What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-07 · 160 added, 84 removed, 563 unchanged (30% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

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

As of June 30, 2024 As of December 31, 2023

ASSETS (Unaudited)

29 unchanged sentences

10,000,000 shares authorized;

400 shares issued and outstanding in 2024 and 2023, respectively.

($ 133,053 and $ 138,132 liquidation preference per share, $ 53,221 and $ 55,253 in aggregate, for 2024 and 2023, respectively) (Note 11)

400 shares issued and outstanding in 2024 and 2023, respectively ($ 128,071 and $ 138,132 liquidation preference per share, $ 51,228 and $ 55,253 in aggregate, for 2024 and 2023, respectively) (Note 11)

39,691 39,691

12 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended March 31,

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

2024 2023 2024 2023

(Unaudited) (Unaudited)

Revenue $ 152,895 $ 147,214 $ 307,327 $ 296,903

4 unchanged sentences

Depreciation and amortization 5,232 7,953 10,360 15,709

Impairment of goodwill and intangible assets (Note 5) — 64,000 — 64,000

Loss on leases (Note 4) 779 — 3,715 —

4 unchanged sentences

Income (loss) before income taxes 1,435 ( 66,365 ) 6,491 ( 73,514 )

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

Income tax (benefit) expense ( 16 ) ( 15,137 ) 1,197 ( 16,551 )

Equity investment loss ( 1,080 ) ( 4 ) ( 4,407 ) ( 9 )

12 unchanged sentences

(In thousands)

Three Months Ended March 31,

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

2024 2023 2024 2023

(Unaudited) (Unaudited)

Net income (loss) $ 371 $ ( 51,232 ) $ 887 $ ( 56,972 )

Other comprehensive (loss) income, net of tax:

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

Unrealized gain on hedging derivatives 141 1,037 537 1,009

Tax effect ( 35 ) ( 256 ) ( 133 ) ( 250 )

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

Unrealized gain on hedging derivatives, net of taxes 106 781 404 759

Reclassification of gains to net income ( 784 ) ( 702 ) ( 1,571 ) ( 1,304 )

1 unchanged sentence

Reclassifications of gains to net income, net of taxes ( 589 ) ( 528 ) ( 1,181 ) ( 981 )

Total other comprehensive loss ( 294 ) ( 475 )

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

Total other comprehensive (loss) income ( 483 ) 253 ( 777 ) ( 222 )

Comprehensive (loss) income $ ( 112 ) $ ( 50,979 ) $ 110 $ ( 57,194 )

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

14 unchanged sentences

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

Preferred stock dividends — — — — — — ( 1,531 ) ( 1,531 )

Exercise of stock options — — 5,796 — 67 — — 67

Issuance of common stock under employee benefit plans — — 94,961 1 — — — 1

Deemed repurchased shares of common and restricted stock for tax withholding — — ( 1,826 ) — ( 26 ) — — ( 26 )

Stock-based compensation — — — — 1,823 — — 1,823

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

Other comprehensive loss — — — — — ( 483 ) ( 483 )

Net income — — — — — — 371 371

Balance as of June 30, 2024 400 $ 39,691 17,670,026 $ 177 $ 302,001 $ 867 $ ( 54,041 ) $ 288,695

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

10 unchanged sentences

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

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

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

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

7 unchanged sentences

Loss on disposals of long-lived assets 212 33

Impairment of goodwill and intangible assets — 64,000

Changes in operating assets and liabilities:

14 unchanged sentences

Cash paid for repurchase of common stock ( 4,133 ) ( 9,001 )

Cash received from exercise of stock options 67 —

Preferred stock dividends paid ( 3,066 ) ( 2,943 )

21 unchanged sentences

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:

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

• American Public University System Segment, or APUS Segment.

23 unchanged sentences

In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s financial position, results of operations, and cash flows.

Operating results for any interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Operating results for any interim period are not necessarily indicative of the results that may be expected for future periods, including the year ending December 31, 2024.

This Quarterly Report on Form 10-Q, or this Quarterly Report, should be read in conjunction with the Consolidated Financial Statements and accompanying notes in its audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, or the Annual Report.

11 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 $ 24.9 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

Restricted cash also includes a $ 24.9 million restricted certificate of deposit 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 June 30, 2024, and December 31, 2023, excluding the restricted certificate of deposit, was $ 1.5 million and $ 2.7 million, respectively.

Total restricted cash as of June 30, 2024, and December 31, 2023, was $ 26.4 million and $ 27.7 million, respectively.

Cash and cash equivalents and restricted cash as of June 30, 2024, and December 31, 2023, were as follows (in thousands):

As of June 30, 2024 As of December 31, 2023

Cash, cash equivalents, and restricted cash $ 156,191 $ 144,342

33 unchanged sentences

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.

In each reporting period, the Company evaluates its cost method investment 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.

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.

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

During the first quarter of 2024, the Company evaluated its equity investments for indicators of impairment and concluded the fair value of the 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, which 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 that 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.

During the second quarter of 2024, the Company sold its remaining equity method investment back to the investee, as it was no longer considered a strategic investment.

As a result, during the three months ended June 30, 2024, the Company recorded an investment loss of $ 1.1 million on a 2013 equity method investment, which is included in equity investment loss in the Consolidated Statements of Income.

The investment loss recorded reduced the book value of the equity method investment to zero , and at June 30, 2024, the Company no longer has any investments accounted for under ASC 323 and ASC 321.

At December 31, 2023, the Company’s equity investments were included in Other assets, net on the accompanying Consolidated Balance Sheets.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC 718, Stock Compensation , which requires companies to expense share-based compensation based on fair value, and ASU 2016-09, Compensation-Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting .

The Company accounts for stock-based compensation in accordance with FASB ASC 718, Stock Compensation , which requires companies to expense share-based compensation based on fair value.

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 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.

9 unchanged sentences

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

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

Three Months Ended March 31,

Stock-based compensation expense for the three months ended June 30, 2024, and 2023 was as follows (in thousands):

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

2024 2023 2024 2023

(Unaudited) (Unaudited)

Instructional costs and services $ 197 $ 258 $ 420 $ 537

5 unchanged sentences

The expense associated with these awards is reflected within the Company’s operating expenses.

For the years ending December 31, 2024, and 2023, the Management Development and Compensation Committee of the Board approved an annual incentive arrangement for senior management employees.

For the years ending December 31, 2024, and 2023, the Management Development and Compensation Committee of the Board approved annual incentive arrangements for senior management employees.

The aggregate amount of awards payable, if any, is dependent upon the achievement of certain Company financial and operational goals and the satisfaction of individual performance goals.

3 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 March 31, 2024, and 2023, the Company recognized an aggregate expense of $ 1.9 million and $ 2.0 million, respectively.

During the three and six months ended June 30, 2024, the Company recognized an aggregate incentive-based compensation expense of $ 1.9 million and $ 3.8 million, respectively, compared to an aggregate expense of $ 1.8 million and $ 3.8 million for the three and six months ended June 30, 2023, 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.

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

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

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

Recent Accounting Pronouncements

4 unchanged sentences

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

APUS RU HCN Corporate and Other Consolidated

4 unchanged sentences

Total Revenue $ 77,048 $ 53,034 $ 16,409 $ 6,404 $ 152,895

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

APUS RU HCN Corporate and Other Consolidated

4 unchanged sentences

Total Revenue $ 73,557 $ 51,971 $ 14,266 $ 7,420 $ 147,214

Six Months Ended June 30, 2024

APUS RU HCN Corporate and Other Consolidated

Instructional services, net of grants and scholarships $ 156,224 $ 89,412 $ 27,289 $ 10,598 $ 283,523

Graduation fees 1,119 — — — 1,119

Textbook and other course materials — 15,693 4,952 — 20,645

Other fees 361 1,064 615 — 2,040

Total Revenue $ 157,704 $ 106,169 $ 32,856 $ 10,598 $ 307,327

Six Months Ended June 30, 2023

APUS RU HCN Corporate and Other Consolidated

Instructional services, net of grants and scholarships $ 146,345 $ 91,709 $ 23,097 $ 12,524 $ 273,675

Graduation fees 757 — — — 757

Textbook and other course materials — 16,597 3,998 — 20,595

Other fees 433 1,132 311 — 1,876

Total Revenue $ 147,535 $ 109,438 $ 27,406 $ 12,524 $ 296,903

Corporate and Other includes tuition and contract training revenue earned by GSUSA and the elimination of intersegment revenue for courses taken by employees of one segment at other segments.

Contract Balances and Performance Obligations

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

The Company had no contract assets or deferred contract costs as of June 30, 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 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 June 30, 2024, was $ 25.6 million and included $ 14.8 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $ 10.8 million in 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.

24 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 July 2024 and January 2026, respectively.

The Company leases corporate office space in Florida, under an operating lease that expires in January 2026, and previously leased corporate office space in Maryland under an operating lease that expired in July 2024.

The RU Segment leases administrative office space in suburban Chicago, Illinois, and Minneapolis, Minnesota, and leases 20 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.

The HCN Segment leases administrative office space in Columbus, Ohio, and leases eight campuses located in three states under operating leases that expire through December 2034.

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

4 unchanged sentences

These assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

When the lease does not provide an implicit interest rate, the Company uses an incremental borrowing rate based on information available at lease commencement to determine the present value of the lease payments.

When the lease does not provide an implicit interest rate, the Company uses an incremental borrowing rate

based on information available at lease commencement to determine the present value of the lease payments.

The ROU assets include all remaining lease payments and exclude lease incentives.

1 unchanged sentence

There are no variable lease payments.

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

Lease expense for the three and six months ended June 30, 2024 was $ 4.3 million and $ 9.5 million, respectively, compared to $ 5.1 million and $ 10.4 million for the three and six months ended June 30, 2023, 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 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.

Cash paid for amounts included in the present value of operating lease liabilities during the three and six months ended June 30, 2024 was $ 3.7 million and $ 8.2 million, respectively, compared to $ 5.1 million and $ 10.1 million for the three and six months ended June 30, 2023, respectively, and is included in operating cash flows.

Loss on leases

During the three months ended March 31, 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.

Additionally, during the three months ended June 30, 2024, the Company paid a lease termination fee of $ 1.2 million related to the consolidation of two RU campuses in Minnesota.

As a result of the lease termination, and the consolidation of the RU campuses, during the three and six months ended June 30, 2024, the Company recorded a loss on leases of $ 0.4 million and $ 1.2 million, respectively.

In May 2024, RU notified the Wisconsin Educational Approval Program that it intends to voluntarily close two Wisconsin campuses, effective December 31, 2025, and 2026, respectively.

As a result, the Company recorded a lease impairment of $ 0.4 million during the three months ended June 30, 2024.

During the three and six months ended June 30, 2024, the total loss on leases was $ 0.8 million and $ 3.7 million, respectively, and is included in Loss on leases in the Consolidated Statements of Income.

Finance Leases

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

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

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

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

As of June 30, 2024, the total finance lease liability was $ 0.6 million, with an average interest rate of 6.70 %.

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 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):

Lease amortization expense associated with the Company’s finance leases was approximately $ 0.1 million for both the three and six months ended June 30, 2024, and $ 30,000 and $ 0.1 million for the three and six months ended June 30, 2023, respectively, 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 June 30, 2024 (dollars in thousands):

Maturity of Lease Liabilities (Unaudited) Operating Leases Finance Leases

35 unchanged sentences

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

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 recorded amortization expense related to definite-lived intangible assets of $ 1.3 million and $ 2.5 million for the three and six months ended June 30, 2024, respectively, compared to $ 4.0 million and $ 7.9 million for the three and six months ended June 30, 2023, 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):

5 unchanged sentences

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

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

During the three months ended June 30, 2024, in connection with the preparation of this Quarterly Report, the Company performed a qualitative assessment for potential impairment of the RU and HCN Segment 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 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.

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 each of the RU and HCN Segments was more than the respective carrying value, and therefore no quantitative impairment test and no impairment charge was necessary.

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

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

The Company concluded it was more likely than not the fair value of the 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 during the three months ended June 30, 2023.

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.

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):

The following table summarizes the changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2024 (in thousands):

APUS Segment RU Segment HCN Segment Total Goodwill

2 unchanged sentences

Impairment — — — $ —

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):

Goodwill as of June 30, 2024 $ — $ 33,030 $ 26,563 $ 59,593

The following table represents the balance of the Company’s intangible assets as of June 30, 2024 (in thousands):

Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Amount

40 unchanged sentences

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(Unaudited) (Unaudited)

Loss per common share

11 unchanged sentences

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(Unaudited) (Unaudited)

Antidilutive securities:

9 unchanged sentences

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

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

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

As of June 30, 2024, and December 31, 2023, the

remaining unamortized deferred financing fees were $ 3.7 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 March 31, 2024, and December 31, 2023.

There were no borrowings outstanding under the Revolving Credit Facility as of June 30, 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 March 31, 2024, the Facilities borrowing rate was 10.94 %, excluding any offset from the interest rate cap agreement described below.

As of June 30, 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.

Interest expense, including offsets from the interest rate cap agreement, was $ 1.9 million and $ 3.9 million for the three and six months ended June 30, 2024, respectively, compared to $ 1.9 million and $ 3.8 million for the three and six months ended June 30, 2023, respectively.

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

With this prepayment, APEI is not required to make quarterly principal payments on the Term Loan until payment of the outstanding principal amount at maturity in September 2027.

With this prepayment, APEI is not required to make quarterly principal payments on the Term Loan until payment of the outstanding principal amount at maturity in September 2027, subject to certain exceptions, including with respect to annual excess cash flows, proceeds from the sale of certain assets, casualty and condemnation events, and prohibited debt issuances.

During the three months ended June 30, 2024, as a result of the annual 2023 excess cash flow calculation, APEI paid $ 2.6 million in principal on the Term Loan.

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.

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

As of June 30, 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 March 31, 2024, and December 31, 2023 (in thousands):

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

Long-term debt consists of the following as of June 30, 2024, and December 31, 2023 (in thousands):

As of June 30, 2024 As of December 31, 2023

Credit agreement $ 96,425 $ 99,063

3 unchanged sentences

Long-Term Debt $ 92,752 $ 94,682

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

Scheduled maturities of long-term debt at June 30, 2024, are as follows (in thousands):

Maturities of Long-Term Debt (Unaudited) Loan Payments

7 unchanged sentences

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 was structured in a way that there was 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.

1 unchanged sentence

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.

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.

At June 30, 2024, and December 31, 2023, the fair value of the interest rate cap totaled $ 1.5 million and $ 2.6 million, respectively, and was recorded in Other assets, net on the Consolidated Balance Sheets.

The unrealized gains of $ 0.5 million and $ 0.9 million are included in accumulated other comprehensive income as of June 30, 2024, and December 31, 2023, respectively.

During the three and six months ended June 30, 2024, the Company reclassified $ 0.8 million and $ 1.6 million, respectively, from accumulated other comprehensive income to interest expense, compared to $ 0.7 million and $ 1.3 million for the three and six months ended June 30, 2023, respectively.

The Company estimates that approximately $ 1.5 million will be reclassified from accumulated other comprehensive income into interest expense during the next six months.

Segment Information

7 unchanged sentences

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

Three Months Ended March 31,

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

2024 2023 2024 2023

(Unaudited) (Unaudited)

APUS Segment $ 77,048 $ 73,557 $ 157,704 $ 147,535

34 unchanged sentences

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

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

As of June 30, 2024 As of December 31, 2023

APUS Segment $ 101,649 $ 108,749

16 unchanged sentences

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

Three Months Ended March 31,

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

(Unaudited) (Unaudited)

2024 2023 2024 2023

DoD tuition assistance programs 45 % 47 % 47 % 48 %

3 unchanged sentences

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

Three Months Ended March 31,

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

(Unaudited) (Unaudited)

2024 2023 2024 2023

Title IV programs 76 % 75 % 76 % 74 %

2 unchanged sentences

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

Three Months Ended March 31,

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

(Unaudited) (Unaudited)

2024 2023 2024 2023

Title IV programs 83 % 79 % 83 % 79 %

7 unchanged sentences

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

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

As of June 30, 2024, the dividend rate was 15.33 % 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.

Dividends will be paid, after declaration by the Board, for each dividend period.

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 months ended March 31, 2024, $ 1.5 million of dividends were declared and paid on the Series A Senior Preferred Stock.

During the three and six months ended June 30, 2024, dividends declared and paid on the Series A Senior Preferred Stock were $ 1.5 million and $ 3.0 million, respectively, compared to $ 1.5 million and $ 2.9 million for the three and six months ended June 30, 2023, respectively.

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 $ 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 of $ 51.2 million and $ 55.3 million as of June 30, 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 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.

As of June 30, 2024, and December 31, 2023, the make-whole payment included in the Liquidation Preference was $ 8.2 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 March 31, 2024 As of December 31, 2023

As of June 30, 2024 As of December 31, 2023

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