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Item 1A. Risk Factors

2023-03-14 compared with 2022-03-02 · 515 added, 434 removed, 375 unchanged (72% of the section changed)

Investing in our common stock involves a high degree of risk.

Before making an investment in our common stock, you should carefully consider the following risks, as well as the other information contained in this Annual Report, including our “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Any of the risk factors described below could significantly and adversely affect our business, financial condition, operating results, cash flows, and prospects.

Any of the risk factors described below could significantly and adversely affect our business, financial condition, results of operations, cash flows, and prospects.

The risks and uncertainties described below are not the only ones we face.

Additional risks and uncertainties not presently known to us or that we currently believe are not material may also adversely affect our business, financial condition, operating results, cash flows, and prospects.

Additional risks and uncertainties not presently known to us or that we currently believe are not material may also adversely affect our business, financial condition, results of operations, cash flows, and prospects.

As a result of the risks and uncertainties described below as well as such additional risks and uncertainties, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic has caused us to adjust our operations, which could adversely affect the student experience, particularly at RU and HCN, and could have additional adverse effects on our business, financial condition, or results of operations.

As discussed more fully in “Overview – COVID-19 Pandemic” in Part I, Item 1 of this Annual Report, the COVID-19 pandemic has prompted us to adjust our operations throughout our business, and we could experience additional impacts in the future if the pandemic and its effects are prolonged or increase in scope.

At RU and HCN, ongoing impacts from the COVID-19 pandemic could disrupt educational services provided to students and increase costs to continue to deliver courses in person and online.

There can be no assurance that our protective measures will prevent cases of COVID-19 among our employees and students, or that RU and HCN will not need to again further limit campus interactions or close campus operations.

Our institutions continue to adjust their operations to respond to regularly changing government regulations and public health guidance.

In addition, although we have leveraged the expertise of APUS and RU in online delivery of curriculum, we have limited experience delivering HCN’s curriculum online, and in the event that HCN’s students’ academic studies move online, they may not experience the same level of success in online coursework or with NCLEX scores following online coursework as they would in a campus environment.

While RU has more experience with online delivery of curriculum, RU’s pre-licensure nursing programs have also been required to adjust their operations and in some cases move to a blended or online learning model, including with respect to practicum learning that would typically be done in a clinical or laboratory setting.

Numerous challenges have arisen, or may arise, from adjustments to the learning experience as a result of COVID-19, including the shift to virtual learning.

For example, some RU students have had to spend additional time enrolled because they have not have had the opportunity to obtain clinical experience during the expected or scheduled quarter of study due to a lack of clinical site availability.

Retention for students decreased in the 2020-2021 reporting year, as compared to the 2019-2020 reporting year, which we believe in part is due to many students preferring not to take classes online due to the potential impact on their performance.

Survey data indicates that students have also been impacted by challenges in signing on to virtual classes at home, providing childcare while remote schooling, and juggling education and employment or caring for ill family members during the pandemic, which we believe may have also impacted retention.

The COVID-19 pandemic also placed pressure on the hiring and retention of qualified nursing faculty at RU and HCN due to the related demand for healthcare workers.

For example, decreases in the permitted faculty to student ratio at clinical sites have increased the demand for faculty coverage to meet student needs at a time when qualified faculty are more difficult to hire and retain.

Please refer to the Risk Factor that begins “If we are unable to attract, retain, and develop skilled personnel .

We believe staffing pressures have adversely affected and could continue to adversely affect the size of new student cohorts and total enrollment at RU, as well as program outcomes.

In 2020, we experienced an increase in net course registrations at APUS and an increase in student enrollment at HCN, and RU similarly experienced an increase in its enrollments.

We believe the increases were in part due to the impact of the COVID-19 pandemic, including an increase in demand for nursing education and a change in the competitive environment due to COVID-19.

Recent trends at APUS and RU show a moderation in registration and enrollments, and we believe HCN could experience a similar situation.

When the pandemic abates, we believe near-term demand for our programs could moderate further.

Changes to our teaching methodology and other changes to our programs at HCN and RU, including as a result of the COVID-19 pandemic, could have an adverse impact on the ability of HCN’s and RU’s graduates to obtain professional licensure, employment, or other outcomes, which could reduce our enrollments and revenue, limit our ability to offer educational programs, and potentially lead to litigation that could be costly to us.

State boards of nursing generally require applicants for licensure to practice nursing to have successfully completed a nursing education program that is approved by the state board.

As discussed more fully in “Regulatory Environment - State Authorization/Licensure of Our Institutions” in Part I, Item 1 of this Annual Report, failure to satisfy a state board of nursing’s relevant NCLEX pass rate can result in the state board taking adverse actions against the nursing program, including and up to withdrawal of approval.

For example, HCN’s ADN Program has been on provisional approval from the OBN since March 2017 due to not meeting the OBN pass rate standard for four consecutive years.

Both HCN and RU monitor, assess, and implement changes designed to improve NCLEX scores over time in order to meet each state board’s requirements, but there is no assurance that such changes will be successful or will not have negative effects on RU’s nursing enrollments or HCN’s overall enrollments.

For example, HCN in past periods experienced lower than planned ADN program enrollments that we believe were at least partly associated with the implementation of new academic achievement and admissions requirements.

In addition, we cannot be certain that factors beyond our control, such as the ongoing COVID-19 pandemic, will not have a negative impact on the student experience, student outcomes and NCLEX scores.

If RU’s nursing graduates or HCN’s graduates fail to obtain professional licensure or employment or experience other negative outcomes in their chosen fields of study, including as a result of the COVID-19 pandemic and the resulting changes to our academic programs, we and our institutions could be exposed to litigation, including class-action litigation, claiming that we are at fault for such failure, which would force us to incur legal and other expenses that could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Adverse impacts on HCN or RU resulting from the COVID-19 pandemic could also lead to an impairment of goodwill.

COVID-19-related relief laws and regulatory guidance contain provisions that could benefit some institutions more than others or that may be ambiguous or subject to change, we may have difficulty adjusting our systems to comply, and failure to comply could subject us to penalties.

As discussed more fully in “Overview – COVID-19 Pandemic,” multiple laws passed during the COVID-19 pandemic, including the CARES Act, the CRRSAA and the ARPA, include provisions designed to provide relief to higher education institutions in connection with the pandemic through, among other things, HEERF.

Among other provisions, these laws place certain conditions on and limit expenditure of HEERF funds.

Our institutions’ failure to comply with applicable provisions of these laws, including provisions related to funding and waivers of Title IV requirements, or with ED guidance related to the COVID-19 pandemic, both of which contain ambiguities, could result in administrative sanctions including fines, restrictions on our ability to participate in Title IV programs, debarment and suspension, and liabilities under applicable law, such as the False Claims Act.

The CARES Act and related ED guidance waive certain federal student financial aid requirements in connection with COVID-19 developments and, to the extent such waivers apply to our institutions, we may have difficulty adjusting our systems to comply with those waivers.

In addition, ED guidance related to the COVID-19 pandemic may change as the pandemic continues.

We cannot predict what additional regulatory actions may be taken or legislation put in place in connection with the COVID-19 pandemic or what impact such regulations or legislation may have on us or our institutions, if any.

Risks Related to Attracting and Retaining Students

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Building awareness and reputation among potential students of our institutions and the programs they offer is critical to our institutions’ ability to attract new students.

In order to maintain and increase our revenue and profits, our institutions must continue to attract new, qualified students in a cost-effective manner, and these students must remain active in our institutions’ programs.

In order to maintain and increase our revenue, profits, and cash flows, our institutions must continue to attract new, qualified students in a cost-effective manner, and these students must remain active and successful in our institutions’ programs.

In addition, because our institutions experience declines in their student populations as a result of graduation, transfers to other academic institutions, withdrawals, military deployments, and other reasons, in order to grow we need to first attract sufficient students to replace those who have left.

Some of the factors that could prevent us from successfully advertising and marketing our institutions’ programs and from successfully enrolling and retaining qualified students in those programs include:

• our institutions’ failure to maintain accreditation, state authorization, eligibility for Title IV programs or other sources of financial aid, or other approvals;

• the emergence of more, and more successful, competitors, and alternative education models, including from military services, as a greater number of schools pursue online education, and in the nursing education geographies we serve;

• changes and revisions to policies of the DoD and the various military services;

• challenges in maintaining strong relationships with military and military-affiliated communities;

• the emergence of more, and more successful, competitors, and alternative education models, including from military services and as a greater number of schools pursue online education;

• factors related to our institutions’ marketing, including the costs of internet advertising and multi-faceted interactive marketing campaigns;

• challenges in designing marketing campaigns that successfully attract college-ready students;

• challenges in designing initiatives that successfully attract students, including nursing students, who are likely to persist and succeed in our programs;

• the reduced availability of, or higher interest rates and other costs associated with, Title IV loan funds or other sources of financial aid;

• performance problems with our institutions’ online systems;

• our institutions’ failure to maintain accreditation, state authorization, eligibility for Title IV programs or other sources of financial aid, or other approvals;

• increased regulation of online education, including in states in which we do not have a physical presence;

• limitations on our ability to enroll nursing students or offer nursing education programs as a result of failure to satisfy NCLEX pass rate requirements;

• investigations or litigation by government agencies, other regulators, or private parties that may limit our ability to operate or damage our reputation;

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• student dissatisfaction with our institutions’ services and programs;

• a decrease in the perceived or actual economic benefits that students derive from our institutions’ programs or programs provided by for-profit schools generally;

• failure to develop, deliver and maintain a message or image that resonates well with our institutions’ students;

• adverse publicity regarding us, our institutions, our competitors, or online or for-profit education generally;

• challenges related to dependence on a third-party and decreased control over messaging as a result of RU’s reliance on Collegis LLC, or Collegis, for marketing services;

• challenges related to RU’s transition from Collegis for marketing services to in-house marketing;

• failure to maintain and improve our campuses;

• challenges in maintaining, developing, and expanding GSUSA’s customer relationships with the federal government and its employees, including as a result of challenges in marketing to the federal government;

• a decline in the acceptance of or demand for online education generally, including as the COVID-19 pandemic abates;

• a decrease in the perceived or actual economic benefits that students derive from our institutions’ programs or programs provided by for-profit schools generally.

If we are unable to continue to develop awareness and reputation of our institutions and the programs we offer, and to recruit and enroll students that persist in our programs over time, our enrollments will suffer and there could be a material adverse effect on our financial condition and results of operations.

If we are unable to effectively market our programs or expand into new markets, including by opening new campuses, our operating results would be negatively affected.

Our marketing strategy for APUS traditionally focused on building long-term, mutually beneficial relationships with organizations and individuals in the military, military-affiliated, and public service communities.

However, with limitations on access to military students, as discussed further below under the Risk Factor that begins “If APUS does not have strong relationships with, and access to, various military installations .

.” and with a continued focus on efforts to attract students outside of the military, we must continue to focus on marketing channels that attract college-ready students unaffiliated with the military who perform well at APUS.

However, we have experienced challenges attracting college-ready students unaffiliated with the military who perform well at APUS, and there is no assurance that we will be able to do so on a cost-effective basis.

Furthermore, because APUS’s tuition is generally lower than that of most of its competitors, it has fewer dollars to spend per student on marketing and advertising than they do.

Nevertheless, APUS has tried to, and may in the future try to, implement new marketing tactics and channels, including those with which it has no experience, and which have no guarantee of success.

For example, we increased marketing expenditures in fiscal year 2020, including to support a new advertising campaign focusing on affordability and return on investment for learners.

• a decline in the acceptance of or demand for online education generally, including as the COVID-19 pandemic continues to abate.

If we are unable to continue to develop awareness and a positive reputation of our institutions and the programs we offer, and to recruit and enroll students that persist in our programs over time, our enrollments will suffer and there could be a material adverse effect on our financial condition and results of operations.

If we are unable to effectively market our programs or expand into new markets, our results of operations would be negatively affected.

Our marketing strategy for APUS traditionally focused on building long-term, mutually beneficial relationships with businesses, other organizations, and individuals in the military, military-affiliated, and public service communities.

We must continue to develop and expand marketing channels that attract college-ready students unaffiliated with the military who may perform well at APUS, including given limitations on access to military students, as discussed further below under the Risk Factor that begins “If APUS does not have strong relationships with, and access to, various military installations...”, and a continued focus on efforts to attract students outside of the military, including in order to maintain compliance with the 90/10 Rule.

However, we have experienced challenges attracting such students, and there is no assurance that we will be able to do so on a cost-effective basis or to prevent a further decline in non-military enrollments at APUS.

Furthermore, because APUS’s tuition is generally lower than that of most of its competitors, it has fewer dollars to spend per student on marketing and advertising than our competitors.

Our pricing structure and margin profile may limit the availability of financial resources to be used for marketing and enrollment generation purposes.

Nevertheless, we have tried to, and may in the future try to, implement new marketing tactics and channels, including those with which we have no experience, and there is no guarantee that our marketing and branding efforts will achieve their desired results.

If we are unable to develop and optimize marketing and advertising programs that are effective in developing awareness of our institutions and the programs we offer and their value propositions and are unable to enroll and retain qualified students in military and non-military markets, our enrollments would suffer, and there could be a material adverse effect on our financial condition and results of operations.

The success of RU and HCN depend, in part, on our ability to maintain and increase student enrollments in those institutions’ programs.

As part of our strategy to continue to build a national nursing platform, we intend to continue to open new campuses and other operating locations for RU and HCN, such as the new HCN campuses in Indianapolis, Indiana and Akron, Ohio that began operations in April 2020 and April 2021, respectively.

As part of our strategy to continue to build a national nursing platform, we intend to open new campuses and other operating locations, similar to the new HCN campus in Detroit, Michigan that started its first class in October 2022.

Such actions require us to obtain appropriate federal, state, and accrediting agency approvals and to comply with any requirements from those agencies related to a new location.

We continue to work on identifying the appropriate balance of academic achievement requirements, admissions requirements, and attracting appropriate students, as well as identifying and remediating the factors impacting enrollments, but cannot predict whether our initiatives and efforts will be successful over the long term.

In addition, with the opening of new campuses, we have been and will be marketing in geographic areas in which RU and HCN did not previously have a campus.

If in the future we are unable to effectively market RU’s and HCN’s programs, we may not be able to successfully maintain and increase those institutions’ enrollments, which would negatively affect our operating results.

In addition, with the opening of new campuses, we have been and will be marketing in geographic areas in which our institutions did not previously have a campus, and these marketing efforts may not be successful.

If we are unable to, or suffer any delay in our ability to, obtain appropriate approvals and accreditations, open, and attract additional students to new campus locations, offer programs at new campuses in a cost-effective manner, identify appropriate clinical placements, or otherwise effectively manage the operations of newly established campuses, our results of operations and financial condition could be adversely affected.

For example, RU is currently subject to ED-imposed restrictions on new programs and locations in terms of Title IV program eligibility, which could limit or adversely affect RU’s near-term growth opportunities, including restricting its ability to serve additional students.

In addition, the inability to expand existing programs efficiently, or successfully, including as a result of constraints on our operations due to COVID-19, pursue new program initiatives, and add new campuses would harm our ability to grow our business and could have an adverse impact on our financial condition.

In addition, the inability to expand existing programs efficiently, or successfully, pursue new program initiatives, and add new campuses, including as a result of marketing failures, would harm our ability to grow our business and could have an adverse impact on our financial condition.

If APUS does not have strong relationships with, and access to, various military installations and installation education centers, our ability to maintain enrollments from military students and our future growth may be impaired.

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Because APUS relies on referrals and personal relationships for recruiting, impediments to access can have an adverse effect on maintaining and generating registrations from military students.

Generally, DoD prohibits educational institutions from holding office hours solely to provide counseling and former military members from accessing installations to represent an educational institution using government ID card privileges.

This has adversely affected our efforts to support existing students and serve new students since the policy was implemented.

Furthermore, the DoD MOU, which specifies terms and conditions of participation in TA and is discussed in more depth in “Regulatory Environment - Department of Defense,” and the related increased focus by DoD on relationships with and oversight of educational providers, or additional DoD restrictions, could lead to further adverse changes in the nature of our relationships with military installations and their education centers and our access to military service members.

DoD requires us to meet certain criteria, including generally having at least 20 students on base, and to request access in writing, in order to access installations solely to provide counseling, and the Air Force expressly prohibits us from holding regular or recurring office hours on installations solely to provide counseling.

This adversely affects our efforts to support existing students and serve new students.

Furthermore, DoD MOUs, which specify terms and conditions of participation in TA and are discussed in more depth in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense”, and the related increased focus by DoD on relationships with and oversight of

educational providers, or additional DoD restrictions, could lead to adverse changes in the nature of our relationships with military installations and their education centers and our access to military service members.

An inability to maintain strong relationships with installation education centers and with military service members would have an adverse effect on APUS’s ability to attract and retain qualified students, resulting in an adverse effect on our financial condition.

Our student registrations and revenue have been adversely impacted and we could continue to experience adverse impacts as a result of the Army’s transition from GoArmyEd to ArmyIgnitED.

Army service members participating in TA programs constituted approximately 16% of APUS’s adjusted net course registrations for 2021.

Our student registrations, revenue, and cash flow have been adversely impacted and we could continue to experience adverse impacts as a result of the Army’s transition to new systems for soldiers to request TA.

APUS relies on the ability of the Army, and the other branches of the Armed Forces, to process service members’ participation in TA programs, and from time to time, changes to processes have impacted the ability of service members to participate in those programs.

For example, the Army in 2021 transitioned from its legacy system, GoArmyEd, to a new system, ArmyIgnitED, for soldiers to use to request TA.

As described more fully in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview,” this transition has been beset by delays and disruption of the Army’s TA programs.

Soldiers can continue to directly register for courses with the expectation TA could be retroactively applied for, and the Army created a process for soldiers to seek reimbursement for out-of-pocket costs incurred during ArmyIgnitED’s unavailability.

While the ArmyIgnitED system went live for soldiers seeking to use TA for courses at APUS on July 19, 2021, we continue to experience challenges related to system performance, process changes and software defects, and there is no assurance that the new portal will ever work correctly or efficiently or will not have continuing impacts on soldiers’ ability to participate in the TA programs or receive funds under those programs.

There was an adverse impact on registrations and revenue for the second and third quarters of 2021.

The inability of soldiers to participate in TA programs, or continued or additional limitations on their ability to apply and participate, would have an adverse effect on our results of operations and financial condition, particularly because soldiers make up the largest group of TA participants at APUS.

In addition, TA will have to be retroactively sought and obtained for soldiers who registered for courses during the period beginning March 8, 2021.

As a result, it is possible that we could incur bad debt expenses if soldiers who expect to receive TA do not receive it and do not otherwise pay the tuition for their courses.

The disruption to the Army’s systems has also adversely impacted APUS’s ability to invoice the Army for Army registrations and has adversely impacted accounts receivable.

As of December 31, 2021, approximately $27.0 million, of which $18.2 million is older than 60 days from the course start date, was due from the Army due to the disruption caused by the transition to ArmyIgnitED.

This transition was beset by delays and disruption of the Army’s TA programs.

In connection with the transition, we experienced challenges related to system performance, process changes and third-party software defects, and there was an adverse impact on registrations and revenue, profits, and cash flow in second and third quarters of 2021.

Due to the transition, ArmyIgnitED does not currently reflect all courses previously taken by soldiers at APUS in the relevant period or all amounts due to APUS.

Our efforts to work with the Army to resolve these discrepancies continue but may be unsuccessful.

We could incur bad debt expense if the Army does not recognize and process payments for all courses taken by soldiers during this period, or if soldiers do not otherwise pay the tuition for courses not reimbursed through Army TA.

In August 2022, the Army transitioned from the initial version of ArmyIgnitED to an upgraded ArmyIgnitED 2.0, with a new third-party service provider, and announced that all TA requests for courses beginning on or after October 1, 2022 must be submitted via ArmyIgnitED 2.0.

As part of this change, the Army stopped allowing institutions to submit invoices from July 30, 2022 until August 29, 2022, which impacted our ability to collect on our accounts receivable, caused our accounts receivable to increase and, as a result, may cause our bad debt expense to increase.

As of December 31, 2022, approximately $26.0 million, of which $16.5 million is older than 60 days from the course start date, was due from the Army due to the disruption caused by the transition to ArmyIgnitED and upgrade to ArmyIgnitED 2.0.

There can be no assurance that our efforts to mitigate any adverse impact of the transition to ArmyIgnitED 2.0 on accounts receivable, bad debt, and cash flow will be successful or that ArmyIgnitED 2.0 will work as expected.

Furthermore, some payments from the Army that were expected in 2022 were delayed into 2023, which together with recent amendments to the 90/10 Rule is expected to cause APUS’s 90/10 Rule percentage to increase and could make it less likely that APUS meets the 90/10 Rule requirements for 2023.

Any future delays in receipt of funds from the Army, or other service branches could have an adverse impact on our cash flow and results of operations.

Difficulties associated with this or any further upgrade or transition to a new service provider, including the related data migration, could cause further disruption to soldiers’ ability to seek and obtain TA and to the Army’s processing of invoices and payments to APUS.

We could experience similar challenges with any other system transitions undertaken by other branches of the DoD or the government.

For example, VA has announced that it plans in 2023 to upgrade systems used for veteran education benefits, and we have no assurance that this upgrade will not disrupt veteran access to those benefits and our ability to collect on related accounts receivable.

The inability of soldiers to participate in TA programs, or of veterans to access VA education benefit programs, or continued or additional limitations on their ability to apply and participate, would have an adverse effect on our results of operations and financial condition.

Enrollments and course registrations by active-duty service members may be adversely affected by a variety of factors not directly related to education programs, including changes in military activity and budgets.

Events not directly related to education programs could lead to a reduction in registrations from students on active-duty.

For example, APUS experienced an increase in net course registrations in 2020, which was driven in part by active-duty service members, and which we believe may have been due in part to the impact of the COVID-19 pandemic.

Recent trends at APUS show a moderation in registration and enrollments, and the end of the pandemic could adversely affect enrollments and course registrations by active duty service members.

For example, after experiencing an increase in net course registrations in 2020, which we believe may have been due in part to the impact of the COVID-19 pandemic, registration and enrollments thereafter moderated, including as a result of broader education sector enrollment headwinds and, in certain periods, disruption resulting from the transition to ArmyIgnitED.

Large-scale personnel reductions or other significant drawdowns of U.S.

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Increased operations and overseas deployments could also negatively impact the ability of certain active-duty military students to pursue higher education, including due to increased demands on active-duty service members and limited internet access associated with some deployments.

Military budget cuts or constraints could negatively affect us by leading to force reductions or cuts to services and tools that we or APUS’s students rely upon for recruitment, enrollment, access, and tuition assistance.

The United States is nearing the federal debt ceiling, the Department of the Treasury has begun implementing measures to prevent a default on the U.S.

national debt, and certain members of Congress have called for negotiations to reduce federal spending in exchange for increasing the debt ceiling.

Budget cuts or constraints, including in connection with the failure to increase or a delay in increasing the federal debt ceiling, could negatively affect us by leading to force reductions or cuts to

services and tools that we or APUS’s students rely upon for recruitment, enrollment, access, and TA.

Even temporary changes to military activity and budgets may adversely affect operations.

For example, funding for the federal government or portions thereof, including the DoD, Department of Homeland Security, and Coast Guard, lapsed and resulted in partial shutdowns in 2018 and 2019.

Any future government shutdown could have a material adverse effect on APUS’s enrollments.

Any future government shutdown could have a material adverse effect on APUS’s enrollments and on our cash flows, results of operations, and financial condition, and U.S.

government default on its debt would have broad adverse macroeconomic effects that would materially affect our cash flow and results of operations.

We will remain subject to the risk of events that occur within and with respect to the military, even where they do not directly relate to the use of TA.

Because of our dependence on active-duty military students, changes that occur within and with respect to the military could have a material adverse effect on our operations.

DoD’s MOU imposes extensive regulatory requirements on our institutions with respect to participation in DoD tuition assistance programs, and our revenue and number of students would decrease if our institutions are no longer able to receive funds under DoD tuition assistance programs or if tuition assistance is reduced, eliminated, or suspended.

As described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense” and “Regulatory Environment – Compliance with Regulatory Standards and the Effect of Regulatory Violations – Compliance Reviews,” each institution participating in TA is party to an MOU outlining certain commitments and agreements in connection with accepting funds from TA.

DoD’s MOUs impose extensive regulatory requirements on our institutions with respect to participation in DoD TA programs, and our revenue and number of students would decrease if our institutions are no longer able to receive funds under DoD TA programs or if TA is reduced, eliminated, or suspended.

As described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense” and “Regulatory Environment – Compliance with Regulatory Standards and the Effect of Regulatory Violations – Compliance Reviews”, each institution participating in TA is party to an MOU in a similar form outlining certain commitments and agreements in connection with accepting funds from TA.

For example, the MOUs include an agreement to participate in the ICP in order to participate in TA.

An institution that is found noncompliant with DoD requirements through the ICP and demonstrates an unwillingness to resolve a finding may be subject to a range of penalties from a written warning to termination of the institution’s participation in TA.

In November 2020, DoD found, in connection with the ICP, that APUS did not clearly articulate certain policies or clearly make certain disclosures, which resulted in APUS submitting a corrective action plan and evidentiary support, subsequent to which ED informed APUS that it had completed the review process and no further actions were required.

The DoD MOUs also provide that an institution may only participate in TA if it is accredited by an accrediting agency recognized by ED, approved for VA funding, and a participant in Title IV programs.

Failure to comply with an MOU could result in an institution losing the ability to participate in TA.

We also believe that in certain circumstances DoD may impose sanctions for failure to comply other than denying an institution the ability to participate in TA, including restricting student enrollment in tuition assistance programs, suspending an institution from enrolling new students, limiting access to military installations, subjecting the institution to heightened compliance oversight, or otherwise limiting an institution’s ability to participate in TA.

We also believe that in certain circumstances DoD may impose sanctions for failure to comply other than denying an institution the ability to participate in TA, including restricting student enrollment in TA programs, suspending an institution from enrolling new students, limiting access to military installations, subjecting the institution to heightened compliance oversight, or otherwise limiting an institution’s ability to participate in TA.

If we fail to comply with the requirements of an MOU, it could result in sanctions, up to losing the ability to participate in TA, that could have a significant adverse effect on our results of operations and financial condition.

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Changes to eligibility requirements under TA have already occurred, and there could be additional changes to the programs in the future.

For example, effective October 1, 2021, the funding for Navy service members was limited due to the increase in number of years of service before funds can be received.

For example, as of October 2021, funding for Navy service members was limited due to the increase in number of years of service before Navy service members are eligible to receive funds.

Additional changes to TA could occur due to Congressional action or DoD policy and funding changes.

For example, the failure of Congress to pass continuing resolutions has limited the release of funds at times in the past, such as during a 35-day partial government shutdown that began in December 2018 in which the Coast Guard suspended its TA program.

Annual TA funding is limited and could be exhausted in any given year due

to budget constraints or changes in demand or policy.

For example, TA benefits available to sailors for the fiscal year ended September 30, 2019 were expected to be exhausted by the end of May 2019 as a result of increased demand, and effective May 28, 2019 the Navy ceased approving TA funds for eligible sailors until the start of the new government fiscal year, resulting in a significant negative impact on our results of operations for the third quarter of 2019.

For example, the failure of Congress to pass appropriations legislation has limited the release of funds at times in the past, such as during a partial government shutdown that began in December 2018 in which the Coast Guard suspended its TA program, and could do so in the future as well, including as a result of budget disputes related to the federal debt ceiling.

Annual TA funding is limited and could be exhausted in any given year due to budget constraints or changes in demand or policy.

For example, as a result of the expected exhaustion of annual TA benefits available to sailors, in May 2019, the Navy ceased approving TA funds for eligible sailors until the start of fiscal year 2020, which adversely impacted our results of operations for the third quarter of 2019.

We are unable to predict whether and to what extent the Navy or other services will impose limitations on TA approvals in the future as a result of limited funding.

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Changes in funding allocations could have a material adverse effect on APUS’s enrollments.

If we are no longer able to receive funds from TA, or if those programs are modified, reduced, eliminated, or temporarily suspended, our enrollments and revenue could be significantly reduced, which would result in a material adverse effect on our results of operations and financial condition.

See also “Our student registrations and revenue have been adversely impacted and we could continue to experience adverse impacts as a result of the Army’s transition from GoArmyEd to ArmyIgnitED” above.

If we are no longer able to receive funds from TA, or if those programs are modified, reduced, eliminated, or temporarily suspended, our enrollments, revenue, and cash flow could be significantly reduced, which would result in a material adverse effect on our results of operations and financial condition.

See also “Our student registrations, revenue, and cash flows

have been adversely impacted and we could continue to experience adverse impacts as a result of the Army’s transition to new systems for soldiers to request TA” above.

Changes our institutions may make to their operations to improve the student experience and enhance their ability to identify and enroll students who are likely to succeed may adversely affect our institutions’ enrollment, profitability, financial condition, results of operations, and cash flows.

We have identified, and continue to work to identify, potential changes and initiatives that we believe will more effectively attract and enroll students who are ready for and who are likely to persist in our institutions’ programs, support those students, and help improve their educational outcomes, including through changes to admissions, initiatives to increase the level of engagement and collaboration in the classroom and to strengthen the bond between APUS and its students, and changes to HCN’s curriculum and academic achievement and course retake policies.

We have identified, and continue to work to identify, potential changes and initiatives that we believe will more effectively attract and enroll students who are ready for and who are likely to persist in our institutions’ programs, support those students, and help improve their educational outcomes, including through changes to admissions, initiatives to increase the level of engagement and collaboration in the classroom and to strengthen the bond with students, the establishment of a center for nursing excellence at RU, and changes to curriculum and academic achievement and course retake policies.

Additional initiatives may include the following:

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If our institutions are unable to successfully adjust to future market demands by updating and expanding the content of existing programs and developing new programs, specializations, and modes of teaching on a timely basis and in a cost-effective manner, our performance may be impaired.

We believe that our institutions need to continuously update and expand the content of their existing programs and develop new programs, specializations, and modes of teaching in order to continue to retain and attract qualified students.

However, the updates and expansions of our institutions’ existing programs and the development of new programs and specializations may not be accepted by their accreditors, state regulators, ED, existing or prospective students, or employers.

However, the updates and expansions of our institutions’ existing programs and the development of new programs and specializations may not be accepted by accreditors, state and federal regulators such as ED, existing or prospective students, or employers.

If we cannot respond to changes in market requirements, our business may be adversely affected.

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In addition, growth restrictions may be imposed on our institutions in connection with changes in ownership or otherwise that adversely impact our ability to adjust to future market demands.

For example, RU is currently subject to ED-imposed restrictions on new programs and locations and on the number of students receiving Title IV who can be enrolled at RU.

These restrictions could limit or adversely affect RU’s growth opportunities, including restricting its

ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current needs by providing new or modified programs.

For example, RU is currently subject to ED-imposed restrictions on new programs and locations and on the number of students receiving Title IV who can be enrolled at RU and to state-imposed constraints on enrollment in Minnesota and admitted students in Illinois.

These restrictions could limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current needs by providing new or modified programs.

If we are unable to respond adequately to changes in market requirements due to financial constraints, regulatory limitations, or other factors, our institutions’ ability to attract and retain students could be impaired and our financial results could suffer.

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Our institutions may have limited experience providing courses in new fields of study or new modes of teaching (such as micro-credentials, or other non-degree credentials) and may need to modify systems and strategies or enter into arrangements with other institutions and organizations to provide new programs effectively and profitably.

If our institutions are unable to establish new academic programs, increase the number of students enrolling in new academic programs, offer programs in a cost-effective manner, or otherwise manage effectively the operations of those programs, our results of operations and financial condition could be adversely affected.

We have limited experience participating in the DoD’s credentialing assistance programs, and increased use of credentialing assistance could have an adverse impact on our business strategy and results of operations.

We have limited experience and few current offerings in credentialing assistance.

As a result, our ability to comply with related regulatory requirements and to enroll students in programs eligible for credentialing assistance remains uncertain, and we may not be as recognized as other providers in this area.

Failure to comply with applicable regulatory requirements or to enroll students in credentialing assistance programs could have an adverse effect on our plans to be competitive in the area of credentialing assistance at APUS.

Students in the Army may use both TA and credentialing assistance for the Army’s expanded credentialing program called the Army Credentialing Assistance Program, subject to a combined cap on benefit amounts.

As a result, soldiers who take advantage of one of these forms of assistance are limited in their ability to use the other form, which could adversely impact enrollments and our results of operations.

Increased use of credentialing assistance in the Army could result in fewer funds being used or available for tuition assistance.

If our institutions are unable to establish new academic programs, increase the number of

students enrolling in new academic programs, offer programs in a cost-effective manner, or otherwise manage effectively the operations of those programs, our results of operations and financial condition could be adversely affected.

We have limited experience participating in the DoD’s credentialing assistance programs, and increased use of CA could have an adverse impact on our business strategy and results of operations.

Students in the Army may use both TA and CA, subject to a combined cap on benefit amounts.

Increased use of credentialing assistance in the Army could result in fewer funds being used or available for TA, which could adversely impact enrollments and our results of operations.

We believe other service branches may also expand their credentialing programs or pursue other approaches to enhancing support for credentialing, such as the Coast Guard’s Credentialing Assistance Program, but there can be no assurance that they will do so or that we will benefit as a result.

For example, the DoD and military branches could move increasingly toward credentialing assistance as a preferred choice for soldiers, which could reduce funds available for TA and adversely impact enrollments and our results of operations, particularly if we are unsuccessful in developing our credentialing assistance offerings.

Continued strong competition in the postsecondary education market could impact our institutions’ market share and increase our cost of acquiring students.

Within the postsecondary education market, our institutions compete primarily with not-for-profit public and private two-year and four-year colleges, as well as other for-profit schools Public institutions receive substantial government subsidies, and public and private not-for-profit institutions have access to government and foundation grants, tax-deductible contributions, and other financial resources generally not available to for-profit schools.

We have limited experience and few current offerings in CA.

Continued strong competition in the postsecondary education market could decrease our institutions’ market share and increase our cost of acquiring students.

Within the postsecondary education market, our institutions compete primarily with not-for-profit public and private two-year and four-year colleges, as well as other for-profit schools.

Public institutions receive substantial government subsidies, and public and private not-for-profit institutions have access to government and foundation grants, tax-deductible contributions, and other financial resources generally not available to for-profit schools.

These institutions may have instructional and support resources, or course delivery tools, that are superior to those of our institutions and other for-profit schools.

Many of these competitors, whether for-profit, not-for-profit, or public, are also able to leverage their greater scale and size to compete more efficiently.

Many of our competitors also have substantially greater name recognition and financial and other resources than we have, which may enable them to compete more effectively for potential students, or to provide instructional and support resources that are superior to those of our institutions and other for-profit schools.

Many of these competitors, whether for-profit, not-for-profit, or public, may also be able to leverage their greater scale, size, name recognition, and financial and other resources to compete more efficiently for potential students, or to provide instructional and support resources that may be superior to those of our institutions and other for-profit schools.

In addition, as indicated in the Risk Factor that begins “Strong competition in the military market...” below, the Armed Forces have established, and may in the future establish, their own postsecondary education programs.

Within the nursing education market, we compete with other schools offering similar programs, including for-profit and not-for-profit public and private college, that may have greater resources or a greater market presence or reputation in the local areas we serve.

Within the nursing education market, we compete with other schools offering similar programs, including for-profit and not-for-profit public and private colleges, that may have greater resources or a greater market presence or reputation in the local areas we serve.

In addition, because of the relatively local focus of RU’s and HCN’s nursing programs, our competitive environment is impacted by various factors that are specific to the particular areas where our campuses are located, including local supply and demand dynamics for nurses and nursing schools.

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For example, a particularly effective or ineffective marketing approach by another school, or the opening or closing of another school, could have unanticipated detriments or benefits to RU’s and HCN’s competitive position.

Within the postsecondary education market generally, we have experienced increased competition, including the entrance of additional providers of online and non-traditional programs, a shift of for-profit institutions to not-for-profit status, and declines or slower growth in the total postsecondary student population.

We operate 30 on-ground nursing campuses in

approximately 20 markets where we compete with a mix of local career colleges and two- and four-year colleges.

Within the postsecondary education market generally, we have experienced increased competition from new market entrants providing both online and non-traditional programs, including providers partnering with Online Program Management, and a shift of for-profit institutions to not-for-profit status.

We operate 30 on-ground campuses in approximately 20 markets where we compete with a mix of local career colleges and two- and four - year colleges.

Because of the relatively local focus of these programs, our competitive environment is impacted by various factors that are specific not only to states where campuses are located but also to the particular areas where the campuses are located, including local supply and demand for nurses and nursing schools.

Title IV postsecondary degree-granting institutions have experienced recent declines in enrollment, and primarily online institutions saw a decline in enrollment in the fall of 2021, reversing growth experienced in the fall of 2020.

Title IV postsecondary degree-granting institutions generally and private for-profit institutions specifically have experienced recent declines in enrollment.

Although primarily online institutions saw an increase in enrollment in the fall of 2022 as compared to the fall of 2021, they saw a decline as compared to the fall of 2020.

Longer term projections suggest that previous growth in enrollment in postsecondary degree-granting institutions is slowing.

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We believe that our institutions will continue to face new competition from non-traditional programs, including lower cost programs.

We are working to develop our own alternatives in some of these areas, but these efforts may not be successful.

For example, RU has offered CBE programs since 2017.

CBE options are available in approximately 56 out of RU’s 60 programs, based on the students election and eligibility.

Other institutions have programs that are more fully developed, and our offerings may not be as successful or receive further market acceptance.

We offer or are working to develop our own alternatives in some of these areas.

For example, RU has offered CBE programs since 2017 and CBE options are available in most of RU’s programs.

However, these efforts may not be successful.

Other institutions have programs that are more fully developed, and our offerings may not be as successful or receive market acceptance.

Our institutions may not be able to compete successfully against current or future competitors and may face competitive pressures that could adversely affect their business or results of operations.

Increased availability of federal student financial aid for CBE programs could create additional competition and drive additional students toward non-traditional education programs.

These competitive factors could cause our institutions’ enrollments, revenue, and profitability to decrease significantly.

These factors could cause our institutions’ enrollments, revenue, and profitability to decrease significantly.

Strong competition in the military market could decrease our institutions’ market share and increase our cost of acquiring students.

We anticipate that APUS will continue to see strong competition within the military market, which continues to be a primary market for APUS.

There are a number of for-profit schools and not-for-profit institutions that focus on the military market because of the size of the market and the availability of funding, and some for-profit schools seek to attract students eligible for TA, VA education benefits, or both, at least in part as a strategy of those institutions to satisfy the current 90/10 Rule, which is described in “Regulatory Environment - Student Financing Sources and Related Regulations/Requirements - Department of Education - Regulation of Title IV Financial Aid Programs - The ‘90/10 Rule.’” Some of these institutions may develop relationships with the military and education service officers that are stronger than APUS’s, which could have an adverse effect on APUS’s ability to attract and retain qualified students, and ultimately, on our financial condition.

Some of these institutions may develop relationships with the military and education service officers that are stronger than APUS’s, which could have an adverse effect on APUS’s ability to attract and retain qualified students, and ultimately, on our financial condition.

In addition, the Armed Forces have established, and may in the future establish, their own postsecondary education programs.

For example, the Department of the Navy, in cooperation with the U.S.

Marine Corps and the U.S.

Coast Guard, in January 2022 expanded a pilot program for online courses at the United States Naval Community College, a community college supporting naval education for enlisted service members, with plans to enroll as many as 5,500 students into targeted associate’s degree and certificate programs with partner colleges and universities.

Marine Corps, Coast Guard, and Coast Guard Reservists, in January 2022 expanded a pilot program for online courses at the United States Naval Community College, a community college supporting naval education for enlisted service members, with over 1,100 students enrolled into targeted associate’s degree and certificate programs with partner colleges and universities.

While a number of schools with which APUS competes participate in this program, APUS is not an eligible partner.

The Armed Forces may also begin offering distance learning through their own institutions.

Other Armed Forces branches may also begin offering distance learning through their own institutions.

Risks Related to the Regulation of Our Industry

If we or our institutions fail to comply with the extensive regulatory requirements for the operation of postsecondary education institutions, we and our institutions could face penalties and significant restrictions on operations, including loss of access to DoD tuition assistance programs and federal student loans and grants.

If we or our institutions fail to comply with the extensive regulatory requirements for the operation of postsecondary education institutions, we and our institutions could face penalties and significant restrictions on operations, including loss of federal student loans and grants and access to DoD TA programs.

We and our institutions are regulated by (i) accrediting agencies, (ii) state regulatory bodies, and (iii) the federal government through ED.

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Regulations, standards, and policies of these agencies address the vast majority of our operations, including our educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, and financial operations and condition.

These regulatory requirements can also affect our ability to acquire new institutions, open new locations, add new or expand existing educational programs, change our

corporate structure or ownership, and make other substantive changes.

Compliance with these requirements can also increase our cost of operations.

These regulatory requirements can also affect our ability to acquire new institutions, open new locations, add new or expand existing educational programs, change our corporate structure or ownership, and make other substantive changes.

Compliance with these requirements increases our cost of operations.

Findings of noncompliance with these laws, regulations, standards, and policies could result in any of the relevant regulatory agencies taking action including:

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If one of our institutions were to lose its eligibility to participate in Title IV, TA, or VA education benefit programs, or if the amount of available funds under these programs were reduced, we could seek to arrange or provide alternative sources of revenue or financial aid for students.

Although we believe that one or more private organizations would be willing to provide financial assistance to students attending our institutions, there is no assurance that this would be the case, and the terms of such financial aid might not be as favorable as those for funds under the Title IV, TA, or VA education benefit programs.

financial aid might not be as favorable as those for funds under the Title IV, TA, or VA education benefit programs.

We may be required to guarantee all or part of such alternative assistance or might incur other additional costs in connection with securing alternative sources of financial aid.

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These lawsuits have the potential to generate significant financial liability linked to our receipt of government funds, including Title IV funds and TA funds.

If our institutions fail to maintain their institutional accreditation, they would lose the ability to participate in Title IV and DoD tuition assistance programs.

Accreditation at the institutional level by an accrediting agency recognized by ED is necessary to participate in TA and Title IV programs.

If our institutions fail to maintain their institutional accreditation, they would lose the ability to participate in Title IV and DoD TA programs and our student enrollments would decline.

Accreditation at the institutional level by an accrediting agency recognized by ED is necessary to participate in Title IV and TA programs.

Our institutions’ accrediting agencies may impose restrictions on their accreditation or may terminate their accreditation.

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Our institutions also must comply with accrediting agency policies and requirements, such as the requirements to apply and wait for approval before making certain changes.

For example, as it did with the RU Acquisition, HLC requires approval before the closing of a transaction in order for an institution to maintain accredited status after closing.

For example, as it did with the Rasmussen Acquisition, HLC requires approval before the closing of a transaction in order for an institution to maintain accredited status after closing.

Failure to meet accreditation criteria or standards or to comply with accreditation policies and requirements could result in the loss of accreditation at the discretion of the accrediting agency.

The complete loss of institutional accreditation at one of our institutions would, among other things, render the institution and its students ineligible to participate in TA and Title IV programs, and have a material adverse effect on our enrollments, revenue, and results of operations.

The postsecondary education regulatory environment has changed and may change in the future as a result of U.S.

federal elections.

Changes in the Presidential administrations and control of Congress as a result of the outcome of elections or other events could result in changes in or new legislation, appropriations, regulations, standards, policies and enforcement actions that could materially affect our business, including material consequences for our institutions’ accreditation, authorization to operate in various states, permissible activities, receipt of funds under student financial assistance programs, and costs of doing business.

For example, as a result of the 2020 U.S.

federal elections, Democrats, who tend to support more regulation of and restrictions on for-profit institutions, gained control of the executive branch and both houses of Congress.

The Biden administration and new Congress have acted and may continue to act to change or eliminate currently effective legislation and ED regulations, and to enact new legislation, such as legislation to reauthorize the HEA, and ED has initiated and could initiate new rulemaking processes to alter existing regulations and could act to change existing ED policies and practices with respect to matters related to postsecondary education institutions.

For example, ARPA, which modifies the HEA’s 90/10 Rule to require that a for-profit institution derive not less than 10 percent of its revenue from sources other than “federal education assistance funds”, was enacted in 2021, and ED is engaged in negotiated rulemaking to address the 90/10 Rule and other topics.

ED also recently completed rulemaking to address borrower defenses to repayment, public service student loan forgiveness programs, mandatory pre-dispute arbitration, and prohibition of class-action lawsuits, among other issues, but has yet to issue related proposed regulations.

We cannot predict the extent to which the Biden administration and Congress, or any future administration or Congress, will act to change or eliminate or to implement new laws, regulations, standards, policies, and practices, nor can we predict the form that new laws, regulations, standards, policies, or practices may take or the extent to which those regulations, practices or policies may impact us or our institutions.

A failure of HCN to satisfy ABHES accreditation standards, including specific student achievement indicators, could have a material adverse impact on HCN’s student enrollment and our and HCN’s revenue, cash flows, and results of operations.

ABHES annually reviews student achievement indicators, including retention rate, placement rate, and licensing and credentialing examination pass rate.

Under ABHES policy, ABHES may withdraw accreditation at any time if it determines that an institution fails to demonstrate at least a 70% retention rate for each program, a 70% placement rate for each program, and a 70% first-time pass rate on mandatory licensing and credentialing examinations or fails to meet state-mandated results for credentialing or licensure.

Alternatively, ABHES may in its discretion provide an opportunity for a program to come into compliance within a period of time specified by ABHES, and ABHES may extend the period for achieving compliance if a program demonstrates improvement over time or other good cause.

For the reporting year ended June 30, 2021, several HCN programs at certain campuses did not satisfy ABHES’s threshold requirements for retention rates.

The retention rates were instead between 55% and 69% for the reporting year.

ABHES has asked HCN to provide updated rates for the period July 1, 2021 through March 31, 2022 and an updated action plan to address any rate that remains below 70% in that period.

If any HCN campus or program fails to satisfy ABHES achievement measures, enrollment in such HCN campus or program could decline, or we could be forced to cease enrollments at that campus or in that program, which could have a material adverse impact on HCN’s student enrollment and our and HCN’s revenue, cash flows, and results of operations.

The actions HCN takes to comply with ABHES requirements may not be successful in resolving existing issues and, if those actions are targeted at specific campuses or programs, may fail to prevent additional issues arising with respect to those or other campuses or programs.

Similarly, even if HCN is successful in the long term in complying with these standards, the actions HCN takes to comply could result in increased costs or decreased enrollments, and impairment of goodwill.

More generally, any institutional or programmatic accreditor may have policies or standards related to specific student achievement indicators that, if not met, may result in our institutions experiencing adverse actions, up to and including withdrawal of accreditation for certain programs.

Such outcomes could have an adverse impact on our ability to enroll students and eventually our ability to continue certain programs, any of which would have an adverse effect on our results of operations, cash flow, and financial condition.

Our institutions’ failure to maintain institutional accreditation could make them ineligible to participate in Title IV and TA programs and our student enrollments would decline.

The standards of accreditation agencies that accredit our institutions and programs can and do vary, and accreditation agencies may prescribe more rigorous standards than are currently in place.

The complete loss of institutional accreditation at one of our institutions would, among other things, render the institution and its students ineligible to participate in Title IV and TA programs, and have a material adverse effect on our enrollments, revenue, and results of operations.

In addition, loss of Title IV participation would result in loss of VA participation.

The standards of accrediting agencies that accredit our institutions and programs can and do vary, and accreditation agencies may prescribe more rigorous standards than are currently in place.

Complying with more rigorous accreditation standards could require significant changes to the way we operate our business and increase our administrative and other costs.

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Many institutions will only accept transfer credit from institutions with certain institutional accreditation.

Students and sponsors of tuition reimbursement programs look to accreditation for quality assurance, and employers rely on institutions’

accredited status when evaluating a candidate’s credentials.

Students and sponsors of tuition reimbursement programs look to accreditation for quality assurance, and employers rely on institutions’ accredited status when evaluating a candidate’s credentials.

In addition, certain of our programs are accredited by programmatic accrediting agencies or recognized by professional organizations.

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Failure to obtain or maintain programmatic accreditation or professional recognition for certain programs could prevent our students from seeking and obtaining licensure or employment, result in materially reduced student enrollments in affected programs, and have a material adverse effect on us.

If our institutions fail to maintain state authorization in the states where they are physically located, the institutions would lose their ability to grant degrees and other credentials in that state and to participate in Title IV programs and DoD tuition assistance programs.

As discussed in “Regulatory Environment – State Licensure/Authorization,” to participate in Title IV programs and TA, an institution must be legally authorized by the relevant education agency of the state in which it is physically located.

Loss of state authorization by one of our institutions in the state in which it is physically located would cause that institution to be ineligible to participate in Title IV programs and TA and to be unable to operate in the state and grant credentials.

In addition, if one of our institutions were to lose its state authorization, it would lose its institutional accreditation.

For example, with respect to RU and HCN, if either institution were to lose approval from any state board of nursing, students in the program lacking approval would not be eligible to apply for licensure by examination to practice nursing in that state.

Recent ED negotiated rulemakings could result in regulations that materially and adversely affect our business.

In March 2022, ED completed negotiated rulemaking processes intended to develop regulations related to Title IV participation.

Topics addressed included modifications to the 90/10 Rule, gainful employment requirements, public service student loan forgiveness programs, BDTR, mandatory pre-dispute arbitration, prohibition of class-action lawsuits, closed school discharges, ability to benefit provisions, certification procedures for participation in Title IV programs, change in ownership and change in control rules and procedures, financial responsibility standards, and standards of administrative capability, among others.

In October 2022, ED announced final regulations relating to some topics that were addressed as part of negotiated rulemaking, such as the 90/10 Rule, BDTR, arbitration proceedings, closed school discharges, and change in ownership and change in control rules, as well as the public service loan forgiveness program, interest capitalization, total and permanent disability discharges, and false certification of a student’s eligibility for Title IV loans.

More information about these final regulations is described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements” and “Regulatory Environment – Regulatory Actions and Restrictions on Operations – Changes in Ownership Resulting in a Change of Control – U.S.

Department of Education”.

We cannot ascertain whether final regulations yet to be adopted by ED regulations could harm our business or materially and adversely affect our financial conditions and results of operations.

The negotiated rulemaking committee focused on draft gainful employment regulations did not reach consensus.

However, in connection with the negotiated rulemaking process, ED released information rates data that it calculated for the two metrics that ED is contemplating using for purposes of determining Title IV eligibility of gainful employment programs.

Those two metrics are referred to as the debt-to-earnings rates (which involve two rates, namely the discretionary earnings rate and the annual earnings rate) and the earnings threshold measure.

In a memorandum accompanying the informational rates and ED’s assessments of whether programs would fail on either of the proposed measures based on those rates, ED explained that the methodology it used to produce this data differed from ED’s proposed methodology from the negotiated rulemaking sessions, that any final regulation’s methodology may change, and that the outcomes depicted in the informational rates for particular programs may differ from those generated by a future gainful employment rule.

ED also made certain assumptions that may not prove to be accurate.

Out of the 30 RU programs, 47 APUS programs, and three HCN programs that ED assessed in the informational rates for which gainful employment data was available and subject to the qualifications set forth in ED’s related memorandum, eight RU programs and three APUS programs failed one or both measures.

At this time, the outcome of any future gainful employment rulemaking is uncertain, and it is difficult to predict whether our institutions’ programs will satisfy any future gainful employment metrics, including whether any programs identified as failing in the informational rates will in fact fail or whether other programs will fail or pass.

The failure of any of our institutions’ programs to meet the required metrics could adversely impact those institutions and programs.

ED’s Spring 2022 Agency Rule List indicates a target date of April 2023 for publication of the gainful employment proposed regulations, which would mean any changes would be effective no earlier than July 1, 2024.

ED’s Spring 2022 Agency Rule List also indicated a target date of April 2023 for publication of proposed regulations relating to ability to benefit, financial responsibility, administrative capability, and certification procedures.

Failure to improve certain of our programs’ NCLEX pass rates and to more generally satisfy NCLEX requirements could reduce our enrollments, revenue, and cash flow, lead to adverse actions taken by state boards of nursing, and limit our ability to offer educational programs.

The majority of RU’s graduates, HCN graduates, and certain APUS graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing.

Their success in obtaining these outcomes depends on numerous factors, including individual merits of the graduate, whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association, whether the program meets all state requirements for professional licensure, and the accreditation of the institution and the specific program.

As discussed more fully in “Regulatory Environment – State Authorization/Licensure”, failure to satisfy NCLEX pass rate requirements imposed by state boards of nursing can result in the state boards of nursing and other regulators taking certain adverse actions, including placement of a program on provisional approval status or withdrawal of approval pursuant to an adjudication proceeding, and NCLEX exam pass rate requirements could limit our institutions’ ability to expand into new geographies.

A number of programs at certain RU campuses and in certain states, including its Bloomington and Moorhead, Minnesota, Illinois, Kansas, and Fort Myers, Florida ADN programs and its Moorhead, Minnesota PN program, as well as HCN’s Ohio ADN program, have experienced first-time NCLEX pass rates below applicable thresholds for consecutive years.

As described more fully in “Regulatory Environment – State Authorization/Licensure – State Authorization/Licensure of Our Institutions”, as a result, regulators and accreditors have in some cases placed these programs on probationary or similar status or

required them to take corrective action, including limiting, or taking action that has the effect of limiting, enrollment.

We believe that low pass rates may be the result of a number of factors, including without limitation the academic preparedness of our students, curriculum gaps, changes in the mode of course delivery including the use of virtual courses, testing failures and inconsistencies, imbalances in enrollment and resources, and changes in admission standards.

We are taking action aimed at improving NCLEX pass rates and meeting related standards, but there can be no assurance that we have accurately identified the underlying reasons for low pass rates or that our efforts to improve these pass rates will succeed in a timely fashion if at all.

Significant changes to the NCLEX effective April 2023 may initially result in lower first-time NCLEX pass rates and could decrease or delay the effectiveness of our efforts to timely improve pass rates for programs subject to adverse regulator or accreditor action.

In addition, merely being subject to disciplinary, probationary, or similar status or requirements could make it more difficult to improve NCLEX pass rates or meet other applicable standards, such as by damaging our reputation and making it more difficult to recruit students who are likely to succeed or at all.

Any voluntary, required, or other reduction in enrollment will have an adverse impact on our revenue.

Although variability in regulator and accreditor approach to and use of discretion in enforcement of NCLEX pass rate standards makes it difficult to predict consequences, failure to abide by the terms of any restrictive status placed on these programs, take appropriate corrective action, or reach applicable threshold rates within an established timeframe could subject impacted programs to additional adverse action, including withdrawal of approval, and we could take voluntary action to curtail or terminate affected programs, any of which would have an adverse effect on our results of operations, cash flows, and financial condition.

Even if the affected programs have long-term success in complying with NCLEX pass rate standards, the actions we take to comply could result in increased costs or decreased enrollments, and impairment of RU or HCN goodwill.

RU’s Bloomington, Minnesota ADN program has been adversely impacted by regulatory action and heightened scrutiny as a result of the failure to meet applicable NCLEX pass rates, and further action by regulators and accreditors could result in additional adverse impacts or cause us to have to close the program.

RU’s Bloomington, Minnesota ADN program has been subject to adverse action and heightened scrutiny from regulators as a result of continued failure to meet applicable NCLEX pass rates, and further action by such regulators, which we believe to be reasonably possible, could adversely impact our ability to continue the Bloomington, Minnesota ADN program or potentially the ADN programs at all of RU’s Minnesota campuses, which would have an adverse effect on our results of operations, cash flows, and financial condition.

A stipulation and consent order with the MBN requires the Bloomington, Minnesota ADN program to among other things reach applicable NCLEX pass rate standards by the end of 2023 and maintain a specified student to faculty ratio in 2023, with a potential penalty up to and including withdrawal of program approval.

The student to faculty ratio limit constrains our ability to enroll students based on our ability to attract and retain qualified faculty.

RU has voluntarily further reduced enrollments in the Bloomington, Minnesota ADN program new cohorts starting in January 2023, but there can be no assurance that these or other efforts will improve NCLEX scores above the applicable threshold or by the required deadline, if at all, or that the program will be found to be in compliance with the order.

As a result of the order, the Minnesota Office of Higher Education, or MOHE, informed RU that it expects RU to identify a clinical site for each student within 50 miles from the student’s home, disclose to potential students that RU may not be able to satisfy the MBN’s order, and provide options for students unable to complete the program if the MBN were to withdraw program approval, including a refund option.

The MBN order and MOHE’s related scrutiny could have an adverse impact on our reputation and ability to enroll students.

Additionally, in September 2021, ACEN placed conditions on the Bloomington, Minnesota ADN program’s continued accreditation, requiring it to demonstrate compliance with all applicable accreditation criteria within two years.

ACEN may determine to deny continuing accreditation absent good cause because the program did not meet the applicable pass rate requirement in 2022.

ACEN accreditation, or accreditation or candidacy status with another national nursing accrediting body, is required under MBN nursing program approval rules.

If ACEN denies continuing accreditation and RU is unable to obtain accreditation or candidacy status with another national nursing accrediting body, RU would likely have to close the Bloomington, Minnesota ADN program.

RU’s Illinois ADN program has been adversely impacted by regulatory action, including as a result of the failure to meet applicable NCLEX pass rates, and further action by regulators and accreditors could result in additional adverse impacts.

RU’s Illinois ADN program has not met state-established first-time NCLEX benchmarks for three consecutive years.

In February 2022, RU’s Illinois ADN program was placed on probationary status by the IDFPR, as a result of which RU is required to temporarily reduce admitted students in the program by 25% and has two years to demonstrate evidence of implementing strategies to correct deficiencies and satisfy the required NCLEX pass rate.

If after two years the pass rate does not satisfy the required standard, the program will be reevaluated by the IDFPR for a determination as to whether the program will be allowed to continue on probation or whether it should be disapproved.

Although RU has two years to demonstrate improved pass rates, RU is also scheduled to appear before the IDFPR’s Board of Nursing in May 2023, at which point IDFPR is similarly expected

to consider whether the program will be allowed to continue on probation.

We could fail to improve RU’s Illinois ADN program’s first-time NCLEX passing rates, and IDFPR could require us to continue on probationary status, impose additional restrictions on RU’s Illinois ADN program, or determine that the program should be disapproved, which would have an adverse effect on our results of operations, cash flows, and financial condition.

An Illinois statute also requires nursing programs in the state to have achieved accreditation by the end of 2022 in order to meet state approval requirements.

RU’s Illinois ADN program has been in candidacy status for initial accreditation with ACEN since July 2020.

Although the IDFPR has indicated that candidacy status satisfies this requirement, the IDFPR could change its position.

ACEN will not grant accreditation to a program on probationary status with the Illinois Department of Financial and Professional Regulation, or IDFPR, as RU’s Illinois ADN program is.

The current candidacy is set to expire in July 2024.

If ACEN ultimately denies continuing accreditation and RU is unable to obtain accreditation or candidacy status with another national nursing accrediting body, RU would likely have to close the Illinois ADN program.

The inability of our institutions’ graduates to obtain professional licensure, employment or other outcomes in their chosen fields of study, particularly in nursing, could reduce our enrollments and revenue, limit our ability to offer educational programs, and potentially lead to litigation that could be costly to us.

As explained in the Risk Factor that begins with the caption “Failure to improve certain of our programs’ NCLEX pass rates...”, the majority of RU’s graduates, HCN graduates and certain APUS graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing.

State requirements for licensure are subject to change, as are professional certification standards, and we may not become aware of changes that may impact our students in certain instances.

In the event that one or more states refuse to recognize our institutions’ students for professional licensure based on factors relating to our institutions or programs, the potential growth of our institutions’ programs would be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, requirements for employment vary from employer to employer and from field to field.

To the extent our graduates fail to satisfy requirements for employment by particular employers or in a particular profession based on characteristics of our programs, the ability to maintain enrollments, as well as the potential for growth of our institutions’ programs would be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, if our institutions’ graduates fail to obtain professional licensure, employment, or other outcomes in their chosen fields of study, we and our institutions could be exposed to litigation, including class-action litigation, claiming that we are at fault for such failure, which would force us to incur legal and other expenses that could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

ABHES annually reviews student achievement indicators, including retention rate, placement rate, and licensing and credentialing examination pass rate.

Under ABHES policy, ABHES may withdraw accreditation at any time if it determines that an institution fails to demonstrate at least a 70% retention rate for each program, a 70% placement rate for each program, and a 70% first-time pass rate on mandatory licensing and credentialing examinations or fails to meet the state-mandated results for credentialing or licensure.

In prior years, several HCN programs at certain HCN campuses have failed to satisfy ABHES’s student achievement measures, and as a result ABHES has placed certain locations and programs on outcomes reporting status and required action plans.

For the reporting year ended June 30, 2022, the PN program at the Akron, Cincinnati, Cleveland, Columbus, Dayton, and Toledo campuses, and the ADN program at the Akron campus, were below the benchmark for retention.

ABHES previously asked HCN to provide updated rates for 2020-2021 reporting year and an updated action plan to address any rate that remains below 70% in that period.

HCN expects that ABHES will require programs below benchmark to provide similar reports based on the retention rate from the period between July 1, 2022 through March 31, 2023.

The PN program at the Cincinnati, Cleveland, Columbus, and Dayton campuses were below benchmark for each of the last two reporting years.

As a result, in February 2023, ABHES placed the PN program at each of these campuses on program-specific warning status, which directs HCN to justify why approval of each program should not be withdrawn, which at a minimum will require HCN to demonstrate that it has developed and implemented a corrective action plan.

If ABHES determines that HCN’s response to the program-specific warning status is insufficient, it could take action that could have an adverse impact on our results of operations, cash flow, and financial condition, including limiting program enrollment, suspending program enrollment and new starts until HCN meets terms and conditions established by ABHES, or withdraw approval for one or more programs.

HCN is also required to disclose the program-specific warnings to current and prospective students, which could adversely affect HCN’s reputation and enrollments.

As discussed in “Regulatory Environment – State Licensure/Authorization”, to participate in Title IV programs and TA, an institution must be legally authorized by the relevant education agency of the state in which its main campus is physically located.

Loss of state authorization by one of our institutions in the state in which its main campus is physically located would cause that institution to be ineligible to participate in Title IV programs, and therefore also TA and VA, to be unable to operate in the state and grant credentials, and to lose institutional accreditation.

If one of our institutions were to lose state authorization as to a non-main campus location, it would be unable to award Title IV aid to students at that location and it would be unable to operate at that location.

ED regulations provide that an institution is considered legally authorized by a state if the state has a process to review and appropriately act on complaints concerning the institution, including enforcing applicable state laws, and the institution complies with any applicable state approval or licensure requirements.

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Various states impose regulatory requirements on educational institutions operating within their boundaries, including registration requirements applicable to online education institutions that have no physical location or other presence in the state but offer educational services to students who reside in the state or advertise to or recruit prospective students in the state.

As described more fully in “Regulatory Environment – State Licensure/Authorization” and “—State Authorization/Licensure of Our Institutions,” our institutions must comply with the requirements of SARA and California, which is the only state that does not participate in SARA, with regard to the interstate offering of postsecondary distance education and online education.

As described more fully in “Regulatory Environment – State Licensure/Authorization” and “Regulatory Environment – State Authorization/Licensure”, our institutions must comply with the requirements of SARA and California, which is the only state that does not participate in SARA, with regard to the interstate offering of postsecondary distance education and online education.

Those requirements may change from time to time and, in some instances, are ambiguous or are left to the interpretative discretion of state regulators.

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We cannot predict the extent to which states will retain membership in SARA, the manner in which SARA’s rules may be modified, interpreted, and enforced, our institutions’ ability to comply with SARA’s requirements and retain eligibility, or the impact that failure to meet the SARA requirements may have on our business.

As more fully described in “Regulatory Environment – State Licensure/Authorization”, APUS and RU are subject to regulations that, among other thing, clarify the required methodology for determining the state in which a student is located for purposes of satisfying state authorization requirements for distance education courses and require an institution to disclose certain information related to whether programs leading to professional licensure meet applicable state requirements, regardless of program modality.

As more fully described in “Regulatory Environment – State Licensure/Authorization”, our institutions are subject to regulations that, among other things, clarify the required methodology for determining the state in which a student is located for purposes of satisfying state authorization requirements for distance education courses and require an institution to disclose certain information related to whether programs leading to professional licensure meet applicable state requirements, regardless of program modality.

Failure to make the disclosures required by these regulations could put us at risk of administrative enforcement action or related litigation, including claims from students related to misrepresentation and other matters.

In addition, we cannot predict whether, or to what extent, such disclosure requirements will have an effect on our enrollment processes and results.

The majority of RU’s graduates, HCN graduates and certain APUS graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing.

Their success in obtaining these outcomes depends on numerous factors, including:

individual merits of the graduate;

whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association;

whether the program meets all state requirements for professional licensure;

and the accreditation of the institution and the specific program.

For example and as discussed more fully in “Regulatory Environment – State Authorization/Licensure of Our Institutions,” failure to satisfy NCLEX pass rate requirements imposed by state boards of nursing can result in the state boards of nursing taking certain adverse actions, including placement of a program on provisional approval status or withdrawal of approval pursuant to an adjudication proceeding, and NCLEX exam pass rate requirements could limit our institutions’ ability to expand into new states.

HCN’s ADN program has been on provisional approval status since March 2017 due to not meeting OBN’s first-time pass rate standard for four consecutive years.

HCN has been implementing changes, including curriculum, admissions, and academic achievement and course retake policy changes that are designed to improve NCLEX scores over time, but there is no assurance that these changes will be successful or will not have negative effects on HCN’s enrollment.

In addition, RU’s ADN programs in Bloomington, Minnesota, in Illinois and in Kansas each experienced 2021 first-time NCLEX pass rates below the applicable state threshold.

This was the third consecutive year of below threshold pass rates for the Bloomington program and the second consecutive year for the Illinois and Kansas programs.

In February 2022, the Illinois ADN program was placed on probationary status by the Illinois Department of Professional Regulation, or IDPR, as a result of which RU has two years to demonstrate evidence of implementing strategies to correct deficiencies and satisfy the required NCLEX pass rate.

If after two years the pass rate does not satisfy the required standard, the program will be reevaluated by the IDPR for a determination as to whether the program will be allowed to continue on probation or whether it should be disapproved.

If RU and HCN are unable to improve NCLEX first-time scores over time in relevant locations, this situation could have an adverse impact on our ability to enroll students and eventually our ability to continue the ADN Programs, either of which would have an adverse effect on our results of operations, cash flows, and financial condition.

State requirements for licensure are subject to change, as are professional certification standards, and we may not become aware of changes that may impact our students in certain instances.

In addition, requirements for employment vary from employer to employer and from field to field.

In addition, if our institutions’ graduates fail to obtain professional licensure, employment or other outcomes in their chosen fields of study, we and our institutions could be exposed to litigation, including class-action litigation, claiming that we are at fault for such failure, which would force us to incur legal and other expenses that could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our institutions must periodically seek recertification to participate in Title IV programs, and may, in certain circumstances, be subject to review by the Department of Education prior to seeking recertification, and our future success may be adversely affected if our institutions are unable to successfully maintain certification or obtain recertification.

As more fully described in “Regulatory Environment–Student Financing Sources and Related Regulations/Requirements – Department of Education,” APUS, RU and HCN must periodically seek recertification from ED, ED may review our institutions’ eligibility and certification to participate in Title IV programs, or the scope thereof.

If our institutions are unable to successfully maintain certification or obtain recertification to participate in ED’s Title IV programs, they will not be able to participate in TA because the DoD MOU requires an institution to be certified to participate in Title IV programs in order to participate in TA.

Loss of participation in Title IV programs and TA would have a material adverse effect on our enrollments, revenue, results of operations, and financial condition.

In addition, also as more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education,” ED must in some cases provisionally certify an institution, which imposes additional conditions on the institution’s receipt of Title IV funds.

For example, APUS, RU and HCN are currently

provisionally certified with ED.

As more fully described in the Risk Factor that begins “RU is currently on provisional certification with the Department of Education...” below, the TPPPA entered into by RU and ED in connection with the RU Acquisition continues growth restrictions that ED imposed as a result of RU’s March 2019 change in ownership, including an enrollment cap on students who participate in Title IV.

In addition, as more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education,” HCN was notified in December 2021 that it had been granted provisional certification until September 30, 2023 because it was subject to an open program review at the time of renewal.

If ED were to withdraw or not renew our institutions’ certification to participate in Title IV programs, our students would no longer be able to receive Title IV program funds or TA funds, which would have a material adverse effect on our enrollments, revenue, results of operations, and financial condition.

A failure to demonstrate “administrative capability” may result in the loss of eligibility to participate in Title IV programs.

ED’s regulations specify extensive criteria that an institution must satisfy to establish that it has the requisite administrative capability to participate in Title IV programs and the sanctions ED may impose if an institution fails to satisfy any of those criteria.

If an institution fails to satisfy any of the administrative capability requirements, ED may require the repayment of Title IV program funds, transfer the institution from the “advance” system of payment of Title IV program funds to heightened cash monitoring status, or to the “reimbursement” method of payment, place the institution on provisional certification status, or commence a proceeding to impose a fine or to limit, suspend, or terminate the participation of the institution in Title IV programs.

If one of our institutions is found not to have satisfied ED’s administrative capability requirements, it could be limited in its access to, or lose, Title IV program funding or certain Title IV-related conditions or fines could be imposed, which would adversely affect our enrollment, revenue, results of operations, and financial condition.

A failure to demonstrate “financial responsibility” may result in the loss of eligibility by one of our institutions to participate in Title IV programs or require the posting of an irrevocable letter of credit in order to maintain eligibility to participate in Title IV programs.

addition, we cannot predict whether, or to what extent, such disclosure requirements will have an effect on our enrollment processes and results.

Our institutions must periodically seek recertification to participate in Title IV programs, and may, in certain circumstances, be subject to review by ED prior to seeking recertification, and our future success may be adversely affected if our institutions are unable to successfully maintain certification or obtain recertification.

As more fully described in “Regulatory Environment–Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, APUS, RU and HCN must periodically seek recertification from ED, and ED may review our institutions’ eligibility and certification to participate in Title IV programs, or the scope thereof.

If our institutions are unable to successfully maintain certification or obtain recertification to participate in ED’s Title IV programs, they will not be able to participate in TA because each DoD MOU requires an institution to be certified to participate in Title IV programs in order to participate in TA.

Similarly, an institution is required to be certified to participate in the Title IV programs in order to be eligible to participate in the VA education benefits programs.

Loss of participation in Title IV programs, TA, and the VA education benefits programs would have a material adverse effect on our enrollments, revenue, results of operations, and financial condition.

In addition, also as more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, ED must in some cases provisionally certify an institution, which imposes additional conditions on the institution’s receipt of Title IV funds.

For example, APUS, RU and HCN are currently provisionally certified with ED.

As more fully described in the Risk Factor that begins “RU is currently on provisional certification with ED...” below, the TPPPA entered into by RU and ED in connection with the Rasmussen Acquisition continues growth restrictions that ED imposed as a result of RU’s March 2019 change in ownership, including an enrollment cap on students who participate in Title IV.

APUS and HCN are subject to provisional certification until June 30, 2023 and September 30, 2023, respectively, because each was subject to an open program review at the time of renewal.

APUS must apply for recertification by March 31, 2023 and HCN by June 30, 2023, and there can be no assurance that ED will grant recertification on a non-provisional basis at that time.

If one or more of our institutions does not comply with the 90/10 Rule, it or they will lose eligibility to participate in federal student financial aid programs.

The HEA requires all for-profit education institutions to comply with what is commonly referred to as the 90/10 Rule, which imposes sanctions on institutions that derive more than 90% of their total revenue on a cash accounting basis from Title IV programs, as calculated under ED’s regulations.

As more fully described in “Regulatory Environment–Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – The ‘90/10 Rule,’” for fiscal years beginning on or after January 1, 2023, federal funds used to calculate the “90%” side of the ratio include Title IV funds and any other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges.

ED confirmed that the 90/10 Rule would no longer permit institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio.

As a result, effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio, and our institutions’ 90/10 Rule percentages will increase, particularly at APUS.

Some payments from the Army that were expected in 2022 were delayed into 2023, which together with the recent amendments to the 90/10 Rule is expected to cause APUS’s 90/10 Rule percentage to increase and could make it less likely that APUS meets the 90/10 Rule requirements for 2023.

As a result, we anticipate that APUS could fail the 90/10 Rule for fiscal 2023, which would require APUS to notify ED and students of this failure, could subject us to heightened regulatory scrutiny and possible adverse regulatory action, and could damage our reputation, which would have a material adverse impact on our results of operation, cash flow, and financial condition.

Inclusion of TA in the 90/10 calculation could also cause other educational institutions to decrease their focus on serving military students using TA benefits, and while that could have a positive impact on our enrollments from those students, it could also have an adverse impact on our ability to meet the requirements of the 90/10 Rule.

This change, and any resulting actions we take to adjust the operations of our institutions to comply with the rule, could have a material adverse impact on the financial condition and operations of our institutions.

We cannot predict the likelihood that Congress or ED will continue to modify the 90/10 Rule with respect to relevant sources of funds or other aspects of the calculation.

For example, in recent years Congress has considered various other proposals that would modify the 90/10 Rule, including proposals to decrease the limit on Title IV funds from 90% to 85%.

Such proposals, or other similar legislation, should they become law, could have a material adverse impact on the operations of our

institutions.

In addition, at least one state has passed, and other states may in the future pass, their own versions of the 90/10 Rule that like the new federal 90/10 Rule include TA and VA education benefits or other sources of funds in the “90%” side of the ratio.

To the extent that any additional laws or regulations are adopted that further limit or condition the participation of for-profit schools or distance education programs in TA or in Title IV programs, or that further limit or condition the amount of TA for which for-profit schools or distance education programs are eligible to receive, our financial condition and results of operations could be materially and adversely affected.

For the past three years, RU has derived less than 80% and HCN has derived more than 80% of its total revenue on a cash accounting basis from Title IV programs as calculated under ED’s regulations.

If RU and HCN are unable to attract students who do not depend on Title IV program aid or through TA or VA benefits, such as students who finance their own education or receive full or partial tuition reimbursement from non-government employers, their 90/10 Rule percentage may increase.

If any of our institutions fails to satisfy the 90/10 Rule and loses eligibility to participate in Title IV programs, it would also lose the ability to participate in the TA because DoD requires institutions to participate in the Title IV programs in order to participate in TA, and ineligibility of either or both of our institutions to participate in Title IV programs and TA would have a material adverse effect on our enrollments, revenue, results of operations, and cash flows.

Our institutions’ failure to meet financial responsibility standards may result in additional regulatory requirements that may negatively impact cash flow or the loss of eligibility by one of our institutions to participate in Title IV programs.

To participate in Title IV programs, an eligible institution must satisfy specific measures of financial responsibility prescribed by ED, or post a letter of credit in favor of ED, and possibly accept other conditions, such as provisional certification, additional reporting requirements, or regulatory oversight of its participation in Title IV programs.

ED may also apply such measures of financial responsibility to a parent company of an eligible institution and, if such measures are not satisfied by the parent company, require the institution to post a letter of credit in favor of ED, and possibly accept other conditions on its participation in Title IV programs.

For our institutions, ED applies its measures of financial responsibility at the level of the parent company, APEI.

An obligation to post a letter of credit, or to accept other conditions, such as a change in our system of Title IV payment from ED for purposes of disbursement, could increase our costs of regulatory compliance, or affect our cash flow.

As discussed in “Regulatory Environment – Regulatory Actions and Restrictions on Operations – RU Acquisition Regulatory Review,” as of September 30, 2020, RU’s financial ratios failed to meet ED’s standards of financial responsibility.

As described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility”, ED’s annual evaluations for compliance with financial responsibility standards include a composite score calculation based on line items from an institution’s audited financial statements.

Generally, an institution’s composite score must be at 1.5 or above for the institution to be deemed financially responsible.

Under certain circumstances, institutions with a composite score less than 1.5 may be able to establish financial responsibility on an alternative basis by complying with various conditions.

A composite score between 1.0 and 1.4 is considered by ED to be in the “zone”, and the “zone alternative” permits institutions to demonstrate financial responsibility by meeting specific monitoring requirements.

Although our consolidated composite score is expected to be above 1.5 at our next financial responsibility test, there is no assurance that it will remain at 1.5 or above in the future or that if it falls in the “zone” in the future that we will be able to demonstrate financial responsibility.

Failure to meet ED’s financial responsibility standards or being subject to zone alternative requirements could adversely affect our results of operations and our operations.

In addition, institutions with composite scores below 1.5 also do not qualify for approval from SARA, unless, in the case of scores above 1.0, the home state exercises its discretion to consider additional financial information.

If SARA were not to renew our institutions’ approval due to low composite scores, we would need to obtain approval or exemptions in states in which our institutions offer distance education programs or discontinue offerings to students in such states.

An obligation to post a letter of credit, or to accept other conditions, such as a change in our system of Title IV payment from ED for purposes of disbursement, as a result of not meeting financial responsibility standards, could increase our costs of regulatory compliance, or affect our cash flow.

As discussed in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility”, as of September 30, 2020, prior to its acquisition by us, RU’s financial ratios failed to meet ED’s standards of financial responsibility.

On May 10, 2021, RU posted a letter of credit with ED totaling $23.1 million, which represents 10% of the Title IV program funds received by RU during its most recently completed fiscal year.

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The 2019 Borrower Defense Regulations identify certain conditions or other triggering events that have or may have an adverse material effect on the institution’s financial condition, in response to which ED would or could require that the institution submit some form of financial protection to ED.

For more on the financial responsibility provisions of the Borrower Defense Regulations, please refer to “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Borrower Defenses.” If, under the 2019 Borrower Defense Regulations, ED determines that one of our institutions is not financially responsible because of one or more triggering events, the institution would be required to provide an irrevocable letter of credit equal to at least 10% of the amount of federal student financial aid funds received by the institution for the past year.

If one of our institutions is found not to have satisfied ED’s financial responsibility requirements, it could be limited in its access to, or lose, Title IV program funds, which would limit our potential for growth and adversely affect our enrollment, revenue, and results of operations.

If we, as the parent company of an eligible institution, are found not to have satisfied ED’s financial responsibility measures, all of our

institutions could be limited in their access to, or lose, Title IV program funds, which would limit our potential for growth and adversely affect our enrollment, revenue, results of operations, and financial position.

ED rules related to borrower defense-to-repayment claims and requirements related to dispute resolution may create significant liability that could have a material adverse effect on our business.

If, under the 2019 Borrower Defense Regulations, ED determines that one of our institutions is not financially responsible because of one or more triggering events, the institution would be required to provide an irrevocable letter of credit equal to at least 10% of the amount of federal student financial aid funds received by the institution for the past year.

If one of our institutions is found not to

have satisfied ED’s financial responsibility requirements, it could be limited in its access to, or lose, Title IV program funds, which would limit our potential for growth and adversely affect our enrollment, revenue, and results of operations.

If we, as the parent company of an eligible institution, are found not to have satisfied ED’s financial responsibility measures, all of our institutions could be limited in their access to, or lose, Title IV program funds, which would limit our potential for growth and adversely affect our enrollment, revenue, results of operations, and financial position.

A failure to demonstrate “administrative capability” may result in the loss of eligibility to participate in Title IV programs.

These criteria relate to, among other things, institutional staffing, operational standards such as procedures for disbursing and safeguarding Title IV program funds, timely submission of accurate reports to ED, referring to ED OIG credible information that a student or employees with Title IV responsibilities may have engaged in fraud or illegal conduct in connection with Title IV program administration, and various other procedural matters.

ED rules related to BDTR claims and requirements related to dispute resolution may create significant liability that could have a material adverse effect on our business.

Under the HEA, ED is authorized to specify in regulations which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a loan under the Direct Loan Program, or a Direct Loan.

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If ED determines that borrowers of Direct Loans who attended our institutions have a defense to repayment of their Direct Loans, we could be subject to repayment liability to ED that could have a material adverse effect on our financial condition, results of operations, and cash flows.

The 2016 Borrower Defense Regulations, which apply to all Direct Loans made on or after July 1, 2017 and before July 1, 2020, prohibit requiring students to initially engage in an institutions’ internal complaint processes, prohibit pre-dispute arbitration agreements, and class action lawsuit waivers, and require notification to ED of arbitration filings and awards, for claims that may form the basis for a borrower defense to repayment.

The 2019 Borrower Defense Regulations, which apply to all Direct Loans made on or after July 1, 2020, generally remove these prohibitions, but require institutions whose students must enter into pre-dispute arbitration agreements or class action waivers to disclose publicly those requirements, and prohibit requiring a student to participate in arbitration or any internal dispute resolution process prior to filing a borrower defense to repayment application with ED.

The 2019 Borrower Defense Regulations, which apply to all Direct Loans made on or after July 1, 2020 and before July 1, 2023, generally remove these prohibitions, but require institutions whose students must enter into pre-dispute arbitration agreements or class action waivers to disclose publicly those requirements, and prohibit requiring a student to participate in arbitration or any internal dispute resolution process prior to filing a BDTR application with ED.

The 2022 Borrower Defense Regulations, which apply to all Direct Loans made on or after July 1, 2023 and to all BDTR claims pending as of that date, prohibit institutions from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class action waivers for claims related to the making of a Federal Direct Loan or the provision of educational services for which the loan was obtained.

As a result of these dispute resolution provisions, we could incur claims and expenses that could have a material adverse effect on our business, financial condition, and results of operations.

As more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements,” ED recently completed negotiated rulemaking to address borrower defenses to repayment, among other issues, but has yet to issue related proposed regulations.

We cannot predict whether ED’s negotiated rulemaking process to address borrower defenses to repayment will result in regulatory changes that would harm our business.

If one or more of our institutions does not comply with the 90/10 Rule, it or they will lose eligibility to participate in federal student financial aid programs.

In recent years, Congress has considered various proposals that would modify the 90/10 Rule.

In March 2021, ARPA, which modifies the 90/10 Rule to require that a for-profit institution derive not less than 10% of its revenue from sources other than “federal education assistance funds,” was signed into law.

ARPA specifies that the modifications shall apply to institutional fiscal years beginning on or after January 1, 2023.

An ED final rule to implement the ARPA modifications is not expected to go into effect until July 1, 2023 at the earliest.

We cannot predict to what extent ARPA and the final rule will affect us and our institutions.

While ARPA does not define “federal education assistance funds,” we expect such definition to be developed by rule and anticipate that ED would seek to include TA and VA education benefits in the scope of the definition.

If the rulemaking process results in TA and VA being included in the “90%” side of the ratio, our institutions’ 90/10 Rule percentage will increase, particularly at APUS.

Such a rule could also cause other educational institutions to decrease their focus on serving military-affiliated students using TA benefits, and while that could have a positive impact on our enrollments from those students, it could also have an adverse impact on our ability to meet the requirements of the 90/10 Rule.

We cannot predict the likelihood that Congress or ED will continue to modify the 90/10 Rule with respect to relevant sources of funds or other aspects of the calculation.

For example, in recent years Congress has considered various other proposals that would modify the 90/10 Rule, including proposals to decrease the limit on Title IV funds from 90% to 85%.

Such proposals, or other similar legislation, should they become law, could have a material adverse impact on the operations of our institutions.

In addition, at least one state has passed, and other states may in the future pass, their own versions of the 90/10 Rule that include TA and VA education benefits or other sources of funds in the “90%” side of the ratio.

To the extent that any additional laws or regulations, including regulations under ARPA, are adopted that limit or condition the participation of for-profit schools or distance education programs in TA or in Title IV programs, or that limit or condition the amount of TA for which for-profit schools or distance education programs are eligible to receive, our financial condition and results of operations

could be materially and adversely affected.

However, at this time, we cannot predict the impact of the ARPA 90/10 Rule on our business, including because we cannot predict how ED will implement the ARPA 90/10 Rule provision.

For the past three years, RU has derived less than 80% and HCN has derived more than 80% of its total revenue on a cash accounting basis from Title IV programs as calculated under ED’s regulations.

If RU and HCN is unable to attract students who do not depend on Title IV program aid, such as students who finance their own education or receive full or partial tuition reimbursement from their employers, or through VA benefits, HCN’s 90/10 Rule percentage may increase.

Congressional and administrative examination of for-profit institutions has resulted in and could result in further legislative and regulatory changes that may materially and adversely affect our business.

We cannot predict whether ED’s concluded or forthcoming negotiated rulemaking processes will result in regulatory changes that would harm our business.

Topics addressed or to be addressed include public service student loan forgiveness programs, mandatory pre-dispute arbitration, and prohibition of class-action lawsuits, ability to benefit provisions, certification procedures for participation in Title IV programs, change of ownership and change in control of institutions of higher education, financial responsibility for institutions of higher education, gainful employment, and standards of administrative capability, among others.

These regulatory changes have the potential to materially and adversely affect our financial conditions and results of operations.

In addition, in October 2021, in what it termed a broad-based initiative to deter for-profit college fraud, the Federal Trade Commission, or FTC, issued informational notices to 70 for-profit higher education institutions, including APUS and RU, informing them of certain marketing practices the FTC had previously determined to be deceptive or unfair and therefore unlawful under the FTC Act and thereby documenting that the institutions have knowledge that the FTC has found these marketing practices to be unfair or deceptive.

The FTC also announced that it would be enhancing its enforcement cooperation with other agencies with oversight of educational institutions, including ED’s Office of Federal Student Aid and the Department of Veterans Affairs.

Finally, on October 6, 2021, ED announced that it had restored an Office of Enforcement within ED’s Office of Federal Student Aid to strengthen oversight of and enforcement actions against postsecondary institutions that participate in federal student loan, grant, and work-study programs.

Any civil penalties or enforcement actions could have a material and adverse effect on our financial condition and results of operations.

A failure by our institutions to comply with the Department of Education’s incentive payment rule could result in sanctions and liability under the False Claims Act.

As more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements”, the 2022 Borrower Defense Regulations address BDTR, among other issues.

We cannot predict whether the final regulations, which are effective July 1, 2023, will result in regulatory changes that would harm our business.

The postsecondary education regulatory environment has changed and may change in the future as a result of U.S.

federal elections.

Changes in Presidential administrations and control of Congress as a result of the outcome of elections or other events could result in changes in or new legislation, appropriations, regulations, standards, policies and enforcement actions that could materially affect our business, including material consequences for our institutions’ accreditation, authorization to operate in various states, permissible activities, receipt of funds under student financial assistance programs, and costs of doing business.

For example, as a result of the 2020 U.S.

federal elections, Democrats, who tend to support more regulation of and restrictions on for-profit institutions, gained control of the executive branch and both houses of Congress, and as a result of the 2022 U.S.

federal midterm elections, Democrats retained control of the Senate and lost control of the House of Representatives.

The Biden administration and 2020 Congress have acted and may continue to act to change or eliminate education-related legislation and ED regulations, and to enact new legislation, such as legislation to reauthorize the HEA, and ED has initiated and could initiate new rulemaking processes to alter existing regulations and could act to change existing ED policies and practices with respect to matters related to postsecondary education institutions.

For example, ARPA, which modifies the HEA’s 90/10 Rule to require that a for-profit institution derive not less than 10 percent of its revenue from sources other than “federal education assistance funds”, was enacted in 2021, and ED has issued final regulations to address the 90/10 Rule and other topics.

ED also issued final regulations to address BDTR, public service student loan forgiveness programs, mandatory pre-dispute arbitration, and prohibition of class-action lawsuits, among other issues.

A failure by our institutions to comply with ED’s incentive payment rule could result in sanctions and liability under the False Claims Act.

If one of our institutions pays a bonus, commission, or other incentive payment in violation of the HEA’s prohibition on such payments, commonly referred to as the incentive payment rule, the institution could be subject to sanctions, which could have a material adverse effect on our business.

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ED may also seek to recover Title IV funds disbursed in connection with the prohibited incentive payments.

As described in “Regulatory Environment - Student Financing Sources and Related Regulations/Requirements,” changes in the interpretation of this prohibition may create uncertainty about what constitutes impermissible incentive payments and errors in the implementation of our compensation programs and arrangements may also lead to impermissible payments.

As described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Incentive Payment Rule”, changes in the interpretation of this prohibition may create uncertainty about what constitutes impermissible incentive payments and errors in the implementation of our compensation programs and arrangements may also lead to impermissible payments.

Ambiguities as to how the incentive payment rule is interpreted also may influence our approach, or limit our alternatives, with respect to employment policies and practices and consequently may negatively affect our ability to recruit, retain, and motivate employees.

The DoD MOU requires that institutions participating in TA have policies in place that are compliant with regulations issued by ED related to restrictions on incentive payments.

DoD MOUs requires that institutions participating in TA have policies in place that are compliant with regulations issued by ED related to restrictions on incentive payments.

In addition, the Johnny Isakson and David P.

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Such suits may prompt ED investigations, and the federal government may determine to intervene in the lawsuits.

Particularly in light of the uncertainty surrounding interpretation of the incentive payment rule, the existence of, the costs of responding to, and the outcome of, such suits or ED investigations

could have a material adverse effect on our reputation causing our enrollments to decline, could cause us to incur costs that are material to our business, and could impact the ability of our institutions to participate in Title IV programs, among other things.

Particularly in light of the uncertainty surrounding interpretation of the incentive payment rule, the existence of, the costs of responding to, and the outcome of, such suits or ED investigations could have a material adverse effect on our reputation causing our enrollments to decline, could cause us to incur costs that are material to our business, and could impact the ability of our institutions to participate in Title IV programs, among other things.

As a result, our business could be materially and adversely affected.

Our institutions may lose eligibility to participate in Title IV programs if their student loan default rates are too high, and our future growth could be impaired as a result.

As described more fully under “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements,” to remain eligible to participate in Title IV programs, an educational institution’s federal student loan cohort default rates must remain below certain specified levels.

As described more fully under “Regulatory Environment – Student Financing Sources and Related Regulations/ Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Student Loan Defaults”, to remain eligible to participate in Title IV programs, an educational institution’s federal student loan cohort default rates must remain below certain specified levels.

If an institution’s cohort default rate equals or exceeds 30% for any given year, it must establish a default prevention task force and develop a default prevention plan with measurable objectives for improving the cohort default rate.

Educational institutions will lose eligibility to participate in Title IV programs if their cohort default rate exceeds 40% for any given year or is equal to or greater than 30% for three consecutive years.

Government policies to minimize the adverse economic impact of the COVID-19 pandemic may artificially lower our institutions’ cohort default rates, which nevertheless may be higher than otherwise expected as a result of the pandemic.

Congress and ED have implemented a temporary freeze on student loan payments and interest accruals until at least May 1, 2022, which means borrowers may be less likely to default on their loans and our institutions’ cohort default rates may be lower not because borrowers are making timely repayments but because the government is allowing them not to make payments.

Educational institutions will lose eligibility to participate in Title IV programs if their cohort default rate is equal to or greater than 30% for three consecutive years, or if the cohort default rate exceeds 40% for any given year.

Government policies to minimize the adverse economic impact of the COVID-19 pandemic have artificially lowered our institutions’ cohort default rates, which nevertheless may be higher than otherwise expected as a result of the pandemic.

Congress and ED have implemented a temporary freeze on student loan payments and interest accruals, which means borrowers are less likely to default on their loans and our institutions’ cohort default rates are lower not because borrowers are making

timely repayments but because the government is allowing them not to make payments.

At the same time, borrowers may face economic constraints as a result of the pandemic, which may lead to an increase in defaults and therefore an increase in our institutions’ cohort default rates upon expiration of the forbearance period.

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In the past, members of Congress have also introduced proposed legislation that would assess institutions a share of the costs associated with default of student loans by students who were enrolled in the institutions’ education programs and would tie an institution’s obligation to make such “risk-sharing” payments to the institution’s eligibility to participate in the Title IV programs.

If one of our institutions loses its eligibility to participate in Title IV programs because of high student loan default rates, students would no longer be eligible to use Title IV program funds at that institution, which would significantly reduce that institution’s enrollments and revenue and have a material adverse effect on our results of operations.

If one of our institutions loses its eligibility to participate in Title IV programs because of high student loan default rates, students would no longer be eligible to use Title IV program funds at that institution, which would significantly reduce that institution’s enrollments and revenue and cash flows and have a material adverse effect on our results of operations.

We rely on third parties to administer elements of APUS’ and HCN’s participation in Title IV programs and their failure to perform services as agreed or to comply with applicable regulations could cause us to lose our eligibility to participate in Title IV programs.

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Further, in the event that our institutions transition to or from a third-party servicer for any of its services, there would be costs and risks related to the transition, which could have a material adverse effect on our financial condition.

Our institutions will be subject to sanctions that could be material to our results and damage our reputation if the Department of Education determines that our institutions failed to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program.

As more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements,” an institution participating in Title IV programs must calculate unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion and must timely return those funds.

As discussed in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education”, ED recently issued guidance that significantly expands the types of activities and functions that constitute third-party servicer activities for Title IV purposes and states ED’s position that an institution may not contract with a third-party servicer for Title IV purposes if the servicer (or its subcontractors) is located outside the U.S.

or is owned or operated by an individual who is not a U.S.

citizen or national or a lawful U.S.

permanent resident.

Our institutions must assess their arrangements with third parties to determine whether a vendor must now be treated as a third-party servicer based on the guidance, and such assessment may lead to a need to modify or end existing contracts and establish new contracts.

Any transition by our institutions to or from a third-party servicer for any services as a result of the new guidance could be costly and present other risks related to the transition, which could have a material adverse effect on our financial condition and results of operations.

Our institutions will be subject to sanctions that could be material to our results and damage our reputation if ED determines that our institutions failed to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program.

As more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Title IV Return of Funds”, an institution participating in Title IV programs must calculate unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion and must timely return those funds.

Under ED regulations, late returns of Title IV program funds for 5% or more of students sampled in connection with the institution’s annual Title IV compliance audit constitute material noncompliance for which an institution generally must submit an irrevocable letter of credit.

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ED may take action against an institution in the event of substantial misrepresentation by the institution concerning the nature of its educational programs, its financial charges, or the employability of its graduates.

As part of the 2022 Borrower Defense Regulations, which become effective July 1, 2023, ED modified the substantial misrepresentation rule to explicitly include certain “omissions of fact” as a basis for a misrepresentation claim or BDTR claim.

If ED determines that an institution has engaged in substantial misrepresentation, ED may:

(i) if the institution is provisionally certified, as our institutions currently are, revoke an institution’s program participation agreement or impose limitations on its participation in Title IV programs;

(ii) deny participation applications made on behalf of the institution;

deny participation applications made on behalf of the institution;

or (iii) initiate a proceeding against the institution to fine the institution or to limit, suspend, or terminate the institution’s participation in Title IV programs.

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Our institutions must comply with certain campus safety and security reporting requirements as well as other requirements in the Clery Act.

The Clery Act requires an institution to report to ED and disclose in an annual security report, for the three most recent calendar years, statistics concerning the number of certain crimes that occurred within the institution’s so-called “Clery geography.” Our institutions each publish an annual security report as required by the Clery Act, and their failure to comply with the Clery Act requirements or regulations promulgated by ED could result in our institutions being fined or having their eligibility to participate in Title IV programs limited, suspended, or terminated, could lead to litigation, or could harm our institutions’ reputation, each of which could, in turn, adversely affect our institutions’ enrollments and revenue and have a material effect on our business.

The Clery Act requires an institution to report to ED and disclose in an annual security report, for the three most recent calendar years, statistics concerning the number of certain crimes that occurred within the institution’s “Clery geography,” which comprises an institution’s campus and non-campus buildings and property, public property on or adjacent to and accessible from the campus, and in some cases areas within the patrol jurisdiction of the campus police or security department.

Our institutions each publish an annual security report as required by the Clery Act, and their failure to comply with the Clery Act requirements or regulations promulgated by ED could result in our institutions being fined or having their eligibility to participate in Title IV programs limited, suspended, or terminated, could lead to litigation, or could harm our institutions’ reputation, each of which could, in turn, adversely affect our institutions’ enrollments and revenue and have a material effect on our business.

Enforcement of laws related to the accessibility of technology continues to evolve, which could result in increased information technology development costs and compliance risks.

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Federal agencies, including ED and the Department of Justice, have considered or are considering how electronic and information technology should be made accessible to persons with disabilities, including via specific technical standards.

For example, as discussed further in “Regulatory Environment – Department of Education – Regulation of Title IV Financial Aid Programs – Accessibility for Students and Disabilities,” ED’s Office of Civil Rights has in recent years taken enforcement action against higher education institutions in connection with the inaccessibility of their websites and online learning management platforms to persons with a disability.

For example, as discussed further in “Regulatory Environment – Department of Education – Regulation of Title IV Financial Aid Programs – Accessibility for Students and Disabilities”, ED’s Office for Civil Rights has in recent years taken enforcement action against higher education institutions in connection with the inaccessibility of their websites and online learning management platforms to persons with a disability.

As a result of such enforcement action or as a result of new laws and regulations that require greater accessibility or accessibility in accordance with specific technical standards, our institutions may have to modify their online classrooms and other uses of technology to satisfy applicable requirements, which could require substantial financial investment.

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For example, ED regularly conducts program reviews of educational institutions that are participating in Title IV programs and the ED OIG regularly conducts audits and investigations of such institutions.

RU and HCN are currently subject to ongoing Title IV program reviews.

In addition, the Federal Trade Commission has investigated and, in some cases, brought lawsuits against for-profit institutions alleging that the institutions engaged in deceptive trade practices, and the Consumer Financial Protection Bureau has sued for-profit institutions for engaging in allegedly illegal predatory lending practices.

RU is currently subject to an ongoing Title IV program review, and ED recently completed a program review of HCN.

In September 2022, RU received a program review report from ED with respect to the previously disclosed open program review for the 2015-2016 and 2016-2017 award years.

ED asserted 14 findings of noncompliance with Title IV rules, including rules related to Title IV administration, policies, and consumer information and reporting requirements, and the federal work study, Pell Grant, and Federal Supplemental Educational Opportunity Grant programs.

The program review report requires RU to do a review in connection with the federal work study finding, prepare policies and procedures, return small amounts of funds to two students, provide training, and take other actions in connection with the findings, and to provide a response, which RU timely provided.

ED will review the response and then issue a final program review determination specifying any liabilities.

At this time, we cannot predict the outcome of the RU program review, when it will be completed, or whether ED will place any liability or other limitations on RU as a result of the review.

In July 2022, HCN received from ED the final program review determination from a review that had been pending since June 2017, and in September 2022 ED notified HCN that it had closed the program review and no further action was required.

The review included findings of a failure to prorate fees, return of Title IV funds calculations that were not properly computed, untimely and inaccurate reporting to the National Student Loan Data System, incomplete verification, and cost of attendance formulation deficiencies.

HCN was required to do a full file review in connection with the return of Title IV funds finding, to have the review tested by an independent auditor, and to prepare policies and procedures and take other actions in connection with the findings.

Total liabilities were approximately $12,000.

In addition, the FTC has investigated and, in some cases, brought lawsuits against for-profit institutions alleging that the institutions engaged in deceptive trade practices, and the Consumer Financial Protection Bureau has sued for-profit institutions for engaging in allegedly illegal predatory lending practices.

In October 2021, in what it termed a broad-based initiative to deter for-profit college fraud, the FTC issued informational notices to 70 for-profit higher education institutions, including APUS and RU, informing them of certain marketing practices the FTC had previously determined to be deceptive or unfair and therefore unlawful under the FTC Act and thereby documenting that the institutions have knowledge that the FTC has found these marketing practices to be unfair or deceptive.

Also in October 2021, ED announced that it had restored an Office of Enforcement within ED’s Office of Federal Student Aid to strengthen oversight of and enforcement actions against postsecondary institutions that participate in federal student loan, grant, and work-study programs.

Any civil penalties or enforcement actions could have a material and adverse effect on our financial condition and results of operations.

If the results of compliance reviews or other proceedings are unfavorable to us, or if we are unable to defend successfully against lawsuits or claims, our institutions may be required to pay monetary damages or be subject to fines, limitations, loss of Title IV funding, injunctions, or other penalties, including the requirement to make refunds.

Even if our institutions adequately address issues raised by an agency review or successfully defend a lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those

reviews or to defend against those lawsuits or claims.

Claims and lawsuits brought against us or one of our institutions may result in reputational damage, even if such claims and lawsuits are without merit.

Any one of these sanctions could materially adversely affect our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our institutions, which may materially adversely affect our ability to operate.

In January 2022, HCN received from ED the program review report from a review that had been pending since June 2017, when ED requested information and conducted an on-site visit for two HCN locations.

ED subsequently requested additional information.

HCN is required to do a full file review in connection with the return of Title IV funds finding, must have the review tested by an independent auditor, and must prepare policies and procedures and take other actions in connection with the findings, with a response due by April 8, 2022.

ED will review the response and then issue a final program review determination letter specifying any liabilities.

At this time, we cannot predict whether ED will impose any liability or limitations on HCN as a result of the review.

Investigations by state Attorneys General, Congress, and governmental agencies may result in increased regulatory burdens and costs.

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In recent years, a number of state attorneys general launched investigations into for-profit postsecondary education institutions.

For example, in August 2018, we resolved an investigation by the Attorney General of Massachusetts of alleged unfair or deceptive acts or practices by AMU pursuant to which, and without any finding or admission of wrongdoing on APUS’s part, APUS paid $270,000 and agreed to otherwise comply with applicable Massachusetts regulations.

For example, in August 2018, we resolved an Attorney General of Massachusetts investigation without any finding or admission of wrongdoing on APUS’s part.

Other state attorneys general may also initiate inquiries into us or our institutions.

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Adverse media or social media coverage regarding others in our industry, or regarding us or our institutions directly, could damage our reputation, could result in lower enrollments at our institutions, lower revenue, and increased expenses, and could have a negative impact on our stock price.

Such allegations could also result in increased scrutiny and regulation by ED, Congress, accrediting bodies, state legislatures, state attorneys general, or other governmental authorities with respect to all for-profit institutions, including us and our institutions.

Such allegations could also result in increased scrutiny

and regulation by ED, Congress, accrediting bodies, state legislatures, state attorneys general, or other governmental authorities with respect to all for-profit institutions, including us and our institutions.

For these reasons or others, not-for-profit or public education institutions may act to differentiate themselves from the for-profit education institutions, including by choosing not to enter into collaborations with for-profit institutions, including us, or by excluding for-profit institutions from membership in industry groups.

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For example, when Walmart announced that it will not be renewing its partnership agreement with APUS, it announced a new program that only involved not-for-profit institutions.

If we undergo a change in ownership or control, the Department of Education will place our institutions on provisional certification to the extent they are not already on provisional status, and the terms of that provisional certification could limit our institutions’ potential for growth and adversely affect our institutions’ enrollment, our revenue, and results of operations.

As described more fully under “Regulatory Environment – Regulatory Actions and Restrictions on Operations,” an institution whose parent undergoes a change in ownership resulting in a change of control loses its eligibility to participate in

Title IV programs and must apply to ED in order to reestablish such eligibility.

If we undergo a change in ownership or control, ED will place our institutions on provisional certification to the extent they are not already on provisional status, and the terms of that provisional certification could limit our institutions’ potential for growth and adversely affect our institutions’ enrollment, our revenue, and results of operations.

As described more fully under “Regulatory Environment – Regulatory Actions and Restrictions on Operations”, an institution whose parent undergoes a change in ownership resulting in a change of control loses its eligibility to participate in Title IV programs and must apply to ED in order to reestablish such eligibility.

Future transactions could constitute a change in ownership or control under ED’s regulations and could cause ED to leave provisional certification in place for our institutions as required by the HEA.

The conditions of provisional certification or heightened scrutiny by ED could impact, among other things, our institutions’ ability to add educational programs, or additional locations, our ability to acquire other institutions, or our ability to make other significant changes.

For example, as described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures,” ED imposed growth restrictions on RU in connection with RU’s 2019 change in ownership and continued those restrictions after the RU Acquisition as part of RU’s temporary provisional certification.

For example, as described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, ED imposed growth restrictions on RU in connection with RU’s 2019 change in ownership and continued those restrictions after the Rasmussen Acquisition as part of RU’s temporary provisional certification.

In addition, if ED were to determine that our institutions were unable to meet their responsibilities while they were provisionally certified, as our institutions currently are, ED could seek to revoke our institutions’ certification to participate in Title IV programs with fewer due process protections than if they were fully certified.

Limitations on our institutions’ operations could, and the loss of our institutions’ certification to participate in Title IV programs would, adversely affect our institutions’ enrollments, and our revenue and results of operations.

See also the Risk Factor that begins “RU is currently on provisional certification with the Department of Education...” below.

See also the Risk Factor that begins “RU is currently on provisional certification with ED...” below.

RU is currently on provisional certification with ED, including because of the Rasmussen Acquisition, and the terms of that provisional certification could limit its potential for growth.

In July 2021, ED notified RU that in connection with its March 2019 change in ownership, ED was imposing certain temporary growth restrictions on the institution, including limitations on new programs and locations and a cap on enrollments by students that participate in Title IV programs.

Additionally, ED required RU to submit periodic financial and enrollment reports, a requirement that it had imposed on RU in connection with a financial responsibility letter of credit previously imposed on RU.

Please refer to the Risk Factor with the caption that begins “A failure to demonstrate ‘financial responsibility’ may result in the loss of eligibility...”.

In September 2021, RU timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership.

ED and RU entered into a TPPPA, effective as of October 14, 2021, that allows RU to continue disbursing Title IV funds during the period of ED’s review of the change in ownership application.

These growth restrictions could limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current education or market needs by providing new or changed programs.

The growth restrictions could also have an adverse effect on our ability to grow revenue or meet investors’ and financial analysts’ expectations for financial performance.

If regulators do not approve or delay their approval of transactions involving a change of control of our Company or of institutions that we own or acquire, our and our institutions’ ability to operate could be impaired.

If we or one of our institutions experiences a change of ownership or control under the standards of applicable state regulatory bodies, accrediting agencies, ED, or other regulators, we or the institution governed by such agencies must notify or seek the approval of each relevant regulatory agency.

Transactions or events that constitute a change of control include significant acquisitions or dispositions of an institution’s common stock, significant changes in the composition of an institution’s Board of Directors, internal restructurings, acquisitions of institutions including the RU Acquisition, or certain other transactions.

Some of these transactions or events may be beyond our control.

Our or our institutions’ failure to obtain, or a delay in receiving, approval of any change of control from the relevant regulatory agencies following a transaction involving a change of ownership or control could result in a suspension of operating authority, loss of accreditation, or suspension, loss of ability to participate in Title IV programs or certain growth restrictions including with respect to adding locations and programs, which could have a material adverse effect on our institutions and our financial condition.

Our failure to obtain, or a delay in receiving, approval of any change of control from other states in which we are currently licensed or authorized could require our institutions to suspend activities in that state or otherwise impair our institutions’ operations.

suspension, loss of ability to participate in Title IV programs or certain growth restrictions including with respect to adding locations and programs, which could have a material adverse effect on our institutions and our financial condition.

Our failure to obtain, or a delay in receiving, any approval of any change of control from other states in which we are currently licensed or authorized could require our institutions to suspend activities in that state or otherwise impair our institutions’ operations.

The potential adverse effects of a change of control could influence, among other things, future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance, or redemption of our stock.

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Growth restrictions that ED could impose as a result of change in ownership are more fully described in “Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “-Student Financing Sources and Related Regulations/Requirements”.

RU is currently on provisional certification with the Department of Education, including because of the recent RU Acquisition, and the terms of that provisional certification could limit its potential for growth.

In July 2021, ED notified RU that in connection with its March 2019 change in ownership, ED was imposing certain temporary growth restrictions on the institution, including limitations on new programs and locations a cap on enrollments by students that participate in Title IV programs.

Please refer to the Risk Factor with the caption that begins “A failure to demonstrate ‘financial responsibility’ may result in the loss of eligibility...”.

On September 9, 2021, RU timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership.

ED and RU entered into a Temporary Provisional Program Participation Agreement, or TPPPA, effective as of October 14, 2021, that allows RU to continue disbursing Title IV funds during the period of ED’s review of the change in ownership application.

The TPPPA continues the growth restrictions that ED imposed as a result of the March 2019 change in ownership, including the same enrollment cap, with certain qualifications more fully described in “Regulatory Environment – Regulatory Actions and Restrictions on Operations.” These growth restrictions could limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current education or market needs by providing new or changed programs.

The growth restrictions could also have an adverse effect on our ability to grow revenue or meet investors’ and financial analysts’ expectations for financial performance.

Certain contingents of Congress continue to examine the for-profit postsecondary education sector, which could result in targeted legislation, heightened oversight, or additional Department of Education rulemaking that may limit or condition Title IV program participation of for-profit schools in a manner that may materially and adversely affect our business.

Certain contingents of Congress continue to examine the for-profit postsecondary education sector, which could result in targeted legislation, heightened oversight, or additional ED rulemaking that may limit or condition Title IV program participation of for-profit schools in a manner that may materially and adversely affect our business.

Certain contingents of Congress continue to examine institutions like ours.

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We cannot predict the extent to which, or whether, Congress may refocus on for-profit education institutions, but Democrats, who gained control of both houses of Congress as a result of the 2020 U.S.

federal elections, tend to support more regulation of and restrictions on for-profit institutions.

federal elections and who retain control of the Senate as a result of the 2022 U.S.

federal midterm elections, tend to support more regulation of and restrictions on for-profit institutions.

We also cannot predict the extent to which, or whether, any hearings or investigations will result in legislation, further rulemaking affecting our participation in Title IV programs, or litigation alleging statutory violations, regulatory infractions, or common law causes of action.

Congress has in the past changed, and may in the future change, eligibility standards and funding levels for federal student financial aid programs, DoD tuition assistance, and other programs.

Congress has in the past changed, and may in the future change, eligibility standards and funding levels for federal student financial aid programs, DoD TA, and other programs.

Other governmental or regulatory bodies may also change similar laws or regulations relating to such programs, which could adversely affect our student population, revenue, and financial condition.

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Congress completed the most recent reauthorization through multiple pieces of legislation and may reauthorize the HEA in a piecemeal manner in the future.

The previous Congress considered comprehensive legislation to reauthorize the HEA, and Congress is expected to consider such legislation again in the future.

Congress has previously considered comprehensive legislation to reauthorize the HEA, and is expected to consider such legislation again in the future.

We cannot predict whether, in what form, or when, the two houses of Congress will reauthorize the HEA or whether, or when, the President will sign reauthorization legislation.

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We are not in a position to predict whether any particular legislation that could adversely affect the for-profit education sector will be passed by Congress or signed into law in the future, but Democrats, who tend to support more regulation of and restrictions on for-profit institutions, gained control of the executive branch and both houses of Congress as a result of the 2020 U.S.

federal elections.

The reallocation of funding among Title IV programs, material changes in the requirements for participation in such programs, or the substitution of materially different Title IV programs could reduce the ability of certain students to finance their education at our institutions and adversely affect our revenue and results of operations.

federal elections, and retain control of the Senate as a result of the 2022 U.S.

federal midterm elections.

The reallocation of funding among Title IV programs, material changes in the requirements for participation in such programs, or the substitution of

materially different Title IV programs could reduce the ability of certain students to finance their education at our institutions and adversely affect our revenue and results of operations.

Failure to comply with the various federal and state laws and regulations governing RU’s and HCN’s extended payment plan options could subject us to fines, penalties, obligations to discharge loans and other injunctive requirements.

RU and HCN offer extended payment plan options designed to assist students with educational costs, including tuition and fees.

The extended payment plans are subject to various federal and state laws and regulations, as discussed in “Regulatory Environment – Student Financing Sources and Related Regulations / Requirements – Additional Sources of Student Payments”.

If we do not comply with these laws and regulations, we could be subject to fines, penalties, obligations to discharge loans and other injunctive requirements, which could have a material adverse effect on our financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

Additionally, an adverse allegation, finding or outcome in any of these matters could also materially and adversely affect our ability to maintain, obtain or renew licenses, approvals or accreditation and maintain eligibility to participate in Title IV programs or serve as a basis for ED to discharge certain Title IV student loans and seek recovery for some or all of its resulting losses from us, either of which could have a material adverse effect on our business, financial condition, results of operations, and cashflows, and result in the imposition of significant restrictions on us and our ability to operate.

Risks Related to Our Business

As part of our business strategy, we have entered into, and may enter into or seek to enter into, business combinations and acquisitions that may be difficult to integrate, disrupt our business, dilute stockholder value, or divert management attention.

In addition to the RU Acquisition and our acquisition of GSUSA, we may seek to enter into additional business combinations or acquisitions in the future.

Acquisitions are typically accompanied by a number of risks, including:

• difficulties consolidating operations and integrating financial, information technology and other systems, as well as the inability to maintain uniform standards, controls, policies and procedures;

• distraction of management’s attention from normal business operations during the acquisition and integration processes;

• inability to obtain, or delay in obtaining, approval of the acquisition from the necessary regulatory agencies, or the imposition of operating restrictions or a letter of credit requirement on us or on the acquired institution such as in the case of the RU Acquisition;

• challenges relating to conforming non-compliant financial reporting procedures to those required of a subsidiary of a U.S.

reporting company, including procedures required by the Sarbanes-Oxley Act;

Economic and market conditions in the U.S.

and abroad and changes in interest rates could affect our enrollments, success with placement and persistence and cohort default rates.

Our business has been and may in the future be adversely affected by a general economic slowdown, recession, or other adverse economic developments in the U.S.

or abroad, including rising interest rates and inflation.

Our institutions derive a significant portion of their revenue from Title IV programs, which include student loans with interest rates subsidized by the federal government.

Additionally, some students finance their education through private loans that are not government subsidized.

Historically low interest rates have created a favorable borrowing environment for students.

However, our students may have to pay higher interest rates on their Title IV program loans and private loans as a result of recent and expected future interest rate increases.

Increases in applicable interest rates could result in a corresponding increase in educational costs to our existing and prospective students, which could result in a reduction in our enrollment.

Higher interest rates could also contribute to higher default rates with respect to our students’ repayment of their education loans.

Higher default rates may in turn adversely impact our eligibility to participate in some Title IV programs, which could adversely impact our operations and financial condition.

In addition, inflation has and in the future could result in increased costs of labor and materials, which could adversely impact our operations and financial condition.

Adverse economic developments, such as those that resulted from the COVID-19 pandemic, that affect the United States could also result in a reduction in the number of jobs available to our graduates and lower salaries being offered in connection with available employment, which, in turn, could result in declines in our success with placements and persistence.

In addition, adverse economic developments could adversely affect the ability or willingness of our former students to repay student loans, which could increase our institutions’ student loan cohort default rates and require increased time, attention, and resources to manage these defaults.

Our institutions’ students are able to borrow Title IV loans in excess of their tuition and fees.

The excess is received by such students as a credit balance refund.

However, if a student withdraws, our institutions must return any unearned Title IV funds (which may include a portion of the credit balance refund) and must seek to collect from the student any resulting amounts owed to the institution.

A protracted economic slowdown could negatively impact such students’ abilities to satisfy debts to the institution, including debts that result from returns of unearned Title IV amounts.

As a result, the amount of Title IV funds we would have to return without repayment from our institutions’ students could increase, and our financial results could suffer.

Our business could be harmed if our institutions experience a disruption in their ability to process Title IV financial aid.

We collected a substantial portion of our fiscal year 2022 consolidated revenue from receipt of Title IV financial aid program funds.

Any processing disruptions by ED, by our institutions, or by third-party service providers may impact the ability of our institutions’ students to obtain Title IV financial aid on a timely basis.

If our institutions experience a disruption in their ability to process Title IV financial aid, either because of administrative challenges on their part or the part of their vendors, or the inability of ED to process Title IV funds on a timely basis, it could have a material adverse effect on our institutions’ business and on our financial condition, results of operations, and cash flows.

If our institutions experience a disruption in their ability to process Title IV financial aid because of administrative challenges on their part or the part of their vendors, ED could

require that our institutions become subject to payment methods for Title IV programs that are not the advance payment system, which could have a material adverse effect on our institutions’ cash flows.

Business combinations and acquisitions may be difficult to integrate, disrupt our business, dilute stockholder value, or divert management attention, and we may not realize the expected benefits of any consummated business combinations or acquisitions.

From time to time, we explore or enter into business combinations and acquisitions, such as our recent Rasmussen Acquisition and GSUSA acquisition, which are typically accompanied by a number of risks, including:

• failure to consummate or delay in consummating the transactions;

• lack of understanding of the target business;

• unrealistic expectations for the benefits of the acquisitions or underestimation of the difficulties and costs of integration;

• failure to achieve anticipated transaction benefits or projected financial results and operational synergies;

• difficulties consolidating operations and integrating financial, information technology and other systems, as well as challenges in maintaining uniform, effective, or compliant standards, controls, policies, and procedures, including financial reporting procedures;

• disruption or termination of relationships with students or business partners;

• distraction of management’s and other key personnel’s attention from normal business operations during the acquisition and integration processes;

• expenses associated with the integration efforts;

• adverse tax or accounting impact;

• unidentified issues not discovered in the due diligence process, including legal and regulatory contingencies.

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If any acquisitions for which we record goodwill are not successful or experience challenges, that goodwill may become impaired and have an adverse impact on our results of operations.

For example, we recorded pretax, non-cash charges of $7.3 million during the fiscal year ended December 31, 2019 to reduce the carrying value of our goodwill as a result of determinations that the fair value of HCN was less than its carrying value because of circumstances including HCN’s underperformance against 2019 internal targets and overall 2019 financial performance.

The RU Acquisition was, and our acquisition of any other educational institution would also likely be, considered a change in ownership and control of the acquired institution under applicable regulatory standards.

For such an acquisition, we may need approval from ED, applicable state agencies and accrediting agencies, and possibly other regulatory bodies, a number of which can only be requested after completion of the acquisition.

For example, we recorded a non-cash charge of $144.9 million, and to reflect the corresponding tax impact of $36.0 million, during the fiscal year ended December 31, 2022 to reduce the carrying value of RU goodwill and intangible assets as a result of determining that the fair value of RU was less than its carrying value.

This was due to RU’s underperformance in the second quarter of 2022 as compared to projections at the time of acquisition as well as the decline in our market value and that of comparable companies.

We believe that it is a reasonable possibility that we will be required to record further impairment charges to reduce the carrying value of RU Segment goodwill in future periods.

The Rasmussen Acquisition was, and our acquisition of any other educational institution would also likely be, considered a change in ownership and control of the acquired institution under applicable regulatory standards.

For the Rasmussen Acquisition, we needed, and for any such acquisition, we would need approval from ED, and we would need to notify or obtain approval from applicable state agencies and accrediting agencies, and possibly other regulatory bodies, to the extent those agencies or bodies require such actions.

A number of these approvals can only be requested after completion of an acquisition.

Our inability to obtain such approvals with respect to a completed acquisition could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

If we are not successful in completing acquisitions, we may incur substantial expenses and devote significant management time and resources without a productive result.

In addition, future acquisitions could result in dilutive issuances of securities or could require use of substantial portions of our available cash, as in the HCN acquisition and the RU Acquisition, or issuances of debt, as in connection with the RU Acquisition, which could adversely affect our financial condition.

Integrating our business with RU’s business may be more difficult, costly or time-consuming than expected, and we may not realize the expected benefits of the Rasmussen Acquisition, which may adversely affect our business results.

If we experience greater than anticipated costs to integrate or are not able to successfully integrate RU into our existing operations, we may not be able to achieve the anticipated benefits of the RU Acquisition, including cost savings and other synergies and growth opportunities.

Even if the integration of RU’s business is successful, we may not realize all of the anticipated benefits of the RU Acquisition during the anticipated time frame, or at all.

For example, events outside our control, such as changes in regulation and laws, as well as economic trends, including as a result of the COVID-19 pandemic, could adversely affect our ability to realize the expected benefits from this acquisition.

In addition, RU was previously a privately held company and was not required to maintain an internal control infrastructure that would meet the standards of a public company, including the requirements of the Sarbanes-Oxley Act of 2002.

The costs that we may incur to implement such controls and procedures may be substantial and we could encounter unexpected delays and challenges in this implementation.

In addition, we may discover significant deficiencies or material weaknesses in the quality of RU’s financial and disclosure controls and procedures.

An inability to realize the full extent of the anticipated benefits of the RU Acquisition, as well as any delays encountered in the integration process, could have an adverse effect upon our revenue, level of expenses, and operating results, which may adversely affect the value of our common stock after the completion of the RU Acquisition.

In addition, it is possible that the integration process could result in the loss of key employees, errors or delays in the implementation of shared services, the disruption of our ongoing business or inconsistencies in standards, controls, procedures, and policies that adversely affect our ability to maintain relationships with students, faculty and other employees or to achieve the anticipated benefits of the RU Acquisition.

Integration efforts also may divert management attention and resources.

In addition, future acquisitions could result in dilutive issuances of securities or could require use of substantial portions of our available cash, as in the HCN acquisition and the Rasmussen Acquisition, or issuances of debt and equity, as in connection with the Rasmussen Acquisition, which could adversely affect our financial condition.

We have not yet been able to fully achieve the anticipated benefits of the Rasmussen Acquisition, as evidenced by the reduction in carrying value of goodwill and intangible assets discussed above, and may not be able to achieve the anticipated benefits of any future acquisition, including cost savings and other synergies and growth opportunities, during the anticipated time frame, or at all.

For example, events outside our control, such as changes in regulation and laws and economic trends, could adversely affect our ability to realize the expected benefits.

A continued inability to realize the full extent of the anticipated benefits of the Rasmussen Acquisition or an inability to realize in full anticipated benefits of any future acquisition could have an adverse effect on our revenue, results of operations, and level of expenses, which may adversely affect the value of our common stock.

Our acquisition of GSUSA may not achieve its expected benefits and we may not be successful in operating GSUSA or executing our plans for its business, including because of our limited experience in training and compliance with government contracting law.

GSUSA is one of the largest providers of training to the federal government workforce, a market in which we have limited experience, and its contracts are governed by the FAR, a regulatory framework with which we have limited experience.

The FAR creates compliance risk, affects how GSUSA interacts and does business with its federal government clients, including by providing government agencies with rights not typically found in commercial contracts, and may impose added costs on GSUSA’s business.

Our government contracts may provide for termination by the government at any time, without cause.

In addition, we may be subject to audits and investigations relating to these contracts, and any violations could result in civil and criminal penalties and administrative sanctions, including termination of contract, refund or suspension of payments, forfeiture of profits, payment of fines, and suspension or debarment from future government business.

The acquisition of GSUSA remains subject also to certain of the risks described in the Risk Factors captioned “Business combinations and acquisitions may be difficult to integrate, disrupt our business, dilute stockholder value, or divert management attention, and we may not realize the expected benefits of any consummated business combinations or acquisitions” above and “Efforts to diversify our business outside of the traditional areas served by our institutions may provide strategic and operational challenges that we are not prepared or able to address” below.

Our inability to realize the expected benefits of the acquisition of GSUSA or to successfully operate its business or execute our business plans for GSUSA would adversely impact our financial condition and results of operations.

Efforts to diversify our business outside of the traditional areas served by our institutions may provide strategic and operational challenges that we are not prepared or able to address.

We intend to continue to explore opportunities to invest in the education industry, which could include purchasing or investing in other education-related companies or companies developing new technologies.

As we seek opportunities to expand our business and serve markets beyond those traditionally served by our institutions, such as the federal government training market through the acquisition of GSUSA, we may encounter strategic and operational challenges different from those within our existing institutions.

We or our institutions may have limited experience operating in new businesses and markets or new modes of teaching and may need to modify systems and strategies or enter into arrangements with other institutions and organizations.

In addition, our systems and infrastructure may not be able to respond quickly enough to support new business opportunities, or we may not otherwise be able to address the strategic or operational differences of or compliance challenges associated with these new opportunities.

If we are unable to successfully capitalize on new opportunities, the value of our common stock may decline over time, including because of the challenges of growing our core business under our current model.

We have implemented a shared services model for services to our institutions, and challenges encountered due to the ongoing operation and expansion of this model could cause strategic or operational challenges and adversely impact us.

Over the last several years, we have invested capital and human resources in the transition and implementation of a shared services model pursuant to which APEI provides services to our institutions that were previously handled directly within those institutions.

However, APEI’s provision of shared services may not provide the level of service or respond quickly enough to meet the business needs of our institutions.

We may not achieve the expected or desired synergies or other benefits of implementing shared services.

In addition, the operation and continued expansion of the shared services model could lead to strategic and operational challenges, inefficiencies, or increased costs, any of which could cause our institutions to become dissatisfied with the shared services model, and adversely affect our business, financial condition, results of operations, and cash flows.

We rely on third-party vendors whose service may be of lower quality than ours, whose responsiveness may be less timely than ours, and whose compliance practices may increase our operational and compliance risk.

We rely on third-party vendors to provide certain services to our institutions and their students primarily related to information technology services, our learning management system, and financial aid processing, and expect to rely more heavily on such vendors, particularly through cloud computing services, in the future.

While we monitor and assess vendor service, it is possible that the quality of service and the timeliness of vendor responses may be less than the service and responsiveness that we or our institutions would provide.

Lack of service level agreements with third-party vendors may negatively impact our operations, and third-party vendors may lack adequate business continuity planning.

Using third-party vendors increases compliance risk that the vendors may not adequately protect personal information, or that they may not comply with applicable federal or state regulations.

Further, transitioning from existing vendors or from in-house processes to new providers or from

third-party providers to in-house processes or vice versa, such as the transition of RU marketing from Collegis to our in-house, centralized marketing team and the planned transition of information technology and related services currently outsourced to Collegis to our control and management or to cloud services or third-party vendors over which we will have management oversight, involves inherent risks, including the risk of significant disruption of integral processes or the decrease in quality of service as compared to the prior provider.

In the event third-party vendors fail to provide services, lack adequate continuity planning, or fail to provide necessary implementation or transition services, our financial condition and results of operations could be adversely affected.

There can be no guarantee that our business will generate sufficient cash flow from operations or that future capital or borrowings will be available to us in an amount sufficient to enable us to fund our other liquidity needs.

Although we believe our cash flow from operations and our existing cash and cash equivalents will provide adequate funds for ongoing operations, debt and interest obligations, and planned capital expenditures for the next 12 months and the foreseeable future , our future capital requirements, and our ability to generate sufficient cash to fund our future operations will depend on a number of factors.

Our business may not generate sufficient cash flow from operations, and future capital or borrowings may not be available to us in an amount sufficient to enable us to service our indebtedness, pay dividends on our Series A Senior Preferred Stock when due, or fund our other liquidity needs.

Failure to achieve business performance consistent with our expectations, to reverse the decline in enrollments at RU, including as a result of regulatory action, or any government shutdown could adversely impact our cash flows and results of operations.

In addition, our efforts to comply with the 90/10 Rule could lead us to reduce enrollments or require us to make expenditures that would reduce our existing cash available for operations.

We have incurred substantial indebtedness under our credit agreement, the cost of servicing that debt could adversely affect our business and financial results, and we may not be able in the future to service that debt.

Our ability to make scheduled payments on or to refinance our obligations under the credit agreement will depend on our financial and operating performance, which will be affected by economic, financial, competitive, business, and other factors, some of which are beyond our control.

The indebtedness we incurred in connection with the RU Acquisition requires us to dedicate a portion of our cash flow to servicing this debt, thereby reducing the availability of cash to fund other business initiatives.

There can be no assurance that our business will generate sufficient cash flow from operations to service our indebtedness or to fund our other liquidity needs.

The indebtedness we incurred in connection with the Rasmussen Acquisition requires us to dedicate a portion of our cash flow to servicing this debt, thereby reducing the availability of cash to fund other business initiatives.

There can be no assurance that our business will generate sufficient cash flow from operations to service our indebtedness.

If we are unable to meet our debt obligations or fund our other liquidity needs, we may need to restructure or refinance all or a portion of our indebtedness on or before maturity or sell certain of our assets.

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In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness.

Any refinancing of

our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

There can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

If we are unable to generate or borrow sufficient cash to make payments on our indebtedness, our business and financial condition would be materially harmed.

Our business could be harmed if our institutions experience a disruption in their ability to process Title IV financial aid.

We collected a substantial portion of our fiscal year 2021 consolidated revenue from receipt of Title IV financial aid program funds.

Any processing disruptions by ED, by our institutions, or by third-party service providers may impact the ability of our institutions’ students to obtain Title IV financial aid on a timely basis.

If our institutions experience a disruption in their ability to process Title IV financial aid because of administrative challenges on their part or the part of their vendors, ED could require that our institutions become subject to payment methods for Title IV programs that are not the advance payment system, which could have a material adverse effect on our institutions’ cash flows.

Efforts to diversify our business outside of the traditional areas served by our institutions may provide strategic and operational challenges that we are not prepared or able to address.

As we seek opportunities to expand our business and serve markets beyond those traditionally served by our institutions, we may encounter strategic and operational challenges different from those within our existing institutions.

For example, GSUSA is one of the largest providers of training to the federal government workforce, a market in which we have limited experience, and its contracts are governed by the Federal Acquisition Regulation, a regulatory framework with which we have limited experience.

The Federal Acquisition Regulation creates compliance risk, affects how GSUSA interacts and does business with its federal government clients, including by providing government agencies with rights not typically found in commercial contracts, and may impose added costs on GSUSA’s business.

Our Series A Senior Preferred Stock provides rights, preferences, and privileges that are not held by our common stockholders, and is senior to our common stock, which could adversely affect our cash flows, liquidity, and financial condition.

We are required to pay periodic cash dividends to the holders of our Series A Senior Preferred Stock, which will accrue at an annual rate equal to Term SOFR (as defined in the Certificate of Designation) plus 10.00%, and will increase by 2.0% on June 28, 2025 and another 0.5% on October 1, 2025 and the first day of every following quarter, subject to a maximum of Term SOFR plus 25.0%, other than an increase in the dividend rate in connection with an event of default under the Certificate of Designation.

Our ability to pay dividends will depend upon our financial condition, cash flows, and operating performance, which are subject to economic and competitive conditions and to factors beyond our control.

Our failure to pay dividends when due would result in an immediate increase in the dividend rate by 6.0% per annum until there is no longer any default in existence and continuing, and (if the failure occurs prior to June 29, 2027) will trigger an immediate requirement to make a payment to the holders of the Series A Senior Preferred Stock equal to a make-whole amount plus a significant additional premium.

We refer to this payment as the Early Premium Amount.

We also have the option, from time to time, to redeem the Series A Senior Preferred Stock pro rata in whole or in part.

Payment of dividends or the exercise of this redemption right could adversely impact our liquidity and reduce the amount of cash flow available for working capital, capital expenditures, growth opportunities, and other general corporate purposes.

In addition, holders of our Series A Senior Preferred Stock have certain consent rights that limit our ability to obtain debt or preferred stock financing or take certain other corporate actions.

Without the consent of at least 60% of the then outstanding shares of Series A Senior Preferred Stock, with certain exceptions, we may not, among other things, (i) incur any indebtedness if such incurrence would cause our Total Net Leverage Ratio (as defined in the purchase agreement for the Series A Senior Preferred Stock) to exceed 0.75:1, (ii) issue any capital stock senior to or pari passu with the Series A Senior Preferred Stock, (iii) declare or pay any cash dividends on our common stock, or (iv) repurchase more than an aggregate of $30 million of our common stock.

Such consent rights may limit our financial and operational flexibility, which could have a material adverse effect on our business or liquidity.

Finally, our common stock ranks junior to our Series A Senior Preferred Stock with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs.

In the event of our liquidation, dissolution or winding-up of our affairs, no distribution or payment may be made to holders of our common stock until we have paid to holders of the Series A Senior Preferred Stock a liquidation preference equal to $100,000 per share of Series A Senior Preferred Stock plus accrued and unpaid dividends plus the Early Premium Amount.

We may need additional capital in the future, but there is no assurance that funds will be available on acceptable terms.

We may need additional capital in the future for various reasons, including to finance business acquisitions, as we did with the RU Acquisition, or investments in technology or to achieve growth or fund other business initiatives, but there is no assurance that capital will be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders.

Additionally, any securities issued to raise capital may have rights, preferences, or privileges senior to those of existing stockholders.

We may need additional capital in the future for various reasons, including to finance business acquisitions, as we did with the Rasmussen Acquisition, or investments in technology or to achieve growth or fund other business initiatives.

There is no assurance that capital will be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders.

Additionally, any securities issued to raise capital may have rights, preferences, or privileges senior to those of existing stockholders, such as our Series A Senior Preferred Stock stockholders have compared to the rights of our common stockholders.

If adequate capital is not available or is not available on acceptable terms, our and our institutions’ ability to expand, develop or enhance services or products, or respond to competitive pressures, will be limited.

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If we are unable to obtain needed capital on terms acceptable to us, we may have to limit strategic initiatives or take other actions that materially adversely affect our business, financial condition, results of operations, and cash flows.

Economic and market conditions in the U.S.

and abroad, including as a result of COVID-19, and changes in interest rates, could affect our enrollments, success with placement and persistence and cohort default rates.

Our business has been and may in the future be adversely affected by a general economic slowdown or recession in the U.S.

or abroad, including the impact of COVID-19.

Our institutions derive a significant portion of their revenue from Title IV programs, which include student loans with interest rates subsidized by the federal government.

Additionally, some students finance their education through private loans that are not government subsidized.

Historically low interest rates have created a favorable borrowing environment for students.

However, our students may have to pay higher interest rates on their Title IV program loans and private loans as a result of recent and expected future interest rate increases.

Increases in applicable interest

rates could result in a corresponding increase in educational costs to our existing and prospective students, which could result in a reduction in our enrollment.

Higher interest rates could also contribute to higher default rates with respect to our students’ repayment of their education loans.

Higher default rates may in turn adversely impact our eligibility to participate in some Title IV programs, which could adversely impact our operations and financial condition.

Adverse economic developments, such as those resulting from the COVID-19 pandemic, that affect the United States could also result in a reduction in the number of jobs available to our graduates and lower salaries being offered in connection with available employment, which, in turn, could result in declines in our success with placements and persistence.

Our institutions’ students are able to borrow Title IV loans in excess of their tuition and fees.

The excess is received by such students as a credit balance refund.

A protracted economic slowdown could negatively impact such students’ abilities to satisfy debts to the institution, including debts that result from returns of unearned Title IV amounts.

As a result, the amount of Title IV funds we would have to return without repayment from our institutions’ students could increase, and our financial results could suffer.

We may not be able to successfully manage and limit our exposure to bad debt.

We experienced increases in bad debt in our HCN segment for the years ended December 31, 2019, 2020 and 2021.

In recent years, we experienced increases in bad debt in our HCN segment, and in the fourth quarter of 2023 we experienced increases in bad debt at RU.

We have also had periods at APUS where we have experienced increases in our bad debt expense, and there is no assurance that bad debt expense will not increase at APUS again in the future or at RU.

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Bad debt increases at our institutions could have a material adverse effect on our financial condition, cash flows, and results of operations.

Third-party vendors may lack adequate business continuity planning.

Using third-party vendors increases compliance risk that the vendors may not adequately protect personal information, or that they may not comply with applicable federal or state regulations.

Further, transitioning from existing vendors or from in-house processes to new providers or from third-party providers to in-house processes or vice versa, such as the replacement of our learning management system with a commercial cloud-based system in 2020, involves inherent risks, including the risk of significant disruptions of integral processes.

If our institutions fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our institutions may lose the ability to participate in Title IV programs or Department of Defense tuition assistance programs, or have participation in these programs conditioned or limited.

If our institutions fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our institutions may lose the ability to participate in Title IV programs or DoD TA programs, or have participation in these programs conditioned or limited.

Our institutions must maintain systems and processes to identify and prevent fraudulent applications for enrollment and financial aid.

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ED requires institutions that participate in Title IV programs to refer to the ED OIG credible information about fraud or other illegal conduct involving Title IV programs, and in the past our institutions have referred to the OIG information with respect to potential fraud by applicants and students.

If the systems and processes that our institutions have established to detect and prevent fraud are inadequate, ED may find that our institutions do not satisfy ED’s administrative capability requirements, which could have the adverse effects described in the Risk Factor captioned “A failure to demonstrate “administrative

capability” may result in the loss of eligibility to participate in Title IV programs.” In addition, our institutions’ ability to participate in Title IV programs and TA is conditioned on maintaining accreditation by an accrediting agency that is recognized by ED.

In addition, our institutions’ ability to participate in Title IV programs and TA is conditioned on maintaining accreditation by an accrediting agency that is recognized by ED.

Any significant failure to adequately detect fraudulent activity related to student enrollment and financial aid could cause our institutions to fail to meet their accreditors’ standards.

Furthermore, accrediting agencies that evaluate institutions offering online programs, like APUS’s programs, must require such institutions to have processes through which the institution establishes that a student who registers for such a program is the same student who participates in and receives credit for the program.

Furthermore, accrediting agencies that evaluate institutions offering

online programs, like APUS’s programs, must require such institutions to have processes through which the institution establishes that a student who registers for such a program is the same student who participates in and receives credit for the program.

Failure to meet the requirements of our institutions’ accrediting agencies could result in the loss of accreditation of one or more of our institutions, which could result in their loss of eligibility to participate in Title IV programs, TA, or both.

If we are unable to attract, retain, and develop skilled personnel, our business and growth prospects could be severely harmed, and changes in management could cause disruption and uncertainty.

We must attract, retain, and develop diverse and highly qualified management, faculty, administrators, and other skilled personnel to our institutions.

If we are unable to attract, retain, and develop skilled personnel and management, our business and growth prospects could be severely harmed, and changes in management could cause disruption and uncertainty.

We must attract, retain, and develop diverse and highly qualified faculty, management, administrators, and other skilled personnel to our institutions.

As we continue to grow our business, make acquisitions, and expand our geographic scope, we need to ensure effective succession for key executive and employee roles in order to meet the growth, development, and profitability goals of our business.

Hiring competition is intense, especially for faculty in specialized areas and qualified executives.

While we continue to work to strengthen our management team and to attract and retain high-caliber talent, including through various human resources programs and what we believe are competitive market compensation and benefit practices, our efforts may not be successful.

For example, due to COVID-19 there has been an increase in demand for nursing professionals, which we believe has impacted our ability to recruit and retain qualified nursing faculty at RU and HCN.

We also believe that current job market dynamics, where the monthly percentage of non-farm workers in the United States who quit their jobs broke multiple all-time U.S.

records in 2021 in what is being referred to as the “Great Resignation”, and current low unemployment, has further increased the challenge of employee retention more broadly.

Overall, turnover of our employees during 2021 was approximately 6% to 10% higher than turnover in 2020, depending on segment.

If we fail to attract new management, faculty, administrators, or skilled personnel or fail to retain, develop, and motivate our existing management, faculty, administrators, and skilled personnel, our institutions and our ability to serve our students and expand our programs, open new locations, make investments or acquisitions, and update or enhance our technology could be severely harmed, and changes in management could disrupt our business and cause uncertainty.

Our success depends on the contributions of our approximately 5,800 employees.

Our performance largely depends on the talents, experience, and efforts of our employees, and we believe that fostering a culture and practice of innovation, quality, communication, cooperation, honesty, and respect is important to attracting and retaining high caliber talent.

In addition, our strategic initiatives require our management, faculty, staff, and skilled personnel to adapt and learn new skills and capabilities.

Our failure to develop and maintain a positive culture and strong employee morale or to continue fostering the growth and development of our personnel, including through the use of staff performance evaluation systems and processes, particularly if the use of those systems and processes is unreliable or inconsistent, could have a material adverse effect on our business and results of operations.

We rely on key personnel to lead with integrity.

To the extent our leaders behave in a manner that is not consistent with our values, we could experience significant impact to our brand and reputation, as well as to our culture.

There continues to be a shortage in access to nursing faculty, which impacts our ability to recruit and retain qualified nursing faculty at RU and HCN.

We also believe that current job market dynamics, including low unemployment, have further increased the challenge of hiring and employee retention.

Overall, turnover of our employees during 2022 increased when compared to 2021.

Excluding RU and GSUSA, which were not part of the organization for all of 2021, turnover in 2022 increased approximately 14% to 24%, depending on segment.

For 2022, 8.3% of full-time employee terminations were voluntary and 19.6% were involuntary.

Turnover in 2021 was approximately 6% to 10% higher than in 2020, depending on segment.

Although we have taken additional steps to retain our current faculty and source and recruit talent, there can be no assurance that our efforts will be successful.

In certain RU campus geographies, the challenge with recruiting qualified faculty has been particularly difficult, and in 2022 our faculty to student ratio has increased.

For example, for the Bloomington, Minnesota ADN program, RU is now required by the Minnesota Board of Nursing to maintain a specified full-time faculty to student ratio, which contributed to RU reducing enrollments by voluntarily increasing admissions standards and capping the number of students that can be accepted to the program quarterly in order to meet the ratio requirement, concentrate on student satisfaction and success, and focus on improving NCLEX scores.

For the January 2023 start date in the Bloomington, Minnesota ADN program, the voluntary cap represented a 67.1% decrease in enrollment potential as compared to the prior year.

Any failure to develop and maintain a positive culture and strong employee morale or to continue fostering the growth and development of our personnel, including through the use of staff performance evaluation systems and processes, could have a material adverse effect on our business and results of operations.

In addition, to the extent our leaders behave in a manner that is not consistent with our values, such as leading with integrity, we could experience significant impact to our brand and reputation, as well as to our culture.

Hiring and retention may also depend on our ability to build and maintain a diverse and inclusive workplace culture that enables our employees to thrive.

We also must manage leadership development and succession planning throughout our business.

We must manage leadership development and succession planning throughout our business.

We have had a number of other executive officers retire or otherwise depart our Company over the last several years and we continually evaluate our leadership structure.

While we have employment agreements with our Chief Executive Officer, our Chief Financial Officer, and our Chief Technology Officer, we do not have employment agreements with other executives or personnel, and the employment agreements that we do have do not prevent our executives from voluntarily ceasing to work for us.

While we have employment agreements with our Chief Executive Officer and our Chief Financial Officer, we do not have employment agreements with other executives or personnel, and the employment agreements that we do have do not prevent our executives from voluntarily ceasing to work for us.

To the extent that we lose experienced personnel, it is critical that we develop other employees, hire new qualified personnel, and successfully manage the transfer of critical knowledge.

Management turnover and vacancies may negatively impact operations, morale, and our ability to execute.

While we have processes in place for management transition and the transfer of knowledge, the loss of key personnel, coupled with an inability to adequately train other personnel, hire new personnel, or transfer knowledge, could significantly impact our business and results of operations.

For example, during 2022, we had unexpected leadership departures at RU that we believe contributed to declines in enrollment at RU in 2022 and that will have a negative impact on starts in the first half of 2023 and overall fiscal 2023 results of operations.

If we fail to attract new faculty, management, administrators, or skilled personnel or fail to retain, develop, and motivate our existing faculty, management, administrators, and skilled personnel, our institutions and our ability to serve our students, acquire new students, expand our programs, open new locations, make investments or acquisitions, and update or enhance our technology could be severely harmed, and changes in management could disrupt our business and cause uncertainty.

We may not achieve the anticipated benefits of our cost savings efforts, including our recent reduction in force, and any savings may be offset by increased costs in other areas.

On November 2, 2022, we completed a reduction in force that resulted in the termination of 98 non-faculty employees and the elimination of 78 open positions across a variety of roles and departments.

The reduction in force resulted in pre-tax labor and benefit savings in 2022 of approximately $2.3 million and approximately $13.5 million on an annualized basis.

The headcount reductions reflect ongoing efforts focused on realigning our organizational structure, eliminating redundancies, and optimizing certain functions.

There can be no assurance that we will be successful or recognize the benefits we anticipate from this reduction in force.

Furthermore, some of the savings realized in 2022 will be offset in the short-term by severance and other related costs, is expected to be further offset by increased expenditures as a result of the insourcing of marketing and information technology services previously outsourced to Collegis, and over the long-term may be offset by increases to wages and salaries necessary to remain competitive.

Reductions in force may also result in increased costs, as opposed to cost savings, including due to associated legal risks, and could distract management and employees.

We have limited experience in making investments in other entities, and any such investments may not result in strategic benefits for our business or could expose us to other risks.

From time to time we will consider and may pursue strategic investments.

These transactions could include, among other things, investments in, partnerships or joint ventures with other schools, service providers or education technology related companies, among other types of entities.

These types of investments involve significant challenges and risks, including that the investment does not advance our business strategy, that we do not realize a satisfactory return on our investment, that we acquire unknown liabilities, or that management’s attention is diverted from our core business.

These events could harm our operating results or financial condition.

Any investments in other entities may also subject us to the operating and financial risks of such entities, and we rely on the internal controls and financial reporting controls of such entities.

We have made minority investments in entities in which we do not have sole control, which present risks in addition to those that apply to other investments or acquisitions.

We do not have the ability to control the policies, management or affairs of these entities, and generally we would not have that ability in any minority investment in an entity.

The interests of persons who control the entities in which we have invested and may invest may differ from our interests, and they may cause such entities to take actions that are not in our best interest, and we may become involved in disputes with such persons.

Our inability to control entities in which we make minority investments could negatively affect our ability to realize the strategic benefits of those investments.

We cannot ensure that we will realize any strategic benefits from these investments in the near-term or at all.

To the extent that the strategic benefits of any investment are not timely realized, or the investment otherwise underperforms, we may wish to dispose of the investment.

Because our interests in entities are highly illiquid and not traded in any public market, we may not be able to timely dispose of these interests or may have to sell at less than our carrying value, as we did in 2021 with our interest in Second Avenue Software.

Further, should the value of these investments become impaired, we may be required to, and in the past have been required to, reduce the carrying value of these investments.

Our inability to dispose of our interest in such an entity, or a reduction in the carrying value of such an entity on our books, would negatively affect our operating results.

From time to time we may pursue strategic investments in or partnerships or joint ventures with other schools, service providers, education technology-related companies, and other types of entities.

We may not have the ability to control the policies, management, or affairs of entities in which we do not have sole control, which could negatively affect our ability to realize the strategic benefits of those investments.

We may not realize strategic benefits from investments and as a result may be required to, and in the past have been required to, reduce the carrying value of investments.

If we wish to dispose of an investment due to failure to realize benefits, underperformance, or otherwise, we may not be able to do so in a timely fashion or may have to sell at less than our carrying value, as we did in 2021 with our interest in Second Avenue Software.

Any of these events could harm our operating results or financial condition.

Our limited ability to obtain exclusive proprietary rights and protect our intellectual property, as well as disputes we may encounter from time to time with third parties regarding our use of their intellectual property, could harm our operations and prospects.

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In some instances, our institutions’ faculty members or students may post various articles or other third-party content online in course discussion boards or in other venues.

The laws governing the fair use of these third-party materials are imprecise and adjudicated on a case-by-case basis, which makes it challenging to adopt and implement appropriately balanced institutional

policies governing these practices.

The laws governing the fair use of these third-party materials are imprecise

and adjudicated on a case-by-case basis, which makes it challenging to adopt and implement appropriately balanced institutional policies governing these practices.

We and our institutions may incur liability for the unauthorized duplication or distribution of this material posted online.

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We rely on dividends, distributions and other payments, advances, and transfers of funds from our operating subsidiaries to meet our obligations and to fund acquisitions and certain investments and generate all of our operating income through our subsidiaries.

As a result, we rely on dividends and other payments or distributions from our operating subsidiaries to meet our obligations and to fund acquisitions and investments.

As a result, we rely on dividends and other payments or distributions from our operating subsidiaries to meet our obligations, including payments of principal and interest on our debt and dividends on our Series A Senior Preferred Stock, and to fund acquisitions and investments.

The ability of our operating subsidiaries to pay dividends or to make distributions or other payments to us depends on their respective operating results and may be restricted by, among other things, the laws of their respective jurisdictions of organization, regulatory requirements such as obligations to maintain certain restricted cash or post letters of credit, financial performance, accreditation requirements, agreements entered into by those operating subsidiaries, and the covenants of any future obligations that we or our subsidiaries may incur.

For example, due to financial performance, HCN did not pay a dividend to APEI in 2019 or 2020.

Legal proceedings, particularly class action lawsuits, may require human and financial resources, distract our management, and negatively affect our reputation and operating results.

For example, due to financial performance, RU and HCN did not pay a dividend and GSUSA did not make a distribution to APEI in 2022.

Legal proceedings, particularly class action lawsuits, may require human and financial resources, distract our management, and negatively affect our reputation and results of operations.

From time to time, we and our institutions have been and may be involved in various legal proceedings.

In recent years, we have observed an increase in litigation brought against for-profit schools, including class actions brought by students and prospective students based on alleged misrepresentations about a school’s programs, an increase in “qui tam” lawsuits, and investigations by state attorneys general into for-profit postsecondary education institutions, which are described above under the heading “Risks Related to the Regulation of Our Industry.” The significant human and financial resources required to investigate and respond to claims brought in any future litigation may distract management’s attention from operating our business or lead to larger payments or liabilities, including adverse regulatory action, and, as a result, negatively affect our operating results.

In recent years, we have observed litigation brought against for-profit schools, including class actions brought by students and prospective students based on alleged misrepresentations about a school’s programs, “qui tam” lawsuits, and investigations by state attorneys general into for-profit postsecondary education institutions, which are described above under the heading “Risks Related to the Regulation of Our Industry”.

Such matters can be time-consuming, require significant human and financial resources to investigate and respond to claims brought in any future litigation, and may divert management’s attention from operating our business.

Furthermore, such matters are unpredictable and could lead to larger payments or liabilities, including adverse regulatory action, and, as a result, negatively affect our results of operations.

Risks Related to Our Technology Infrastructure

We need to continue to expend time, money and resources into our institutions’ information technology, which may place a strain on our capacity that could adversely affect our systems, controls, and operating efficiency, and those of our institutions.

We need to invest capital, time, and resources to update our institutions’ information technology, including our student-facing systems, in response to competitive pressures in the marketplace, including data analytics, artificial intelligence, interactive and immersive user and learning experience technologies such as those that leverage virtual and augmented reality, multi-channel customer engagement, and robotic process automation, to update or replace older systems, and to enhance functionality.

We incurred approximately $5.6 million and $6.0 million during 2020 and 2021, respectively, as part of an overall information technology transformation program.

We expect to make similar expenditures in future years.

We will also have to make investments to integrate the technology systems of RU and GSUSA and likely any other business we may acquire in the future.

Our efforts to improve our information technology systems may not be successful, may cost more than expected, may increase our level of spending, not all of which can be capitalized, or may otherwise adversely affect our financial condition, particularly.

We may also be unable to address all of the initiatives that we would like to pursue or find that the number of projects we are working on impacts our ability to adequately address critical areas.

Our ongoing transition away from Collegis for outsourced RU marketing and information technology functions may not be timely, efficient, or cost-effective, or may pose other operational challenges.

RU has historically relied on Collegis for a variety of outsourced marketing services and information technology functions under one contract for marketing services and another for information technology functions.

In April 2022, we notified Collegis that we intended to permit the contracts to expire by their terms on September 30, 2024.

The marketing services contract was thereafter mutually terminated effective January 31, 2023.

We have transitioned the marketing services and plan to transition the information technology services currently outsourced to Collegis back to our operations or to one or more other third-party vendors by September 30, 2024.

We expect to conduct the majority of information technology transition and incur most of the associated expenses in 2024.

The transition will cause us to incur significant time and expense, may not be timely, efficient, or cost effective, or may otherwise be difficult to implement or pose operational challenges, any of which could adversely affect our business, financial condition, results of operations, and cash flows.

This transition will require the efforts of multiple parties, including third-party vendors, and we cannot be assured that the level of cooperation among the parties will not create added challenges.

These developments could also have adverse impacts on our ongoing relationship with Collegis or the level of service that it provides.

In addition, there is no assurance that any contracts with third parties that replace Collegis for any of these services will be on terms that are favorable to us or that the quality of service we provide will be better than that provided by Collegis.

We need to continue to expend time, money, and resources into our and our institutions’ information technology, which may place a strain on our capacity that could adversely affect our systems, controls, and operating efficiency, and those of our institutions.

We need to invest capital, time, and resources to update our information technology, including our hardware and student-facing systems, in response to competitive pressures in the marketplace and student expectations, including data analytics, artificial intelligence, interactive and immersive user and learning experience technologies such as those that leverage virtual and augmented reality, multi-channel customer engagement, and robotic process automation, to update or replace older systems and infrastructure, and to enhance functionality.

We have made investments to integrate the technology systems of RU and GSUSA and will likely have to make similar investments for any other business we may acquire in the future.

The nature and age of our current information technology may limit our business opportunities, and our efforts to maintain and improve our information technology systems may not be successful, may cost more than expected, may increase our level of spending, not all of which can be capitalized, may take longer than expected or require us to devote more of our information technology resources than expected, or may otherwise adversely affect our financial condition.

We may also be unable to address all of the initiatives that we would like to pursue or find that the number of projects we are working on impacts our ability to adequately address critical areas, and may fail to correctly prioritize information technology projects, which could increase costs or limit our growth.

As a result of unsuccessful development efforts, or as a result of replacing outdated technology, software, or other technology related assets, we have in the past had and may in the future have assets that become impaired.

We will continue to evaluate our Partnership At a Distance TM , or PAD, at APUS, customized student information and services system for possible changes and upgrades and anticipate that we will eventually make significant changes to that system, as well.

We continually evaluate APUS’s customized student information and services system, PAD, for possible changes and upgrades and anticipate that we will eventually make significant changes to or replace that system, as well.

In addition, failure to address poor data quality and integrity as well as a lack of consistency and standardization in defining, collecting, managing, using, and storing data may adversely affect our business and results of operations.

If we are unable to increase the capacity of our institutions’ technology resources or update their resources appropriately, their ability to handle future growth, to attract or retain students, and our financial condition and results of operations could be adversely affected.

Similarly, even if we are able to increase the capacity of our institutions’ resources and

update their resources appropriately, our financial condition and results of operations could be adversely affected by an increased level of spending.

Similarly, even if we are able to increase the capacity of our institutions’ resources and update their resources appropriately, our financial condition and results of operations could be adversely affected by an increased level of spending.

Significant system disruptions to our online computer networks, technology infrastructure, or online classroom infrastructure, or to the networks, infrastructure, and systems of third parties, could negatively impact our ability to generate revenue and could damage our reputation, limiting our ability to attract and retain students.

The performance and reliability of our and our institutions’ networks and technology infrastructure, including those of third parties systems we use or rely on, is critical to our institutions’ reputation and ability to attract and retain students.

Any system error or failure, or a sudden and significant increase in bandwidth usage, could interrupt our or our institutions’ ability to operate and could result in the unavailability of our online classrooms, preventing students from accessing their courses and adversely affecting our results of operations.

In addition, our institutions’ technology infrastructure, and the technology infrastructure of our third-party vendors, could be vulnerable to interruption or malfunction due to events beyond our control, including natural disasters, cyber-attacks, terrorist activities, and telecommunications failures.

The proprietary information systems and processes at APUS that we refer to as Partnership at a Distance TM , or PAD, have been predominantly developed in-house, with limited support from outside vendors.

The performance and reliability of our and our institutions’ networks and technology infrastructure, including those of third parties systems we use or rely on, is critical to our operations and our institutions’ reputation and ability to attract and retain students.

Any system error or failure, including as a result of outages and other difficulties that may result from having or relying on outdated systems or infrastructure, or a sudden and significant increase in bandwidth usage, could interrupt our or our institutions’ ability to operate and could result in the unavailability of our online classrooms, preventing students from accessing their courses and adversely affecting our results of operations.

At APUS, PAD has been predominantly developed in-house, with limited support from outside vendors.

To the extent that we have utilized third-party vendors to provide certain software products for our systems, we have generally needed to integrate those products into, and ensure that they function with, PAD.

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To the extent that we face system disruptions, malfunctions or vulnerabilities with PAD or the failure of PAD to meet internal or industry standards, or lose employees with experience on our systems, we may not have the capacity to address such disruptions, malfunctions, vulnerabilities, or failures or to continue to administer or make adequate modifications to PAD with our internal resources, and we may not be able to identify outside contractors with expertise relevant to our custom system.

RU relies on Collegis for a variety of outsourced information technology functions, including data center, learning management system, user support, and network and voice services, in addition to the marketing services that Collegis provides.

The contract with Collegis for managed IT services expires in September 2024, may be renewed only by mutual consent, and we are only able to terminate it in advance of expiration under limited circumstances.

There is no assurance that we will be able to renew our contract with Collegis or other vendors with whom we have contracts that expire or that such renewals will be on the same or substantially similar terms or on conditions that are commercially reasonable to us.

We also use third-party services such as cloud computing and software-as-a-service for certain aspects of our operations and are reliant on the capabilities of vendors for such functions.

We migrated to a cloud-based learning management system for APUS and expect to increasingly rely on cloud computing and software-as-a-service providers for our information technology operations in the future, such as through the continued implementation of a cloud-based customer relationship management system.

Our learning management system upgrade was completed in early 2021 and the first phases of our customer relationship management system upgrade were completed in January 2022.

Vendors, such as Collegis, and our cloud computing service providers may take actions beyond our control that could adversely affect our access to the providers’ services, including discontinuing or limiting our access to their platforms or modifying or interpreting their terms of service or other policies in a manner that impacts our ability to run our business and operations.

In addition, any transition of third-party services, whether to another vendor or directly to us or our institutions, could be difficult to implement and cause us to incur significant time and expense.

We rely on third parties for certain information technology capabilities.

We use third-party services such as cloud computing and software-as-a-service for certain aspects of our operations and are reliant on the capabilities of vendors for such functions.

Vendors may take actions beyond our control that could adversely affect our access to the providers’ services, including discontinuing or limiting our access to their platforms or modifying or interpreting their terms of service or other policies in a manner that impacts our ability to run our business and operations.

In addition, there is no assurance that we will be able to renew contracts with vendors that are subject to expiration or that such renewals will be on the same or substantially similar terms or on conditions that are commercially reasonable to us.

Any transition of third-party services, whether to another

vendor or directly to us or our institutions, could be difficult to implement and cause us to incur significant time and expense.

Any significant downtime or other interruption or disruption of these services could adversely impact our operations and our business.

Any significant interruption in the operation of our institutions’ data centers or server rooms or those of our vendors could cause a loss of data.

Any significant interruption in the operation of our or our vendors’ data centers or server rooms could cause a loss of data.

Even with redundancy, a significant interruption in the operation of these facilities or the loss of institutional and operational data due to a natural disaster, fire, power interruption, act of terrorism, or another unanticipated catastrophic event, including as a result of climate change, may not be preventable.

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Additionally, our institutions do not necessarily control the operation of the facilities hosting our technology infrastructure and may be required to rely on other parties to provide physical security, facilities management, and communications infrastructure services.

If any third-party vendors encounter financial difficulty such as bankruptcy or other events beyond our control that causes them to fail to adequately secure and maintain their facilities or provide necessary connectivity or capacity, our institutions and their students may experience interruptions in service or the loss or theft of important data, which could adversely affect our financial condition.

If any third-party vendors encounter financial difficulties or other events beyond our control occur that cause them to fail to adequately secure and maintain their facilities or provide necessary connectivity or capacity, our institutions and their students may experience interruptions in service or the loss or theft of important data, which could adversely affect our financial condition.

Data security breaches and cyber-attacks could compromise sensitive information, including personal information, and cause system disruptions and significant damage to our business and reputation.

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If we or third parties with access to our systems, or to confidential, proprietary, or personal information experience security breaches in the future or we learn of a past breach that we or third parties have experienced, we may be required to expend significant resources to investigate, remediate, or disclose these security breaches or to address resulting regulatory investigations or litigation.

Such breaches could result in the impositions of penalties, disruption to our operations, and damage to our reputation.

Such breaches could result in imposition of penalties, disruption to our operations, and damage to our reputation.

Our increased use and reliance on cloud computing could expose us to additional risks.

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We use external vendors to perform security assessments on a periodic basis to review and assess our information security.

We utilize this information to audit ourselves to monitor the security of our technology infrastructure and to assess whether and how to prioritize the allocation of scarce resources to protect data and systems.

We utilize this information to audit ourselves, monitor the security of our technology infrastructure, and assess whether and how to prioritize the allocation of scarce resources to protect data and systems.

However, we cannot ensure that these security assessments and audits will identify or appropriately categorize relevant risks or result in the protection of our computer networks against security breaches.

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From time to time we experience security events and incidents, and these reflect an increasing level of sophistication, organization, and innovation.

We have devoted and will continue to devote significant resources to the security of our computer systems, but they may still be vulnerable to these threats and may subsequently be deemed to have been inadequate by regulators or courts.

We have devoted and will continue to devote significant resources to the security of our computer

systems, but they may still be vulnerable to these threats and may subsequently be deemed to have been inadequate by regulators or courts.

The lack of prescriptive measures in data security and cybersecurity laws could contribute to any such regulator or court findings.

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For example, if an institution fails to comply with FERPA, ED may require corrective actions by the institution or may terminate an institution’s eligibility to participate in Title IV programs.

Failure to comply with the applicable GLBA requirements may result in FTC enforcement, which could include the imposition of conditions, penalties,

monitoring, and oversight.

Failure to comply with the applicable GLBA requirements may result in FTC enforcement, which could include the imposition of conditions, penalties, monitoring, and oversight.

In addition, this area of the law and interpretations of applicable laws and regulations differ and are evolving.

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and countries globally have been enacting and considering new legislation.

These evolving laws and interpretations are difficult to predict and could impact our business, including by increasing compliance costs, by for example, restricting use or sharing of consumer data, including for marketing or advertising.

These evolving laws and interpretations are difficult to predict and could adversely impact our business, including by increasing compliance costs, by for example, restricting use or sharing of consumer data, including for marketing or advertising.

The CCPA and related regulations is an example of a U.S.

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The CCPA provides for penalties and includes a private right to action for certain data breaches.

The CCPA is being replaced by the CPRA, which is even more expansive, in 2023.

Other new state privacy laws taking effect in 2023 include laws in Colorado and Virginia.

The CCPA is being expanded by the CPRA in 2023.

Other new state privacy laws taking effect in 2023 include laws in Colorado, Connecticut, Utah, and Virginia.

In addition, our institutions may be subject to the GDPR, which has extensive requirements relevant to businesses handling personal information about individuals in the EU.

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• significant volatility in the market price and trading volume of comparable companies;

• actual or anticipated changes in our earnings, our institutions’ net course registrations or enrollments, or fluctuations in our operating results;

• actual or anticipated changes in our earnings, our institutions’ net course registrations or enrollments, or fluctuations in our results of operations;

• our ability to meet or exceed, or changes in, the expectations of securities analysts, or the extent or accuracy of analyst coverage of our company;

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• purchases or sales of large blocks of our stock;

• future issuances of common stock or other securities;

• recruitment or departure of key personnel;

• actions of others in our industry.

• actions of others in our industry, including but not limited to acquisitions, investments, or strategic alliances.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.

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Our quarterly results fluctuate and, therefore, the results in any quarter may not represent the results we may achieve in any subsequent quarter or full year.

Our revenue and operating results normally fluctuate as a result of seasonal or other variations in our institutions’ enrollments and associated expenses.

Our revenue and results of operations normally fluctuate as a result of seasonal or other variations in our institutions’ enrollments and associated expenses.

The student population at our institutions varies as a result of new enrollments, graduations, student attrition, increased military operations and deployments, the success of our marketing programs, and other reasons that we cannot always anticipate.

We expect quarterly fluctuations in operating results to continue as a result of seasonal enrollment patterns at our institutions and related fluctuations in expenses.

We expect quarterly fluctuations in results of operations to continue as a result of seasonal enrollment patterns at our institutions and related fluctuations in expenses.

These fluctuations may result in volatility in our results of operations, have an adverse effect on the market price of our common stock, or both.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors