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Item 8. Financial Statements and Supplementary Data

2024-03-05 compared with 2023-03-14 · 256 added, 206 removed, 1047 unchanged (31% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of American Public Education, Inc.

To the shareholders and the Board of Directors of American Public Education, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of American Public Education, Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in Item 15(c) (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15(c) (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 5, 2024, expressed in an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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Critical Audit Matter

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill and Intangible Assets — RU Reporting Unit — Refer to Notes 2 and 6 to the financial statements

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Intangible Assets — Rasmussen University Reporting Unit — Refer to Notes 2 and 7 to the financial statements.

Critical Audit Matter Description

In connection with the Company’s September 1, 2021 acquisition of Rasmussen University (“RU”), the Company recorded $217.4 million of goodwill, representing the excess of the purchase price over the amount assigned to the new assets acquired and the fair value assigned to identified intangible assets.

Additionally, the Company recorded an initial fair value of $86.5 million related to intangible assets acquired with the acquisition.

Goodwill is tested for impairment annually as of October 31, through a qualitative or quantitative assessment and when events and circumstances indicate that the estimated fair value of a reporting unit may no longer exceed its carrying value.

When it is determined that a quantitative impairment test should be performed, if the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit's carrying value over the fair value is recognized as an impairment loss.

During the second quarter of 2022, the Company concluded it was more likely than not the fair value of the Company’s RU Segment was less than its carrying amount.

Therefore, the Company performed a quantitative impairment test for the Rasmussen University Segment (RU Segment) as of May 31, 2022.

The implied fair value of goodwill was calculated

and compared to the recorded goodwill.

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

Additionally, the Company impaired the value of intangible assets acquired with RU.

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

As of December 31, 2022, the Company concluded an additional impairment of $2.0 million for Accreditation, Licensing, and Title IV Intangible Asset acquired with the acquisition of RU.

Given the significant estimates and assumptions made by management to estimate the fair value of the RU reporting unit at the interim impairment test date and the annual impairment test date, and the sensitivity of the estimated fair value to changes in those estimates and assumptions, performing audit procedures to evaluate the reasonableness of management's estimates and assumptions utilized in its impairment analyses, particularly the revenue growth rate, the EBITDA margin, the selection of the discount rate, and the selection of the royalty rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

In connection with the Company’s September 1, 2021, acquisition of Rasmussen University (“RU”), the Company recorded $217.4 million of goodwill, representing the excess of the purchase price over the amount assigned to new assets acquired, and intangible assets with an initial fair value of $51.0 million.

During the fiscal year ended December 31, 2022, the Company recorded non-cash impairment charges of $131.4 million and $15.5 million, reducing the carrying values of the RU goodwill and intangible assets to $86.0 million and $35.5 million, respectively.

The Company annually assesses goodwill and indefinite-lived intangible assets, or more frequently if events and circumstances indicate that the estimated fair value may no longer exceed its carrying value.

Such factors considered in the Company’s assessment include, but are not limited to, enrollment trends, financial performance, macroeconomic conditions, as well as industry and market considerations.

When a quantitative impairment test is performed, if the fair value of the reporting unit is

less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment loss.

During the second quarter of 2023, the Company concluded it was more likely than not the fair value of the RU reporting unit was less than its carrying amount.

Therefore, the Company performed a quantitative impairment test for the RU reporting unit as of May 31, 2023.

As a result, the Company recorded a non-cash impairment charge of $53.0 million to reduce the carrying value of the RU goodwill to the implied fair value during the quarter ended June 30, 2023 and year ended December 31, 2023.

Also during the second quarter of 2023, the Company recorded a non-cash impairment charge of $11.0 million to reduce the carrying value of RU intangible assets during the quarter ended June 30, 2023 and year ended December 31, 2023.

During the fourth quarter of 2023, the Company completed their annual assessment of goodwill and indefinite-lived intangibles for RU reporting unit.

The annual assessment concluded that the fair value of goodwill and indefinite-lived intangibles for RU exceeded their carrying value, thereby resulting in no impairment loss.

Given the significant estimates and assumptions made by management to estimate the fair value of the RU reporting unit and the sensitivity of the estimated fair value to changes in those estimates and assumptions, performing audit procedures to evaluate the reasonableness of management's estimates and assumptions utilized in its impairment assessment, particularly the forecasts of future revenue, the EBITDA margin, the selection of the discount rate, and the selection of the royalty rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures included evaluating management's fair value estimate and significant assumptions, projections of expected revenue growth rate, EBITDA margin, discount rate and royalty rate, used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Our audit procedures related to the revenue growth rate, EBITDA margin, discount rate and royalty rate included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of RU, such as controls related to management’s revenue growth rates, EBITDA margin, the selection of the discount rate and selection of the royalty rate.

• We evaluated the reasonableness of management’s revenue growth rates and EBITDA margin by comparing management’s rates with:

Our audit procedures included evaluating management's fair value estimate and significant assumptions, forecasts of future revenue, EBITDA margin, discount rate and royalty rate used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Our audit procedures related to the revenue projections, EBITDA margin, discount rate and royalty rate included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the RU reporting unit, such as controls related to management’s forecasts of future revenues, EBITDA margin, the selection of the discount rate and selection of the royalty rate.

• We evaluated the reasonableness of management’s revenue and EBITDA margin forecasts by comparing management’s forecasts to:

◦ historical results;

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◦ forecasted information included in the Company’s press releases as well as in analyst and industry reports of the Company and companies in its peer group.

• We considered the impact of changes in the regulatory environment on management’s forecasts.

We also considered the impact of the COVID-19 Global Pandemic and inquired of the effects of the pandemic on the Company’s enrollments and forecasts.

• We considered the impact of changes in the regulatory environment on management’s forecasts, as well as the Company’s historical enrollments and revenues.

• We evaluated the impact of changes in management’s forecasts from the interim impairment test date of May 31, 2023, and the annual impairment test date of October 31, 2023.

• With the assistance of our fair value specialists, we evaluated the valuation methodology, discount rate used, and royalty rates used, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate and royalty rate selected by management.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, discount rate, long term growth rate and royalty rates used by testing the underlying source information, the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate and royalty rate selected by management.

• We compared the carrying value for the reporting unit to amounts recorded by the Company.

• We recalculated the excess or deficit of fair value over the carrying value for the Reporting Unit.

Preferred Stock Equity Raise— Refer to Note 11 to the financial statements

Critical Audit Matter Description

On December 28, 2022 (the “Closing Date”), the Company issued $40 million of the Series A Senior Preferred Stock, $0.01 par value per share (the “Preferred Stock”), to affiliates of Redwood Capital Management, LLC and MSD Partners, L.P., affiliates of each of which are existing common stockholders of the Company (the “Investors”).

The sale of the Preferred Stock was consummated on the Closing Date pursuant to a purchase agreement (the “Purchase Agreement”) among the Company and the Investors.

We identified auditing the Company’s evaluation of the accounting treatment for the Series A Senior Preferred Stock and embedded derivative features, specifically the qualification for permanent equity accounting and identification of the embedded features as a critical audit matter.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the classification of the Series A Senior Preferred Stock included the following:

• Obtained and reviewed the Purchase Agreement to understand the terms and conditions, economic substance, and redemption rights.

• Obtained an understanding of management’s process for determining the qualification of the stock issuance for equity accounting treatment, we verified management's records of new equity instruments by reading the original agreements for the equity instruments and assessing the terms relating to the technical accounting guidance.

• Obtained an understanding of management’s process for identifying embedded derivative features in the Purchase Agreement and the valuation process for the derivatives.

• We consulted with subject matter experts with specialized skill and knowledge in technical accounting with respect to the application of accounting literature to the transaction, and evaluated the related accounting conclusions, including the classification of the transaction in permanent equity.

Furthermore, we consulted on the reasonableness of the embedded derivative features identified based on guidance.

• We assessed the required financial statement disclosures related to the transactions for completeness and accuracy.

• We tested the effectiveness of controls over management’s technical accounting analysis for the issuance, including analysis of related disclosures.

• We recalculated the excess or deficit of fair value over the carrying value for the RU reporting unit.

/s/ Deloitte & Touche LLP

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Income tax receivable 2,871 474

Assets held for sale — 8,561

Total current assets 186,091 217,382

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Lease liabilities, current 14,396 13,309

Long-term debt, current 8,750 —

Total current liabilities 70,758 73,989

Lease liabilities, long term 101,420 96,739

Deferred income taxes 5,059 —

Long-term debt, net 93,151 94,682

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authorized shares - 10,000,000 ;

Series A Senior Preferred Stock, no shares issued or outstanding in 2021;

400 shares issued and outstanding in 2022 ($ 155,587 liquidation preference per share, $ 62,235 in aggregate)

Series A Senior Preferred Stock, 400 shares issued or outstanding in 2022 and 2023, respectively.

($ 155,587 and $ 138,132 liquidation preference per share, $ 62,235 and $ 55,253 in aggregate, for 2022 and 2023, respectively) (Note 13)

39,691 39,691

Common Stock, $ .01 par value;

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Accumulated other comprehensive income 3,102 1,644

Retained earnings 128,932 13,891

Retained earnings (accumulated deficit) 13,891 ( 49,096 )

Total stockholders’ equity 349,727 291,976

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General and administrative 103,379 120,352 128,239

Loss on disposals of long-lived assets 851 1,282 1,176

Impairment of goodwill and intangible assets — — 146,900

Depreciation and amortization 17,832 32,127 27,816

Impairment of goodwill and intangible assets — 146,900 64,000

Loss on assets held for sale (Note 6) — — 2,425

Loss on disposals of long-lived assets 1,282 1,176 554

Total costs and expenses 388,432 743,676 648,851

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

Interest income (expense) 1,092 ( 4,277 ) ( 17,728 )

Interest expense, net ( 4,277 ) ( 17,728 ) ( 4,459 )

Income (loss) from operations before income taxes 26,094 ( 151,248 ) ( 52,765 )

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Net income (loss) $ 17,752 $ ( 114,993 ) $ ( 47,286 )

Other comprehensive income, net of tax:

Other comprehensive (loss) income, net of tax:

Unrealized gain on hedging derivatives 149 4,429 924

Tax effect ( 41 ) ( 1,094 ) ( 227 )

Unrealized gain on hedging derivatives, net of taxes 108 3,335 697

Reclassifications of gains to net income — ( 453 ) ( 2,857 )

Tax effect — 112 702

Reclassifications of gains to net income, net of taxes — ( 341 ) ( 2,155 )

Total other comprehensive income (loss) $ 108 $ 2,994 $ ( 1,458 )

Comprehensive income (loss) $ 17,860 $ ( 111,999 ) $ ( 48,744 )

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(In thousands, except shares)

Additional Paid-In Capital Accumulated Other Comprehensive Income (loss) Retained Earnings Total Stockholders’ Equity

Additional Paid-In Capital Accumulated Other Comprehensive Income (loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity

Preferred Stock Common Stock

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— $ — 14,809,172 $ 148 $ 195,597 — $ 111,180 $ 306,925

Issuance of common stock in public offering — — 3,680,000 37 86,168 — — 86,205

Issuance of common stock under employee benefit plans — — 319,468 3 ( 3 ) — — —

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Stock-based compensation — — — — 7,654 — — 7,654

Repurchased and retired shares of common stock — — ( 547,563 ) ( 5 ) — — ( 13,603 ) ( 13,608 )

Other comprehensive income — — — — — 108 — 108

Net income — — — — — — 17,752 17,752

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— — 18,709,171 187 286,385 108 128,932 415,612

Issuance of common stock in public offering 3,680,000 37 86,168 — — 86,205

Issuance of preferred stock in private offering 400 39,691 — — — — — 39,691

Preferred Stock Dividends — — — — — — ( 48 ) ( 48 )

Issuance of common stock under employee benefit plans — — 264,384 3 ( 3 ) — — —

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Stock-based compensation — — — — 8,009 — — 8,009

Unrealized gain on hedging derivatives, net of taxes — — — 108 — 108

Net income — — — — — — 17,752 17,752

Other comprehensive income — — — 2,994 — 2,994

Net loss — — — — — — ( 114,993 ) ( 114,993 )

Balance as of December 31, 2022

400 39,691 18,892,791 189 292,854 3,102 13,891 349,727

Issuance of preferred stock in private offering 400 39,691 — — — — — 39,691

Preferred Stock Dividends — — — — — — ( 6,008 ) ( 6,008 )

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Stock-based compensation — — — — 7,740 — — 7,740

Unrealized gain on hedging derivatives, net of taxes — — — 2,994 — 2,994

Repurchased and retired shares of common stock — — ( 1,515,766 ) ( 15 ) — — ( 9,693 ) ( 9,708 )

Other comprehensive loss — — — ( 1,458 ) — ( 1,458 )

Net loss — — — — — — ( 47,286 ) ( 47,286 )

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Deferred income taxes 5,530 ( 41,910 ) ( 16,005 )

Loss on assets held for sale — — 2,425

Loss on disposal of long-lived assets 1,282 1,176 554

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Cash paid for repurchase of common/restricted stock ( 3,032 ) ( 1,538 ) ( 10,739 )

Preferred stock dividends paid — — ( 6,005 )

Cash received from issuance of common stock 86,205 — —

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Cash paid for debt issuance costs ( 13,644 ) — —

Net cash (used in) provided by financing activities ( 15,705 ) 242,341 ( 35,711 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 24,946 ( 78,059 ) ( 20,169 )

Net cash provided by (used in) financing activities 242,341 ( 35,711 ) ( 16,858 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 78,059 ) ( 20,169 ) 14,884

Cash, cash equivalents, and restricted cash at beginning of period 227,686 149,627 129,458

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Nature of the Business

American Public Education, Inc., or APEI, which together with its subsidiaries is referred to as the “Company,” is a provider of online and campus-based postsecondary education and, with the acquisition of Graduate School USA, career learning to students through the following subsidiary institutions:

American Public Education, Inc., or APEI, which together with its subsidiaries is referred to as the “Company,” is a provider of online and campus-based postsecondary education and career learning to students through the following subsidiary institutions:

• American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military, military-affiliated, public service and service-minded communities through American Military University, or AMU, and American Public University, or APU.

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• Rasmussen College, LLC, which is referred to herein as Rasmussen University, or RU, a nursing- and health sciences-focused institution, provides postsecondary education to students at its 22 campuses across six states and online.

The Company completed the acquisition of RU, or the Rasmussen Acquisition, on September 1, 2021, or the RU Closing Date.

Please refer to “Note 3.

Acquisition Activity” in these Consolidated Financial Statements for more information on this acquisition.

The Consolidated Financial Statements do not include the operating results or financial position of RU for any periods prior to the Closing Date.

RU is institutionally accredited by HLC.

• National Education Seminars, Inc., which is referred to herein as Hondros College of Nursing, or HCN, provides nursing education to students enrolled at six campuses in Ohio, one campus in Indianapolis, Indiana, and, beginning in October 2022, one campus in Detroit, Michigan, to serve the needs of the nursing and healthcare communities.

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

HCN is institutionally accredited by the Accrediting Bureau for Health Education Schools, or ABHES.

• American Public Training LLC, which is referred to herein as Graduate School USA, or GSUSA, provides career learning and leadership training in-person and online to the federal workforce.

The Company completed the acquisition of substantially all the assets of GSUSA, or the GSUSA Acquisition, on January 1, 2022, or the GSUSA Closing Date.

Please refer to “Note 3.

Acquisition Activity” in these Consolidated Financial Statements for more information on this acquisition.

The Consolidated Financial Statements do not include the operating results or financial position of GSUSA for any periods prior to the GSUSA Closing Date.

GSUSA is accredited by the Accrediting Council for Continuing Education and Training, or ACCET.

GSUSA operates as a stand-alone subsidiary of APEI but does not meet the quantitative thresholds to qualify as a reportable segment.

Therefore, GSUSA’s results are combined and presented within “Corporate and Other”.

Please refer to “Note 14.

Segment Information” for more information on the Company’s reporting segments.

The Company’s subsidiary institutions are licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent the institutions believe such licenses or authorizations are required, and APUS, RU, and HCN are certified by the United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs.

During the third quarter of 2021, the Company revised its reportable segments, as discussed further in “Note 14.

Segment Information”.

Prior period segment disclosures have been restated to conform to the current period presentation.

The Company’s subsidiary institutions are licensed or otherwise authorized by state authorities to offer education programs to the extent the institutions believe such licenses or authorizations are required, and APUS, RU, and HCN are certified by the United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs.

The Company’s operations are organized into the following three reportable segments:

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

These adjustments include unallocated corporate activity and eliminations, which generally were previously reported within the APEI Segment, and effective January 1, 2022, the operational activities of GSUSA.

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

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

Therefore, GSUSA’s results are combined and presented within “Corporate and Other”.

Please refer to “Note 16.

Segment Information” for more information on the Company’s reporting segments.

Significant Accounting Policies

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Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed, and the fair value assigned to identifiable intangible assets.

The Company completed the Rasmussen and GSUSA Acquisitions on September 1, 2021 and January 1, 2022, respectively.

The Company completed the acquisitions of RU, or the Rasmussen Acquisition, on September 1, 2021, or the RU Closing Date, and the acquisition of substantially all the assets of GSUSA, or the GSUSA Acquisition, on January 1, 2022, or the GSUSA Closing Date.

Accordingly, the financial results of the Company as of and for any periods ended prior to the respective acquisition dates do not include the financial results of RU and GSUSA and therefore are not directly comparable.

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Total restricted cash as of December 31, 2022 and 2023 was $ 26.9 million and $ 27.7 million, respectively.

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

December 31, 2022 December 31, 2023

Cash, cash equivalents, and restricted cash $ 129,458 $ 144,342

restricted cash ( 26,939 ) ( 27,682 )

Total unrestricted cash $ 102,519 $ 116,660

Accounts receivable.

The Company accounts for receivables in accordance with FASB ASC 310, Receivables.

Course tuition is recorded as accounts receivable and deferred revenue at the time students begin a course or term.

Tuition is recorded as accounts receivable and deferred revenue at the time students begin a course or term.

Students may remit tuition payments upon enrollment or they may elect various other payment options with payment terms extending beyond the start of the course or term.

These other payment options include payments by sponsors, financial aid, alternative loans, or tuition assistance programs that remit payments directly to the subsidiary institution.

These other payment options include payments by sponsors, financial aid, alternative loans, or tuition assistance, or TA, programs, that remit payments directly to the subsidiary institution.

RU and HCN also offer extended payment plan options.

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TA is billed by branch of service on a course-by-course basis when a student starts a course, whereas Title IV programs are billed based on the courses included in a student’s term.

Effective January 1, 2024, APUS revised its billing policy for students utilizing TA, which previously ranged from two weeks to five weeks after course start date to nine weeks

after the course start date.

Billed accounts receivable are considered past due if the invoice has been outstanding for more than 30 days.

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Interest charged by HCN on payment plans was not material for the periods presented.

Assets Held For Sale.

Assets held for sale represents real property located in Charles Town, West Virginia for the Company’s APUS Segment.

Long-lived assets are classified as held for sale when the assets are expected to be sold and meet other held for sale criteria.

For additional details regarding assets held for sale, please refer to “Note 6.

Assets Held For Sale” in these Consolidated Financial Statements.

Property and equipment.

All property and equipment is carried at cost less accumulated depreciation, except the acquired assets of RU and GSUSA, which were recorded at fair value at the Closing Date.

All property and equipment is carried at cost less accumulated depreciation, except the acquired assets of RU and GSUSA, which were recorded at fair value at the respective closing dates of the acquisitions.

Depreciation and amortization are calculated on a straight-line basis over the estimated useful lives of the assets.

Leasehold improvement depreciation is calculated on a straight-line basis over the lesser of the estimated useful life of the asset or the term of the lease.

Leasehold improvement depreciation is calculated on a straight-line basis over the estimated useful life of the asset or the term of the lease.

For tax purposes, different methods are used.

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

Finite-lived intangible assets acquired in business combinations are recorded at fair value on their acquisition dates and are amortized on a straight-line basis over the estimated useful life of the asset.

Indefinite-lived and finite-lived intangible assets acquired in business combinations are recorded at fair value on the acquisition date.

Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful life of the asset.

The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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

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

For additional details regarding goodwill and intangible assets, please refer to “Note 7.

Goodwill and Intangible Assets” in these Consolidated Financial Statements.

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The Company accounts for its investments in less than majority owned companies in accordance with FASB ASC 323, Investments - Equity Method and Joint Ventures and FASB ASC 321, Investments - Equity Securities.

The Company applies ASC 323, Investments - Equity Method and Joint Ventures to investments w hen it has the ability to exercise significant influence but does not control the operating and financial policies of the company.

The Company applies ASC 323 to investments w hen it has the ability to exercise significant influence but does not control the operating and financial policies of the company.

This is generally represented by equity ownership of at least 20 percent but not more than 50 percent.

Investments accounted for under the equity method are initially recorded at cost and subsequently adjusted by the Company’s share of equity in income or losses after the date of acquisition.

The pro-rata share of the operating results of the investee is reported in the Consolidated Statements of Income as equity investment loss.

Investments that do not meet the equity method requirements are accounted for using the cost method under ASC 321, Investments - Equity Securities, with changes in the fair value of the investment reported in the Consolidated Statements of Income as equity investment loss.

The pro-rata share of the operating results of the investee is reported in the Consolidated Statements of Income as equity investment income or loss.

Investments that do not meet the equity method requirements are accounted for using the cost method under ASC 321 with changes in the fair value of the investment reported in the Consolidated Statements of Income as equity investment income or loss.

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

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

During the third quarter of 2023, the Company evaluated its equity method and cost method investments for impairment and concluded the fair value of a cost method investment was less than its carrying amount.

As a result, the Company recorded an investment loss of $ 5.2 million, during the third quarter of 2023.

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

The investment loss recorded reduced the book value of the cost method investment to zero.

There were no indicators of impairment during the years ended December 31, 2021 and 2022.

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

As of December 31, 2023, the aggregate carrying amount of the Company’s investments accounted for under ASC 321 was approximately $ 3.3 million.

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

The Company’s equity investments are included in other assets on the accompanying Consolidated Balance Sheets.

Derivatives and hedging.

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Deferred revenue and student deposits.

Deferred revenue and student deposits at December 31, 2021 and 2022 was $ 21.8 million and $ 23.8 million, respectively.

Deferred revenue includes payments that have been received from students for courses or terms that are still in process and student deposits represent cash received from students prior to the commencement of a course or term and are refundable to the student in the event the student withdrawals before the start of the course or term.

Deferred revenue and student deposits was approximately $ 23.8 million at both December 31, 2022 and 2023.

Deferred revenue includes payments that have been received from students for courses or

terms that are still in process and student deposits represent cash received from students prior to the commencement of a course or term and are refundable to the student in the event the student withdrawals before the start of the course or term.

Series A Senior Preferred Stock.

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The Series A Senior Preferred Stock is recorded net of issuance costs.

Dividends on the Series A Senior Preferred Stock are included in preferred stock dividends on the Consolidated Statements of Income.

The Preferred Stock Series A is a cumulative, perpetual, redeemable instrument.

Dividends on the Series A Senior Preferred Stock are presented in preferred stock dividends on the Consolidated Statements of Income.

The Series A Senior Preferred Stock is a cumulative, perpetual, redeemable instrument.

Dividends will be accrued as contractually obligated and paid upon approval by the Company’s Board of Directors.

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Revenue” in these Consolidated Financial Statements.

The Company provides scholarships and grants and, in the case of APUS, technology fee grants to certain students to assist them financially and promote their enrollment.

The Company provides scholarships and grants to certain students to assist them financially and promote their enrollment.

Scholarship assistance and technology fee grants of $ 54.6 million, $ 68.8 million, and $ 80.7 million were provided for the years ended December 31, 2021, 2022 and 2023, respectively, and are included as a reduction to revenue in the accompanying Consolidated Statements of Income.

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The forfeiture assumption is ultimately adjusted to the actual forfeiture rate.

If actual results differ significantly from these estimates, stock-based compensation expense could be higher and have a material impact on the Company’s consolidated financial statements.

If actual results differ significantly from these estimates, stock-based compensation expense could be higher or lower and have a material impact on the Company’s consolidated financial statements.

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

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Stockholders’ Equity” in these Consolidated Financial Statements.

Income per common share.

Basic net income per common share is based on the weighted average number of shares of common stock outstanding during the period.

Diluted net income per common share increases the shares used in the per share calculation by the dilutive effects of options, warrants, and restricted stock.

Net Income (loss) per common share.

Net income (loss) per common share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

Net income (loss) available to common stockholders is net income (loss) adjusted for preferred stock dividends declared.

Diluted loss per common share is calculated by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding, increased by the shares used in the per share calculation by the dilutive effects of restricted stock and option awards.

Fair value of financial instruments.

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As such, their carrying amounts approximate fair value and fall within Level 1 of the fair value hierarchy.

The valuation of the interest rate cap is measured as the present value of all expected future cash flows based on the London Interbank Offered Rate, or LIBOR-based, yield curves.

The valuation of the interest rate cap is measured as the present value of all expected future cash flows based on the Term Secured Overnight Financing Rate, or Term SOFR.

The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty.

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The Company considers the applicability and impact of all ASUs, issued by the FASB.

ASUs issued but not listed were assessed and determined to be either not applicable or expected to have minimal impact on its consolidated financial position and/or results of operations.

ASUs issued but not listed were assessed and determined to be either not applicable or expected to have minimal impact on the Company’s consolidated financial position and/or results of operations.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This standard requires the Company to disclose significant segment expenses that are regularly provided to the chief operating decision-maker, or CODM, and are included within each reported segments operating results.

The standard also requires the Company to disclose the total amount of any other items included in segment operating results which were not deemed to be significant expenses for separate disclosure, along with a qualitative description of the composition of these other items.

In addition, the standard also requires disclosure of the CODM’s title and position, as well as detail on how the CODM uses the reported measure of segment operating results to evaluate segment performance and allocate resources.

The guidance is effective for the fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning

after December 15, 2024, and should be applied retrospectively unless it is impracticable to do so.

Early adoption is permitted.

We are currently evaluating the ASU to determine its impact on our Segment disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires, among other things, the following for public business entities:

(i) enhanced disclosures of specific categories of reconciling items included in the rate reconciliation, as well as additional information for any of these items meeting certain qualitative and quantitative thresholds;

(ii) disclosure of the nature, effect and underlying causes of each individual reconciling item disclosed in the rate reconciliation and the judgment used in categorizing them if not otherwise evident;

and (iii) enhanced disclosures for income taxes paid, which includes federal, state, and foreign taxes, as well as for individual jurisdictions over a certain quantitative threshold.

The guidance is effective for the fiscal years beginning after December 15, 2024, including interim periods within those fiscal years and can be applied on either a prospective or retrospective basis.

Early adoption is permitted.

We are currently evaluating the ASU to determine its impact on our income tax disclosures.

Acquisition Activity

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The Company applied the acquisition method of accounting to the Rasmussen Acquisition, whereby the excess of the acquisition date fair value of consideration transferred over the fair value of identifiable assets and liabilities assumed was allocated to goodwill.

Goodwill reflects the fair value associated with the RU workforce and synergies expected from cost savings, operations, and revenue enhancements of the combined company that are expected to result from the acquisition.

The goodwill recorded as part of the acquisition was allocated to the RU reportable segment in the amount of $ 217.4 million and is deductible for tax purposes.

At the RU Closing Date, goodwill reflected the fair value associated with the RU workforce and synergies expected from cost savings, operations, and revenue enhancements of the combined company that were expected to result from the acquisition.

The goodwill recorded as part of the acquisition was allocated to the RU Segment in the amount of $ 217.4 million and is deductible for tax purposes.

The preliminary opening balance sheet was subject to adjustment based on a final assessment of the fair values of certain acquired assets and liabilities, primarily intangible assets and goodwill.

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The Company completed its assessment of the fair value of certain acquired assets and liabilities assumed during the measurement period, and, as a result, during the first quarter of 2022, recorded a $ 0.5 million increase in goodwill in connection with the Rasmussen Acquisition based on the final working capital adjustment.

During the second quarter of 2022, the Company recorded a non-cash impairment charge of $ 131.4 million to reduce the carrying value of RU Segment goodwill, as discussed further in “Note 6.

During the second quarters of 2022 and 2023, the Company recorded non-cash impairment charges of $ 131.4 million, and the corresponding tax impact of $ 36.0 million, and $ 53.0 million, and the corresponding tax impact of $ 15.8 million, respectively, to reduce the carrying value of RU Segment goodwill, as discussed further in “Note 7.

Goodwill and Intangible Assets” in these Consolidated Financial Statements.

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The fair value of the identified intangible assets, including the trade name, student roster, and lead conversions was determined using the income-based approach.

The fair value of curricula and accreditation, licensing, and Title IV identified intangible assets was determined using the cost approach.

The fair value of accreditation, licensing, and Title IV, and curricula identified intangible assets was determined using the cost approach.

The table below presents a summary of intangible assets acquired and the useful lives of these assets (in thousands):

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Lead conversions 2 years 1,500

During the second and fourth quarters of 2022, the Company recorded non-cash impairment charges of $ 13.5 million and $ 2.0 million, respectively, to reduce the carrying value of RU Segment accreditation, licensing, and Title IV indefinite lived intangible assets, as discussed further in “Note 6.

During 2022 and 2023, the Company recorded non-cash impairment charges of $ 15.5 million and $ 11.0 million, respectively, to reduce the carrying value of RU Segment accreditation, licensing, and Title IV and trade name indefinite-lived intangible assets, as discussed further in “Note 7.

Goodwill and Intangible Assets” in these Consolidated Financial Statements.

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The following unaudited pro forma information is presented as if the Rasmussen Acquisition occurred at the beginning of the earliest period presented.

In preparing the pro forma results, the Company is required to make estimates and assumption including with respect to underlying financial performance, purchase accounting, appropriate depreciation and amortization methods, effective tax rate, and future interest rates, among other estimates and assumptions.

The Company believes that these estimates and assumptions are reasonable under the circumstances.

In preparing the pro forma results, the Company was required to make estimates and assumption including with respect to underlying financial performance, purchase accounting, appropriate depreciation and amortization methods, effective tax rate, and future interest rates, among other estimates and assumptions.

The Company believes that these estimates and assumptions were reasonable under the circumstances.

The pro forma results do not represent what may occur in the future as actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to the Company’s Consolidated Financial Statements.

The table below presents the Company’s pro forma combined revenue and net income (in thousands):

Year Ended December 31,

The table below presents the Company’s pro forma combined revenue and net income for the year ended December 31, 2021 (in thousands):

Revenue $ 600,984

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The Company applied the acquisition method of accounting to the GSUSA Acquisition, whereby the assets acquired and liabilities assumed were recognized at fair value on the GSUSA Closing Date.

There was no goodwill recorded as a result of the GSUSA Acquisition, but an approximate $ 3.8 million noncash, non-taxable gain on the acquisition was recorded and is included as a separate line item on the Consolidated Statements of Income .

The preliminary opening balance sheet is subject to adjustment based on a final assessment of the fair values of certain acquired assets and liabilities assumed.

The Company has up to one year from the GSUSA Closing Date, or the measurement period, to complete the allocation of the purchase price.

As the Company finalizes its assessment of the fair values of certain acquired assets and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period.

The Company will reflect measurement period adjustments in the period in which the adjustments occur.

During the second quarter of 2022, the Company recorded a $ 0.7 million decrease in the gain on acquisition in connection with the GSUSA Acquisition based on the final working capital adjustment.

The preliminary opening balance sheet was subject to adjustment based on a final assessment of the fair values of certain acquired assets and liabilities assumed.

The Company had up to one year from the GSUSA Closing Date, or the measurement period, to complete the allocation of the purchase price.

The Company completed its assessment of the fair value of certain acquired assets and liabilities assumed during the measurement period, and, as a result, during the second quarter of 2022, the Company recorded a $ 0.7 million decrease in the gain on acquisition in connection with the GSUSA Acquisition based on the final working capital adjustment.

The following table summarizes the components of the consideration along with the purchase price allocation (in thousands):

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Generally, instructional services are billed when a course or term begins and paid within thirty days of the bill date.

In September 2023, APUS removed the technology fee for undergraduate students.

Graduation fees .

APUS graduation fee revenue represents a one-time, non-refundable fee per degree, charged to students upon submission of a program graduation application.

The fee covers administrative costs associated with completing a review of the student’s academic and financial standing prior to graduation.

Effective April 2023, the fee was increased from $ 100 to $ 150 per degree, which covers administrative costs associated with completing a review of the student’s academic and financial standing prior to graduation.

The Company recognizes revenue once graduation review services are completed.

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Generally, other fees revenue is recognized when the fee is charged to the student, which coincides with the completion of the specific performance obligation to the student.

APUS provides an APUS-funded tuition grant to support students who are U.S.

Military active-duty service members, National Guard members, reservists, military spouses and dependents, and, until January 2020, veterans, as well as a grant to cover the technology fee for students using TA.

Prior to September 2023, APUS provided an APUS-funded tuition grant for undergraduate and master’s students who are eligible for TA benefits and their spouses and dependents.

In September 2023, APUS removed these tuition grants and instead provided a Preferred Military Rate for undergraduate and master’s level courses for all U.S.

active-duty service members, National Guard members, Reservists, and military families.

In April 2023, coinciding with APUS tuition increases, APUS added a 10% APUS-funded Veteran Grant for veterans and veteran’s family members, on standard undergraduate and master’s level courses, partially offsetting the tuition increases for veteran students.

RU also provides an RU-funded tuition grant to support students who are U.S.

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In the following table, revenue, shown net of grants and scholarships, is disaggregated by type of service provided.

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

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

Year Ended December 31, 2021

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The Company did not consolidate the financial results of the RU Segment prior to the RU Closing Date.

Corporate and Other includes tuition and contract training revenue earned by GSUSA from the GSUSA Closing Date through December 31, 2022, and the elimination of intersegment revenue.

Corporate and Other includes tuition and contract training revenue earned by GSUSA which was acquired on the GSUSA Closing Date, and the elimination of intersegment revenue.

The APUS Segment charges the HCN Segment and corporate employees for the value of courses taken at APUS by HCN Segment employees and corporate employees.

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Deferred revenue at December 31, 2022 was $ 23.8 million and includes $ 13.0 million in future revenue that has not yet been earned for courses and terms that are in progress, as well as $ 10.8 million in consideration received in advance for future courses or terms, or student deposits, and represents the Company’s performance obligation to transfer future instructional services to students.

Deferred revenue at December 31, 2022 was $ 23.8

Deferred revenue at December 31, 2023 was also

$ 23.8 million and includes $ 13.8 million in future revenue that has not yet been earned for courses and terms that are in progress as well as $ 10.0 million in student deposits.

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The losses on long-lived assets are included as loss on disposals of long-lived assets in these Consolidated Financial Statements.

For the years ended December 31, 2020, 2021, and 2022, the APUS Segment sold certain excess real property located in Charles Town, West Virginia, for a net sales price of $ 0.8 million, $ 0.7 million, and $ 0.8 million, respectively, resulting in a loss on disposals of long-lived assets of $ 0.4 million, $ 0.5 million, and $ 0.4 million, respectively.

For the years ended December 31, 2021, 2022, and 2023, the APUS Segment sold certain excess real property and equipment located in Charles Town, West Virginia, for a net sales price of $ 0.7 million, $ 0.8 million, and $ 0.1 million, respectively, resulting in a loss on disposals of long-lived assets of $ 0.5 million, $ 0.4 million, and $ 0.1 million, respectively.

The loss is included in loss on disposals of long-lived assets in these Consolidated Financial Statements.

During the years ended December 31, 2021, 2022, and 2023, the Company recorded depreciation expense of $ 12.7 million, $ 16.2 million and $ 15.6 million, respectively.

Assets Held For Sale

Assets held for sale at December 31, 2023, represent excess real property located in Charles Town, West Virginia for the Company’s APUS Segment, which is no longer in use due to the relocation of employees to a new facility and the continued remote work of many employees following the abatement of the COVID-19 pandemic.

Long-lived assets are classified as held for sale when the assets are expected to be sold within the next 12 months and meet the other relevant held for sale criteria.

As such, the property is recorded at the lower of the carrying value or fair value, less costs to sell, until such time the asset is sold.

The Company estimates the fair value of the real property is $ 9.0 million, which, after reduction for the estimated cost to sell of approximately $ 0.4 million, resulted in a loss of $ 2.4 million for the year ended December 31, 2023.

The loss is included in loss on assets held for sale in these Consolidated Financial Statements.

Goodwill and Intangible Assets

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

The Company later recorded impairment charges reducing the carrying value of RU and HCN goodwill to $ 86.0 million and $ 26.6 million, respectively.

The Company recorded non-cash impairment charges in 2022 and

2023 for RU, and 2016 and 2019 for HCN, reducing the carrying value of RU and HCN goodwill to $ 33.0 million and $ 26.6 million, respectively.

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

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During the second quarter of 2022, the Company concluded it was more likely than not the fair value of the Company’s RU Segment was less than its carrying amount as a result of RU’s under performance compared to projections at the time of acquisition, along with the decline in market value of the Company and comparable companies.

Therefore, during

the second quarter, the Company proceeded with an interim quantitative impairment test for the RU Segment.

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

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

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

Therefore, during the second quarter, the Company proceeded with an interim quantitative impairment test for the RU Segment.

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

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

During the fourth quarter of 2022, the Company completed its annual assessment of RU Segment goodwill for impairment and determined that the fair value was greater than the carrying value and therefore there was no impairment of RU Segment goodwill as of the valuation date which was October 31.

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

Therefore, during the second quarter, the Company proceeded with an interim quantitative impairment test for the RU Segment.

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

As a result, the Company recorded a non-cash impairment charge of $ 53.0 million, and the corresponding tax impact of $ 15.8 million, to reduce the carrying value of RU Segment goodwill to $ 33.0 million.

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

For the years ended December 31, 2021, 2022, and 2023, the Company completed its annual assessment of HCN goodwill and concluded that HCN’s fair value was more than the carrying value;

consequently, there was no impairment.

The Company’s 2023 annual assessment during the fourth quarter of 2023 concluded that the fair value of RU and HCN exceeded their carrying values by approximately $ 32.4 million, or 25 %, and $ 7.4 million, or 21 %, respectively.

The Company engaged an independent valuation firm to assist with the valuations.

The independent valuation firm weights the results of three different valuation methods to determine fair value:

(1) discounted cash flow;

(2) guideline public company;

and (3) guideline transaction for comparable transactions.

The independent valuation firm weights the results of two different valuation methods to determine fair value:

(1) discounted cash flow and (2) guideline public company.

Under the discounted cash flow method, fair value was determined by discounting the estimated future cash flows of RU and HCN at their estimated weighted-average cost of capital.

Under the guideline public company method, pricing multiples from other public companies in the public higher education market were used to determine the fair value of RU and HCN.

Under the comparable transaction method, pricing terms from other transactions in the higher education market were used to determine the fair value.

Values derived under the three valuation methods were then weighted to estimate RU and HCN’s enterprise values.

Values derived under the two valuation methods were then weighted to estimate RU and HCN’s enterprise values.

The income and cost approaches were used, as applicable, to value the RU and HCN’s indefinite-lived intangibles assets.

For the years ended December 31, 2020, 2021, and 2022, the Company completed its annual assessment of HCN goodwill and concluded that HCN’s fair value was more than the carrying value;

consequently, there was no impairment.

The Company’s 2022 annual assessment concluded that the fair value of RU and HCN exceeded their carrying values by approximately $ 10.0 million, or 5 %, and $ 4.9 million, or 13 %, respectively.

Changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 2022 and 2023 are as follows (in thousands):

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$ — $ 33,030 $ 26,563 $ 59,593

Intangible Assets

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

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Trade name 1 year

During the second and fourth quarters of 2022, the Company concluded it was more likely than not the fair value of the Company’s RU Segment intangible assets was less than its carrying amount as a result of RU’s under performance compared to projections at the time of acquisition and as compared to revised projections.

As a result, the Company completed impairment tests related to the valuation of its RU Segment intangible assets during the second and fourth quarters.

The implied fair value of intangible assets was calculated and compared to the recorded value and determined the fair value of the accreditation, licensing, and Title IV indefinite lived intangible assets was $ 11.0 million, or $ 13.5 million less than its carrying value during the second quarter, and $ 9.0 million, or $ 2.0 million less than the carrying value in the fourth quarter.

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

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

The implied fair value of intangible assets was calculated and compared to the recorded value and it was determined the fair value of the accreditation, licensing, and Title IV was $ 11.0 million, or $ 13.5 million less than its carrying value during the second quarter, and $ 9.0 million, or $ 2.0 million less than the carrying value in the fourth quarter.

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

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

During the second quarter of 2023, the Company concluded it was more likely than not the fair value of the Company’s RU Segment intangible assets was less than its carrying amount resulting from RU’s underperformance when compared to 2023 internal targets, projected enrollment trends, the decline in financial performance projected for the remainder

of 2023 as compared to prior projections, and the Company’s market value.

As a result, the Company completed an impairment test related to the valuation of RU Segment intangible assets during the second quarter.

The implied fair value of intangible assets was calculated and compared to the recorded value and it was determined the fair value of the RU Segment trade name was $ 18.5 million, or $ 8.0 million less than its carrying value, and RU Segment accreditation, licensing, and Title IV was $ 6.0 million, or $ 3.0 million less than the carrying value during the second quarter.

As a result, the Company recorded a non-cash impairment charge of $ 11.0 million to reduce the carrying values of the RU Segment indefinite-lived intangible assets during 2023.

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

The following table represents the balance of the Company’s intangible assets as of December 31, 2022 (in thousands):

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Non-compete agreements 86 86 — —

Tradename 35 35 — —

Accreditation and licensing 28 11 — 17

Total finite-lived intangible assets $ 40,826 $ 25,313 $ — $ 15,513

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Determining fair value requires judgment and the use of significant estimates and assumptions, including fluctuations in enrollments, revenue growth rates, operating margins, discount rates, and future market conditions, among others.

Given the current competitive and regulatory environment and the uncertainties regarding the related impact on the business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim and annual goodwill impairment tests will prove to be accurate predictions of the future.

If the Company’s assumptions are not realized, the Company may record additional goodwill impairment charges in future periods.

Given the current competitive and regulatory environment and the uncertainties regarding the related impact on the business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim and annual goodwill and intangible asset impairment tests will prove to be accurate predictions of the future.

If the Company’s assumptions are not realized, the Company may record additional goodwill and intangible asset impairment charges in future periods.

It is not possible at this time to determine if any such future impairment charge would result or whether such charge would be material.

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These options are included in the lease term when it is reasonably certain that the option will be exercised.

The Company leases corporate office space in Maryland and, beginning in January 2023, in Florida, under operating leases that expire in May 2024 and January 2026.

The Company leases corporate office space in Maryland and, beginning in January 2023, in Florida, under operating leases that expire in May 2024 and January 2026, respectively.

The RU Segment leases administrative office space in suburban Chicago, Illinois, and Minneapolis, Minnesota, and leases 22 campuses located in six states under operating leases that expire through October 2033.

The HCN Segment leases administrative office space in suburban Columbus, Ohio, and leases six campuses located in Ohio, one campus in Indianapolis, Indiana, and one campus in suburban Detroit, Michigan, which opened in October 2022, under operating leases that expire through June 2032.

The HCN Segment leases administrative office space in suburban Columbus, Ohio, and leases eight campuses located in three states under operating leases that expire through June 2032.

GSUSA leases classroom and administrative office space in Washington, D.C.

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

The Term Loan, the proceeds of which were used as part of the cash consideration for the Rasmussen Acquisition, was fully funded on the Closing Date and is presented net of deferred financing fees on the Consolidated Balance Sheets.

The Term Loan, the proceeds of which were used as part of the cash consideration for the Rasmussen Acquisition, was fully funded on the RU Closing Date and is presented net of deferred financing fees on the Consolidated Balance Sheets.

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

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The Interest Coverage Ratio is also defined in the Credit Agreement and reflects a ratio of consolidated EBITDA to consolidated interest expense.

Outstanding borrowings under the Facilities bear interest at a per annum rate equal to LIBOR (subject to a 0.75 % floor) plus 5.50 %, which shall increase by an additional 2.00 % on all past due obligations if APEI fails to pay any amount when due.

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

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

As of December 31, 2023, the Facilities borrowing rate was 10.96 % excluding any offset from the interest rate cap agreement described below.

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APEI is required to make principal payments of the Term Loan on the last day of each quarter, commencing with the quarter ended December 31, 2021, in an amount equal to $ 2.2 million per quarter.

During the years ended December 31, 2021 and 2022, APEI paid $ 4.6 million and $ 18.7 million, respectively, of interest, amortization of debt issuance costs, and unused commitment fees related to its Term Loan and Revolving Credit Facility.

During the years ended December 31, 2021, 2022, and 2023, APEI paid $ 4.6 million, $ 18.7 million, and $ 9.6 million, respectively, of interest, amortization of debt issuance costs, and unused commitment fees related to its Term Loan and Revolving Credit Facility.

In December 2022, APEI made prepayments totaling $ 65.0 million on the Term Loan.

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Subject to certain exceptions, including debt prepayments, the Term Loan contains mandatory prepayment requirements, including with respect to excess cash flow, proceeds of certain asset sales, casualty and condemnation events, and unpermitted debt issuances.

With the December 2022 debt prepayment, APEI has no mandatory prepayment obligation for the year ended December 31, 2022.

With the December 2022 debt prepayment, APEI had no mandatory prepayment obligation for the year ended December 31, 2023.

The Facilities are and will be guaranteed by APEI’s subsidiaries and certain of APEI’s future subsidiaries that are required to become a party thereto as guarantors (collectively, the “Guarantors”).

The obligations of APEI and the Guarantors are secured by a pledge of substantially all of their respective assets pursuant to the terms of the Collateral Agreement dated as of the Closing Date by and among APEI, the Agent and the Guarantors from time to time party thereto (the “Collateral Agreement”).

The obligations of APEI and the Guarantors are secured by a pledge of substantially all of their respective assets pursuant to the terms of the Collateral Agreement dated as of the RU Closing Date by and among APEI, the Agent and the Guarantors from time to time party thereto (the “Collateral Agreement”).

The Credit Agreement contains customary affirmative and negative covenants, including limitations on APEI’s and its subsidiaries’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions and enter into affiliate transactions, in each case, subject to certain exceptions, as well as customary representations, warranties, events of default, and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Facilities.

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Please refer to “Note 13.

Stockholders’ Equity” in these Consolidated Financial Statements for information on certain restrictions placed on the Company’s indebtedness pursuant to the terms of the Company’s Series A Senior Preferred Stock.

Preferred Stock” in these Consolidated Financial Statements for information on certain restrictions placed on the Company’s indebtedness pursuant to the terms of the Company’s Series A Senior Preferred Stock.

Long-term debt consists of the following (in thousands):

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

This interest rate cap agreement, designated as a cash flow hedge, provides the Company with interest rate protection in the event the LIBOR rate exceeds 2.0 %.

The interest rate cap was effective October 1, 2021 and will expire on January 1, 2025.

This interest rate cap agreement, designated as a cash flow hedge, provided the Company with interest rate protection in the event the LIBOR rate exceeded 2.0 %.

The interest rate cap was effective October 1, 2021 and was scheduled to expire on January 1, 2025.

In connection with cessation of publication of LIBOR, the Company terminated its existing interest rate cap agreement and entered into a new interest rate cap agreement that transitioned the benchmark rate to Term SOFR effective June 30, 2023.

The new interest rate cap agreement is structured in a way that there is no change in the value to the Company and provides the Company with interest rate protection in the event that the Term SOFR rate exceeds 1.78 %.

The new interest rate cap agreement will expire on December 31, 2024.

Changes in the fair value of the interest rate cap designated as a hedging instrument that effectively offset the variability of cash flows associated with the Company’s variable-rate, long-term debt obligations are reported in accumulated other comprehensive income.

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The unrealized gain of $ 0.9 million is included within other comprehensive income.

For the year ended December 31, 2022, the Company reclassified approximately $ 0.5 million from other comprehensive income to interest expense.

For the years ended December 31, 2022 and 2023, the Company reclassified approximately $ 0.5 million and $ 2.9 million, respectively, from other comprehensive income to interest expense.

The Company estimates that approximately $ 2.3 million will be reclassified from accumulated other comprehensive income into interest expense during the next twelve months.

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2021 2022 2023

Current income tax expense (benefit):

Current income tax expense:

Federal $ 513 $ 4,293 $ 2,384

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Deferred revenue 36 36

Net operating loss 3,338 —

Total gross deferred tax assets 70,741 83,629

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Prepaid expenses ( 437 ) ( 167 )

Goodwill and intangibles ( 1,302 ) —

Other comprehensive income - unrealized gain on interest rate cap ( 1,047 ) ( 544 )

Total deferred tax liabilities ( 34,839 ) ( 30,109 )

Deferred tax (liabilities) assets, net $ ( 5,059 ) $ 35,355

At December 31, 2022, the Company had state net operating loss carryforwards and federal capital loss carryforwards of $ 56.4 million and $ 1.8 million, respectively, which are available to offset future taxable income.

The federal capital loss carryforwards will expire in 2026 while the state net operating loss carryforwards will begin to expire in various years from 2036 through 2041.

Deferred tax assets, net $ 35,355 $ 51,360

At December 31, 2023, the Company had apportioned state net operating loss carryforwards of $ 4.4 million and federal capital loss carryforwards of $ 7.9 million, respectively, which are available to offset future taxable income.

At December 31, 2022, the Company had apportioned state net operating loss carryforwards of $ 2.4 million and federal capital loss carryforwards of $ 1.8 million, respectively, which are available to offset future taxable income.

The federal capital loss carryforwards will begin to expire in 2026 while the state net operating loss carryforwards will begin to expire in various years from 2037 through 2043.

The amount of state net operating losses that can be carried forward indefinitely is $ 2.7 million.

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Gain on acquisition — — % ( 947 ) 0.63 % — — %

Post-employment benefits ( 67 ) ( 0.26 ) % — — % — — %

Uncertain tax position 49 0.19 % — — % — — %

Valuation allowance 206 0.82 % ( 197 ) 0.13 % 1,614 ( 2.78 ) %

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The plan provides for Company discretionary profit-sharing contributions at matching percentages.

Employees immediately vest 100 % in all salary reduction contributions and employer contributions.

The Company made discretionary contributions to the plan of $ 5.1 million, $ 6.2 million, and $ 6.3 million for the years ended December 31, 2021, 2022, and 2023, respectively.

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In 2014, 2020, and again in 2023, the Company’s stockholders approved amendments to the plan increasing the number of shares available for purchase by participating employees and extended the term of the ESPP.

The current term of the ESPP is now May 15, 2030, and at December 31, 2022 there remain 20,080 shares available for purchase under the ESPP.

Effective December 31, 2023, the Company elected to suspend the ESPP.

Beginning January 1, 2024, eligible employees may no longer purchase shares of the Company’s common stock through the ESPP until such time as the Company reinstates the plan.

Shares purchased in the open market for issuance to employees pursuant to the plan for the years ended December 31, 2021, 2022, and 2023 were as follows:

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On May 20, 2022, the Company’s stockholders approved an amendment to the 2017 Incentive Plan to increase the number of shares available for issuance thereunder by 1,125,000 and to clarify provisions on vesting in dividends or dividend equivalent rights paid on unvested awards and the determination of fair market value.

On May 19, 2023, the Company’s stockholders approved an amendment to increase the number of shares available for issuance thereunder by 1,200,000 .

Grants under the 2017 Incentive Plan generally vest over a period of three years and the Company recognizes compensation expense over that period.

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The Company recognizes the estimated fair value of performance-based restricted stock units by assuming the satisfaction of any performance-based objectives at the “target” level, which is the most probable outcome determined for accounting purposes at the time of grant and multiplying the corresponding number of shares earned based upon such achievement by the closing price of the Company’s stock on the date of grant.

To the extent performance goals are not met, compensation cost is not ultimately recognized against the goals and, to the extent previously recognized, compensation cost is reversed.

To the extent performance goals are not met, compensation cost is not ultimately recognized against the goals and, to the extent

previously recognized, compensation cost is reversed.

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

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1,052,164 $ 14.74

There were 48,434 , 3,233 , and 490,127 shares of restricted stock or restricted stock units excluded in the computation of diluted net income per common share for the years ended December 31, 2020, 2021, and 2022, respectively.

For the years ended December 31, 2021, 2022, and 2023, there were 3,233 , 490,127 , and 885,080 shares of anti-dilutive restricted stock or restricted stock units, respectively, excluded in the computation of diluted net income per common share.

At December 31, 2023, total unrecognized compensation expense in the amount of $ 8.3 million relates to non-vested restricted stock and restricted stock units, which will be recognized over a weighted average period of 1.7 years.

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In addition, the Company determines the risk-free interest rate by selecting the U.S.

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

Estimates of fair value are subjective and are not intended to predict actual future events, and

subsequent events are not necessarily indicative of the reasonableness of the original estimates of fair value made under FASB ASC Topic 718.

Options currently outstanding vest ratably over a period of three years and expire in ten years from the date of grant.

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

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

Options currently outstanding vest ratably over a period of three years and expire ten years from the date of grant.

The table below sets forth stock option activity for the year ended December 31, 2021:

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Outstanding, December 31, 2022

133,588 $ 21.04 8.09 $ 37

Options granted 33,762 6.71 10 $ —

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Outstanding, December 31, 2023

163,382 $ 17.95 7.73 $ 119

Exercisable, December 31, 2023

83,644 $ 23.16 6.78 $ —

The following table sets forth the assumptions used in calculating the fair value at the date of grant of each option award granted:

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Weighted-average fair value of options granted during the year $ 15.13 $ 8.53 $ 4.44

For the years ended December 31, 2020, 2021, and 2022, there were 60,504 , 101,520 , and 133,588 anti-dilutive stock options excluded from the calculation of diluted net income per share, respectively.

For the years ended December 31, 2021, 2022, and 2023, there were 101,520 , 133,588 , and 163,382 anti-dilutive stock options, respectively, excluded from the calculation of diluted net income per share.

At December 31, 2023, total unrecognized compensation expense in the amount of $ 0.4 million relates to non-vested stock options, which will be recognized over a weighted average period of 1.6 years.

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The stock repurchase program does not obligate the Company to repurchase any shares, may be suspended or discontinued at any time, and is funded using available cash.

On May 2, 2019, the Company’s Board of Directors authorized the repurchase of up to $ 35.0 million of the Company’s shares of common stock, and on December 5, 2019, the Board approved an additional authorization of up to $ 25.0 million of shares.

Subject to market conditions, applicable legal requirements, and other factors, the repurchases may be made from time to time in the open market or in privately negotiated transactions.

The authorization does not obligate the Company to acquire any shares, and purchases may be commenced or suspended at any time based on market conditions and other factors the Company deem appropriate.

Further, on November 27, 2023, the Company’s Board of Directors authorized a new program to repurchase up to an additional $ 10.0 million of shares of the Company’s common stock.

Subject to market conditions, applicable legal requirements, and other factors, the repurchases under these authorizations may be made from time to time in the open market or in privately negotiated transactions.

The authorizations do not obligate the Company to acquire any shares, and purchases may be commenced or suspended at any time based on market conditions and other factors the Company deem appropriate.

The Company may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing.

The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares under this authorization.

The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares under these authorizations.

The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow, stock price and general business and market conditions.

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The authorization under this program is in addition to the Company’s repurchase program under which the Company may annually purchase up to the cumulative number of shares issued or deemed issued in that year under its equity incentive and stock purchase plan.

Series A Senior Preferred Stock in order for the Company to repurchase more than $ 30.0 million of its common stock in the aggregate.

During the year ended December 31, 2020, the Company repurchased 547,563 shares of the Company’s common stock for approximately $ 13.6 million.

The Company’s credit agreement includes restrictions on its ability to repurchase its common stock, and the terms of the Series A Senior Preferred Stock require the consent of the holders of at least 60 % of the then outstanding shares of the Series A Senior Preferred Stock in order for the Company to repurchase more than $ 30.0 million of its common stock in the aggregate.

During the years ended December 31, 2021 and 2022, the Company did not repurchase shares of common stock.

As of December 31, 2022, the Company has remaining $ 8.4 million under its share repurchase authorization.

During the year ended December 31, 2023, the Company repurchased 1,515,766 shares of common stock for $ 9.7 million.

As of December 31, 2023, the Company has $ 8.8 million remaining under its share repurchase authorizations.

For the period January 1, 2024 through January 31, 2024, we repurchased an additional 251,000 shares for $ 2.8 million.

Effective February 1, 2024, the Company ceased purchases under this purchase authorization.

During the years ended December 31, 2021, 2022, and 2023, the Company was deemed to have repurchased 99,469 , 80,764 , and 91,855 shares, respectively, of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants.

These repurchases were not part of the stock repurchase programs authorized by the Company’s Board of Directors as described above.

Series A Senior Preferred Stock

Preferred Stock

On December 28, 2022, APEI issued $ 40 million of the Series A Senior Preferred Stock, $ 0.01 par value per share, to affiliates of existing common stockholders of the Company.

The Series A Senior Preferred Stock has cumulative dividends that accrue daily at the initial annual rate, which is equal to the Secured Overnight Financing Rate, or SOFR (selected by the Company for each divided period), plus 10.00 %, or an initial rate of 14.55 %.

On the 30-month anniversary of the closing date, the dividend rate spread shall increase by 2.00 % per annum and shall increase by 0.50 % per annum at the beginning of each full fiscal quarter thereafter.

The Series A Senior Preferred Stock has cumulative dividends that accrue daily at the annual rate which is equal to Term SOFR (selected by the Company for each divided period), plus 10.00 %.

On the 30-month anniversary of issuance, the dividend rate spread shall increase by 2.00 % per annum and shall increase by 0.50 % per annum at the beginning of each full fiscal quarter thereafter.

The dividend rate spread increases 6.00 % in the event of default, a change of control, or other non-compliance as noted in the related Certificate of Designation and the purchase agreement for the shares of Series A Senior Preferred Stock, or the Purchase Agreement.

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

Dividend periods will be monthly, quarterly or every six months, at the Company’s option.

As of December 31, 2023, the dividend rate was 15.35 % based on a three-month dividend period.

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

Dividends will be paid, after declaration by the Company’s Board of Directors, for each dividend period.

If the Company selects a dividend period longer than three months, an interim dividend payment will be required for each three month period.

The Company evaluated the Series A Senior Preferred Stock at issuance for the embedded derivative features and the potential need for bifurcation under ASC 815-15 Derivatives and Hedging- Embedded Derivatives .

The Company engaged an independent valuation firm to assist with the evaluation.

As of December 31, 2022, the embedded features identified for bifurcation were determined to have minimal or no value and therefore deemed to not be material to the financial statements.

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

During the year ended December 31, 2023, $ 6.0 million of dividends were declared and paid on the Series A Senior Preferred Stock.

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

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

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

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

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

The Liquidation Preference of $ 62.2 million and $ 55.3 million of December 31, 2022 and 2023, respectively, is based on the occurrence of a liquidation event, which is also considered an event of default as defined in the Certificate of Designation.

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

As of December 31, 2022 and 2023, the make-whole payment included in the Liquidation Preference was $ 19.3 million and $ 12.3 million, respectively.

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

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

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

As of December 31, 2022 As of December 31, 2023

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

Make whole payment 19,251 12,266

Early redemption premium 2,915 2,915

Liquidation Preference $ 62,235 $ 55,253

The Series A Senior Preferred Stock has no voting rights for directors or otherwise, except as required by law or with respect to certain protective provisions.

Without the consent of at least 60 % of the then outstanding shares of Series A Senior Preferred Stock, with certain exceptions, the Company may not, among other things, (i) incur any indebtedness if such incurrence would cause the Company’s Total Net Leverage Ratio (as defined in the Purchase Agreement) to exceed 0.75 :1, (ii) issue any capital stock senior to or pari passu with the Series A Senior Preferred Stock, (iii) declare or pay any cash dividends on the Company’s common stock, or (iv) repurchase more than an aggregate of $ 30 million of the Company’s common stock.

However, holders of our Series A Senior Preferred Stock have certain consent rights that limit our ability to obtain debt or preferred stock financing or take certain other corporate actions.

Without the consent of at least 60 % of the then outstanding shares of Series A Senior Preferred Stock, with certain exceptions, the Company may not, among other things, (i) incur any indebtedness if such incurrence would cause the Company’s Total Net Leverage Ratio (as defined in the Purchase Agreement) to exceed 0.75 to 1.00, (ii) issue any capital stock senior to or pari passu with the Series A Senior Preferred Stock, (iii) declare or pay any cash dividends on the Company’s common stock, or (iv) repurchase more than an aggregate of $ 30 million of the Company’s common stock.

Contingencies

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Concentration

Our students utilize various payment sources and programs to finance their education expenses, including funds from:

Department of Defense, or DoD, tuition assistance programs, or TA, education benefit programs administered by the U.S.

Students utilize various payment sources and programs to finance their education expenses, including funds from:

Department of Defense, or DoD, TA programs, education benefit programs administered by the U.S.

Department of Veteran’s Affairs, or VA, and federal student aid from Title IV programs, as well as cash and other sources.

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Segment Information

In connection with the Rasmussen Acquisition (as further described in “Note 3.

Acquisition Activity”), the Company revised its reportable segments to include RU as a reportable segment to reflect the manner in which the chief operating decision-maker evaluates performance and allocates resources.

Prior to the third quarter of 2021, the Company had two reportable segments:

the American Public Education, Inc.

Segment, or APEI Segment, and the Hondros College of Nursing Segment, or HCN Segment.

Subsequent to the Rasmussen Acquisition, the Company has three reportable segments:

the APUS Segment, which was previously included within the former APEI Segment;

the RU Segment;

and the HCN Segment.

The APEI Segment previously reported the results of both APUS and remaining unallocated corporate expenses.

The Company has three reportable segments:

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

GSUSA does not meet the quantitative thresholds to qualify as a reportable segment;

1 unchanged sentence

Adjustments to reconcile segment results to the Consolidated Financial Statements, including unallocated corporate activity and eliminations, which generally were previously reported within the APEI Segment, are also included in “Corporate and Other”.

Prior periods have been updated to conform to the revised presentation.

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

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Total assets $ 615,056 $ 557,386

Subsequent Events

The Company has reviewed its business activities and has no subsequent events to report.

Subsequent Event

In February 2024, the Company elected to terminate its RU Segment lease for a planned Dallas, Texas campus.

The Company paid a lease termination fee of $ 2.2 million, and recorded a loss of $ 2.1 million in the first quarter of 2024 as a result of this lease termination.

Quarterly Financial Summary (unaudited)

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data