Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our consolidated financial statements and the notes thereto, the “Cautionary Notice Regarding Forward-Looking Statements,” Part I, Item 1A “Risk Factors,” and the other information appearing elsewhere, or incorporated by reference, in this Annual Report on Form 10-K.
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. 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
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States, and Torrens University, an accredited post-secondary institution of higher education located in Australia. Our operations also include the Education Technology Services segment, which primarily develops and maintains relationships with employers to build education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs, including through Workforce Edge, a full-service education benefits administration solution for employers, and Sophia Learning, which offers low-cost online general education-level courses.
Segments Overview
As of December 31, 2025, we had the following reportable segments:
U.S. 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 an offering Strayer University. USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are offerings 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. 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 2025, USHE average total student enrollment decreased 1.4% to 86,285 compared to 87,550 in 2024.
•Trailing 4-quarter student persistence within USHE was 88.3% in the third quarter of 2025 compared to 86.9% for the same period in 2024. Student persistence is calculated as the rate of students continuing from one quarter to the next, adjusted for graduates, on a trailing 4-quarter basis. Student persistence is reported one quarter in arrears. The table below summarizes USHE trailing 4-quarter student persistence for the past 8 quarters.
•Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased 9.6% as of the end of the third quarter of 2025. Government provided grants and loans per credit earned includes all federal loans and grants for students (Title IV hereafter) in our USHE institutions, and is calculated on a trailing 4-quarter basis and reported one quarter in arrears. Title IV per credit earned has been declining as employer affiliated enrollment has grown, and as more students earn credit through Sophia Learning and other affordable alternative pathways. The table below summarizes the percentage change in USHE trailing 4-quarter Title IV per credit earned for the past 8 quarters.
Education Technology Services (“ETS”) Segment
•Our ETS segment primarily develops and maintains relationships with employers to build education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs. The employer relationships developed by the ETS segment are an important source of student enrollment for Capella University and Strayer University, and a significant portion of the revenue attributed to the ETS segment is driven by the volume of enrollment derived from these employer relationships. Enrollments attributed to the ETS segment are determined based on a student’s employment status and the existence of a corporate partnership arrangement with SEI. All enrollments attributed to the ETS 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 2025, average employer affiliated enrollment as a percentage of USHE average total student enrollment was 32.3% compared to 29.6% in 2024.
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•ETS also supports employer partners through Workforce Edge, a platform which provides employers a full-service education benefits administration solution, and Sophia Learning, which offers low-cost online general education-level courses recommended by the American Council on Education for credit at other colleges and universities.
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. Torrens University is registered with the Tertiary Education Quality and Standards Agency (“TEQSA”), the regulator for higher education providers and universities throughout Australia, as an Australian University that is authorized to self-accredit its courses.
•Think Education is a vocational registered training organization and accredited higher education provider 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 the TEQSA and the Australian Skills Quality Authority, the regulator for vocational education and training organizations that operate in Australia.
•Media Design School at Strayer (“MDS”) is a private training establishment for creative and technology qualifications in New Zealand. MDS offers industry-endorsed courses in 3D animation and visual effects, game art, game programming, graphic and motion design, digital media, artificial intelligence, and creative advertising. MDS is accredited in New Zealand by the New Zealand Qualifications Authority (“NZQA”), the organization responsible for the quality assurance of non-university tertiary training providers. On September 8, 2025, MDS became a wholly owned subsidiary and international additional location of Strayer University and is included within Strayer University’s Middle States Commission on Higher Education accreditation. NZQA approved the transaction and MDS continues to operate as a New Zealand private tertiary institution. MDS continues to be part of our ANZ reportable segment.
•In 2025, Australia/New Zealand average total student enrollment decreased 1.8% to 19,232 compared to 19,585 in 2024.
We believe we have the right operating strategies in place to provide the most direct path between learning and employment for our students. We are constantly innovating to differentiate ourselves in our markets and drive growth by supporting student success, producing affordable degrees, optimizing our comprehensive marketing strategy, serving a broader set of our students’ professional needs, and establishing new growth platforms. The talent of our faculty and employees, supported by market leading technology, enable these strategies. We believe our strategy will allow us to continue to deliver high quality, affordable education, resulting in continued growth over the long-term. We will continue to invest in this strategy to strengthen the foundation and future of our business.
Critical Accounting Policies and Estimates
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and judgments related to its allowance for credit losses; income tax provisions; the useful lives of property and equipment; redemption rates for scholarship programs and valuation of contract liabilities; fair value of right-of-use lease assets for facilities that have been vacated; incremental borrowing rates; valuation of deferred tax assets, goodwill, and intangible assets; forfeiture rates and achievability of performance targets for stock-based compensation plans; and accrued expenses. Management bases its estimates and judgments on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily apparent from other sources. 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.
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Revenue recognition — Capella University and Strayer University offer educational programs primarily on a quarter system having four academic terms, which generally coincide with our quarterly financial reporting periods. Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within the calendar year. Approximately 94% of our revenues during the year ended December 31, 2025 consisted of tuition revenue. Capella University offers monthly start options for new students, who then transition to a quarterly schedule. Capella University also offers its FlexPath program, which allows students to determine their 12-week billing session schedule after they complete their first course. Tuition revenue for all students is recognized ratably over the period of instruction as the universities provide academic services, whether delivered in person at a physical campus or online. Tuition revenue is shown net of any refunds, withdrawals, discounts, and scholarships. The universities also derive revenue from other sources such as textbook-related income, certificate revenue, certain academic fees, licensing revenue, accommodation revenue, and food and beverage fees, which are all recognized when earned. In accordance with Accounting Standards Codification (“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. At the start of each academic term or program, a contract liability is recorded for academic services to be provided, and a tuition receivable is recorded for the portion of the tuition not paid in advance. Any cash received prior to the start of an academic term or program is recorded as a contract liability.
Students at Capella University and Strayer University finance their education in a variety of ways, and historically a majority of our students have participated in one or more financial aid programs provided through Title IV of the Higher Education Act. In addition, many of our working adult students finance their own education or receive full or partial tuition reimbursement from their employers. Those students who are veterans or active duty military personnel have access to various additional government-funded educational benefit programs.
In Australia, domestic students may finance their education themselves or by taking a loan through the national Higher Education Loan Program provided by the Australian government to support higher education. In New Zealand, domestic students may utilize government loans to fund tuition and may be eligible for a period of “fees free” study funded by the government. International students 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. 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. We use the student’s withdrawal date or last date of attendance for this purpose. Our specific refund policies vary across the universities and non-degree programs. For students attending Capella University, our refund policy varies based on course format. GuidedPath students are allowed a 100% refund through the first five days of the course, a 75% refund from six to twelve days, and 0% refund for the remainder of the period. FlexPath students receive a 100% refund through the 12th calendar day of the course for their first billing session only and a 0% refund after that date and for all subsequent billing sessions. For students attending Strayer University, our refund policy typically permits students who complete less than half of a course to receive a partial refund of tuition for that course. For domestic students attending an ANZ institution, refunds are typically provided to students that withdraw within the first 20% of a course term. For international students attending an ANZ institution, refunds are provided to students that withdraw prior to the course commencement date. In limited circumstances, refunds to students attending an ANZ institution may be granted after these cut-offs subject to an application for special consideration by the student and approval of that application by the institution. Refunds reduce the tuition revenue that otherwise would have been recognized for that student. Since the academic terms coincide with our financial reporting periods for most programs, nearly all refunds are processed and recorded in the same quarter as the corresponding revenue. For certain programs where courses may overlap a quarter-end date, we estimate a refund or withdrawal rate and do not recognize the related revenue until the uncertainty related to the refund is resolved. The portion of tuition revenue refundable to students may vary based on the student’s state of residence.
For U.S. students who receive funding under Title IV and withdraw, funds are subject to return provisions as defined by the Department of Education. The university is responsible for returning Title IV funds to the Department and then may seek payment from the withdrawn student of prorated tuition or other amounts charged to him or her. Loss of financial aid eligibility during an academic term is rare and would normally coincide with the student’s withdrawal from the institution. In Australia and New Zealand, government funding for eligible students is provided directly to the institution on an estimated basis annually. 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
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evenly on a monthly basis. Periodic reconciliation and true-ups are undertaken between the relevant government authority and the institution based on actual eligible enrollments, which may result in a net amount being due to or from the government.
Students at Strayer University registering in credit-bearing courses in any undergraduate program qualify for the Learn and Earn Scholarship (formerly known as the Graduation Fund), whereby qualifying students earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program. Students must meet all of Strayer University’s admission requirements and not be eligible for any previously offered scholarship program. To maintain eligibility, students must be enrolled in a bachelor’s degree program. Students who have more than one consecutive term of non-attendance lose any Learn and Earn Scholarship credits earned to date, but may earn and accumulate new credits if the student is reinstated or readmitted by Strayer University in the future. In their final academic year, qualifying students will receive one free course for every three courses that the student successfully completed in prior years. The Company defers the value of the related performance obligation associated with the free credits estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student toward earning the benefit. The estimated value of awards under the Learn and Earn Scholarship that will be recognized in the future is based on historical experience of students’ persistence in completing their course of study and earning a degree and the tuition rate in effect at the time it was associated with the transaction. Estimated redemption rates of eligible students vary based on their term of enrollment. As of December 31, 2025, we had deferred $38.1 million for estimated redemptions earned under the Learn and Earn Scholarship, as compared to $37.1 million at December 31, 2024. Each quarter, we assess our assumptions underlying our estimates for persistence and estimated redemptions based on actual experience. To date, any adjustments to our estimates have not been material. However, if actual persistence or redemption rates change, adjustments to the reserve may be necessary and could be material.
Tuition receivable — We record estimates for our allowance for credit losses related to tuition receivable from students primarily based on our historical collection rates by age of receivable and adjusted for reasonable expectations of future collection performance, net of recoveries. Our experience is that payment of outstanding balances is influenced by whether the student returns to the institution, as we require students to make payment arrangements for their outstanding balances prior to enrollment. Therefore, we monitor outstanding tuition receivable balances through subsequent terms, increasing the reserve on such balances over time as the likelihood of returning to the institution diminishes and our historical experience indicates collection is less likely. We periodically assess our methodologies for estimating credit losses in consideration of actual experience. If the financial condition of our students were to deteriorate based on current or expected future events resulting in evidence of impairment of their ability to make required payments for tuition payable to us, additional allowances or write-offs may be required. During 2025 and 2024, our bad debt expense was 4.2% and 4.4% of revenue, respectively. A change in our allowance for credit losses of 1% of gross tuition receivable as of December 31, 2025 would have changed our income from operations by approximately $1.3 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. Indefinite-lived intangible assets, which include trade names, are recorded at fair market value on their acquisition date. At the time of acquisition, goodwill and indefinite-lived intangible assets are allocated to reporting units. Management identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management regularly reviews the operating results of those components.
Goodwill and indefinite-lived intangible assets are assessed at least annually for impairment, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount. In 2025, we performed a qualitative impairment assessment, consistent with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), of goodwill and indefinite-lived intangible assets assigned to our reporting units to evaluate the recoverability of the related amounts. 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. Based on the qualitative impairment assessments performed, we concluded that no goodwill or indefinite-lived intangible asset impairments had been incurred during the year ended December 31, 2025.
In the second quarter of 2024, the Australian government introduced proposed legislation seeking to limit the number of international students enrolled at Australian institutions. Due to the potential adverse financial impacts of the proposed regulations, in 2024 we performed a quantitative impairment assessment for goodwill assigned to the ANZ reporting unit and for the ANZ indefinite-lived intangible assets as of October 1, 2024. We determined the fair value of the ANZ reporting unit and the ANZ trade name using an income-based approach, which consisted of a discounted cash flow model that included projections of future revenues and cash flows. Based on the results of our quantitative impairment assessment, we concluded that the fair value of the ANZ reporting unit exceeded carrying value by approximately 17% and the fair value of the ANZ indefinite-lived intangible assets exceeded carrying value by approximately 14%.
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For the fourth quarter of 2025, student enrollment within ANZ decreased 1.6% to 19,514 compared to 19,825 for the same period in 2024, largely due to constraints on international enrollment. Lower international enrollment was partially offset by growth in domestic enrollment, which is expected to be a larger driver of future growth. The year‐over‐year decline in the fourth quarter was also lower than the decreases experienced in the two prior quarters, reflecting an improvement in enrollment trends. In addition, we successfully enrolled up to the international student cap in 2025, and the cap is expected to increase in 2026. These factors, together with improved domestic enrollment trends, have reduced our concern about potential impairment compared to prior quarters. While regulatory constraints on international enrollments remain a factor, a sustained decline in international students without corresponding growth in domestic enrollment could increase the risk of impairment in future periods. As of December 31, 2025, the ANZ reporting unit had $510.3 million of goodwill and $64.6 million of indefinite-lived intangible assets. We believe the fair value of the ANZ reporting unit remains in excess of carrying value and that the fair value of the indefinite-lived intangible assets remains in excess of carrying value as of December 31, 2025. Management will continue to assess goodwill and indefinite-lived intangible assets for impairment in future quarters.
Finite-lived intangible assets that are acquired in business combinations are recorded at fair value on their acquisition dates and are amortized on a straight-line basis over the estimated useful life of the asset. We review our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets. Our finite-lived intangible assets consisted of student relationships, which were fully amortized by the end of 2023.
Other estimates — We record estimates for income tax liabilities and estimate the useful lives of our property and equipment and intangible assets. 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.
Results of Operations
In 2025, we generated $1,268.2 million in revenue compared to $1,219.9 million in 2024. Our income from operations increased to $174.2 million in 2025 compared to $155.6 million in 2024, primarily driven by higher revenue in our USHE and ETS segments, partially offset by higher operating expenses and restructuring costs. Our net income in 2025 was $126.6 million compared to $112.7 million in 2024, and diluted earnings per share was $5.41 in 2025 compared to $4.67 in 2024.
Year Ended December 31, 2025 Compared To Year Ended December 31, 2024
Revenues. Consolidated revenues increased to $1,268.2 million in 2025 compared to $1,219.9 million in 2024, primarily due to higher revenue in our ETS segment, which was driven by an increase in Workforce Edge revenue from employer partnerships and growth in Sophia Learning subscriptions, and higher revenue in our USHE segment due to higher revenue per student, partially offset by lower revenue in our ANZ segment primarily due to unfavorable foreign currency exchange impacts. In the USHE segment for the year ended December 31, 2025, average total student enrollment decreased 1.4% to 86,285 from 87,550 in 2024. USHE segment revenues increased 1.2% to $868.2 million in 2025 compared to $857.9 million in 2024, primarily due to higher revenue per student. In the ANZ segment for the year ended December 31, 2025, average total student enrollment decreased 1.8% to 19,232 from 19,585 in 2024. ANZ segment revenues decreased 2.2% to $251.6 million in 2025 compared to $257.1 million in 2024, primarily due to unfavorable foreign currency exchange impacts and a decrease in enrollment, partially offset by higher revenue per student. ETS segment revenues increased 41.4% to $148.4 million in 2025 compared to $104.9 million in 2024, primarily due to an increase in Workforce Edge revenue from employer partnerships, growth in Sophia Learning subscriptions, and higher employer affiliated enrollment.
Instructional and support costs. Consolidated instructional and support costs decreased to $647.1 million in 2025 compared to $650.5 million in 2024, principally due to lower facility expenses, personnel-related costs, student material costs, bad debt expense, and favorable foreign currency exchange impacts, partially offset by higher technology-related costs, depreciation expense, and stock-based compensation expense. Consolidated instructional and support costs as a percentage of revenues decreased to 51.0% in 2025 from 53.3% in 2024.
General and administration expenses. Consolidated general and administration expenses increased to $425.0 million in 2025 compared to $412.2 million in 2024, principally due to increased investments in branding initiatives and partnerships with brand ambassadors, higher personnel-related costs, and higher facility expenses, partially offset by lower stock-based compensation expense, depreciation expense, and favorable foreign currency exchange impacts. Consolidated general and administration expenses as a percentage of revenues decreased to 33.5% in 2025 from 33.8% in 2024.
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Restructuring costs. Restructuring costs increased to $21.9 million in 2025 from $1.6 million in 2024, primarily due to an $8.2 million increase in severance and other personnel-related expenses associated with the elimination of certain positions, a $6.3 million increase in asset impairment charges, a $5.8 million decrease in net benefits from the early termination of operating leases, and a $0.3 million loss from the sale of property and equipment of an owned campus in 2025.
Income from operations. Consolidated income from operations increased to $174.2 million in 2025 compared to $155.6 million in 2024, primarily driven by higher revenue in our USHE and ETS segments, partially offset by higher operating expenses and restructuring costs. USHE segment income from operations increased 32.0% to $101.9 million in 2025 compared to $77.2 million in 2024, primarily driven by higher revenue and lower personnel-related costs, student material costs, facility expenses, and stock-based compensation expense, partially offset by higher technology-related costs, and investments in branding initiatives. ANZ segment income from operations decreased 5.2% to $35.5 million in 2025 compared to $37.4 million in 2024, primarily driven by lower revenue and higher personnel-related costs, student material costs, and technology-related costs, partially offset by lower stock-based compensation expense. ETS segment income from operations increased 37.7% to $58.8 million in 2025 compared to $42.7 million in 2024, primarily due to higher revenue as a result of an increase in Workforce Edge revenue from employer partnerships, growth in Sophia Learning subscriptions, and higher employer affiliated enrollment, partially offset by higher personnel-related costs and increased investments in branding initiatives.
Other income. Other income decreased to $3.2 million in 2025 compared to $5.8 million in 2024, primarily due to a $4.3 million decrease in interest income and a $1.3 million increase in loss from our limited partnership investments, partially offset by a $2.8 million decrease in interest expense. We incurred $1.0 million of interest expense in 2025 compared to $3.8 million in 2024.
Provision for income taxes. Income tax expense was $50.8 million in 2025 compared to $48.7 million in 2024. Our effective tax rate for 2025 was 28.6%, compared to 30.2% in 2024. Income tax expense for the years ended December 31, 2025 and 2024 includes windfall tax benefits of approximately $0.4 million and shortfall tax impacts of approximately $1.2 million, respectively, related to share-based payment arrangements. Our effective tax rate, excluding these and other discrete tax adjustments, was 29.0% for 2025.
Net income. Net income increased to $126.6 million in 2025 compared to $112.7 million in 2024 due to the factors discussed above.
Year Ended December 31, 2024 Compared To Year Ended December 31, 2023
Revenues. Consolidated revenues increased to $1,219.9 million in 2024 compared to $1,132.9 million in 2023, primarily due to enrollment growth in the USHE and ANZ segments and growth in Sophia Learning subscriptions, partially offset by lower revenue per student in the USHE segment and unfavorable foreign currency exchange impacts. In the USHE segment for the year ended December 31, 2024, average total student enrollment increased 6.4% to 87,550 from 82,267 in 2023. USHE segment revenues increased 4.8% to $857.9 million in 2024 compared to $819.0 million in 2023, primarily due to the increase in student enrollment, partially offset by lower revenue per student. In the ANZ segment for the year ended December 31, 2024, average total student enrollment increased 4.8% to 19,585 from 18,692 in 2023. ANZ segment revenues increased 10.1% to $257.1 million in 2024 compared to $233.5 million in 2023, primarily due to the increase in enrollment and higher revenue per student as a result of students taking higher course loads, partially offset by unfavorable foreign currency exchange impacts. ETS segment revenues increased 30.4% to $104.9 million in 2024 compared to $80.5 million in 2023, primarily as a result of growth in Sophia Learning subscriptions, higher employer affiliated enrollment, and an increase in Workforce Edge revenue from new employer partnerships.
Instructional and support costs. Consolidated instructional and support costs increased to $650.5 million in 2024 compared to $623.9 million in 2023, principally due to increases in personnel-related costs, bad debt expense, technology-related expenses, and stock-based compensation expense, partially offset by lower student material costs and favorable foreign currency exchange impacts. Consolidated instructional and support costs as a percentage of revenues decreased to 53.3% in 2024 from 55.1% in 2023.
General and administration expenses. Consolidated general and administration expenses increased to $412.2 million in 2024 compared to $384.4 million in 2023, principally due to higher personnel-related costs, increased investments in branding initiatives and partnerships with brand ambassadors, and higher stock-based compensation expense, partially offset by favorable foreign currency exchange impacts. Consolidated general and administration expenses as a percentage of revenues decreased to 33.8% in 2024 from 33.9% in 2023.
Amortization of intangible assets. There was no amortization of intangible assets in 2024 compared to $11.5 million in 2023, due to the finite-lived intangible assets acquired through the acquisition of ANZ becoming fully amortized in the fourth quarter of 2023.
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Merger and integration costs. There were no merger and integration costs in 2024 compared to $1.5 million in 2023. These costs primarily related to integration expenses associated with the acquisition of ANZ.
Restructuring costs. Restructuring costs decreased to $1.6 million in 2024 from $16.3 million in 2023, primarily due to a $6.9 million decrease in severance and other personnel-related expenses from employee terminations, a $6.1 million increase in net gains related to the early termination of operating leases, and a $3.8 million decrease in asset impairment charges, partially offset by a $2.1 million gain from the sale of property and equipment of an owned campus in 2023.
Income from operations. Consolidated income from operations increased to $155.6 million in 2024 compared to $95.3 million in 2023, primarily due to higher revenue driven by enrollment growth in the USHE and ANZ segments and growth in Sophia Learning subscriptions in the ETS segment, lower restructuring costs, and lower amortization expense of intangible assets, partially offset by higher operating expenses. USHE segment income from operations increased 29.4% to $77.2 million in 2024 compared to $59.6 million in 2023, primarily driven by higher revenue due to an increase in student enrollment, decreased investments in branding initiatives, and lower student material costs, partially offset by higher personnel-related costs, bad debt expense, and technology-related expenses. ANZ segment income from operations increased 4.3% to $37.4 million in 2024 compared to $35.9 million in 2023, primarily driven by higher revenue due to an increase in enrollment and higher revenue per student as a result of students taking higher course loads, partially offset by increased investments in branding initiatives, higher personnel-related costs, and higher stock-based compensation expense. ETS segment income from operations increased 46.9% to $42.7 million in 2024 compared to $29.1 million in 2023, primarily due to higher revenue as a result of growth in Sophia Learning subscriptions, an increase in employer affiliated enrollment, and an increase in Workforce Edge revenue from new employer partnerships, partially offset by higher personnel-related costs.
Other income. Other income increased to $5.8 million in 2024 compared to $5.4 million in 2023, primarily due to a $3.4 million decrease in interest expense and a $2.1 million increase in interest income, partially offset by a $5.1 million decrease in investment income from our limited partnerships. We incurred $3.8 million of interest expense in 2024 compared to $7.2 million in 2023.
Provision for income taxes. Income tax expense was $48.7 million in 2024 compared to $30.9 million in 2023. Our effective tax rate for 2024 was 30.2%, compared to 30.7% in 2023. Income tax expense for the years ended December 31, 2024 and 2023 includes shortfall tax impacts related to share-based payment arrangements of approximately $1.2 million and $1.4 million, respectively. Our effective tax rate, excluding these and other discrete tax adjustments, was 29.0% for 2024.
Net income. Net income increased to $112.7 million in 2024 compared to $69.8 million in 2023 due to the factors discussed above.
Non-GAAP Financial Measures
We use certain financial measures including 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 GAAP. These measures, which are considered “non-GAAP financial measures” under SEC rules, are defined by us to exclude the following:
•amortization and depreciation expense related to intangible assets and software assets acquired through our acquisition of Torrens University and associated assets in Australia and New Zealand;
•integration expenses associated with our acquisition of Torrens University and associated assets in Australia and New Zealand;
•severance costs, asset impairment charges, gains/losses 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.
To illustrate currency impacts to operating results, Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings per Share for the year ended December 31, 2025 are also presented on a constant currency basis.
When considered together with GAAP financial results, we believe these measures provide management and investors with an additional understanding of our business and operating results, including underlying trends associated with our ongoing operations.
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Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with other similarly titled measures of other companies. 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 $196.1 million in 2025 compared to $157.3 million in 2024. Adjusted net income was $144.6 million in 2025 compared to $117.7 million in 2024, and adjusted diluted earnings per share was $6.18 in 2025 compared to $4.87 in 2024.
The tables below reconcile our reported results of operations to adjusted results:
Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2025 (in thousands, except per share data)
Non-GAAP Adjustments
Diluted earnings per share $ 5.41 $ 6.18
Weighted average diluted shares outstanding 23,402 23,402
Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2024 (in thousands, except per share data)
Non-GAAP Adjustments
Diluted earnings per share $ 4.67 $ 4.87
Weighted average diluted shares outstanding 24,140 24,140
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Reconciliation of Reported to Adjusted Results of Operations for the year ended December 31, 2023 (in thousands, except per share data)
Non-GAAP Adjustments
Operating margin 8.4% 11.0%
Diluted earnings per share $ 2.91 $ 3.72
Weighted average diluted shares outstanding 23,956 23,956
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(1)Reflects amortization and depreciation expense of intangible assets and software assets acquired through the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.
(2)Reflects integration expenses associated with the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.
(3)Reflects severance costs, asset impairment charges, gains/losses on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities.
(4)Reflects income/loss recognized from the Company’s investments in partnership interests and other investments.
(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 29.0%, 29.0%, and 30.0%, for 2025, 2024, and 2023, respectively.
The table below presents our adjusted results of operations on a constant currency basis for the year ended December 31, 2025 (amounts in thousands, except per share data):
Diluted earnings per share $ 5.41 $ 6.21
Weighted average diluted shares outstanding 23,402 23,402
__________________________________________________________________________________________
(1)Reflects non-GAAP adjustments related to restructuring costs, income/loss from other investments, and tax adjustments as described further in the Reconciliation of Reported to Adjusted Results of Operations tables above.
(2)Reflects an adjustment to translate foreign currency after the non-GAAP adjustments for the year ended December 31, 2025 at a constant exchange rate of 0.66 Australian Dollars to U.S. Dollars, which was the average exchange rate for the same period in 2024.
Liquidity and Capital Resources
At December 31, 2025, we had cash, cash equivalents, and marketable securities of $153.1 million compared to $199.0 million at December 31, 2024. We maintain our cash and cash equivalents primarily in money market funds and demand deposit bank accounts at high credit quality financial institutions, which are included in cash and cash equivalents at December 31, 2025 and 2024. We also hold marketable securities, which primarily include corporate debt securities, U.S. treasury securities with maturities greater than three months, and term deposits. We earned interest income of $8.2 million, $12.5 million, and $10.4 million in each of the years ended December 31, 2025, 2024, and 2023, respectively.
We are party to a credit facility (the “Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $250 million. The Amended Credit Facility provides us with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase
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the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in an amount up to the sum of (x) the greater of (A) $300 million and (B) 100% of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00. In addition, the Amended Credit Facility provides for a subfacility for borrowings in certain foreign currencies in an amount equal to the U.S. dollar equivalent of $150 million. Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to Term SOFR or a base rate, plus a margin ranging from 1.50% to 2.00%, depending on our leverage ratio. An unused commitment fee ranging from 0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused amounts. As of December 31, 2025 and 2024, we were in compliance with all covenants of the Amended Credit Facility and had no borrowings outstanding under the Revolving Credit Facility. During the years ended December 31, 2025 and 2024, we paid $0.5 million and $3.2 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.
Our net cash provided by operating activities increased to $198.2 million in 2025 compared to $169.3 million in 2024. The increase was primarily driven by higher earnings and non-cash adjustments, partially offset by unfavorable changes in working capital.
Our net cash provided by (used in) investing activities increased to $8.5 million of cash provided in 2025 compared to $64.4 million of cash used in 2024. The increase was primarily driven by a $48.1 million increase in cash proceeds from marketable securities and other investments, a $26.0 million decrease in purchases of marketable securities, and $2.2 million of cash proceeds from the sale of property and equipment in 2025, partially offset by a $3.7 million increase in capital expenditures. Capital expenditures increased to $44.3 million in 2025 compared to $40.6 million in 2024, primarily due to the timing of capital projects.
Our net cash used in financing activities increased to $206.2 million in 2025 compared to $136.8 million in 2024. The increase was primarily driven by a $127.4 million increase in share repurchases and a $6.4 million increase in net payments for employee stock awards, partially offset by the non-recurrence in 2025 of a $61.3 million long-term debt payment and a $1.7 million payment of debt financing costs made in 2024, as well as a $1.5 million decrease in cash dividend payments in 2025.
The Board of Directors declared an annual cash dividend of $2.40 per common share, payable in equal parts quarterly. During the year ended December 31, 2025, we paid a total of $57.5 million in cash dividends on our common stock compared to $59.0 million in 2024. During the year ended December 31, 2025, we paid $138.9 million to repurchase shares of common stock in the open market under our repurchase program, compared to $11.5 million in 2024. As of December 31, 2025, we had $213.5 million remaining in share repurchase authorization to use through December 31, 2026.
Our recurring cash requirements consist primarily of general operating expenses, capital expenditures, discretionary dividend payments, income tax payments, and contractual obligations related to our lease agreements, marketing-related vendor subscription agreements, limited partnership investments, and Revolving Credit Facility. We believe that the combination of our existing cash, cash equivalents, and marketable securities, cash generated from operating activities, and if necessary, cash available under our Amended Credit Facility will be sufficient to meet our cash requirements for the next 12 months and beyond.
Our material contractual cash commitments include minimum lease payments required under our lease agreements, multi-year marketing spend commitments under a marketing agreement, capital commitments related to our four limited partnership investments and commitment fees associated with our Revolving Credit Facility.
The table below presents our contractual lease cash commitments, including minimum payments for leases signed but not yet commenced as of December 31, 2025 (in thousands):
Payments Due By Period
Total Less than 1Year 1-3Years 3-5Years More than5 Years
We have a commitment to purchase approximately $42.8 million of media advertising over a three-year period ending in December 2028. The commitment includes annual minimum purchase requirements; however, the timing and allocation of future cash flows will depend on our marketing strategy. Accordingly, we cannot reasonably estimate the amount that will be paid in any given year. As of December 31, 2025, the full $42.8 million commitment remained outstanding.
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As of December 31, 2025, we have a commitment to invest up to $1.7 million in our four limited partnership investments through 2031. 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.
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. As of December 31, 2025, our maximum estimated commitment fee is $0.8 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.
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. We 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. Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates. As of December 31, 2025, 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.
We had no outstanding debt under our Amended Credit Facility as of December 31, 2025. 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. An increase in Term SOFR would affect interest expense on any outstanding balance of the Revolving Credit Facility. For every 100 basis points increase in Term SOFR, we would incur an incremental $2.5 million in interest expense per year assuming the entire $250 million Revolving Credit Facility was utilized.
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 19.8% of our consolidated revenues for the year ended December 31, 2025. We therefore have foreign currency risk related to these currencies, which is primarily the Australian dollar. Accordingly, changes in exchange rates, and in particular a weakening of foreign currencies relative to the USD may negatively affect our revenue and operating income as expressed in the USD. For the year ended December 31, 2025, a hypothetical 10% adverse change in the average annual foreign currency exchange rates would have decreased our consolidated revenues by approximately $25.2 million. In addition, the effect of exchange rate changes on cash, cash equivalents, and restricted cash in the year ended December 31, 2025 was a increase of $2.3 million. We do not use foreign exchange contracts or derivatives to hedge any foreign currency exposures.
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Item 8.Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Strategic Education, Inc.
Consolidated Balance Sheets as of December 31, 2024 and 2025 77
Notes to Consolidated Financial Statements 81
All other schedules are omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Strategic Education, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Strategic Education, Inc. and subsidiaries (the “Company”) as of December 31, 2025, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2026, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Learn and Earn Scholarship Liability related to Undergraduate Degree Programs — Refer to Note 3 to the financial statements
Critical Audit Matter Description
The Company offers the Learn and Earn Scholarship (formerly known as the Graduation Fund), which allows undergraduate students to 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 registering in credit-bearing courses in any undergraduate degree program receive one free course for every three courses that the student successfully completes. The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student toward earning the benefit. The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs. The portion of the Learn and Earn Scholarship liability balance related to students enrolled in undergraduate degree programs was $37.8 million as of December 31, 2025.
We identified the Learn and Earn Scholarship liability as a critical audit matter because estimating credits to be redeemed in the future involves significant estimation by management using a high volume of historical information. This required an increased audit effort due to the volume of historical information when performing audit procedures to evaluate whether the Learn and Earn Scholarship liability was appropriately recorded as of December 31, 2025.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Learn and Earn Scholarship liability for undergraduate degree programs included the following, among others:
•We tested the effectiveness of controls over management’s estimation of the Learn and Earn Scholarship liability for undergraduate degree programs, including those related to management’s methodology and the deferred value of credits estimated to be redeemed in the future.
•We evaluated the appropriateness of the methodology used by management to determine the Learn and Earn Scholarship liability for undergraduate degree programs.
•We tested the completeness and accuracy of the underlying information used to determine the Learn and Earn Scholarship liability for undergraduate degree programs.
•We recalculated the deferred value of credits estimated to be redeemed in the future used to determine the Learn and Earn Scholarship liability for undergraduate degree programs.
/s/ Deloitte & Touche LLP
McLean, Virginia
February 27, 2026
We have served as the Company’s auditor since 2025.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Strategic Education, Inc.
Opinion on the Financial Statements
We have audited the consolidated balance sheet of Strategic Education, Inc. and its subsidiaries (the “Company”) as of December 31, 2024, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the two years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Washington, District of Columbia
February 27, 2025
We served as the Company’s auditor from 1993 to 2024.
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STRATEGIC EDUCATION, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Current assets:
Income taxes receivable — 2,511
Marketable securities, non-current 14,981 5,000
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Income taxes payable 2,926 —
Commitments and contingencies
Stockholders’ equity:
Accumulated other comprehensive loss (88,565) (46,115)
The accompanying notes are an integral part of these consolidated financial statements.
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STRATEGIC EDUCATION, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Year Ended December 31,
Costs and expenses:
Amortization of intangible assets 11,457 — —
Merger and integration costs 1,544 — —
Earnings per share:
Weighted average shares outstanding:
STRATEGIC EDUCATION, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
For the Year Ended December 31,
Other comprehensive income (loss):
Unrealized gains (losses) on marketable securities, net of tax 288 246 (219)
The accompanying notes are an integral part of these consolidated financial statements.
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STRATEGIC EDUCATION, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Shares Par Value
Common stock dividends ($2.40 per share) — — — (58,819) — (58,819)
Foreign currency translation adjustment — — — — 533 533
Unrealized gains on marketable securities, net of tax — — — — 288 288
Common stock dividends ($2.40 per share) — — — (59,099) — (59,099)
Foreign currency translation adjustment — — — — (54,564) (54,564)
Unrealized gains on marketable securities, net of tax — — — — 246 246
Common stock dividends ($2.40 per share) — — — (57,316) — (57,316)
Foreign currency translation adjustment — — — — 42,669 42,669
Unrealized losses on marketable securities, net of tax — — — — (219) (219)
The accompanying notes are an integral part of these consolidated financial statements.
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STRATEGIC EDUCATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Year Ended December 31,
Cash flows from operating activities:
Gain on sale of property and equipment (2,136) — —
Gain on early termination of operating leases (141) (6,166) (2,196)
Amortization of deferred financing costs 557 674 425
Amortization of investment discount/premium (65) (290) (432)
Changes in assets and liabilities:
Income taxes payable and income taxes receivable (4,688) 1,067 (5,563)
Cash flows from investing activities:
Proceeds from sale of property and equipment 5,890 — 2,200
Proceeds from other investments 457 20 —
Cash paid for acquisition, net of cash acquired (530) (177) (36)
Net cash provided by (used in) investing activities (48,545) (64,360) 8,506
Cash flows from financing activities:
Payments of deferred financing costs — (1,698) —
Non-cash transactions:
Non-cash additions to property and equipment $ 3,066 $ 2,488 $ 2,741
The accompanying notes are an integral part of these consolidated financial statements.
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1.Nature of Operations
Strategic Education, Inc. (“Strategic Education” or the “Company”), a Maryland corporation, 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. Strategic Education’s portfolio of companies is dedicated to closing the skills gap by placing adults on the most direct path between learning and employment.
The accompanying consolidated financial statements and footnotes include the results of the Company’s three reportable segments: (1) U.S. Higher Education (“USHE”), which is primarily comprised of Capella University and Strayer University and is focused on providing flexible and affordable certificate and degree programs to working adults; (2) Education Technology Services (“ETS”), which primarily develops and maintains relationships with employers to build education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs, including through Workforce Edge, a full-service education benefits administration solution for employers, and Sophia Learning, which offers low-cost online general education-level courses; and (3) Australia/New Zealand (“ANZ”), which through Torrens University and associated assets, provides certificate and degree programs in Australia and New Zealand. The Company’s reportable segments are discussed further in Note 20.
2. Significant Accounting Policies
Financial Statement Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidated financial statements. Certain amounts in the prior periods have been reclassified to conform to the current period’s presentation.
Below is a description of the nature of the costs included in the Company’s operating expense categories.
Instructional and support costs generally contain items of expense directly attributable to activities that support students. This expense category includes salaries and benefits of faculty and academic administrators, as well as admissions and administrative personnel who support and serve student interests. Instructional and support costs also include course development costs and costs associated with delivering course content, including educational supplies, facilities, and all other physical plant and occupancy costs, with the exception of costs attributable to the corporate offices. Bad debt expense incurred on delinquent student account balances is also included in instructional and support costs.
General and administration expenses include salaries and benefits of management and employees engaged in finance, human resources, legal, regulatory compliance, marketing and other corporate functions. Also included are the costs of advertising and production of marketing materials. General and administration expense also includes the facilities occupancy and other related costs attributable to such functions.
Amortization of intangible assets consists of amortization and depreciation expense related to intangible assets and software assets acquired through the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand (“ANZ”).
Merger and integration costs include integration expenses associated with the Company’s acquisition of ANZ.
Restructuring costs include severance and other personnel-related expenses from voluntary and involuntary employee terminations, asset impairment charges, gains/losses on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities. See Note 4 for additional information.
Foreign Currency Translation and Transaction Gains and Losses
The United States Dollar (“USD”) is the functional currency of the Company and its subsidiaries operating in the United States. The financial statements of its foreign subsidiaries are maintained in their functional currencies. The functional currency of each of the foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business. Financial statements of foreign subsidiaries are translated into USD using the exchange rates applicable to the dates of the financial statements. Assets and liabilities are translated into USD using the period-end spot foreign exchange rates. Income and expenses are translated at the weighted-average exchange rates in effect during the period. Equity accounts are translated at historical exchange rates. The effects of these translation adjustments are reported as a component of accumulated other comprehensive income (loss) within stockholders’ equity.
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For any transaction that is in a currency different from the entity’s functional currency, the Company records a net gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) in the consolidated statements of income.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash maintained in mostly FDIC-insured bank accounts and cash invested in money market mutual funds, bank overnight deposits, and U.S. treasury bills. The Company places its cash and temporary cash investments with various financial institutions. The Company considers all highly liquid instruments purchased with a maturity of three months or less at the date of purchase to be cash equivalents.
Concentration of Credit Risk
Most cash and cash equivalent balances are in excess of the FDIC insurance limit. The Company has not experienced any losses on its cash and cash equivalents.
Restricted Cash
In the United States, a significant portion of the Company’s revenues are funded by various federal and state government programs. The Company generally does not receive funds from these programs prior to the start of the corresponding academic term. The Company may be required to return certain funds for students who withdraw from a U.S. higher education institution during the academic term. The Company had approximately $1.8 million and $0.3 million of these unpaid obligations as of December 31, 2024 and 2025, respectively. In Australia and New Zealand, advance tuition payments from international students are required to be restricted until a student commences his or her course. In addition, a portion of tuition prepayments from students enrolled in a vocational education and training program are held in trust by a third party law firm to adhere to tuition protection requirements. As of December 31, 2024 and 2025, the Company had approximately $7.3 million and $8.0 million, respectively, of restricted cash related to these requirements in Australia and New Zealand. These balances are recorded as restricted cash and included in other current assets in the consolidated balance sheets.
As part of conducting operations in Pennsylvania, the Company is required to maintain a “minimum protective endowment” of at least $0.5 million in an interest-bearing account as long as the Company operates its campuses in the state. The Company holds these funds in an interest-bearing account, which is included in other assets.
The following table illustrates the reconciliation of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows as of December 31, 2024 and 2025 (in thousands):
As of December 31,
Restricted cash included in other current assets 9,082 8,254
Restricted cash included in other assets 500 500
Marketable Securities
Investments in marketable securities are carried at either amortized cost or fair value. Investments in marketable securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in marketable securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Management determines the appropriate designation of marketable securities at the time of purchase and re-evaluates such designation as of each balance sheet date. All of the Company’s marketable securities are designated as either held-to-maturity or available-for-sale.
The Company’s held-to-maturity marketable securities consist of term deposits, U.S. treasury securities, and corporate debt securities, which are carried at amortized cost. The Company’s available-for-sale marketable securities consisted of corporate debt securities, which were carried at fair value as determined by quoted market prices or other inputs either directly or indirectly observable in the marketplace for identical or similar assets, with unrealized gains and losses, net of tax, recognized as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Management reviews the fair value of the portfolio at least quarterly, and evaluates individual securities with fair value below amortized cost at the balance sheet date for impairment. In order to determine whether there is an impairment, management evaluates whether the Company
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intends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis.
If management intends to sell an impaired debt security, or it is more likely than not the Company will be required to sell the security prior to recovering its amortized cost basis, an impairment is deemed to have occurred. The amount of an impairment related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings. The amount of an impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of accumulated other comprehensive income (loss) within stockholders’ equity.
The cost of securities sold is based on the specific identification method. Amortization of premiums, accretion of discounts, interest, dividend income and realized gains and losses are included in other income. The contractual maturity date of available-for-sale securities is based on the days remaining to the effective maturity. The Company classifies marketable securities as either current or non-current assets based on management’s intent with regard to usage of those funds, which is dependent upon the security’s maturity date and liquidity considerations based on current market conditions. If management intends to hold the securities for longer than one year as of the balance sheet date, they are classified as non-current.
Tuition Receivable and Allowance for Credit Losses
The Company records tuition receivable and contract liabilities for its students upon the start of the academic term or program. Tuition receivables are not collateralized; however, credit risk is minimized as a result of the diverse nature of the Company’s student bases and through the participation of the majority of the students in federally funded financial aid programs. An allowance for credit losses is established based upon historical collection rates by age of receivable and adjusted for reasonable expectations of future collection performance, net of estimated recoveries. These collection rates incorporate historical performance based on a student’s current enrollment status, likelihood of future enrollment, degree mix trends and changes in the overall economic and regulatory environment. In the event that current collection trends differ from historical trends, an adjustment is made to the allowance for credit losses and bad debt expense.
The Company’s current tuition receivable and allowance for credit losses were as follows as of December 31, 2024 and 2025 (in thousands):
An additional $7.0 million and $6.2 million of tuition receivable, net, are included in other assets as of December 31, 2024 and 2025, respectively, because these amounts are expected to be collected after 12 months.
The following table illustrates changes in the Company’s current and non-current allowance for credit losses for each of the three years ended December 31, 2025 (in thousands):
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. In accordance with Accounting Standards Codification (“ASC”) 360 Property, Plant, and Equipment, the carrying values of the Company’s assets are re-evaluated when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on expected undiscounted future cash flows, then a loss is recognized using a fair value-based model. During the years ended December 31, 2023, 2024, and 2025, the Company recognized $0.4 million, $0.2 million and $2.6 million, respectively, of impairment charges related to property and equipment, which is included in Restructuring costs on the consolidated statements of income.
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Depreciation and amortization of property and equipment is calculated using the straight-line method over the estimated useful lives ranging from three years to 40 years. Depreciation and amortization expense of property and equipment was $48.4 million, $44.4 million and $48.4 million for the years ended December 31, 2023, 2024, and 2025, respectively. Included in the 2023 depreciation and amortization expense amount is $2.6 million of depreciation expense related to content acquired in the ANZ acquisition, which is included in Amortization of intangible assets on the consolidated statements of income. Repairs and maintenance costs are expensed as incurred.
In recent years, the Company has evaluated its owned and leased real estate portfolio to identify underutilized facilities to either downsize or exit. As a result of this evaluation, the Company sold one owned U.S. Higher Education campus in 2023 and one in 2025. The Company sold the related long-lived assets, consisting of land, buildings, and building improvements, and recognized a $2.1 million gain on sale during the year ended December 31, 2023 and a $0.3 million loss on sale during the year ended December 31, 2025. These amounts are included in Restructuring costs on the consolidated statements of income.
Property and equipment includes costs of computer software developed for internal use, which is accounted for in accordance with ASC 350-40, Internal-Use Software. Computer software development costs that are incurred in the preliminary project stage are expensed as incurred. During the development stage, direct consulting costs, payroll, and payroll-related costs for employees that are directly associated with the project are capitalized and amortized over the estimated useful life of the software once placed into operation.
Purchases of property and equipment and changes in accounts payable for each of the three years in the period ended December 31, 2025 in the consolidated statements of cash flows have been adjusted to exclude non-cash purchases of property and equipment transactions during that period.
Deferred Costs
The Company defers certain commissions earned by third party international agents that are considered incremental and recoverable costs of obtaining a contract with customers in the Australia/New Zealand segment. These costs are amortized over the period of benefit which ranges from one to two years. The Company also defers implementation costs incurred in cloud computing arrangements and amortizes these costs over the term of the arrangement.
Leases
The Company determines if an arrangement is a lease at inception. The Company analyzes each lease agreement to determine whether it should be classified as a finance lease or operating lease. Leases with an initial term longer than 12 months are included in right-of-use (“ROU”) lease assets, lease liabilities, and lease liabilities, non-current on the Company’s consolidated balance sheets. The Company combines lease and non-lease components for all leases.
ROU lease assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU lease assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the implicit interest rate for most of the Company’s leases cannot be readily determined, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term for operating leases.
Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company subleases certain building space to third parties and sublease income is recognized on a straight-line basis over the lease term. See Note 7 for additional information.
Fair Value
ASC 820-10, Fair Value Measurement, establishes a framework for measuring fair value, establishes a fair value hierarchy based upon the observability of inputs used to measure fair value, and expands disclosures about fair value measurements. Assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. Under ASC 820-10, fair value of an investment is the price that would be received to sell an asset or to transfer a liability to an entity in an orderly transaction between market participants at the measurement date. The hierarchy gives the highest priority to assets and liabilities with readily available quoted prices in an active market and lowest priority to unobservable inputs, which require a higher degree of judgment when measuring fair value, as follows:
•Level 1 assets or liabilities use quoted prices in active markets for identical assets or liabilities as of the measurement date;
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•Level 2 assets or liabilities use observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities; and
•Level 3 assets or liabilities use unobservable inputs that are supported by little or no market activity.
The Company’s assets and liabilities that are subject to fair value measurement are categorized in one of the three levels above. Fair values are based on the inputs available at the measurement dates, and may rely on certain assumptions that may affect the valuation of fair value for certain assets or liabilities.
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 in a business combination. Indefinite-lived intangible assets, which include trade names, are recorded at fair value on their acquisition date. An indefinite life was assigned to the trade names because they have the continued ability to generate cash flows indefinitely.
Goodwill and the indefinite-lived intangible assets are assessed at least annually for impairment on the first day of the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit or indefinite-lived intangible asset below its carrying amount. The Company 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 Company’s goodwill impairment test includes an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount based on the qualitative assessment, or that a qualitative assessment should not be performed for a reporting unit, the Company proceeds with performing a quantitative goodwill impairment test. In performing the quantitative goodwill impairment test, the Company compares the fair value of the reporting unit to the carrying value of its net assets. If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit, goodwill is not impaired and no further testing is required. If the carrying value of the net assets of the reporting unit exceeds the fair value of the reporting unit, an impairment loss is recognized to the extent the fair value of the reporting unit is less than the carrying value of the reporting unit’s net assets.
Finite-lived intangible assets acquired in business combinations are recorded at fair value on their acquisition dates and are amortized on a straight-line basis over the estimated useful life of the asset. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets. Finite-lived intangible assets consisted of student relationships, which were all fully amortized by the end of 2023.
Authorized Stock
The Company has authorized 32,000,000 shares of common stock, par value $0.01, of which 24,502,385 and 22,968,860 shares were issued and outstanding as of December 31, 2024 and 2025, respectively. The Company has authorized 8,000,000 shares of preferred stock, none of which is issued or outstanding. Before any preferred stock may be issued, the Board of Directors must establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and the terms or conditions of the redemption of the preferred stock.
The Board of Directors declared a quarterly cash dividend of $0.60 per common share for each quarter of 2025. The Company paid these quarterly cash dividends in March, June, September and December of 2025.
Advertising Costs
The Company expenses advertising costs in the quarter incurred. Advertising costs were $185.0 million, $186.3 million and $192.4 million for the years ended December 31, 2023, 2024, and 2025, respectively, and are included within General and administration expense on the consolidated statements of income.
Stock-Based Compensation
In accordance with ASC 718, Stock Compensation, the Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including employee stock options, restricted stock, restricted stock units, performance stock units, and employee stock purchases related to the Company’s Employee Stock Purchase Plan,
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based on estimated fair values. The fair value of restricted stock awards granted is measured using the fair value of the Company’s common stock on the date of grant or the most recent modification date, whichever is later. The Company records compensation expense for all share-based payment awards ratably over the vesting period. For awards with graded vesting, the Company measures fair value and records compensation expense separately for each vesting tranche. Stock-based compensation expense recognized in the consolidated statements of income for each of the three years in the period ended December 31, 2025 is based on awards ultimately expected to vest and, therefore, has been adjusted for estimated forfeitures. The Company estimates forfeitures at the time of grant and revises the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The forfeiture rate used is based on historical experience. The Company also assesses the likelihood that performance criteria associated with performance-based awards will be met. If it is determined that it is more likely than not that performance criteria will not be achieved, the Company revises its estimate of the number of shares it believes will ultimately vest. Refer to Note 15 for additional information.
Net Income Per Share
Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share reflects the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options, restricted stock, and restricted stock units (“stock awards”). The dilutive effect of stock awards was determined using the treasury stock method. Under the treasury stock method, the following are assumed to be used to repurchase shares of the Company’s common stock: (1) the proceeds received from the exercise of stock options, and (2) the amount of compensation cost associated with the stock awards for future service not yet recognized by the Company. Stock awards are excluded from the computation of diluted earnings per share when their effect would be anti-dilutive.
Set forth below is a reconciliation of shares used to calculate basic and diluted earnings per share for each of the three years ended December 31, 2025 (in thousands):
Incremental shares issuable upon the assumed exercise of stock options 4 5 1
Unvested restricted stock and restricted stock units 549 729 652
Comprehensive Income
Comprehensive income includes net income and all changes in the Company’s equity during a period from non-owner sources, which for the Company consists of foreign currency translation adjustments and unrealized gains and losses on available-for-sale marketable securities, net of tax. As of December 31, 2023, 2024, and 2025, the balance of accumulated other comprehensive loss was $34.2 million, net of tax of $0.1 million, $88.6 million, net of tax of $0.1 million, and $46.1 million, respectively. There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the years ended December 31, 2023 and 2024. During the year ended December 31, 2025, approximately $0.2 million, net of tax of $0.1 million, of unrealized gains (losses) on marketable securities was reclassified out of accumulated other comprehensive income (loss) to Other income on the consolidated statements of income.
Income Taxes
The Company provides for deferred income taxes based on temporary differences between financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized.
ASC 740, Income Taxes, requires the company to determine whether uncertain tax positions should be recognized within the Company’s financial statements. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. Uncertain tax positions are recognized when a tax position, based solely on its technical merits, is determined more likely than not to be sustained upon examination. Upon determination, uncertain tax positions are measured to determine the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority
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that has full knowledge of all relevant information. A tax position is derecognized if it no longer meets the more likely than not threshold of being sustained.
The tax years since 2022 remain open for federal tax examination, the tax years since 2021 remain open to examination by certain states, and the tax years since 2020 remain open to examination by foreign taxing jurisdictions in which the Company is subject to taxation.
In December 2021, the Organization for Economic Cooperation and Development (“OECD”) introduced Pillar Two Model Rules to establish a global minimum tax rate of 15% on a per-country basis. Countries where the Company operates, such as Australia and New Zealand, have enacted domestic legislation to implement these global corporate minimum tax rules for fiscal years beginning after January 1, 2024, and January 1, 2025, respectively. The Company has evaluated the impact of the OECD’s Pillar Two framework on its financial statements and determined that Pillar Two did not have a material impact on its 2025 financial statements. We remain compliant with all relevant regulations and will continue to monitor any future developments that may affect our financial reporting.
Other Investments
The Company holds investments in certain limited partnerships that invest in innovative companies in the health care and education-related technology fields. The Company accounts for the investments in limited partnerships under the equity method. The Company’s pro-rata share in the net income (loss) of the limited partnerships is included in Other income on the consolidated statements of income. The Company also holds investments accounted for at cost less impairment as these investments do not have readily determinable fair value.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the period reported. The most significant management estimates include allowances for credit losses, useful lives of property and equipment and intangible assets, incremental borrowing rates, potential sublease income and vacancy periods, accrued expenses, forfeiture rates and the likelihood of achieving performance criteria for stock-based awards, value of free courses earned by students that will be redeemed in the future, valuation of goodwill and intangible assets, and the provision for income taxes. Actual results could differ from those estimates.
Recently Adopted Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires disclosure of specific categories in the effective tax rate reconciliation. Further, the standard requires certain disclosures of state versus federal income tax expense and taxes paid. The Company adopted ASU 2023-09 for its annual reporting period ended on December 31, 2025 and applied the amendments prospectively. See Note 19 for the required income tax disclosures.
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires the disclosure of amounts related to purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion within each income statement expense line item that contains any of these expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted, and the amendments can be applied prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2024-03 will have on its consolidated financial statement disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). ASU 2025-06 eliminates the existing guidance that categorizes software development into distinct project stages and replaces it with a recognition threshold based on management’s authorization and commitment to fund the project, along with the probability of completion and intended use. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual periods. Early adoption is permitted, and the amendments can be applied prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2025-06 will have on its consolidated financial statements and related disclosures.
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Other ASUs recently issued by the FASB but not yet effective are not expected to have a material effect on the Company’s consolidated financial statements.
3. Revenue Recognition
The Company’s revenues primarily consist of tuition revenue arising from educational services provided in the form of classroom instruction and online courses. Tuition revenue is deferred and recognized ratably over the period of instruction, which varies depending on the course format and chosen program of study. Capella University’s GuidedPath classes and Strayer University’s educational programs typically are offered on a quarterly basis, and such periods coincide with the Company’s quarterly financial reporting periods, while Capella University’s FlexPath courses are delivered over a twelve-week subscription period. 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.
The following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the years ended December 31, 2023, 2024, and 2025 (in thousands):
U.S. Higher Education Segment
Australia/New Zealand Segment
___________________________________________________________
(1)Other revenue is primarily comprised of academic fees, sales of course materials, placement fees and other non-tuition revenue streams.
(2)Education Technology Services revenue is primarily derived from tuition revenue and administrative fees.
Revenues are recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods and services. The Company applies the five-step revenue model under ASC 606, Revenue Recognition (“ASC 606”) to determine when revenue is earned and recognized.
Arrangements with students may have multiple performance obligations. For such arrangements, the Company allocates net tuition revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers and observable market prices. The standalone selling price of material rights to receive free classes or scholarships in the future is estimated based on class tuition prices or amounts of scholarships, and likelihood of redemption based on historical student attendance and completion behavior.
At the start of each academic term or program, a contract liability is recorded for academic services to be provided, and a tuition receivable is recorded for the portion of the tuition not paid in advance. Any cash received prior to the start of an academic term or program is recorded as a contract liability. Some students may be eligible for scholarship awards, the estimated value of which will be realized in the future and is deducted from revenue when earned, based on historical student attendance and completion behavior. Contract liabilities are recorded as a current or long-term liability in the consolidated balance sheets based on when the benefits are expected to be realized. Substantially all of the contract liability balance classified as short term at the beginning of the year was recognized into revenue during the year ended December 31, 2025.
Course materials are available to enable students to access electronically all required materials for courses in which they enroll during the quarter. Revenue derived from course materials is recognized ratably over the duration of the course as the Company provides the student with continuous access to these materials during the term. For sales of certain other course materials, the Company is considered the agent in the transaction, and as such, the Company recognizes revenue net of amounts owed to the vendor at the time of sale. Revenues also include certain academic fees recognized within the quarter of instruction, and certificate revenue and licensing revenue, which are recognized as the services are provided.
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Contract Liabilities – Learn and Earn Scholarship
Strayer University offers the Learn and Earn Scholarship (formerly known as the Graduation Fund), which allows undergraduate students to 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 registering in credit-bearing courses in any undergraduate degree program receive one free course for every three courses that the student successfully completes. To be eligible, students must meet all of Strayer University’s admission requirements, and must be enrolled in a bachelor’s degree program. Students who have more than one consecutive term of non-attendance lose any Learn and Earn Scholarship credits earned to date, but may earn and accumulate new credits if the student is reinstated or readmitted by Strayer University in the future.
Revenue from students participating in the Learn and Earn Scholarship is recorded in accordance with ASC 606. The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student toward earning the benefit. The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs. Each quarter, the Company assesses its assumptions underlying these estimates, and to date, any adjustments to the estimates have not been material. The amount estimated to be redeemed in the next 12 months is $16.7 million and is included as a current contract liability in the consolidated balance sheets. The remainder is expected to be redeemed within two to four years.
The table below presents activity in the contract liability related to the Learn and Earn Scholarship for the years ended December 31, 2024 and 2025 (in thousands):
The portion of the Learn and Earn Scholarship balance related to students enrolled in undergraduate degree programs was $35.3 million and $37.8 million as of December 31, 2024 and 2025, respectively. The remaining Learn and Earn Scholarship balance related to students enrolled in master’s degree programs.
Contract Liabilities – Tuition Cap
Students in certain programs at Capella University may be eligible for tuition cap pricing, wherein their tuition is waived once the student has reached the designated dollar cap threshold for their program. The Company defers the value of the related performance obligation associated with this tuition benefit estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student towards reaching the tuition cap. The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within these programs or similar programs. Each quarter, the Company assesses its assumptions underlying these estimates. As of December 31, 2024 and 2025, the Company had $14.7 million and $18.5 million, respectively, of contract liabilities in the consolidated balance sheets related to tuition cap benefits that are estimated to be redeemed in the future. The amount estimated to be redeemed in the next 12 months is $7.4 million and is included as a current contract liability in the consolidated balance sheets.
Costs to Obtain a Contract
Certain commissions earned by third party international agents are considered incremental and recoverable costs of obtaining a contract with customers in the Australia/New Zealand segment. These costs are deferred and then amortized over the period of benefit which ranges from one year to two years.
4. Restructuring and Related Charges
The Company incurs severance and other employee separation costs related to employee terminations that are not tied to a formal restructuring plan. During the years ended December 31, 2023, 2024, and 2025, the Company incurred $12.0 million, $4.9 million and $13.3 million, respectively, of severance and other employee separation charges related to the elimination of certain positions. These severance and other employee separation charges are included in Restructuring costs on the consolidated statements of income.
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The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities for the years ended December 31, 2023, 2024, and 2025 (in thousands):
Severance Restructuring Liability
Balance as of December 31, 2022 $ —
Restructuring and other charges 12,015
Restructuring and other charges 4,902
Restructuring and other charges 13,326
_________________________________________________________
(1)Restructuring liabilities are included in accounts payable and accrued expenses in the consolidated balance sheets.
The Company evaluates its owned and leased real estate portfolio on an ongoing basis, which has resulted in the consolidation and sale of underutilized facilities. During the years ended December 31, 2023, 2024, and 2025, the Company recorded right-of-use lease asset impairment charges of approximately $5.1 million, $0.7 million, and $4.7 million, respectively, related to facilities that were consolidated during the period. The Company also recorded fixed asset impairment charges of approximately $0.4 million, $0.2 million and $2.6 million during the years ended December 31, 2023, 2024, and 2025, respectively.
The Company recorded net benefits related to the early termination of leases of approximately $0.1 million, $6.2 million and $0.4 million during the years ended December 31, 2023, 2024, and 2025, respectively. These net benefits reflect the reduction of the lease liability for payments that will no longer be required and the corresponding adjustment to the related right‐of‐use asset, if any, net of cash payments made in connection with the early termination.
During the year ended December 31, 2023, the Company recorded a $2.1 million gain from the sale of property and equipment at an owned campus, and during the year ended December 31, 2025, the Company recorded a $0.3 million loss related to the sale of property and equipment at its last remaining owned campus. These right-of-use lease asset impairments, fixed asset impairments, net benefits from early lease terminations, and gains and losses on the sale of property and equipment are included in Restructuring costs on the consolidated statements of income.
5. Marketable Securities
The following is a summary of available-for-sale securities, which are carried at fair value, as of December 31, 2024 (in thousands):
Balance as of December 31, 2024
Corporate debt securities $ 500 $ — $ (1) $ 499
The Company did not have any marketable securities classified as available-for-sale as of December 31, 2025.
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The following is a summary of held-to-maturity securities, which are carried at amortized cost, as of December 31, 2024 and 2025 (in thousands):
Balance as of December 31, 2024
Balance as of December 31, 2025
The unrealized gains and losses on the Company’s investments in marketable securities as of December 31, 2024 and 2025 were caused by changes in market values primarily due to interest rate changes. As of December 31, 2025, there were no securities which were in an unrealized loss position for a period longer than twelve months. The Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell these securities prior to the recovery of their amortized cost basis, which may be at maturity. As such, no impairment charges were recorded during the years ended December 31, 2023, 2024, and 2025. The Company has no allowance for credit losses related to its marketable securities as all investments are in investment grade securities.
The following table summarizes the maturities of the Company’s marketable securities as of December 31, 2024 and 2025 (in thousands):
Due after one year through five years — 14,981 — 5,000
The following table summarizes the purchases of and proceeds from marketable securities for the years ended December 31, 2023, 2024, and 2025 (in thousands):
Purchases of marketable securities
Proceeds from marketable securities
Maturities of available-for-sale securities $ 9,800 $ 12,805 $ 500
Maturities of held-to-maturity securities — 18,220 78,578
The Company did not sell any available-for-sale or held-to-maturity securities during the years ended December 31, 2023, 2024, and 2025. The Company did not record any gross realized gains or losses in net income during the years ended December 31, 2023, 2024, and 2025.
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6. Property and Equipment
The composition of property and equipment as of December 31, 2024 and 2025 is as follows (in thousands):
December 31, 2024 December 31, 2025 Estimated usefullife (years)
Accumulated depreciation and amortization (199,679) (209,170)
Construction in progress includes costs associated with the construction and renovation of facilities and the development of information technology applications.
7. Leases
The Company has long-term, non-cancelable operating leases for campuses and other administrative facilities. These leases generally range from 3 years to 15 years and may include renewal options to extend the lease term. In addition, the leases commonly include lease incentives in the form of rent abatements and tenant improvement allowances. The Company subleases certain portions of unused building space to third parties.
The components of lease costs were as follows for the years ended December 31, 2023, 2024, and 2025 (in thousands)
Lease Cost:
___________________________________________________________
(1)During the years ended December 31, 2023, 2024, and 2025, operating lease cost includes $5.1 million, $0.7 million, and $4.7 million of right-of-use lease asset impairment charges, respectively, related to redundant leased space that was vacated during the year. During the years ended December 31, 2023, 2024 and 2025, operating lease cost includes $0.1 million,$6.2 million, and$0.4 million, respectively, of net benefits related to the early termination of leases. These net benefits reflect the reduction of the lease liability for payments that will no longer be required and the corresponding adjustment to the related right-of-use asset, if any, net of cash payments made in connection with the early termination.
The following table provides a summary of the Company’s average lease term and discount rate as of December 31, 2024 and 2025:
Weighted average remaining lease term (years) 6.8 6.7
Weighted average discount rate 4.88 % 4.98 %
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Supplemental information related to the Company’s leases for the years ended December 31, 2023, 2024, and 2025 (in thousands):
Maturities of lease liabilities (in thousands):
Year Ending December 31,
Present value of lease liabilities $ 109,121
___________________________________________________________
(1)Excludes approximately $4.3 million of legally binding minimum lease payments for leases that were signed but had not yet commenced as of December 31, 2025.
8. Fair Value Measurement
Assets measured at fair value on a recurring basis consist of the following as of December 31, 2024 (in thousands):
Fair Value Measurements at Reporting Date Using
Assets:
Available-for-sale securities:
Corporate debt securities 499 — 499 —
Total assets at fair value on a recurring basis $ 92,915 $ 92,416 $ 499 $ —
Assets measured at fair value on a recurring basis consist of the following as of December 31, 2025 (in thousands):
Fair Value Measurements at Reporting Date Using
Assets:
Total assets at fair value on a recurring basis $ 88,239 $ 88,239 $ — $ —
The Company measures the above items on a recurring basis at fair value as follows:
•Money market funds — Classified in Level 1 is excess cash the Company holds in money market funds, which are included in cash and cash equivalents in the accompanying consolidated balance sheets. The Company’s other cash and cash equivalents as of December 31, 2024 and 2025 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.
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•Available-for-sale securities – Classified in Level 2 and valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets. The Company does not hold securities in inactive markets. The Company records any net unrealized gains and losses for changes in fair value as a component of accumulated other comprehensive income (loss) in stockholders’ equity.
The Company’s held-to-maturity marketable securities, which consist of term deposits, U.S. treasury securities, and corporate debt securities, are not included in the tables above as they are carried at amortized cost and not measured at fair value on a recurring basis. The estimated fair value of the Company’s held-to-maturity marketable securities at December 31, 2024 and 2025 was $61.4 million and $12.3 million, respectively. These securities are valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets and are classified in Level 2 of the fair value hierarchy.
The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and did not transfer assets or liabilities between levels of the fair value hierarchy during the years ended December 31, 2024 or 2025.
9. Goodwill and Intangible Assets
Goodwill
The following table presents changes in the carrying value of goodwill by segment for the years ended December 31, 2024 and 2025 (in thousands):
Additions — — — —
Impairments — — — —
Currency translation adjustments — (45,005) — (45,005)
Additions — — — —
Impairments — — — —
The Company assesses goodwill at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount.
In 2025, the Company performed a qualitative impairment assessment of goodwill assigned to its reporting units using the first day of the fourth quarter of 2025 as the assessment date. The Company evaluated the likelihood of impairment by considering qualitative factors relevant to the reporting units, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that could have a significant bearing on fair value. Based on the results of this qualitative impairment analysis, the Company concluded that no impairment indicators existed for its reporting units as of the assessment date. There were no goodwill impairment charges recorded during the years ended December 31, 2023, 2024, and 2025.
Intangible Assets
The Company’s finite-lived intangible assets were comprised of approximately $200.0 million of student relationships, which were amortized on a straight-line basis over a three-year useful life. Straight-line amortization expense for finite-lived intangible assets reflected the pattern in which the economic benefits of the assets were consumed over their estimated useful lives. All finite-lived intangible assets were fully amortized by the end of 2023. Amortization expense related to finite-lived intangible assets was $8.9 million for the year ended December 31, 2023.
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Indefinite-lived intangible assets not subject to amortization consist of trade names. The Company assigned an indefinite useful life to its trade name intangible assets, as it is believed these assets have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic, or other factors to limit the useful life of the trade name intangibles.
The following table presents changes in the carrying value of indefinite-lived intangible assets for the years ended December 31, 2024 and 2025 (in thousands):
Indefinite-Lived Intangible Assets
Additions —
Impairments (800)
Currency translation adjustments (5,725)
Additions —
Impairments (356)
Currency translation adjustments 4,501
The Company assesses indefinite-lived intangible assets at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective indefinite-lived intangible asset below its carrying amount.
In 2025, the Company performed a qualitative impairment assessment of its indefinite-lived intangible assets using the first day of the fourth quarter of 2025 as the assessment date. The Company evaluated the likelihood of impairment by considering qualitative factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that could have a significant bearing on fair value. Based on the results of this qualitative impairment analysis, the Company concluded that no impairment indicators existed for its indefinite-lived intangible assets as of the assessment date.
There were no impairment charges related to indefinite-lived intangible assets recorded during the year ended December 31, 2023. During the years ended December 31, 2024 and 2025, the Company recorded indefinite-lived intangible asset impairment charges of $0.8 million and $0.4 million, respectively, which are included in Restructuring costs on the consolidated statements of income.
10. Other Current Assets
Other current assets consist of the following as of December 31, 2024 and 2025 (in thousands):
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11. Other Assets
Other assets consist of the following as of December 31, 2024 and 2025 (in thousands):
Cloud computing arrangements, net of current portion $ 18,328 $ 24,941
Prepaid expenses, net of current portion 15,678 14,973
Tuition receivable, net, non-current 7,040 6,217
Deferred contract costs, net of current portion 808 2,149
Cloud Computing Arrangements
The Company defers implementation costs incurred in cloud computing arrangements and amortizes these costs over the term of the arrangement.
Prepaid Expenses
Long-term prepaid expenses primarily relate to payments that have been made for future services to be provided after one year. In 2020, pursuant to the terms of the perpetual license agreement associated with the Jack Welch Management Institute, the Company made a final one-time cash payment of approximately $25.3 million for the right to continue to use the Jack Welch name and likeness. As of December 31, 2024 and 2025, $14.7 million and $13.2 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.
Equity Method Investments
The Company holds investments in certain limited partnerships that invest in various innovative companies in the health care and education-related technology fields. The Company has commitments to invest up to an additional $1.7 million across these partnerships through 2031. The Company’s investments range from 3% to 5% of any partnership’s interest and are accounted for under the equity method.
The following table illustrates changes in the Company’s limited partnership investments for the years ended December 31, 2024 and 2025 (in thousands):
Limited partnership investments, beginning of period $ 16,068 $ 13,428
Pro-rata share in the net income (loss) of limited partnerships (2,699) (4,346)
Distributions (472) —
Limited partnership investments, end of period $ 13,428 $ 9,472
Tuition Receivable
Non-current tuition receivable, net, represents tuition that the Company expects to collect, but not within the next 12 months.
Other Investments
The Company holds investments in education technology start-ups focused on transformational technologies that improve student success. These investments are accounted for at cost less impairment as they do not have readily determinable fair value.
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Deferred Contract Costs
The Company defers certain commissions paid in the Australia/New Zealand segment to third-party international recruitment agents and amortizes these costs over the period of benefit.
Other
Other is comprised primarily of deferred financing costs associated with the Company’s credit facility, deferred accreditation costs associated with the Australia/New Zealand segment, and refundable security deposits associated with the Company’s leased campus and office space.
12. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following as of December 31, 2024 and 2025 (in thousands):
Accrued student obligations and other 7,173 7,722
13. Long-Term Debt
On October 18, 2024, the Company entered into an amended credit facility (the “Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $250 million. The Amended Credit Facility provides the Company 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 the future in an aggregate amount of up to the sum of (x) the greater of (A) $300 million and (B) 100% of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00. In addition, the Amended Credit Facility provides for a subfacility for borrowings in certain foreign currencies in an amount equal to the U.S. dollar equivalent of $150 million. The maturity date of the Amended Credit Facility is October 18, 2029. The Company paid approximately $1.7 million in debt financing costs associated with the Amended Credit Facility, and these costs are being amortized on a straight-line basis over the five-year term of the Amended Credit Facility.
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 the Company’s leverage ratio. The Company also is subject to a quarterly unused commitment fee ranging from 0.20% to 0.30% per annum depending on the Company’s leverage ratio, times the daily unused amount under the Revolving Credit Facility.
The Amended Credit Facility is guaranteed by all domestic subsidiaries, subject to certain exceptions, and secured by substantially all of the assets of the Company and its subsidiary guarantors. The Amended Credit Facility contains customary affirmative and negative covenants, representations, warranties, events of default, and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Amended Credit Facility. In addition, the Amended Credit Facility requires that the Company satisfy certain financial maintenance covenants, including:
•A leverage ratio of not greater than 2.00 to 1.00. Leverage ratio is defined as the ratio of total debt (net of unrestricted cash in an amount not to exceed $150 million) to trailing four-quarter EBITDA.
•A coverage ratio of not less than 1.75 to 1.00. Coverage ratio is defined as the ratio of trailing four-quarter EBITDA and rent expense to trailing four-quarter interest and rent expense.
As of December 31, 2024 and 2025, the Company was in compliance with all covenants of the Amended Credit Facility and had no borrowings outstanding under the Revolving Credit Facility.
During the years ended December 31, 2023, 2024 and 2025, the Company paid $6.8 million, $3.2 million and $0.5 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.
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14. Other Long-Term Liabilities
Other long-term liabilities consist of the following as of December 31, 2024 and 2025 (in thousands):
Contract liabilities, net of current portion $ 34,505 $ 35,577
Contract Liabilities
In connection with its student tuition contracts, the Company has an obligation to provide free tuition in the future should certain eligibility conditions be maintained. Long-term contract liabilities represent the amount of revenue under these arrangements that the Company expects will be realized after one year.
Asset Retirement Obligations
Certain of the Company’s lease agreements require the leased premises to be returned in a predetermined condition.
15. Equity Awards
In connection with the merger with Capella Education Company on August 1, 2018, the Capella Education Company 2014 Equity Incentive Plan (the “2014 Capella Plan”) and the Capella Education Company 2005 Stock Incentive Plan (collectively, the “Capella Plans”) were assumed by the Company. Under the Capella Plans, shares of the Company’s common stock were permitted to be issued upon the exercise or settlement of equity awards that were granted prior to the merger date or pursuant to awards granted after the closing of the merger to legacy Capella Education Company employees under the 2014 Capella Plan.
On November 6, 2018, the Company’s shareholders approved the Strategic Education, Inc. 2018 Equity Compensation Plan (the “2018 Plan”), which replaced the Strayer Education, Inc. 2015 Equity Compensation Plan (the “2015 Plan”). The 2018 Plan provides for the granting of restricted stock, restricted stock units, stock options intended to qualify as incentive stock options, options that do not qualify as incentive stock options, and other forms of equity compensation and performance-based awards to employees, officers, and directors of the Company, or to a consultant or advisor to the Company, at the discretion of the Board of Directors. Vesting provisions are at the discretion of the Board of Directors. Options may be granted at option prices based at or above the fair market value of the shares at the date of grant. The maximum term of the awards granted under the 2018 Plan is ten years. The original number of shares of common stock authorized for issuance under the 2018 Plan was 700,000, plus the number of shares available for grant under the 2015 Plan at the time of stockholder approval of the 2018 Plan, plus the number of shares which may become available under the 2015 Plan due to forfeitures of outstanding awards.
On April 27, 2022, the Company’s shareholders approved the First Amendment to the 2018 Plan, which increased the total number of shares of common stock available for issuance under the 2018 Plan by the number of shares that were available for issuance under the 2014 Capella Plan as of the effective date of the First Amendment, plus the number of shares that may become available upon the future expiration, forfeiture or cancellation of outstanding awards under the Capella Plans. Subsequent to the shareholders approval of the First Amendment, all equity-based awards are granted under the 2018 Plan.
On April 23, 2025, the Company’s shareholders approved the Second Amendment to the 2018 Plan, which increased the total number of shares of common stock available for issuance under the 2018 Plan by 700,000 shares. As of December 31, 2025, 983,727 shares were available for issuance under the 2018 Plan.
As of December 31, 2025, the Company has issued and outstanding awards under the 2018 Plan and the 2014 Capella Plan.
Dividends paid on unvested restricted stock are reimbursed to the Company, and dividend equivalents accumulated on unvested restricted stock units are forfeited, if the recipient forfeits his or her shares as a result of termination of employment prior to vesting in the award, other than as a result of the recipient’s death, disability, or certain qualifying terminations in connection with a change in control of the Company, or unless waived by the Company.
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Restricted Stock and Restricted Stock Units
The table below sets forth the restricted stock and restricted stock units activity for each of the three years in the period ended December 31, 2025:
Number ofshares or units Weighted-averagegrant price
Stock Options
The table below sets forth the stock option activity and other stock option information for each of the three years in the period ended December 31, 2025:
Grants — —
Forfeitures/Expirations — —
Grants — —
Forfeitures/Expirations — —
Grants — —
__________________________________________________________________________
(1)The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the respective trading day and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holder had all options been exercised on the respective trading day. The amount of intrinsic value will change based on the fair market value of the Company’s common stock.
The Company received $0.2 million, $0.5 million, and $0.3 million of net cash proceeds related to stock options exercised during the years ended December 31, 2023, 2024, and 2025, respectively. The aggregate intrinsic value of the stock options exercised during the years ended December 31, 2023, 2024, and 2025 was $0.1 million, $0.3 million, and $0.1 million, respectively.
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Valuation and Expense Information under ASC 718, Stock Compensation
At December 31, 2025, total stock-based compensation cost which has not yet been recognized was $39.4 million for unvested restricted stock and restricted stock units. This cost is expected to be recognized over the next 1.4 years on a weighted-average basis. Approximately 742,000 shares of restricted stock awards and restricted stock units are subject to performance conditions. The stock-based compensation expense for performance awards is based on the Company’s estimates that such performance criteria are probable of being achieved over the respective vesting periods. Such a determination involves judgment surrounding the Company’s ability to maintain regulatory compliance. If the performance targets are not reached during the respective vesting period, or it is determined it is more likely than not that the performance criteria will not be achieved, related compensation expense is adjusted.
The following table reflects the amount of stock-based compensation expense recorded in each of the expense line items for the years ended December 31, 2023, 2024, and 2025 (in thousands):
During the years ended December 31, 2023 and 2024, the Company recognized shortfall tax impacts of approximately $1.4 million and $1.2 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes. During the year ended December 31, 2025, the Company recognized windfall tax benefits of approximately $0.4 million.
16. Other Employee Benefit Plans
The Company sponsors the Strategic Education, Inc. 401(k) Plan, which covers all eligible employees of the Company. The Company makes discretionary contributions to participants of the Strategic Education, Inc. 401(k) Plan through a Company match of 100% on the first 2%, and 50% on the next 2%, of the employee contributions, for a maximum company match of 3%. The Company’s contributions to these plans totaled $8.2 million, $8.6 million and $8.9 million for the years ended December 31, 2023, 2024, and 2025, respectively.
Pursuant to local laws, ANZ is required to make contributions on behalf of its employees for post-retirement superannuation benefits. In addition, ANZ has recorded a liability for long service leave, an entitlement for which employees meeting certain requirements are eligible for extended paid leave. The Company incurred $8.6 million, $9.3 million, and $10.9 million in expense related to these arrangements for the benefit of ANZ employees for the years ended December 31, 2023, 2024, and 2025, respectively.
In May 1998, the Company adopted the Strayer Education, Inc. Employee Stock Purchase Plan (“ESPP”). Under the ESPP, eligible employees may purchase shares of the Company’s common stock, subject to certain limitations, at 90% of its market value at the date of purchase. Purchases are limited to 10% of an employee’s eligible compensation. The aggregate number of shares of common stock that may be made available for purchase by participating employees under the ESPP is 2,500,000 shares. Shares purchased in the open market for employees for the years ended December 31, 2023, 2024, and 2025 were as follows:
Sharespurchased Average priceper share
17. Stock Repurchase Plan
In November 2003, the Company’s Board of Directors authorized the Company to repurchase up to an aggregate of $15 million in value of common stock in open market purchases from time to time at the discretion of the Company’s management depending on market conditions and other corporate considerations. The Company’s Board of Directors amended the program
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on various dates, increasing the repurchase amount authorized and extending the expiration date. At December 31, 2025, $213.5 million of the Company’s share repurchase authorization was remaining for repurchases through December 31, 2026. All of the Company’s share repurchases were effected in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. This stock repurchase plan may be modified, suspended, or terminated at any time by the Company without notice.
Repurchases of common stock are recorded as a reduction to additional paid-in capital in an amount equal to the price at which the repurchased shares were originally sold, with any excess cash paid to repurchase the shares being recorded as a reduction to retained earnings.
Shares of common stock repurchased on the open market under the Company’s repurchase program for the years ended December 31, 2023, 2024, and 2025 were as follows:
Sharesrepurchased Average pricepaid per share
18. Commitments and Contingencies
The Company’s U.S. Higher Education institutions participate in various federal student financial assistance programs which are subject to audit by agencies, including the Department of Education, the Veterans Administration, and the Department of Defense. Management believes that the potential effects of audit adjustments, if any, for the periods currently under audit will not have a material adverse effect, individually or in the aggregate, on the Company’s consolidated financial position, results of operations, or cash flows.
19. Income Taxes
The income tax provision for the years ended December 31, 2023, 2024 and 2025 is summarized below (in thousands):
Current:
Deferred: