To assess goodwill for impairment, the Company utilized a combination of an income approach and a market approach to determine the fair value of the ANZ reporting unit. The income approach consisted of a discounted cash flow model that included projections of future cash flows for the reporting unit, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return. The market approach was based on revenue multiples derived from a group of selected guideline public companies operating in the education sector. The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ reporting unit include, but are not limited to, the amounts and timing of expected future cash flows, revenue growth, operating margins, the discount rate, the terminal growth rate, and, for the market approach, the selection of guideline public companies and their related revenue multiples. The assumptions used in determining the expected future cash flows consider various factors such as historical operating trends, particularly in student enrollment and pricing, anticipated economic and regulatory conditions, reasonable expectations for planned business expansion opportunities, and long-term operating strategies and initiatives. The discount rate is based on the Company’s assumption of a prudent investor’s required rate of return for assuming the risk of investing in the ANZ reporting unit. The terminal growth rate reflects the sustainable operating income a reporting unit could generate in a perpetual state as a function of revenue growth, inflation, and future margin expectations. The guideline public companies used in the market approach were selected based on their similarity to the ANZ reporting unit, including consideration of industry, service offerings, and other relevant factors. The Company believes that these assumptions are consistent with a reasonable market participant view while employing the concept of highest and best use of the asset. These fair value measurements are based on significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy.
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Based on the results of this quantitative impairment assessment, the Company concluded that the carrying value of the ANZ reporting unit exceeded its estimated fair value by $ 127.0 million. Accordingly, the Company recognized a goodwill impairment charge of $ 127.0 million during the three and nine months ended September 30, 2026, representing the full excess of carrying value over fair value, as this amount did not exceed the total goodwill allocated to the reporting unit. The impairment charge is included in the Impairment of goodwill and intangible assets line on the unaudited condensed consolidated statements of income (loss). No events or circumstances occurred in the three and nine months ended September 30, 2026 to indicate an impairment to goodwill within the Company’s other reporting units. There were no impairment charges related to goodwill recorded during the three and nine months ended September 30, 2025.
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In connection with the interim impairment assessment described above, the Company also performed a quantitative impairment assessment of the ANZ indefinite-lived trade name intangible asset as of September 30, 2026. The Company used an income-based approach to determine the fair value of the ANZ trade name. The income approach consisted of a discounted cash flow model, using the relief from royalty method, which included a projection of future revenues for ANZ, identifying a royalty rate, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.
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The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ trade name include, but are not limited to, the amounts and timing of future revenue growth rates, the royalty rate, the discount rate, and the terminal growth rate. The assumptions used in determining the expected future revenue growth rates consider various factors such as historical operating trends, particularly in student enrollment and pricing, anticipated economic and regulatory conditions, reasonable expectations for planned business expansion opportunities, and long-term operating strategies and initiatives. The royalty rate is based on the Company’s assumption of what a reasonable market participant would pay to license the ANZ trade name, expressed as a percentage of revenues. The discount rate is based on the Company’s assumption of a prudent investor’s required rate of return for assuming the risk of investing in a particular company. The terminal growth rate reflects the sustainable revenue growth the business could generate in a perpetual state as a function of inflationary expectations. The Company believes that these assumptions are consistent with a reasonable market participant view while employing the concept of highest and best use of the asset. These fair value measurements are based on significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy.
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The Company’s effective income tax rate was 27.6 % and ( 12.6 )% for the three months ended September 30, 2025 and 2026, respectively, and 28.6 % and 514.8 % for the nine months ended September 30, 2025 and 2026, respectively. The rate for the three months ended September 30, 2026 reflects income tax expense recognized on a pre-tax loss, primarily attributable to a non-deductible goodwill impairment charge recorded during the quarter. The impairment charge was also the primary driver of the higher effective income tax rate for the nine months ended September 30, 2026.
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decisions for purposes of the False Claims Act in connection with federal grants and contracts.” Various lawsuits challenging Executive Order 14173 were filed in federal district court. Although the U.S. District Court for the District of Maryland initially granted a preliminary injunction enjoining portions of the executive order, the U.S. Court of Appeals for the Fourth Circuit stayed the injunction and, on February 6, 2026, vacated the injunction and remanded the case to the district court. After the district court denied another injunction, plaintiffs voluntarily dismissed the complaint without prejudice “in light of specific representations made by the government... about the narrow scope of the Executive Orders challenged in this case and the decision of the Fourth Circuit accepting those representations and recognizing that narrow scope” (i.e., that the Executive Orders did not seek to establish new law related to DEI). The district court terminated the case on June 30, 2026.
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On July 23, 2026, the Department announced its rescission of several disparate-impact provisions from the Title VI implementing regulations. The Department indicated the action aligns with President Trump’s April 23, 2025 Executive Order 14281 “Restoring Equality of Opportunity and Meritocracy” which ordered agencies, among other matters, to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability” and the Attorney General to “initiate appropriate action to repeal or amend the implementing regulations for Title VI of the Civil Rights Act of 1964 for all agencies to the extent they contemplate disparate-impact liability.” On October 19, 2026, the U.S. Supreme Court granted certiorari in Association for Education Fairness v. Montgomery County Board of Education, Docket No. 26-12, on the question “whether a plaintiff alleging that a school district implemented facially-neutral admissions criteria for a racially discriminatory purpose must show that the criteria produced a disparate impact on the targeted racial group before a court may consider evidence of discriminatory intent.”
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On October 1, 2026, the Australian Government announced that the National Code of Practice for Providers of Education and Training to Overseas Students 2018 was amended to impose a longer transfer restriction period for international students, affecting onshore transfers from other providers.
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Separately, during the third quarter of 2026, a new representative proceeding was commenced against Torrens. The proceeding alleges that Torrens underpaid casual academics by failing to pay them separately for marking and other tasks. The Company intends to defend against these claims vigorously and is unable to predict the outcome or financial impact of this proceeding at this time. Accordingly, no provision has been recognized. Refer to Note 16 - Litigation - within the footnotes to the unaudited condensed consolidated financial statements for additional information regarding these matters.
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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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Taken together, we determined these developments represented a triggering event that warranted an interim impairment assessment of the goodwill assigned to the ANZ reporting unit and the ANZ trade name in advance of our annual testing date of October 1, 2026. We elected to bypass a qualitative impairment assessment and proceeded directly to a quantitative impairment assessment using September 30, 2026 as the assessment date.
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To assess goodwill, we utilized a combination of an income approach and a market approach to determine the fair value of the ANZ reporting unit. The income approach consisted of a discounted cash flow model using a forecast period of 10 years, a discount rate of 11.5%, and a terminal growth rate of 3.0%. The market approach was based on revenue multiples of 1.30x to 1.50x derived from a group of selected guideline public companies operating in the education sector. Our conclusion of fair value for the ANZ reporting unit reflects a weighting of 75% for the income approach and 25% for the market approach, as we believe the income approach provides a more reliable indication of fair value for the reporting unit, with the market approach serving as corroborative support. We believe that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ reporting unit include the amounts and timing of expected future cash flows, revenue growth, operating margins, the discount rate, the terminal growth rate, and, for the market approach, the selection of guideline public companies and their related revenue multiples. Refer to Note 7 - Goodwill and Intangible Assets - within the footnotes to the unaudited condensed consolidated financial statements for additional information regarding the methodology and nature of these assumptions.
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Based on the results of this quantitative impairment assessment, we concluded that the carrying value of the ANZ reporting unit exceeded its estimated fair value by $127.0 million. Accordingly, we recognized a goodwill impairment charge of $127.0 million during the three and nine months ended September 30, 2026, representing the full excess of carrying value over fair value, as this amount did not exceed the total goodwill allocated to the reporting unit.
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We also performed a quantitative impairment assessment of the ANZ trade name as of September 30, 2026. We used an income-based approach to determine the fair value of the ANZ trade name. The income approach consisted of a discounted cash flow model, using the relief from royalty method, with a forecast period of 10 years, a discount rate of 12.0%, a royalty rate of 2.5%, and a terminal growth rate of 3.0%. Based on the results of this assessment, we concluded that the carrying value of the ANZ trade name exceeded its estimated fair value by $7.1 million. Accordingly, we recognized an impairment charge of $7.1 million related to the ANZ trade name during the three and nine months ended September 30, 2026.
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As of September 30, 2026, following these impairment charges, the ANZ reporting unit had $408.5 million of remaining goodwill and $60.0 million of remaining indefinite-lived intangible assets. As these impairment charges reduced the carrying value of the ANZ reporting unit’s goodwill and the ANZ trade name to their respective estimated fair values, no headroom remains. If ANZ’s operating performance does not progress in line with our projections, or if the discount rate, terminal growth rate, royalty rate, revenue projections, operating margins, or revenue multiples change adversely, the remaining goodwill and/or trade name could become further impaired in future periods. Management will continue to assess these assets for impairment in future quarters.
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No events or circumstances occurred in the three and nine months ended September 30, 2026 to indicate an impairment to goodwill or indefinite-lived intangible assets related to any of our other reporting units.
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Impairment of goodwill and intangible assets. Impairment of goodwill and intangible assets includes goodwill and indefinite-lived intangible asset impairment charges recorded in the third quarter of 2026 related to the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.
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to higher revenue, partially offset by higher technology-related costs, corporate expenses, and increased investments in branding initiatives.
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Impairment of goodwill and intangible assets. Impairment of goodwill and intangible assets includes goodwill and indefinite-lived intangible asset impairment charges recorded in the third quarter of 2026 related to the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.
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• goodwill and intangible asset impairment charges related to the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand;
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(2) Reflects an impairment of goodwill and intangible assets related to the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.
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(5) For the three and nine months ended September 30, 2026, approximately 433,000 and 446,000, respectively, incremental shares attributable to stock awards were excluded from the diluted share count for GAAP purposes because their impact would have been anti-dilutive due to the net losses for the periods.
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(3) For the three and nine months ended September 30, 2026, approximately 433,000 and 446,000, respectively, incremental shares attributable to stock awards were excluded from the diluted share count for GAAP purposes because their impact would have been anti-dilutive due to the net losses for the periods.
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Risk Factors
We are required to assess goodwill and indefinite-lived intangible assets for impairment at least annually. In the third quarter of 2026, we recognized impairment charges related to the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand. We recorded a goodwill impairment charge of $127.0 million during the three and nine months ended September 30, 2026 in connection with our assessment that the carrying value of the ANZ reporting unit exceeded its estimated fair value. We also recognized an impairment charge of $7.1 million related to the ANZ trade name during the three and nine months ended September 30, 2026. As a result, there is no remaining cushion between the carrying values of the ANZ reporting unit’s goodwill and the ANZ trade name and their respective estimated fair values, such that any further decline in ANZ’s projected cash flows or other key assumptions underlying these estimates could result in additional impairment charges. Any future impairment charges could have a material impact on operating results and statements of financial position of the Company.
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