What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-08-08 · 225 added, 221 removed, 257 unchanged (63% of the section changed)

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Forward-looking statements in this Quarterly Report include, without limitation, statements regarding:

• changes in and our ability to comply with the extensive regulatory framework applicable to our industry, as well as state law and regulations and accrediting agency requirements, and the expected impacts of any non-compliance;

• changes in and our ability to comply with the extensive regulatory framework applicable to our industry, including the 90/10 Rule, as well as state law and regulations and accrediting agency requirements, and the expected impacts of any non-compliance;

• our ability to manage, grow, and diversify our business and execute our business initiatives and strategy;

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University, or APU.

As of June 30, 2023, approximately 66% of APUS students self-reported that they served in the military on active duty at the time of initial enrollment.

As of September 30, 2023, approximately 66% of APUS students self-reported that they served in the military on active duty at the time of initial enrollment.

• Rasmussen College, LLC, referred to herein as Rasmussen University, or RU, provides nursing- and health sciences-focused postsecondary education to over 13,500 students at its 22 campuses in six states and online.

As of June 30, 2023, approximately 6,400 students are pursuing nursing degrees at RU, approximately 90% of whom are enrolled in RU’s pre-licensure nursing degree programs.

As of September 30, 2023, approximately 5,700 students are pursuing nursing degrees at RU, approximately 90% of whom are enrolled in RU’s pre-licensure nursing degree programs.

• National Education Seminars, Inc., referred to herein as Hondros College of Nursing, or HCN, provides nursing education to approximately 2,800 students at eight campuses in three states.

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Tuition Increases

In April 2023, APUS implemented tuition and fee increases for its non-military and veteran students.

In April and July 2023, APUS implemented tuition and fee increases for its non-military and veteran students.

Even with these tuition and fee increases, we believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities.

RU implemented tuition increases, which took effect on January 3, 2023, for select programs to help offset the increased costs of delivering a quality education, and HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs to offset the increased costs of delivering a quality, competitive education.

RU implemented tuition increases, which took effect on January 3, 2023, for select programs to help offset the increased cost of delivering a quality education, and HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs to offset the increased cost of delivering a quality, competitive education.

Cost and Expense Reductions

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.

During the three months ended September 30, 2023, we completed a reduction in force that resulted in the termination of 74 employees and the elimination of 57 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.

Additionally, beginning in the third quarter, we plan to reduce non-labor costs by approximately $0.8 million to $1.1 million.

We incurred an aggregate of approximately $3.0 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force, all of which were incurred in the third quarter of 2023.

The reduction in force is expected to result in pre-tax labor and benefit savings in 2023 of approximately $6.2 million, excluding severance costs, or approximately $15.5 million in savings on an annualized basis.

In November 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 representing approximately 5.8% of our non-faculty workforce.

We incurred an aggregate of approximately $3.1 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force, all of which were incurred in the fourth quarter of 2022.

The reduction in force resulted in pre-tax labor and benefit savings of approximately $2.3 million in 2022, or approximately $13.5 million on an annualized basis.

The reduction in force resulted in pre-tax labor and benefit savings of approximately $2.3 million in 2022.

In January 2022, RU completed a reduction in force that resulted in the termination of nine full-time faculty members and 19 non-faculty employees across a variety of roles and departments at RU, representing approximately 3.0% of RU’s full-time faculty workforce, and 2.1% of RU’s non-faculty workforce.

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Regulatory and Legislative Activity

The Accreditation Commission for Education in Nursing, or ACEN, accredits certain RU Practical Nursing, or PN, and Associate Degree in Nursing, or ADN, programs at certain RU locations.

In September 2021, ACEN granted RU’s ADN program in Bloomington, Minnesota continued accreditation with conditions.

The ADN program has two years from the date the conditions were imposed to demonstrate compliance with all applicable accreditation criteria.

If compliance is not achieved by the end of the monitoring period, ACEN may determine to deny continuing accreditation absent good cause.

site visit at the Bloomington, Minnesota ADN program in April 2023.

In June 2023, ACEN’s site visit team recommended denial of continuing accreditation for the Bloomington, MN ADN program.

However, RU has an opportunity to respond to this recommendation before the ACEN board makes a decision, and we believe that we have a strong rationale for why continuing accreditation should not be denied for this program.

We expect the ACEN board to make a decision in August or September 2023.

As explained in the “Risk Factors” section of this Quarterly Report, if ACEN denies continuing accreditation, RU has the ability to immediately reapply for accreditation with ACEN or with another nursing program accreditor, the first step of which would be candidacy.

Due to previously self-imposed enrollment caps in this program, enrollment in the Bloomington, MN ADN program currently represents approximately 2% of RU’s current total enrollment.

If RU is unable to obtain accreditation or candidacy status with ACEN or another nursing program accreditor, RU would likely have to close its Bloomington, Minnesota ADN program, which would have an adverse impact on RU’s enrollments and RU’s and our results of operations, cash flows, and financial condition.

An Illinois statute 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 Illinois Department of Financial and Professional Regulation, or 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 IDFPR, as RU’s Illinois ADN program is.

The current candidacy is set to expire in July 2024.

As explained in the “Risk Factors” section of this Quarterly Report, if ACEN ultimately denies continuing accreditation and RU is unable to obtain accreditation or candidacy status with another national nursing accrediting body, RU will likely have to close its Illinois ADN program, which would have an adverse impact on RU’s enrollments and RU’s and our results of operations, cash flows, and financial condition.

A bill to amend the Illinois Nurse Practice Act, or HB2509, could positively impact the RU ADN program offered in Illinois by providing the program with additional time to improve National Council Licensure Examination, or NCLEX, rates.

HB2509 was approved by the Illinois legislature and was sent to the governor on June 16, 2023;

he has until August 15, 2023 to sign it.

If signed, HB2509 will take effect January 1, 2024.

HB2509 would change the Illinois NCLEX pass rate requirements from a one-year rate measurement based on first attempts only to a three-year average that includes all test attempts.

It would also temporarily remove nursing programs from probationary status for a period of three years.

Removal from probationary status may be viewed favorably by ACEN or another nursing program accreditor and may result in RU’s Illinois ADN program obtaining ACEN accreditation and thus to be deemed to have met Illinois’ requirement for RU’s Illinois ADN programs to have achieved accreditation by the end of 2022 in order to meet state approval requirements.

The Accreditation Commission for Education in Nursing, or ACEN, accredits certain RU Practical Nursing, or PN, and Associate Degree in Nursing, or ADN, programs at certain RU campuses.

In September 2021, ACEN granted RU’s ADN program in Bloomington, Minnesota continued accreditation with conditions, requiring it to demonstrate compliance with all applicable accreditation criteria within two years.

In June 2023, ACEN’s site visit team recommended denial of continuing accreditation for the program based on the team’s findings that the program did not demonstrate compliance with certain accreditation criteria related to student outcomes.

RU thereafter responded to the recommendation detailing RU’s belief that good cause existed not to deny continuing accreditation.

On October 6, 2023, RU received notice from ACEN that the ACEN board had granted continuing accreditation for good cause until September 2024.

ACEN also requested a follow-up report for good cause to be submitted in advance of a required follow-up site visit in spring 2024 due to a finding of non-compliance

related to an alleged lack of evidence that the program implements actions based on data analysis to improve the program completion rate .

In conjunction with the spring 2024 follow-up visit, the ACEN board will also conduct a focused visit due to a complaint received by ACEN related to student clinical preparation and graduate clinical performance.

If the ACEN board grants continuing accreditation following its review of the follow-up report and spring 2024 site visit report, the next evaluation visit will be scheduled for spring 2031.

If the ACEN board denies continuing accreditation following its review of the report and the spring 2024 visit, the program can apply for an additional year of continuing accreditation for good cause.

In August 2023, RU decided to voluntarily pause new enrollments beginning in November 2023.

Due to previously self-imposed enrollment caps in this program and the pause on new enrollments, enrollment in the Bloomington, MN ADN program currently represents less than 2% of RU’s current total enrollment.

If RU is unable to obtain accreditation or candidacy status with ACEN or another nursing accreditor, RU would likely have to close its Bloomington, Minnesota ADN program, which would have an adverse impact on RU’s enrollments and RU’s and our results of operations, cash flows, and financial condition.

The State of Illinois enacted legislation in August 2023, which takes effect January 1, 2024, that we believe could positively impact RU ADN program in Illinois by providing the program with additional time to improve National Council Licensure Examination, or NCLEX, pass rates.

The legislation changes the Illinois NCLEX pass rate requirements from a one-year measurement based on first attempts only to a three-year average that includes all test attempts.

It also temporarily removes all nursing programs from probationary status for a period of three years.

The resulting removal from probationary status of RU’s Illinois ADN program may be viewed favorably by ACEN or another nursing program accreditor and may result in RU’s Illinois ADN program obtaining ACEN accreditation following a site visit in February 2024, which we also believe will allow RU to be deemed to have met Illinois’ requirement for its Illinois ADN program to have achieved accreditation by the end of 2022 in satisfaction of state approval requirements.

ED recently released a final rule amending and expanding the current financial responsibility, administrative capability, and certification regulations, which takes effect July 1, 2024.

Under the amended regulations, institutions will be required to meet additional financial responsibility criteria and must report certain “financial responsibility” events to ED.

In addition, ED may find that an institution has failed the administrative capability requirements if it:

does not provide adequate financial aid counseling or career services;

has been subject to a negative action by a state or federal agency, court, or accreditor;

fails to verify high school diplomas;

or does not timely place students in clinical or externship opportunities.

ED may require institutions that fail to meet these financial responsibility and administrative capability criteria to participate in Title IV programs under a provisional certification or submit financial protection.

ED may also impose additional requirements on the institution’s participation in Title IV programs, such as restrictions on enrollment, addition of new programs, or acquisitions.

Cohort Default Rate

To remain eligible to participate in Title IV programs, an educational institution’s student loan cohort default rates must remain below certain levels.

Pursuant to requirements of the Higher Education Act, as amended, if the cohort default rate for any year exceeds 40% in any single year, or exceeds 30% for three consecutive years, an institution loses eligibility to participate in Title IV programs.

If an institution’s cohort default rate is equal to or greater than 30% in any year, it must establish a default prevention task force.

In September 2023, ED released final official cohort default rates for institutions for federal fiscal year 2020, with ED reporting a zero percent cohort default rate for APUS, RU and HCN.

These rates were favorably impacted by regulatory relief provided in connection with the COVID-19 pandemic pursuant to which borrowers with Title IV program student loans were not required to make payments.

Additional information regarding student loan default rates, prior year default rates, and potential risks associated with them is available in our Annual Report.

Reportable Segments

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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.

Summary of Results

Consolidated revenue for the three months ended June 30, 2023 decreased to $147.2 million from $149.6 million, or by 1.6%, compared to the prior year period.

Our net loss for the three months ended June 30, 2023 was $51.2 million, compared to a net loss of $110.0 million in the prior year period, a decrease of $58.8 million.

Results for the three months ended June 30, 2023 include a non-cash impairment charge of $64.0 million in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact.

Our operating margins increased to negative 44.3% for the three months ended June 30, 2023, compared to negative 94.4% in the prior year period.

Excluding the impact of the non-cash impairment charge, for the three months ended June 30, 2023, our operating margin was negative 0.9% and our net loss was $3.0 million.

Results for the three months ended June 30, 2022 include a non-cash impairment charge of $144.9 million in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact.

Excluding the impact of the non-cash impairment charge, for the three months ended June 30, 2022, our operating margin was 2.4% and our net loss was $1.1 million.

Consolidated revenue for the six months ended June 30, 2023 decreased to $296.9 million from $304.4 million, or by 2.4%, compared to the prior year period.

Results for the six months ended June 30, 2023 include a non-cash impairment charge of $64.0 million in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact.

Our operating margins increased to negative 23.8% for the six months ended June 30, 2023 from negative 44.7% in the prior year period.

Our net loss for the six months ended June 30, 2023 was $57.0 million, compared to net loss of $104.7 million in the prior year period, a decrease of $47.7 million.

Excluding the impact of the non-cash impairment charge, for the six months ended June 30, 2023, our operating margin was negative 2.2% and our net loss was $8.8 million.

Results for the six months ended June 30, 2022 include a non-cash impairment charge of $144.9 million in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets and the corresponding tax impact.

Excluding the non-cash impairment charge for the six months ended June 30, 2022, our operating margin was 2.9% and our net income was $4.2 million.

APUS net course registrations for the three months ended June 30, 2023 increased to approximately 88,300 from approximately 83,500, an increase of 4,800, or 5.7%, compared to the prior year period.

APUS Segment revenue for the three months ended June 30, 2023 increased to $73.6 million from $69.9 million, or by 5.2%, compared to the prior year period.

APUS net course registrations for the six months ended June 30, 2023 increased to approximately 184,500 from approximately 177,400, or approximately 4.0%.

APUS Segment revenue six months ended June 30, 2023 increased to $147.5 million from $143.0 million, or by 3.2%, compared to the prior year period.

For the three months ended June 30, 2023, APUS Segment operating margins increased to 25.8% from 19.5% in the prior year period and increased to 24.4% from 18.7% for the six months ended June 30, 2023, compared to the prior year period.

RU total enrollment for the three months ended June 30, 2023, decreased to approximately 13,900 from approximately 15,900, a decrease of 2,000 or 12.6% compared to the prior year period.

RU Segment revenue for the three months ended June 30, 2023 decreased to $52.0 million from $63.9 million, or by 18.7%, compared to the prior year period.

RU total enrollment for the six months ended June 30, 2023 decreased 12.1%, as compared to the prior year period.

RU Segment revenue for the six months ended June 30, 2023 decreased to $109.4 million from $131.0 million, or by 16.5%, compared to the prior year period.

Excluding the impact of the non-cash impairment charge discussed above, for the three months ended June 20, 2023, RU Segment operating margins decreased to negative 25.5% from negative 2.6% in the prior year period and decreased to negative 23.9% for the six months ended June 30, 2023 from negative 0.6% in the prior year period.

At HCN, total enrollment for the three months ended June 30, 2023 increased to approximately 3,000 from approximately 2,400, an increase of approximately 600, or 22.3%, compared to the prior year period.

HCN Segment revenue for the three months ended June 30, 2023 increased to $14.3 million from $11.5 million, or by 24.2%, compared to the prior year period.

HCN total enrollment for the six months ended June 30, 2023 increased approximately 16.2%, as compared to the prior year period.

For the three months ended June 30, 2023, HCN Segment operating margins increased to negative 1.6% from negative 5.5% in the three months ended June 30, 2022.

For the six months ended June 30, 2023, HCN Segment operating margins increased to negative 5.6% from negative 7.1% in the prior year period.

Consolidated revenue for the three months ended September 30, 2023 increased to $150.8 million from $149.5 million, or by 0.9%, compared to the prior year period.

Our net loss for the three months ended September 30, 2023 was $3.3 million, compared to a net loss of $3.8 million in the prior year period, an increase of $0.4 million.

The results for the three months ended September 30, 2023, include a non-cash investment loss of $5.2 million, net of tax, on one of our cost method equity investments, due to the investee entering into an agreement to be sold which will result in no sales proceeds.

Our operating margins increased to 4.2% for the three months ended September 30, 2023, compared to negative 0.7% in the prior year period.

Consolidated revenue for the nine months ended September 30, 2023, decreased to $447.7 million from $453.9 million, or by 1.4%, compared to the prior year period.

Results for the nine months ended September 30, 2023, include a non-cash impairment charge of $64.0 million in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact, and a non-cash investment loss of $5.2 million, net of tax, on one of our cost method investments in Corporate and Other.

Results for the nine months ended September 30, 2022, include a non-cash impairment charge of $144.9 million in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact.

Our operating margins increased to negative 14.3% for the nine months ended September 30, 2023 from negative 30.1% in the prior year period.

Our net loss for the nine months ended September 30, 2023, was $60.3 million, compared to net loss of $108.5 million in the prior year period, a decrease of $48.2 million.

Excluding the impact of the non-cash impairment charges, for the nine months ended September 30, 2023 and 2022, our operating margin was negative 0.1% and positive 1.7%, respectively, and our net loss was $6.9 million, compared to net income of $0.4 million in the prior year period.

The net loss for the nine months ended September 30, 2023, includes a non-cash investment loss of $5.2 million, net of tax.

APUS net course registrations for the three months ended September 30, 2023, increased to approximately 92,300 from approximately 85,800, an increase of 6,500, or 7.6%, compared to the prior year period.

APUS Segment revenue for the three months ended September 30, 2023, increased to $76.4 million from $68.7 million, or by 11.2%, compared to the prior year period.

The revenue increase for the period was greater than the increase in net course registrations due to the April and July tuition and fee increases.

APUS net course registrations for the nine months ended September 30, 2023, increased to approximately 276,900 from approximately 263,200, or approximately 5.2%.

APUS Segment revenue nine months ended September 30, 2023, increased to $223.9 million from $211.7 million, or by 5.8%, compared to the prior year period.

During the nine month period, the impact of the April and July tuition and fee increases was partially offset by a change in student mix to more students that utilize military TA at a lower revenue per net course registration.

For the three months ended September 30, 2023, APUS Segment operating margins increased to 28.7% from 18.2% in the prior year period and increased to 25.9% from 18.6% for the nine months ended September 30, 2023, compared to the prior year period.

RU total enrollment for the three months ended September 30, 2023, decreased to approximately 13,500 from approximately 15,000, a decrease of 1,500, or 10.0%, compared to the prior year period.

RU Segment revenue for the three months ended September 30, 2023, decreased to $52.1 million from $61.5 million, or by 15.4%, compared to the prior year period.

RU total enrollment for the nine months ended September 30, 2023, decreased 11.5%, as compared to the prior year period.

RU Segment revenue for the nine months ended September 30, 2023, decreased to $161.5 million from $192.5 million, or by 16.1%, compared to the prior year period.

In both periods, the revenue decrease was greater than the enrollment decrease due to a change in student mix to more online students that have lower revenue per enrollment, partially offset by tuition increases implemented in January 2023.

RU Segment operating margins decreased to negative 20.3% from negative 12.8% for the three months ended September 30, 2023, and improved to negative 62.4% for the nine months ended September 30, 2023, from negative 79.8% in the prior year period.

HCN total enrollment for the three months ended September 30, 2023, increased to approximately 2,800 from approximately 2,400, an increase of approximately 400, or 17.0%, compared to the prior year period.

HCN Segment revenue for the three months ended September 30, 2023, increased to $13.7 million from $11.4 million, or by 20.4%, compared to the prior year period.

HCN total enrollment for the nine months ended September 30, 2023, increased approximately 16.4%, as compared to the prior year period.

HCN Segment revenue for the nine months ended September 30, 2023, increased to $41.1 million from $34.4 million, or by 19.5%, compared to the prior year period.

In both periods, the revenue increase was greater than the enrollment increase due to tuition increases in the second quarter of 2023.

For the three months ended September 30, 2023, HCN Segment operating margins improved to negative 4.7% from negative 12.2% in the three months ended September 30, 2022.

For the nine months ended September 30, 2023, HCN Segment operating margins improved to negative 5.3% from negative 8.8% in the prior year period.

Critical Accounting Policies and Use of Estimates

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In connection with our acquisitions of RU and HCN, we recorded $217.4 million and $38.6 million of goodwill, respectively, in our RU and HCN Segments.

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 Segment 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 Segment goodwill to $ 33.0 million and $ 26.6 million, respectively.

There was no goodwill recorded in connection with the acquisition of GSUSA reported in Corporate and Other, and there is no goodwill in our APUS Segment.

In addition to goodwill, in connection with the acquisitions of RU and HCN, we recorded identified intangible assets with an indefinite useful life in the aggregate amount of $51.0 million and $3.7 million, respectively, in our RU and HCN Segments, which include intangible assets related to 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 acquisition of GSUSA reported in Corporate and Other.

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

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, and more frequently if events and circumstances exist that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, and more frequently if events or changes in circumstances exist that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

The process of evaluating goodwill and indefinite-lived intangible assets for impairment is subjective and requires significant judgment and estimates.

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Our methodology for determining fair values remained consistent for the periods presented.

During the three months ended September 30, 2023 and 2022, we completed 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 and 2022, the Company concluded it was more likely than not that the fair value of the RU and HCN Segments were more than the carrying value and therefore no quantitative impairment test and no impairment charge was necessary.

During the second quarter of 2023, we completed qualitative assessments to determine if an interim goodwill impairment test was necessary.

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Therefore, we proceeded with a quantitative impairment test.

As a result of these assessments, we recorded a non-cash goodwill impairment charge of $ 53.0 million, which reflects the corresponding tax impacts, to reduce the carrying value of the RU Segment goodwill.

As a result of these assessments, during the second quarter of 2023, we recorded a non-cash goodwill impairment charge of $ 53.0 million to reduce the carrying value of the RU Segment goodwill, and to reflect the corresponding tax impact.

In addition, we concluded there were indicators of impairment of the RU Segment’s intangible assets.

As a result, we recorded non-cash impairment charges of $11.0 million to reduce the carrying value of our RU Segment indefinite-lived intangible assets.

As a result, during the second quarter of 2023, we recorded non-cash impairment charges of $11.0 million to reduce the carrying value of our RU Segment indefinite-lived intangible assets.

There were no indicators of impairment for our HCN Segment.

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We determined the fair value of the RU Segment accreditation, licensing and Title IV indefinite-lived intangible asset was $13.5 million, during the second quarter of 2022, and $2.0 million, during the annual assessment, less than its carrying value.

As a result, we recorded a total non-cash impairment charge of $15.5 million during 2022 to reduce the carrying value of our RU Segment indefinite-lived intangible assets.

As a result, we recorded total non-cash impairment charges of $15.5 million during 2022 to reduce the carrying value of our RU Segment indefinite-lived intangible assets.

There were no indicators of impairment for our HCN Segment.

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Results of Operations

Below we have included a discussion of our operating results and material changes in our operating results during the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022.

Below we have included a discussion of our operating results and material changes in our operating results during the three and nine months ended September 30, 2023, compared to the three and nine months ended September 30, 2022.

Our revenue and operating results normally fluctuate as a result of seasonal or other variations in our enrollments and the level of expenses in our reportable segments.

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We expect quarterly fluctuations in operating results to continue as a result of various enrollment patterns and changes in revenue and expenses.

APUS net course registrations for the three months ended June 30, 2023 increased to approximately 88,300 from approximately 83,500, an increase of 4,800, or 5.7%, compared to the prior year period.

APUS net course registrations for the six months ended June 30, 2023 increased to approximately 184,500 from approximately 177,400, or 4.0%.

The increase in net course registrations was primarily due to increases in military registrations from students utilizing TA.

APUS Segment operating margins increased to 25.8% for the three months ended June 30, 2023 from 19.5% for the prior year period, and increased to 24.4% for the six months ended June 30, 2023 from 18.7% for the prior year period.

The increase in the operating margin was primarily due to an increase in revenue during the period and decreases in advertising costs and employee compensation costs, partially offset by increases in technology costs as compared to the prior year period.

RU total enrollment for the three months ended June 30, 2023, was 13,900 compared to 15,900 for the three months ended June 30, 2022, a decrease of 12.6%, driven by a 22.0% decrease in nursing enrollment.

RU enrollment for the six months ended June 30, 2023 decreased 12.1%, driven by a 20.0% decrease in nursing enrollment.

We believe this decline in enrollment, which reflects year-over-year declines in new and total nursing enrollment, as well as declines in campus-based non-nursing programs, was caused, in part, by the prior departure of leadership accountable for enrollment and nursing operations and caps on nursing student enrollment at certain RU campuses.

Excluding the impact of the non-cash impairment charge discussed above, RU Segment operating margin decreased to negative 25.5% from negative 2.6% for the three months ended June 30, 2023 and decreased to negative 23.9% from negative 0.6% for the six months June 30, 2023, compared to the prior year periods.

The decrease in the operating margin was primarily due to decreases in revenue during three and six months ended June 30, 2023, as a result of declines in enrollment, specifically total nursing enrollment, which decreased 22.0% and 20.0% during three and six months ended June 30, 2023, respectively, as well as increases in employee compensation costs and marketing expenses which includes $2.4 million in transition services fees during the six months ended June 30, 2023 related to the termination of the Collegis, LLC, or Collegis, marketing contract effective January 31, 2023, as compared to the prior year period.

HCN total enrollment for the six months ended June 30, 2023 increased approximately 16.2%, as compared to the prior year period.

APUS net course registrations for the nine months ended September 30, 2023, increased to approximately 276,900 from approximately 263,200, or 5.2%.

The increase in net course registrations during the three and nine months ended September 30, 2023, was primarily due to increases in military registrations from students utilizing TA which is at a lower revenue per net course registration.

APUS Segment operating margins increased to 28.7% for the three months ended September 30, 2023, from 18.2% for the prior year period, and increased to 25.9% for the nine months ended September 30, 2023, from 18.6% for the prior year period.

The increase in the operating margin was primarily due to increases in revenue during the three and nine months ended September 30, 2023, and decreases in advertising and marketing support costs and credit card processing fees, partially offset by increases in technology costs and bad debt expense as compared to the prior year period.

RU total enrollment for the three months ended September 30, 2023, was 13,500 compared to 15,000 for the three months ended September 30, 2022, a decrease of 1,500, or 10.0%, driven by a 26.0% decrease in nursing enrollment.

RU enrollment for the nine months ended September 30, 2023, decreased 11.5%, driven by a 22.2% decrease in nursing enrollment.

We believe this decline in enrollment, which reflects year-over-year declines in new and total nursing enrollment was caused, in part, by the prior departure of leadership accountable for enrollment and nursing operations and caps on nursing student enrollment at certain RU campuses.

Excluding the impact of the non-cash impairment charge discussed above, RU Segment operating margin decreased to negative 20.3% for the three months ended September 30, 2023 from negative 12.8% in the prior year period, and decreased to negative 22.7% for the nine months September 30, 2023, from negative 4.5% in the prior year period.

The decrease in the operating margin was primarily due to decreases in revenue during the three and nine months ended September 30, 2023, and increases in technology costs due in part to the Collegis contract mandated annual fee increase, facilities costs, and classroom materials costs, partially offset by decreases in advertising costs and employee compensation costs as compared to the prior year period.

Additionally, the nine months ended September 30, 2023, includes increases in bad debt expense as well as $2.4 million in transition services fees related to the termination of the Collegis, LLC, or Collegis, marketing contract effective January 31, 2023, as compared to the prior year period.

HCN total enrollment for the nine months ended September 30, 2023, increased approximately 16.4%, as compared to the prior year period.

We believe that the increase in new and total student enrollment at HCN is due, in part, to enrollment growth in recently opened campuses including the opening of the Detroit, Michigan campus in October 2022.

HCN Segment operating margin increased to negative 1.6% from negative 5.5% for the three months ended June 30, 2023 and increased to negative 5.6% from negative 7.1% for the six months ended June 30, 2023, compared to the prior year periods.

The increase in the operating margin is primarily due to increases in revenue, partially offset by increases in compensation costs, rent expense and building maintenance costs, as compared to the prior year period.

HCN Segment operating margin improved to negative 4.7% from negative 12.2% for the three months ended September 30, 2023, and improved to negative 5.3% for the nine months ended September 30, 2023, from negative 8.8% in the prior year period.

The improvement in the operating margin is primarily due to increases in revenue and decreases in advertising costs partially offset by increases in employee compensation costs, bad debt expense, and facilities costs, as compared to the prior year period.

For a more detailed discussion of our results by reportable segment, refer to “Analysis of Operating Results by Reportable Segment” below.

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The following table sets forth statements of income data as a percentage of revenue for each of the periods indicated:

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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Gain on acquisition — — — 0.8

Interest expense (0.7) (2.3) (1.0) (2.2)

Interest expense, net (0.5) (2.4) (0.8) (2.3)

Loss from operations before income taxes 3.7 (3.1) (15.1) (31.6)

Income tax benefit (10.3) (23.6) (5.6) (11.3)

Equity investment loss — — — —

Income tax expense (benefit) 2.5 (0.6) (2.9) (7.7)

Equity investment loss, net of tax (3.5) — (1.2) —

Net loss (2.2) (2.5) (13.5) (23.9)

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Net loss available to common shareholders (3.2) % (2.5) % (14.5) % (23.9) %

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Our consolidated revenue for the three months ended June 30, 2023 was $147.2 million, a decrease of $2.4 million, or 1.6%, compared to $149.6 million for the three months ended June 30, 2022.

The decrease in revenue was primarily due to a $11.9 million, or 18.7%, decrease in revenue in our RU Segment, partially offset by a $3.7 million, or 5.2% increase in revenue in our APUS Segment, a $3.1 million, or 70.2%, increase in GSUSA revenue included in Corporate and Other, and a $2.8 million, or 24.2%, increase in revenue in our HCN Segment.

The RU Segment revenue decrease was primarily due to an 12.6% decrease in total student enrollment as compared to the prior year period, partially offset by increases in tuition in certain programs implemented in January 2023.

The APUS Segment revenue increase was primarily due to a 5.7% increase in net course registrations as compared to the prior year period.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Our consolidated revenue for the three months ended September 30, 2023, was $150.8 million, an increase of $1.3 million, or 0.9%, compared to $149.5 million for the three months ended September 30, 2022.

The increase in revenue was primarily due to a $7.7 million, or 11.2% increase in revenue in our APUS Segment, a $2.3 million, or 20.4%, increase in revenue in our HCN Segment, and a $0.8 million, or 10.0%, increase in GSUSA revenue included in Corporate and Other, partially offset by $9.5 million, or 15.4%, decrease in revenue in our RU Segment.

The RU Segment revenue decrease was primarily due to a 10.0% decrease in total student enrollment driven by a 26.0% decrease in nursing enrollment as compared to the prior year period, partially offset by increases in tuition in certain programs implemented in January 2023.

The APUS Segment revenue increase was primarily due to a 7.6% increase in net course registrations and tuition and fee increases implemented in April and July 2023, as compared to the prior year period.

The HCN Segment revenue increase was primarily due to a 17.0% increase in total student enrollment, as well as a 5% tuition increase implemented during the second quarter, compared to the prior year period.

Costs and expenses.

Costs and expenses for the three months ended June 30, 2023 were $212.5 million, a decrease of $78.4 million, or 26.9%, compared to $290.9 million for the three months ended June 30, 2022, due primarily to a $80.9 million decrease in goodwill and intangible asset impairment charges in our RU Segment.

Costs and expenses for the three months ended June 30, 2023 include a non-cash impairment charge of $64.0 million to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact.

This compares to a non-cash impairment charge of $144.9 million in the prior year period.

Costs and expenses for the three months ended June 30, 2023 as compared to the prior year period, excluding impairment charges, increased $2.5 million, due primarily to increases in employee compensation costs, bad debt expense, building rent and maintenance costs, and technology costs, partially offset by a decrease in advertising costs.

Costs and expenses as a percentage of revenue decreased to 144.3% for the three months ended June 30, 2023 from 194.4% for the three months ended June 30, 2022.

Excluding impairment charges, costs and expenses were 100.9% of revenue for the three months ended June 30, 2023, compared to 97.6% of revenue in the prior year period.

Costs and expenses for the three months ended September 30, 2023, were $144.4 million, a decrease of $6.1 million, or 4.1%, compared to $150.6 million for the three months ended September 30, 2022.

The decrease in costs and expenses for the three months ended September 30, 2023, as compared to the prior year period were due primarily to decreases in advertising costs, depreciation and amortization costs, and marketing support material costs, partially offset by increases in technology costs, bad debt expense, and employee compensation costs in our APUS and HCN Segments due to an increase in registrations at APUS and enrollments at HCN.

Costs and expenses as a percentage of revenue decreased to 95.8% for the three months ended September 30, 2023, from 100.7% for the three months ended September 30, 2022.

Instructional costs and services expenses.

Our instructional costs and services expenses for the three months ended June 30, 2023 were $75.0 million, an increase of $2.9 million, or 4.0%, compared to $72.1 million for the three months ended June 30, 2022.

The increase in instructional costs and services expenses was primarily due to an increase in employee compensation costs in our APUS Segment and Corporate and Other, increases in nursing faculty compensation costs and classroom costs in our HCN Segment due to increased revenue, and increases in building maintenance costs and classroom costs in our RU Segment, partially offset by decreases in employee compensation costs in our RU Segment.

Increases in employee compensation costs in both our APUS and HCN Segments were primarily due to increased revenue.

Instructional costs and services expenses as a percentage of revenue increased to 50.9% for the three months ended June 30, 2023 from 48.2% for the three months ended June 30, 2022.

Our instructional costs and services expenses for the three months ended September 30, 2023, were $73.2 million, an increase of $1.4 million, or 2.0%, compared to $71.8 million for the three months ended September 30, 2022.

The increase in instructional costs and services expenses was primarily due to increases in

employee compensation costs in our APUS and HCN Segments due to an increase in registrations at APUS and enrollments at HCN, and Corporate and Other due to higher revenue at GSUSA, an increase in classroom material costs in our RU and HCN Segments, and an increase in technology costs in our RU Segment, due in part to the Collegis contract mandated annual fee increase, partially offset by decreases in employee compensation costs in our RU Segment.

Instructional costs and services expenses as a percentage of revenue increased to 48.5% for the three months ended September 30, 2023 from 48.0% for the three months ended September 30, 2022.

Selling and promotional expenses.

Our selling and promotional expenses for the three months ended June 30, 2023 were $33.0 million, a decrease of $2.9 million, or 8.0%, compared to $35.8 million for the three months ended June 30, 2022.

This decrease in selling and promotional expenses was primarily due to decreases in advertising costs in our APUS and RU Segments and Corporate and Other.

Selling and promotional expenses as a percentage of revenue decreased to 22.4% for the three months ended June 30, 2023 from 24.0% for the three months ended June 30, 2022.

Our selling and promotional expenses for the three months ended September 30, 2023, were $33.3 million, a decrease of $7.6 million, or 18.6%, compared to $40.9 million for the three months ended September 30, 2022.

The decrease in selling and promotional expenses was primarily due to decreases in advertising costs in all our segments, a decrease in marketing support materials costs in our APUS Segment and decreases in employee compensation costs in our RU and HCN Segments and Corporate and Other.

Selling and promotional expenses as a percentage of revenue decreased to 22.1% for the three months ended September 30, 2023, from 27.4% for the three months ended September 30, 2022.

General and administrative expenses.

Our general and administrative expenses for the three months ended June 30, 2023 were $32.5 million, an increase of $2.6 million, or 8.7%, compared to $29.9 million for the three months ended June 30, 2022.

The increase in general and administrative expenses was primarily due to an increase in employee compensation costs in Corporate and Other and our RU Segment, an increase in bad debt expense in all segments, and an increase in technology costs in our HCN Segment and Corporate and Other, partially offset by decreases in professional fees in our APUS and RU Segments and Corporate and Other.

Consolidated bad debt expense for the three months ended June 30, 2023 was $3.9 million, or 2.7% of revenue, compared to $2.9 million, or 2.0% of revenue in the prior year period.

General and administrative expenses as a percentage of revenue increased to 22.1% for the three months ended June 30, 2023 from 20.0% for the three months ended June 30, 2022.

Our general and administrative expenses for the three months ended September 30, 2023, were $30.9 million, an increase of $1.2 million, or 4.1%, compared to $29.7 million for the three months ended September 30, 2022.

The increase in general and administrative expenses was primarily due to an increase in bad debt expense in our APUS and HCN Segments, an increase in technology costs in our HCN and APUS Segments and Corporate and Other, an increase in professional fees in Corporate and Other, partially offset by decreases in employee compensation costs, primarily in our APUS Segment.

Consolidated bad debt expense for the three months ended September 30, 2023, was $4.5 million, or 3.0% of revenue, compared to $3.7 million, or 2.5% of revenue in the prior year period.

General and administrative expenses as a percentage of revenue increased to 20.5% for the three months ended September 30, 2023, from 19.8% for the three months ended September 30, 2022.

As we continue to evaluate enhancements to our business capabilities, particularly in technology, we expect to incur additional costs and that our general and administrative expenses will vary from time to time.

Loss on disposals of long-lived assets.

The loss on disposals of long-lived assets was $32,000 for the three months ended June 30, 2023, compared to a gain of $9,000 for the three months ended June 30, 2022.

Impairment of goodwill and intangible assets .

For the three months ended June 30, 2023, we recorded $64.0 million in non-cash impairment charges in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets compared to $144.9 million for the three months ended June 30, 2022.

For additional information regarding the impairment of goodwill and intangible assets, and a discussion of the potential for future impairment charges for goodwill and intangible assets, please refer to the discussion in “Note 6.

Goodwill and Intangible Assets” included in the Notes to Consolidated Financial Statements in this Quarterly Report.

(Gain) loss on disposals of long-lived assets.

The gain on sale of long-lived assets was $16,000 for the three months ended September 30, 2023, compared to a loss of $178,000 for the three months ended September 30, 2022.

Depreciation and amortization expenses.

Depreciation and amortization expenses were $8.0 million and $8.1 million for the three months ended June 30, 2023 and 2022, respectively.

Depreciation and amortization expenses as a percentage of revenue was 5.4% for both the three months ended June 30, 2023 and 2022, respectively.

Depreciation and amortization expenses were $7.0 million and $8.0 million for the three months ended September 30, 2023 and 2022, respectively.

Depreciation and amortization expenses as a percentage of revenue was 4.7% and 5.3% for the three months ended September 30, 2023 and 2022, respectively.

Stock-based compensation expenses.

Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $2.1 million and $2.4 million for the three months ended June 30, 2023 and 2022, respectively.

Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $1.7 million and $2.0 million for the three months ended September 30, 2023 and 2022, respectively.

Stock-based compensation costs include accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Gain on acquisition.

The $0.7 million decrease in gain on acquisition for the period ended June 30, 2022 was due to the final working capital adjustment in connection with the GSUSA Acquisition.

Interest expense.

Interest expense was $1.1 million and $3.4 million for the three months ended June 30, 2023 and 2022, respectively.

Interest expense, net.

Interest expense, net, was $0.8 million and $3.6 million for the three months ended September 30, 2023 and 2022, respectively.

The decrease in interest expense was primarily due to the decrease in the outstanding balance in our senior secured term loan facility.

In December 2022, we made $65.0 million in prepayments to reduce our outstanding debt.

Income tax benefit.

We recognized an income tax benefit of $15.1 million and $35.3 million for the three months ended June 30, 2023 and 2022, respectively, or an effective tax rate benefit of 22.8% in 2023, compared to an effective tax rate benefit of 24.3% in 2022.

The three months ended June 30, 2023 and 2022 include a $15.8 million and $36.0 million income tax benefit related to the impairment of goodwill and intangible assets, respectively.

Excluding the $15.8 million and $36.0 million, income tax expense for both the three months ended June 30, 2023 and 2022 was $0.7 million, or an effective tax rate expense of 28.0% and 144.9%, respectively.

The effective tax rate for both periods were impacted by non-deductible expenses in relation to the pre-tax losses.

Net (loss) income.

Our net loss was $51.2 million and $110.0 million, respectively, for the three months ended June 30, 2023 and 2022, a decrease in loss of $58.8 million.

This decrease was related to the factors discussed above.

Income tax expense (benefit).

We recognized income tax expense of $3.7 million for the three months ended September 30, 2023, compared to an income tax benefit of $0.9 million in the prior year period, respectively, or an effective tax rate of 66.2% in 2023, compared to an effective tax rate benefit of 18.6% in 2022.

The increase in the effective tax rate in 2023 is primarily due to a change in our estimated state apportionment, reducing the expected future benefit for our net deferred tax assets.

Our net loss was $3.3 million, compared to a net loss of $3.8 million, for the three months ended September 30, 2023 and 2022, respectively, an increase of $0.4 million.

This increase was related to the factors discussed above.

Preferred stock dividends.

Preferred stock dividends for the three months ended June 30, 2023 were $1.5 million.

Preferred stock dividends for the three months ended September 30, 2023, were $1.5 million.

Our Series A Senior Preferred Stock was issued in December 2022, and therefore there were no preferred stock dividends in the comparable prior year period.

Net income (loss) available to common stockholders.

The net loss available to common stockholders for the three months ended June 30, 2023 was $52.7 million, compared to net loss available to common stockholders of $110.0 million for the three months ended June 30, 2022, a decrease of $57.3 million.

This decrease in net loss available to common shareholders was related to the factors discussed above.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Our consolidated revenue for the six months ended June 30, 2023 was $296.9 million, a decrease of $7.5 million, or 2.4%, compared to $304.4 million for the six months ended June 30, 2022.

The decrease in revenue was primarily due to a $21.6 million, or 16.5% decrease in revenue in our RU Segment, partially offset by a $5.1 million, or 67.6%, increase in GSUSA revenue included in Corporate and Other, a $4.5 million, or 3.2% increase in revenue in our APUS Segment and a $4.4 million, or 19.0% increase in revenue in our HCN Segment.

Net loss available to common stockholders.

The net loss available to common stockholders for the three months ended September 30, 2023, was $4.9 million, compared to net loss available to common stockholders of $3.8 million for the three months ended September 30, 2022, an increase of $1.1 million.

This increase in net loss available to common shareholders was related to the factors discussed above.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Our consolidated revenue for the nine months ended September 30, 2023, was $447.7 million, a decrease of $6.1 million, or 1.4%, compared to $453.9 million for the nine months ended September 30, 2022.

The decrease in revenue was primarily due to a $31.0 million, or 16.1% decrease in revenue in our RU Segment, partially offset by a $12.2 million, or 5.8% increase in revenue in our APUS Segment, a $6.7 million, or 19.5% increase in revenue in our HCN Segment, and a $5.9 million, or 38.1%, increase in GSUSA revenue included in Corporate and Other.

The RU Segment revenue decrease was primarily due to a 11.5% decrease in total student enrollment, partially offset by tuition increases in certain programs implemented in January 2023, as compared to the prior year period.

The APUS Segment revenue increase was primarily due to a 4.0% increase in net course registrations as compared to the prior year period.

The HCN Segment revenue increase was primarily due to a 16.2% increase in total student enrollment compared to the prior year period.

The APUS Segment revenue increase was primarily due to a 5.2% increase in net course registrations and tuition and fee increases implemented in April and July 2023, as compared to the prior year period.

The HCN Segment revenue increase was primarily due to a 16.4% increase in total student enrollment compared to the prior year period, as well as a 5% tuition increase implemented during the second quarter, compared to the prior year period.

Costs and expenses.

Costs and expenses for the six months ended June 30, 2023 were $367.5 million, a decrease of $72.9 million, or 16.5%, compared to $440.4 million for the six months ended June 30, 2022 due primarily to a $80.9 million decrease in goodwill and intangible asset impairment charges in our RU Segment.

Costs and expenses for the six months ended June 30, 2023 include a non-cash impairment charge of $64.0 million to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact.

This compares to a non-cash impairment charge of $144.9 million in the prior year period.

Costs and expenses for the six months ended June 30, 2023, excluding impairment charges, increased $8.0 million as compared to the prior year period and include $2.4 million in transition services fees in our RU Segment selling and promotional expenses related to the termination of the marketing contract with Collegis, effective January 31, 2023.

Other increases in costs and expenses for the six months ended June 30, 2023 as compared to the prior year period include increases in employee compensation costs, bad debt expense, technology costs, and building rent and maintenance costs, partially offset by a decrease in advertising costs and professional services costs.

Costs and expenses as a percentage of revenue decreased to 123.8% for the six months ended June 30, 2023 from 144.7% for the six months ended June 30, 2022.

Excluding impairment charges and Collegis transition service fees, costs and expenses were 101.4% of revenue for the three months ended June 30, 2023, compared to 97.1% of revenue in the prior year period.

Costs and expenses for the nine months ended September 30, 2023, were $512.0 million, a decrease of $79.0 million, or 13.4%, compared to $591.0 million for the nine months ended September 30, 2022.

Costs and expenses for the nine months ended September 30, 2023, include a non-cash impairment charge of $64.0 million to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact.

This compares to a non-cash impairment charge and the corresponding tax impact of $144.9 million in the prior year period, a decrease of $80.9 million in the current year period.

Other increases in costs and expenses for the nine months ended September 30, 2023, as compared to the prior year period include increases in employee compensation costs in our APUS and HCN Segments due to an increase in registrations at APUS and enrollments at HCN, technology costs, bad debt expense, and facilities costs, partially offset by a decrease in advertising costs and depreciation and amortization costs.

Excluding impairment charges, on a pre-tax basis costs increased $1.9 million as compared to the prior year period and include $2.4 million in transition services fees in our RU Segment selling and promotional expenses related to the termination of the marketing contract with Collegis, effective January 31, 2023.

Costs and expenses as a percentage of revenue decreased to 114.3% for the nine months ended September 30, 2023, from 130.1% for the nine months ended September 30, 2022.

Excluding impairment charges and Collegis transition service fees, costs and expenses were 99.5% of revenue for the three months ended September 30, 2023, compared to 98.3% of revenue in the prior year period.

Instructional costs and services expenses.

Our instructional costs and services expenses for the six months ended June 30, 2023 were $148.9 million, an increase of $5.1 million, or 3.5%, compared to $143.8 million for the six months ended June 30, 2022.

The increase in instructional costs and services expenses was primarily due to increases in nursing faculty compensation costs, building rent and maintenance costs and classroom costs in our HCN Segment due to increased revenue, increases in employee compensation costs and professional services costs in our APUS Segment and Corporate and Other, and increases in technology costs, building maintenance costs and professional services costs in our RU Segment, partially offset by decreases in employee compensation costs in our RU Segment.

Increases in employee compensation costs in both our APUS and HCN Segments were primarily due to increases in revenue.

Instructional costs and services expenses as a percentage of revenue increased to 50.1% for the six months ended June 30, 2023 from 47.2% for the six months ended June 30, 2022.

Our instructional costs and services expenses for the nine months ended September 30, 2023, were $222.1 million, an increase of $6.5 million, or 3.0%, compared to $215.6 million for the nine months ended September 30, 2022.

The increase in instructional costs and services expenses was primarily due to increases in employee compensation costs in our APUS and HCN Segments due to an increase in registrations and APUS and enrollments at HCN, higher nursing faculty compensation costs, and classroom materials costs in our HCN Segment, higher employee compensation costs in Corporate and Other due to higher revenue at GSUSA, and increases in technology costs, facilities costs and professional services costs in our RU Segment, partially offset by decreases in employee compensation costs in our RU Segment and classroom materials costs in our APUS Segment.

Instructional costs and services expenses as a percentage of revenue increased to 49.6% for the nine months ended September 30, 2023, from 47.5% for the nine months ended September 30, 2022.

Selling and promotional expenses.

Our selling and promotional expenses for the six months ended June 30, 2023 were $72.9 million, a decrease of $2.3 million, or 3.0%, compared to $75.2 million for the six months ended June 30, 2022.

Selling and promotional expenses for the six months ended June 30, 2023 include $2.4 million in transition services fees in our RU Segment related to the termination of the Collegis marketing contract effective January 31, 2023, offset by decreases in advertising costs in all segments and Corporate and Other.

Selling and promotional expenses as a percentage of revenue decreased to 24.6% for the six months ended June 30, 2023 from 24.7% for the six months ended June 30, 2022.

Excluding the Collegis transition service fees, selling and promotional expenses were 23.7% of revenue for the six months ended June 30, 2023, compared to 24.7% of revenue in the prior year period.

Our selling and promotional expenses for the nine months ended September 30, 2023 were $106.2 million, a decrease of $9.9 million, or 8.5%, compared to $116.1 million for the nine months ended September 30, 2022.

The decrease in selling and promotional expenses was primarily due to decreases in advertising costs in all segments and Corporate and Other, partially offset by $2.4 million in transition services fees in our RU Segment related to the termination of the Collegis marketing contract effective January 31, 2023.

Selling and promotional expenses as a percentage of revenue decreased to 23.7% for the nine months ended September 30, 2023 from 25.6% for the nine months ended September 30, 2022.

Excluding the Collegis transition service fees, selling and promotional expenses were 23.2% of revenue for the nine months ended September 30, 2023, compared to 25.6% of revenue in the prior year period.

General and administrative expenses.

Our general and administrative expenses for the six months ended June 30, 2023 were $66.0 million, an increase of $6.5 million, or 10.9%, compared to $59.5 million for the six months ended June 30, 2022.

The increase in general and administrative expenses was primarily due to increases in employee compensation costs in our RU and HCN Segments and Corporate and Other, increases in technology costs in all segments and Corporate and Other, and increases in bad debt expense in all segments, partially offset by decreases in professional fees in our APUS and RU Segments and Corporate and Other.

Consolidated bad debt expense for the six months ended June 30, 2023 was $7.8 million, or 2.6% of revenue, compared to $5.7 million, or 1.9% of revenue in the prior year period.

General and administrative expenses as a percentage of revenue increased to 22.2% for the six months ended June 30, 2023 from 19.6% for the six months ended June 30, 2022.

Our general and administrative expenses for the nine months ended September 30, 2023, were $96.9 million, an increase of $7.7 million, or 8.7%, compared to $89.2 million for the nine months ended September 30, 2022.

The increase in general and administrative expenses was primarily due to increases in employee compensation costs in our RU and HCN Segments and Corporate and Other, increases in bad debt expense in all segments, and increases in technology costs in all segments and Corporate and Other, partially offset by decreases in professional fees in our APUS and RU Segments and Corporate and Other.

Consolidated bad debt expense for the nine months ended September 30, 2023, was $12.3 million, or 2.7% of revenue, compared to $9.4 million, or 2.1% of revenue in the prior year period.

General and administrative expenses as a percentage of revenue increased to 21.6% for the nine months ended September 30, 2023, from 19.6% for the nine months ended September 30, 2022.

As we continue to evaluate enhancements to our business

capabilities, particularly in technology, we expect to incur additional costs and that our general and administrative expenses will vary from time to t ime.

Loss on disposals of long-lived assets.

The loss on disposals of long-lived assets was $33,000 and $0.8 million for the six months ended June 30, 2023 and 2022, respectively.

The loss on disposals of long-lived assets was $17,000 and $1.0 million for the nine months ended September 30, 2023 and 2022, respectively.

The prior year loss was primarily related to the sale of excess facilities located in Charles Town, West Virginia.

Impairment of goodwill and intangible assets.

For the six months ended June 30, 2023, we recorded $64.0 million in non-cash impairment charges in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets, compared to $144.9 million for the six months ended June 30, 2022.

For the nine months ended September 30, 2023, we recorded $64.0 million in non-cash impairment charges in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact, compared to $144.9 million for the nine months ended September 30, 2022.

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Depreciation and amortization expenses.

Depreciation and amortization expenses were $15.7 million and $16.3 million for the six months ended June 30, 2023 and 2022, respectively.

Depreciation and amortization expenses as a percentage of revenue were 5.3% for both the six months ended June 30, 2023 and June 30, 2022.

Depreciation and amortization expenses were $22.7 million and $24.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Depreciation and amortization expenses as a percentage of revenue were 5.1% and 5.3% for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Stock-based compensation expenses.

Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $4.3 million and $4.7 million for the six months ended June 30, 2023 and 2022, respectively.

Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $6.0 million and $6.7 million for the nine months ended September 30, 2023 and 2022, respectively.

Stock-based compensation costs include accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Gain on acquisition.

The $3.8 million gain on acquisition for the for the six months ended June 30, 2022 resulted from the GSUSA Acquisition and represents the excess of the fair value of net assets acquired over consideration paid.

Interest expense.

Interest expense was $2.9 million and $6.7 million for the six months ended June 30, 2023 and 2022, respectively.

The $3.8 million gain on acquisition for the for the nine months ended September 30, 2022, resulted from the GSUSA Acquisition and represents the excess of the fair value of net assets acquired over consideration paid.

Interest expense, net.

Interest expense, net, was $3.7 million and $10.3 million for the nine months ended September 30, 2023 and 2022, respectively.

The decrease in interest expense was primarily due to the decrease in the outstanding balance in our senior secured term loan facility.

In December 2022, we made $65.0 million in prepayments to reduce our outstanding debt.

Income tax benefit.

We recognized an income tax benefit of $16.6 million and $34.3 million, for the six months ended June 30, 2023 and 2022, respectively, or an effective tax rate benefit of 22.5% in 2023 compared to an effective tax rate benefit of 24.7% in 2022.

The six months ended June 30, 2023 and 2022 include a $15.8 million and $36.0 million income tax benefit related to the impairment of goodwill and intangible assets, respectively.

Excluding the $15.8 million and $36.0 million income tax benefits, the income tax benefit for the six months ended June 30, 2023 was $0.8 million, or an effective tax rate benefit of 7.9%, compared to income tax expense of $1.7 million, or an effective tax rate of 28.9%, for the six months ended June 30, 2022.

The 2023 effective tax rate was impacted by non-deductible expenses in relation to the pre-tax loss for the period.

The 2022 effective tax rate was impacted by the non-taxable gain on acquisition and higher non-deductible expenses in relation to the pre-tax income for the period.

Net (loss) income.

Our net loss was $57.0 million and $104.7 million for the six months ended June 30, 2023 and 2022, respectively, a decrease in net loss of $47.7 million.

Income tax expense (benefit).

We recognized an income tax benefit of $12.8 million and $35.2 million, for the nine months ended September 30, 2023 and 2022, respectively, or an effective tax rate benefit of 18.9% in 2023 compared to an effective tax rate benefit of 24.5% in 2022.

The nine months ended September 30, 2023 and 2022 include a $15.8 million and $36.0 million income tax benefit related to the impairment of goodwill and intangible assets, respectively.

Excluding the $15.8 million and $36.0 million income tax benefits, the income tax expense for the nine months ended September 30, 2023 and 2022 was $3.0 million and $0.8 million, or an effective tax rate of 75.8% and 65.1%.

The 2023 effective tax rate, excluding the impairment charge and the corresponding tax impact, was impacted by the items impacting the three months ended September 30, 2023, and higher non-deductible expenses in relation to the pre-tax loss for the period.

The higher effective tax rate in 2022, excluding the impairment charge and the corresponding tax impact, is due to higher non-deductible expenses in relation to the pre-tax income for the period.

Our net loss was $60.3 million and $108.5 million for the nine months ended September 30, 2023 and 2022, respectively, a decrease in net loss of $48.2 million.

This decrease was related to the factors discussed above.

Preferred stock dividends.

Preferred stock dividends for the six months ended June 30, 2023 were $2.9 million.

Preferred stock dividends for the nine months ended September 30, 2023 were $4.5 million.

The Series A Senior Preferred Stock was issued in December 2022, and therefore there were no preferred stock dividends issued in the comparable prior year period.

Net income (loss) available to common stockholders.

The net loss available to common stockholders was $59.9 million and $104.7 million for the six months ended June 30, 2023 and 2022, respectively, a decrease in net loss available to common stockholders of $44.8 million.

Net loss available to common stockholders.

The net loss available to common stockholders was $64.8 million and $108.5 million for the nine months ended September 30, 2023 and 2022, respectively, a decrease in net loss available to common stockholders of $43.7 million.

This decrease was related to the factors discussed above.

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The following table provides details on our operating results by reportable segment for the respective periods (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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Total loss from operations before interest and income taxes $ 6,400 $ (1,026) $ (64,238) $ (137,086)

For the three months ended June 30, 2023, the $3.7 million, or 5.2%, increase to approximately $73.6 million in revenue in our APUS Segment was primarily attributable to higher net course registrations.

Net course registrations increased 5.7% to approximately 88,300 from approximately 83,500 in the prior year period, primarily due to an increase in registration by military students utilizing TA, which generate a lower revenue per registration than other funding sources.

Income from operations before interest and income taxes increased to $18.9 million, or by 39.0%, during the three months ended June 30, 2023 from $13.6 million in the prior year period, an increase of $5.3 million, as a result of the increase in revenue and an overall decrease in expenses as compared to the same period in 2022.

For the six months ended June 30, 2023, the $4.5 million, or 3.2%, increase to approximately $147.5 million in revenue in our APUS Segment was primarily attributable to higher net course registrations.

Net course registrations increased 4.0% to approximately 184,500 from approximately 177,400 in the prior year period, primarily due to an increase in registration by military students utilizing TA, which generate a lower revenue per registration than other funding sources.

Income from operations before interest and income taxes increased to $36.0 million, or by 34.4%, during the six months ended June 30, 2023 from $26.8 million in the prior year period, an increase of $9.2 million, as a result of the increase in revenue and an overall decrease in expenses as compared to the same period in 2022.

For the three months ended June 30, 2023, the $11.9 million, or 18.7%, decrease to approximately $52.0 million in revenue in the RU Segment was primarily due to a 12.6% decrease in total student enrollment driven by a 22.0% decrease in nursing enrollment as compared to the prior year period, partially offset by tuition increases in certain programs implemented in January 2023.

The RU Segment loss from operations for the three months ended June 30, 2023 and 2022 includes goodwill and intangible asset impairment charges and the corresponding tax impacts of $64.0 million and $144.9 million, respectively.

The RU Segment loss from operations before interest and income taxes was $77.3 million for the three months ended June 30, 2023, compared to a loss from operations of $146.6 million in the prior year period.

Excluding the impairment charges, the RU Segment loss from operations before interest and income taxes was $13.3 million for the three months ended June 30, 2023, compared to a loss from operations before interest and income taxes of $1.7 million in the prior year period.

For the six months ended June 30, 2023, the $21.6 million, or 16.5%, decrease to approximately $109.4 million in revenue in the RU Segment was primarily due to a 12.1% decrease in total student enrollment driven by a 20.0% decrease in nursing enrollment, partially offset by tuition increases in certain programs which took effect in January 2023, as compared to the same period in 2022.

The RU Segment loss from operations before interest and income taxes was $90.1 million for the six months ended June 30, 2023, compared to a loss from operations of $145.7 million for the six months ended June 30, 2022.

The RU Segment loss from operations for the six months ended June 30, 2023 and 2022 includes goodwill and intangible asset impairment charges and the corresponding tax impacts of $64.0 million and $144.9 million, respectively.

Excluding the impairment charges, the RU Segment loss from operations before interest and income taxes was $26.1 million for the three months ended June 30, 2023, compared to a loss from operations before interest and income taxes of $0.8 million in the prior year period.

We believe this decline in total nursing enrollment was caused, in part, by the prior departure of leadership accountable for enrollment and nursing operations and caps on nursing student enrollment at certain RU campuses.

For the three months ended June 30, 2023, the $2.8 million, or 24.2% increase to approximately $14.3 million in revenue in our HCN Segment was primarily due to year-over-year increase in total student enrollment, as well as a 5% tuition increase implemented during the second quarter.

For the three months ended September 30, 2023, the $7.7 million, or 11.2%, increase to approximately $76.4 million in revenue in our APUS Segment was primarily attributable to higher net course registrations.

Net course registrations increased 7.6% to approximately 92,300 from approximately 85,800 in the prior year period, primarily due to an increase in registration by military students utilizing TA, and tuition and fee increases implemented in April and July 2023.

Income from operations before interest and income taxes increased to $21.9 million, or by 75.1%, during the three months ended September 30, 2023, from $12.5 million in the prior year period, an increase of $9.4 million, as a result of the increase in revenue and an overall decrease in expenses as compared to the same period in 2022.

For the nine months ended September 30, 2023, the $12.2 million, or 5.8%, increase to approximately $223.9 million in revenue in our APUS Segment was primarily attributable to higher net course registrations.

Net course registrations increased 5.2% to approximately 276,900 from approximately 263,200 in the prior year period, primarily due to an increase in registration by military students utilizing TA, and tuition and fee increases implemented in April and July 2023.

Income from operations before interest and income taxes increased to $58.0 million, or by 47.3%, during the nine months ended September 30, 2023, from $39.3 million in the prior year period, an increase of $18.6 million, as a result of the increase in revenue and an overall decrease in expenses as compared to the same period in 2022.

For the three months ended September 30, 2023, the $9.5 million, or 15.4%, decrease to approximately $52.1 million in revenue in the RU Segment was primarily due to a 10.0% decrease in total student enrollment driven by a 26.0% decrease in nursing enrollment as compared to the prior year period, partially offset by tuition increases in certain programs implemented in January 2023.

The RU Segment loss from operations before interest and income taxes was $10.6 million for the three months ended September 30, 2023, compared to a loss from operations of $7.9 million in the prior year period.

For the nine months ended September 30, 2023, the $31.0 million, or 16.1%, decrease to approximately $161.5 million in revenue in the RU Segment was primarily due to a 11.5% decrease in total student enrollment driven by a 22.2% decrease in nursing enrollment, partially offset by tuition increases in certain programs which took effect in January 2023, as compared to

the same period in 2022.

The RU Segment loss from operations before interest and income taxes was $100.7 million for the nine months ended September 30, 2023, compared to a loss from operations of $153.6 million for the nine months ended September 30, 2022.

We believe this decline in total nursing enrollment was caused, in part, by changes in nursing operations management and caps on nursing student enrollment at certain RU campuses.

For the three months ended September 30, 2023, the $2.3 million, or 20.4% increase to approximately $13.7 million in revenue in our HCN Segment was primarily due to year-over-year increase in total student enrollment, as well as a 5% tuition increase implemented during the second quarter.

Total student enrollment increased 17.0% to approximately 2,800 students as compared to the same period in 2022.

The loss from operations before interest and income taxes was $0.2 million during the three months ended June 30, 2023, compared to a loss from operations before interest and income taxes of $0.6 million in the same period in 2022, a decrease of $0.4 million.

For the six months ended June 30, 2023, the $4.4 million, or 19.0% increase to approximately $27.4 million in revenue in our HCN Segment was primarily due to year-over-year increases in total student enrollment.

The loss from operations before interest and income taxes was $0.6 million during the three months ended September 30, 2023, compared to a loss from operations before interest and income taxes of $1.4 million in the same period in 2022, a decrease of $0.8 million.

For the nine months ended September 30, 2023, the $6.7 million, or 19.5% increase to approximately $41.1 million in revenue in our HCN Segment was primarily due to year-over-year increases in total student enrollment.

Total student enrollment increased 16.4%, as compared to the same period in 2022.

The loss from operations before interest and income taxes was $1.5 million during the six months ended June 30, 2023, compared to a loss from operations before interest and income taxes of $1.6 million in the same period in 2022, a decrease of $0.1 million.

The loss from operations before interest and income taxes was $2.2 million during the nine months ended September 30, 2023, compared to a loss from operations before interest and income taxes of $3.0 million in the same period in 2022, a decrease of $0.8 million.

We believe that the increase in total student enrollment is primarily due to the opening of new campuses, including the Detroit, Michigan campus, which opened in October 2022.

Liquidity and Capital Resources

Cash and cash equivalents were $139.4 million and $129.5 million at June 30, 2023 and December 31, 2022, respectively, representing an increase of $9.9 million, or 7.6%.

The increase in cash was primarily due to payments received by APUS from the Army, which totaled approximately $42 million during the first six months of 2023, of which approximately $20.9 million in payments related to periods prior to 2023, and the timing of other receipts and payments.

Cash and cash equivalents were $155.2 million and $129.5 million at September 30, 2023 and December 31, 2022, respectively, representing an increase of $25.7 million, or 19.9%.

The increase in cash was primarily due to payments received by APUS from the Army, which totaled approximately $51.3 million during the nine months ended September 30, 2023, of which approximately $18.1 million in payments related to periods prior to 2023, and the timing of other receipts and payments.

We have historically financed operating activities and capital expenditures with cash provided by operating activities.

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Generally, these funds are received within 60 days of the start of the courses to which they relate.

The Higher Education Act of 1965, as amended, requires 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.

Payments from the Army that were expected in 2022 are being received in 2023, which, together with recent changes to the 90/10 Rule and faster enrollment growth among service members than non-military growth, has caused APUS’s 90/10 Rule percentage to increase and could make it more difficult for APUS to meet the 90/10 Rule requirements for 2023.

Failure to meet the 90/10 Rule for fiscal 2023, which would require APUS to notify ED and students of this failure, would lead to placement of APUS on provisional certification status for two years with respect to its Title IV participation, 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.

Payments from the Army that were expected in 2021 and 2022 were delayed and have been received in 2023.

As of September 2023, approximately $18.1 million in these delayed Army payments had been received in 2023.

These delayed Army payments, together with recent changes to the 90/10 Rule and faster enrollment growth among service members than non-military growth, has caused APUS’s 90/10 Rule percentage to increase and are making it more difficult for APUS to meet the 90/10 Rule requirements for 2023.

Steps that we may take to reduce our 90/10 Rule percentage in order to comply with the 90/10 Rule may require us to make significant cash expenditures to acquire new students who do not receive educational assistance funds provided by a federal agency, which would reduce the amount of cash we have available to fund our operations.

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In early 2023, we experienced an improvement in Army’s processing of current invoices and payments, while continuing to work with the Army on invoices submitted during the transition to ArmyIgnitED 2.0.

During the six months ended June 30, 2023, APUS received approximately $42.0 million in payments from the Army as compared to $38.8 million in payments received from the Army during the six months ended June 30, 2022.

As of June 30, 2023, approximately $10.6 million, of which $6.1 million is older than 60 days from the course start date, was due from the Army, as compared to $26.0 million due from the Army as of December 31, 2022, of which $16.5 million was older than 60 days from the course start date.

Beginning in September of 2023, we began to change our approach to invoicing for TA to offset the effect of the receipt of the delayed payments from the Army.

Previously, TA was typically billed by branch of service on a course-by-course basis when a student either started or completed a course.

Beginning in September 2023, APUS is taking longer to bill TA, which we expect will have the effect of delaying into 2024 payments for TA that ordinarily would have been received in 2023.

We anticipate that APUS’s change in billing approach will result in approximate ly $17.6 million of receivables that we would have expected to receive in 2023 will instead be received in 2024, which amount is consistent with the amount of the delayed Army payments that were received in 2023.

As of September 30, 2023, approximately $13.5 million, of which $5.0 million is older than 60 days from the course start date, was due from the Army, as compared to $26.0 million due from the Army as of December 31, 2022, of which $16.5 million was older than 60 days from the course start date.

In addition to the $17.6 million of receivables that will be received in 2024 due to the change in billing timing, we would expect to bill the Army and collect $4.3 million outstanding from courses that began in 2022 and prior, in 2024.

Capital expenditures could be higher in the future as a result of, among other things, additional expenditures for technology or other business capabilities, including as a result of insourcing of information technology functions and marketing services from Collegis, the maintenance or relocation of existing campuses at RU and HCN and GSUSA’s classroom and administrative facility, the opening of new campuses at HCN, the acquisition or lease of existing structures or potential new construction projects, and necessary tenant improvements that arise as a result of our ongoing evaluation of our space needs and opportunities for physical growth.

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Operating Activities

Net cash provided by operating activities was $28.5 million and $45.4 million for the six months ended June 30, 2023 and 2022, respectively.

The decrease in cash from operating activities was primarily an increase in negative cash flow from operations in our RU and HCN Segments, and changes in working capital due to the timing of receipts and payments.

Accounts receivable at June 30, 2023 decreased approximately $11.9 million compared to December 31, 2022, primarily as a result of

improvement in Army’s processing of invoices and payments to APUS.

Accounts payable, accrued liabilities, and accrued compensation and benefits at June 30, 2023 were approximately $4.0 million higher than December 31, 2022, primarily due to the timing of payment processing.

Net cash provided by operating activities was $48.7 million and $52.2 million for the nine months ended September 30, 2023 and 2022, respectively.

The decrease in cash from operating activities was primarily due to an increase in negative cash flow from operations in our RU Segment, and changes in working capital due to the timing of receipts and payments.

Accounts receivable at September 30, 2023 decreased approximately $13.3 million compared to December 31, 2022,

primarily as a result of improvement in Army’s processing of invoices and payments to APUS.

Accounts payable, accrued liabilities, and accrued compensation and benefits at September 30, 2023 were approximately $6.2 million higher than December 31, 2022, primarily due to the timing of payment processing.

Investing Activities

Net cash used in investing activities was $6.6 million and $4.6 million for the six months ended June 30, 2023 and 2022, respectively.

Investing activities for the six months ended June 30, 2023 include capital expenditures of $6.6 million.

For the six months ended June 30, 2022, capital expenditures were $7.3 million, partially offset by net proceeds from the GSUSA Acquisition of $1.9 million and the proceeds from the sale of real property of $0.8 million, respectively.

Net cash used in investing activities was $9.4 million and $8.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Investing activities for the nine months ended September 30, 2023 include capital expenditures of $9.5 million compared to capital expenditures of $10.9 million for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023 and 2022, proceeds from the sale of real property were $0.1 million and $0.8 million, respectively.

The nine months ended September 30, 2022, includes $2.0 million in cash received from the GSUSA Acquisition.

Financing Activities

Net cash used in financing activities was $12.0 million and $5.9 million for the six months ended June 30, 2023 and 2022, respectively.

Financing activities for the six months ended June 30, 2023 include $2.9 million related to the payment of dividends on our preferred stock and $8.0 million used for the repurchase of our common shares, and $1.0 million for the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants.

For the six months ended June 30, 2022, the cash used in financing activities was primarily due to $1.5 million used for the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants and $4.4 million in principal payments on our long term debt.

Due to debt prepayments made in December 2022, no further principal payments are required on our outstanding debt until 2027.

Net cash used in financing activities was $13.6 million and $8.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Financing activities for the nine months ended September 30, 2023, include $4.5 million related to the payment of dividends on our preferred stock and $8.0 million used for the repurchase of our common shares, and $1.0 million for the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants.

For the nine months ended September 30, 2022, the cash used in financing activities was primarily due to $1.5 million used for the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants and $6.6 million in principal payments on our long-term debt.

Due to debt prepayments made in December 2022, no principal payments are required on our outstanding debt until 2027.

Contractual Commitments

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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-Q

Item 2. Management’s Discussion and Analysis