What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 126 added, 100 removed, 648 unchanged (26% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

ASSETS (Unaudited)

44 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

6 unchanged sentences

Impairment of goodwill and intangible assets (Note 6) — — 64,000 144,900

Loss on disposals of long-lived assets 32 ( 9 ) 33 784

(Gain) loss on disposals of long-lived assets ( 16 ) 178 17 962

Depreciation and amortization 7,026 7,982 22,735 24,249

Total costs and expenses 144,438 150,561 511,979 590,976

Loss from operations before interest and income taxes ( 65,268 ) ( 141,260 ) ( 70,638 ) ( 136,060 )

Income (loss) from operations before interest and income taxes 6,400 ( 1,026 ) ( 64,238 ) ( 137,086 )

Gain on acquisition (Note 3) — — — 3,828

Interest expense ( 1,097 ) ( 3,390 ) ( 2,876 ) ( 6,745 )

Loss before income taxes ( 66,365 ) ( 145,355 ) ( 73,514 ) ( 138,977 )

Income tax benefit ( 15,137 ) ( 35,332 ) ( 16,551 ) ( 34,292 )

Equity investment loss ( 4 ) ( 6 ) ( 9 ) ( 11 )

Interest expense, net ( 792 ) ( 3,594 ) ( 3,668 ) ( 10,339 )

Income (loss) before income taxes 5,608 ( 4,620 ) ( 67,906 ) ( 143,597 )

Income tax expense (benefit) 3,712 ( 860 ) ( 12,839 ) ( 35,152 )

Equity investment loss, net of tax ( 5,224 ) ( 2 ) ( 5,233 ) ( 13 )

Net loss $ ( 3,328 ) $ ( 3,762 ) $ ( 60,300 ) $ ( 108,458 )

11 unchanged sentences

(In thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

Reclassifications of gains to net income, net of taxes ( 533 ) ( 47 ) ( 1,483 ) ( 47 )

Total other comprehensive income (loss) 253 618 ( 222 ) 1,834

Total other comprehensive (loss) income ( 343 ) 1,195 ( 565 ) 3,029

Comprehensive loss $ ( 3,671 ) $ ( 2,567 ) $ ( 60,865 ) $ ( 105,429 )

20 unchanged sentences

Repurchased and retired shares of common stock — — ( 1,260,357 ) ( 13 ) — — ( 7,615 ) ( 7,628 )

Other comprehensive loss — — — 253 253

Other comprehensive gain — — — 253 253

Net loss — — — — ( 51,232 ) ( 51,232 )

Balance as of June 30, 2023 400 $ 39,691 17,770,389 $ 178 $ 296,142 $ 2,880 $ ( 54,011 ) $ 284,880

Preferred Stock dividends — — — — — — ( 1,525 ) ( 1,525 )

Issuance of common stock under employee benefit plans — — 18,140 1 ( 1 ) — — —

Deemed repurchased shares of common and restricted stock for tax withholding — — ( 4,914 ) ( 1 ) ( 26 ) — — ( 27 )

Stock-based compensation — — — — 1,733 — — 1,733

Other comprehensive loss — — — — — ( 343 ) ( 343 )

Net loss — — — — — — ( 3,328 ) ( 3,328 )

Balance as of September 30, 2023 400 $ 39,691 17,783,615 $ 178 $ 297,848 $ 2,537 $ ( 58,864 ) $ 281,390

The accompanying notes are an integral part of these Consolidated Financial Statements.

20 unchanged sentences

Balance as of June 30, 2022 — — 18,877,755 $ 189 $ 289,635 $ 1,942 $ 24,236 $ 316,002

Issuance of common stock under employee benefit plans — — 22,578 — — — — —

Deemed repurchased shares of common and restricted stock for tax withholding — — ( 8,257 ) — ( 80 ) — — ( 80 )

Stock-based compensation — — — — 1,997 — — 1,997

Other comprehensive gain — — — — — 1,195 — 1,195

Net loss — — — — — — ( 3,762 ) ( 3,762 )

Balance as of September 30, 2022 — — 18,892,076 $ 189 $ 291,552 $ 3,137 $ 20,474 $ 315,352

The accompanying notes are an integral part of these Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

Net loss $ ( 60,300 ) $ ( 108,458 )

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 22,735 24,249

1 unchanged sentence

Stock-based compensation 6,025 6,703

Equity investment loss 9 11

Equity investment loss, net of tax 5,233 13

Deferred income taxes ( 13,311 ) ( 38,916 )

51 unchanged sentences

This segment reflects the operational activities of HCN.

Adjustments to reconcile segment results to the Consolidated Financial Statements are included in “Corporate and Other”.

These adjustments include unallocated corporate activity and eliminations, and the operational activities of GSUSA.

Adjustments to reconcile segment results to the Consolidated Financial Statements are included in “Corporate and Other.” These adjustments include unallocated corporate activity and eliminations, and the operational activities of GSUSA.

GSUSA operates as a stand-alone subsidiary of APEI, but does not meet the quantitative thresholds to qualify as a reportable segment, and does not have other requisite characteristics as a reportable segment.

12 unchanged sentences

All material intercompany transactions and balances have been eliminated in consolidation.

Unaudited Interim Financial Information

Unaudited Interim Consolidated Financial Information

The unaudited interim Consolidated Financial Statements do not include all the information and notes required by GAAP for audited annual financial statement presentations.

15 unchanged sentences

Restricted cash also includes amounts to secure letters of credit, including $ 24.3 million in a restricted certificate of deposit account to secure a letter of credit for the benefit of ED on behalf of RU in connection with RU’s 2020 composite score, which is used by ED for determining compliance with financial responsibility standards, being below the minimum required, and a $ 0.7 million restricted certificate of deposit to secure a letter of credit in lieu of a security deposit for a RU leased campus.

Restricted cash on the Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, excluding the restricted certificates of deposit, was $ 1.6 million and $ 2.0 million, respectively.

Total restricted cash as of June 30, 2023 and December 31, 2022 was $ 26.6 million and $ 26.9 million, respectively.

Cash and cash equivalents and restricted cash as of June 30, 2023 and December 31, 2022 were as follows (in thousands):

As of June 30, 2023 As of December 31, 2022

Restricted cash on the Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022, excluding the restricted certificates of deposit, was $ 2.3 million and $ 2.0 million, respectively.

Total restricted cash as of September 30, 2023 and December 31, 2022 was $ 27.3 million and $ 26.9 million, respectively.

Cash and cash equivalents and restricted cash as of September 30, 2023 and December 31, 2022 were as follows (in thousands):

As of September 30, 2023 As of December 31, 2022

Cash, cash equivalents, and restricted cash $ 155,154 $ 129,458

1 unchanged sentence

Total unrestricted cash $ 127,859 $ 102,519

The Company accounts for its equity method and cost method investments under FASB ASC 321, Investments - Equity Securities .

The Company periodically evaluates its equity method investment for indicators of an other-than-temporary impairment.

Factors the Company considers when evaluating for an other-than-temporary impairment include the duration and severity of the impairment, the reasons for the decline in value, and the potential recovery period.

For an investee with impairment indicators, the Company measures fair value on the basis of discounted cash flows or other appropriate valuation methods.

If it is probable that the Company will not recover the carrying amount of the investment, the impairment is considered other-than-temporary and recorded in equity investment loss, net of tax, and the equity investment balance is reduced to its fair value.

For each reporting period, the Company evaluates its cost method investments for observable price changes.

Factors the Company may consider when evaluating an observable price change may include significant changes in the regulatory, economic or technological environment, changes in general market conditions, bona fide offers to purchase or sell similar investments, and other criteria.

Management must exercise significant judgment in evaluating the potential impairment of its equity and cost method investments.

The Company evaluated its equity method and cost method investments for impairment as of September 30, 2023, and concluded the fair value of a cost method investment was less than its carrying amount.

As a result, the Company recorded an investment loss of $ 5.2 million, net of tax, during the three months ended September 30, 2023.

This investment loss is included in equity investment loss, net of tax, in the Consolidated Statements of Income and is due to the investee entering into an agreement to be sold which will result in no sales proceeds to the Company.

The investment loss recorded eliminated the difference between the fair value and the book value of the cost method investment.

There were no indicators of impairment during the three and nine months ended September 30, 2022.

The Company’s equity method and cost method investments are included in Other assets, net on the accompanying Consolidated Balance Sheets.

As of September 30, 2023, the aggregate carrying amount of the Company’s investments accounted for under ASC 321 was approximately $ 3.3 million.

Goodwill and Intangible Assets

4 unchanged sentences

The Company’s goodwill and intangible assets are deductible for tax purposes.

The Company annually assesses goodwill for impairment in the fourth quarter, or more frequently if events and circumstances indicate that goodwill might be impaired.

The Company annually assesses goodwill for impairment in the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

Impairment testing consists of an optional qualitative assessment as well as a quantitative test.

4 unchanged sentences

The Company reviews its intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If such assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets.

If such assets are not recoverable, an impairment loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets.

For additional details regarding goodwill and intangible assets, please refer to “Note 6.

11 unchanged sentences

Treasury constant maturity for the same maturity as the estimated life of the option quoted on an investment basis in effect at the time of grant for that business day.

Judgment is required in estimating the percentage of share-based awards that are expected to vest, and in the case of performance stock units, or PSUs, the level of performance that will be achieved and the number of shares that will be earned.

Judgment is required in estimating the percentage of share-based awards that are expected to vest, and in the case of performance stock units, the level of performance that will be achieved and the number of shares that will be earned.

The Company estimates forfeitures of share-based awards at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from original estimates.

2 unchanged sentences

Estimates of fair value are subjective and are not intended to predict actual future events, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made under ASC 718.

Stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022 was as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

13 unchanged sentences

Amounts accrued are subject to change in future interim periods if actual future financial results or operational performance are better or worse than expected.

The Company recognized an aggregate expense associated with the Company’s current year annual incentive-based compensation plans of approximately $ 1.8 million and $ 3.8 million during the three and six months ended June 30, 2023, compared to an aggregate expense of approximately $ 0.6 million and $ 2.4 million during the three and six months ended June 30, 2022.

During the three months

ended September 30, 2023, the Company recognized an aggregate benefit associated with the Company’s current year annual incentive-based compensation plans of approximately $ 0.7 million compared to an aggregate expense of approximately $ 0.4 million during the three months ended September 30, 2022.

During the nine months ended September 30, 2023, the Company recognized an aggregate expense of approximately $ 3.2 million compared to an aggregate expense of approximately $ 2.9 million during the nine months ended September 30, 2022.

The Company has historically calculated the provision for income taxes during the interim reporting periods by applying an estimate of the annual effective tax rate for the full calendar year to income before income taxes for the period, adjusted for discrete items.

For the three and six months ended June 30, 2023, the Company has elected to utilize the actual effective tax rate as allowed by FASB ASC 740, Accounting for Income Taxes.

The Company calculated the interim tax provision for the three and six months ended June 30, 2023 as if it was the annual period and determined the income tax expense or benefit on that basis.

The Company believes that the actual effective tax rate for the three and six months ended June 30, 2023 is a better estimate than the annual effective tax rate, as the annual effective tax rate method was highly sensitive to insignificant changes to estimated annual tax expense.

For the three and nine months ended September 30, 2023, the Company has elected to utilize the actual effective tax rate as allowed by FASB ASC 740, Accounting for Income Taxes.

The Company calculated the interim tax provision for the three and nine months ended September 30, 2023, as if it was the annual period and determined the income tax expense or benefit on that basis.

The Company believes that the actual effective tax rate for the three and nine months ended September 30, 2023, is a better estimate than the annual effective tax rate, as the annual effective tax rate method is highly sensitive to insignificant changes to estimated annual tax expense.

Recent Accounting Pronouncements

4 unchanged sentences

On January 1, 2022, or the GSUSA Closing Date, the Company completed the acquisition of GSUSA, or the GSUSA Acquisition, pursuant to an Asset Purchase Agreement dated August 10, 2021, by and between American Public Training LLC, and Graduate School USA, or the Seller, for an aggregate purchase price of $ 1.0 million, subject to working capital adjustments.

At closing, the Company received approximately $ 1.9 million from the Seller, which represented the estimated net working capital at closing net of an initial cash payment to the Seller of $ 0.5 million, which was the purchase price less

$ 0.5 million retained by the Company to secure the indemnification obligations of the Seller.

The purchase price reflects the $ 0.5 million due to the Seller post-closing, and additional adjustments to the estimated net working capital at closing.

40 unchanged sentences

The table also includes a reconciliation of the disaggregated revenue with the reportable segments (in thousands):

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

APUS RU HCN Corporate and Other Consolidated

4 unchanged sentences

Total Revenue $ 76,406 $ 52,073 $ 13,741 $ 8,618 $ 150,838

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

APUS RU HCN Corporate and Other Consolidated

4 unchanged sentences

Total Revenue $ 68,735 $ 61,548 $ 11,409 $ 7,843 $ 149,535

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

APUS RU HCN Corporate and Other Consolidated

4 unchanged sentences

Total Revenue $ 223,941 $ 161,511 $ 41,147 $ 21,142 $ 447,741

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

APUS RU HCN Corporate and Other Consolidated

6 unchanged sentences

Contract Balances and Performance Obligations

The Company had no contract assets or deferred contract costs as of June 30, 2023 and December 31, 2022.

The Company had no contract assets or deferred contract costs as of September 30, 2023 and December 31, 2022.

The Company recognizes a contract liability, or deferred revenue, when a student begins a course, in the case of APUS and GSUSA, or starts a term, in the case of RU and HCN.

Deferred revenue at June 30, 2023 was $ 28.6 million and included $ 12.2 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $ 16.4 million in consideration received in advance for future courses or terms, or student deposits.

Deferred revenue at September 30, 2023 was $ 29.2 million and included $ 18.0 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $ 11.2 million in consideration received in advance for future courses or terms, or student deposits.

Deferred revenue at December 31, 2022 was $ 23.8 million and included $ 13.0 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $ 10.8 million in student deposits.

13 unchanged sentences

Interest charged by HCN on payment plans was immaterial for the periods presented.

The Company’s principal leasing activities include leases for facilities, which are classified as operating leases, and, as a result of the GSUSA Acquisition, leases for copiers and printers, classified as finance leases.

Leases are classified as operating leases unless they meet any of the criteria below to be classified as a finance lease:

21 unchanged sentences

There are no variable lease payments.

Lease expense for the three and six months ended June 30, 2023 was $ 5.1 million and $ 10.4 million, respectively, compared to $ 5.1 million and $ 10.1 million for the three and six months ended June 30, 2022, respectively.

Lease expense for the three and nine months ended September 30, 2023 was $ 5.3 million and $ 15.7 million, respectively, compared to $ 5.0 million and $ 15.1 million for the three and nine months ended September 30, 2022, respectively.

These costs are primarily related to long-term operating leases, but also include amounts for short-term leases with terms greater than 30 days that are not material.

Cash paid for amounts included in the present value of operating lease liabilities during the three and six months ended June 30, 2023 was $ 5.1 million and $ 10.1 million, respectively, compared to $ 5.2 million and $ 10.0 million for the three and six months ended June 30, 2022, respectively, and is included in operating cash flows.

Cash paid for amounts included in the present value of operating lease liabilities during the three and nine months ended September 30, 2023 was $ 5.0 million and $ 15.2 million, respectively, compared to $ 4.8 million and $ 14.7 million for the three and nine months ended September 30, 2022, respectively, and is included in operating cash flows.

Finance Leases

1 unchanged sentence

The Company pledged the assets financed to secure the outstanding leases.

As of June 30, 2023, the total finance lease liability was $ 0.2 million, with an average interest rate of 3.75 %.

As of September 30, 2023, the total finance lease liability was $ 0.1 million, with an average interest rate of 3.75 %.

The ROU assets are recorded within Property and equipment, net on the Consolidated Balance Sheets.

Lease amortization expense associated with the Company’s finance leases was approximately $ 30,000 and $ 0.1 million for both the three and six months ended June 30, 2023 and 2022, respectively, and is recorded within Depreciation and amortization expense on the Consolidated Statements of Income.

The following tables present information about the amount and timing of cash flows arising from the Company’s operating and finance leases as of June 30, 2023 (dollars in thousands):

Lease amortization expense associated with the Company’s finance leases was approximately $ 27,000 and $ 81,000 for the three and nine months ended September 30, 2023 and 2022, respectively, and is recorded within Depreciation and amortization expense on the Consolidated Statements of Income.

The following tables present information about the amount and timing of cash flows arising from the Company’s operating and finance leases as of September 30, 2023 (dollars in thousands):

Maturity of Lease Liabilities (Unaudited) Operating Leases Finance Leases

27 unchanged sentences

The Company recorded $ 217.4 million and $ 38.6 million of goodwill in connection with the RU and HCN acquisitions, respectively, representing the excess of the purchase price over the fair value of assets acquired and liabilities assumed, including identifiable intangible assets.

The Company recorded non-cash impairment charges in 2022 for RU, and 2016 and 2019 for HCN, reducing the carrying value of RU and HCN goodwill to $ 86.0 million and $ 26.6 million, respectively.

The Company recorded non-cash impairment charges in 2022 and 2023 for RU, and 2016 and 2019 for HCN, reducing the carrying value of RU and HCN goodwill to $ 33.0 million and $ 26.6 million, respectively.

There was no goodwill recorded in connection with the acquisition of GSUSA.

In addition to goodwill, in connection with the acquisitions of RU and HCN, the Company recorded identified intangible assets with an indefinite useful life in the aggregate amount of $ 51.0 million and $ 3.7 million, respectively, which include trade name, accreditation, licensing, and Title IV, and affiliate agreements.

The Company recorded non-cash impairment charges in 2022, reducing the carrying value of RU identified intangible assets with an indefinite useful life to $ 35.5 million.

The Company recorded non-cash impairment charges in 2022 and 2023, reducing the carrying value of RU identified intangible assets with an indefinite useful life to $ 24.5 million.

There were no indefinite useful life intangible assets identified as a result of the GSUSA Acquisition.

There are no indefinite-lived intangible assets in our APUS Segment.

There are no indefinite-lived intangible assets in the APUS Segment.

The Company recorded $ 35.5 million, $ 4.4 million and $ 1.0 million of identified intangible assets with a definite useful life in connection with the acquisitions of RU, HCN and GSUSA, respectively.

There are no definite-lived intangible

assets in our APUS Segment.

The Company recorded amortization expense related to definite lived intangibles assets of approximately $ 4.0 million and $ 7.9 million during both the three and six months ended June 30, 2023 and 2022, respectively.

There are no definite-lived intangible assets in the APUS Segment.

The Company recorded amortization expense related to definite lived intangibles assets of approximately $ 3.0 million and $ 10.9 million for the three and nine months ended September 30, 2023, respectively, compared to $ 4.0 million and $ 11.9 million for the three and nine months ended September 30, 2022, respectively.

The Company accounts for goodwill and indefinite-lived intangible assets in accordance with FASB ASC 350, Intangibles Goodwill and Other , and ASU 2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

The Company annually assesses goodwill for impairment, or more frequently if events and circumstances indicate that goodwill might be impaired.

The Company annually assesses goodwill for impairment, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

Goodwill impairment testing consists of an optional qualitative assessment as well as a quantitative test.

2 unchanged sentences

If the carrying value is greater than the fair value, the difference between the two values is recorded as an impairment.

During the three months ended June 30, 2023, in connection with preparation of this Quarterly Report, the Company completed a qualitative assessment of RU and HCN Segment goodwill to determine if an interim goodwill impairment testing was necessary.

During the three months ended June 30, 2023, the Company completed a qualitative assessment of RU and HCN Segment goodwill to determine if an interim goodwill impairment testing was necessary.

This evaluation included consideration of enrollment trends and financial performance, as well as industry and market conditions.

The Company concluded it was more likely than not the fair value of the Company’s RU Segment was less than its carrying amount resulting from RU’s underperformance when compared to 2023 internal targets, projected enrollment trends, the decline in financial performance projected for the remainder of 2023 as compared to prior projections, and the Company’s market value.

There were no indicators of impairment at HCN.

There were no

indicators of impairment at HCN.

As a result, the Company completed a quantitative impairment test related to the valuation of its RU Segment goodwill during the second quarter of 2023.

8 unchanged sentences

In total, the Company recorded non-cash impairment charges of $ 64.0 million during the three months ended June 30, 2023 related to RU Segment goodwill and intangible assets, and the corresponding tax impact of $ 15.8 million.

During the three months ended September 30, 2023 the Company performed a qualitative analysis for the RU and HCN Segments’ goodwill and indefinite-lived intangible assets.

As part of the analysis, the Company considered the events and circumstances expressly required by ASC 350, in addition to other entity-specific factors.

Factors considered included RU and HCN’s financial and enrollment performance against internal targets, economic factors, and the continued favorable growth outlook for nursing education.

After completing the qualitative review of goodwill for the RU and HCN Segments for the three months ended September 30, 2023, the Company concluded it was more likely than not that the fair value of the RU and HCN Segments was more than the carrying value and therefore no quantitative impairment test and no impairment charge was necessary.

During the three months ended June 30, 2022, the Company completed a qualitative assessment to determine if an interim goodwill impairment test was necessary.

3 unchanged sentences

The implied fair value of goodwill was calculated and compared to the recorded goodwill.

As a result, the Company recorded a non-cash impairment charge of $ 131.4 million, and the corresponding tax impact of $ 36.0 million, to reduce the carrying value of RU Segment goodwill.

As a result, during the second quarter of 2022, the Company recorded a non-cash impairment charge of $ 131.4 million, and the corresponding tax impact of $ 36.0 million, to reduce the carrying value of RU Segment goodwill.

The impairment charge recorded eliminated the difference between the fair value and book value of RU Segment goodwill.

Further, during the three months ended June 30, 2022, the Company also evaluated events and circumstances related to the valuation of its intangible assets recorded within the RU and HCN Segments to determine if there were indicators of impairment.

These evaluations concluded there were indicators of impairment during the three months ended June 30, 2022 of RU Segment intangible assets.

These evaluations concluded there were indicators of impairment during the second quarter of 2022 of RU Segment intangible assets.

There were no indicators of impairment at HCN.

As a result, the Company recorded a non-cash impairment charge of $ 13.5 million to reduce the carrying value of RU Segment accreditation, licensing, and Title IV indefinite-lived intangible assets.

As a result, during the second quarter of 2022, the Company recorded a non-cash impairment charge of $ 13.5 million to reduce the carrying value of RU Segment accreditation, licensing, and Title IV indefinite-lived intangible assets.

The impairment charge recorded eliminated the difference between the fair value of the accreditation, licensing, and Title IV indefinite lived intangible assets, and its book value.

In total, the Company recorded non-cash impairment charges of $ 144.9 million during the three months ended June 30, 2022 related to RU Segment goodwill and intangible assets, and the corresponding tax impact.

The following table summarizes the changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2023 (in thousands):

In total, during the three months ended June 30, 2022, the Company recorded non-cash impairment charges of $ 144.9 million related to RU Segment goodwill and intangible assets, and $ 36.0 million related to the corresponding tax impact.

The following table summarizes the changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2023 (in thousands):

APUS Segment RU Segment HCN Segment Total Goodwill

6 unchanged sentences

Impairment — ( 53,000 ) — ( 53,000 )

Adjustments — — — —

Goodwill as of June 30, 2023 $ — $ 33,030 $ 26,563 $ 59,593

The following table represents the balance of the Company’s intangible assets as of June 30, 2023 (in thousands):

Goodwill as of September 30, 2023 $ — $ 33,030 $ 26,563 $ 59,593

The following table represents the balance of the Company’s intangible assets as of September 30, 2023 (in thousands):

Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Amount

40 unchanged sentences

The table below reflects the calculation of loss per common share and the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted loss per common share (in thousands, expect per share amounts).

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

13 unchanged sentences

The table below reflects a summary of securities that could potentially dilute basic loss per common share in future periods that were not included in the computation of diluted loss per share because the effect would have been antidilutive (in thousands).

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

9 unchanged sentences

The Revolving Credit Facility also includes a $ 5.0 million sub-facility for swing line loans.

The Term Loan, the proceeds of which were used as part of the cash consideration for the acquisition of RU, was fully funded on September 1, 2021, the closing date of the acquisition of RU, and is presented net of deferred financing fees on the Consolidated Balance Sheets.

Deferred financing fees are being amortized using the effective interest method over the term of

the Term Loan.

As of June 30, 2023 and December 31, 2022, the remaining unamortized deferred financing fees were $ 5.1 million and $ 5.9 million, respectively.

Consolidated Balance Sheets.

Deferred financing fees are being amortized using the effective interest method over the term of the Term Loan.

As of September 30, 2023 and December 31, 2022, the remaining unamortized deferred financing fees were $ 4.7 million and $ 5.9 million, respectively.

Deferred financing fees of $ 0.5 million related to the Revolving Credit Facility were recorded as an asset and are being amortized to interest expense over the term of the Revolving Credit Facility.

There were no borrowings outstanding under the Revolving Credit Facility as of June 30, 2023 and December 31, 2022.

There were no borrowings outstanding under the Revolving Credit Facility as of September 30, 2023 and December 31, 2022.

In June 2023, in connection with the cessation of publication of the London Interbank Offered Rate, or LIBOR, the Credit Agreement was amended to change the applicable floating index rate at which interest on borrowings under the Facilities would accrue from LIBOR to Term Secured Overnight Financing Rate, or Term SOFR (as defined in the Credit Agreement, as amended), a forward-looking term rate.

Outstanding borrowings under the Facilities bear interest at a per annum rate equal to Term SOFR (plus a credit spread adjustment ranging from 0.11448 % to 0.42826 % depending on the interest period selected by APEI and subject to a 0.75 % floor after giving effect to such adjustment) plus 5.50 %, which shall increase by an additional 2.00 % on all past due obligations if APEI fails to pay any amount when due.

As of June 30, 2023, the Facilities borrowing rate was 10.65 %, excluding any offset from the interest rate cap agreement described below.

As of September 30, 2023, the Facilities borrowing rate was 10.95 %, excluding any offset from the interest rate cap agreement described below.

An unused commitment fee in the amount of 0.50 % is payable quarterly in arrears based on the average daily unused amount of the commitments under the Revolving Credit Facility.

3 unchanged sentences

In addition, the Credit Agreement contains a financial covenant that requires APEI to maintain a Total Net Leverage Ratio of no greater than 2.0 to 1.0.

As of June 30, 2023, APEI was in compliance with all debt covenants.

As of September 30, 2023, APEI was in compliance with all debt covenants.

For additional information on certain restrictions placed on the Company’s indebtedness pursuant to the terms of the Company’s Series A Senior Preferred Stock, please refer to “Note 12.

Preferred Stock” in these Consolidated Financial Statements.

Long-term debt consists of the following as of June 30, 2023 and December 31, 2022 (in thousands):

As of June 30, 2023 As of December 31, 2022

Long-term debt consists of the following as of September 30, 2023 and December 31, 2022 (in thousands):

As of September 30, 2023 As of December 31, 2022

Credit agreement $ 99,063 $ 99,063

3 unchanged sentences

Long-Term Debt $ 94,316 $ 93,151

Scheduled maturities of long-term debt at June 30, 2023 are as follows (in thousands):

Scheduled maturities of long-term debt at September 30, 2023 are as follows (in thousands):

Maturities of Long-Term Debt (Unaudited) Loan Payments

2 unchanged sentences

Derivatives and Hedging

The Company is subject to interest rate risk, as all outstanding borrowings under the Credit Agreement are subject to a variable rate of interest.

The Company is subject to interest rate risk, including because all outstanding borrowings under the Credit Agreement are subject to a variable rate of interest.

On September 30, 2021, the Company entered into an interest rate cap agreement to manage its exposure to the variable rate of interest with a total notional value of $ 87.5 million.

6 unchanged sentences

These amounts subsequently are reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings.

As of June 30, 2023 and December 31, 2022, the fair value of the interest rate cap totaled $ 4.2 million and $ 4.5 million, respectively, and was recorded in Other assets on the Consolidated Balance Sheets.

The unrealized gain of $ 1.0 million, net of taxes, is included in accumulated other comprehensive income.

During the three and six months ended June 30, 2023, the Company reclassified approximately $ 0.7 million and $ 1.3 million, respectively, from other comprehensive income to interest expense.

As of September 30, 2023 and December 31, 2022, the fair value of the interest rate cap totaled $ 3.7 million and $ 4.5 million, respectively, and was recorded in Other assets, net on the Consolidated Balance Sheets.

The unrealized gain for the three and nine months ended September 30, 2023, of $ 0.3 million and $ 1.3 million, respectively, net of taxes, is included in accumulated other comprehensive income.

During the three and nine months ended September 30, 2023, the Company reclassified $ 0.8 million and $ 2.1 million, respectively, from other comprehensive income to interest expense.

During the three and nine months ended September 30, 2022, the Company reclassified $ 0.1 million from other comprehensive income to interest expense.

The Company estimates that approximately $ 1.1 million will be reclassified from accumulated other comprehensive income into interest expense during the next twelve months.

2 unchanged sentences

the APUS Segment, the RU Segment, and the HCN Segment.

GSUSA does not meet the quantitative thresholds to qualify as a reportable segment, and does not have other requisite characteristics as a reportable segment, therefore, its operational activities are presented below within “Corporate and Other”.

Adjustments to reconcile segment results to the Consolidated Financial Statements, including unallocated corporate activity and eliminations, are also included in “Corporate and Other”.

GSUSA does not meet the quantitative thresholds to qualify as a reportable segment and does not have other requisite characteristics as a reportable segment, therefore, its operational activities are presented below within “Corporate and Other.” Adjustments to reconcile segment results to the Consolidated Financial Statements, including unallocated corporate activity and eliminations, are also included in “Corporate and Other.”

In accordance with FASB ASC 280, Segment Reporting , the chief operating decision-maker has been identified as the Company’s Chief Executive Officer.

1 unchanged sentence

A summary of financial information by reportable segment is as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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APUS Segment $ 21,948 $ 12,532 $ 57,963 $ 39,338

RU Segment (Note 6) ( 77,274 ) ( 146,553 ) ( 90,138 ) ( 145,662 )

RU Segment ( 10,570 ) ( 7,900 ) ( 100,708 ) ( 153,562 )

HCN Segment ( 641 ) ( 1,392 ) ( 2,179 ) ( 3,017 )

Corporate and Other ( 4,337 ) ( 4,266 ) ( 19,314 ) $ ( 19,845 )

Total loss from operations before interest and income taxes $ ( 65,268 ) $ ( 141,260 ) $ ( 70,638 ) $ ( 136,060 )

Total income (loss) from operations before interest and income taxes $ 6,400 $ ( 1,026 ) $ ( 64,238 ) $ ( 137,086 )

Interest income (expense):

3 unchanged sentences

Corporate and Other ( 1,556 ) ( 3,698 ) ( 5,304 ) $ ( 10,533 )

Total Interest expense $ ( 1,097 ) $ ( 3,390 ) $ ( 2,876 ) $ ( 6,745 )

Total Interest expense, net $ ( 792 ) $ ( 3,594 ) $ ( 3,668 ) $ ( 10,339 )

Income tax expense (benefit):

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Corporate and Other ( 1,351 ) 4,814 ( 5,259 ) ( 7,400 )

Total Income tax benefit $ ( 15,137 ) $ ( 35,332 ) $ ( 16,551 ) $ ( 34,292 )

Total Income tax expense (benefit) $ 3,712 $ ( 860 ) $ ( 12,839 ) $ ( 35,152 )

Capital expenditures:

5 unchanged sentences

A summary of the Company’s consolidated assets by reportable segment is as follows (in thousands):

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

APUS Segment $ 93,918 $ 113,551

16 unchanged sentences

A summary of APUS Segment revenue derived from students by primary funding source is as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Unaudited) (Unaudited)

5 unchanged sentences

A summary of RU Segment revenue derived from students by primary funding source is as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Unaudited) (Unaudited)

4 unchanged sentences

A summary of HCN Segment revenue derived from students by primary funding source is as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(Unaudited) (Unaudited)

9 unchanged sentences

Other than an increase in the dividend rate spread relating to default, in no event will the dividend rate spread exceed SOFR plus 25.00 %.

As of June 30, 2023, the dividend rate was 15.23 % based on a three-month dividend period.

As of September 30, 2023, the dividend rate was 15.39 % based on a three-month dividend period.

Dividend periods will be monthly, every three months or every six months, at the Company’s option, and the Company currently anticipates using a three-month period.

1 unchanged sentence

If the Company selects a six-month dividend period, an interim dividend payment will be required for each three-month period therein.

During the three and six months ended June 30, 2023, $ 1.5 million and $ 2.9 million, respectively, of dividends were declared and paid on Series A Senior Preferred Stock.

During the three and nine months ended September 30, 2023, $ 1.5 million and $ 4.5 million, respectively, of dividends were declared and paid on the Series A Senior Preferred Stock.

The Series A Senior Preferred Stock has no stated maturity, is not convertible, is not subject to any mandatory redemption, sinking fund or other similar provisions, and will remain outstanding unless redeemed at the Company’s option.

The Company has the right to redeem the preferred stock pro rata in whole or in part at the price per share equal to the liquidation preference, or the Liquidation Preference, plus any applicable early premium amount noted in the Certificate of Designation and Purchase Agreement.

The Liquidation Preference of $ 59.0 million and $ 62.2 million as of June 30, 2023 and December 31, 2022, respectively, is based on the occurrence of a liquidation event, which is also considered an event of default as defined in the Certificate of Designation.

The Company has the right to redeem the Series A Senior Preferred Stock pro rata in whole or in part at the price per share equal to the liquidation preference, or the Liquidation Preference, plus any applicable early premium amount noted in the Certificate of Designation and Purchase Agreement.

The Liquidation Preference of $ 57.2 million and $ 62.2 million as of September 30, 2023 and December 31, 2022, respectively, is based on the occurrence of a liquidation event, which is also considered an event of default as defined in the Certificate of Designation.

The Liquidation Preference includes an early redemption premium amount and a make-whole payment for any redemption of the securities prior to June 30, 2025.

As of June 30, 2023 and December 31, 2022, the make-whole payment included in the Liquidation Preference was $ 16.0 million and $ 19.3 million, respectively.

As of September 30, 2023 and December 31, 2022, the make-whole payment included in the Liquidation Preference was $ 14.2 million and $ 19.3 million, respectively.

The make-whole payment included in the Liquidation Preference will be reduced quarterly until June 30, 2025, at which time it will be eliminated.

Events of default include an increase of the dividend rate spread of 6.00 % and an early premium amount, as defined in the Certificate of Designation.

Events of default trigger an increase of the dividend rate spread of 6.00 % and an early premium amount, as defined in the Certificate of Designation.

The following table lists the components of the liquidation preference for the periods presented below (in thousands):

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

Series A Senior Preferred Stock (plus accrued and unpaid dividends) $ 40,072 $ 40,069

4 unchanged sentences

Without the consent of at least 60 % of the then outstanding shares of Series A Senior Preferred Stock, with certain exceptions, the Company may not, among other things, (i) incur any indebtedness if such incurrence would cause the Company’s Total Net Leverage Ratio (as defined in the Purchase Agreement) 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 the Company’s common stock, or (iv) repurchase more than an aggregate of $ 30 million of the Company’s common stock.

Subsequent Event

On August 1, 2023, we completed a reduction in force that resulted in the termination of 35 employees and the elimination of 46 open positions across a variety of roles and departments at APEI, RU, HCN and GSUSA.

The headcount reductions reflect our ongoing efforts focused on realigning our organizational structure, eliminating redundancies, and optimizing certain functions.

We incurred an aggregate of approximately $ 1.7 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force.

The reduction in force is expected to result in pre-tax labor and benefit savings in 2023 of approximately $ 3.8 million, excluding severance costs, and approximately $ 8.1 million in savings on an annualized basis.

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-Q

Item 1. Financial Statements