What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2023-11-07 · 141 added, 268 removed, 506 unchanged (45% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

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

As of March 31, 2024 As of December 31, 2023

ASSETS (Unaudited)

5 unchanged sentences

Income tax receivable 318 474

Assets held for sale 8,561 8,561

Total current assets 223,757 217,382

2 unchanged sentences

Deferred income taxes 51,017 51,360

Goodwill 59,593 112,593

Intangible assets, net 30,282 31,539

Goodwill 59,593 59,593

Other assets, net 6,924 9,986

24 unchanged sentences

Accumulated other comprehensive income 1,350 1,644

(Accumulated deficit) retained earnings ( 58,864 ) 13,891

Accumulated deficit ( 52,881 ) ( 49,096 )

Total stockholders’ equity 288,473 291,976

4 unchanged sentences

(In thousands, except per share amounts)

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

2023 2022 2023 2022

(Unaudited) (Unaudited)

Three Months Ended March 31,

Revenue $ 154,432 $ 149,689

3 unchanged sentences

General and administrative 36,277 33,489

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

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

Depreciation and amortization 5,128 7,756

Loss on leases (Note 4) 2,936 —

Loss on disposals of long-lived assets 28 1

Total costs and expenses 149,250 155,059

Income (loss) from operations before interest and income taxes 5,182 ( 5,370 )

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

Interest expense, net ( 126 ) ( 1,779 )

1 unchanged sentence

Income tax expense (benefit) 1,213 ( 1,414 )

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

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

Equity investment loss ( 3,327 ) ( 5 )

Net income (loss) 516 $ ( 5,740 )

Preferred stock dividends 1,535 1,457

10 unchanged sentences

(In thousands)

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

2023 2022 2023 2022

(Unaudited) (Unaudited)

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

Three Months Ended March 31,

Net income (loss) $ 516 $ ( 5,740 )

Other comprehensive (loss) income, net of tax:

Unrealized gain on hedging derivatives 274 1,652 1,283 4,091

Unrealized gain (loss) on hedging derivatives 396 ( 28 )

Tax effect ( 98 ) 6

Unrealized gain on hedging derivatives, net of taxes 190 1,242 918 3,076

Unrealized gain (loss) on hedging derivatives, net of taxes 298 ( 22 )

Reclassification of gains to net income ( 787 ) ( 602 )

1 unchanged sentence

Reclassifications of gains to net income, net of taxes ( 592 ) ( 453 )

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

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

Total other comprehensive loss ( 294 ) ( 475 )

Comprehensive income (loss) $ 222 $ ( 6,215 )

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

2 unchanged sentences

(In thousands, except share amounts)

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

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

Preferred Stock Common Stock

7 unchanged sentences

Other comprehensive loss — — — — — ( 294 ) — ( 294 )

Net loss — — — — — — ( 5,740 ) ( 5,740 )

Net income — — — — — — 516 516

Balance as of March 31, 2024 400 $ 39,691 17,571,095 $ 176 $ 300,137 $ 1,350 $ ( 52,881 ) $ 288,473

Preferred Stock dividends — — — — — — ( 1,487 ) ( 1,487 )

Issuance of common stock under employee benefit plans — — 53,756 1 ( 1 ) — — —

Deemed repurchased shares of common and restricted stock for tax withholding — — ( 1,416 ) — ( 7 ) — — ( 7 )

Stock-based compensation — — — — 2,068 — — 2,068

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

Other comprehensive gain — — — 253 253

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

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

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

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

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

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

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

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

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

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

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands, except share amounts)

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

2 unchanged sentences

Balance as of December 31, 2022 400 $ 39,691 18,892,791 $ 189 $ 292,854 $ 3,102 $ 13,891 $ 349,727

Issuance of common stock under employee benefit plans — — 218,512 3 ( 3 ) — — —

Deemed repurchased shares of common and restricted stock for tax withholding — — ( 71,331 ) ( 1 ) ( 1,443 ) — — ( 1,444 )

Stock-based compensation — — — — 2,356 — — 2,356

Repurchased and retired shares of common stock — — — — — — — —

Other comprehensive gain — — — — — 1,324 — 1,324

Net income — — — — — — 5,333 5,333

Balance as of March 31, 2022 — — 18,856,352 $ 189 $ 287,295 $ 1,432 $ 134,265 $ 423,181

Preferred Stock dividends ( 1,457 ) ( 1,457 )

Issuance of common stock under employee benefit plans — — 245,638 3 ( 3 ) — — —

2 unchanged sentences

Repurchased and retired shares of common stock — — ( 75,000 ) ( 1 ) 1 — ( 371 ) ( 371 )

Other comprehensive gain — — — — — 510 — 510

Net loss — — — — — — ( 110,029 ) ( 110,029 )

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

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

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

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

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

Other comprehensive loss — — — — — ( 475 ) — ( 475 )

Net loss — — — — — — ( 5,740 ) ( 5,740 )

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

Balance as of March 31, 2023 400 39,691 18,978,406 $ 190 $ 294,082 $ 2,627 $ 6,323 $ 342,913

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

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

Net income (loss) $ 516 $ ( 5,740 )

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

2 unchanged sentences

Stock-based compensation 1,918 2,224

Equity investment loss, net of tax 5,233 13

Equity investment loss 3,327 5

Deferred income taxes 343 688

Loss on disposals of long-lived assets 28 1

Impairment of goodwill and intangible assets 64,000 144,900

Gain on acquisition — ( 3,828 )

Changes in operating assets and liabilities:

10 unchanged sentences

Investing activities

Cash received from acquisition, net of cash paid — 1,951

Capital expenditures ( 6,218 ) ( 3,206 )

Proceeds from the sale of real property 123 765

Net cash used in investing activities ( 6,218 ) ( 3,206 )

14 unchanged sentences

Nature of the Business

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

American Military University, or AMU, and American Public University, or APU.

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:

APUS is institutionally accredited by the Higher Learning Commission, or HLC.

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

RU is institutionally accredited by the HLC.

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

• 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 21 campuses in six states and online.

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 at eight campuses in three states.

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

9 unchanged sentences

This segment reflects the operational activities of HCN.

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

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

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

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

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

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

Please refer to “Note 8.

27 unchanged sentences

As a trustee of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of the program participation agreement with ED.

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

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

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

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

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

Restricted cash also includes amounts to secure letters of credit, including $ 24.9 million in a restricted certificate of deposit account to secure a letter of credit for the benefit of ED on behalf of RU in connection with RU’s 2020 composite score, which is used by ED for determining compliance with financial responsibility standards, being below the minimum required.

Restricted cash on the Consolidated Balance Sheets as of March 31, 2024, and December 31, 2023, excluding the restricted certificate of deposit, was $ 3.0 million and $ 2.7 million, respectively.

Total restricted cash as of March 31, 2024, and December 31, 2023, was $ 27.9 million and $ 27.7 million, respectively.

Cash and cash equivalents and restricted cash as of March 31, 2024, and December 31, 2023, were as follows (in thousands):

As of March 31, 2024 As of December 31, 2023

Cash, cash equivalents, and restricted cash $ 153,197 $ 144,342

1 unchanged sentence

Total unrestricted cash $ 125,341 $ 116,660

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Assets Held for Sale

Assets held for sale represent excess 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 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.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed.

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.

Goodwill is not amortized.

3 unchanged sentences

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

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

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

The quantitative test compares the fair value of a reporting unit to its carrying value.

1 unchanged sentence

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

2 unchanged sentences

Goodwill and Intangible Assets” in these Consolidated Financial Statements.

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 to investments when it can 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 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 an other-than-temporary impairment.

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

If it is probable that the Company will not recover the carrying amount of the investment, the impairment is

considered other-than-temporary and recorded in equity investment income or loss, and the equity investment balance is reduced to its fair value accordingly.

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

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

During the first quarter of 2024, the Company evaluated its equity and cost method investments for indicators of impairment and concluded the fair value of a cost method investment was less than its carrying amount.

As a result, during the three months ended March 31, 2024, the Company recorded an investment loss of $ 3.3 million on a 2015 cost method investment.

This investment loss is included in equity investment loss in the Consolidated Statements of Income and is due to the investee entering into a new convertible debt agreement which resulted in the conversion of the Company’s preferred stock holdings in the investee into common shares, and the dilution of the Company’s ownership percentage.

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

There were no indicators of impairment during the three months ended March 31, 2023.

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

As of March 31, 2024, the aggregate carrying amount of the Company’s investments accounted for under ASC 323 and ASC 321 was $ 1.1 million and zero , respectively.

Stock-based Compensation

2 unchanged sentences

Stock-based payments may include incentive stock options or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance shares, performance units, cash-based awards, other stock-based awards, including unrestricted shares, or any combination of the foregoing.

Stock-based compensation cost is recognized as an expense generally over a three-year vesting period using the straight-line method for employees and the graded-vesting method for members of the Company’s Board of Directors.

Stock-based compensation cost is recognized as expense generally over a three-year vesting period using the straight-line method for employees and the graded-vesting method for members of the Company’s Board of Directors.

It is measured using the Company’s closing stock price on the date of the grant.

4 unchanged sentences

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

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

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

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

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.

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

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

2023 2022 2023 2022

(Unaudited) (Unaudited)

Stock-based compensation expense for the three months ended March 31, 2024, and 2023 was as follows (in thousands):

Three Months Ended March 31,

Instructional costs and services $ 223 $ 279

11 unchanged sentences

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

During the three months

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

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

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

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

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

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

During the three months ended March 31, 2024, and 2023, the Company recognized an aggregate expense of $ 1.9 million and $ 2.0 million, respectively.

The Company accounts for income taxes in accordance with FASB ASC 740, Accounting for Income Taxes .

The Company determines its interim tax provision by applying the estimated income tax rate expected for the full calendar year to income before income taxes for the period adjusted for discrete items.

Recent Accounting Pronouncements

1 unchanged sentence

All ASUs issued subsequent to the filing of the Annual Report on March 5, 2024, were assessed and determined to be either inapplicable or not expected to have a material impact on the Company’s consolidated financial position and/or results of operations.

Acquisition Activity

Acquisition of Graduate School USA

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

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

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

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 $ 4.5 million non-cash, 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 was subject to adjustment based on a final assessment of the fair value 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 values 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 for a net gain of $ 3.8 million based on the final working capital adjustment.

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

Purchase Price Allocation Amount

Cash and cash equivalents $ 1,000

Working capital adjustment ( 2,450 )

Total consideration ( 1,450 )

Assets acquired:

Accounts receivable 4,282

Prepaid expenses 1,096

Property and equipment, net 400

Operating lease assets 31,635

Intangible assets 965

Total assets acquired 38,378

Liabilities assumed:

Accounts payable and accrued liabilities 810

Deferred revenue 1,969

Lease liabilities, current 1,179

Lease liabilities, long-term 30,779

Deferred income taxes 1,263

Total liabilities assumed 36,000

Net assets acquired 2,378

Gain on acquisition $ 3,828

The gain on acquisition represents the excess of the fair value of net assets acquired over consideration paid.

The consideration paid represents a substantial discount to the book value of GSUSA’s net assets at the GSUSA Closing Date, primarily due to the fair value adjustments related to the trade name, fixed assets, and right-of-use, or ROU, lease assets and liabilities compared to book value.

The gain on acquisition was primarily the result of prior financial results, a lack of access to capital by the Seller, and the agreed upon purchase price that reflected the fact that GSUSA may need additional capital to fund operating losses.

The fair values of the customer contracts and relationships and trade name intangible assets were determined using the income-based approach.

The fair values of the curricula and accreditation and licensing identified intangible assets were determined using the cost approach.

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

Intangible Assets Useful life Amount

Customer contracts and relationships 2.5 years $ 744

Curricula 3 years 158

Trade name 1 year 35

Accreditation and licenses 2.5 years 28

Pro forma financial information relating to the GSUSA Acquisition is not presented because the GSUSA Acquisition did not represent a significant business acquisition for the Company.

Disaggregation of Revenue

1 unchanged sentence

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

Three Months Ended September 30, 2023

APUS RU HCN Corporate and Other Consolidated

Instructional services, net of grants and scholarships $ 75,879 $ 43,743 $ 11,761 $ 8,618 $ 140,001

Graduation fees 381 — — — 381

Textbook and other course materials — 7,707 1,796 — 9,503

Other fees 146 623 184 — 953

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

Three Months Ended September 30, 2022

APUS RU HCN Corporate and Other Consolidated

Instructional services, net of grants and scholarships $ 68,173 $ 50,973 $ 9,619 $ 7,843 $ 136,608

Graduation fees 374 — — — 374

Textbook and other course materials — 9,814 1,631 — 11,445

Other fees 188 761 159 — 1,108

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

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

APUS RU HCN Corporate and Other Consolidated

4 unchanged sentences

Total Revenue $ 80,656 $ 53,135 $ 16,447 $ 4,194 $ 154,432

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

APUS RU HCN Corporate and Other Consolidated

6 unchanged sentences

Contract Balances and Performance Obligations

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

The Company had no contract assets or deferred contract costs as of March 31, 2024, and December 31, 2023.

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

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

Deferred revenue at March 31, 2024, was $ 26.9 million and included $ 16.5 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $ 10.5 million in consideration received in advance for future courses or terms, or student deposits.

Deferred revenue at December 31, 2023, was $ 23.8 million and included $ 13.8 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $ 10.0 million in student deposits.

13 unchanged sentences

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

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

The Company’s principal leasing activities include leases for facilities, which are classified as operating leases, and leases for copiers and printers, which are classified as finance leases.

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

8 unchanged sentences

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

The RU Segment leases administrative office space in suburban Chicago, Illinois, and Minneapolis, Minnesota, and leases 21 campuses located in six states under operating leases that expire through March 2034.

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 December 2032.

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and Honolulu, Hawaii, under operating leases that expire through September 2036.

Operating lease assets are ROU assets, which represent the right to use the underlying assets for the lease term.

Operating lease assets are right-of-use, or ROU, assets, which represent the right to use the underlying assets for the lease term.

Operating lease liabilities represent the obligation to make lease payments arising from the lease.

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There are no variable lease payments.

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

Lease expense for the three months ended March 31, 2024, and 2023 was $ 5.2 million and $ 5.3 million, respectively.

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

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

Cash paid for amounts included in the present value of operating lease liabilities during the three months ended March 31, 2024, and 2023, was $ 4.8 million and $ 4.9 million, respectively, and is included in operating cash flows.

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 as a result of this lease termination.

Additionally, in the first quarter of 2024, the Company’s RU Segment began consolidating two Minnesota campuses and recorded a loss of $ 0.8 million on the Minnesota campus lease obligations.

Lease losses on lease termination and campus consolidation totaling $ 2.9 million for the three months ended March 31, 2024, are included in Loss on leases in the Consolidated Statements of Income.

In conjunction with the lease termination and campus consolidation, the Company reduced Operating lease assets, net, and Lease liabilities, current and long term by $ 5.0 million and $ 4.2 million, respectively.

Finance Leases

In connection with the GSUSA Acquisition, the Company acquired leases for copiers and printers that are classified as finance leases and expire on December 31, 2024.

The Company leases copiers and printers that are classified as finance leases that expire in 2027.

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

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

As of March 31, 2024, the total finance lease liability was $ 0.6 million, with an average interest rate of 6.60 %.

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

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

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

Lease amortization expense associated with the Company’s finance leases was approximately $ 27,000 for both the three months ended March 31, 2024, and 2023, and is recorded in Depreciation and amortization expense in the Consolidated Statements of Income.

The following tables present information about the amount and timing of cash flows arising from the Company’s operating and finance leases as of March 31, 2024 (dollars in thousands):

Maturity of Lease Liabilities (Unaudited) Operating Leases Finance Leases

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Goodwill and Intangible Assets

In connection with its acquisitions, the Company has applied FASB ASC 805 using the acquisition method of accounting.

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

The Company recorded non-cash impairment charges in 2022 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.

In connection with its acquisitions of RU and HCN, the Company applied FASB ASC 805 and recorded goodwill of $ 217.4 million and $ 38.6 million, 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 non-cash impairment charges for RU and HCN Segment goodwill reducing the carrying value to $ 33.0 million and $ 26.6 million, respectively.

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

There is no goodwill recorded in the APUS Segment.

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

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

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

The Company later recorded non-cash impairment charges reducing the carrying value of RU Segment indefinite-lived intangible assets to $ 24.5 million.

There were no indefinite-lived intangible assets recorded in conjunction with the acquisition of GSUSA.

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

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

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

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

For the three months ended March 31, 2024, and 2023, the Company recorded amortization expense related to definite-lived intangible assets of $ 1.3 million and $ 3.9 million, respectively.

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

Simplifying the Test for Goodwill Impairment .

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

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

The Company annually assesses goodwill and indefinite-lived intangible assets for impairment, or more frequently if events or changes in circumstances indicate that goodwill and indefinite-lived intangible assets might be impaired.

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

The quantitative test compares the fair value of the reporting unit to its carrying value.

1 unchanged sentence

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

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

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

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

There were no

indicators of impairment at HCN.

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

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

The Company also evaluated events and circumstances related to the valuation of its intangible assets recorded within the RU and HCN Segments to determine if there were indicators of impairment.

The Company concluded there were indicators of impairment during the three months ended June 30, 2023 of the RU Segment intangible assets.

There were no indicators of impairment at HCN.

As a result, the Company recorded a non-cash impairment charge of $ 11.0 million to reduce the carrying values of the RU Segment trade name and RU Segment accreditation, licensing and Title IV indefinite-lived intangible assets during the second quarter of 2023 to $ 18.5 million and $ 6.0 million, respectively.

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 their book values.

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

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

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

During the three months ended March 31, 2024, the Company performed a qualitative assessment for potential impairment of the RU and HCN Segments’ goodwill and indefinite-lived intangible assets.

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

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

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

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

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 circumstances that included RU’s performance to date against 2022 internal targets and overall 2022 financial performance to date.

There were no indicators of impairment at HCN.

Therefore, the Company proceeded with a quantitative impairment test related to the valuation of its RU Segment goodwill during the second quarter of 2022.

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

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

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

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

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

There were no indicators of impairment at HCN.

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

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

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

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

After completing the qualitative review of goodwill and indefinite-lived intangible assets for the RU and HCN Segments, the Company concluded it was more likely than not that the fair value of the RU and HCN Segments was more than the carrying value, and therefore no quantitative impairment test and no impairment charge was necessary.

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

The following table summarizes the changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, 2024 (in thousands):

APUS Segment RU Segment HCN Segment Total Goodwill

2 unchanged sentences

Impairment — — — —

Adjustments — 507 — 507

Goodwill as of December 31, 2022 $ — $ 86,030 $ 26,563 $ 112,593

Goodwill acquired — — — —

Impairment — ( 53,000 ) — ( 53,000 )

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

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

Goodwill as of March 31, 2024 $ — $ 33,030 $ 26,563 $ 59,593

The following table represents the balance of the Company’s intangible assets as of March 31, 2024 (in thousands):

Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Amount

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Curricula 14,563 11,400 — 3,163

Student contracts and relationships 4,614 4,168 — 446

Student and customer contracts and relationships 4,614 4,465 — 149

Lead conversions 1,500 1,500 — —

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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 during the period.

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

Net 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.

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

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

2023 2022 2023 2022

(Unaudited) (Unaudited)

Three Months Ended March 31,

Loss per common share

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

Net income (loss) $ 516 $ ( 5,740 )

Preferred Stock Dividend 1,535 1,457

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

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

2023 2022 2023 2022

(Unaudited) (Unaudited)

Three Months Ended March 31,

Antidilutive securities:

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and Truist Securities, Inc., as lead arrangers and joint bookrunners, and certain lenders party thereto, or the Lenders.

The Credit Agreement provides for (i) a senior secured term loan facility in an aggregate original principal amount of $ 175 million, or the Term Loan, with a scheduled maturity date of September 1, 2027 and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $ 20.0 million, or the Revolving Credit Facility, which together with the Term Loan is referred to as the Facilities, with a scheduled maturity date of September 1, 2026, the full capacity of which may be utilized for the issuance of letters of credit.

The Credit Agreement provides for (i) a senior secured term loan facility in an aggregate original principal amount of $ 175.0 million, or the Term Loan, with a scheduled maturity date of September 1, 2027 and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $ 20.0 million, or the Revolving Credit Facility, and, together with the Term Loan, is referred to as the Facilities, with a scheduled maturity date of September 1, 2026, the full capacity of which may be utilized for the issuance of letters of credit.

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

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

Consolidated Balance Sheets.

The Term Loan is presented net of deferred financing fees on the Consolidated Balance Sheets.

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

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

As of March 31, 2024, and December 31, 2023,

the remaining unamortized deferred financing fees were $ 4.0 million and $ 4.4 million, respectively.

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

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

There were no borrowings outstanding under the Revolving Credit Facility as of March 31, 2024, and December 31, 2023.

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

As of March 31, 2024, the Facilities borrowing rate was 10.94 %, excluding any offset from the interest rate cap agreement described below.

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

Interest expense, including offsets from the interest rate cap agreement, was $ 1.9 million for both the three months ended March 31, 2024, and 2023.

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

2 unchanged sentences

In addition, the Credit Agreement contains a financial covenant that requires APEI to maintain a Total Net Leverage Ratio of no greater than 2.00 to 1.00.

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

As of March 31, 2024, APEI was in compliance with all debt covenants.

For additional information on certain restrictions placed on the Company’s indebtedness pursuant to the terms of the Company’s Series A Senior Preferred Stock, please refer to “Note 11.

Preferred Stock” in these Consolidated Financial Statements.

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

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

Long-term debt consists of the following as of March 31, 2024, and December 31, 2023 (in thousands):

As of March 31, 2024 As of December 31, 2023

Credit agreement $ 99,063 $ 99,063

3 unchanged sentences

Long-Term Debt $ 95,040 $ 94,682

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

Scheduled maturities of long-term debt at March 31, 2024, are as follows (in thousands):

Maturities of Long-Term Debt (Unaudited) Loan Payments

11 unchanged sentences

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

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

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

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

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

At March 31, 2024, and December 31, 2023, the fair value of the interest rate cap totaled $ 2.2 million and $ 2.6 million, respectively, and was recorded in Other assets, net on the Consolidated Balance Sheets.

The unrealized gain of and $ 0.4 million and the unrealized loss of $ 28,000 are included in accumulated other comprehensive income as of March 31, 2024, and 2023.

During the three months ended March 31, 2024, and 2023, the Company reclassified $ 0.8 million and $ 0.6 million, respectively, from other comprehensive income to interest expense.

The Company estimates that approximately $ 2.2 million will be reclassified from accumulated other comprehensive income into interest expense during the next twelve months.

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

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

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

therefore, its operational activities are presented below within Corporate and Other.

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

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

1 unchanged sentence

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

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

2023 2022 2023 2022

(Unaudited) (Unaudited)

Three Months Ended March 31,

APUS Segment $ 80,656 $ 73,978

34 unchanged sentences

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

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

As of March 31, 2024 As of December 31, 2023

APUS Segment $ 116,288 $ 108,749

16 unchanged sentences

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

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

(Unaudited) (Unaudited)

2023 2022 2023 2022

Three Months Ended March 31,

DoD tuition assistance programs 48 % 49 %

3 unchanged sentences

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

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

(Unaudited) (Unaudited)

2023 2022 2023 2022

Three Months Ended March 31,

Title IV programs 75 % 74 %

2 unchanged sentences

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

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

(Unaudited) (Unaudited)

2023 2022 2023 2022

Three Months Ended March 31,

Title IV programs 83 % 79 %

3 unchanged sentences

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 SOFR (selected by the Company for each divided period), plus 10.00 %, or an initial rate of 14.55 % for the first dividend period, a three-month dividend period.

The Series A Senior Preferred Stock has cumulative dividends that accrue daily at an annual rate that is equal to 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.

1 unchanged sentence

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

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

As of March 31, 2024, the dividend rate was 15.31 % based on a three-month dividend period.

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

1 unchanged sentence

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

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

During the three months ended March 31, 2024, $ 1.5 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 Series A Senior Preferred Stock pro rata in whole or in part at the price per share equal to the liquidation preference, or the Liquidation Preference, plus any applicable early premium amount noted in the Certificate of Designation and Purchase Agreement.

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

The Liquidation Preference of $ 53.2 million and $ 55.3 million as of March 31, 2024, and December 31, 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 September 30, 2023 and December 31, 2022, the make-whole payment included in the Liquidation Preference was $ 14.2 million and $ 19.3 million, respectively.

As of March 31, 2024, and December 31, 2023, the make-whole payment included in the Liquidation Preference was $ 10.2 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.

1 unchanged sentence

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

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

As of March 31, 2024 As of December 31, 2023

Series A Senior Preferred Stock (plus accrued and unpaid dividends) $ 40,071 $ 40,072

5 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements