10-K: Strategic Education Reports Strong 2025 Earnings Amidst Regulatory Shifts

Strategic Education, Inc. announced a significant increase in revenue, net income, and diluted earnings per share for 2025, driven by its Education Technology Services segment, despite declining student enrollment in its U.S. Higher Education and Australia/New Zealand segments.

Summary

• Consolidated revenues increased to $1,268.2 million in 2025, up from $1,219.9 million in 2024.
• Income from operations rose to $174.2 million in 2025, compared to $155.6 million in 2024.
• Net income reached $126.6 million in 2025, an increase from $112.7 million in 2024.
• Diluted earnings per share grew to $5.41 in 2025, up from $4.67 in 2024.
• The U.S. Higher Education (USHE) segment's revenue increased by 1.2% to $868.2 million, despite a 1.4% decrease in average total student enrollment to 86,285.
• The Australia/New Zealand (ANZ) segment's revenue decreased by 2.2% to $251.6 million, with average total student enrollment declining by 1.8% to 19,232, primarily due to unfavorable foreign currency exchange impacts and international enrollment constraints.
• The Education Technology Services (ETS) segment experienced substantial growth, with revenues increasing by 41.4% to $148.4 million, driven by Workforce Edge and Sophia Learning subscriptions.
• Employer-affiliated enrollment now comprises 32.3% of USHE's average total student enrollment in 2025, up from 29.6% in 2024.
• Trailing 4-quarter student persistence within USHE improved to 88.3% in Q3 2025, from 86.9% in Q3 2024.
• Restructuring costs significantly increased to $21.9 million in 2025, from $1.6 million in 2024, including severance, asset impairment charges, and losses from property sales.
• The company repurchased $138.9 million of common stock in 2025, with $213.5 million remaining in authorization through December 31, 2026.
• The company paid an annual cash dividend of $2.40 per common share in 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, demonstrating strong financial growth and strategic execution, particularly in the ETS segment and student persistence. However, the extensive and evolving regulatory landscape, coupled with declining international enrollment in ANZ, introduces significant uncertainties that temper the overall sentiment.

Positives

• Consolidated revenue increased to $1,268.2 million in 2025 from $1,219.9 million in 2024.
• Income from operations increased to $174.2 million in 2025 from $155.6 million in 2024.
• Net income increased to $126.6 million in 2025 from $112.7 million in 2024.
• Diluted earnings per share increased to $5.41 in 2025 from $4.67 in 2024.
• The Education Technology Services (ETS) segment demonstrated robust growth, with revenues increasing by 41.4% to $148.4 million in 2025.
• Employer-affiliated enrollment as a percentage of USHE total student enrollment increased to 32.3% in 2025 from 29.6% in 2024, indicating successful employer partnerships.
• USHE segment student persistence (trailing 4-quarter) improved to 88.3% in Q3 2025 from 86.9% in Q3 2024.
• The company reduced its overall physical real estate footprint by more than 25% in 2025 compared to 2024, leading to lower facility expenses.
• Strong net cash provided by operating activities, increasing to $198.2 million in 2025 from $169.3 million in 2024.
• Capella University and Strayer University maintained 0.0% official three-year cohort default rates for 2020, 2021, and 2022.
• Capella University (67.88%) and Strayer University (89.64%) remained in compliance with the 90/10 Rule for fiscal year 2024.
• Torrens University completed its re-registration process with TEQSA and received a registration renewal for the maximum period of seven years on September 3, 2025.
• Media Design School at Strayer (MDS) became a wholly-owned subsidiary and international additional location of Strayer University on September 8, 2025, and is included within Strayer University's Middle States accreditation.

Negatives

• USHE average total student enrollment decreased by 1.4% to 86,285 in 2025.
• ANZ segment revenue decreased by 2.2% to $251.6 million in 2025, primarily due to unfavorable foreign currency exchange impacts and a 1.8% decrease in average total student enrollment to 19,232.
• Trailing 4-quarter government provided grants and loans per credit earned within USHE decreased by 9.6% as of the end of Q3 2025.
• Restructuring costs significantly increased to $21.9 million in 2025 from $1.6 million in 2024, including higher severance, asset impairment charges, and a loss from the sale of property.
• Other income decreased to $3.2 million in 2025 from $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 limited partnership investments.
• Cash, cash equivalents, and marketable securities decreased to $153.1 million at December 31, 2025, from $199.0 million at December 31, 2024.
• Increased capital expenditures to $44.3 million in 2025 from $40.6 million in 2024.
• Increased share repurchases to $138.9 million in 2025 from $11.5 million in 2024, contributing to the decrease in cash.

Risks

• Failure to comply with extensive legal and regulatory requirements for higher education institutions (federal, state, accrediting agencies) could lead to significant monetary or other liabilities and penalties, including loss of access to federal student loans and grants.
• Congressional examination of for-profit post-secondary education could lead to legislation or other governmental action that may negatively affect the industry.
• Limitations on the amount of federal student financial aid for which students are eligible under Title IV could materially and adversely affect the business.
• Capella University and Strayer University are subject to compliance reviews, which, if they result in a material finding of noncompliance, could affect their ability to participate in Title IV programs.
• If either Capella University or Strayer University fails to maintain its institutional accreditation or if its institutional accrediting body loses recognition by the Department of Education, the University would lose its ability to participate in Title IV programs.
• If either Capella University or Strayer University fails to maintain any of its state or foreign authorizations, the University would lose its ability to operate in the relevant jurisdiction and to participate in Title IV programs there.
• If either Capella University or Strayer University fails to obtain recertification by the Department of Education when required, that University would lose its ability to participate in Title IV programs.
• A failure to demonstrate financial responsibility or administrative capability may result in the loss of eligibility to participate in Title IV programs.
• Student loan defaults in the U.S. could result in the loss of eligibility to participate in Title IV programs, although current rates are 0.0% due to COVID-era loan forbearance.
• Capella University or Strayer University could lose its eligibility to participate in federal student financial aid programs or be provisionally certified if the percentage of its revenues derived from those programs were too high (90/10 Rule).
• The failure by Capella University or Strayer University to comply with the Department of Education's incentive compensation rules could result in sanctions and other liability.
• The failure by Capella University or Strayer University to comply with the Department of Education's misrepresentation rules could result in sanctions and other liability, including recoupment of discharged borrower defense claims.
• Failure to comply with the Department of Education's gainful employment regulations effective July 1, 2024, as well as Congressionally legislated accountability metrics effective July 2026, could result in heightened disclosure requirements and loss of Title IV eligibility.
• The failure by Capella University or Strayer University to comply with the Department of Education's credit hour or direct assessment rules could result in sanctions and other liability.
• The failure by Capella University or Strayer University to comply with Federal civil rights laws (Title VI, Title IX, Section 504, ADA, Clery Act) could result in sanctions and other liability.
• Capella University and Strayer University are subject to sanctions if they fail to calculate accurately and make timely payment of refunds of Title IV program funds for students who withdraw.
• Investigations, legislative and regulatory developments, and general credit market conditions related to the student loan industry may result in fewer lenders and loan products and increased regulatory burdens and costs.
• Reliance on third parties for software and services necessary to administer participation in Title IV programs poses risks of non-compliance and loss of eligibility.
• Disruption in the ability to process student loans under the Federal Direct Loan Program could harm the business.
• Changes in the availability of Title IV funds by Congress, such as those introduced by the One Big Beautiful Bill Act (OBBBA), could materially adversely affect enrollment and financial condition.
• As enforcement of laws related to the accessibility of technology continues to evolve in the U.S., information technology development costs and compliance risks could increase.
• Enrollment rate is uncertain, and the company may not be able to estimate future enrollments effectively, impacted by macroeconomic factors and regulatory risks (e.g., Australian international student limits).
• Adding new locations, programs, and services is dependent on demand forecasts and regulatory approvals, which may be conditioned, delayed, or halted.
• Future success depends in part upon the ability to recruit and retain key personnel.
• Success depends in part on the ability to update and expand the content of existing academic programs and develop new programs in a cost-effective and timely manner.
• Financial performance depends in part on the ability to continue to increase awareness of academic programs among working adult students.
• Congressional and other governmental activities in the U.S. could damage the reputation of Capella University or Strayer University and limit the ability to attract and retain students.
• Strong competition in the post-secondary education market, including the online education market, which is subject to rapid technological changes.
• Competitors may attempt to duplicate proprietary rights and intellectual property, adversely affecting the business.
• Seasonal and other fluctuations in operating results could adversely affect the trading price of common stock.
• Regulatory requirements in the U.S. may make it more difficult to acquire the company.
• Capacity constraints or system disruptions to computer networks could damage the reputation of the institutions and limit the ability to attract and retain students.
• Computer networks, and those of third parties, may be vulnerable to cybersecurity risks (unauthorized access, viruses, ransomware, AI-enabled attacks) that could disrupt operations and require significant resources.
• Personal information collected may be vulnerable to breach, theft, or loss, subject to privacy and data security laws (FERPA, GLBA, CCPA, GDPR, Australian/NZ Privacy Acts), impacting reputation and operations.
• Failure to maintain adequate processes to prevent and detect fraudulent activity related to student online enrollment or financial aid could adversely affect operations.
• Use of generative artificial intelligence tools poses risks, including relating to quality, reputational damage, competitive disadvantage, cybersecurity, and evolving regulatory compliance.
• Operating institutions in the U.S., Australia, and New Zealand subjects the company to complex business, economic, legal, political, geopolitical, and foreign currency risks.
• Integrating SEI and Torrens University and associated assets in ANZ may be more difficult, costly, or time-consuming than expected, and anticipated benefits may not be fully realized.
• Goodwill and indefinite-lived intangible assets recorded in connection with acquisitions could become impaired in the future.
• The impact of pandemics and other possible future public health emergencies may adversely affect the business, future results of operations, and overall financial performance, including challenges from remote/hybrid working and increased cybersecurity risks.

Future Outlook

The company aims to be a leading innovator and provider of career-relevant education, focusing on improving student success, enhancing student experience, and addressing affordability. It plans to establish new platforms for growth, build employer relationships, and maintain a high-performing culture. The regulatory environment, particularly changes from the One Big Beautiful Bill Act (OBBBA) regarding federal student aid, new gainful employment regulations, and ongoing scrutiny of higher education institutions, will significantly influence future operations and financial performance. The company expects continued growth over the long-term and will invest in its strategy to strengthen the business foundation.

Management Comments

• 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.

Industry Context

StockSavvy.ai notes the U.S. post-secondary education market remains large, fragmented, and highly competitive, with increasing adoption of flexible online and hybrid learning models. The industry faces ongoing public policy debates related to access, affordability, and student outcomes, heavily dependent on Title IV funding. The Australian higher education market, after rebounding in 2023-2024, is now subject to new government measures to limit international student enrollments. The regulatory environment, particularly with the One Big Beautiful Bill Act (OBBBA) and new Gainful Employment regulations, introduces significant changes to federal student aid and accountability, increasing compliance burdens and uncertainty for institutions like Strategic Education. Increased governmental scrutiny on for-profit education and evolving civil rights laws (Title IX, Title VI) further shape a dynamic and challenging operational landscape.

Comparison to Industry Standards

• Capella University and Strayer University's 0.0% cohort default rates for 2020, 2021, and 2022 are consistent with the national average for proprietary institutions (also 0.0%) due to the COVID-19 repayment pause, indicating industry-wide impact rather than unique outperformance.
• The company's 90/10 Rule compliance (Capella at 67.88% and Strayer at 89.64% in FY2024) positions them below the 90% federal funding threshold, which is a favorable position compared to institutions operating closer to the limit, especially with the expanded definition of federal funds.
• Torrens University is highlighted as the only investor-funded university in Australia, distinguishing its operational and funding model from the predominantly public and other private institutions in the Australian higher education market.
• Strayer University's Jack Welch Management Institute (JWMI) MBA program is ranked as a Top-10 online MBA program by Princeton Review, indicating strong competitive standing against other MBA offerings.

Management Changes

Corporate Governance

Legal Proceedings

• Capella University received notice on January 25, 2024, and Strayer University on February 1, 2024, regarding approximately 6,700 and 1,900 borrower defense to repayment applications, respectively, filed between June 23, 2022, and November 15, 2022. The Department of Education has not yet adjudicated these claims or decided on recoupment.
• A lawsuit challenging the 2023 Gainful Employment Rule was upheld by the U.S. District Court for the Northern District of Texas in October 2025, with plaintiffs filing an appeal in November 2025. Capella University and Strayer University are not parties to this lawsuit.
• Multiple lawsuits challenging the 2024 Title IX Rule resulted in preliminary injunctions in several states, including an order on July 15, 2024, naming Capella University and Strayer University among nearly 700 schools. On January 9, 2025, the 2024 Title IX Rule was vacated nationwide by a U.S. District Court.
• Lawsuits challenging Executive Order 14173 (Ending Illegal Discrimination and Restoring Merit-Based Opportunity) and related Department of Education guidance (DCL and FAQs) led to a preliminary injunction, which was stayed pending appeal. The DCL and FAQs were vacated in August 2025, and a joint motion to dismiss the appeal was filed on January 21, 2026.
• The CFPB conducted an inquiry into the company's student loan servicing and collections practices, specifically regarding transcript withholding (a practice discontinued by the company prior to the CFPB notice). The CFPB identified a preliminary finding related to a product no longer utilized and required remediation, which the company completed. A review of remediation efforts is pending.
• The Department of Education's Office for Civil Rights initiated investigations into dozens of higher education institutions for alleged Title VI violations starting March 14, 2025.

Stakeholder Impact

• Shareholders: Experienced increased net income and diluted EPS, continued cash dividends, and benefits from the share repurchase program. Face potential risks from extensive regulatory changes, increased competition, and international enrollment limitations.
• Students: Benefit from improved student persistence, affordability initiatives (FlexPath, Learn and Earn Scholarship, Sophia Learning), and enhanced student support services. Are impacted by changes to federal student aid programs (OBBBA), new gainful employment regulations, and potential program ineligibility.
• Employees: Benefit from market-competitive compensation, comprehensive benefits, 401(k) Plan, Employee Stock Purchase Plan, paid time off, wellness programs, and tuition assistance. Some employees were affected by restructuring activities leading to position eliminations and severance.
• Employers: Benefit from the Education Technology Services segment's employer partnerships, Workforce Edge platform, and Sophia Learning, which provide education benefits programs and solutions for workforce development.
• Regulators: The company is subject to ongoing scrutiny and compliance requirements from federal (Department of Education, CFPB, FTC), state, and accrediting agencies, with significant legislative and regulatory changes impacting operations and compliance efforts.

Next Steps

• Public comment on proposed OBBBA regulations is open through March 2, 2026.
• The Department of Education anticipates convening the Accreditation, Innovation, and Modernization negotiated rulemaking committee in April-May 2026.
• NC-SARA's next policy modification process is expected to begin in January 2026.
• The Department of Education plans to publish Financial Value Transparency (FVT) and Gainful Employment (GE) metrics in early 2025 (though the reporting deadline was extended to September 30, 2025) and notify institutions of failing GE programs.
• Proposed changes to the gainful employment regulation are expected to be effective as early as July 1, 2027.
• A rehearing by the entire appellate court for National Treasury Employees Union v. Vought, et al. is scheduled for February 24, 2026.
• The Audit Committee will continue to receive quarterly cybersecurity updates from the Chief Information Officer and/or the CISO.
• Management will continue to assess goodwill and indefinite-lived intangible assets for impairment in future quarters.
• The company will continue to monitor any future developments that may affect its financial reporting related to the OECD's Pillar Two framework.
• The company is currently evaluating the impact that ASU 2024-03 (Income Statement Reporting Comprehensive Income-Expense Disaggregation Disclosures) and ASU 2025-06 (Intangibles-Goodwill and Other-Internal-Use Software) will have on its consolidated financial statements and related disclosures.
• The CFPB will conduct a review of the company's remediation efforts and, upon completion, will determine whether to close the 2022 exam.

Key Dates

Recommendation

Strategic Education, Inc. demonstrated strong financial performance in 2025 with increased revenue, net income, and EPS, driven by robust growth in its Education Technology Services segment and improved student persistence in USHE. The company's commitment to innovation and affordability is commendable. However, the extensive and rapidly evolving regulatory landscape in both the U.S. and Australia/New Zealand, including significant changes to federal student aid (OBBBA), gainful employment rules, and ongoing legal challenges related to Title IX and Title VI, introduces substantial uncertainty and potential future liabilities. While the company is proactive in compliance and has a strong balance sheet, these regulatory headwinds and declining enrollment in some segments warrant a cautious 'hold' stance for seasoned investors until the long-term impacts of these regulatory shifts become clearer.

Keywords

Strategic Education, Higher Education, Online Education, Capella University, Strayer University, Torrens University, Workforce Edge, Sophia Learning, SEC Filing, 10-K, Financial Results, Student Enrollment, Education Technology, Accreditation, Title IV, Student Loans, Regulatory Compliance, Australia, New Zealand, Financial Performance, Earnings, EPS, Share Repurchase, Cybersecurity, AI, OBBBA, Gainful Employment, Title IX, Title VI