adding Locations and Educational Programs State requirements and accrediting agency standards can limit, slow, or halt the ability of Capella University and Strayer University to establish legally authorized additional locations and programs. Most states require approval before institutions can add new programs, campuses, or teaching locations.
Any Strayer University or Capella University expansion plans assume its continued ability to establish new campuses as additional locations under such applicable regulations and thereby avoid incurring the two-year delay in participation in Title IV programs.
Any Capella University or Strayer University expansion plans assume its continued ability to establish new campuses as additional locations under such applicable regulations and thereby avoid incurring the two-year delay in participation in Title IV programs.
We believe that both Strayer University and Capella University are in compliance with the credit hour rules. In addition to the credit hour model, the Department of Education has granted approvals for a small number of institutions to operate direct assessment academic programs.
We believe that both Capella University and Strayer University are in compliance with the credit hour rules. In addition to the credit hour model, the Department of Education has granted approvals for a small number of institutions to operate direct assessment academic programs.
If either Strayer University or Capella University were not to continue to comply with these regulations, such noncompliance might affect the operations of the University and its ability to participate in Title IV programs.
If either Capella University or Strayer University were not to continue to comply with these regulations, such noncompliance might affect the operations of the University and its ability to participate in Title IV programs.
Compliance Reviews Strayer University and Capella University are subject to announced and unannounced compliance reviews and audits by various external agencies, including the Department of Education, its Office of Inspector General, state licensing agencies, guaranty agencies, and accrediting agencies.
Compliance Reviews Capella University and Strayer University are subject to announced and unannounced compliance reviews and audits by various external agencies, including the Department of Education, its Office of Inspector General, state licensing agencies, guaranty agencies, and accrediting agencies.
In addition, to enable the Secretary of Education to make a determination of financial responsibility, an institution must submit annually to the Secretary of Education audited financial statements prepared in accordance with Department of Education regulations. For Strayer University and Capella University, financial responsibility is determined at the SEI parent level.
In addition, to enable the Secretary of Education to make a determination of financial responsibility, an institution must submit annually to the Secretary of Education audited financial statements prepared in accordance with Department of Education regulations. For Capella University and Strayer University, financial responsibility is determined at the SEI parent level.
Although there are no such sanctions currently in force against Strayer University or Capella University, if such sanctions or proceedings were imposed and resulted in a substantial curtailment, or termination, of that University’s participation in Title IV programs or resulted in substantial fines or monetary liabilities, that University and the Company could be materially and adversely affected.
Although there are no such sanctions currently in force against Capella University or Strayer University, if such sanctions or proceedings were imposed and resulted in a substantial curtailment, or termination, of that University’s participation in Title IV programs or resulted in substantial fines or monetary liabilities, that University and the Company could be materially and adversely affected.
If Strayer University or Capella University lost its eligibility to participate in Title IV programs, or if Congress reduced the amount of available federal student financial aid, the University would seek to arrange or provide alternative sources of revenue or financial aid for students.
If Capella University or Strayer University lost its eligibility to participate in Title IV programs, or if Congress reduced the amount of available federal student financial aid, the University would seek to arrange or provide alternative sources of revenue or financial aid for students.
Accordingly, the loss of eligibility of Strayer University or Capella University to participate in Title IV programs, or a reduction in the amount of available federal student financial aid, would be expected to have a material adverse effect on Strayer University or Capella University, even if it could arrange or provide alternative sources of revenue or student financial aid.
Accordingly, the loss of eligibility of Capella University or Strayer University to participate in Title IV programs, or a reduction in the amount of available federal student financial aid, would be expected to have a material adverse effect on Capella University or Strayer University, even if it could arrange or provide alternative sources of revenue or student financial aid.
Additionally, both Middle States and the Higher Learning Commission will undertake a site visit to an institution that has undergone a change in ownership or control no later than six months after the change. Each state in which the institution operates may also have its own change in ownership approval processes.
Additionally, both the Higher Learning Commission and Middle States will undertake a site visit to an institution that has undergone a change in ownership or control no later than six months after the change. Each state in which the institution operates may also have its own change in ownership approval processes.
Department of Homeland Security may require an institution to obtain approval for a change in ownership and control. Pursuant to federal law providing benefits for veterans and reservists, some of the programs offered by Strayer University and Capella University are approved by state approving agencies for the enrollment of persons eligible to receive U.S. Department of Veterans Affairs educational benefits.
Department of Homeland Security may require an institution to obtain approval for a change in ownership and control. Pursuant to federal law providing benefits for veterans and reservists, some of the programs offered by Capella University and Strayer University are approved by state approving agencies for the enrollment of persons eligible to receive U.S. Department of Veterans Affairs educational benefits.
If Strayer University or Capella University underwent a change of control that required approval by any state authority, accrediting agency, or any federal agency, and such approval were significantly delayed, limited, or denied, there could be a material adverse effect on the University’s ability to offer certain educational programs, award certain degrees, diplomas, or certificates, operate one or more of its locations, admit certain students, or participate in Title IV programs, which in turn, could materially and adversely affect the University’s operations.
If Capella University or Strayer University underwent a change of control that required approval by any state authority, accrediting agency, or any federal agency, and such approval were significantly delayed, limited, or denied, there could be a material adverse effect on the University’s ability to offer certain educational programs, award certain degrees, diplomas, or certificates, operate one or more of its locations, admit certain students, or participate in Title IV programs, which in turn, could materially and adversely affect the University’s operations.
Such reductions, in turn, could lead to lower enrollments at Strayer University or Capella University or require us to increase our reliance upon alternative sources of student financial aid.
Such reductions, in turn, could lead to lower enrollments at Capella University or Strayer University or require us to increase our reliance upon alternative sources of student financial aid.
Given the significant percentage of our revenues that are derived indirectly from Title IV programs, the loss of, or a significant reduction in, Title IV program funds available to our students could have a material adverse effect on Strayer University, Capella University, and the Company.
Given the significant percentage of our revenues that are derived indirectly from Title IV programs, the loss of, or a significant reduction in, Title IV program funds available to our students could have a material adverse effect on Capella University, Strayer University, and the Company.
Department of Education Title IV regulations applicable to Strayer University and Capella University have been subject to frequent revisions, many of which have increased the level of scrutiny to which higher education institutions are subjected and have raised applicable standards.
Department of Education Title IV regulations applicable to Capella University and Strayer University have been subject to frequent revisions, many of which have increased the level of scrutiny to which higher education institutions are subjected and have raised applicable standards.
Potential Effect of Regulatory Violations If either Strayer University or Capella University fails to comply with the regulatory standards governing Title IV programs, the Department of Education could impose one or more sanctions, including transferring the University from the advance payment method to the reimbursement or cash monitoring system of payment, seeking to require repayment of certain Title IV funds, requiring the University to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification, taking emergency action against the University, or referring the matter for criminal prosecution or initiating proceedings to impose a fine or to limit, condition, suspend, or terminate the University’s participation in Title IV programs.
Potential Effect of Regulatory Violations If either Capella University or Strayer University fails to comply with the regulatory standards governing Title IV programs, the Department of Education could impose one or more sanctions, including transferring the University from the advance payment method to the reimbursement or cash monitoring system of payment, provisional certification, seeking to require repayment of certain Title IV funds, requiring the University to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification, taking emergency action against the University, or referring the matter for criminal prosecution or initiating proceedings to impose a fine or to limit, condition, suspend, or terminate the University’s participation in Title IV programs.
Institutions with a cohort default rate equal to or greater than 15% for any of the three most recent fiscal years for which data are available are subject to a 30-day delayed disbursement period for first-year, first-time undergraduate borrowers. National and institutional cohort default rates for cohort years 2018 and 2019 have been impacted by the COVID-19 repayment pause.
Institutions with a cohort default rate equal to or greater than 15% for any of the three most recent fiscal years for which data are available are subject to a 30-day delayed disbursement period for first-year, first-time undergraduate borrowers. National and institutional cohort default rates for cohort years 2018, 2019, and 2020 have been impacted by the COVID-19 repayment pause.
Certain high-performing faculty have been promoted into what we call “10x” teaching roles where they are provided with new technology and support resources that enable them to teach much larger class cohorts than was previously possible. None of Strayer University’s employees are a party to any collective bargaining or similar agreement.
Certain high-performing faculty have been promoted into what we call “10x” teaching roles where they are provided with technology and support resources that enable them to teach much larger class cohorts than was previously possible. None of Strayer University’s employees are a party to any collective bargaining or similar agreement.
The Universities leverage these transformational capabilities to provide high quality, easily accessible, and affordable educational programs to their students. • Consistent operating history. Strayer University, Capella University, and Torrens University have been in continuous operation since 1892, 1993, and 2013, respectively, and all three institutions have demonstrated an ability to operate 12 Table of Contents consistently and grow profitably.
The Universities leverage these transformational capabilities to provide high quality, easily accessible, and affordable educational programs to students. 12 Table of Contents • Consistent operating history. Strayer University, Capella University, and Torrens University have been in continuous operation since 1892, 1993, and 2013, respectively, and all three institutions have demonstrated an ability to operate consistently and grow profitably.
Core faculty and part-time faculty teach courses, serve on curriculum or other relevant committees, work on curriculum development in their areas of expertise, and serve as comprehensive exam readers and dissertation mentors to doctoral students in addition to other responsibilities. None of Capella University’s employees are a party to any collective bargaining or similar agreement with Capella University.
Core, part-time, and adjunct faculty teach courses, serve on curriculum or other relevant committees, work on curriculum development in their areas of expertise, and serve as comprehensive exam readers and dissertation mentors to doctoral students in addition to other responsibilities. None of Capella University’s employees are a party to any collective bargaining or similar agreement with Capella University.
Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending Borrower Defense to Repayment claims as of July 1, 2023, regardless of the date of a borrower’s loan disbursement; defines the types of misconduct that could lead to borrower defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final Department of Education actions that could give rise to a Borrower Defense to Repayment claim; establishes a presumption that borrowers reasonably relied upon misrepresentations or omissions; establishes a reconsideration process for borrowers whose claims are not approved for a full discharge, including based on a state law standard; and creates a process for the adjudication 30 Table of Contents of group claims based on common facts.
Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending Borrower Defense to Repayment claims as of July 1, 2023, regardless of the date of a borrower’s loan disbursement; defines the types of misconduct that could lead to borrower defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final Department of Education actions that could give rise to a Borrower Defense to Repayment claim; establishes a presumption that 31 Table of Contents borrowers reasonably relied upon misrepresentations or omissions; establishes a reconsideration process for borrowers whose claims are not approved for a full discharge, including based on a state law standard; and creates a process for the adjudication of group claims based on common facts.
The final rules became effective August 14, 2020. On August 24, 2021, the Department of Education Office for Civil Rights issued guidance indicating it would cease enforcement of the rules’ prohibition against consideration of statements made by individuals failing to submit to cross-examination at a live hearing.
The final rules became effective August 14, 2020. On August 24, 2021, the Department of Education Office for Civil Rights (“OCR”) issued guidance indicating it would cease enforcement of the rules’ prohibition against consideration of statements made by individuals failing to submit to cross-examination at a live hearing.
Other trends that could positively affect demand for our programs include: • increasing demand by employers for specific types of professional and skilled workers; • expansion of employer provided tuition assistance programs as a mechanism to attract and retain employees; • growth in the number of high school graduates from 2.8 million in 1999-2000 to an estimated 3.7 million in 2022-2023, according to the National Center for Education Statistics; • the significant and measurable income premium and enhanced employment prospects attributable to post-secondary education; • a number of initiatives underway to reduce the cost of a post-secondary education; and • continued demand from working adults for programs offered by accredited institutions.
Other trends that could positively affect demand for our programs include: • increasing demand by employers for specific types of professional and skilled workers; • expansion of employer provided tuition assistance programs as a mechanism to attract and retain employees; • growth in the number of high school graduates from 2.8 million in 1999-2000 to an estimated 3.7 million in 2023-2024, according to the National Center for Education Statistics; • the significant and measurable income premium and enhanced employment prospects attributable to post-secondary education; • a number of initiatives underway to reduce the cost of a post-secondary education; and • continued demand from working adults for programs offered by accredited institutions.
Think Education delivers education at several campuses in Sydney, Melbourne, Brisbane, and Adelaide as well as through online study. Think Education and its colleges are accredited in Australia by TEQSA and the Australian Skills Quality Authority (“ASQA”), the regulator for vocational education and training organizations that operate in Australia.
Think Education delivers education services at several campuses in Sydney, Melbourne, Brisbane, and Adelaide as well as through online study. Think Education and its colleges are accredited in Australia by TEQSA and the Australian Skills Quality Authority (“ASQA”), the regulator for vocational education and training organizations that operate in Australia.
Company Strengths We have a track record of providing practical and convenient education programs and solutions for working adults, employers, and recent high school graduates. We believe the following strengths position us to capitalize on the demand for post-secondary education: • Focus on innovation.
Company Strengths We have a strong track record of providing practical and convenient education programs and solutions for working adults, employers, and recent high school graduates. We believe the following strengths position us to capitalize on the demand for post-secondary education: • Focus on innovation.
Tuition rates vary based on degree level and program. In addition, tuition rates may vary in states with specific regulations governing tuition costs. Tuition rates are reviewed at least annually. Year-over-year tuition adjustments are specific to the degree level or program and depend on market conditions, program differentiation or changes in operating costs associated with the degree level or program.
In addition, tuition rates may vary in states with specific regulations governing tuition costs. Tuition rates are reviewed at least annually. Year-over-year tuition adjustments are specific to the degree level or program and depend on market conditions, program differentiation or changes in operating costs associated with the degree level or program.
As the proportion of traditional colleges providing alternative learning modalities increases, we will face increasing competition for students from traditional colleges, including colleges with well-established reputations for excellence and colleges in states that offer various forms of “free college” programs.
As the proportion of traditional colleges providing alternative learning modalities increases, we face increasing competition for students from traditional colleges, including colleges with well-established reputations for excellence and colleges in states that offer various forms of “free college” programs.
Two active Strayer University programs, the Associate in Arts in Accounting and Associate in Arts in Business Administration, were “in the zone,” and one active Capella University program, the Masters of Science in Marriage and Family Counseling/Therapy, was “in the zone.” Each of those three programs remained fully eligible.
One active Capella University program, the Masters of Science in Marriage and Family Counseling/Therapy, was “in the zone” and two active Strayer University programs, the Associate in Arts in Accounting and Associate in Arts in Business Administration, were “in the zone.” Each of those three programs remained fully eligible.
All course modalities have the same academic requirements and content, and are taught by Strayer University faculty. Throughout a course, faculty assess students, respond to inquiries, and interact with students to support their learning efforts.
All course modalities have the same academic requirements and content, and are taught by Strayer University faculty. Throughout a course, faculty assess students performance, respond to inquiries, and interact with students to support their learning efforts.
We believe the key factors affecting our competitive position include the quality of our programs offered, the quality of other services provided to students, our reputation among students and in the general marketplace, the cost and perceived value of our offerings, the employment rate and terms of employment for our graduates, the ease of access to our offerings, the quality and reputation of our faculty and other employees, the quality of our campus facilities and online platforms, the time commitment required to complete our programs and obtain a degree, the quality and size of our alumni base, our partnerships with employers, and our relationship with other learning institutions.
We believe the key factors affecting our competitive position include the quality of our programs, the quality of other support services provided to students, our reputation among students and in the general marketplace, the cost and perceived value of our offerings, the employment rate and terms of employment for our graduates, the ease of access to our offerings, the quality and reputation of our faculty and other employees, the quality of our campus facilities and online platforms, the time commitment required to complete our programs and obtain a degree, the quality and size of our alumni base, our partnerships with employers, and our relationship with other learning institutions.
Current Federal Rulemaking On August 10, 2021, the Department announced its intention to establish the Affordability and Student Loans committee, to prepare proposed regulations to address the following topics: borrower defense to repayment, misrepresentation, closed 37 Table of Contents school discharges, discharges for borrowers with a total and permanent disability, discharges for false certification of student eligibility, loan repayment plans, interest capitalization, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements and associated counseling about such arrangements, Pell Grant eligibility or prison education programs, and the Public Service Loan Forgiveness program.
Current Federal Rulemaking On August 10, 2021, the Department announced its intention to establish the Affordability and Student Loans committee, to prepare proposed regulations to address the following topics: borrower defense to repayment, misrepresentation, closed school discharges, discharges for borrowers with a total and permanent disability, discharges for false certification of student eligibility, loan repayment plans, interest capitalization, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements and associated counseling about such arrangements, Pell Grant eligibility or prison education programs, and the Public Service Loan Forgiveness program.
In addition, eligible students pursuing an educational program solely through distance learning are eligible to receive a housing stipend of approximately $917 per month, half the national average amount available to students attending certain classroom-based programs or programs that combine classroom learning and distance learning. On August 16, 2017, the President signed into law the Harry W.
In addition, eligible students pursuing an educational program solely through distance learning are eligible to receive a housing stipend of approximately $967 per month, half the national average amount available to students attending certain classroom-based programs or programs that combine classroom learning and distance learning. On August 16, 2017, the President signed into law the Harry W.
Strayer University is also authorized to participate in state financial aid programs in Pennsylvania, Florida, Alabama, and Vermont. Capella University is authorized to participate in the Minnesota GI Bill and the Minnesota Indian Scholarship programs.
Strayer University is also authorized to participate in state financial aid programs in Pennsylvania, Florida, and Vermont. Capella University is authorized to participate in the Minnesota GI Bill and the Minnesota Indian Scholarship programs.
Registration as an RTO is for a fixed period of up to seven years. ASQA regularly reviews the conduct and operations of RTOs. Torrens is one of 44 universities in Australia. It is a private, for-profit entity and is registered with TEQSA. As a self-accrediting university, it is not required to have its individual courses of study accredited by TEQSA.
Registration as an RTO is for a fixed period of up to seven years. ASQA regularly reviews the conduct and operations of RTOs. Torrens is one of 43 universities in Australia. It is a private, for-profit entity and is registered with TEQSA. As a self-accrediting university, it is not required to have its individual courses of study accredited by TEQSA.
This group includes, but is not limited to, applicants with physical disabilities, applicants from geographically isolated areas, applicants with economically disadvantaged backgrounds and Aboriginal or Torres Strait Islander applicants. Students enrolling in a vocational education and training program must meet minimum requirements for admission including any course specific requirements and English language requirements.
This group includes, but is not limited to, applicants with physical disabilities, applicants from geographically isolated areas, applicants with economically disadvantaged backgrounds and applicants that are Aboriginal or Torres Strait Islander. Students enrolling in a vocational education and training program must meet minimum requirements for admission including any course specific requirements and English language requirements.
Consistent with that approach, the Higher Learning Commission’s current policies include giving the Commission more discretion to designate institutions to be in “financial distress” or under “government investigation.” Receipt of these designations could affect future accreditation status and eligibility for Title IV aid under the Department of Education’s “financial responsibility” triggers.
Consistent with that approach, the Higher Learning Commission’s current policies include giving HLC more discretion to designate institutions to be in “financial distress” or under “government investigation.” Receipt of these designations could affect future accreditation status and eligibility for Title IV aid under the Department of Education’s “financial responsibility” triggers.
If an institutional accreditor loses recognition by the Secretary of Education, an institution may be allowed to continue its participation in Title IV programs on a provisional basis for a period not to exceed 18 months to allow the institution to seek 18 Table of Contents accreditation from another recognized accrediting agency.
If an institutional accreditor loses recognition by the Secretary of Education, an institution may be allowed to continue its participation in Title IV programs on a provisional basis for a period not to exceed 18 months to allow the institution to seek accreditation from another recognized accrediting agency.
Organization of Capella University Overall academic and business decisions of Capella University, including review and approval of the annual financial budget, are directed by its Board of Trustees. Capella University’s By-Laws prescribe that a majority of members be independent from Capella University and the Company to provide independent oversight of all academic programs and services.
Organization of Capella University Overall academic and business decisions of Capella University, including review and approval of the annual financial budget, are directed by its Board of Trustees. Capella University’s By-Laws prescribe that a majority of members be independent from Capella University and the Company to assure independent oversight of all academic programs and services.
Licensure of Online Programs The increasing popularity and use of the internet and other technology for the delivery of education has led, and may continue to lead, to the adoption of new laws and regulatory practices in the United States or foreign countries or to the interpretation of existing laws and regulations to apply to such services.
Authorization of Online Programs The increasing popularity and use of the internet and other technology for the delivery of education has led, and may continue to lead, to the adoption of new laws and regulatory practices in the United States or foreign countries or to the interpretation of existing laws and regulations to apply to such services.
Restrictions on Incentive Compensation As a part of an institution’s program participation agreement with the Department of Education and in accordance with the Higher Education Act and Title IV regulations, the institution may not provide any commission, bonus, or other incentive 27 Table of Contents payment based in any part, directly or indirectly, upon success in securing enrollments or awarding financial aid to any person or entity engaged in any student recruitment, admissions, or financial aid-awarding activity.
Restrictions on Incentive Compensation As a part of an institution’s program participation agreement with the Department of Education and in accordance with the Higher Education Act and Title IV regulations, the institution may not provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or awarding financial aid to any person or entity engaged in any student recruitment, admissions, or financial aid-awarding activity.
Our operations emphasize relationships through our Education Technology Services segment with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs. We generated net revenue of $1.1 billion in 2022.
Our operations emphasize relationships through our Education Technology Services segment with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs. We generated net revenue of $1.1 billion in 2023.
Strayer University’s By-Laws prescribe that a majority of members be independent from Strayer University and the Company to assure independent oversight of all academic programs and services. Within the academic, strategic and financial parameters set by the Board of Trustees, Strayer University is managed on a daily basis by the Strayer University President.
Strayer University’s By-Laws prescribe that a majority of members be independent from Strayer University and the Company to assure independent oversight of all academic programs and services. Within the academic, strategic, and financial parameters set by the Board of Trustees, Strayer University is managed daily by the Strayer University President.
Capella University’s competency-based learning infrastructure and direct assessment capabilities through the FlexPath offering, Strayer University’s video, simulation and content and student support capabilities, and Torrens University’s virtual career expo are examples of this drive to transform education delivery and learning by working adults.
Capella University’s competency-based learning infrastructure and direct assessment capabilities through the FlexPath learning model, Strayer University’s video, simulation and content and student support capabilities, and Torrens University’s virtual career expo are examples of this drive to transform education delivery and learning by working adults.
In addition, we have the rights to trade names, logos and other intellectual property specific to our international institutions including “Torrens University Australia,” “Think Education Group,” and “Media Design School”, in the countries in which those institutions operate. Regulation U.S.
In addition, we have the rights to trade names, logos and other intellectual property specific to our international institutions including “Torrens University Australia,” “Think Education Group,” and “Media Design School,” in the countries in which those institutions operate. Regulation U.S.
The regulatory changes require proprietary institutions to count all “federal education assistance funds” as federal revenue in the 32 Table of Contents 90/10 calculation for fiscal years beginning on or after January 1, 2023. Such funds include not only Title IV funds but also certain funds from the U.S. Department of Defense, Department of Veterans Affairs, and other agencies.
The regulatory changes require proprietary institutions to count all “federal education assistance funds” as federal revenue in the 90/10 calculation for fiscal years beginning on or after January 1, 2023. Such funds include not only Title IV funds but also certain funds from the U.S. Department of Defense, Department of Veterans Affairs, and other agencies.
Media Design School is a globally recognized private tertiary institution for creative and technology qualifications in New Zealand. Media Design School offers industry-endorsed courses in 3D animation and visual effects, game art, game programming, graphic and motion design, digital media artificial intelligence, and creative advertising.
Media Design School is a private tertiary institution for creative and technology qualifications in New Zealand. Media Design School offers industry-endorsed courses in 3D animation and visual effects, game art, game programming, graphic and motion design, digital media artificial intelligence, and creative advertising.
In order to keep pace with a changing knowledge-based economy, we constantly strive to meet the evolving needs of our students and their current and prospective employers by regularly refining, updating, and adding to our portfolio of educational programs.
In order to keep pace with a changing knowledge-based economy, we constantly strive to meet the evolving needs of our students and their current and prospective employers by regularly refining, updating, and adding to our portfolio of educational offerings.
Federal Financial Aid Regulation To be eligible to participate in Title IV programs, Strayer and Capella Universities must comply with specific standards and procedures set forth in the Higher Education Act and the regulations issued thereunder by the Department of Education.
Federal Financial Aid Regulation To be eligible to participate in Title IV programs, Capella University and Strayer University must comply with specific standards and procedures set forth in the Higher Education Act and the regulations issued thereunder by the Department of Education.
Borrower Defenses to Repayment Pursuant to the Higher Education Act and following negotiated rulemaking, on November 1, 2016, the Department of Education released a final regulation specifying the acts or omissions of an institution that a borrower may assert as a defense to repayment of a loan made under the Direct Loan Program and the consequences of such borrower defenses for borrowers, institutions, and the Secretary of Education (the “2016 BDTR Rule”).
Borrower Defenses to Repayment Pursuant to the Higher Education Act and following negotiated rulemaking, on November 1, 2016, the Department of Education released a final regulation specifying the acts or omissions of an institution that a borrower may assert as a defense to repayment of a loan made under the Direct Loan Program and the consequences of such borrower defenses for borrowers, 30 Table of Contents institutions, and the Secretary of Education (the “2016 BDTR Rule”).
We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, 42 Table of Contents and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Furthermore, the suspension from Title IV programs and the necessity of obtaining regulatory approvals in connection with a change of control could materially limit the University’s flexibility in future financing or acquisition transactions. 36 Table of Contents Legislative and Regulatory Activity Congress, from time to time, considers legislation that would make changes in the Higher Education Act and other education-related federal laws.
Furthermore, the suspension from Title IV programs and the necessity of obtaining regulatory approvals in connection with a change of control could materially limit the University’s flexibility in future financing or acquisition transactions. Legislative and Regulatory Activity Congress, from time to time, considers legislation that would make changes in the Higher Education Act and other education-related federal laws.
The employer relationships developed by the Education Technology Services division are an important source of student enrollment for Strayer University and Capella University, and the majority of the revenue attributed to the Education Technology Services division is driven by the volume of enrollment derived from these employer relationships.
The employer relationships developed by the Education Technology Services segment are an important source of student enrollment for Capella University and Strayer University, and the majority of the revenue attributed to the Education Technology Services segment is driven by the volume of enrollment derived from these employer relationships.
Congress has enacted several tax credits for students pursuing higher education and has provided for a tax 22 Table of Contents deduction for interest on student loans and exclusions from income of certain tuition reimbursement amounts. Eligible students at Strayer University or Capella University may participate in educational assistance programs administered by the U.S.
Congress has enacted several tax credits for students pursuing higher education and has provided for a tax deduction for interest on student loans and exclusions from income of certain tuition reimbursement amounts. Eligible students at Capella University or Strayer University may participate in educational assistance programs administered by the U.S.
The Department also announced the formation of a Prison Education Program Subcommittee. Negotiations occurred in October-December 2021, with negotiators reaching consensus on total and permanent disability discharge, eliminating interest capitalization for nonstatutory capitalization events, false certification discharge and Pell Grant eligibility for prison education programs. The committee did not reach consensus on the remainder of the topics.
The Department also announced the formation of a Prison Education Program Subcommittee. Negotiations occurred in October-December 2021, with negotiators reaching consensus on total and permanent disability discharge, eliminating interest capitalization for non-statutory capitalization events, false certification discharge and Pell Grant eligibility for prison education programs. The committee did not reach consensus on the remainder of the topics.
We operate primarily through our wholly-owned subsidiaries Strayer University and Capella University, both accredited post-secondary institutions of higher education located in the United States, as well as Torrens University, an accredited post-secondary institution of higher education located in Australia.
We operate primarily through our wholly-owned subsidiaries, Capella University and Strayer University, both accredited post-secondary institutions of higher education located in the United States, and Torrens University, an accredited post-secondary institution of higher education located in Australia.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSpecifically, the new rule defines a “misrepresentation” to include any false, erroneous or misleading statement made by the institution or its representatives, or its marketing, advertising, recruiting or admissions agents, as well as any omission of fact that a reasonable person would have considered in deciding to enroll in or continue attendance at the institution.
Biggest changeIn 2021, the Department began the process to amend the Borrower Defense to Repayment rules, including the definition of misrepresentation, and on October 31, 2022, the Department released final Borrower Defense to Repayment regulations, which include among other defenses “substantial misrepresentation,” with a significantly expanded definition of misrepresentation that also includes “omissions of fact.” Specifically, the new rule defines a “misrepresentation” to include any false, erroneous or misleading statement made by the institution or its representatives, or its marketing, advertising, recruiting or admissions agents, as well as any omission of fact that a reasonable person would have considered in deciding to enroll in or continue attendance at the institution.
See “Cautionary Notice Regarding Forward-Looking Statements.” Risks Related to Extensive Regulation of Our U.S. Business If Strayer University and Capella University fail to comply with the extensive legal and regulatory requirements for higher education institutions, they could face significant monetary or other liabilities and penalties, including loss of access to federal student loans and grants for their students.
See “Cautionary Notice Regarding Forward-Looking Statements.” Risks Related to Extensive Regulation of Our U.S. Business If Capella University and Strayer University fail to comply with the extensive legal and regulatory requirements for higher education institutions, they could face significant monetary or other liabilities and penalties, including loss of access to federal student loans and grants for their students.
As providers of higher education, Strayer University and Capella University are subject to extensive laws and regulation on both the federal and state levels and by accrediting agencies. In particular, the Higher Education Act and related regulations subject Strayer University, Capella University, and all other higher education institutions that participate in the various Title IV programs to significant regulatory scrutiny.
As providers of higher education, Capella University and Strayer University are subject to extensive laws and regulation on both the federal and state levels and by accrediting agencies. In particular, the Higher Education Act and related regulations subject Capella University, Strayer University, and all other higher education institutions that participate in the various Title IV programs to significant regulatory scrutiny.
Strayer University and Capella University received the FTC’s notice on October 7, 2021, although the FTC made clear that receipt of the notice itself does not reflect any assessment by the FTC as to whether Strayer University or Capella University has engaged in deceptive or unfair conduct.
Capella University and Strayer University received the FTC’s notice on October 7, 2021, although the FTC made clear that receipt of the notice itself does not reflect any assessment by the FTC as to whether Capella University or Strayer University has engaged in deceptive or unfair conduct.
If Strayer University and Capella University are found not to be in compliance with these laws, regulations, standards, or policies, they could lose access to Title IV program funds and face related monetary liability, which would have a material adverse effect on the Company.
If Capella University and Strayer University are found not to be in compliance with these laws, regulations, standards, or policies, they could lose access to Title IV program funds and face related monetary liability, which would have a material adverse effect on the Company.
Strayer University and Capella University have cooperated with these inquiries.
Capella University and Strayer University have cooperated with these inquiries.
Any action or inaction by Congress that significantly reduces funding for Title IV programs or the ability of Strayer University, Capella University, or their students to participate in these programs could materially harm our business.
Any action or inaction by Congress that significantly reduces funding for Title IV programs or the ability of Capella University, Strayer University, or their students to participate in these programs could materially harm our business.
In addition, Strayer University’s and Capella University’s ability to conduct their business, including obtaining necessary approvals from the Department of Education, may be affected by staffing levels or review procedures at the Department and the volume of applications and other requests to the Department.
In addition, Capella University’s and Strayer University’s ability to conduct their business, including obtaining necessary approvals from the Department of Education, may be affected by staffing levels or review procedures at the Department and the volume of applications and other requests to the Department.
If either Strayer University or Capella University fails to maintain its institutional accreditation or if its institutional accrediting body loses recognition by the Department of Education, the University would lose its ability to participate in Title IV programs.
If either Capella University or Strayer University fails to maintain its institutional accreditation or if its institutional accrediting body loses recognition by the Department of Education, the University would lose its ability to participate in Title IV programs.
In addition, an adverse action by Middle States or the Higher Learning Commission other than loss of accreditation, such as issuance of a warning, could have a material adverse effect on our business.
In addition, an adverse action by the Higher Learning Commission or Middle States other than loss of accreditation, such as issuance of a warning, could have a material adverse effect on our business.
If a state in which Strayer University or Capella University is located fails to comply in the future with the provisions of the new rule or fails to provide the University with legal authorization, it could limit the University’s ability to operate in that state and to participate in Title IV programs at least for students in that state and could have a material adverse effect on our operations.
If a state in which Capella University or Strayer University is located fails to comply in the future with the provisions of the new rule or fails to provide the University with legal authorization, it could limit the University’s ability to operate in that state and to participate in Title IV programs at least for students in that state and could have a material adverse effect on our operations.
To be eligible to participate in Title IV programs, Strayer University and Capella University must comply with specific standards and procedures set forth in the Higher Education Act and the regulations issued thereunder by the Department of Education, including, among other things, certain standards of financial responsibility and administrative capability.
To be eligible to participate in Title IV programs, Capella University and Strayer University must comply with specific standards and procedures set forth in the Higher Education Act and the regulations issued thereunder by the Department of Education, including, among other things, certain standards of financial responsibility and administrative capability.
Strayer University or Capella University could lose its eligibility to participate in federal student financial aid programs or be provisionally certified with respect to such participation if the percentage of its revenues derived from those programs were too high, or could be restricted from enrolling students in certain states if the percentage of the University ’ s revenues from federal or state programs were too high.
Capella University or Strayer University could lose its eligibility to participate in federal student financial aid programs or be provisionally certified with respect to such participation if the percentage of its revenues derived from those programs were too high, or could be restricted from enrolling students in certain states if the percentage of the University ’ s revenues from federal or state programs were too high.
The failure by Strayer University or Capella University to comply with the Department of Education ’ s incentive compensation rules could result in sanctions and other liability.
The failure by Capella University or Strayer University to comply with the Department of Education ’ s incentive compensation rules could result in sanctions and other liability.
The failure by Strayer University or Capella University to comply with the Department of Education’s credit hour or direct assessment rules could result in sanctions and other liability. Title IV regulations define the term “credit hour” and require accrediting agencies and state authorization agencies to review the reliability and accuracy of an institution’s credit hour assignments.
The failure by Capella University or Strayer University to comply with the Department of Education’s credit hour or direct assessment rules could result in sanctions and other liability. Title IV regulations define the term “credit hour” and require accrediting agencies and state authorization agencies to review the reliability and accuracy of an institution’s credit hour assignments.
Strayer University and Capella University must comply with the campus safety and security reporting requirements as well as other requirements in the Clery Act, including changes made to the Clery Act by the Violence Against Women Reauthorization Act of 2013. On October 20, 2014, the Department of Education promulgated final regulations implementing amendments to the Clery Act.
Capella University and Strayer University must comply with the campus safety and security reporting requirements as well as other requirements in the Clery Act, including changes made to the Clery Act by the Violence Against Women Reauthorization Act of 2013. On October 20, 2014, the Department of Education promulgated final regulations implementing amendments to the Clery Act.
Failure to comply with these final rules and the resulting sanctions could have a material adverse effect on our business. Strayer University and Capella University are subject to sanctions if they fail to calculate accurately and make timely payment of refunds of Title IV program funds for students who withdraw before completing their educational program.
Failure to comply with these final rules and the resulting sanctions could have a material adverse effect on our business. Capella University and Strayer University are subject to sanctions if they fail to calculate accurately and make timely payment of refunds of Title IV program funds for students who withdraw before completing their educational program.
We rely on one or more third parties for software and services necessary to administer Strayer University ’ s and Capella University ’ s participation in Title IV programs and failure of such a third party to provide compliant software and services, or by us in our use of the software, could cause Strayer University or Capella University to lose eligibility to participate in Title IV programs.
We rely on one or more third parties for software and services necessary to administer Capella University ’ s and Strayer University ’ s participation in Title IV programs and failure of such a third party to provide compliant software and services, or by us in our use of the software, could cause Capella University or Strayer University to lose eligibility to participate in Title IV programs.
Because each of Strayer University and Capella University is jointly and severally liable to the Department of Education for the actions of third-party Title IV processing software providers, failure of such providers to comply with applicable regulations could have a material adverse effect on Strayer University or Capella University, including loss of eligibility to participate in Title IV programs.
Because each of Capella University and Strayer University is jointly and severally liable to the Department of Education for the actions of third-party Title IV processing software providers, failure of such providers to comply with applicable regulations could have a material adverse effect on Capella University or Strayer University, including loss of eligibility to participate in Title IV programs.
Such developments could adversely affect our enrollment, revenues, and results of operations. Our business could be harmed if Strayer University or Capella University experience a disruption in their ability to process student loans under the Federal Direct Loan Program.
Such developments could adversely affect our enrollment, revenues, and results of operations. Our business could be harmed if Capella University or Strayer University experience a disruption in their ability to process student loans under the Federal Direct Loan Program.
As enforcement of laws related to the accessibility of technology continues to evolve in the U.S., information technology development costs and compliance risks could increase. Strayer University’s and Capella University’s online education programs are made available to students through personal computers and other technological devices.
As enforcement of laws related to the accessibility of technology continues to evolve in the U.S., information technology development costs and compliance risks could increase. Capella University’s and Strayer University’s online education programs are made available to students through personal computers and other technological devices.
If Strayer University or Capella University is found to have violated Section 504 or the ADA, it may be required to modify existing content and functionality of its online classroom or other uses of technology, including through adoption of specific technical standards.
If Capella University or Strayer University is found to have violated Section 504 or the ADA, it may be required to modify existing content and functionality of its online classroom or other uses of technology, including through adoption of specific technical standards.
In addition, private parties may file or threaten to file lawsuits alleging failure to comply with laws that prohibit discrimination on the basis of disability, such as Section 504 and the ADA, and defending against and resolving such actions may require Strayer University or Capella University to incur costs of litigation and costs to modify its online classrooms and other uses of technology.
In addition, private parties may file or threaten to file lawsuits alleging failure to comply with laws that prohibit discrimination on the basis of disability, such as Section 504 and the ADA, and defending against and resolving such actions may require Capella University or Strayer University to incur costs of litigation and costs to modify its online classrooms and other uses of technology.
These and other governmental activities, including potential new regulations on program integrity and gainful employment, even if resulting in no adverse findings or actions against Strayer University or Capella University, singly or cumulatively could affect public perception of proprietary higher education, damage the reputation of Strayer University or Capella University, and limit our ability to attract and retain students.
These and other governmental activities, including potential new regulations on program integrity and gainful employment, even if resulting in no adverse findings or actions against Capella University or Strayer University, singly or cumulatively could affect public perception of proprietary higher education, damage the reputation of Capella University or Strayer University, and limit our ability to attract and retain students.
Strayer University and Capella University, with their online programs, operate in a highly competitive market with rapid technological changes, and they may not compete successfully. Online education is a highly fragmented and competitive market that is subject to rapid technological change.
Capella University and Strayer University, with their online programs, operate in a highly competitive market with rapid technological changes, and they may not compete successfully. Online education is a highly fragmented and competitive market that is subject to rapid technological change.
Department of Defense (military tuition assistance) and the Department of Veterans Affairs (veterans education benefits) in addition to the Title IV programs already covered by the 90/10 Rule. These revisions to the 90/10 Rule will apply to institutional fiscal years beginning on or after January 1, 2023.
Department of Defense (military tuition assistance) and the Department of Veterans Affairs (veterans education benefits) in addition to the Title IV programs already covered by the 90/10 Rule. These revisions to the 90/10 Rule apply to institutional fiscal years beginning on or after January 1, 2023.
The loss of Strayer University’s accreditation by Middle States or Middle States’ loss of recognition by the Department of Education would render Strayer University ineligible to participate in Title IV programs and would have a material adverse effect on our business.
Similarly, the loss of Strayer University’s accreditation by Middle States or Middle States’ loss of recognition by the Department of Education would render Strayer University ineligible to participate in Title IV programs and would have a material adverse effect on our business.
Each of Strayer University and Capella University collected the majority of its fiscal year 2022 total consolidated net revenue from receipt of Title IV financial aid program funds, principally from federal student loans under the Federal Direct Loan Program. Any processing disruptions by the Department of Education may affect our students’ ability to obtain student loans on a timely basis.
Each of Capella University and Strayer University collected the majority of its fiscal year 2023 total consolidated net revenue from receipt of Title IV financial aid program funds, principally from federal student loans under the Federal Direct Loan Program. Any processing disruptions by the Department of Education may affect our students’ ability to obtain student loans on a timely basis.
We cannot assure you that the Universities, including their online educational platforms, will be able to expand their program infrastructure on a timely basis sufficient to meet demand for their programs. The Universities’ computer systems and operations could be vulnerable to interruption or malfunction due to events beyond their control, including natural disasters and telecommunications failures.
We cannot assure you that the Universities, including their online educational platforms, will be able to expand their program infrastructure on a timely basis sufficient to meet demand for their programs. The Universities’ computer systems and operations could be vulnerable to interruption or malfunction due to events beyond their control, including natural disasters, telecommunications failures, and cybersecurity incidents.
Our business could be harmed if Congress makes changes to the availability of Title IV funds. Each of Strayer University and Capella University collected the majority of its fiscal year 2022 total consolidated net revenue from receipt of Title IV financial aid program funds, principally from federal student loans under the Federal Direct Loan Program.
Our business could be harmed if Congress makes changes to the availability of Title IV funds. Each of Capella University and Strayer University collected the majority of its fiscal year 2023 total consolidated net revenue from receipt of Title IV financial aid program funds, principally from federal student loans under the Federal Direct Loan Program.
Any interruption to the Universities’ computer systems or operations could have a material adverse effect on our ability to attract and retain students. The Company’s computer networks, and those of third parties we use in our operations, may be vulnerable to security risks that could disrupt operations and require them to expend significant resources.
Any interruption to the Universities’ computer systems or operations could have a material adverse effect on our ability to attract and retain students. The Company’s computer networks, and those of third parties we use in our operations, may be vulnerable to cybersecurity risks that could disrupt operations and require them to expend significant resources.
The Company’s computer networks, and those of third-parties we use in our operations, may be vulnerable to unauthorized access, computer hackers, computer viruses, and other security problems, such as ransomware attacks, denial of service attacks, physical or electronic break-ins and similar disruptions.
The Company’s computer networks, and those of third-parties we use in our operations, may be vulnerable to unauthorized access, computer hackers, computer viruses, and other cybersecurity problems, such as ransomware attacks, denial of service attacks, physical or electronic break-ins and similar disruptions.
On April 4, 2022, the Company received correspondence from the CFPB, in which the CFPB took the position that it has supervisory authority over the Company as a covered person that offers or provides private education loans pursuant to 12 U.S.C. 5514(a)(1)(D) and further indicated the CFPB is considering whether to cite violations based on preliminary findings that the Company may have violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. 5301 et seq., due to alleged student loan servicing and collections practices or policies.
On April 4, 2022, the Company received correspondence from the CFPB, in which the CFPB took the position that it has supervisory authority over the Company as a covered person that offers or provides private education loans pursuant to 12 U.S.C. 5514(a)(1)(D) and further indicated the CFPB is considering whether to cite violations based on preliminary findings that the Company may have violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. 5301 et seq., 43 Table of Contents due to alleged student loan servicing and collections practices or policies.
If Strayer University or Capella University failed to comply with the requirements to participate in SARA or state licensing or authorization requirements to provide distance education in a non-SARA state, the University could lose its ability to participate in SARA or may be subject to the loss of state licensure or authorization to provide distance education in that non-SARA state, respectively.
If Capella University or Strayer University fails to comply with the requirements to participate in SARA or state licensing or authorization requirements to provide distance education in a non-SARA state, the University could lose its ability to participate in SARA or may be subject to the loss of state licensure or authorization to provide distance education in that non-SARA state, respectively.
The extent to which the COVID-19 pandemic and future public health emergencies will affect our business, operations and financial results is uncertain and will depend on numerous evolving factors that remain uncertain and are impossible to predict, including: the duration and scope of the pandemic; the impact on economic activity from the pandemic and actions taken in response, including those of governmental entities; the impact of the pandemic and the government response thereto on our employees, students, and business partners, including any suspensions or terminations of employer tuition reimbursement programs; our ability to operate and provide our services with employees working remotely and/or closures of our campus locations; potential exposure to claims for liability arising out of employees or students who may contract the virus; and the ability of our students to continue their education notwithstanding the pandemic.
The extent to which pandemics like the COVID-19 pandemic and future public health emergencies could affect our business, operations and financial results is uncertain and will depend on numerous factors that are impossible to predict, including: the duration and scope of the pandemic; the impact on economic activity from the pandemic and actions taken in response, including those of governmental entities; the impact of the pandemic and the government response thereto on our employees, students, and business partners, including any suspensions or terminations of employer tuition reimbursement programs; our ability to operate and provide our services with employees working remotely and/or closures of our campus locations; potential exposure to claims for liability arising out of employees or students who may contract the virus; and the ability of our students to continue their education notwithstanding the pandemic.
Integrating SEI and the recently acquired Torrens University and associated assets in Australia and New Zealand (“ANZ”) may be more difficult, costly or time consuming than expected, and the combined company may not realize all of the anticipated benefits of the acquisition.
Integrating SEI and Torrens University and associated assets in Australia and New Zealand (“ANZ”) may be more difficult, costly or time consuming than expected, and the combined company may not realize all of the anticipated benefits of the acquisition.
Miguel Cardona and the United States Department of Education , the Department joined a proposed class settlement agreement that would result in a blanket grant of automatic, presumptive relief for all Borrower Defense to Repayment applications filed by students at any of approximately 150 different listed institutions, including Capella University, through June 22, 2022.
Miguel Cardona and the United States Department of Education , the Department joined a proposed class settlement agreement that resulted in a blanket grant of automatic, presumptive relief for all Borrower Defense to Repayment applications filed by students at any of approximately 150 different listed institutions, including Capella University, through June 22, 2022.
If the Company is not able to achieve these objectives, the anticipated benefits of the acquisition of ANZ may not be realized fully or at all or may take longer to realize than expected. The goodwill and indefinite-lived intangible assets recorded in connection with the acquisitions of Capella Education Company (“CEC”) and ANZ could become impaired in the future.
If the Company is not able to achieve these objectives, the anticipated benefits of the acquisition of ANZ may not be realized fully or at all or may take longer to realize than expected. 56 Table of Contents The goodwill and indefinite-lived intangible assets recorded in connection with the acquisitions of Capella Education Company (“CEC”) and ANZ could become impaired in the future.
A change in ownership resulting in a change of control of Strayer University or Capella University (or of the Company) would trigger a requirement for recertification of the University (or the Universities) by the Department of Education for 51 Table of Contents purposes of participation in federal student financial aid programs, a review of the University’s accreditation by its institutional accrediting agency, and reauthorization of the University (or the Universities) by certain state licensing and other regulatory agencies.
A change in ownership resulting in a change of control of Capella University or Strayer University (or of the Company) would trigger a requirement for recertification of the University (or the Universities) by the Department of Education for purposes of participation in federal student financial aid programs, a review of the University’s accreditation by its institutional accrediting agency, and reauthorization of the University (or the Universities) by certain state licensing and other regulatory agencies.
If one of the Universities fails to demonstrate financial responsibility or maintain administrative capability under the Department of Education’s regulations, the University could lose its eligibility to participate in Title IV programs or have that eligibility adversely conditioned. Such developments could have a material adverse effect on our business.
If one of the Universities fails to demonstrate financial responsibility or maintain administrative capability under the Department of 47 Table of Contents Education’s regulations, the University could lose its eligibility to participate in Title IV programs or have that eligibility adversely conditioned. Such developments could have a material adverse effect on our business.
Instead of measuring student progress through the number of credit hours spent in the course, these direct assessment programs allow students to progress through courses by showing mastery over material through the completion of assessments, sometimes in less time than it would take to complete a course under a credit hour model.
Instead of measuring student progress through 50 Table of Contents the number of credit hours spent in the course, these direct assessment programs allow students to progress through courses by showing mastery over material through the completion of assessments, sometimes in less time than it would take to complete a course under a credit hour model.
Strayer University and Capella University are subject to compliance reviews, which, if they resulted in a material finding of noncompliance, could affect their ability to participate in Title IV programs.
Capella University and Strayer University are subject to compliance reviews, which, if they result in a material finding of noncompliance, could affect their ability to participate in Title IV programs.
For example, Section 504 of the Rehabilitation Act of 1973 (“Section 504”), prohibits discrimination against a person with a disability by any organization that receives federal financial assistance. The Americans with Disabilities Act (“ADA”) prohibits discrimination based on disability in several areas, including public accommodations.
For example, Section 504 of the Rehabilitation Act of 1973 (“Section 504”), prohibits discrimination against a person with a disability by any organization that receives federal financial assistance. The Americans 52 Table of Contents with Disabilities Act (“ADA”) prohibits discrimination based on disability in several areas, including public accommodations.
The Company had already discontinued its historical practice prior to the CFPB’s notice, and informed the CFPB that it completed the remedial actions in the allotted 30 days. On April 26, 2022, the CFPB informed the Company that it intended to conduct an announced education loan exam in June 2022. The examination started on June 13, 2022.
The Company had already discontinued its historical practice prior to the CFPB’s notice, and informed the CFPB that it completed the remedial actions in the allotted 30 days. On April 26, 2022, the CFPB informed the Company that it intended to conduct an announced education loan exam in June 2022.
As a result of such enforcement action, or as a result of new laws and regulations that require greater accessibility, 49 Table of Contents Strayer University or Capella University may have to modify its online classrooms and other uses of technology to satisfy applicable requirements at potentially substantial cost.
As a result of such enforcement action, or as a result of new laws and regulations that require greater accessibility, Capella University or Strayer University may have to modify its online classrooms and other uses of technology to satisfy applicable requirements at potentially substantial cost.
As a result, we may be required to expend significant resources to protect against the threat of these security breaches or disruptions to alleviate problems caused by these breaches or disruptions.
As a result, we may be required to expend significant resources to protect against the threat of these cybersecurity breaches or disruptions to alleviate problems caused by these breaches or disruptions.
In an effort to establish actual knowledge and create a pathway for penalties in the event of post-notice acts or practices, the FTC issued that 41 Table of Contents same day an informational notice to the 70 largest for-profit schools based on enrollment and revenues.
In an effort to establish actual knowledge and create a pathway for penalties in the event of post-notice acts or practices, the FTC issued that same day an informational notice to the 70 largest for-profit schools based on enrollment and revenues.
On November 29, 2022, the CFPB informed the Company that, within 90 days, it should remediate the finding for any impacted students, and it also identified areas for the Company to address to ensure regulatory compliance. The Company has taken remedial action and responded to the CFPB within the 90-day deadline.
On November 29, 2022, the CFPB informed the Company that, within 90 days, it should remediate the finding for any impacted students, and it also identified areas for the Company to address to ensure regulatory compliance. The Company took remedial action and responded to the CFPB within the 90-day deadline.
Such 48 Table of Contents actions could reduce demand for and/or availability of private education loans, decrease Strayer University’s or Capella University’s non-Title IV revenue, and thereby increase Strayer University’s or Capella University’s 90/10 ratio, and have a material adverse effect on our business.
Such actions could reduce demand for and/or availability of private education loans, decrease Capella University’s or Strayer University’s non-Title IV revenue, and thereby increase Capella University’s or Strayer University’s 90/10 ratio, and have a material adverse effect on our business.
A reduction in government funding levels could lead to lower enrollments at our schools and require us to arrange for alternative sources of financial aid for our students. Lower student enrollments or our inability to arrange such alternative sources of funding could adversely affect our business.
A reduction in government funding levels could lead to lower enrollments 44 Table of Contents at our schools and require us to arrange for alternative sources of financial aid for our students. Lower student enrollments or our inability to arrange such alternative sources of funding could adversely affect our business.
Possession and use of personal information in our operations also subjects us to various U.S. state and federal legislative and regulatory burdens that could, among other things, require notification of data breaches and restrict our use of personal information.
Possession and use of personal information in our operations also subjects us to various 55 Table of Contents U.S. state and federal legislative and regulatory burdens that could, among other things, require notification of data breaches and restrict our use of personal information.
Our financial performance depends in part on our ability to continue to increase awareness of the academic programs we offer among working adult students. Awareness of the academic programs we offer among working adult students in the U.S. is critical to the continued acceptance and growth of our programs.
Our financial performance depends in part on our ability to continue to increase awareness of the academic programs we offer among working adult students. 53 Table of Contents Awareness of the academic programs we offer among working adult students in the U.S. is critical to the continued acceptance and growth of our programs.
On 46 Table of Contents August 30, 2019, the Department released final Borrower Defense to Repayment regulations that included a new definition of “misrepresentation,” which became effective July 1, 2020.
On August 30, 2019, the Department released final Borrower Defense to Repayment regulations that included a new definition of “misrepresentation,” which became effective July 1, 2020.
Similarly, the loss of Capella University’s accreditation by the Higher Learning Commission or the 43 Table of Contents Higher Learning Commission’s loss of recognition by the Department of Education would render Capella University ineligible to participate in Title IV programs and would have a material adverse effect on our business.
The loss of Capella University’s accreditation by the Higher Learning Commission or the Higher Learning Commission’s loss of recognition by the Department of Education would render Capella University ineligible to participate in Title IV programs and would have a material adverse effect on our business.
While the Company disagrees with CFPB’s position as to its supervisory authority and disputes any alleged legal or regulatory violations, SEI is cooperating with CFPB’s inquiry and responded to CFPB as requested on April 25, 2022.
While the Company disagrees with CFPB’s position as to its supervisory authority and disputes any alleged legal or regulatory violations, the Company cooperated with CFPB’s inquiry and responded to CFPB as requested on April 25, 2022.
In recent years, the Department of Education’s Office of Civil Rights and third parties have brought enforcement actions against institutions related to website accessibility of online course material.
In recent years, the Department of Education’s OCR and third parties have brought enforcement actions against institutions related to website accessibility of online course material.
Our enrollment in 2023 will be affected by legislative uncertainty and regulatory activity in the U.S., and macroeconomic conditions globally, including those affected by the COVID-19 pandemic. It is likely that legislative, regulatory, and economic uncertainties will continue for the foreseeable future, and thus it is difficult to assess our long-term growth prospects.
Our enrollment in 2024 will be affected by legislative uncertainty and regulatory activity in the U.S., and macroeconomic conditions globally. It is likely that legislative, regulatory, and economic uncertainties will continue for the foreseeable future, and thus it is difficult to assess our long-term growth prospects.
The Higher Education Act is subject to periodic reauthorization. Congress completed the most recent reauthorization through multiple pieces of legislation and may reauthorize the HEA in a piecemeal manner in the future. Additionally, Congress determines the funding level for each Title IV program on an annual basis.
Congress completed the most recent reauthorization through multiple pieces of legislation and may reauthorize the HEA in a piecemeal manner in the future. Additionally, Congress determines the funding level for each Title IV program on an annual basis.
The transition to remote working involves many operational challenges and may adversely affect our ability to satisfy student needs. Remote working may increase the chance of successful cyber-attacks, including ransomware attacks and email phishing schemes targeting employees to give up their credentials.
The Company’s transition to remote and hybrid working involves many operational challenges and may adversely affect our ability to satisfy student needs. Remote working may also increase the chance of cybersecurity incidents, including ransomware attacks and email phishing schemes targeting employees to give up their credentials.
On October 4, 2022, OCR released a resource document for students and institutions in which it reinforced that current Title IX regulations prohibit discrimination based on pregnancy, childbirth, false pregnancy, termination of pregnancy or recovery therefrom.
On October 4, 2022, the Department of Education’s Office for Civil Rights released a resource document for students and institutions in which it reinforced that current Title IX regulations prohibit discrimination based on pregnancy, childbirth, false pregnancy, termination of pregnancy or recovery therefrom.
If Strayer University and/or Capella University lose eligibility to participate in Title IV programs because of high student loan default rates, the loss would have a material adverse effect on our business. Strayer University’s three-year cohort default rates for federal fiscal years 2017, 2018, and 2019 were 11.3%, 8.6%, and 2.2%, respectively.
If Capella University or Strayer University loses eligibility to participate in Title IV programs because of high student loan default rates, the loss would have a material adverse effect on our business. Capella University’s three-year cohort default rates for federal fiscal years 2018, 2019, and 2020 were 5.2%, 1.1%, and 0.0%, respectively.
If one of the Universities pays a bonus, commission, or other incentive payment in violation of applicable Department of Education rules or if the Department of Education or other third parties interpret a University’s compensation practices as noncompliant, the University could be subject to sanctions or other liability. Such penalties could have a material adverse effect on our business.
If one of the Universities pays a bonus, commission, or other incentive payment in violation of applicable Department of Education rules or if the Department of Education or other third parties interpret a University’s compensation practices as noncompliant, the University could be subject to sanctions or other liability.
Although we use security and business controls to limit access to and use of personal information, a third party may be able to circumvent those security and business controls, potentially resulting in a breach of student or employee privacy.
Some of this personal information is held and managed by certain vendors. Although we use security and business controls to limit access to and use of personal information, a third party may be able to circumvent those security and business controls, potentially resulting in a breach of student or employee privacy.
Historically, our quarterly revenues and income from U.S. operations have been lowest in the third quarter (July through September) because fewer students are enrolled during the summer months. ANZ’s quarterly revenues and income from operations have been lowest in the first quarter (January through March) because fewer students are enrolled during the summer season in Australia and New Zealand.
Historically, our quarterly revenues and income from U.S. operations have been lowest in the third quarter (July through September) because fewer students are enrolled during the summer months.
Additional challenges associated with the international conduct of the business that may materially adversely affect our operating results include: • each of our institutions is subject to unique regulatory schemes, business challenges, and competitive pressures; • difficulty maintaining quality standards consistent with our brands and with local accreditation standards; • fluctuations in exchange rates, possible currency devaluations, inflation and hyperinflation; • compliance with a variety of domestic and foreign laws and regulations; • political elections and changes in government policies; • potential economic, political, and geopolitical instability affecting the countries in which we and our vendors operate; and • limitations on the repatriation and investment of funds and foreign currency exchange restrictions. 52 Table of Contents The personal information that the Company collects may be vulnerable to breach, theft, or loss that could adversely affect our reputation and operations and is subject to privacy and data security laws which may impact operational efficiency.
Additional challenges associated with the international conduct of the business that may materially adversely affect our operating results include: • each of our institutions is subject to unique regulatory schemes, business challenges, and competitive pressures; • difficulty maintaining quality standards consistent with our brands and with local accreditation standards; • fluctuations in exchange rates, possible currency devaluations, inflation and hyperinflation; • compliance with a variety of domestic and foreign laws and regulations; • political elections and changes in government policies; • potential economic, political, and geopolitical instability affecting the countries in which we and our vendors operate; and • limitations on the repatriation and investment of funds and foreign currency exchange restrictions.
A number of legislators have variously requested the Government Accountability Office to review and make recommendations regarding, among other things, recruitment practices, educational quality, student outcomes, the sufficiency of integrity safeguards against waste, fraud, and abuse in Title IV programs, and the percentage of proprietary institutions’ revenue coming from Title IV and other federal funding sources. 42 Table of Contents This activity may result in legislation, further rulemaking affecting participation in Title IV programs, and other governmental actions.
A number of legislators have variously requested the Government Accountability Office to review and make recommendations regarding, among other things, recruitment practices, educational quality, student outcomes, the sufficiency of integrity safeguards against waste, fraud, and abuse in Title IV programs, and the percentage of proprietary institutions’ revenue coming from Title IV and other federal funding sources.
If refunds are not properly calculated or timely paid, the University may be required to post a letter of credit with the Department of Education or be subject to sanctions or other adverse actions by the Department of Education. Such consequences could have a material adverse effect on our business.
If refunds are not properly calculated or timely paid, the University may be required to post a letter of credit with the Department of Education or be subject to sanctions or other adverse actions by the Department of Education.
Such penalties could have a material adverse effect on our business. 47 Table of Contents The failure by Strayer University or Capella University to comply with the Clery Act or Title IX could result in sanctions and other liability.
Such penalties could have a material adverse effect on our business. 48 Table of Contents The failure by Capella University or Strayer University to comply with the Department of Education’s misrepresentation rules could result in sanctions and other liability.
Capella University’s three-year cohort default rates for federal fiscal years 2017, 2018, and 2019 were 6.5%, 5.2%, and 1.1%, respectively. The average official cohort default rates for proprietary institutions nationally were 14.7%, 11.2%, and 3.1% for federal fiscal years 2017, 2018, and 2019, respectively.
Strayer University’s three-year cohort default rates for federal fiscal years 2018, 2019, and 2020 were 8.6%, 2.2%, and 0.0%, respectively. The average official cohort default rates for proprietary institutions nationally were 11.2%, 3.1%, and 0.0% for federal fiscal years 2018, 2019, and 2020, respectively.
If the Department of Education determines that an institution is out of compliance with the credit hour definition or direct assessment requirements, the Department of Education could impose liabilities or other sanctions.
If the Department of Education determines that an institution is out of compliance with the credit hour definition or direct assessment requirements, the Department of Education could impose liabilities or other sanctions. Such penalties could have a material adverse effect on our business.
Fieldwork concluded on August 5, 2022. On September 12, 2022, the CFPB informed the Company of a preliminary finding related to a product that is no longer utilized, and invited the Company’s response. The Company timely responded to the CFPB’s letter, disagreeing with the preliminary finding and noting that the product to which it related is no longer utilized.
The examination started on June 13, 2022 and fieldwork concluded on August 5, 2022. On September 12, 2022, the CFPB informed the Company of a preliminary finding related to a product that is no longer utilized, and invited the Company’s response.
The Department has indicated that any recoupment against institutions “could be imposed only after the Department initiated a separate, future proceeding, in accordance with regulations that require the Department to prove a sufficient basis for liability and provide schools with notice and an opportunity to be heard.” If the Department seeks recovery for the amounts of discharged loans from Capella University in future proceedings, any such recovery could have a material adverse effect on our business.
The Department has indicated that any recoupment against institutions “could be imposed only after the Department initiated a separate, future proceeding, in accordance with regulations that require the Department to prove a sufficient basis for liability and provide schools with notice and an opportunity to be heard.” If the Department were to seek recovery for the amounts of automatically discharged loans of Capella University students under the Sweet settlement, Capella University would dispute and defend against such efforts.
The class settlement agreement would also provide certain expedited review of borrower defense claims related to schools excluded from the automatic relief list, as well as for borrowers who applied during the period after execution of the settlement and before final approval.
The class settlement agreement also provided certain expedited review of borrower defense claims related to schools excluded from the automatic relief list, as well as for borrowers regardless of which institution they attended who applied during the period after execution of the settlement and before final approval (i.e., from June 23, 2022 to November 15, 2022) (the “post-class applicants”).
Capella University derived approximately 67.06% of its cash-basis revenues from Title IV program funds in 2021. On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which amends the “90/10 Rule” to include “all federal education assistance” in the “90” side of the ratio calculation.
For fiscal year 2022, using the formula specified in the Higher Education Act, Strayer University derived approximately 80.57% of its cash-basis revenues from these programs. On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which amends the “90/10 Rule” to include “all federal education assistance” in the “90” side of the ratio calculation.
The following are some of the factors that could prevent us from successfully marketing our programs: • the emergence of more successful competitors; • customer dissatisfaction with our services and programs; • performance problems with our online systems; and • our failure to maintain or expand our brand or other factors related to our marketing. 50 Table of Contents Congressional and other governmental activities in the U.S. could damage the reputation of Strayer University or Capella University and limit our ability to attract and retain students.
The following are some of the factors that could prevent us from successfully marketing our programs: • the emergence of more successful competitors; • customer dissatisfaction with our services and programs; • performance problems with our online systems; and • our failure to maintain or expand our brand or other factors related to our marketing.
We are required to assess goodwill and indefinite-lived intangible assets for impairment at least annually. To the extent goodwill or indefinite-lived intangible assets become impaired, we may be required to incur material charges relating to such impairment.
We are required to assess goodwill and indefinite-lived intangible assets for impairment at least annually. To the extent goodwill or indefinite-lived intangible assets become impaired, we may be required to incur material charges relating to such impairment. Such a potential impairment charge could have a material impact on future operating results and statements of financial position of the Company.
Possession and use of personal information in our operations subject us to risks and costs that could harm our business. The Universities collect, use, and retain large amounts of personal information regarding their students and their families, including social security numbers, tax return information, personal and family financial data, and credit card numbers.
The Universities collect, use, and retain large amounts of personal information regarding their students and their families, including social security numbers, tax return information, personal and family financial data, and credit card numbers. We also collect and maintain personal information of our employees in the ordinary course of our business.
A proprietary institution of higher education that violates the 90/10 Rule for any fiscal year will be placed on provisional status for up to two fiscal years. Using the formula specified in the Higher Education Act, Strayer University derived approximately 82.95% of its cash-basis revenues from these programs in 2021.
A proprietary institution of higher education that violates the 90/10 Rule for any fiscal year will be placed on provisional status for up to two fiscal years. For fiscal year 2022, Capella University derived approximately 65.30% of its cash-basis revenues from Title IV program funds.
If an institution has not made these determinations, it must make a general disclosure to the public to that effect. An institution must also notify students within 14 days if it determines that a program does not meet a state’s requirements.
If an institution has not made these determinations, it must make a general disclosure to the public to that effect. The disclosure rules have been modified by U.S. Department of Education regulations effective July 1, 2024, as described below. An institution must also notify students within 14 days if it determines that a program does not meet a state’s requirements.
Institutions with a cohort default rate equal to or greater than 15% for any of the three most recent fiscal years for which data are available are subject to a 30-day delayed disbursement period for first-year, first-time borrowers. 45 Table of Contents In addition, an institution may lose its eligibility to participate in some or all Title IV programs if its default rate for a federal fiscal year was greater than 40%.
Institutions with a cohort default rate equal to or greater than 15% for any of the three most recent fiscal years for which data are available are subject to a 30-day delayed disbursement period for first-year, first-time borrowers.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn 2022, we reduced our leased and owned facility footprint by approximately 175,000 square feet, primarily due to lease terms expiring, by reducing the size of existing facilities at the time of lease renewal, or through the sale of owned campuses. The facilities that we own consist of approximately 40,000 square feet.
Biggest changeIn 2023, we reduced our leased and owned facility footprint by approximately 90,000 square feet, primarily due to lease terms expiring, by reducing the size of existing facilities at the time of lease renewal, or through the sale of owned campuses. The facility that we own consists of approximately 20,000 square feet.
For more information regarding our ongoing lease commitments, see Note 8, Leases, in the consolidated financial statements appearing in Part II, Item 8 of this report.
For more information regarding our ongoing lease commitments, see Note 7, Leases, in the consolidated financial statements appearing in Part II, Item 8 of this report.
New locations in the U.S. will continue to incorporate a new smaller cost-efficient design intended to service a student body that values a brick and mortar presence, even while taking an increasing number of their courses online. 54 Table of Contents Our leases generally range from three to fifteen years with one to two renewal options for extended terms.
Any new locations in the U.S. will continue to incorporate a smaller cost-efficient design intended to service a student body that values a brick and mortar presence, even while taking an increasing number of their courses online. 58 Table of Contents Our leases generally range from three to fifteen years with one to two renewal options for extended terms.
Item 2. Properties Except for two campus facilities which we own, our campus and administrative facilities are leased. The Company’s corporate headquarters is located at 2303 Dulles Station Blvd., Herndon, VA 20171. Our primary location in Minneapolis, also the headquarters for Capella University, is located at 225 South 6 th Street, Minneapolis, MN 55402.
Item 2. Properties Except for one campus facility which we own, our campus and administrative facilities are leased. The Company’s corporate headquarters is located at 2303 Dulles Station Blvd., Herndon, VA 20171. Our primary location in Minneapolis, also the headquarters for Capella University, is located at 225 South 6 th Street, Minneapolis, MN 55402.
As of December 31, 2022, the Company leased approximately 70 campus and administrative facilities in the United States consisting of approximately 0.8 million square feet.
As of December 31, 2023, the Company leased approximately 70 campus and administrative facilities in the United States consisting of approximately 0.8 million square feet.
We did not open any new campuses in the U.S. during 2022.
We did not open any new campuses in the U.S. during 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 22, Litigation, in the consolidated financial statements appearing in Part II, Item 8 of this report for additional information regarding our legal proceedings and related matters, which information is incorporated herein by reference.
Biggest changeSee Note 21, Litigation, in the consolidated financial statements appearing in Part II, Item 8 of this report for additional information regarding our legal proceedings and related matters, which information is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(ATGE), Bright Horizons Family Solutions, Inc. (BFAM), Chegg, Inc. (CHGG), Graham Holdings Company (GHC), Grand Canyon Education, Inc. (LOPE), Stride Inc. (formerly K12, Inc.) (LRN), Laureate Education, Inc. (LAUR), Pearson PLC (PSO), and Perdoceo Education Corporation (PRDO).
Biggest change(BFAM), Chegg, Inc. (CHGG), Graham Holdings Company (GHC), Grand Canyon Education, Inc. (LOPE), Stride Inc. (LRN), Laureate Education, Inc. (LAUR), Pearson PLC (PSO), Perdoceo Education Corporation (PRDO), and 2U, Inc. (TWOU). At present, there is no comparative index for the education industry.
Our Board of Directors amended the program on various dates, increasing the repurchase amount authorized and extending the expiration date, with the most recent extension being approved by our Board of Directors in November 2022. All of our share repurchases have been effected in compliance with Rule 10b-18 under the Exchange Act.
Our Board of Directors amended the program on various dates, increasing the repurchase amount authorized and extending the expiration date, with the most recent extension being approved by our Board of Directors in November 2023. All of our share repurchases have been effected in compliance with Rule 10b-18 under the Exchange Act.
Cumulative stockholder return assumes reinvestment of dividends and the peer group cumulative stockholder return is weighted by market capitalization at the beginning of each year. There were no sales by us of unregistered securities during the year ended December 31, 2022.
Cumulative stockholder return assumes reinvestment of dividends and the peer group cumulative stockholder return is weighted by market capitalization at the beginning of each year. There were no sales by us of unregistered securities during the year ended December 31, 2023.
In 2021 and 2022, our Board of Directors approved the following dividend payments per common shares: 2021 2022 First Quarter $0.60 $0.60 Second Quarter $0.60 $0.60 Third Quarter $0.60 $0.60 Fourth Quarter $0.60 $0.60 Whether to declare dividends and the amount of dividends to be paid in the future will be reviewed periodically by our Board of Directors in light of our earnings, cash flow, financial condition, capital needs, investment opportunities, and regulatory considerations.
In 2022 and 2023, our Board of Directors approved the following dividend payments per common share: 2022 2023 First Quarter $0.60 $0.60 Second Quarter $0.60 $0.60 Third Quarter $0.60 $0.60 Fourth Quarter $0.60 $0.60 Whether to declare dividends and the amount of dividends to be paid in the future will be reviewed periodically by our Board of Directors in light of our earnings, cash flow, financial condition, capital needs, investment opportunities, and regulatory considerations.
There is no requirement or assurance that common dividends will be paid in the future. Peer Group Performance Graph The following performance graph compares the cumulative stockholder return on our common stock since December 31, 2017 with The NASDAQ Stock Market (U.S.) Index and a self-determined peer group consisting of 2U, Inc. (TWOU), Adtalem Global Education, Inc.
There is no requirement or assurance that common dividends will be paid in the future. Peer Group Performance Graph The following performance graph compares the cumulative stockholder return on our common stock since December 31, 2018 with The NASDAQ Stock Market (U.S.) Index and a self-determined peer group consisting of Adtalem Global Education, Inc. (ATGE), Bright Horizons Family Solutions, Inc.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Select Market under the symbol “STRA.” As of January 27, 2023, there were 24,402,891 shares of common stock outstanding, and approximately 136 holders of record, which includes nominees or broker dealers holding stock on behalf of beneficial owners.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Select Market under the symbol “STRA.” As of January 26, 2024, there were 24,406,816 shares of common stock outstanding, and approximately 125 holders of record, which includes nominees or broker dealers holding stock on behalf of beneficial owners.
During the three months ended December 31, 2022, the Company paid $3.2 million to repurchase shares of common stock under its repurchase program. At December 31, 2022, the Company’s remaining authorization for common stock repurchases was $246.8 million, and is available for use through December 31, 2023.
During the three months ended December 31, 2023, the Company did not repurchase any shares of common stock under its repurchase program. At December 31, 2023, the Company’s remaining authorization for common stock repurchases was $240.0 million, and is available for use through December 31, 2024.
The NASDAQ Stock Market (U.S.) Index and a Peer Group 56 Table of Contents Name 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Strategic Education, Inc. 100 128 182 112 71 99 NASDAQ Stock Market (U.S.) 100 97 133 192 235 159 Peer Group 100 116 120 176 130 111 __________________________________________________________ * The comparison assumes $100 was invested on December 31, 2017 in our common stock, the NASDAQ Stock Market (U.S.) Index, and the peer companies selected by us.
The NASDAQ Stock Market (U.S.) Index and a Peer Group 60 Table of Contents Name 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Strategic Education, Inc. 100 142 87 55 77 93 NASDAQ Stock Market (U.S.) 100 137 198 242 163 236 Peer Group 100 98 132 99 89 116 __________________________________________________________ * The comparison assumes $100 was invested on December 31, 2018 in our common stock, the NASDAQ Stock Market (U.S.) Index, and the peer companies selected by us.
Removed
The peer group no longer includes Houghton Mifflin Harcourt Company, which was acquired in April 2022, and Zovio Inc., which has dissolved and delisted its securities in December 2022. At present, there is no comparative index for the education industry.
Removed
A summary of the Company’s share repurchases during the three months ended December 31, 2022 is set forth below: Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs ($ mil) Beginning Balance (at 09/30/22) $ 213.1 October — $ — — 213.1 November 40,315 79.36 40,315 246.8 December — — — 246.8 Total (at 12/31/22) 40,315 $ 79.36 40,315 $ 246.8 _____________________________________ (1) The Company’s repurchase program was announced on November 3, 2003 for repurchases up to an aggregate amount of $15 million in value of common stock through December 31, 2004.
Removed
The Board of Directors amended the program on various dates increasing the amount authorized and extending the authorization date. On November 2, 2022, the Board of Directors increased the amount authorized to $250.0 million for use through December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+15 added−20 removed49 unchanged
Biggest changeThe tables below reconcile our reported results of operations to adjusted results (amounts in thousands, except per share data): Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2022 (in thousands, except per share data) Non-GAAP Adjustments As Reported (GAAP) Purchase accounting adjustments (1) Merger and integration costs (2) Restructuring costs (3) Income from other investments (4) Tax adjustments (5) As Adjusted (Non-GAAP) Revenues $ 1,065,480 $ — $ — $ — $ — $ — $ 1,065,480 Total costs and expenses $ 994,720 $ (14,350) $ (1,117) $ (2,115) $ — $ — $ 977,138 Income from operations $ 70,760 $ 14,350 $ 1,117 $ 2,115 $ — $ — $ 88,342 Operating margin 6.6% 8.3% Income before income taxes $ 69,569 $ 14,350 $ 1,117 $ 2,115 $ (579) $ — $ 86,572 Net income $ 46,670 $ 14,350 $ 1,117 $ 2,115 $ (579) $ (3,419) $ 60,254 Diluted earnings per share $ 1.94 $ 2.51 Weighted average diluted shares outstanding 23,998 23,998 Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2021 (in thousands, except per share data) Non-GAAP Adjustments As Reported (GAAP) Purchase accounting adjustments (1) Merger and integration costs (2) Restructuring costs (3) Income from other investments (4) Tax adjustments (5) As Adjusted (Non-GAAP) Revenues $ 1,131,686 $ 3,646 $ — $ — $ — $ — $ 1,135,332 Total costs and expenses $ 1,057,774 $ (51,495) $ (11,201) $ (25,472) $ — $ — $ 969,606 Income from operations $ 73,912 $ 55,141 $ 11,201 $ 25,472 $ — $ — $ 165,726 Operating margin 6.5% 14.6% Income before income taxes $ 76,599 $ 55,141 $ 11,201 $ 25,472 $ (5,300) $ — $ 163,113 Net income $ 55,087 $ 55,141 $ 11,201 $ 25,472 $ (5,300) $ (24,975) $ 116,626 Diluted earnings per share $ 2.28 $ 4.83 Weighted average diluted shares outstanding 24,122 24,122 65 Table of Contents Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2020 (in thousands, except per share data) Non-GAAP Adjustments As Reported (GAAP) Purchase accounting adjustments (1) Merger and integration costs (2) Restructuring costs (3) Income from other investments (4) Tax adjustments (5) As Adjusted (Non-GAAP) Revenues $ 1,027,653 $ 11,296 $ — $ — $ — $ — $ 1,038,949 Total costs and expenses $ 918,269 $ (64,225) $ (13,770) $ (12,382) $ — $ — $ 827,892 Income from operations $ 109,384 $ 75,521 $ 13,770 $ 12,382 $ — $ — $ 211,057 Operating margin 10.6% 20.3% Income before income taxes $ 113,957 $ 75,521 $ 13,770 $ 12,382 $ (2,094) $ — $ 213,536 Net income $ 86,268 $ 75,521 $ 13,770 $ 12,382 $ (2,094) $ (33,141) $ 152,706 Diluted earnings per share $ 3.77 $ 6.68 Weighted average diluted shares outstanding 22,860 22,860 __________________________________________________________________________________________ (1) Reflects a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.
Biggest changeThe tables below reconcile our reported results of operations to adjusted results (amounts in thousands, except per share data): Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2023 (in thousands, except per share data) Non-GAAP Adjustments As Reported (GAAP) Purchase accounting adjustments (1) Merger and integration costs (2) Restructuring costs (3) Income from other investments (4) Tax adjustments (5) As Adjusted (Non-GAAP) Revenues $ 1,132,924 $ — $ — $ — $ — $ — $ 1,132,924 Total costs and expenses $ 1,037,603 $ (11,457) $ (1,544) $ (16,256) $ — $ — $ 1,008,346 Income from operations $ 95,321 $ 11,457 $ 1,544 $ 16,256 $ — $ — $ 124,578 Operating margin 8.4% 11.0% Income before income taxes $ 100,726 $ 11,457 $ 1,544 $ 16,256 $ (2,718) $ — $ 127,265 Net income $ 69,791 $ 11,457 $ 1,544 $ 16,256 $ (2,718) $ (7,245) $ 89,085 Diluted earnings per share $ 2.91 $ 3.72 Weighted average diluted shares outstanding 23,956 23,956 68 Table of Contents Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2022 (in thousands, except per share data) Non-GAAP Adjustments As Reported (GAAP) Purchase accounting adjustments (1) Merger and integration costs (2) Restructuring costs (3) Income from other investments (4) Tax adjustments (5) As Adjusted (Non-GAAP) Revenues $ 1,065,480 $ — $ — $ — $ — $ — $ 1,065,480 Total costs and expenses $ 994,720 $ (14,350) $ (1,117) $ (2,115) $ — $ — $ 977,138 Income from operations $ 70,760 $ 14,350 $ 1,117 $ 2,115 $ — $ — $ 88,342 Operating margin 6.6% 8.3% Income before income taxes $ 69,569 $ 14,350 $ 1,117 $ 2,115 $ (579) $ — $ 86,572 Net income $ 46,670 $ 14,350 $ 1,117 $ 2,115 $ (579) $ (3,419) $ 60,254 Diluted earnings per share $ 1.94 $ 2.51 Weighted average diluted shares outstanding 23,998 23,998 Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2021 (in thousands, except per share data) Non-GAAP Adjustments As Reported (GAAP) Purchase accounting adjustments (1) Merger and integration costs (2) Restructuring costs (3) Income from other investments (4) Tax adjustments (5) As Adjusted (Non-GAAP) Revenues $ 1,131,686 $ 3,646 $ — $ — $ — $ — $ 1,135,332 Total costs and expenses $ 1,057,774 $ (51,495) $ (11,201) $ (25,472) $ — $ — $ 969,606 Income from operations $ 73,912 $ 55,141 $ 11,201 $ 25,472 $ — $ — $ 165,726 Operating margin 6.5% 14.6% Income before income taxes $ 76,599 $ 55,141 $ 11,201 $ 25,472 $ (5,300) $ — $ 163,113 Net income $ 55,087 $ 55,141 $ 11,201 $ 25,472 $ (5,300) $ (24,975) $ 116,626 Diluted earnings per share $ 2.28 $ 4.83 Weighted average diluted shares outstanding 24,122 24,122 __________________________________________________________________________________________ (1) Reflects a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.
We operate primarily through our wholly-owned subsidiaries Strayer University and Capella University, both accredited post-secondary institutions of higher education located in the United States, and Torrens University, an accredited post-secondary institution of higher education located in Australia.
We operate primarily through our wholly-owned subsidiaries, Capella University and Strayer University, both accredited post-secondary institutions of higher education located in the United States, and Torrens University, an accredited post-secondary institution of higher education located in Australia.
USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are units of Strayer University. • Strayer University is accredited by the Middle States Commission on Higher Education and Capella University is accredited by the Higher Learning Commission, both higher education institutional accrediting agencies recognized by the Department of Education.
USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are units of Strayer University. • Capella University is accredited by the Higher Learning Commission and Strayer University is accredited by the Middle States Commission on Higher Education, both higher education institutional accrediting agencies recognized by the Department of Education.
Revenue recognition — Strayer University and Capella University offer educational programs primarily on a quarter system having four academic terms, which generally coincide with our quarterly financial reporting periods. Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within the calendar year.
Revenue recognition — Capella University and Strayer University offer educational programs primarily on a quarter system having four academic terms, which generally coincide with our quarterly financial reporting periods. Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within the calendar year.
Students at Strayer University and Capella University finance their education in a variety of ways, and historically about 75% of our students have participated in one or more financial aid program provided through Title IV of the Higher Education Act.
Students at Capella University and Strayer University finance their education in a variety of ways, and historically about 75% of our students have participated in one or more financial aid program provided through Title IV of the Higher Education Act.
Australia/New Zealand Segment • Torrens University is the only investor-funded university in Australia. Torrens University offers undergraduate, graduate, higher degree by research, and specialized degree courses primarily in five fields of study: business, design and creative technology, health, hospitality, and education. Courses are offered both online and at physical campuses.
Australia/New Zealand (“ANZ”) Segment • Torrens University is the only investor-funded university in Australia. Torrens University offers undergraduate, graduate, higher degree by research, and specialized degree courses primarily in five fields of study: business, design and creative technology, health, hospitality, and education. Courses are offered both online and at physical campuses.
Students at Strayer University registering in credit-bearing courses in any undergraduate or graduate program qualify for the Graduation Fund, whereby qualifying students earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program.
Students at Strayer University registering in credit-bearing courses in any undergraduate program qualify for the Graduation Fund, whereby qualifying students earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program.
Consolidated instructional and support costs decreased to $597.3 million in 2022 compared to $608.3 million in 2021, principally due to lower facility costs and bad debt expenses. Consolidated instructional and support costs as a percentage of revenues increased to 56.1% in 2022, from 53.7% in 2021. General and administration expenses.
Consolidated instructional and support costs decreased to $597.3 million in 2022 compared to $608.3 million in 2021, principally due to lower facility costs and bad debt expense. Consolidated instructional and support costs as a percentage of revenues increased to 56.1% in 2022 from 53.7% in 2021. General and administration expenses.
The Amended Credit Facility provides us with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase 66 Table of Contents the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in an amount up to the sum of (x) the greater of (A) $300 million and (B) 100% of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00.
The Amended Credit Facility provides us with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in an amount up to the sum of (x) the greater of (A) $300 million and (B) 100% of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00.
Australia/New Zealand segment income from operations decreased 15.0% to $30.5 million in 2022 compared to $35.9 million in 2021, primarily due to lower revenues and unfavorable foreign currency impacts.
Australia/New Zealand segment income from operations decreased 15.0% to $30.5 million in 2022 compared to $35.9 million in 2021, primarily due to lower revenues and unfavorable foreign currency exchange impacts.
Approximately 96% of our revenues during the year ended December 31, 2022 consisted of tuition revenue. Capella University offers monthly start options for new students, who then transition to a quarterly schedule. Capella University also offers its FlexPath program, which allows students to determine their 12-week billing session schedule after they complete their first course.
Approximately 96% of our revenues during the year ended December 31, 2023 consisted of tuition revenue. Capella University offers monthly start options for new students, who then transition to a quarterly schedule. Capella University also offers its FlexPath program, which allows students to determine their 12-week billing session schedule after they complete their first course.
In the Australia/New Zealand segment for the year ended December 31, 2022, total average enrollment increased to 19,388 from 19,350 in the prior year. Australia/New Zealand segment revenues decreased 7.7% to $230.7 million compared to $250.1 million in 2021, primarily due to unfavorable foreign exchange impacts and lower revenue-per-student.
In the Australia/New Zealand segment for the year ended December 31, 2022, average total student enrollment increased to 19,388 from 19,350 in 2021. Australia/New Zealand segment revenues decreased 7.7% to $230.7 million in 2022 compared to $250.1 million in 2021, primarily due to unfavorable foreign currency exchange impacts and lower revenue per student.
In the USHE segment for the year ended December 31, 2022, total average enrollment decreased 6.5% to 77,027 from 82,425 in the prior year. USHE segment revenues decreased 7.0% to $771.0 million compared to $829.3 million in 2021 primarily as a result of declines in enrollment.
In the USHE segment for the year ended December 31, 2022, average total student enrollment decreased 6.5% to 77,027 from 82,425 in 2021. USHE segment revenues decreased 7.0% to $771.0 million in 2022 compared to $829.3 million in 2021, primarily as a result of declines in enrollment.
To illustrate currency impacts to operating results, Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the year ended December 31, 2022 are also presented on a constant currency basis.
To illustrate currency impacts to operating results, Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the year ended December 31, 2023 are also presented on a constant currency basis.
Think Education delivers education at several campuses in Sydney, Melbourne, Brisbane, and Adelaide as well as through online study.
Think Education delivers education services at several campuses in Sydney, Melbourne, Brisbane, and Adelaide as well as through online study.
The employer relationships developed by the Education Technology Services division are an important source of student enrollment for Strayer University and Capella University, and the majority of the revenue attributed to the Education Technology Services division is driven by the volume of enrollment derived from these employer relationships.
The employer relationships developed by the Education Technology Services segment are an important source of student enrollment for Capella University and Strayer University, and the majority of the revenue attributed to the Education Technology Services segment is driven by the volume of enrollment derived from these employer relationships.
Based on the qualitative and quantitative impairment assessments performed, we concluded that no goodwill or indefinite-lived intangible asset impairments had been incurred during the years ended December 31, 2021 or 2022.
Based on the qualitative and quantitative impairment assessments performed, we concluded that no goodwill or indefinite-lived intangible asset impairments had been incurred during the years ended December 31, 2022 or 2023.
Therefore, we monitor outstanding tuition receivable balances through subsequent terms, increasing the reserve on such balances over time as the likelihood of returning to the institution diminishes and our historical experience indicates collection is less likely. We periodically assess our methodologies for estimating credit losses in consideration of actual experience.
Therefore, we monitor outstanding tuition receivable balances through subsequent terms, increasing the reserve on such balances over time as the likelihood of returning to the institution diminishes and our historical experience indicates collection is less likely. We periodically assess our methodologies for estimating credit losses in consideration of actual 64 Table of Contents experience.
Students must meet all of Strayer University’s admission requirements and not be eligible for any previously offered scholarship program. To maintain eligibility, students must be enrolled in a bachelor’s or master’s degree program.
Students must meet all of Strayer University’s admission requirements and not be eligible for any previously offered scholarship program. To maintain eligibility, students must be enrolled in a bachelor’s degree program.
Management regularly reviews its estimates and judgments for reasonableness and may modify them in the future. Actual results may differ from these estimates under different assumptions or conditions. 59 Table of Contents Management believes that the following critical accounting policies are its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Management regularly reviews its estimates and judgments for reasonableness and may modify them in the future. Actual results may differ from these estimates under different assumptions or conditions. Management believes that the following critical accounting policies are its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to LIBOR or a base rate, plus a margin ranging from 1.50% to 2.00%, depending on our leverage ratio. An unused commitment fee ranging from 0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused amounts.
Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to Term SOFR or a base rate, plus a margin ranging from 1.50% to 2.00%, depending on our leverage ratio. An unused commitment fee ranging from 0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused amounts.
The amount of government funding provided is based on a course-by-course forecast of enrollments that the 60 Table of Contents institution submits for the upcoming calendar year. Using the enrollment forecast provided as well as the requesting institution’s historical enrollment trends, the government approves a fixed amount, which is then funded to the institution evenly on a monthly basis.
The amount of government funding provided is based on a course-by-course forecast of enrollments that the institution submits for the upcoming calendar year. Using the enrollment forecast provided as well as the requesting institution’s historical enrollment trends, the government approves a fixed amount, which is then funded to the institution evenly on a monthly basis.
Consolidated general and administration expenses increased to $379.8 million in 2022 compared to $361.3 million in 2021, principally due to increased investments in branding initiatives and partnerships with 62 Table of Contents brand ambassadors. Consolidated general and administration expenses as a percentage of revenues increased to 35.6% in 2022 from 31.9% in 2021. Amortization of intangible assets.
Consolidated general and administration expenses increased to $379.8 million in 2022 compared to $361.3 million in 2021, principally due to increased investments in branding initiatives and partnerships with brand ambassadors. Consolidated general and administration expenses as a percentage of revenues increased to 35.6% in 2022 from 31.9% in 2021. Amortization of intangible assets .
If the financial condition of our students were to deteriorate based on current or expected future events resulting in evidence of impairment of their ability to make required payments for tuition payable to us, additional allowances or write-offs may be required. During 2022 and 2021, our bad debt expense was 3.9% and 3.8% of revenue, respectively.
If the financial condition of our students were to deteriorate based on current or expected future events resulting in evidence of impairment of their ability to make required payments for tuition payable to us, additional allowances or write-offs may be required. During 2023 and 2022, our bad debt expense was 4.3% and 3.9% of revenue, respectively.
We earned interest income of $3.8 million, $1.1 million, and $4.0 million in each of the years ended December 31, 2022, 2021, and 2020, respectively. We are party to a credit facility (“Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $350 million.
We earned interest income of $10.4 million, $3.8 million, and $1.1 million in each of the years ended December 31, 2023, 2022, and 2021, respectively. We are party to a credit facility (“Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $350 million.
All enrollments attributed to the Education Technology Services division continue to be attributed to the division until the student graduates or withdraws, even if his or her employment status changes or if the partnership contract expires. • In 2022, employer affiliated enrollment as a percentage of USHE enrollment was 24.4% compared to 21.0% in 2021. • Education Technology Services also supports employer partners through Workforce Edge, a platform which provides employers a full-service education benefits administration solution, and Sophia Learning, which enables education benefits programs through the use of low-cost online general education-level courses recommended by the American Council on Education for credit at other colleges and universities.
All enrollments attributed to the Education Technology Services segment continue to be attributed to the segment until the student graduates or withdraws, even if his or her employment status changes or if the partnership contract expires. • In 2023, employer affiliated enrollment as a percentage of USHE enrollment was 27.2% compared to 24.4% in 2022. • Education Technology Services also supports employer partners through Workforce Edge, a platform which provides employers a full-service education benefits administration solution, and Sophia Learning, which enables education benefits programs through the use of low-cost online general education-level courses recommended by the American Council on Education for credit at other colleges and universities.
To assess the indefinite-lived intangible assets, we used an income-based approach to determinate the fair value of the ANZ trade names, which consisted of a discounted cash flow model, using the relief from royalty method, that included a projection of future revenues for ANZ, identifying a royalty rate, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.
To assess the indefinite-lived intangible assets, we used an income-based approach to determinate the fair value of the Capella University trade name, which consisted of a discounted cash flow model, using the relief from royalty method, that included a projection of future revenues for Capella University, identifying a royalty rate, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.
As of December 31, 2022, our maximum estimated commitment fee is $0.7 million per annum related to the unused portion of our credit facility. Recently Issued Accounting Standards Refer to Note 2, Significant Accounting Policies, within the footnotes to the consolidated financial statements for recently issued accounting standards.
As of December 31, 2023, our maximum estimated commitment fee is $0.9 million per annum related to the unused portion of our credit facility. Recently Issued Accounting Standards Refer to Note 2, Significant Accounting Policies, within the footnotes to the consolidated financial statements for recently issued accounting standards.
Tuition revenue for all students is recognized ratably over the course of instruction as the universities provide academic services, whether delivered in person at a physical campus or online. Tuition revenue is shown net of any refunds, withdrawals, corporate discounts, scholarships, and employee tuition discounts.
Tuition revenue for all students is recognized ratably over the period of instruction as the universities provide academic services, whether delivered in person at a physical campus or online. Tuition revenue is shown net of any refunds, withdrawals, discounts, and scholarships.
Enrollments attributed to the Education Technology Services segment are determined based on a student’s employment status and the existence 58 Table of Contents of a corporate partnership arrangement with SEI.
Enrollments attributed to the Education Technology Services segment are determined based on a student’s employment status and the existence of a corporate partnership arrangement with SEI.
Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 (10.3) % (15.1) % (17.2) % (15.1) % (11.3) % (8.1) % (6.4) % (5.3) % Education Technology Services Segment • Our Education Technology Services segment is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs.
Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 (11.3) % (8.1) % (6.4) % (5.3) % (6.2) % (7.2) % (7.4) % (8.3) % Education Technology Services Segment • Our Education Technology Services segment is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs.
Estimated redemption rates of eligible students vary based on their term of enrollment. As of December 31, 2022, we had deferred $46.8 million for estimated redemptions earned under the Graduation Fund, as compared to $52.0 million at December 31, 2021. Each quarter, we assess our assumptions underlying our estimates for persistence and estimated redemptions based on actual experience.
Estimated redemption rates of eligible students vary based on their term of enrollment. As of December 31, 2023, we had deferred $44.5 million for estimated redemptions earned under the Graduation Fund, as compared to $46.8 million at December 31, 2022. Each quarter, we assess our assumptions underlying our estimates for persistence and estimated redemptions based on actual experience.
Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 86.7 % 86.5 % 87.0 % 86.9 % 86.8 % 87.1 % 87.3 % 87.7 % • Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 5.3% as of the end of the third quarter of 2022.
Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 86.8 % 87.1 % 87.3 % 87.7 % 87.4 % 87.4 % 87.3 % 87.4 % • Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 8.3% as of the end of the third quarter of 2023.
To assess goodwill, we used an income-based approach to determine the fair value of the ANZ reporting unit, which consisted of a discounted cash flow model that included projections of future cash flows for the ANZ reporting unit, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.
To assess goodwill, we used an income-based approach to determine the fair value of the Capella University and Strayer University reporting units, which consisted of a discounted cash flow model that included projections of future cash flows for the two reporting units, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.
Dollars, which was the average exchange rate for the same period in 2021. Liquidity and Capital Resources At December 31, 2022, we had cash, cash equivalents, and marketable securities of $235.9 million compared to $298.8 million at December 31, 2021.
Dollars, which was the average exchange rate for the same period in 2022. Liquidity and Capital Resources At December 31, 2023, we had cash, cash equivalents, and marketable securities of $208.7 million compared to $235.9 million at December 31, 2022.
These measures, which are considered “non-GAAP financial measures” under SEC rules, are defined by us to exclude the following: • purchase accounting adjustments to record acquired contract liabilities at fair value as a result of our acquisition of Torrens University and associated assets in Australia and New Zealand and to record amortization and depreciation expense related to intangible assets and software assets acquired through our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand; • transaction and integration expenses associated with our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand; • severance costs and right-of-use lease asset impairment charges associated with our restructuring; • income/loss from partnership and other investments that are not part of our core operations; and 64 Table of Contents • discrete tax adjustments related to stock-based compensation and other adjustments.
These measures, which are considered “non-GAAP financial measures” under SEC rules, are defined by us to exclude the following: • purchase accounting adjustments to record acquired contract liabilities at fair value as a result of our acquisition of Torrens University and associated assets in Australia and New Zealand and to record amortization and depreciation expense related to intangible assets and software assets acquired through our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand; • transaction and integration expenses associated with our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand; • severance costs, lease and fixed asset impairment charges, gains on sale of real estate and early termination of leased facilities, and other costs associated with our restructuring activities; • income/loss from partnership and other investments that are not part of our core operations; and • discrete tax adjustments related to stock-based compensation and other adjustments.
Background Strategic Education, Inc. (“SEI,” “we”, “us” or “our”) is an education services company that provides access to high-quality education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets.
Background Strategic Education, Inc. (“SEI,” “we,” “us,” “our,” or “the Company”) is an education services company that provides access to high-quality education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets.
In accordance with ASC 606, materials provided to students in connection with their enrollment in a course are recognized as revenue when control of those materials transfers to the student.
In accordance with Accounting Standards Codification (“ASC”) 606, Revenue Recognition , materials provided to students in connection with their enrollment in a course are recognized as revenue when control of those materials transfers to the student.
The increase in the effective tax rate in 2022 was primarily due to a $1.5 million tax shortfall recognized through share-based payment arrangements. Our effective tax rate, excluding these and other discrete tax adjustments, was 30.4% for 2022. Net income. Net income decreased to $46.7 million in 2022 compared to $55.1 million in 2021 due to the factors discussed above.
The increase in the effective tax rate in 2022 was primarily due to a $1.5 million tax shortfall recognized through share-based payment arrangements. Our effective tax rate, excluding these and other discrete tax adjustments, was 30.4% for 2022. Net income.
International students attending an ANZ institution are not eligible for funding from the Australian or New Zealand governments. A typical class is offered in weekly increments over a six- to twelve-week period, depending on the university and course type, and is followed by an exam. Student attendance is based on physical presence in class for on-ground classes.
International students attending an ANZ institution are not eligible for funding from the Australian or New Zealand governments. 63 Table of Contents A typical class is offered in weekly increments over a six- to twelve-week period, depending on the university and course type, and is followed by an exam.
The USHE segment provides academic offerings both online and in physical classrooms, helping working adult students develop specific competencies they can apply in their workplace. • In 2022, USHE average total enrollment decreased 6.5% to 77,027 students compared to 82,425 students in 2021. • Trailing 4-quarter student persistence within USHE was 87.7% in the third quarter of 2022 compared to 86.9% for the same period in 2021.
The USHE segment provides academic offerings both online and in physical classrooms, helping working adult students develop specific competencies they can apply in their workplace. 61 Table of Contents • In 2023, USHE average total student enrollment increased 6.8% to 82,267 compared to 77,027 in 2022. • Trailing 4-quarter student persistence within USHE was 87.4% in the third quarter of 2023 compared to 87.7% for the same period in 2022.
Non-GAAP Financial Measures In the accompanying analysis of financial information for the three years ended December 31, 2022, we use certain financial measures including Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share that are not required by or prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Net income decreased to $46.7 million in 2022 compared to $55.1 million in 2021 due to the factors discussed above. 67 Table of Contents Non-GAAP Financial Measures In the accompanying analysis of financial information for the three years ended December 31, 2023, we use certain financial measures including Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share that are not required by or prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
(2) Reflects transaction and integration expenses associated with the Company’s merger with Capella Education Company, including premerger litigation settlement, net of insurance recovery, and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand. (3) Reflects severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring.
(2) Reflects transaction and integration expenses associated with the Company’s merger with Capella Education Company, including premerger litigation settlement, net of insurance recovery, and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.
Segments Overview As of December 31, 2022, we had the follow three reportable segments: U.S. Higher Education ( “ USHE ” ) Segment • The USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Strayer University and Capella University, including the Jack Welch Management Institute MBA, which is a unit of Strayer University.
Higher Education ( “ USHE ” ) Segment • The USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Capella University and Strayer University, including the Jack Welch Management Institute MBA, which is a unit of Strayer University.
We were in compliance with all applicable covenants related to the Amended Credit Facility as of December 31, 2022. As of December 31, 2022 and 2021, we had $101.4 million and $141.6 million, respectively, outstanding under our Revolving Credit Facility. During the year ended December 31, 2022, we repaid $40.0 million of the outstanding balance under our Revolving Credit Facility.
We were in compliance with all applicable covenants related to the Amended Credit Facility as of December 31, 2023. As of December 31, 2023 and 2022, we had $61.4 million and $101.4 million, respectively, outstanding under our Revolving Credit Facility.
We maintain our cash and cash equivalents primarily in demand deposit bank accounts and money market funds at high credit quality financial institutions, which are included in cash and cash equivalents at December 31, 2022 and 2021. We also hold marketable securities, which primarily include tax-exempt municipal securities and corporate debt securities.
We maintain our cash and cash equivalents primarily in money market funds and demand deposit bank accounts at high credit quality financial institutions, which are included in cash and cash equivalents at December 31, 2023 and 2022.
Non-GAAP financial measures may be considered in addition to, but not as a substitute for or superior to, GAAP results. A reconciliation of these measures to the most directly comparable GAAP measures is provided below.
Non-GAAP financial measures may be considered in addition to, but not as a substitute for or superior to, GAAP results. A reconciliation of these measures to the most directly comparable GAAP measures is provided below. Adjusted income from operations was $124.6 million in 2023 compared to $88.3 million in 2022.
Due to the uncertainty with respect to the timing of future cash flows associated with the limited partnership investments, we are unable to make reasonably reliable estimates of the period in which such additional investments may take place. 67 Table of Contents Due to the uncertainty with respect to the timing of future borrowings associated with our credit facility, we are unable to make reasonably reliable estimates of any commitment fees charged on the unused portion of the credit facility.
Due to the uncertainty with respect to the timing of future cash flows associated with the limited partnership investments, we are unable to make reasonably reliable estimates of the period in which such additional investments may take place.
Adjusted net income was $60.3 million in 2022 compared to $116.6 million in 2021, and adjusted diluted earnings per share was $2.51 in 2022 compared to $4.83 in 2021.
Adjusted net income was $89.1 million in 2023 compared to $60.3 million in 2022, and adjusted diluted earnings per share was $3.72 in 2023 compared to $2.51 in 2022.
The table below sets forth our contractual cash commitments associated with lease liabilities as of December 31, 2022 (in thousands): Payments Due By Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Lease liabilities $ 183,829 $ 29,704 $ 54,444 $ 42,546 $ 57,135 As of December 31, 2022, we have a commitment to invest up to $2.7 million in our four limited partnership investments through 2031.
The table below sets forth our contractual cash commitments associated with lease liabilities as of December 31, 2023 (in thousands): Payments Due By Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Lease liabilities $ 175,948 $ 30,151 $ 55,967 $ 45,092 $ 44,738 As of December 31, 2023, we have a commitment to invest up to $2.4 million in our four limited partnership investments through 2031.
FlexPath students receive a 100% refund through the 12th calendar day of the course for their first billing session only and a 0% refund after that date and for all subsequent billing sessions. For domestic students attending an ANZ institution, refunds are typically provided to students that withdraw within the first 20% of a course term.
FlexPath students receive a 100% refund through the 12th calendar day of the course for their first billing session only and a 0% refund after that date and for all subsequent billing sessions.
In 2022, we performed a qualitative impairment assessment, consistent with ASC 350, 61 Table of Contents of goodwill assigned to all reporting units, except for goodwill assigned to the ANZ reporting unit, as well as for indefinite-lived intangible assets, except for the ANZ trade names, to evaluate the recoverability of the related amounts.
In 2023, we performed a qualitative impairment assessment, consistent with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), of goodwill assigned to all reporting units, except for goodwill assigned to the Capella University and Strayer University reporting units, as well as for indefinite-lived intangible assets, except for the Capella University trade name, to evaluate the recoverability of the related amounts.
No impairment charges related to finite-lived intangible assets were recorded during the years ended December 31, 2021 or 2022. Other estimates — We record estimates for certain of our accrued expenses and for income tax liabilities.
No impairment charges related to finite-lived intangible assets were recorded during the years ended December 31, 2022 or 2023. As of December 31, 2023, all finite-lived intangible assets related to student relationships were fully amortized. Other estimates — We record estimates for income tax liabilities and estimate the useful lives of our property and equipment and intangible assets.
Management identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management regularly reviews the operating results of those components. We had significant additions to goodwill and tradename intangible assets related to our acquisition of ANZ in 2020.
Management identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management regularly reviews the operating results of those components.
The decrease in net cash used in investing activities was primarily driven by a decrease in capital expenditures, partially offset by lower cash proceeds from marketable securities and from the sale of property and equipment in 2022.
The increase in net cash used in investing activities was primarily driven by $26.9 million in purchases of marketable securities and lower cash proceeds related to the sale of property and equipment, partially offset by higher cash proceeds from marketable securities and other investments and lower capital expenditures in 2023.
Media Design School is accredited in New Zealand by the New Zealand Qualifications Authority, the organization responsible for the quality assurance of non-university tertiary training providers. • In 2022, Australia/New Zealand enrollment increased to 19,388 compared to 19,350 for the same period in 2021.
Media 62 Table of Contents Design School is accredited in New Zealand by the New Zealand Qualifications Authority, the organization responsible for the quality assurance of non-university tertiary training providers. • In 2023, Australia/New Zealand average total student enrollment decreased 3.6% to 18,692 compared to 19,388 in 2022.
Our recurring cash requirements consist primarily of general operating expenses, capital expenditures, discretionary dividend payments, and contractual obligations related to our lease agreements, limited partnership investments, and Revolving Credit Facility.
As of December 31, 2023, we had $240.0 million remaining in share repurchase authorization to use through December 31, 2024. Our recurring cash requirements consist primarily of general operating expenses, capital expenditures, discretionary dividend payments, and contractual obligations related to our lease agreements, limited partnership investments, and Revolving Credit Facility.
For online classes, attendance consists of logging into one’s course shell and performing an academically-related activity (e.g., engaging in a discussion post or taking a quiz). If a student withdraws from a course prior to completion, a portion of the tuition may be refundable depending on when the withdrawal occurs.
Student attendance is based on physical presence in class for on-ground classes. For online classes, attendance consists of logging into one’s course shell and performing an academically-related activity (e.g., engaging in a discussion post or taking a quiz).
We estimate the useful lives of our property and equipment and intangible assets and periodically review our assumed forfeiture rates and ability to achieve performance targets for stock-based awards and adjust them as necessary.
We also periodically review our assumed forfeiture rates and ability to achieve performance targets for stock-based awards and adjust them as necessary. Should actual results differ from our estimates, revisions to the carrying amount of property and equipment and intangible assets, stock-based compensation expense, and income tax liabilities may be required.
Diluted earnings per share was $1.94 in 2022 compared to $2.28 in 2021. Year Ended December 31, 2022 Compared To Year Ended December 31, 2021 Revenues. Consolidated revenues decreased to $1,065.5 million in 2022, compared to $1,131.7 million in the same period in the prior year, primarily due to declines in enrollment and unfavorable foreign exchange impacts.
Net income increased to $69.8 million in 2023 compared to $46.7 million in 2022 due to the factors discussed above. Year Ended December 31, 2022 Compared To Year Ended December 31, 2021 Revenues. Consolidated revenues decreased to $1,065.5 million in 2022 compared to $1,131.7 million in 2021, primarily due to declines in enrollment and unfavorable foreign currency exchange impacts.
Consolidated instructional and support costs as a percentage of revenues increased to 53.7% in 2021, from 51.8% in 2020. General and administration expenses.
Consolidated instructional and support costs as a percentage of revenues decreased to 55.1% in 2023 from 56.1% in 2022. General and administration expenses.
A change in our allowance for credit losses of 1% of gross tuition receivable as of December 31, 2022 would have changed our income from operations by approximately $1.1 million.
A change in our allowance for credit losses of 1% of gross tuition receivable as of December 31, 2023 would have changed our income from operations by approximately $1.2 million. Goodwill and intangible assets — Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed.
We incurred $3.6 million of interest expense in 2021 compared to $1.4 million in 2020. Provision for income taxes. Income tax expense was $21.5 million in 2021 compared to $27.7 million in 2020. Our effective tax rate for 2021 was 28.1% compared to 24.3% in 2020.
We incurred $7.2 million of interest expense in 2023 compared to $5.7 million in 2022. Provision for income taxes. Income tax expense was $30.9 million in 2023 compared to $22.9 million in 2022. Our effective tax rate for 2023 was 30.7%, compared to 32.9% in 2022.
The qualitative factors considered included macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value. In 2022, in connection with the goodwill in our ANZ reporting unit as well as our ANZ indefinite-lived intangible assets, we performed a quantitative impairment assessment, consistent with ASC 350.
The qualitative factors considered included macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value.
During the year ended December 31, 2022, we paid $40.1 million to repurchase 612,104 common shares in the open market under our repurchase program, compared to $5.9 million in 2021. As of December 31, 2022, we had $246.8 million remaining in share repurchase authorization to use through December 31, 2023.
During the year ended December 31, 2023, we paid a total of $58.8 million in cash dividends on our common stock compared to $59.2 million in 2022. During the year ended December 31, 2023, we paid $10.0 million to repurchase shares of common stock in the open market under our repurchase program, compared to $40.1 million in 2022.
The decrease in net cash from operating activities was primarily driven by lower earnings in the USHE segment, partially offset by a decrease in cash used for working capital. Our net cash used in investing activities decreased in 2022 to $31.4 million, compared to $33.1 million in 2021.
Our net cash provided by operating activities decreased to $117.1 million in 2023 compared to $126.1 million in 2022. The decrease in net cash from operating activities was primarily driven by higher tax payments and an increase in cash used for working capital.
During the years ended December 31, 2022 and 2021, we paid $4.2 million and $2.7 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility. Our net cash provided by operating activities decreased in 2022 to $126.1 million, compared to $180.5 million in 2021.
During each of the years ended December 31, 2023 and 2022, we repaid $40.0 million of the outstanding balance under our Revolving Credit Facility. During each of the years ended December 31, 2023 and 2022, we paid $6.8 million and $4.2 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.
We use the student’s withdrawal date or last date of attendance for this purpose. Our specific refund policies vary across the universities and non-degree programs. For students attending Strayer University, our refund policy typically permits students who complete less than half of a course to receive a partial refund of tuition for that course.
If a student withdraws from a course prior to completion, a portion of the tuition may be refundable depending on when the withdrawal occurs. We use the student’s withdrawal date or last date of attendance for this purpose. Our specific refund policies vary across the universities and non-degree programs.
Capital expenditures decreased to $43.2 million for the year ended December 31, 2022, compared to $49.4 million in 2021, due to the timing of capital projects. Our net cash used in financing activities increased in 2022 to $142.4 million, compared to $67.9 million in 2021.
Capital expenditures decreased to $36.9 million in 2023 compared to $43.2 million in 2022, primarily due to a shift towards cloud computing investments and timing of capital projects. 70 Table of Contents Our net cash used in financing activities decreased to $113.6 million in 2023 compared to $142.4 million in 2022.
The table below presents our adjusted results of operations on a constant currency basis for the year ended December 31, 2022 (amounts in thousands, except per share data): As Adjusted (Non-GAAP) Constant currency adjustment (1) As Adjusted with Constant Currency (Non-GAAP) Revenues $ 1,065,480 $ 18,645 $ 1,084,125 Total costs and expenses $ 977,138 $ 15,816 $ 992,954 Income from operations $ 88,342 $ 2,829 $ 91,171 Operating margin 8.3% 8.4% Income before income taxes $ 86,572 $ 2,846 $ 89,418 Net income $ 60,254 $ 1,958 $ 62,212 Diluted earnings per share $ 2.51 $ 2.59 Weighted average diluted shares outstanding 23,998 23,998 __________________________________________________________________________________________ (1) Reflects an adjustment to translate foreign currency results for the year ended December 31, 2022 at a constant exchange rate of 0.75 Australian Dollars to U.S.
(5) Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted effective tax rate of 30.0%, 30.4%, and 28.5%, for 2023, 2022, and 2021, respectively. 69 Table of Contents The table below presents our adjusted results of operations on a constant currency basis for the year ended December 31, 2023 (amounts in thousands, except per share data): As Adjusted (Non-GAAP) Constant currency adjustment (1) As Adjusted with Constant Currency (Non-GAAP) Revenues $ 1,132,924 $ 10,937 $ 1,143,861 Total costs and expenses $ 1,008,346 $ 8,925 $ 1,017,271 Income from operations $ 124,578 $ 2,012 $ 126,590 Operating margin 11.0% 11.1% Income before income taxes $ 127,265 $ 2,106 $ 129,371 Net income $ 89,085 $ 1,475 $ 90,560 Diluted earnings per share $ 3.72 $ 3.78 Weighted average diluted shares outstanding 23,956 23,956 __________________________________________________________________________________________ (1) Reflects an adjustment to translate foreign currency results for the year ended December 31, 2023 at a constant exchange rate of 0.69 Australian Dollars to U.S.
Our operations emphasize relationships through our Education Technology Services segment with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs. 57 Table of Contents Acquisition of Torrens University and associated assets in Australia and New Zealand On November 3, 2020, we completed the acquisition of Torrens University and associated assets in Australia and New Zealand (“ANZ”), pursuant to the sale and purchase agreement dated July 29, 2020.
Our operations emphasize relationships through our Education Technology Services segment with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs. Segments Overview As of December 31, 2023, we had the following reportable segments: U.S.
Other income decreased to $2.7 million in 2021 compared to $4.6 million in 2020, as a result of an increase in interest expense related to our revolving credit facility which was used to partially fund the ANZ acquisition in November 2020, partially offset by higher investment income from our limited partnerships and other investments in 2021.
Other income (expense) increased to $5.4 million of income in 2023 compared to $1.2 million of expense in 2022, primarily due to an increase of $6.6 million in interest income and an increase of $1.8 million in investment income from our limited partnerships, partially offset by an increase in interest expense due to higher interest rates.
In the Education Technology Services segment, revenues for the year ended December 31, 2021 increased 38.7% to $52.3 million compared to $37.7 million in 2020 as a result of rapid growth in Sophia Learning and higher employer affiliated enrollment.
Education Technology Services segment revenues increased 26.2% to $80.5 million in 2023 compared to $63.8 million in 2022, primarily as a result of growth in Sophia Learning subscriptions and higher employer affiliated enrollment. Instructional and support costs.
Our income from operations decreased to $70.8 million in 2022 compared to $73.9 million in 2021, primarily due to lower earnings in the USHE segment, partially offset by lower amortization expense of intangible assets, restructuring costs, and merger and integration costs. Our net income in 2022 was $46.7 million compared to $55.1 million in 2021.
Our income from operations increased to $95.3 million in 2023 compared to $70.8 million in 2022, primarily due to higher revenue driven by student enrollment growth in the USHE segment and growth in Sophia Learning subscriptions in the Education Technology Services segment, and lower amortization expense of intangible assets, partially offset by higher restructuring costs, bad debt expense, and unfavorable foreign currency exchange impacts.
Income from operations. Consolidated income from operations decreased to $73.9 million in 2021 compared to $109.4 million in 2020, primarily due to lower earnings in the USHE segment and higher restructuring costs, partially offset by the inclusion of ANZ’s income from operations and lower amortization expense related to intangible assets.
Consolidated income from operations increased to $95.3 million in 2023 compared to $70.8 million in 2022, primarily due to higher revenue driven by student enrollment growth in the USHE segment and growth in Sophia Learning subscriptions in the Education Technology Services segment, and lower amortization expense of intangible assets, partially offset by higher restructuring costs, bad debt expense, and unfavorable foreign currency exchange impacts.
The increase in net cash used in financing activities was primarily driven by a $40.0 million long-term debt payment in 2022 and a $34.2 million increase in repurchases of common stock.
The decrease in net cash used in financing activities was primarily driven by a $30.1 million decrease in repurchases of common stock, partially offset by an increase in net payments for employee stock awards. The Board of Directors declared an annual cash dividend of $2.40 per common share, payable in equal parts quarterly.
In the USHE segment for the year ended December 31, 2021, total average enrollment decreased 11.0% to 82,425 from 92,637 in the prior year. USHE segment revenues decreased 14.2% to $829.3 million compared to $966.6 million in 2020 as a result of declines in enrollment and revenue-per-student due to higher scholarships and discounts.
In the USHE segment for the year ended December 31, 2023, average total student enrollment increased 6.8% to 82,267 from 77,027 in 2022. USHE segment revenues increased 6.2% to $819.0 million in 2023 compared to $771.0 million in 2022, primarily due to the increase in student enrollment.
Restructuring costs increased to $25.5 million in 2021 from $12.4 million in 2020, principally due to $21.6 million of right-of-use lease asset and fixed asset impairment charges associated with vacating leased space in 2021 based on an assessment of our real estate portfolio, partially offset by lower severance costs and a $2.7 million gain in 2021 from the sale of property and equipment of owned campuses that were closed in connection with the 2020 restructuring plan.
Restructuring costs increased to $16.3 million in 2023 from $2.1 million in 2022, principally due to an increase of $10.5 million in severance and other personnel-related expenses from employee terminations related to position eliminations during the year, a decrease of $1.9 million in gains related to the sale of real estate and early terminations of leased facilities, and an increase of $1.8 million in right-of use lease asset and fixed asset impairment charges associated with vacating leased space in 2023.
Education Technology Services segment income from operations increased 8.5% to $21.3 million in 2021, compared to $19.6 million in 2020 as a result of rapid growth in Sophia Learning, partially offset by increased investment in outreach to corporate partners.
Education Technology Services segment income from operations increased 51.0% to $29.1 million in 2023 compared to $19.3 million in 2022, primarily due to higher revenue as a result of growth in Sophia Learning subscriptions and an increase in employer affiliated enrollment. Other income (expense).
USHE segment income from operations decreased 45.8% to $104.9 million in 2021, compared to $193.4 million in 2020, primarily due to declines in enrollment and revenue-per-student due to higher scholarships and discounts.
USHE segment income from operations increased 54.5% to $59.6 million in 2023 compared to $38.6 million in 2022, primarily due to higher revenue from an increase in student enrollment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−2 removed2 unchanged
Biggest changeWe have not used derivative financial instruments in our investment portfolio. Earnings from investments in bank overnight deposits, money market mutual funds, and marketable securities may be adversely affected in the future should interest rates decline, although such a decline may reduce the interest rate payable on any borrowings under our Revolving Credit Facility.
Biggest changeWe have not used derivative financial instruments in our investment portfolio. Earnings from investments in money market mutual funds, bank overnight deposits, U.S. treasury bills, and marketable securities may be adversely affected in the future should interest rates decline, although such a decline may reduce the interest rate payable on any borrowings under our Revolving Credit Facility.
Borrowings under the Amended Credit Facility bear interest at LIBOR or a base rate, plus a margin ranging from 1.50% to 2.00% depending on our leverage ratio. An unused commitment fee ranging from 0.20% to 0.30%, depending on our leverage ratio, accrues on unused amounts under the Amended Credit Facility.
Borrowings under the Amended Credit Facility bear interest at Term SOFR or a base rate, plus a margin ranging from 1.50% to 2.00% depending on our leverage ratio. An unused commitment fee ranging from 0.20% to 0.30%, depending on our leverage ratio, accrues on unused amounts under the Amended Credit Facility.
As of December 31, 2022, a 1% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows related to investments in cash equivalents or interest earning marketable securities. At December 31, 2022, we had $101.4 million outstanding under our Amended Credit Facility.
As of December 31, 2023, a 1% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows related to investments in cash equivalents or interest earning marketable securities. At December 31, 2023, we had $61.4 million outstanding under our Amended Credit Facility.
We do not use foreign exchange contracts or derivatives to hedge any foreign currency exposures. 68 Table of Contents
We do not use foreign exchange contracts or derivatives to hedge any foreign currency exposures. 72 Table of Contents
For the year ended December 31, 2022, a hypothetical 10% adverse change in the average annual foreign currency exchange rates would have decreased our consolidated revenues by approximately $23.1 million. In addition, the effect of exchange rate changes on cash and cash equivalents in the year ended December 31, 2022 was a decrease of $4.1 million.
For the year ended December 31, 2023, a hypothetical 10% adverse change in the average annual foreign currency exchange rates would have decreased our consolidated revenues by approximately $23.4 million. In addition, the effect of exchange rate changes on cash and cash equivalents in the year ended December 31, 2023 was a decrease of $0.5 million.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We are subject to the impact of interest rate changes and may be subject to changes in the market values of our future investments. We invest our excess cash in bank overnight deposits, money market funds and marketable securities.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We are subject to the impact of interest rate changes and may be subject to changes in the market values of our future investments. We invest our excess cash in money market mutual funds, bank overnight deposits, U.S. treasury bills, and marketable securities.
Foreign Currency Risk The United States Dollar (“USD”) is our reporting currency. The functional currency of each of our foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business. Revenues denominated in currencies other than the USD accounted for 21.7% of our consolidated revenues for the year ended December 31, 2022.
Foreign Currency Risk The United States Dollar (“USD”) is our reporting currency. The functional currency of each of our foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business. Revenues denominated in currencies other than the USD accounted for 20.6% of our consolidated revenues for the year ended December 31, 2023.
An increase in LIBOR would affect interest expense on any outstanding balance of the Revolving Credit Facility. For every 100 basis points increase in LIBOR, we would incur an incremental $3.5 million in interest expense per year assuming the entire $350 million Revolving Credit Facility was utilized.
An increase in Term SOFR would affect interest expense on any 71 Table of Contents outstanding balance of the Revolving Credit Facility. For every 100 basis points increase in Term SOFR, we would incur an incremental $3.5 million in interest expense per year assuming the entire $350 million Revolving Credit Facility was utilized.
Removed
In March 2021, the administrator of LIBOR announced that the publication of certain LIBOR settings will cease after December 2021 and publication of the remainder of the LIBOR settings will cease after June 2023.
Removed
At December 31, 2022, we had no exposure to the discontinued LIBOR settings and had approximately $101.4 million of LIBOR-based debt outstanding on our Revolving Credit Facility. Our Revolving Credit Facility includes mechanisms for replacing the applicable reference rate, which we do not expect to be materially different from LIBOR.

Other STRA 10-K year-over-year comparisons