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Business Context and Reporting Period

Company: Strategic Education, Inc. (SEI)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: SEI operates three reportable segments: U.S. Higher Education (USHE) comprising Capella University and Strayer University; Australia/New Zealand (ANZ) comprising Torrens University, Think Education, and Media Design School; and Education Technology Services (ETS) comprising Workforce Edge and Sophia Learning. The company focuses on providing flexible, affordable post-secondary education and workforce training to working adults.

Key Financial Metrics

Segment Performance (2025 Revenue):

• USHE: $868.2 million (+1.2% YoY)
• ANZ: $251.6 million (-2.2% YoY, impacted by foreign currency)
• ETS: $148.4 million (+41.4% YoY)

Material Changes vs. Prior Period

• Revenue Growth: Driven primarily by a 41.4% increase in ETS revenue due to Workforce Edge partnerships and Sophia Learning subscriptions, and a 1.2% increase in USHE revenue due to higher revenue per student despite a 1.4% decline in average enrollment.
• Cost Management: Instructional and support costs decreased to 51.0% of revenue (from 53.3% in 2024) due to lower facility and personnel costs, partially offset by higher technology expenses.
• Restructuring: Restructuring costs increased significantly to $21.9 million in 2025 (from $1.6 million in 2024), driven by severance, asset impairments, and lease terminations.
• Capital Allocation: The company repurchased $138.9 million of common stock in 2025 (compared to $11.5 million in 2024) and paid $57.5 million in dividends.
• Enrollment Trends: USHE average enrollment decreased 1.4% to 86,285; ANZ average enrollment decreased 1.8% to 19,232. However, USHE student persistence improved to 88.3%.

Guidance, Outlook, and Risks

Regulatory Environment (OBBBA): The "One Big Beautiful Bill Act" (OBBBA), signed July 4, 2025, introduces significant changes effective July 2026, including the elimination of Federal Direct PLUS loans for graduate/professional students, new loan limits, and a new accountability framework based on graduate earnings. The company is monitoring the impact of these changes on enrollment and financial aid eligibility.

Outlook: Management expects continued growth in employer-affiliated enrollment (currently 32.3% of USHE) and ETS revenue. The company is investing in AI and automation to lower operating costs and improve student success.

Key Risks:

• Regulatory Compliance: Extensive reliance on Title IV federal funding; risks associated with the 90/10 rule (Strayer was at 89.64% federal revenue in 2024) and Gainful Employment metrics.
• International Operations: ANZ segment faces constraints on international student enrollment due to Australian government caps, though domestic enrollment is growing.
• Legal Proceedings: Ongoing borrower defense to repayment (BDTR) claims and potential recoupment risks from the Department of Education.
• Competition: Increasing competition from traditional public institutions and alternative education providers.

Investor Verification Checklist

• 90/10 Rule Compliance: Verify the final 2025 calculation for Strayer University, which was at 89.64% federal revenue in 2024, to ensure it remains under the 90% threshold.
• OBBBA Impact Analysis: Assess the specific impact of the July 2026 elimination of PLUS loans and new earnings accountability metrics on graduate program enrollment.
• BDTR Exposure: Review the status of the ~6,700 Capella and ~1,900 Strayer borrower defense claims received in 2024 and the potential for recoupment.
• ANZ International Caps: Monitor the implementation of Australian government limits on international students and the company's ability to offset this with domestic growth.
• Goodwill Impairment: Confirm the valuation of ANZ goodwill ($510.3 million) given the regulatory headwinds in the international student market.