STRATEGIC EDUCATION, INC. : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations is a supplement to and should be read in conjunction with our
condensed consolidated financial statements and the related notes and other
financial information included elsewhere in this Quarterly Report on Form 10-Q
and with our Annual Report on Form 10-K for the year ended December 31, 2021.

Caution Regarding Forward-Looking Statements

Certain of the statements included in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" as well as elsewhere in this
Quarterly Report on Form 10-Q are forward-looking statements made pursuant to
the Private Securities Litigation Reform Act of 1995 ("Reform Act"). Such
statements may be identified by the use of words such as "expect," "estimate,"
"assume," "believe," "anticipate," "may," "will," "forecast," "outlook," "plan,"
"project," "potential" or similar words, and include, without limitation,
statements relating to future enrollment, revenues, revenues per student,
earnings growth, operating expenses, capital expenditures and the ultimate
effect of the COVID-19 pandemic on the Company's business and results. These
statements are based on the Company's current expectations and are subject to a
number of assumptions, risks and uncertainties. In accordance with the Safe
Harbor provisions of the Reform Act, the Company has identified important
factors that could cause the actual results to differ materially from those
expressed in or implied by such statements. The assumptions, risks and
uncertainties include the pace of student enrollment, our continued compliance
with Title IV of the Higher Education Act, and the regulations thereunder, as
well as other federal laws and regulations, institutional accreditation
standards and state regulatory requirements, rulemaking by the Department and
increased focus by the U.S. Congress on for-profit education institutions,
competitive factors, risks associated with the further spread of COVID-19,
including the ultimate impact of COVID-19 on people and economies, the impact of
regulatory measures or voluntary actions that may be put in place to limit the
spread of COVID-19, including restrictions on business operations or social
distancing requirements, risks associated with the opening of new campuses,
risks associated with the offering of new educational programs and adapting to
other changes, risks associated with the acquisition of existing educational
institutions including our acquisition of Torrens University and associated
assets in Australia and New Zealand, the risk that the benefits of our
acquisition of Torrens University and associated assets in Australia and New
Zealand may not be fully realized or may take longer to realize than expected,
the risk that our acquisition of Torrens University and associated assets in
Australia and New Zealand may not advance our business strategy and growth
strategy, risks related to the timing of regulatory approvals, our ability to
implement our growth strategy, the risk that the combined company may experience
difficulty integrating employees or operations, risks associated with the
ability of our students to finance their education in a timely manner, and
general economic and market conditions. You should not put undue reliance on any
forward-looking statements. Further information about these and other relevant
risks and uncertainties may be found in Part II, "Item 1A. Risk Factors" of this
Quarterly Report on Form 10-Q, Part I, "Item 1A. Risk Factors" of the Company's
Annual Report on Form 10-K and in the Company's other filings with the
Securities and Exchange Commission. The Company undertakes no obligation to
update or revise forward-looking statements, except as required by law.

Further information

We maintain a website at http://www.strategiceducation.com. The information on
our website is not incorporated by reference in this Quarterly Report on Form
10-Q, and our web address is included as an inactive textual reference only. We
make available, free of charge through our website, our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the Securities and
Exchange Commission.

Background

Strategic Education, Inc. ("SEI," "we", "us" or "our") is an education services
company that provides access to high-quality education through campus-based and
online post-secondary education offerings, as well as through programs to
develop job-ready skills for high-demand markets. We operate primarily through
our wholly-owned subsidiaries Strayer University and Capella University, both
accredited post-secondary institutions of higher education located in the United
States, and Torrens University, an accredited post-secondary institution of
higher education located in Australia. Our operations emphasize relationships
through our Education Technology Services segment with employers to build
employee education benefits programs that provide employees with access to
affordable and industry relevant training, certificate, and degree programs.

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Company response to COVID-19

The ongoing COVID-19 pandemic has caused significant volatility and disruption
to the United States and international economies. SEI took early action to
protect the health and well-being of our students and employees in accordance
with government mandates and informed by guidance from the Centers for Disease
Control and Prevention. Specifically, we instituted a work-from-home policy for
the vast majority of our workforce, closed physical campus locations, moved our
on-ground courses at Strayer University online, postponed large events such as
graduation ceremonies, and prohibited non-essential employee travel. As guidance
has evolved, we have begun to reopen campus and office locations and permit
business travel, after instituting a mandatory vaccination policy for all
employees who may be required to be on-site at a Company facility or at a
Company-sponsored event, subject to medical and religious accommodations (any
employee receiving an accommodation is required to test at least weekly before
being on-site).

We have taken measures to provide financial relief to our students and employer
partners negatively affected by the COVID-19 crisis, including payment
flexibility, scholarship opportunities, and other pricing relief. We expect that
these measures will enable more students to continue pursuing their education
during and after the COVID-19 pandemic. In the third quarter of 2020, we began
implementing a restructuring plan that included both voluntary and involuntary
employee terminations in an effort to reduce ongoing operating costs to align
with changes in enrollment. Our restructuring efforts have also included the
consolidation of underutilized facilities in response to changes in enrollment
trends and as a result of our work-from-home policies.

As the pandemic has continued, we have seen sustained weakness in demand,
especially in the United States, where total enrollment in our U.S. Higher
Education segment declined 13% in the first quarter of 2022, compared to the
same period in 2021. Enrollment in ANZ also has been impacted by the pandemic
and the related closure of international borders in Australia and New Zealand.

We believe that our current financial condition and expected results of operations, together with our ability to further control costs, are sufficient to support the continued operation of SEI in a manner that protects the health and well-being of our employees. , students and partners.

Company presentation

From March 31, 2022we had the following declarable segments:

WE Higher education sector

•The USHE segment provides flexible and affordable certificate and degree
programs to working adults primarily through Strayer University and Capella
University, including the Jack Welch Management Institute MBA, which is a unit
of Strayer University. USHE also operates non-degree web and mobile application
development courses through Hackbright Academy and Devmountain, which are units
of Strayer University.

•Strayer University is accredited by the Middle States Commission on Higher
Education and Capella University is accredited by the Higher Learning
Commission, both higher education institutional accrediting agencies recognized
by the Department of Education. 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 the first quarter of 2022, USHE enrollment decreased by 13% to 78,172, compared to 89,482 for the same period in 2021.

•Trailing 4-quarter student persistence within USHE was 86.8% in the fourth
quarter of 2021 compared to 86.7% for the same period in 2020. 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.

 Q1 2020      Q2 2020      Q3 2020      Q4 2020      Q1 2021      Q2 2021      Q3 2021      Q4 2021
  87.2  %      86.6  %      86.8  %      86.7  %      86.5  %      87.0  %      86.9  %      86.8  %

Education Technology Services Segment

•Our Education Technology Services segment is primarily focused on developing
and maintaining relationships with employers to build employee education
benefits programs that provide employees with access to affordable and industry
relevant training, certificate, and degree programs. The employer relationships
developed by the Education Technology Services division are an important source
of student enrollment for Strayer University and Capella University, and the
majority of the revenue attributed to the Education Technology Services division
is driven by the volume of enrollment
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derived from these employer relationships. Enrollments attributed to the
Education Technology Services segment are determined based on a student's
employment status and the existence of a corporate partnership arrangement with
SEI. All enrollments attributed to the Education Technology Services division
continue to be attributed to the division until the student graduates or
withdraws, even if his or her employment status changes or if the partnership
contract expires.

• In the first quarter of 2022, employer-affiliated enrollment as a percentage of USHE enrollment was 23.0%, compared to 20.7% for the same period in 2021.

•Education Technology Services also supports employer partners through Workforce
Edge, a platform which provides employers a full-service education benefits
administration solution, and Sophia Learning, which enables lower cost education
benefits programs through the use of low-cost online general education courses
recommended by the American Council on Education for credit at other colleges
and universities.

Australia/New Zealand Segment

•Torrens University is the only investor-funded university in Australia. Torrens
University offers undergraduate, graduate, higher degree by research, and
specialized degree courses primarily in five fields of study: business, design
and creative technology, health, hospitality, and education. Courses are offered
both online and at physical campuses. 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 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 is a private tertiary institution for creative and
technology qualifications in New Zealand. Media Design School offers
industry-endorsed courses in 3D animation and visual effects, game art, game
programming, graphic and motion design, digital media artificial intelligence,
and creative advertising. Media Design School is accredited in New Zealand by
the New Zealand Qualifications Authority, the organization responsible for the
quality assurance of non-university tertiary training providers.

• In the first quarter of 2022, Australia/New Zealand registrations fell 4% to 20,575 from 21,469 for the same period in 2021.

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.

Significant 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. 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
and intangible assets; 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.
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Management believes that the following critical accounting policies are its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue recognition - Like many traditional institutions, Strayer University and
Capella University offer educational programs primarily on a quarter system
having four academic terms, which generally coincide with our quarterly
financial reporting periods. Torrens University offers the majority of its
education programs on a trimester system having three primary academic terms,
which all occur within the calendar year. Approximately 96% of our revenues
during the three months ended March 31, 2022 consisted of tuition revenue.
Capella University offers monthly start options for new students, who then
transition to a quarterly schedule. Capella University also offers its FlexPath
program, which allows students to determine their 12-week billing session
schedule after they complete their first course. Tuition revenue for all
students is recognized ratably over the course of instruction as the
universities provide academic services, whether delivered in person at a
physical campus or online. Tuition revenue is shown net of any refunds,
withdrawals, corporate discounts, scholarships, and employee tuition discounts.
The universities also derive revenue from other sources such as textbook-related
income, certificate revenue, certain academic fees, licensing revenue,
accommodation revenue, food and beverage fees, and other income, which are all
recognized when earned. In accordance with ASC 606, materials provided to
students in connection with their enrollment in a course are recognized as
revenue when control of those materials transfers to the student. 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 Strayer University and Capella University finance their education in
a variety of ways, and historically about 75% of our students have participated
in one or more financial aid program provided through Title IV of the Higher
Education Act. 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 attending an ANZ institution finance their
education themselves or by taking a loan through the government's Higher
Education Loan Program or Vocational Student Loan Program. In New Zealand,
domestic students may utilize government loans to fund tuition, and in addition
may be eligible for a period of "fees free" study funded by the government.
International students attending an ANZ institution are not eligible for funding
from the Australian or New Zealand government.

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 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 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 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 student 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
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amount of government funding provided is based on a course-by-course forecast of
enrollments that the institution submits for the upcoming calendar year. Using
the enrollment forecast provided as well as the requesting institution's
historical enrollment trends, the government approves a fixed amount, which is
then funded to the institution evenly on a monthly basis. 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 beginning in the summer 2013 term or graduate program
beginning in the summer 2020 term (fiscal third quarter), and subsequent terms
qualify for the Graduation Fund, whereby qualifying students earn tuition
credits that are redeemable in the final year of a student's course of study if
he or she successfully remains in the program. Students must meet all of Strayer
University's admission requirements and not be eligible for any previously
offered scholarship program. Our employees and their dependents are not eligible
for the program. To maintain eligibility, students must be enrolled in a
bachelor's or master's degree program. Students who have more than one
consecutive term of non-attendance lose any Graduation Fund 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 response to the COVID-19
pandemic, Strayer University temporarily allowed students to miss three
consecutive terms without losing their Graduation Fund credits. In their final
academic year, qualifying students will receive one free course for every three
courses that the student successfully completed in prior years. Strayer
University's performance obligation associated with free courses that may be
redeemed in the future is valued based on a systematic and rational allocation
of the cost of honoring the benefit earned to each of the underlying revenue
transactions that result in progress by the student toward earning the benefit.
The estimated value of awards under the Graduation Fund 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
March 31, 2022, we had deferred $51.2 million for estimated redemptions earned
under the Graduation Fund, as compared to $52.0 million at December 31, 2021.
Each quarter, we assess our assumptions underlying our estimates for persistence
and estimated redemptions based on actual experience. 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. For the
first quarter of 2022, our bad debt expense was 2.8% of revenue, compared to
3.7% for the same period in 2021. A change in our allowance for credit losses of
1% of gross tuition receivable as of March 31, 2022 would have changed our
income from operations by approximately $1.1 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. No events or circumstances
occurred in the three months ended March 31, 2022 to indicate an impairment to
goodwill or indefinite-lived intangible assets. Accordingly, no impairment
charges related to goodwill or indefinite-lived intangible assets were recorded
during the three month period ended March 31, 2022.

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. Finite-lived
intangible assets consist of student relationships. 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.
No impairment charges related to finite-lived intangible assets were recorded
during the three month period ended March 31, 2022.

Other estimates - We record estimates for certain of our accrued expenses and
for income tax liabilities. We estimate the useful lives of our property and
equipment and intangible assets and periodically review our assumed forfeiture
rates and ability to
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Achieve performance targets for equity-based awards and adjust as needed. If actual results differ from our estimates, revisions to our accrued liabilities, carrying value of goodwill and intangible assets, stock-based compensation expense and income tax liabilities profits might be needed.

Operating results

In the first quarter of 2022, we generated $258.9 million in revenue compared to
$290.3 million in 2021. Our income from operations was $13.4 million for the
first quarter of 2022 compared to $12.0 million in 2021, primarily due to lower
restructuring costs and amortization expense of intangible assets, partially
offset by lower earnings in the USHE segment. Net income in the first quarter of
2022 was $7.0 million compared to $9.6 million for the same period in 2021.
Diluted earnings per share was $0.29 compared to $0.40 for the same period in
2021.

In the accompanying analysis of financial information for 2022 and 2021, we use
certain financial measures including Adjusted Revenue, Adjusted Total Costs and
Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted
Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted Earnings
per Share that are not required by or prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). These
measures, which are considered "non-GAAP financial measures" under SEC rules,
are defined by us to exclude the following:

•purchase accounting adjustments to record acquired contract liabilities at fair
value as a result of our acquisition of Torrens University and associated assets
in Australia and New Zealand and to record amortization and depreciation expense
related to intangible assets and software assets acquired through our merger
with Capella Education Company and our acquisition of Torrens University and
associated assets in Australia and New Zealand;

• transaction and integration expenses related to our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand;

•severance costs and right-of-use asset impairment charges related to our restructuring;

•income/losses from partnership and other investments that are not part of our core business;

•separate tax adjustments related to stock-based compensation and other adjustments; and

To illustrate currency impacts to operating results, Adjusted Revenue, Adjusted
Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating
Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted
Diluted Earnings per Share for the three months ended March 31, 2022 are also
presented on a constant currency basis utilizing an exchange rate of 0.7728
Australian Dollars to U.S. Dollars, which was the average exchange rate for the
same period in 2021.

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.

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 results for 2021 exclude foreign currency exchange impacts and are
therefore not directly comparable to adjusted results previously reported for
the three months ended March 31, 2021. Adjusted income from operations was
$19.4 million in the first quarter of 2022 compared to $52.9 million in 2021.
Adjusted net income was $13.1 million in the first quarter of 2022 compared to
$37.0 million in 2021, and adjusted diluted earnings per share was $0.54 in the
first quarter of 2022 compared to $1.53 in 2021.


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The tables below reconcile our reported operating results to adjusted results (amounts in thousands, except per share data):

Reconciliation of reported and adjusted operating results for the three months ended March 31, 2021

                                                                                                        Non-GAAP Adjustments
                                                                                    Merger and
                                  As Reported         Purchase accounting           integration            Restructuring           Income from other                Tax                 As Adjusted
                                    (GAAP)               adjustments(1)              costs(2)                 costs(3)               investments(4)            adjustments(5)           (Non-GAAP)
Revenues                        $    290,336          $           2,223          $            -          $             -          $               -          $             -          $    292,559
Total costs and expenses        $    278,336          $         (19,407)         $       (1,012)         $       (18,267)         $               -          $             -          $    239,650
Income from operations          $     12,000          $          21,630          $        1,012          $        18,267          $               -          $             -          $     52,909
Operating margin                           4.1%                                                                                                                                                 18.1%

income before taxes $14,167 $21,630

     $        1,012          $        18,267          $          (2,783)         $             -          $     52,293
Net income                      $      9,577          $          21,630          $        1,012          $        18,267          $          (2,783)         $       (10,688)         $     37,015

Diluted earnings per share      $       0.40                                                                                                                                          $       1.53
Weighted average diluted shares
outstanding                              24,153                                                                                                                                                24,153


Reconciliation of Reported to Adjusted Results of Operations for the three
months ended March 31, 2022

                                                                                                          Non-GAAP Adjustments
                                                                                      Merger and
                                  As Reported          Purchase accounting            integration             Restructuring             Loss from other                 Tax                 As Adjusted
                                    (GAAP)               adjustments(1)                costs(2)                  costs(3)               investments(4)             adjustments(5)           (Non-GAAP)
Revenues                        $    258,855          $                -          $              -          $             -          $                -          $             -          $    258,855
Total costs and expenses        $    245,414          $           (3,738)         $           (410)         $        (1,858)         $                -          $             -          $    239,408
Income from operations          $     13,441          $            3,738          $            410          $         1,858          $                -          $             -          $     19,447
Operating margin                           5.2%                                                                                                                                                      7.5%
Income before income taxes      $     12,270          $            3,738          $            410          $         1,858          $              387          $             -          $     18,663
Net income                      $      7,029          $            3,738          $            410          $         1,858          $              387          $          (358)         $     13,064

Diluted earnings per share      $       0.29                                                                                                                                              $       0.54
Weighted average diluted shares
outstanding                              24,114                                                                                                                                                    24,114

__________________________________________________________________________________________

(1)Reflects a purchase accounting adjustment to record acquired contract
liabilities at fair value as a result of the Company's acquisition of Torrens
University and associated assets in Australia and New Zealand, and amortization
and depreciation expense of intangible assets and software assets acquired
through the Company's merger with Capella Education Company and the Company's
acquisition of Torrens University and associated assets in Australia and New
Zealand.
(2)Reflects transaction and integration expenses associated with the Company's
merger with Capella Education Company, including premerger litigation
settlement, and the Company's acquisition of Torrens University and associated
assets in Australia and New Zealand.
(3)Reflects severance costs and right-of-use lease asset impairment charges
associated with the Company's restructuring.
(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 30.0% and 29.2% for the three months ended
March 31, 2022 and 2021, respectively.
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The table below presents our adjusted operating results in constant currencies for the three months ended March 31, 2022 (amounts in thousands, except data per share):

                                                                                                    As Adjusted with
                                                                                                        Constant
                                                     As Adjusted          Constant currency             Currency
                                                     (Non-GAAP)             adjustment(1)              (Non-GAAP)
Revenues                                           $    258,855          $           2,886          $     261,741
Total costs and expenses                           $    239,408          $           3,150          $     242,558
Income from operations                             $     19,447          $            (264)         $      19,183
Operating margin                                              7.5%                                              7.3%
Income before income taxes                         $     18,663          $            (268)         $      18,395
Net income                                         $     13,064          $            (210)         $      12,854

Diluted earnings per share                         $       0.54                                     $        0.53
Weighted average diluted shares outstanding                 24,114                                            24,114


__________________________________________________________________________________________

(1)Reflects an adjustment to translate foreign currency results for the three
months ended March 31, 2022 at a constant exchange rate of 0.7728 Australian
Dollars to U.S. Dollars, which was the average exchange rate for the same period
in 2021.

Three months completed March 31, 2022 Compared to the three months ended March 31, 2021

Revenues. Consolidated revenue decreased to $258.9 million, compared to $290.3
million in the same period in the prior year, primarily due to declines in
enrollment. In the USHE segment for the three months ended March 31, 2022, total
enrollment decreased 13% to 78,172 from 89,482 for the same period in 2021. USHE
segment revenue decreased 13.6% to $195.8 million compared to $226.5 million in
2021 primarily as a result of declines in enrollment. Near term revenue in the
USHE segment is expected to continue to be impacted negatively by the ongoing
COVID-19 pandemic with weaker demand for enrollments. In the Australia/New
Zealand segment for the three months ended March 31, 2022, total enrollment
decreased 4% to 20,575 from 21,469 for the same period in 2021. Australia/New
Zealand segment revenue decreased 5.4% to $48.5 million compared to $51.3
million in 2021 as a result of declines in enrollment and revenue-per-student.
In the Education Technology Services segment, revenue for the three months ended
March 31, 2022 increased 16.4% to $14.6 million compared to $12.5 million in
2021 as a result of growth in Sophia Learning and higher employer affiliated
enrollment.

Instructional and support costs. Consolidated instructional and support costs
decreased to $144.6 million, compared to $152.8 million in the same period in
the prior year, principally due to lower facility costs and bad debt expense.
Consolidated instructional and support costs as a percentage of revenues
increased to 55.9% in the first quarter of 2022 from 52.6% in the first quarter
of 2021.

General and administration expenses. Consolidated general and administration
expenses increased to $94.8 million in the first quarter of 2022 compared to
$86.8 million in the prior year, principally due to increased investments in
branding initiatives and partnerships with brand ambassadors. Consolidated
general and administration expenses as a percentage of revenues increased to
36.6% in the first quarter of 2022 from 29.9% in the first quarter of 2021.

Amortization of intangible assets. Amortization of intangible assets decreased
to $3.7 million in the first quarter of 2022 compared to $19.4 million in 2021,
due to the finite-lived intangible assets acquired through the merger with
Capella Education Company being fully amortized as of the third quarter of 2021.

Merger and integration costs. Merger and integration costs decreased to $0.4
million in the first quarter of 2022 compared to $1.0 million for the same
period in 2021, as a result of lower integration expenses associated with the
acquisition of ANZ.

Restructuring costs. Restructuring costs decreased to $1.9 million in the first quarter of 2022 compared to $18.3 million in 2021, mainly due to $16.4 million right-of-use rental assets and fixed asset impairment charges associated with the vacating of leased space in the first quarter of 2021.

Income from operations. Consolidated income from operations increased to $13.4
million in the first quarter of 2022 compared to $12.0 million in the first
quarter of 2021, principally due to lower restructuring costs and amortization
expense of intangible assets, partially offset by lower earnings in the USHE
segment. USHE segment income from operations decreased 67.6% to $15.5 million in
the first quarter of 2022, compared to $47.8 million in the first quarter of
2021, primarily due to lower enrollments and increased investments in marketing
initiatives. In the Australia/New Zealand segment, loss from operations was $0.7
million in the first quarter of 2022, compared to a $2.9 million loss in the
first quarter of 2021, primarily driven by a $2.2 million purchase
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accounting reduction in 2021 related to contract liabilities acquired in the
acquisition. In the Education Technology Services segment, income from
operations for the three months ended March 31, 2022 decreased 19.9% to $4.7
million compared to $5.9 million in 2021 as a result of increased investment in
outreach to corporate partners, partially offset by growth in Sophia Learning
and an increase in employer affiliated enrollment.

Other income (expense). Other income (expense) decreased to $1.2 million of
expense in the first quarter of 2022 compared to $2.2 million of income in the
first quarter of 2021, as a result of a decrease in investment income from our
limited partnership investments. We incurred $0.9 million of interest expense in
the three months ended March 31, 2022 and 2021.

Provision for income taxes. Income tax expense was $5.2 million in the first
quarter of 2022, compared to $4.6 million in the first quarter of 2021. Our
effective tax rate for the quarter was 42.7%, compared to 32.4% for the same
period in 2021. The
increase in the effective tax rate in 2022 was primarily due to a $1.3 million
tax shortfall recognized through share-based payment arrangements.

Net revenue. Net profit decreased to $7.0 million in the first quarter of 2022 compared to $9.6 million in the first quarter of 2021 due to the factors discussed above.

Cash and capital resources

To March 31, 2022we had cash, cash equivalents and marketable securities of
$321.5 million compared to $298.8 million to December 31, 2021 and $274.0 million to March 31, 2021. To March 31, 2022most of our cash was held in demand deposit accounts with high quality financial institutions.

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 $350 million. The Amended
Credit Facility provides us with an option, subject to obtaining additional loan
commitments and satisfaction of certain conditions, to increase the commitments
under the Revolving Credit Facility or establish one or more incremental term
loans (each, an "Incremental Facility") in an amount up to the sum of (x) the
greater of (A) $300 million and (B) 100% of the Company's consolidated EBITDA
(earnings before interest, taxes, depreciation, amortization, and noncash
charges, such as stock-based compensation) calculated on a trailing four-quarter
basis and on a pro forma basis, and (y) if such Incremental Facility is incurred
in connection with a permitted acquisition or other permitted investment, any
amounts so long as the Company's leverage ratio (calculated on a trailing
four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00. 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 LIBOR or a base rate, plus a margin ranging from 1.50%
to 2.00%, depending on our leverage ratio. An unused commitment fee ranging from
0.20% to 0.30% per annum, depending on our leverage ratio, accrues on unused
amounts. We were in compliance with all applicable covenants related to the
Amended Credit Facility as of March 31, 2022. As of March 31, 2022 and 2021, we
had $141.7 million and $141.8 million, respectively, outstanding under our
Revolving Credit Facility. During the three months ended March 31, 2022 and
2021, we paid $0.4 million and $0.7 million, respectively, of interest and
unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities for the three months ended
March 31, 2022 was $56.6 million, compared to $78.8 million for the same period
in 2021. The decrease in net cash from operating activities was primarily driven
by lower earnings in the USHE segment, partially offset by favorable timing of
payments of working capital.

Capital expenditures decreased to $9.7 million for the three months ended
March 31, 2022compared to $12.7 million for the same period in 2021, due to the timing of capital projects.

The Board of Directors declared a regular, quarterly cash dividend of $0.60 per
share of common stock in February 2022. During the three months ended March 31,
2022, we paid a total of $15.0 million in cash dividends on our common stock.
During the three months ended March 31, 2022, we paid $4.0 million to repurchase
common shares in the open market under our repurchase program. As of March 31,
2022, we had $246.0 million of share repurchase authorization remaining to use
through December 31, 2022.

For the first quarters of 2022 and 2021, bad debt as a percentage of revenue was 2.8% and 3.7%, respectively.

We believe that existing cash and cash equivalents, cash generated from
operating activities, and if necessary, cash borrowed under our Amended Credit
Facility will be sufficient to meet our requirements for at least the next 12
months. Currently, we maintain our cash primarily in demand deposit bank
accounts and money market funds, which are included in cash and cash equivalents
at March 31, 2022 and 2021. We also hold marketable securities, which primarily
include tax-exempt municipal
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securities and corporate debt securities. In the three months ended
March 31, 2022 and 2021, we earned interest income of $0.2 million and $0.3 millionrespectively.

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