What changed in this filing

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Item 1A. Risk Factors

2025-03-06 compared with 2024-03-05 · 318 added, 456 removed, 504 unchanged (61% of the section changed)

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Our marketing strategy for APUS traditionally focused on building long-term, mutually beneficial relationships with businesses, other organizations, and individuals in military, military-affiliated, and public service communities.

We must continue to develop and expand marketing channels that attract college-ready students unaffiliated with the military who may perform well at APUS, including given limitations on access to military students, as discussed further below under the Risk Factor that begins “If APUS does not have strong relationships with, and access to, various military installations...”, and a continued focus on efforts to attract students outside of the military, including in order to maintain compliance with the 90/10 Rule.

We must continue to develop and expand marketing channels that attract college-ready students unaffiliated with the military who may perform well at APUS and focus on efforts to attract students outside of the military, including in order to maintain compliance with the 90/10 Rule.

However, we have experienced challenges attracting such students, and there is no assurance that we will be able to do so on a cost-effective basis or to prevent a further decline in non-military enrollments at APUS.

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If we are unable to develop and optimize marketing and advertising programs that are effective in developing awareness of our institutions and the programs we offer and their value propositions and are unable to enroll and retain qualified students in military and non-military markets, our enrollments would suffer, and there could be a material adverse effect on our financial condition and results of operations.

In April 2024, APU announced its intention to expand its reach to become a global digital university that integrates emerging technologies and enhanced teaching and learning opportunities for faculty and students, adopted a new visual identity, a new tagline:

Digital Learning for Real Life TM , an expanded global focus, and a suite of digital student services.

In connection with this transition and rebranding initiative, APU aims to provide students with highly collaborative learning experiences, AI-powered classroom support, and personalized digital services.

This transition and rebranding initiative may be difficult to complete, divert management attention, and require us to expend resources and incur expenses.

Additionally, despite APU’s efforts, this transition and rebranding initiative may not yield increased enrollments, and, even if it does, any increased enrollments may not offset expenses we incur and could potentially impact the mix of students attracted to APU, which could have a negative effect on our compliance with the 90/10 Rule.

If APU fails to successfully rebrand into a global digital university or incurs substantial expenses in an unsuccessful attempt to do so, we may fail to attract new enrollments to the extent necessary

to realize a sufficient return on our efforts.

Accordingly, our business, results of operations, and financial condition could be impacted.

As described more fully under “Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN”, and in the Risk Factor that begins with the caption “The planned combination of APUS, RU, and HCN,” on January 28, 2025, we announced the Combination, which may impact our ability to maintain and increase student enrollments.

The success of RU and HCN depends, in part, on our ability to maintain and increase student enrollments in those institutions’ programs.

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Accordingly, there is no assurance that we will be able to effectuate this expansion strategy at RU and HCN or if such strategy will achieve desired results.

For more on the limitations on our ability to expand our nursing programs into new geographical markets, see also the Risk Factors that begin with the captions “If our institutions are unable to successfully adjust…,” “If we or our institutions fail to comply with the extensive regulatory…,” “Failure to improve certain of our programs’ NCLEX pass rates...,” “RU’s planned closure of its Bloomington…,” and “RU is

currently on provisional certification with ED…,” as well as “Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements” generally.

For more on the limitations on our ability to expand our nursing programs into new geographical markets, see also the Risk Factors that begin with the captions “If our institutions are unable to successfully adjust…”, “If we or our institutions fail to comply with the extensive regulatory…,” “Failure to improve certain of our programs’ NCLEX pass rates...,” as well as “Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements” generally.

Opening new campuses and locations requires us to obtain appropriate federal, state, and accrediting agency approvals and to comply with any related requirements from those agencies.

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Because APUS relies on referrals and personal relationships for recruiting, impediments to access can have an adverse effect on maintaining and generating registrations from military students.

DoD requires us to meet certain criteria, including generally having at least 20 students on base, and to request access in writing, in order to access installations solely to provide counseling, and generally prohibits us from holding regular or recurring office hours on installations solely to provide counseling.

This adversely affects our efforts to support existing students and serve new students.

DoD requires us to meet certain criteria in order to access installations solely to provide counseling and generally prohibits us from holding regular or recurring office hours on installations solely to provide counseling.

Furthermore, DoD MOUs, which specify terms and conditions of participation in TA and are discussed in more depth in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense”, and the related increased focus by DoD on relationships with and oversight of educational providers, or additional DoD restrictions, could lead to adverse changes in the nature of our relationships with military installations and their education centers and our access to military service members.

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Events not directly related to education programs could lead to a reduction in registrations from students on active duty.

For example, after experiencing an increase in net course registrations in 2020, which we believe may have been due in part to the impact of the COVID-19 pandemic, registration and enrollments thereafter moderated, including as a result of broader education sector enrollment headwinds and, in certain periods, disruption resulting from the transition to ArmyIgnitED discussed elsewhere in this Annual Report.

Large-scale personnel reductions or other significant drawdowns of U.S.

active-duty military forces would also likely have a negative effect on enrollment and course registrations.

For example, large-scale personnel reductions or other significant drawdowns of U.S.

active-duty military forces would likely have a negative effect on enrollment and course registrations.

Increased operations and overseas deployments, increased demands on active-duty service members, and limited internet access associated with some deployments could also negatively impact the ability of certain active-duty military students to pursue higher education.

Congressional inaction on budgetary matters has led to lapses in funding, resulting in government shutdowns, and subsequent policy changes that have affected federal student aid programs at DoD.

Congressional inaction on budgetary matters has led to lapses in funding or has resulted government shutdowns, and policy changes have affected federal student aid programs at DoD.

A future government shutdown, particularly one that impacts DoD or includes suspension or resulting modification of TA programs, including in connection with congressional action or inaction relating to the federal debt ceiling, could have a material adverse effect on APUS’s enrollments and on our cash flows, results of operations, and financial condition.

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Because of APUS’s dependence on active-duty military students, changes that occur within and with respect to the military could have a material adverse effect on our results of operations.

Continued declines in enrollments at RU could materially adversely affect RU’s and our profitability, financial condition, results of operations, and cash flows.

RU has experienced continued declines in enrollments since the first quarter of 2022.

We believe that unexpected leadership departures at RU during 2022 had a negative impact on the first half of 2023 and overall 2023 results of operations, including enrollments.

Enrollments were further impacted by adverse findings by accrediting agencies and state regulatory bodies as a result of failures to meet applicable NCLEX benchmarks, self-imposed enrollment caps, the pause on new enrollments, and the closure of the program, with respect to the Bloomington, Minnesota ADN program, as discussed in greater detail in “Risks Related to the Regulation of Our Industry”.

If enrollments continue to decline, RU’s and our reputation, profitability, financial condition, results of operations, and cash flows could be materially adversely affected.

Declines in enrollments at RU could materially adversely affect RU’s and our profitability, financial condition, results of operations, and cash flows.

RU enrollments have been impacted by adverse findings by accrediting agencies and state regulatory bodies as a result of failures to meet applicable NCLEX benchmarks, operational challenges, self-imposed enrollment caps, the pause on new enrollments, and the consolidation and closure of campuses, as discussed in greater detail in “Risks Related to the Regulation of Our Industry”.

In addition, RU enrollments may be affected by challenges related to implementation of our integrated curriculum and testing services, along with any resulting student complaints and our approach to resolving such complaints.

If RU enrollments do not continue to stabilize, RU’s and our reputation, profitability, financial condition, results of operations, and cash flows could be materially adversely affected.

While we have identified, and continue to work to identify, new marketing strategies and other initiatives that we believe will attract and enroll quality students, there can be no assurance that these efforts will be successful.

Changes our institutions may make to their operations to improve the student experience and enhance our institutions’ ability to identify and enroll students who are likely to succeed may adversely affect our institutions’ enrollment, profitability, financial condition, results of operations, and cash flows.

We have identified, and continue to work to identify, potential changes and initiatives that we believe will more effectively attract and lead to the enrollment of students who are ready for and who are likely to persist in our institutions’ programs, support those students, and help improve their educational outcomes, including through changes to admissions, initiatives to increase the level of engagement and collaboration in the classroom and strengthen the bond with students, the establishment of a Council for Nursing Excellence at RU, and changes to curriculum and course retake policies at RU and HCN.

We continue to support those students, and help improve their educational outcomes, including through changes to admissions, initiatives to increase the level of engagement and collaboration in the classroom, to improve the educational outcomes of our students, and strengthen the bond with students.

We also have implemented initiatives dedicated to helping students pass the NCLEX exam the first time by identifying student-specific challenge areas, providing customized tutoring resources and faculty training, and making changes to curriculum and course retake policies at RU and HCN.

Additional initiatives have included and may in the future include the following:

• altering our institutions’ marketing efforts to target the appropriate prospective students;

• changing tuition costs and payment options;

• further revising admissions standards and requirements;

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• implementing more stringent satisfactory academic progress standards.

• changing tuition costs and payment options;

• altering our institutions’ marketing efforts to target the appropriate prospective students.

These initiatives require significant time, energy, and resources, and may adversely impact our institutions’ business, financial condition, results of operations, and cash flows, particularly in the near term.

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To offer a new academic program, our institutions may be required to obtain appropriate federal, state, and accrediting agency approvals, which may be conditioned or delayed in a manner that could significantly affect our growth plans.

In addition, growth restrictions may be imposed on our institutions in connection with changes in ownership or otherwise that adversely impact our ability to adjust to future market demands.

For example, including due to the change in control from APEI’s acquisition of RU,

RU is currently subject to ED-imposed restrictions on new programs and locations and on the number of students receiving Title IV who can be enrolled at RU.

Additionally, state-imposed constraints exist on enrollment in Minnesota, Illinois, and Kansas.

In addition, growth restrictions imposed on our institutions in connection with changes in ownership or otherwise may adversely impact our ability to adjust to future market demands.

For example, including due to the change in ownership from APEI’s acquisition of RU, RU is currently subject to ED-imposed restrictions on new programs and locations and on the number of students receiving Title IV who can be enrolled at RU.

Additionally, state-imposed constraints exist on RU enrollments in Minnesota and Kansas.

These restrictions will limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current needs by providing new or modified programs.

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Many of these competitors, whether for-profit, not-for-profit, or public, may also be able to leverage their greater scale, size, name recognition, and financial and other resources to compete for potential students, or to provide instructional and support resources that may be superior to those of our institutions and other for-profit schools.

In addition, as indicated in the Risk Factor that begins “Strong competition in the military market...” below, the Armed Forces have established, and may in the future establish, their own postsecondary education programs.

In addition, as indicated in “Our Market and Competition – Competition – Institutions Serving Military Students”, the Armed Forces have established, and may in the future establish, their own postsecondary education programs.

Within the nursing education market, we compete with other schools offering similar programs, including for-profit and not-for-profit public and private colleges, that may have greater resources or a greater market presence or reputation in the local areas we serve.

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Within the postsecondary education market generally, we have experienced increased competition from new market entrants providing both online and non-traditional programs, including providers partnering with Online Program Management, and a shift of for-profit institutions to not-for-profit status.

We operate 30 on-ground campuses in approximately 20 markets where we compete with a mix of local career colleges and two- and four - year colleges.

Because of the relatively local focus of these programs, our competitive environment is impacted by various factors that are specific not only to states where campuses are located but also to the particular areas where the campuses are located, including local supply and demand for nurses and nursing schools.

In the fall of 2023, there was an industry-wide increase of approximately 2.1% in undergraduate enrollment for the first time since the beginning of the pandemic, as compared to an overall industry-wide enrollment decline of 0.7% in the fall 2022.

Longer term projections suggest that previous growth in enrollment in postsecondary degree-granting institutions is slowing.

The combination of reduced growth or declines in the postsecondary student population and the entrance of additional providers in the online postsecondary education market will further intensify competition, and any resulting decline in the number of enrollments could have an adverse effect on our results of operations.

In addition, increased competition for college-ready students has led to an increase in the cost of advertising in certain marketing channels.

Continued increases in the cost of advertising may adversely impact our ability to attract college-ready students and/or increase our student acquisition costs.

In the fall of 2024, there was an industry-wide increase of approximately 3% in undergraduate enrollment as compared to an approximate 2% increase in the fall 2023.

However, despite overall increases in online postsecondary enrollments at the undergraduate and graduate levels, data suggest that previous growth in enrollment in postsecondary degree-granting institutions is slowing.

The combination of reduced growth or declines in the postsecondary student population and the entrance of additional providers in the online postsecondary education market will

further intensify competition, and any resulting decline in the number of enrollments could have an adverse effect on our results of operations.

In addition, although our overall advertising costs decreased year-over-year in 2024, increased competition for college-ready students has led to an increase in the cost of advertising in certain marketing channels.

Increases in our advertising costs, and continued increases in the cost of advertising in certain marketing channels, may adversely impact our ability to attract college-ready students and/or increase our student acquisition costs.

We expect to continue to face greater competition from non-traditional offerings, provided by both educational institutions and non-traditional providers.

Competing institutions and others provide non-traditional education programs without charge or at low costs, including CBE programs, coding bootcamps, micro-credentialing, massive open online courses, and other flexible and individualized

We believe that our institutions will continue to face new competition from non-traditional programs, including lower cost programs.

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These factors could cause our institutions’ enrollments, revenue, and profitability to decrease significantly.

Strong competition in the military market could decrease our institutions’ market share and increase our cost of acquiring students.

We anticipate that APUS will continue to see strong competition within the military market, which continues to be a primary market for APUS.

There are a number of for-profit schools and not-for-profit institutions that focus on the military market because of the size of the market and the availability of funding, and some for-profit schools seek to attract students eligible for TA, VA education benefits, or both.

Some of these institutions may develop relationships with the military and education service officers that are stronger than APUS’s, which could have an adverse effect on APUS’s ability to attract and retain qualified students, and ultimately, on our financial condition.

In addition, the Armed Forces have established, and may in the future establish, their own postsecondary education programs.

For example, in January 2022, the Department of the Navy, in cooperation with the U.S.

Marine Corps, Coast Guard, and Coast Guard Reservists, expanded a pilot program for online courses at the United States Naval Community College, or the USNCC, a community college supporting naval education for enlisted service members, with over 1,100 students enrolled into targeted associate’s degree and certificate programs with partner colleges and universities.

The pilot program was completed on September 30, 2023 and a published report on the outcome is scheduled to be reported in early 2024.

The USNCC has now entered the initial operating phase with approximately 2,600 students and anticipate being fully operational in 2028.

While a number of schools with which APUS competes participate in this program, APUS as a for-profit institution, is not an eligible partner.

Other Armed Forces branches may also begin offering distance learning through their own institutions.

Tuition and fee increases at RU, APUS, and HCN have had, and could have an adverse impact on enrollment, our financial condition and our results of operations.

RU implemented tuition increases, effective January 2023, for select programs, APUS implemented tuition and fee increases for its non-military and veteran students in the second and third quarters of 2023, and HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs.

These increases were implemented to help offset the increased cost of delivering a quality, competitive education.

However, higher tuition and fees could cause potential students to be unwilling, or unable, to enroll at our institutions and/or in affected programs, and existing students may be unwilling, or unable, to remained enrolled, which would result in lower enrollments at our institutions and adverse impacts on our financial condition and results of operations.

Tuition and fee increases at RU, APUS, and HCN could have an adverse impact on enrollment, our financial condition and our results of operations.

As more fully described in “Our Institutions and Operations – Our Institutions – Accreditation – Affordability and Cost of Attendance”, certain of our institutions implemented tuition and fee increases for certain or all students across select or all programs, as the case may be.

Even with these increases, tuition and fees for our institutions are designed to be affordable and competitive when compared to the tuition and fees at similar institutions offering the same level of flexibility, accessibility, and student experience.

However, higher tuition and fees may cause potential students to be unwilling, or unable, to enroll at our institutions and/or in affected programs, and existing students may be unwilling, or unable, to remained enrolled, resulting in lower enrollments at our institutions and adverse impacts on our financial condition and results of operations.

RU’s actual and planned closure of campuses or termination of programs on certain campuses may adversely impact RU and us.

In August 2023, RU decided to voluntarily pause new enrollments in the Bloomington, Minnesota ADN program beginning in November 2023, and, after informing in December 2023 MBN that it intended to voluntarily close the program, RU closed the program effective June 15, 2024.

This program had been subject to adverse action and heightened scrutiny from regulators as a result of a continued failure to meet applicable regulatory and accreditor requirements.

In July 2024, RU closed its Lake Elmo, Minnesota campus and moved all enrolled students at the campus to RU’s Eagan, Minnesota campus, which is located less than 10 miles from the Lake Elmo campus.

In addition, in May 2024, RU notified the EAP that it intends to voluntarily close its Green Bay, and Wausau, Wisconsin campuses, effective December 31, 2025, and 2026, respectively.

Taken together, the actions regarding the Lake Elmo campus and Wisconsin campuses are expected to directly impact approximately 190 students, or 1% of RU’s current total enrollment.

As RU evaluates its other campuses and programs, it could make similar consolidation and closure decisions about other campuses or programs.

The closure of RU’s Bloomington, Minnesota ADN program, Green Bay, and Wausau, Wisconsin and Lake Elmo, Minnesota campuses, or any consolidation and closure of other campuses or programs may have an adverse impact on RU’s enrollments and reputation, which could further impact RU’s enrollments, operations, cash flows, and financial condition.

Consolidation and closure decisions could also adversely impact online enrollment in the areas surrounding the closed campuses.

In addition, any future consolidation and closure could have a more significant impact on RU’s overall student body than these closures.

Risks Related to the Regulation of Our Industry

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Findings of noncompliance with these laws, regulations, standards, and policies could result in any of the respective regulatory agencies taking certain actions, including:

imposing monetary fines, penalties, or injunctions;

limiting operations, including restricting our institutions’ ability to offer new programs of study or to open new locations, or imposing limits on our growth;

limiting or terminating our ability to grant degrees;

restricting or revoking our institutions’ accreditation, licensure, or

other approval required to operate;

(i) imposing monetary fines, penalties, or injunctions;

(ii) limiting operations, including restricting our institutions’ ability to offer new programs of study or to open new locations, or imposing limits on our growth;

(iii) limiting or terminating our ability to grant degrees;

(iv) restricting or revoking our institutions’ accreditation, licensure, or other approval required to operate;

limiting, suspending, or terminating our institutions’ eligibility to participate in Title IV programs, TA, or VA education benefit programs;

requiring us to repay funds, post a letter of credit, or become subject to payment methods for Title IV programs that are not the advance payment system;

subjecting us to civil or criminal penalties;

or other actions that could have a material adverse effect on our business.

(v) requiring us to repay funds, post a letter of credit, or become subject to payment methods for Title IV programs that are not the advance payment system;

(vi) subjecting us to civil or criminal penalties;

(vii) or other actions that could have a material adverse effect on our business.

See also the Risk Factor that begins “Government and regulatory agencies and third parties…” below.

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We cannot predict with certainty how these regulatory requirements will be applied or whether we will be able to comply, or will be deemed by others to have complied, with all of the requirements.

For example, effective as of July 2024, a new Minnesota statute prohibits private educational institutions from using agreements that restrict students from disclosing information in connection with many types of student complaints.

In October 2024, MOHE notified RU that it had determined that RU had used an impermissible nondisclosure agreement with one student.

RU has responded to MOHE’s request for information with respect to this matter;

however, there can be no assurance that RU will be able to favorably resolve this matter with MOHE or that MOHE will not take adverse action against RU, which could reflect a range of actions, including, but not limited to, fines, penalties, operational limitations, administrative reporting, monitoring, and up to revocation of RU’s status as a registered institution in Minnesota, the state where RU’s main campus is located.

In addition, in some circumstances of noncompliance or alleged noncompliance, we may be subject to lawsuits under the federal False Claims Act, similar state false claim statutes, or various “whistleblower” statutes.

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Any such litigation could result in substantial costs and a diversion of our management’s attention and resources.

If our institutions fail to maintain their institutional accreditation, they would lose the ability to participate in Title IV and DoD TA programs and our student enrollments would decline.

If our institutions fail to maintain their institutional accreditation, they will lose the ability to participate in Title IV and DoD TA programs and our student enrollments would decline.

Accreditation at the institutional level by an accrediting agency recognized by ED is necessary to participate in Title IV and TA programs.

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Our institutions also must comply with accrediting agency policies and requirements, such as the requirements to apply and wait for approval before making certain changes.

For example, as it did with the Rasmussen Acquisition, HLC requires approval before the closing of a transaction in order for an institution to maintain accredited status after closing.

Failure to meet accreditation criteria or standards or to comply with accreditation policies and requirements could result in the loss of accreditation at the discretion of the accrediting agency.

The complete loss of institutional accreditation at one of our institutions would, among other things, render the institution and its students ineligible to participate in Title IV and TA programs, and have a material adverse effect on our enrollments, revenue, and results of operations.

In addition, loss of Title IV participation would result in loss of TA and VA participation.

The standards of accrediting agencies that accredit our institutions and programs can and do vary, and accreditation agencies may prescribe more rigorous standards than are currently in place.

For example, as it did with the acquisition of RU, or the Rasmussen Acquisition, HLC requires approval before the closing of a transaction in order for an institution to maintain accredited status after closing.

The standards of accrediting agencies that accredit our institutions and programs can and do vary, and accrediting agencies may prescribe more rigorous standards than are currently in place.

Complying with more rigorous accreditation standards could require significant changes to the way we operate our business and increase our administrative and other costs.

No assurances can be given that our institutions or programs would be able to comply with more rigorous accreditation standards in a timely manner or at all.

If one of our institutions or programs does not meet its accreditation requirements, its accreditation could be limited, modified, suspended, or terminated.

Failure to maintain institutional accreditation would make our institutions ineligible to participate in Title IV and TA programs, which could have a material adverse effect on the institution’s student enrollment and revenue.

Failure to meet accreditation criteria or standards or to comply with accreditation policies and requirements could result in the loss, limitation, modification, or suspension of accreditation at the discretion of the accrediting agency.

The complete loss of institutional accreditation at one of our institutions would, among other things, render the institution and its students ineligible to participate in Title IV, TA, and VA programs, and have a material adverse effect on our enrollments, revenue, and results of operations.

In addition, accrediting bodies may adopt new or revised criteria, standards, and policies that are intended to monitor, regulate, or limit the growth of our programs or for-profit institutions like ours.

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In addition, certain of our programs are accredited by programmatic accrediting agencies or recognized by professional organizations.

If our institutions fail to satisfy the standards of these programmatic accrediting agencies and professional organizations, the relevant programs could lose the programmatic accreditation or professional recognition, which could result in materially reduced student enrollments in those programs and have a material adverse effect on us.

If our institutions fail to satisfy the standards of these programmatic accrediting agencies, including as it relates to specific student achievement indicators, and professional organizations, the relevant programs could lose the programmatic accreditation or professional recognition, which could result in materially reduced student enrollments in those programs and have a material adverse effect on us.

In addition, in certain cases, professional licensure will not be granted if an applicant for licensure earned the relevant educational credential from an institution or educational program that lacks institutional or programmatic accreditation.

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The HEA requires all for-profit education institutions to comply with what is commonly referred to as the 90/10 Rule, which imposes sanctions on institutions that derive more than 90% of their total revenue on a cash accounting basis from Title IV programs and other federal educational assistance funds, as calculated under ED’s regulations.

As more fully described in “Regulatory Environment–Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – The ‘90/10 Rule,’” for fiscal years beginning on or after January 1, 2023, which for our institutions means the year ended December 31, 2023, federal educational assistance funds used to calculate the “90%” side of the ratio include Title IV funds and any other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal educational assistance funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges.

ED confirmed that the 90/10 Rule no longer permits institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio.

As a result, effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio, and our institutions’ 90/10 Rule percentages increased, particularly at APUS.

As more fully described in “Regulatory Environment–Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – The ‘90/10 Rule’” for fiscal years beginning on or after January 1, 2023, federal educational assistance funds used to calculate the “90%” side of the ratio include Title IV funds and all other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal educational assistance funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges.

The 90/10 Rule no longer permits institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio.

As a result, effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio.

While each of our institutions was in compliance with the 90/10 Rule for 2024, with APUS’s relevant percentage for 2024 being 89%, there is no assurance that we will continue to be able to comply in future years, particularly at APUS.

As a result of the problems with TA discussed in further detail in the Risk Factor that begins “Our student registrations, revenue, and cash flow have been adversely impacted...” below, cash payments from the Army to APUS that were expected in 2021 and 2022 were received in 2023, which together with recent modifications to the 90/10 Rule and enrollment growth among service members as compared to declines in students who use non-federal educational assistance funds caused APUS’s 90/10 Rule percentage to increase.

As of December 31, 2023, approximately $22.3 million, of which $12.7 million is older than 60 days from the course start date, was due from the Army, as compared to $26.0 million due from the Army as of December 31, 2022, of which $16.5 million was older than 60 days from the course start date.

If we are unable to collect aged amounts due from the Army, this may cause our bad debt to increase.

Moreover, the delayed invoicing discussed below may cause the “90%” side of the ratio to increase in 2024 or future years, which could have an adverse impact on our cash flow and results of operations, as well as APUS’s ability to comply with the 90/10 Rule in 2024 or future years.

In September 2023, APUS changed its approach to invoicing for TA to offset the effect of the receipt of the delayed payments from the Army due to ArmyIgnitED system issues.

APUS is currently taking longer to bill TA, which had the effect of delaying into 2024 payments for TA that ordinarily would have been received in 2023.

We estimate that APUS’s change in billing approach resulted in approximately $22.1 million of receivables that we would have expected to receive in 2023 being received in 2024.

While the change in billing approach positively impacted the “90%” side of the ratio in 2023, it may cause the “90%” side of the ratio to increase in 2024 or future years.

In addition to the $22.1 million of receivables received in 2024 due to the change in billing timing, in 2024 we expect to bill the Army and collect $4.0 million outstanding from courses that began in 2022 and prior.

The Combination (as defined below) is expected to benefit 90/10 Rule compliance and other regulatory considerations;

however, there can be no assurance that the Combination will have the expected benefits or when those benefits will be realized.

As a result of the problems with TA discussed in further detail in the Risk Factor that begins “Our student registrations, revenue, and cash flow have been adversely impacted...” below, approximately $18.4 million in cash payments from the Army to APUS that were expected to be received in 2021 and 2022 were received in 2023.

This together with the January 1, 2023, change to the 90/10 Rule and enrollment growth among service members as compared to declines in students who use non-federal educational assistance funds, caused APUS’s 90/10 Rule percentage to increase.

In September 2023, APUS changed its approach to invoicing for TA to offset the effect of the receipt of the delayed payments from the Army.

APUS took longer to bill TA, which had the effect of delaying into 2024 payments for TA that ordinarily would have been received in 2023.

APUS’s change in billing approach resulted in approximately $22.1 million of receivables that we would have expected to receive in 2023 being received in 2024.

The change in billing approach positively impacted the “90%” side of the ratio in 2023.

In January 2024, APUS separately revised its billing policy for students utilizing TA from two weeks to five weeks after course start date to nine weeks after the course start date.

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

The change in billing practice also added to our accounts receivable as of December 31, 2023 and resulted in an increase to our leverage ratios as of December 31, 2023 under our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock, as described in Notes 9 and 13 to our audited consolidated financial statements for the year ended December 31, 2023.

See the discussion below under “Our Series A Senior Preferred Stock provides rights, preferences, and privileges that are not held by our common stockholders, and is senior to our common stock, which could adversely affect our cash flows, liquidity, and financial condition” for a discussion of the impact on our leverage ratio.

While we do not anticipate

that a higher leverage ratio will have material limitations on our expected operations for 2024, it could result in reduced operational flexibility in 2024 and future years.

In addition, given the recent modifications of the 90/10 Rule, we also anticipate more general scrutiny of practices and compliance with the 90/10 Rule across the industry.

The change in billing approach positively impacted the “90%” side of the ratio in 2024.

In December 2024, APUS implemented another change to its approach to invoicing for TA, delaying into 2025 payments for TA that ordinarily would have been received in 2024.

We estimate that APUS’s change in billing approach resulted in approximately $26.4 million of receivables that we would have expected to receive in 2024 being received in 2025.

While the change in billing approach positively impacted the “90%” side of the ratio in 2024, it reduced operating cash flow in 2024, may result in increased bad debt expense in 2025, and may cause the “90%” side of the ratio to increase in 2025 or future years, which could have an adverse impact on our cash flow and results of operations, as well as APUS’s ability to comply with the 90/10 Rule in 2025 or future years.

The change in billing practice added to our accounts receivable as of December 31, 2024, and resulted in an increase to our leverage ratios as of December 31, 2024, under our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock, each as defined and discussed in “Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 9.

Long-term Debt” and “ – Note 13.

Preferred Stock”.

While we do not anticipate that a higher leverage ratio will have material limitations on our expected operations for 2025, it could result in reduced operational flexibility in 2025 and future years.

As noted in the Risk Factor with the caption beginning “Government and regulatory agencies and third parties...”, ED is currently conducting a regular program review at APUS, which includes, among other things, a review of APUS’s compliance with the 90/10 Rule.

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Such proposals, or other similar legislation, should they become law, could have a material adverse impact on the operations of our institutions.

In addition, at least one state has passed, and other states may in the future pass, their own versions of the 90/10 Rule that like the new federal 90/10 Rule include TA and VA education benefits or other sources of funds in the “90%” side of the ratio.

In addition, states have passed or may in the future pass, their own versions of the 90/10 Rule that like the new federal 90/10 Rule include TA and VA education benefits or other sources of funds in the “90%” side of the ratio.

To the extent that any additional laws or regulations are adopted that further limit or condition the participation of for-profit schools or distance education programs in TA or in Title IV programs, or that further limit or condition the amount of TA for which for-profit schools or distance education programs are eligible to receive, our financial condition and results of operations could be materially and adversely affected.

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Those transactions may not be successful or could cause disruption to our operations.

For examples of some of the challenges that some types of strategic transactions could have, see the Risk Factor that starts with “Business combinations and acquisitions may be difficult to integrate …” below.

For examples of some of the challenges that some types of strategic transactions could have, see the Risk Factors with the captions beginning with “The planned combination of APUS, RU, and HCN” and “Business combinations and acquisitions may be difficult to integrate …” below.

If any of our institutions fails to satisfy the 90/10 Rule and loses eligibility to participate in Title IV programs, it would also lose the ability to participate in TA because DoD requires institutions to participate in Title IV programs in order to participate in TA, and ineligibility of either or both of our institutions to participate in Title IV programs and TA would have a material adverse effect on our enrollments, revenue, results of operations, and cash flows.

Similarly, failure of one of our institutions to meet the 90/10 Rule for any fiscal year would require the institution to notify ED and students of this failure, would result in the institution being on provisional status for two fiscal years, could subject the institution to heightened regulatory scrutiny and possible adverse regulatory action, and could damage the institution’s reputation, which would have a material adverse impact on our results of operation, cash flow, and financial condition.

regulatory scrutiny and possible adverse regulatory action, and could damage the institution’s reputation, which would have a material adverse impact on our results of operation, cash flow, and financial condition.

Failure of an institution to meet the 90/10 Rule for two consecutive fiscal years results in the institution becoming ineligible to participate in Title IV programs for at least two fiscal years, which would have a material adverse impact on our results of operation, cash flow, and financial condition.

DoD’s MOUs impose extensive regulatory requirements on our institutions with respect to participation in DoD TA programs, and our revenue and number of students would decrease if our institutions were no longer able to receive funds under DoD TA programs or if TA is reduced, eliminated, or suspended.

As described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense” and “Regulatory Environment – Compliance with Regulatory Standards and the Effect of Regulatory Violations – Compliance Reviews”, each institution participating in TA is party to an MOU in a similar form outlining certain commitments and agreements in connection with accepting funds from TA.

For example, the MOUs include an agreement to participate in the ICP in order to participate in TA.

As described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense” and “Business – Regulatory Environment – Compliance with Regulatory Standards and the Effect of Regulatory Violations – Compliance Reviews”, each institution participating in TA is party to an MOU in a similar form outlining certain commitments and agreements in connection with accepting funds from TA.

For example, the MOUs include an agreement to participate in the DoD’s ICP, in order to participate in TA.

An institution that is found noncompliant with DoD requirements through the ICP and demonstrates an unwillingness to resolve a finding may be subject to a range of penalties from a written warning to termination of the institution’s participation in TA.

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We also believe that in certain circumstances DoD may impose sanctions for a failure to comply instead of denying an institution the ability to participate in TA, including restricting student enrollment in TA programs, suspending an institution from enrolling new students, limiting access to military installations, subjecting the institution to heightened compliance oversight, or otherwise limiting an institution’s ability to participate in TA.

In February 2025, ICP notified APUS that it will conduct a review of APUS compliance with the DoD MOU.

If an institution fails to comply with the requirements of an MOU, it could result in sanctions, up to losing the ability to participate in TA, that could have a significant adverse effect on our results of operations and financial condition.

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We are unable to predict whether and to what extent the Armed Forces will impose limitations on TA approvals in the future as a result of limited funding.

Furthermore, we expect each military branch and the DoD to continually evaluate their approaches to education, including by launching or expanding their own institutions, as discussed in further detail in the Risk Factor that begins “Strong competition in the military market...” below, and such actions could have an impact on the funds available to service members to pursue their education at our institutions.

Furthermore, we expect each military branch and the DoD to continually evaluate their approaches to education, including by launching or expanding their own institutions, as discussed in further detail in the Risk Factor that begins “Continued strong competition in the postsecondary education market...” above, and such actions could have an impact on the funds available to service members to pursue their education at our institutions.

Changes in funding allocations could have a material adverse effect on APUS’s enrollments.

If we are no longer able to receive funds from TA, or if those programs are modified, reduced, eliminated, or temporarily suspended, our enrollments, revenue, and cash flow could be significantly reduced, which would result in a material adverse effect on our results of operations and financial condition.

See also the Risk Factor captioned “Our student registrations, revenue, and cash flows have been adversely impacted and we could continue to experience adverse impacts as a result of the Army’s transition to new systems for soldiers to request TA” below.

HLC has scheduled a comprehensive site visit for APUS for its mid-cycle review in year four of its ten-year accreditation cycle instead of a panel review.

HLC will conduct a focused visit at APUS in March 2024 after HLC raised potential concerns regarding APUS’s compliance with standards related to program development oversight and program assessment processes as a result of certain courses not being available for students in one program.

Pursuant to HLC policy, APUS has transitioned from the Open Pathway to the Standard Pathway because of the decision to conduct a focused visit.

As a result of this transition, APUS will be subject to a comprehensive site-visit for the year four mid-cycle review under the Standard Pathway, currently scheduled in the spring of 2025.

The reaffirmation of accreditation site visit date remains unchanged and will take place 2030-2031.

HLC’s focused visit will result in a written report addressing the topics of concern identified in the letter calling for the focused visit.

The focused visit team report will include a recommendation to accept the report or may call for additional monitoring, sanction, show-cause order, or withdrawal of accreditation.

Although APUS would have the opportunity to respond prior to any HLC action on the report, we cannot be sure that the HLC team will not identify deficiencies at APUS during the focused visit or call for negative accreditation-related action against APUS as a result.

ED’s recently finalized new gainful employment requirements could materially and adversely affect our business after they take effect.

Pursuant to new gainful employment, or GE, regulations, that will take effect July 1, 2024, ED will determine the Title IV eligibility of GE programs based in part on satisfaction of specified performance levels of two measures defined by the GE regulations:

See also the Risk Factor captioned “Our student registrations, revenue, and cash flows have been adversely impacted and we could experience additional adverse impacts as a result of the Army’s transition to new systems for soldiers to request TA” below.

HLC could identify deficiencies during its mid-cycle comprehensive evaluation of APUS and take adverse action against APUS based on such deficiencies.

HLC conducted a focused visit at APUS in March 2024 after HLC raised potential concerns regarding APUS’s compliance with standards related to program development oversight and program assessment processes as a result of certain courses not being available for students in one program.

In June 2024, HLC affirmed that APUS addressed all concerns regarding compliance with HLC standards.

However, pursuant to HLC policy, APUS transitioned from the Open Pathway to the

Standard Pathway because of the decision to conduct a focused visit.

As a result of this transition, APUS is subject to a mid-cycle comprehensive evaluation.

For more details on this evaluation and related details involving the Combination, see “Business – Regulatory Environment – Accreditation – Institutional Accreditation.” We cannot be sure that HLC will not identify deficiencies at APUS during the mid-cycle comprehensive evaluation site visit or call for negative accreditation-related action against APUS as a result.

ED’s new gainful employment requirements could materially and adversely affect our business.

Pursuant to new GE regulations, that took effect July 1, 2024, ED will determine the Title IV eligibility of GE programs based in part on satisfaction of specified performance levels of two measures defined by the GE regulations:

the debt-to-earnings rates (which include two rates, the discretionary debt-to-earnings rate and the annual debt-to-earnings rate) and the earnings premium measure.

ED previously released a data set, referred to as the program performance data, or the PPD, that includes calculations of the two metrics for certain programs.

The methodology ED used to produce the PPD differs from the methodology that will be used under the final GE regulations, primarily due to data limitations.

out of the 30 RU programs, 47 APUS programs, and three HCN programs (including one no longer offered at HCN) that ED assessed in the PPD, six current RU programs and three APUS programs failed one or both of the new measures.

The six RU programs failing in the PPD represent 8.5% of total student enrollment for the three months ended December 31, 2023.

The three APUS programs failing in the PPD represent 2.1% of total net course registrations for the three months ended December 31, 2023.

Programs that fail to satisfy the specified performance levels of the GE measures in two of any three successive years for which the debt-to-earnings rates or the earnings premium measure are calculated would lose access to Title IV funding.

Under the GE regulations, the failure of any of our institutions’ programs to satisfy the required specified performance levels could adversely impact those institutions and programs.

Institutions will generally be required to report certain information used to calculate these measures to ED by July 31 of each year, provided that for 2024, ED has extended the deadline numerous times, most recently to September 30, 2025.

We expect that the earliest a program could lose eligibility is July 1, 2026, based on the effective date of the regulations, though ED has delayed its assessment and publication of relevant data.

We expect that the earliest a program could lose eligibility is July 1, 2026.

In addition, programs that fail any of the metrics in a year will be required to warn enrolled and prospective students that the program risks losing access to Title IV funding.

At this time, it is difficult to predict whether our institutions’ programs will satisfy performance levels of future GE metrics, including whether the programs identified as failing in the PPD will in fact fail or whether other programs will fail or pass.

At this time, it is difficult to predict whether our institutions’ programs will satisfy performance levels of GE metrics, including whether the programs will fail or pass.

Failure to improve certain of our programs’ NCLEX pass rates and to more generally satisfy NCLEX requirements could reduce our enrollments, revenue, and cash flow, lead to adverse actions taken by state boards of nursing, and limit our ability to offer educational programs.

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Their success in obtaining these outcomes depends on numerous factors, including individual merits of the graduate, whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association, whether the program meets all state requirements for professional licensure, and the accreditation of the institution and the specific program.

As discussed more fully in “Regulatory Environment – State Authorization/Licensure”, failure to satisfy NCLEX pass rate requirements imposed by state boards of nursing can result in the state boards of nursing and other regulators taking certain adverse actions, including placement of a program on provisional approval status or withdrawal of approval pursuant to an adjudication proceeding, and NCLEX exam pass rate requirements could limit our institutions’ ability to expand into new geographies.

A number of programs at certain RU campuses and in certain states, including its Bloomington and Moorhead, Minnesota, Fort Myers, Florida, Ocala, Florida, Tampa/Brandon, Florida, and Illinois, and Kansas ADN programs and its Moorhead, Minnesota PN program, as well as HCN’s Ohio ADN program, have not met state-established first-time NCLEX benchmarks for consecutive years.

As described more fully in “Regulatory Environment – State Authorization/Licensure – State Authorization/Licensure of Our Institutions”, as a result, regulators and accreditors have in some cases placed these programs on probationary or similar status or required them to take corrective action, including limiting, or taking action that has the effect of limiting, enrollment.

Failure to satisfy NCLEX pass rate requirements imposed by state boards of nursing can result in the state boards of nursing and other regulators taking certain adverse actions, including placement of a program on provisional approval status or withdrawal of approval pursuant to an adjudication proceeding, and NCLEX exam pass rate requirements could limit our institutions’ ability to expand into new geographies.

As discussed more fully in “Business – Regulatory Environment – State Authorization/Licensure – State Authorization/Licensure of Our Institutions”, certain programs at certain RU campuses and in certain states have not met state-established first-time NCLEX benchmarks for consecutive years.

As a result, regulators and accreditors have in some cases placed these programs on probationary or similar status or required them to take corrective action, including limiting, or taking action that has the effect of limiting, enrollment.

We believe that low pass rates may be the result of a number of factors, including without limitation the academic preparedness of our students, curriculum gaps, changes in the mode of course delivery including the use of virtual courses, testing failures and inconsistencies, imbalances in enrollment and resources, and changes in admission standards.

We are taking action aimed at improving NCLEX pass rates and meeting related standards, but there can be no assurance that we have accurately identified the underlying reasons for low pass rates or that our efforts to improve these pass rates will succeed in a timely fashion, if at all.

Significant changes to the NCLEX were effective in April 2023.

While the average scores at RU and HCN both increased, there were also increases nationwide, and the ultimate impact of the change in the NCLEX is still uncertain, including because NCLEX regulatory thresholds could change.

We are taking action aimed at helping prepare students and graduates for successful performance on the NCLEX exam and improving NCLEX pass rates and meeting related standards, including programmatic certification improvement plans at RU, and curriculum, academic achievement, and course retake policy changes at HCN, and results for certain programs have shown significant improvement, but there can be no assurance that our actions or will not have negative effects on RU’s or HCN’s enrollment or that we have accurately identified the underlying reasons for low pass rates or that our efforts to improve pass rates will succeed in a timely fashion, if at all, or persist to the extent they have been or may be successful.

If affected programs are unable to improve NCLEX scores over time, and in some cases by the deadlines imposed on programs at certain campuses and in certain states as discussed above, this situation could have an adverse impact on their ability to enroll students and eventually our ability to continue offering the ADN programs at the applicable campuses.

In addition, merely being subject to disciplinary, probationary, or similar status or requirements could make it more difficult to improve NCLEX pass rates or meet other applicable standards, such as by damaging our reputation and making it more difficult to recruit students who are likely to succeed.

Any voluntary, required, or other reduction in enrollment will have an adverse impact on our revenue.

In February 2023, the Florida Board of Nursing, or FBN, placed RU’s Fort Myers, Florida ADN program on probation until its pass rate reaches the applicable threshold for a calendar year.

RU is required to disclose this status to active and prospective students.

If the program fails to achieve the required NCLEX pass rate within two years following placement on probation, FBN may extend the program’s status for a year if the program is demonstrating progress toward achievement.

However, absent further extension or achievement of the required rate by the end of the extension, Florida law provides that FBN shall terminate the program.

In February 2024 FBN also placed RU’s Ocala, Florida and Tampa/Brandon, Florida ADN programs on probation – a status that must be disclosed to active and prospective students – until the programs’ pass rates reach the applicable threshold for a calendar year.

RU was required to present an action plan to FBN on February 7, 2024, detailing benchmarks to measure progress toward achieving the required NCLEX pass rate.

In January 2024, legislation that would significantly overhaul the regulation of Florida nursing programs in ways that could materially adversely impact RU’s Florida ADN and PN programs was introduced in the Florida senate, but at this time there can be no assurance that the legislation will be enacted as drafted or at all.

Although variability in regulator and accreditor approach to and use of discretion in enforcement of NCLEX pass rate standards makes it difficult to predict consequences, failure to abide by the terms of any restrictive status placed on these programs, take appropriate corrective action, or reach applicable threshold rates within a required timeframe could subject impacted programs to additional adverse action, including withdrawal of approval, and we could take voluntary action to curtail or terminate affected programs, any of which would have an adverse effect on our results of operations, cash flows, and financial condition.

Even if the affected programs have long-term success in complying with NCLEX pass rate standards, the actions we take to comply could result in increased costs or decreased enrollments, and impairment of RU or HCN goodwill.

Recently introduced Florida legislation, if enacted, could have a material adverse impact on RU’s Florida ADN and PN programs.

In January 2024, legislation was introduced in the Florida senate that would significantly overhaul the regulation of Florida nursing programs.

If enacted, this legislation could materially adversely impact RU’s Florida ADN and PN programs.

At this time, it is uncertain whether the legislation will be attached to another bill, enacted as drafted, or enacted at all.

RU’s planned closure of the Bloomington, Minnesota ADN program effective June 2024 may adversely impact RU and us.

RU’s Bloomington, Minnesota ADN program has been subject to adverse action and heightened scrutiny from regulators as a result of a continued failure to meet applicable regulatory and accreditor requirements.

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

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

ACEN notified RU in October 2023 that the ACEN board had granted continuing accreditation for good cause until September 2024.

ACEN also requested a follow-up report for good cause be submitted in advance of a follow-up visit in spring 2024 related to student outcomes criteria.

In addition with the planned spring 2024 follow-up visit, the ACEN board notified RU that it plans to conduct a focused visit due to a complaint received by ACEN related to student clinical preparation and graduate clinical performance.

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

On December 29, 2023, RU informed the MBN that it intends to voluntarily close the Bloomington, Minnesota ADN program, effective June 15, 2024.

The MBN approved the voluntary closure of the Bloomington, Minnesota ADN program at its February 1, 2024 meeting.

For all students enrolled in the Bloomington, Minnesota ADN program graduating after June 2024, their enrollment record will be transferred to RU’s St.

Cloud, Minnesota ADN.

However, there can be no assurance that any or all remaining students in the program will find the St.

Cloud transfer suitable.

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

As RU evaluates its other campuses and programs, it could make similar closure decisions about other programs or campuses.

The closure of the Bloomington, Minnesota ADN program, or any closure of other programs or campuses, may have an adverse impact on RU’s enrollments and reputation, which could further impact RU’s enrollments operations, cash flows, and financial condition.

RU’s Illinois ADN program has been adversely impacted by regulatory action, including as a result of the failure to meet applicable NCLEX pass rates, and further action by regulators and accreditors could result in additional adverse impacts.

RU’s Illinois ADN program has not met state-established first-time NCLEX benchmarks for three consecutive years.

In February 2022, RU’s Illinois ADN program was placed on probationary status by the Illinois Department of Financial and Professional Regulation, or IDFPR, as a result of which RU is required to temporarily reduce admitted students in the program by 25% and has two years to demonstrate evidence of implementing strategies to correct deficiencies and satisfy the required NCLEX pass rate.

In August 2023, the State of Illinois enacted legislation, which took effect January 1, 2024, that provides programs with additional time to improve NCLEX pass rates.

The legislation changed the Illinois NCLEX pass rate requirements from a one-year measurement based on first attempts only to a three-year average that includes all test attempts and removed all nursing programs, including RU’s Illinois ADN program, from probationary status for a period of three years.

However, there can be no assurance that they will not seek to impose different or additional requirements in connection with this change in legislation.

Furthermore, there can be no assurance that any resulting removal from probationary status of RU’s Illinois ADN program will be viewed favorably by ACEN or another nursing program accreditor or would result in RU’s Illinois ADN program obtaining ACEN accreditation following the February 2024 site visit.

An Illinois statute also requires nursing programs in the state to have achieved accreditation by the end of 2022 in order to meet state approval requirements.

RU’s Illinois ADN program has been in candidacy status for initial accreditation with

ACEN since July 2020.

Although the IDFPR has indicated that candidacy status satisfies this requirement, the IDFPR could change its position.

ACEN will not grant accreditation to a program on probationary status with the IDFPR, as RU’s Illinois ADN program is.

The current candidacy is set to expire in July 2024.

If ACEN ultimately denies initial accreditation and RU is unable to obtain accreditation or candidacy status with another national nursing accrediting body, RU would likely have to close the Illinois ADN program.

Removal from probationary status pursuant to the newly enacted Illinois legislation described above may be viewed favorably by ACEN or another nursing program accreditor and may result in RU’s Illinois ADN program obtaining ACEN accreditation following a site visit in February 2024.

However, there is no assurance that this legislation will benefit RU’s Illinois ADN program as anticipated or that the program will meet the new NCLEX pass rate requirements.

RU’s Illinois ADN program was previously adversely impacted by regulatory action, including as a result of the failure to meet applicable NCLEX pass rates, and further action by regulators and accreditors could result in additional adverse impacts.

As discussed more fully in “Business – Regulatory Environment – State Authorization/Licensure – State Authorization/Licensure of Our Institutions”, RU’s Illinois ADN program had not met state-established first-time NCLEX benchmarks for three consecutive years.

In February 2022, RU’s Illinois ADN program was placed on probationary status by IDFPR as a result of which RU was required to temporarily reduce admitted students in the program by 25% and was given two years to demonstrate evidence of implementing strategies to correct deficiencies and satisfy the required NCLEX pass rate.

The State of Illinois enacted legislation that, effective January 1, 2024, changed the Illinois NCLEX pass rate requirements from a one-year measurement based on first attempts only to a three-year average that includes all test attempts and removed all nursing programs, including RU’s Illinois ADN program, from probationary status until September 2026.

IDFPR published a list of approved nursing programs, which included RU’s Illinois ADN program without reference to probation, but it did acknowledge the program’s low pass rate for two consecutive years.

There can be no assurance that IDFPR will not seek to impose different or additional requirements in connection with this change in legislation.

The inability of our institutions’ graduates to obtain professional licensure, employment, or other outcomes in their chosen fields of study, particularly in nursing, could reduce our enrollments and revenue, limit our ability to offer educational programs, and potentially lead to litigation that could be costly to us.

As explained in the Risk Factor that begins with the caption “Failure to improve certain of our programs’ NCLEX pass rates...”, the majority of RU’s graduates, HCN graduates and certain APUS graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing.

Certain APUS graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing.

State requirements for licensure are subject to change, as are professional certification standards, and we may not become aware of changes that may impact our students in certain instances.

In addition, as further discussed in “Regulatory Environment – State Licensure/Authorization - Federal Requirements for State Authorization/Licensure - State Authorization and Professional Licensure”, new ED regulations will require institutions that offer postsecondary education programs leading to employment in an occupation that requires licensure or certification to meet certain additional requirements in order for those programs to maintain eligibility to participate in Title IV programs.

In addition, as further discussed in “Business – Regulatory Environment – State Licensure/Authorization – Federal Requirements for State Authorization/Licensure - State Authorization and Professional Licensure”, ED regulations require institutions that offer postsecondary education programs leading to employment in an occupation that requires licensure or certification to meet certain additional requirements in order for those programs to maintain eligibility to participate in Title IV programs.

In each state in which the institution is located, in which students enrolled in distance education are located, or where a student enrolled after July 1, 2024, attests that they intend to seek employment, the program must satisfy the applicable state education requirements for professional licensure or certification so that a student seeking employment may qualify to take any licensure or certification exam needed to practice or find employment in the state.

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ABHES annually reviews student achievement indicators, including retention rate, placement rate, and licensing and credentialing examination pass rate.

Under ABHES policy, ABHES may withdraw accreditation at any time if it determines that an institution fails to demonstrate at least a 70% retention rate for each program, a 70% placement rate for each program, and a 70% first-time pass rate on mandatory licensing and credentialing examinations or fails to meet the state-mandated results for credentialing or licensure.

credentialing or licensure.

Alternatively, ABHES may in its discretion provide an opportunity for a program to come into compliance within a period of time specified by ABHES, and ABHES may extend the period for achieving compliance if a program demonstrates improvement over time or for other good cause.

In prior years, several HCN programs at certain HCN campuses have failed to satisfy ABHES’ student achievement measures, and as a result, ABHES has placed certain locations and programs on program-specific warning or outcomes reporting status and required action plans.

As a result of retention rates being below the 70% benchmark for the 2021-2022 reporting year, which was the second consecutive full reporting year, ABHES placed the PN programs at the Cincinnati, Cleveland, Columbus, and Dayton campuses on program-specific warning status in January 2023.

Toledo PN and Akron ADN program retention rates fell below the 70% benchmark for the 2021-2022 reporting year, which was the first full reporting year.

As a result of failing to meet the threshold benchmark, ABHES required HCN to submit reports for each of these programs demonstrating their retention rate through the first three quarters of the 2022-2023 reporting year by May 2023.

The reports submitted in response to this requirement demonstrated that the PN programs at the Cincinnati, Cleveland, Columbus, and Dayton campuses and the ADN program at the Akron campus were above the 70% retention benchmark through the first three quarters of the 2022-2023 reporting year.

As a result, the Cincinnati, Cleveland, Columbus, and Dayton PN programs were removed from program-specific warning status, and ABHES informed HCN that no additional information was required for the ADN program at the Akron campus.

However, HCN reported that the retention rate for the PN program at the Toledo campus was below the 70% benchmark through the first three quarters of the 2022-2023 reporting year.

Consequently, the Toledo PN program was placed on outcomes reporting status, and required to provide an additional report and action plan in October 2023, which HCN submitted.

For the reporting year ended June 30, 2023, the PN program at the Cleveland, Columbus, Dayton, and Toledo campuses, as well as the ADN program at the Akron and Dayton campuses, were below the 70% benchmark for retention.

As a result, ABHES continued the Toledo PN program on outcomes reporting status, due to its retention rate falling below the 70% benchmark.

ABHES is also requiring additional reporting for the Cleveland PN, Columbus PN, Dayton PN, and Akron ADN programs.

In conjunction with these actions, ABHES is requiring HCN to submit reports for each of these programs demonstrating their retention rate through the first three quarters of the 2023-2024 reporting year by May 2024.

If the Cleveland PN, Columbus PN, Dayton PN, Dayton ADN, and Akron ADN programs do not meet the 70% retention benchmark by the third quarter of the 2023-2024 reporting year, ABHES will likely place these programs on outcomes reporting status.

If the Toledo PN program does not meet the 70% retention benchmark by the third quarter of the 2023-2024 reporting year, ABHES will likely place the program on program-specific warning status.

If ABHES places any HCN program on program-specific warning status, and ABHES determines that HCN’s response to the program-specific warning status is insufficient, it could take action that could have an adverse impact on our results of operations, cash flow, and financial condition, including limiting program enrollment, suspending program enrollment and new starts until HCN meets terms and conditions established by ABHES, or withdraw approval for one or more programs.

As more fully described in “Business – Regulatory Environment – Accreditation – Institutional Accreditation”, in prior years, several HCN programs at certain HCN campuses have failed to satisfy ABHES’ student achievement measures, and as a result, ABHES has placed certain locations and programs on program-specific warning or outcomes reporting status and required action plans.

If ABHES determines that HCN’s response to the program-specific warning status is insufficient, it could take action that could have an adverse impact on our results of operations, cash flow, and financial condition, including limiting program enrollment, suspending program enrollment and new starts until HCN meets terms and conditions established by ABHES, or withdraw approval for one or more programs.

HCN is also required to disclose the program-specific warnings to current and prospective students, which could adversely affect HCN’s reputation and enrollments.

If any HCN campus or program fails to satisfy ABHES achievement measures, enrollment in such HCN campus or program could decline, or we could be forced to cease enrollments at that campus or in that program, which could have a material adverse impact on HCN’s student enrollment and our and HCN’s revenue, results of operations, and cash flows.

If any HCN campus or program fails to satisfy ABHES achievement measures, enrollment at such HCN campus or program could decline, or we could be forced to cease enrollments at that campus or in that program, which could have a material adverse impact on HCN’s student enrollment and our and HCN’s revenue, results of operations, and cash flows.

The actions HCN takes to comply with ABHES requirements may not be successful in resolving existing issues and, if those actions are targeted at specific campuses or programs, they may fail to prevent additional issues arising with respect to those or other campuses or programs.

Similarly, even if HCN is successful in the long term in complying with these standards, the actions HCN takes to comply could result in increased costs or decreased enrollments, and impairment of HCN goodwill.

More generally, any institutional or programmatic accreditor may have policies or standards related to specific student achievement indicators that, if not met, may result in our institutions experiencing adverse actions, up to and including withdrawal of accreditation for certain programs.

Such outcomes could have an adverse impact on our ability to enroll students and eventually our ability to continue certain programs, any of which would have an adverse effect on our results of operations, cash flow, and financial condition.

If our institutions fail to maintain state authorization in the states where they are physically located, the institutions would lose their ability to grant degrees and other credentials in that state and to participate in Title IV programs and DoD TA programs.

As discussed in “Regulatory Environment – State Licensure/Authorization”, to participate in Title IV programs and TA, an institution must be legally authorized by the relevant education agency of the state in which its main campus is physically located.

Loss of state authorization by one of our institutions in the state in which its main campus is physically located would render that institution ineligible to participate in Title IV programs, and therefore also TA and VA, to be unable to operate in the state and grant credentials, and to lose institutional accreditation.

As discussed in “Business – Regulatory Environment – State Licensure/Authorization”, to participate in Title IV programs and TA, an institution must be legally authorized by the relevant education agency of the state in which its main campus is physically located.

Loss of state authorization by one of our institutions in the state in which its main campus is physically located would render that institution unable to participate in Title IV programs, and therefore also TA and VA, to operate in the state and grant credentials, and to maintain institutional accreditation.

If one of our institutions were to lose state authorization as to a non-main campus location, it would be unable to award Title IV aid to students at that location, and it would be unable to operate at that location.

ED regulations provide that an institution is considered legally authorized by a state if the state has a process to review and appropriately act on complaints concerning the institution, including enforcing applicable state laws, and the institution complies with any applicable state approval or licensure requirements.

If a state in which one of our institutions is located fails in the future to satisfy the provisions of that regulation, our institutions’ ability to operate in that state and to participate in Title IV programs could be limited or terminated.

If a state in which one of our institutions is located fails in the future to satisfy the provisions of those regulations, our institutions’ ability to operate in that state and to participate in Title IV programs could be limited or terminated.

Our institutions’ failure to comply with the requirements of SARA or regulations of ED or various states related to state authorization could result in actions that would have a material adverse effect on our enrollments, revenue, and results of operations.

Various states impose regulatory requirements on educational institutions operating within their boundaries, including registration requirements applicable to online education institutions that have no physical location or other presence in the state but offer educational services to students who reside in the state or advertise to or recruit prospective students in the state.

As described more fully in “Regulatory Environment – State Licensure/Authorization” and “Regulatory Environment – State Authorization/Licensure”, APUS and RU must comply with the requirements of California, which is the only state that does not participate in SARA, and APUS, RU, and HCN must comply with SARA, with regard to the interstate offering of postsecondary distance education and online education.

As described more fully in “Business – Regulatory Environment – State Authorization/Licensure”, APUS and RU must comply with the requirements of California, which is the only state that does not participate in SARA, and APUS, RU, and HCN must comply with SARA, with regard to the interstate offering of postsecondary distance education and online education.

Those requirements may change from time to time and, in some instances, are ambiguous or are left to the interpretative discretion of state regulators.

Changes in requirements to participate in SARA or changes to state laws and regulations and the interpretation of those laws and regulations may limit our ability to offer education programs and award degrees.

Changes in requirements to participate in SARA, including those approved by SARA’s coordinating entity, the board of directors of NC-SARA in October 2024, or changes to state laws and regulations and the interpretation of those laws and regulations may limit our ability to participate in the reciprocity agreements, offer education programs and award degrees.

If one of our institutions were to fail to comply with such requirements, the institution could lose its ability to participate in SARA or may be subject to the loss of state licensure or authorization to provide distance education.

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We cannot predict the extent to which states will retain membership in SARA, the manner in which SARA’s rules may be modified, interpreted, and enforced, our institutions’ ability to comply with SARA’s requirements and retain eligibility, or the impact that failure to meet the SARA requirements may have on our business.

As more fully described in “Regulatory Environment – State Licensure/Authorization”, our institutions are subject to regulations that, among other things, clarify the required methodology for determining the state in which a student is located for purposes of satisfying state authorization requirements for distance education courses and require an institution to disclose certain information related to whether programs leading to professional licensure meet applicable state requirements, regardless of program modality.

As more fully described in “Business – Regulatory Environment – State Licensure/Authorization”, our institutions are subject to regulations that, among other things, clarify the required methodology for determining the state in which a student is located for purposes of satisfying state authorization requirements for distance education courses and require an institution to disclose certain information related to whether programs leading to professional licensure meet applicable state requirements, regardless of program modality.

Failure to make the disclosures required by these regulations could put us at risk of administrative enforcement action or related litigation, including claims from students related to misrepresentation and other matters.

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Our institutions must periodically seek recertification to participate in Title IV programs, and may, in certain circumstances, be subject to review by ED prior to seeking recertification, and our future success may be adversely affected if our institutions are unable to successfully maintain certification or obtain recertification.

As more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, APUS, RU and HCN must periodically seek recertification from ED, and ED may review our institutions’ eligibility and certification to participate in Title IV programs, or the scope thereof.

If our institutions are unable to successfully maintain certification or obtain recertification to participate in ED’s Title IV programs, they will not be able to participate in TA because each DoD MOU requires an institution to be certified to participate in Title IV programs in order to participate in TA.

As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, APUS, RU and HCN must periodically seek recertification from ED, and ED may review our institutions’ eligibility and certification to participate in Title IV programs, or the scope thereof.

However, also as described in the foregoing section, ED must in some cases provisionally certify an institution, which imposes additional conditions on the institution’s receipt of Title IV funds.

For example, APUS and RU are currently provisionally certified with ED.

If our institutions are unable to successfully maintain certification, including provisional certification, or obtain recertification to participate in ED’s Title IV programs, they will not be able to participate in TA because each DoD MOU requires an institution to be certified to participate in Title IV programs in order to participate in TA.

Similarly, an institution is required to be certified to participate in the Title IV programs in order to be eligible to participate in the VA education benefits programs.

Loss of participation in Title IV programs, TA, and the VA education benefits programs would have a material adverse effect on our enrollments, revenue, results of operations, and financial condition.

In addition, also as more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, ED must in some cases provisionally certify an institution, which imposes additional conditions on the institution’s receipt of Title IV funds.

For example, APUS and RU are currently provisionally certified with ED.

As more fully described in the Risk Factor that begins “RU is currently on provisional certification with ED...” below, the PPPA, entered into by RU and ED in connection with the Rasmussen Acquisition continues restrictions that ED imposed as a result of RU’s March 2019 change in ownership, including an enrollment cap on students who participate in Title IV.

In June 2020, APUS timely applied for recertification to participate in Title IV programs.

ED subsequently notified APUS that it had completed its review of APUS’s application and had granted APUS provisional certification until June 30, 2023 because APUS was subject to an open program review at the time of renewal.

That program review was closed in January 2021 with no findings, penalties, or further action required.

APUS applied for recertification on March 23, 2023.

APUS’s recertification application is still pending and APUS remains on provisional certification.

In June 2021, HCN timely applied for certification to participate in Title IV programs.

ED subsequently notified HCN that it had been granted provisional certification

for all Title IV programs until September 30, 2023.

As described in the PPPA, ED granted approval on a provisional basis because HCN was subject to an open program review at the time of certification.

As described in “Regulatory Environment – Compliance with Regulatory Standards and Effect of Regulatory Violations – Compliance Reviews,” in July 2022, HCN received a final program review determination from ED, and in September 2022, ED notified HCN that it had closed the program review and no further action was required though the provisional designation remained.

In June 2023, HCN again timely applied for recertification.

ED subsequently notified HCN that it had been granted non-provisional participation in all Title IV programs effective August 15, 2023 and expiring June 30, 2026.

Our institutions’ failure to meet financial responsibility standards may result in additional regulatory requirements that may negatively impact cash flow or the loss of eligibility by one of our institutions to participate in Title IV programs.

Our subsidiary institutions’ failure to meet financial responsibility standards may result in additional regulatory requirements that may negatively impact cash flow or the loss of eligibility by one of our institutions to participate in Title IV programs.

To participate in Title IV programs, an eligible institution must satisfy specific measures of financial responsibility prescribed by ED or post a letter of credit in favor of ED, and possibly accept other conditions, such as provisional certification, additional reporting requirements, or regulatory oversight of its participation in Title IV programs.

As described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility”, ED’s annual evaluations for compliance with financial responsibility standards include a composite score calculation based on line items from an institution’s audited financial statements.

Generally, an institution’s composite score must be at 1.5 or above for the institution to be deemed financially responsible.

Under certain circumstances, institutions with a composite score less than 1.5 may be able to establish financial responsibility on an alternative basis by complying with various conditions.

A composite score between 1.0 and 1.4 is considered by ED to be in the “zone”, and the “zone alternative” permits institutions to demonstrate financial responsibility by meeting specific monitoring requirements.

For purposes of evaluating the financial responsibility of our institutions, including the composite score calculation, we supply consolidated financial statements to ED because ED does not review each of our institution’s financial statements separately.

Failure to meet ED’s financial responsibility standards or being subject to zone alternative requirements could adversely affect our results of operations and our operations.

As described more fully in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility”, on March 4, 2024, ED notified us that according to its calculations, we had a 2022 consolidated composite score of 1.1 and our institutions were therefore in the “zone.” Although we disagree with ED’s calculation and conclusion and plan to submit a rebuttal to ED, ED may not agree with our position.

If ED does not agree with our position, we intend to comply with the zone alternative requirements, under which we would be required to:

(i) make Title IV disbursements to eligible students and parents under the heightened cash monitoring payment method, or HCM1, pursuant to which we would be required to first make disbursements to eligible students and parents and pay any credit balances before we request or receive funds from ED for the amount of those disbursements;

(ii) notify ED of certain events, such as an adverse action taken by any of our institution’s accreditors or state authorizing agencies;

(iii) provide regular reports to ED relating to our institution’s current operations and future plans;

and (iv) require our auditors to express an opinion on our compliance with the requirements under the zone alternative.

A determination that we are in the zone could also result in additional adverse regulatory and accreditor requirements and actions, including with respect to SARA eligibility.

If the respective SARA portal agency for APUS, RU, or HCN were not to renew the institution’s approval due to a low composite score, we would need to obtain approval or exemptions in states in which the affected institution offers distance education programs or discontinue the affected institution’s offerings to students in such states.

In addition, some states have adopted financial standards that are similar to ED’s composite score, which means an affected institution may be unable to obtain licensure in that state if it were to lose SARA participation.

And, because composite scores are viewed as a measure of financial responsibility, other regulators or accreditors could more generally consider a composite score that is in “zone” negatively, which could have an impact on their interactions with us and what they permit us to do.

As described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility”, ED’s annual evaluations for compliance with financial responsibility standards include a composite score calculation based on line items from an institution’s audited financial statements, and such composite score must be at 1.5 or above for the institution to be deemed financially responsible.

A composite score between 1.0 and 1.4 is considered by ED to be in the “zone.” An institution in the “zone” may still participate in Title IV programs as a financially responsible institution through the “zone alternative” or the “financial protection alternative” as set forth in ED regulations.

On March 4, 2024, ED notified us that according to its calculations, we had a 2022 consolidated composite score of 1.1 and our institutions were therefore in the “zone.” We disagree with ED’s calculation and conclusion and submitted a rebuttal to ED on March 18, 2024.

On April 10, 2024, ED issued a response to our rebuttal, indicating that ED does not agree with our position and reiterating that our institutions must establish financial responsibility on an alternative basis.

On April 17, 2024, we timely informed ED that although we continue to disagree with its composite score methodology with respect to our deferred tax asset, we selected the “zone alternative” as the alternative basis on which we establish financial responsibility.

As described more fully in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility”, under the zone alternative, we must:

(i) make Title IV disbursements and pay credit balances before requesting or receiving funds from ED for those disbursements;

(ii) notify ED of certain events;

(iii) provide regular reports to ED;

(iv) require our auditors to opine on our compliance with zone alternative requirements;

and (v) seek ED’s prior approval of new educational programs or locations.

If our institutions are in the zone for three consecutive fiscal years, then in the fourth consecutive fiscal year they must achieve a composite score of at least 1.5.

If they do not achieve that score, they will be required to comply with either the “provisional certification alternative” or the “financial protection alternative” as a condition of continued Title IV participation.

Although our consolidated composite score is expected to be above 1.5 at December 31, 2024, our next financial responsibility test, there is no

assurance that it will remain at 1.5 or above in the future or that if it falls in the “zone” in the future that we will be able to demonstrate financial responsibility.

The determination that we are in the zone could also result in additional adverse regulatory and accreditor requirements, limitations, and actions, including with respect to SARA, eligibility or as a result of SARA.

An obligation to post a letter of credit, or to accept other conditions, such as a change in our system of Title IV payment from ED for purposes of disbursement, as a result of not meeting financial responsibility standards, could increase our costs of regulatory compliance, or affect our cash flow.

As discussed in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility”, prior to its acquisition by us, RU’s financial ratios failed to meet ED’s standards of financial responsibility.

In May 2021, RU posted a letter of credit with ED totaling $23.1 million, which represents 10% of the Title IV program funds received by RU during its most recently completed fiscal year as of that time.

Additionally, RU is required to make Title IV disbursements to eligible students and parents under HCM1 and provide monthly and bi-weekly financial and enrollment reporting to ED.

The 2019 Borrower Defense Regulations identify certain conditions or other triggering events that have or may have an adverse material effect on the institution’s financial condition, in response to which ED would or could require that the

institution submit some form of financial protection to ED.

For more on the financial responsibility provisions of the Borrower Defense Regulations, please refer to “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Borrower Defenses”.

If, under the 2019 Borrower Defense Regulations, ED determines that one of our institutions is not financially responsible because of one or more triggering events, the institution would be required to provide an irrevocable letter of credit equal to at least 10% of the amount of federal student financial aid funds received by the institution for the past year.

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

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

Such financial responsibility events include certain mandatory and discretionary triggers that capture financial circumstances that may not be reflected in an institution’s financial statements, including instances where an institution faces a potential loss of Title IV funding.

Under the new rule, if ED determines that an institution has 90/10 Rule violations, high borrower default rates, or certain pending legal and administrative actions, it will require the institution to post “financial protection”.

ED may also require the institution to post financial protection if it determines that certain discretionary triggers may have an adverse effect on the financial condition of the institution, such as pending accrediting agency or government agency actions, high annual dropout rates, or pending borrower defense claims.

If ED requires financial protection as a result of more than one mandatory or discretionary trigger, ED will require separate financial protection for each individual trigger.

In addition to financial protection, ED may require institutions that fail to meet these financial responsibility criteria to participate in Title IV programs under a provisional certification.

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

If one of our institutions is found not to have satisfied ED’s financial responsibility requirements, it could be limited in its access to, or lose, Title IV program funds, which would limit our potential for growth and adversely affect our enrollment, revenue, and results of operations.

If we, as the parent company of an eligible institution, are found not to have satisfied ED’s financial responsibility measures, all of our institutions could be limited in their access to, or lose, Title IV program funds, which would limit our potential for growth and adversely affect our enrollment, revenue, results of operations, and financial position.

For more on the financial responsibility requirements, please refer to “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs”.

For more on the financial responsibility requirements, please refer to “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs”.

A failure to demonstrate “administrative capability” may result in the loss of eligibility to participate in Title IV programs.

As more fully discussed in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Administrative Capability”.

ED’s regulations specify extensive criteria that an institution must satisfy to establish that it has the requisite administrative capability to participate in Title IV programs and the sanctions ED may impose if an institution fails to satisfy any of those criteria.

These criteria relate to, among other things, institutional staffing, operational standards such as procedures for disbursing and safeguarding Title IV program funds, timely submission of accurate reports to ED, referring to ED OIG credible information that a student or employees with Title IV responsibilities may have engaged in fraud or illegal conduct in connection with Title IV program administration, and various other procedural matters.

ED may find that an institution has failed the administrative capability requirements if the institution does not provide adequate financial aid counseling or career services, has been subject to a negative action by a state or federal agency, court, or accreditor, fails to verify high school diplomas, or does not timely place students in geographically accessible clinical or externship opportunities.

If an institution fails to satisfy any of the administrative capability requirements, ED may require the repayment of Title IV program funds, transfer the institution from the “advance” system of payment of Title IV program funds to heightened cash monitoring status, or to the “reimbursement” method of payment, place the institution on provisional certification status, or commence a proceeding to impose a fine or to limit, suspend, or terminate the participation of the institution in Title IV programs, which would adversely affect our enrollment, revenue, results of operations, and financial condition.

If an institution fails to satisfy any of the administrative capability requirements, ED may require the repayment of Title IV program funds, transfer the institution from the “advance” method of payment of Title IV program funds to heightened cash monitoring status, or to the “reimbursement” method of payment, place the institution on provisional certification status, or commence a proceeding to impose a fine or to limit, suspend, or terminate the participation of the institution in Title IV programs, which would adversely affect our enrollment, revenue, results of operations, and financial condition.

ED rules related to BDTR claims may create significant liability that could have an adverse effect on our business and results of operations.

Under the HEA, ED is authorized to specify in regulations which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a loan under the Direct Loan Program, or a Direct Loan.

As more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Borrower Defenses”, ED may initiate a proceeding to collect from an institution the amount of relief resulting from a borrower defense brought by an individual borrower.

If ED determines that borrowers of Direct Loans (or Direct Consolidation Loans made after July 1, 2023) who attended our institutions have a defense

to repayment of their Direct Loans, we could be subject to repayment liability to ED that could have a material adverse effect on our financial condition, results of operations, and cash flows.

However, the July 1, 2023 effective date of the 2022 Borrower Defense Regulations is currently enjoined nationwide by court order, so we cannot predict whether the final regulations will result in regulatory changes that would harm our business.

As a result of the 2022 Borrower Defense Regulations injunction, ED announced that while it will not adjudicate any borrower defense applications under the 2022 Borrower Defense Regulations unless and until the effective date is reinstated, it will continue to adjudicate borrower defense applications under the 2016 Borrower Regulations and 2019 Borrower Defense Regulations if required pursuant to a court ordered settlement.

In 2022, ED joined a class settlement agreement that would result in a blanket grant of automatic, presumptive relief for all BDTR applications filed by students at certain institutions through June 22, 2022, but our institutions were not included in the blanket grant of relief.

The class settlement agreement would also provide certain expedited review of borrower defense claims related to institutions excluded from the automatic relief list, as well as for borrowers who applied during the period after execution of the settlement and before final approval.

Borrowers had to have submitted an application by November 15, 2022 in order to receive expedited review.

In December 2023, RU received from ED 338 BDTR claims, all of which were dated between June 23, 2022 and November 15, 2022, for students attending RU between 2000 and 2022, seeking in the aggregate a discharge of approximately $6.1 million in loans.

In December 2023, HCN received from ED 77 BDTR claims, all of which were dated between June 23, 2022 and November 15, 2022, for students attending HCN between 2007 and 2022, seeking in the aggregate a discharge of approximately $1.4 million in loans.

RU and HCN dispute the validity of these claims and have filed responses to them with ED.

We are unable to predict whether ED will grant BDTR relief for the claims, or if so, whether it will seek recoupment from RU and/or HCN.

As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Borrower Defenses”, ED may initiate a proceeding to collect from an institution the amount of relief resulting from a borrower defense brought by an individual borrower.

If ED determines that borrowers of Direct Loans (or Direct Consolidation Loans made after July 1, 2023) who attended our institutions have a defense to repayment of their Direct Loans, we could be subject to repayment liability to ED that could have a material adverse effect on our financial condition, results of operations, and cash flows.

However, the July 1, 2023, effective date of the 2022 Borrower Defense Regulations is currently enjoined nationwide by court order.

As a result of the injunction, ED announced that while it will not adjudicate any borrower defense applications under the 2022 Borrower Defense Regulations unless and until the effective date is reinstated, it will continue to adjudicate borrower defense applications under the 2016 Borrower Regulations and 2019 Borrower Defense Regulations if required pursuant to a court ordered settlement.

In 2022, ED joined a class settlement agreement resulted in a blanket grant of automatic, presumptive relief for all BDTR applications filed by students at certain institutions through June 22, 2022, but our institutions were not included in the blanket grant of relief.

As discussed in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Borrower Defenses”, APUS, RU and HCN have received from ED BDTR claims for students seeking a discharge of loans dated after July 22, 2022.

Each of the respective institutions disputes the validity of these claims and has filed responses to them with ED.

Due to the 2022 Borrower Defense Regulations injunction we cannot predict whether the final regulations will result in regulatory changes that would harm our business, and we cannot predict, if the 2022 Borrower Defense Regulations are upheld, whether ED will grant BDTR relief for the claims, or if so, whether it will seek recoupment from our institutions.

However, if in the future our institutions are subject to ED recoupment actions, our business, reputation, enrollments, and financial condition may be adversely impacted.

While we have not received any claims with respect to APUS at this time, we believe is it reasonably likely that we will receive claims in the future.

BDTR regulations, among other issues, are more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Borrower Defenses”.

The postsecondary education regulatory environment has changed and may change in the future as a result of U.S.

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Changes in Presidential administrations and control of Congress as a result of the outcome of elections or other events could result in changes in or new legislation, appropriations, regulations, standards, policies and enforcement actions that could materially affect our business, including material consequences for our institutions’ accreditation, authorization to operate in various states, permissible activities, receipt of funds under student financial assistance programs, and cost of doing business.

For example, as a result of the 2020 U.S.

federal elections, Democrats, who tend to support more regulation of and restrictions on for-profit institutions, gained control of the executive branch and both houses of Congress, and as a result of the 2022 U.S.

federal midterm elections, Democrats retained control of the Senate and lost control of the House of Representatives.

The Biden administration and 2020 Congress have acted and may continue to act to change or eliminate education-related legislation and ED regulations, and to enact new legislation, such as legislation to reauthorize the HEA, and ED has initiated and could initiate new rulemaking processes to alter existing regulations and could act to change existing ED policies and practices with respect to matters related to postsecondary education institutions.

For example, ARPA, which modifies the HEA’s 90/10 Rule to require that a for-profit institution derive not less than 10 percent of its revenue from sources other than “federal education assistance funds”, was enacted in 2021, and ED has issued final regulations to address the 90/10 Rule and other topics.

ED also issued final regulations to address BDTR, public service student loan forgiveness programs, mandatory pre-dispute arbitration, and prohibition of class-action lawsuits, among other issues.

We cannot predict the extent to which the Biden administration and Congress, or any future administration or Congress, will act to change or eliminate or to implement new laws, regulations, standards, policies, and practices, nor can we predict the form that new laws, regulations, standards, policies, or practices may take or the extent to which those regulations, practices or policies may impact us or our institutions.

The Trump administration and current Congress may act to change or eliminate education-related legislation and ED regulations, and to enact new legislation to alter existing regulations and could act to change existing ED policies and practices with respect to matters related to postsecondary education institutions.

President Trump and members of his administration have also stated that the administration intends to dismantle ED, limiting its functions to only those that are statutorily required or transferring oversight of certain functions to other agencies.

In addition, news reports indicate that an Executive Order to this effect is reportedly pending.

We cannot predict what actions the Trump administration will take with respect to the operations of ED or the response of the staff of ED to any such actions, nor can we predict the extent to which the Trump administration and Congress, or any future administration or Congress, will act to change or eliminate or to implement new laws, regulations, standards, policies, and practices, nor can we predict the form that new laws, regulations, standards, policies, or practices may take or the extent to which those regulations, practices or policies may impact us or our institutions or federal funds disbursed to schools through Title IV programs or TA.

For example, even without changes being made to Title IV programs, more general changes or uncertainty at ED could cause disruptions or delays in the processing of Title IV or other necessary interactions with ED.

Significant changes to ED or to federal regulation of higher education could have a material adverse impact on our enrollment, revenue, results of operations, and financial condition.

A failure by our institutions to comply with ED’s incentive payment rule could result in sanctions and liability under the False Claims Act.

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ED may also seek to recover Title IV funds disbursed in connection with the prohibited incentive payments.

As described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid

Programs – Incentive Payment Rule”, changes in the interpretation of this prohibition may create uncertainty about what constitutes impermissible incentive payments and errors in the implementation of our compensation programs and arrangements may also lead to impermissible payments.

As described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Incentive Payment Rule”, changes in the interpretation of this prohibition may create uncertainty about what constitutes impermissible incentive payments and errors in the implementation of our compensation programs and arrangements may also lead to impermissible payments.

Ambiguities as to how the incentive payment rule is interpreted also may influence our approach, or limit our alternatives, with respect to employment policies and practices and consequently may negatively affect our ability to recruit, retain, and motivate employees.

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Our institutions may lose eligibility to participate in Title IV programs if their student loan default rates are too high, and our future growth could be impaired as a result.

As described more fully under “Regulatory Environment – Student Financing Sources and Related Regulations/ Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Student Loan Defaults” and “ –

Cohort Default Rate”, if the cohort default rate for any year exceeds 40% in any single year, or exceeds 30% for three consecutive years, an institution loses eligibility to participate in Title IV programs.

As described more fully under “Business – Regulatory Environment – Student Financing Sources and Related Regulations/ Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Student Loan Defaults” and “ – Cohort Default Rate”, if the cohort default rate for any year exceeds 40% in any single year, or exceeds 30% for three consecutive years, an institution loses eligibility to participate in Title IV programs.

If an institution’s cohort default rate equals or exceeds 30% for any given year, it must establish a default prevention task force and develop a default prevention plan with measurable objectives for improving the cohort default rate.

Government policies to minimize the adverse economic impact of the COVID-19 pandemic have artificially lowered our institutions’ cohort default rates, which nevertheless may be higher than otherwise expected as a result of the pandemic.

Congress and ED implemented a temporary freeze on student loan payments and interest accruals, which means borrowers are less likely to default on their loans and our institutions’ cohort default rates are lower not because borrowers are making timely repayments but because the government is allowing them not to make payments.

In June 2023, the Fiscal Responsibility Act was enacted, ending the freeze on payments and interest accruals.

Accordingly, interest accrual on federal student loans resumed on September 1, 2023 and payments became due beginning October 1, 2023, which may lead to an increase in defaults and therefore an increase in our institutions’ cohort default rates.

ED has announced a 12-month “on-ramp” to repayment, running from October 1, 2023 to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period will not be considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.

In September 2024, ED released final official cohort default rates for institutions for federal fiscal year 2021, with ED reporting a zero percent cohort default rate for APUS, RU, and HCN.

These rates were favorably impacted by regulatory relief provided in connection with the COVID-19 pandemic pursuant to which borrowers with Title IV program student loans were not required to make payments, but interest accrual on forborne federal student loans resumed on September 1, 2023, and payments became due beginning October 1, 2023.

In connection with these developments, ED implemented a 12-month “on-ramp” to

repayment, running from October 1, 2023, to September 30, 2024, during which borrowers were not placed into default for missed payments.

The end of COVID-19 pandemic-related student loan forbearance and the 12-month “on-ramp” period may lead to higher default rates in the future.

ED has also announced other actions intended to provide debt relief and support for student loan borrowers, such as instituting a new income-driven repayment plan.

However, there can be no assurance that our institutions’ cohort default rates will benefit from these efforts, and the eventual end of the “on-ramp” period may also lead to an increase in defaults.

However, there can be no assurance that our institutions’ cohort default rates will benefit from these efforts.

If one of our institutions loses its eligibility to participate in Title IV programs because of high student loan default rates, students would no longer be eligible to use Title IV program funds at that institution, which would significantly reduce that institution’s enrollments and revenue and cash flows and have a material adverse effect on our results of operations.

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Congress could also increase the measuring period, which could also negatively impact student default rates.

We rely on third parties to administer elements of APUS’ and HCN’s participation in Title IV programs and their failure to perform services as agreed or to comply with applicable regulations could cause us to lose our eligibility to participate in Title IV programs.

We rely on third parties to administer elements of APUS’s, RU’s, and HCN’s participation in Title IV programs and their failure to perform services as agreed or to comply with applicable regulations could cause us to lose our eligibility to participate in Title IV programs.

ED’s regulations permit an institution to enter into a written contract with a third-party servicer for the administration of any aspect of the institution’s participation in Title IV programs.

The third-party servicer must, among other obligations, comply with Title IV requirements and be jointly and severally liable with the institution to ED for any violation by the servicer of any

Title IV provision.

The third-party servicer must, among other obligations, comply with Title IV requirements and be jointly and severally liable with the institution to ED for any violation by the servicer of any Title IV provision.

An institution must report to ED new contracts with or any significant modifications to contracts with third-party servicers and other matters related to third-party servicers.

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Further, in the event that our institutions transition to or from a third-party servicer for any of its services, there would be costs and risks related to the transition, which could have a material adverse effect on our financial condition.

As discussed in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education”, ED recently issued and subsequently retracted guidance that would have significantly expanded the types of activities and functions that constitute third-party servicer activities for Title IV purposes and stated ED’s position that an institution may not contract with a third-party servicer for Title IV purposes if the servicer (or its subcontractors) is located outside the U.S.

or is owned or operated by an individual who is not a U.S.

citizen or national or a lawful U.S.

permanent resident.

In a November 2023 press release, ED indicated that it intends to issue updated guidance in early 2024.

with an effective date at least six months after its publication.

Once final guidance is published, our institutions must assess their arrangements with third parties to determine whether a vendor must now be treated as a third-party servicer based on the guidance, and such assessment may lead to a need to modify or end existing contracts and establish new contracts.

Any transition by our institutions to or from a third-party servicer for any services as a result of the new guidance could be costly and present other risks related to the transition, which could have a material adverse effect on our financial condition and results of operations.

Our institutions will be subject to sanctions that could be material to our results and damage our reputation if ED determines that our institutions failed to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program.

As more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Title IV Return of Funds”, an institution participating in Title IV programs must calculate unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion and must timely return those funds.

As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Title IV Return of Funds”, an institution participating in Title IV programs must calculate unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion and must timely return those funds.

Under ED regulations, late returns of Title IV program funds for 5% or more of students sampled in connection with the institution’s annual Title IV compliance audit constitute material noncompliance for which an institution generally must submit an irrevocable letter of credit.

Our institutions’ failure to comply with ED’s substantial misrepresentation rules could result in material sanctions.

As more fully described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Substantial Misrepresentation”, ED may fine, suspend or terminate the participation in Title IV programs by an institution that engages in substantial misrepresentation regarding the nature of its education program, its financial charges, or the employability of its graduates.

As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Substantial Misrepresentation”, ED may fine, suspend or terminate the participation in Title IV programs by an institution that engages in substantial misrepresentation regarding the nature of its education program, its financial charges, or the employability of its graduates.

If administrative actions or litigation claiming substantial misrepresentation were brought against our institutions, we could incur legal costs related to their investigation and defense, which could materially and adversely impact our financial condition.

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Federal agencies, including ED and the Department of Justice, have considered or are considering how electronic and information technology should be made accessible to persons with disabilities, including via specific technical standards.

For example, as discussed further in “Regulatory Environment – Department of Education – Regulation of Title IV Financial Aid Programs – Accessibility for Students and Disabilities”, ED’s Office for Civil Rights, or OCR, has in recent years taken enforcement action against higher education institutions in connection with the inaccessibility of their websites and online learning management platforms to persons with a disability.

In 2022, OCR initiated a random compliance review of APUS’s learning management system and courses.

At this time, we cannot predict the outcome of the compliance review or when it will be completed, whether there will be any adverse findings in the resulting compliance review, or whether OCR will place any liability or other limitations on APUS as a result of the compliance review.

For example, as discussed further in “Business – Regulatory Environment – Department of Education – Regulation of Title IV Financial Aid Programs – Accessibility for Students and Disabilities”, ED’s

OCR has in recent years taken enforcement action against higher education institutions in connection with the inaccessibility of their websites and online learning management platforms to persons with a disability.

In 2022, OCR initiated a compliance review of APUS’s learning management system and courses.

In August 2024, OCR identified we were out of compliance with certain accessibility requirements for people with disabilities for ten courses.

Currently, APUS is cooperating with OCR on a resolution to bring APUS into compliance.

At this time, we cannot predict when the compliance review will be completed, additional costs associated with compliance, whether there will be any further findings , or whether OCR will place any liability or other limitations on APUS as a result of the compliance review.

As a result of such enforcement action or as a result of new laws and regulations that require greater accessibility or accessibility in accordance with specific technical standards, our institutions may have to modify their online classrooms and other uses of technology to satisfy applicable requirements, which could require substantial financial investment.

As with all nondiscrimination laws that apply to recipients of federal financial assistance, an institution may lose access to federal financial assistance if it does not comply with Section 504 requirements.

In addition, private parties may file or threaten to file lawsuits alleging failure to comply with laws that prohibit discrimination on the basis of disability, such as the class action complaint APUS received in July 2020 regarding its website accessibility that settled in September 2020, and defending against such actions may require our institutions to incur costs to modify their online classrooms and other uses of technology and costs of litigation.

In addition, private parties may file or threaten to file lawsuits alleging failure to comply with laws that prohibit discrimination on the basis of disability.

Government and regulatory agencies and third parties may conduct compliance reviews, bring claims, or initiate enforcement actions or litigation against us, any of which could disrupt our institutions’ operations and adversely affect their performance.

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For example, ED regularly conducts program reviews of educational institutions that are participating in Title IV programs and ED OIG regularly conducts audits and investigations of such institutions.

ED finalized a Title IV program review of RU in July 2023 and APUS is currently subject to an ongoing Title IV program review.

In July 2023, ED began a program review of APUS’s administration of Title IV programs during the 2021-2022 and 2022-2023 award years that includes a review of compliance with the 90/10 Rule.

At this time, we cannot predict the outcome of the APUS program review, when it will be completed, whether there will be any adverse findings in the resulting program review report, what findings there may be related to 90/10 Rule compliance, if any, or whether ED will place any liability or other limitations on APUS as a result of the review.

In September 2022, RU received a program review report from ED with respect to the previously disclosed open program review for the 2015-2016 and 2016-2017 award years.

ED asserted 14 findings of noncompliance with Title IV rules, including rules related to Title IV administration, policies, and consumer information and reporting requirements, and the federal work study, Pell Grant, and Federal Supplemental Educational Opportunity Grant programs.

The program review report required RU to do a review in connection with the federal work study finding, prepare policies and procedures, return small amounts of funds to two students, provide training, and take other actions in connection with the findings, and to provide a response, which RU timely provided.

In July 2023, RU received a final program review report from ED in which ED found that all the findings of noncompliance with Title IV rules had been resolved with a total liability of approximately $4,200 including a de minimis amount of interest associated with the liability.

In July 2022, HCN received from ED the final program review determination from a review that had been pending since June 2017, and in September 2022 ED notified HCN that it had closed the program review, and no further action was required.

The review included findings of a failure to prorate fees, return of Title IV funds calculations that were not properly computed, untimely and inaccurate reporting to the National Student Loan Data System, incomplete verification, and cost of attendance formulation deficiencies.

HCN was required to do a full file review in connection with the return of Title IV funds finding, to have the review tested by an independent auditor, and to prepare policies and procedures and take other actions in connection with the findings.

Total liabilities were approximately $12,000.

HCN notified all students and/or borrowers in writing regarding payments made on their behalf.

HCN timely submitted the total payment to ED and in accordance with instructions provided.

In addition, the FTC has investigated and, in some cases, brought lawsuits against for-profit institutions alleging that the institutions engaged in deceptive trade practices, and the Consumer Financial Protection Bureau has sued for-profit institutions for engaging in allegedly illegal predatory lending practices.

In October 2021, in what it termed a broad-based initiative to deter for-profit college fraud, the FTC issued informational notices to 70 for-profit higher education institutions, including APUS and RU, informing them of certain marketing practices the FTC had previously determined to be deceptive or unfair and therefore unlawful under the FTC Act and thereby documenting that the institutions have knowledge that the FTC has found these marketing practices to be unfair or deceptive.

APUS and RU were not specifically accused of wrongdoing.

In July 2023, ED began a program review of APUS’s administration of Title IV programs during the 2021-2022 and 2022-2023 award years that, among other things, includes a review of compliance with the 90/10 Rule.

APUS has not yet received a program review report from ED.

Accordingly, at this time, we cannot predict the outcome of the APUS program review, when it will be completed, whether there will be any adverse findings in the resulting program review report, what findings there may be related to 90/10 Rule compliance, if any, or whether ED will place any liability or other limitations on APUS as a result of the review.

In addition, the FTC has investigated and, in some cases, brought lawsuits against for-profit institutions alleging that the institutions engaged in deceptive trade practices, and the CFPB has sued for-profit institutions for engaging in allegedly illegal predatory lending practices.

The FTC announced that it would be enhancing its enforcement cooperation with other agencies with oversight of educational institutions, including ED’s Office of Federal Student Aid and the Department of Veterans Affairs.

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Claims and lawsuits brought against us or one of our institutions may result in reputational damage, even if such claims and lawsuits are without merit, which could materially adversely affect our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our institutions, which may materially adversely affect our ability to operate.

Investigations by state Attorneys General, Congress, and governmental agencies may result in increased regulatory burdens and costs.

We and other for-profit postsecondary education providers have been subject to increased regulatory scrutiny and litigation in recent years.

State attorneys general have increasingly focused on allegations of improper recruiting, compensation, and deceptive marketing practices, among other issues.

States may also have consumer disclosure laws, including laws specifically applicable to for-profit institutions, and a state attorney general may take the position that any such laws apply to institutions that offer wholly online education to students in the state.

In recent years, a number of state attorneys general launched investigations into for-profit postsecondary education institutions.

State attorneys general may also initiate inquiries into us or our institutions.

Actions by state attorneys general and other governmental agencies, such as the recently restored Office of Enforcement within ED’s Office of Federal Student Aid, whether or not involving us or our institutions, could damage our reputation and the reputation of our institutions and limit the ability to recruit and enroll students, which could reduce student demand for our institutions’ programs and adversely impact our revenue and cash flow from operations.

Our regulatory environment and our reputation may be negatively influenced by the actions of other for-profit institutions.

Investigations by state Attorneys General, Congress, and governmental agencies into the Company and other for-profit institutions may result in increased regulatory burdens and costs and may impact our reputation.

Regulatory investigations and civil litigation brought against other for-profit education institutions have attracted adverse media and social media coverage, have been the subject of federal and state legislative hearings, and have in some cases resulted in legislation or rulemaking.

In some cases, institutions have ceased operations, including while under multiple government investigations.

Broader allegations against the overall for-profit school sector have negatively affected public perceptions of for-profit education institutions, including our institutions, and this trend could continue or broaden.

Broader allegations against the overall for-profit school sector, including allegations of improper recruiting, compensation, and deceptive marketing practices, among other issues, have negatively affected public perceptions of for-profit

education institutions, including our institutions, and this trend could continue or broaden.

In addition, reports on student lending practices of various lending institutions and schools, including for-profit schools, and investigations by a number of state attorneys general, Congress, and governmental agencies have led to adverse media and social media coverage of postsecondary and for-profit education.

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Such allegations could also result in increased scrutiny and regulation by ED, Congress, accrediting bodies, state legislatures, state attorneys general, or other governmental authorities with respect to all for-profit institutions, including us and our institutions.

State attorneys general may also take adverse positions on laws and apply them to institutions that offer wholly online education to students in the state.

For these reasons or others, not-for-profit or public education institutions may act to differentiate themselves from the for-profit education institutions, including by choosing not to enter into collaborations with for-profit institutions, including us, or by excluding for-profit institutions from membership in industry groups.

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If we undergo a change in ownership or control, ED will place our institutions on provisional certification if they are not already on provisional status, and the terms of that provisional certification could limit our institutions’ potential for growth and adversely affect our institutions’ enrollment, our revenue, and results of operations.

As described more fully under “Regulatory Environment – Regulatory Actions and Restrictions on Operations”, an institution whose parent undergoes a change in ownership resulting in a change of control loses its eligibility to participate in Title IV programs and must apply to ED in order to reestablish such eligibility.

As described more fully under “Business – Regulatory Environment – Regulatory Actions and Restrictions on Operations”, an institution whose parent undergoes a change in ownership resulting in a change of control loses its eligibility to participate in Title IV programs and must apply to ED in order to reestablish such eligibility.

For example, as described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, ED imposed growth restrictions on RU in connection with RU’s 2019 change in ownership and continued those restrictions after the Rasmussen Acquisition as part of RU’s provisional certification, with certain qualifications more fully described in “Business – Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “ – Student Financing Sources and Related Regulations/Requirements”.

These growth restrictions could limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students.

Future transactions could constitute a change in ownership or control under ED’s regulations and could cause ED to leave provisional certification in place for our institutions as required by the HEA.

The conditions of provisional certification or heightened scrutiny by ED could impact, among other things, our institutions’ ability to add educational programs, or additional locations, our ability to acquire other institutions, or our ability to make other significant changes.

For example, as described in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, ED imposed growth restrictions on RU in connection with RU’s 2019 change in ownership and continued those restrictions after the Rasmussen Acquisition as part of RU’s temporary provisional certification.

In addition, if ED were to determine that our institutions were unable to meet their responsibilities while they were provisionally certified, as

our institutions currently are, ED could seek to revoke our institutions’ certification to participate in Title IV programs with fewer due process protections than if they were fully certified.

In addition, if ED were to determine that our institutions were unable to meet their responsibilities while they were provisionally certified, as our institutions currently are, ED could seek to revoke our institutions’ certification to participate in Title IV programs with fewer due process protections than if they were fully certified.

Limitations on our institutions’ operations could, and the loss of our institutions’ certification to participate in Title IV programs would, adversely affect our institutions’ enrollments, and our revenue and results of operations.

See also the Risk Factor that begins “RU is currently on provisional certification with ED...” below.

RU is currently on provisional certification with ED, and the terms of that provisional certification could limit its potential for growth.

In July 2021, ED notified RU that in connection with its March 2019 change in ownership that preceded our acquisition of RU, ED imposed certain temporary growth restrictions on RU, including limitations on new programs and locations and a cap on enrollments by students that participate in Title IV programs.

Additionally, ED required RU to submit periodic financial and enrollment reports, a requirement that it had imposed on RU in connection with a financial responsibility letter of credit previously imposed on RU.

In connection with the Rasmussen Acquisition, RU timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership and, effective October 2021, ED and RU entered into a TPPPA that allowed RU to continue disbursing Title IV funds while ED reviewed the change in ownership application.

The TPPPA continued the growth restrictions imposed as a result of the previous change in ownership, with certain qualifications more fully described in “Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “Student Financing Sources and Related Regulations/Requirements”.

In August 2023, ED notified RU that it had approved RU’s continued participation in the Title IV programs under APEI ownership.

In the PPPA that RU executed in connection with the approval, ED continues to impose certain growth restrictions on RU that were included in the TPPPA, including limitations on new programs and locations and an enrollment cap on the number of students that participate in Title IV programs.

ED also continues to require RU to submit periodic financial and Title IV enrollment reports.

The PPPA also imposes new reporting requirements related to accrediting agency actions, government actions, class actions and student complaints.

The PPPA specifies that after ED reviews and accepts financial statements and compliance audits for one complete fiscal year of RU’s Title IV participation under APEI’s ownership, RU may seek removal of the enrollment cap and approval for new programs that replace current programs.

The PPPA also specifies that at least until after ED reviews and accepts financial statements and compliance audits that cover the second complete fiscal year of RU’s Title IV participation under our ownership, RU must seek pre-approval for new locations, new programs that are not replacing current programs, and other changes.

For the second and third fiscal years, RU is also subject to enrollment growth limitations, after which RU can request that ED release RU from further enrollment restrictions.

The PPPA no longer requires RU to post the financial responsibility letter of credit that ED had imposed based on the 2019 change in ownership and control of RU, although this letter of credit has not yet been released.

We believe we have met all obligations for the release of the letter of credit.

These growth restrictions could limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students.

If regulators do not approve or delay their approval of transactions involving a change of control of our Company or of institutions that we own or acquire, our and our institutions’ ability to operate could be impaired.

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Some of these transactions or events may be beyond our control.

Our or our institutions’ failure to obtain, or a delay in receiving, approval of any change of control from the relevant regulatory agencies following a transaction involving a change of ownership or control could result in a suspension of operating authority, loss of accreditation, or suspension, loss of ability to participate in Title IV programs or certain growth restrictions including with respect to adding locations and programs, which could have a material adverse effect on our institutions and our financial condition.

Our or our institutions’ failure to obtain, or a delay in obtaining, approval of any change of control from the relevant regulatory agencies following a transaction involving a change of ownership or control could result in a suspension of operating authority, loss of accreditation, or suspension, loss of ability to participate in Title IV programs or certain growth restrictions including with respect to adding locations and programs, which could have a material adverse effect on our institutions and our financial condition.

Our failure to obtain, or a delay in receiving, any approval of any change of control from other states in which we are currently licensed or authorized could require our institutions to suspend activities in that state or otherwise impair our institutions’ operations.

The potential adverse effects of a change of control could influence, among other things, future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance, or redemption of our stock.

In addition, the regulatory burdens and risks associated with a change of control also could have an adverse effect on the market price of our common stock.

Growth restrictions that ED could impose as a result of change in ownership are more fully described in “Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “-Student Financing Sources and Related Regulations/Requirements”.

Growth restrictions that ED could impose as a result of change in ownership are more fully described in “Business – Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “– Student Financing Sources and Related Regulations/Requirements”.

Congress has in the past changed, and may in the future change, eligibility standards and funding levels for federal student financial aid programs, DoD TA, and other programs.

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The HEA must be periodically reauthorized by Congress and each Title IV program must be funded through appropriations acts on an annual basis.

The most recent comprehensive reauthorization occurred in 2008 when Congress reauthorized most HEA programs through the 2014 federal fiscal year.

The reauthorization has been temporarily extended in the years that have followed.

Congress previously considered comprehensive legislation to reauthorize the HEA, including proposals from Republicans and Democrats, referred to as the Student Aid Improvement Act and the College Affordability Act, respectively, and Congress could consider such legislation again in the future We cannot predict whether, in what form, or when, HEA reauthorization legislation will be enacted.

We cannot predict whether, in what form, or when, HEA reauthorization legislation will be enacted.

Modifications to the HEA could occur as part of reauthorization, which could require us to modify our business practices and increase administrative costs, thereby negatively impacting our results of operations.

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Congressional action may also require our institutions to modify their practices in ways that could result in increased administrative and regulatory expenses.

We are not in a position to predict the extent to which, or whether, Congress may focus on for-profit education institutions or whether any particular legislation that could adversely affect the for-profit education sector will be passed by Congress or signed into law in the future, but Democrats, who tend to support more regulation of and restrictions on for-profit institutions, currently control the executive branch of the U.S.

The reallocation of funding among Title IV programs, material changes in the requirements for participation in such programs, or the substitution of materially different Title IV programs could reduce the ability of certain students to finance their education at our institutions and adversely affect our revenue and results of operations.

Failure to comply with the various federal and state laws and regulations governing HCN’s extended payment plan option could subject us to fines, penalties, obligations to discharge loans and other injunctive requirements.

HCN offers an extended payment plan option designed to assist students with educational costs, including tuition and fees.

The extended payment plan is subject to various federal and state laws and regulations, as discussed in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Additional Sources of Student Payments”.

Failure to comply with the various federal and state laws and regulations governing HCN’s extended payment plan options could subject us to fines, penalties, obligations to discharge loans and other injunctive requirements.

HCN offers extended payment plan options designed to assist students with educational costs, including tuition and fees.

The extended payment plan is subject to various federal and state laws and regulations, as discussed in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Additional Sources of Student Payments”.

If we do not comply with these laws and regulations, we could be subject to fines, penalties, obligations to discharge loans and other injunctive requirements, which could have a material adverse effect on our financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

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Risks Related to Our Business

Our student registrations, revenue, and cash flow have been adversely impacted and we could continue to experience adverse impacts as a result of the Army’s transition to new systems for soldiers to request TA.

APUS relies on the ability of the Army, and the other branches of the Armed Forces, to process service members’ participation in TA programs, and from time to time, changes to processes have impacted the ability of service members to participate in those programs.

For example, the Army in 2021 transitioned from its legacy system, GoArmyEd, to a new system, ArmyIgnitED, for soldiers to use to request TA.

This transition was beset with delays and disruptions to the Army’s TA

Our student registrations, revenue, and cash flow have been adversely impacted, and we could experience additional adverse impacts as a result of the Armed Forces’ transition to new systems for soldiers to request TA.

APUS relies on the ability of the Armed Forces to process service members’ participation in TA programs, and from time to time, changes to processes have impacted the ability of service members to participate in those programs.

For example, the Army in 2021 transitioned from its legacy system, GoArmyEd, to ArmyIgnitED, for soldiers to use to request TA.

This transition was beset with delays and disruptions to the Army’s TA programs.

In connection with the transition, we experienced challenges related to system performance, process changes and third-party software defects, and there was an adverse impact on registrations and revenue, profits, and cash flow in the second and third quarters of 2021.

Due to the transition, ArmyIgnitED does not currently reflect all courses previously taken by soldiers at APUS in the relevant period or all amounts due to APUS.

Our efforts to work with the Army to resolve these discrepancies continue but may be unsuccessful.

We could incur bad debt expense if the Army does not recognize and process payments for all courses taken by soldiers during this period, or if soldiers do not otherwise pay the tuition for courses not reimbursed through Army TA.

In August 2022, the Army transitioned from the initial version of ArmyIgnitED to an upgraded ArmyIgnitED 2.0, with a new third-party service provider, and announced that all TA requests for courses would be required to be submitted via ArmyIgnitED 2.0.

As part of this change, the Army stopped allowing institutions to submit invoices for a portion of 2022, which impacted our ability to collect on our accounts receivable and caused our accounts receivable to increase.

Furthermore, some payments from the Army that were expected in 2021 and 2022 were delayed into 2023, which, together with recent modifications to the 90/10 Rule and enrollment growth among service members as compared to declining enrollments from students who use non-federal educational assistance funds, caused the “90%” side of the ratio to increase for 2023 at APUS.

As part of this change, the Army stopped allowing institutions to submit invoices for a portion of 2022, which

delayed our ability to collect on our accounts receivable and caused our accounts receivable to increase.

The impact of the delayed receipt of funds and APUS’s change in billing process are discussed in further detail in the Risk Factor that begins “If one or more of our institutions does not comply with the 90/10 Rule…”.

There can be no assurance that our continued efforts to mitigate any adverse impact of the transition to ArmyIgnitED 2.0 on accounts receivable, bad debt, and cash flow will be successful or that ArmyIgnitED 2.0 will work as expected.

Difficulties associated with the transition to ArmyIgnitED or any further upgrade or transition to a new service provider, including the related data migration, could cause further disruption to soldiers’ ability to seek and obtain TA and to the Army’s processing of invoices and payments to APUS.

Difficulties associated with any further upgrade or transition to a new service provider, including the related data migration, could cause further disruption to service members’ ability to seek and obtain TA and to the processing of invoices and payments to APUS.

We could experience similar challenges with any other system transitions undertaken by other branches of the DoD or the government.

For example, VA has announced multi-year plans to upgrade systems used for veteran education benefits, and we have no assurance that upgrades will not disrupt veteran access to those benefits and our ability to collect on related accounts receivable.

For example, in February 2025, the service provider for the Army and Air Force experienced difficulties with routine system maintenance and upgrades resulting in an approximate two week service outage.

Additionally, VA has announced multi-year plans to upgrade systems used for veteran education benefits, and we have no assurance that upgrades will not disrupt veteran access to those benefits and our ability to collect on related accounts receivable.

The inability of soldiers to participate in TA programs, or of veterans to access VA education benefit programs, or continued or additional limitations on their ability to apply and participate, would have an adverse effect on our results of operations and financial condition.

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Additionally, some students finance their education through private loans that are not government subsidized.

Historically low interest rates have created a favorable borrowing environment for students.

However, our students may have to pay higher interest rates on their Title IV program loans and private loans as a result of recent interest rate increases.

Any increases in applicable interest rates could result in a corresponding increase in educational costs to our existing and prospective students, which could result in a reduction in our enrollment.

Historically low interest rates have in the past created a favorable borrowing environment for students.

However, our students may have to pay higher interest rates on their Title IV program loans and private loans as a result of recent and future interest rate increases.

Increases in applicable interest rates could result in a corresponding increase in educational costs to our existing and prospective students, which could result in a reduction in our enrollment.

Higher interest rates could also contribute to higher default rates with respect to our students’ repayment of their education loans.

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If our institutions experience a disruption in their ability to process Title IV financial aid because of administrative challenges on their part or the part of their vendors, ED could require that our institutions become subject to payment methods for Title IV programs that are not the advance payment system, which could have a material adverse effect on our institutions’ cash flows.

The planned combination of APUS, RU, and HCN may not be completed, or may not be completed on the terms currently contemplated, and if it is, the expected benefits may not be realized, any of which could have a material adverse impact on our business, financial condition, and results of operations.

As described more fully under “ Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN”, on January 28, 2025, we announced our plan to combine APUS, RU , and HCN into one consolidated HLC-accredited institution to be named American Public University System, which will be a university system encompassing all APUS, RU, and HCN programs, campuses, and operations, or the Combination .

As a result of the Combination, the combined institution will have two divisions tentatively named (i ) APUS Global, comprised of AMU and APU and (ii) Rasmussen, comprised of RU’s campus-based and online nursing programs, RU’s healthcare programs, HCN’s campus-based healthcare programs, and RU’s non-healthcare programs, with final names to be determined closer to closing of the Combination.

We anticipate completing the Combination in the third quarter of 2025 subject to obtaining required approvals and ED taking related actions, but we may be unable to complete the Combination in an efficient, cost-effective manner, or at all.

In addition, we may not fully realize the projected benefits of the Combination, if at all, or it may take longer to realize those benefits than expected, including, without limitation, addressing regulatory compliance and other regulatory considerations.

We may experience challenges with respect to maintaining and increasing student enrollments, delays, business disruption, increased costs, including from lost synergies, negative market reaction to the announcement and planning for the Combination, and other challenges during or following the Combination, which could adversely affect the Company’s business, financial condition, and results of operations.

We may also experience challenges in attracting, retaining, and motivating key personnel during the pendency of the Combination and following its completion, which could harm our business.

In addition, the Combination will require substantial management attention and could detract attention from our and our institutions’ day-to-day business operations, which may disrupt our ongoing business and may adversely impact relationships with students, employees, and other counterparties .

In addition, APUS, as the surviving institution, will need to obtain required approvals from state agencies, including state boards of nursing, in order to operate in the states where HCN and RU currently operate.

There can be no assurance that APUS will obtain the required state and ED approvals, including ED approval to expand APUS’s Title IV certification to encompass the RU and HCN programs and location, nor can there be any assurance that APUS will obtain those approvals on a timely basis.

If required approvals and accreditation are not obtained, we may not be able to complete the Combination.

If we are not able to complete the Combination, or if there is a negative reaction from students, employees, or other material stakeholders, our reputation, business, results of operations, and our ability to comply with regulatory requirements may be materially adversely impacted.

Business combinations and acquisitions may be difficult to integrate, disrupt our business, dilute stockholder value, or divert management attention, and we may not realize the expected benefits of any consummated business combinations or acquisitions.

From time to time, we explore or enter into business combinations and acquisitions, such as our recent Rasmussen Acquisition and GSUSA Acquisition, which are typically accompanied by a number of risks, including:

From time to time, we explore or enter into business combinations and acquisitions, which are typically accompanied by a number of risks, including:

• failure to consummate or delay in consummating the transactions;

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• distraction of management’s and other key personnel’s attention from normal business operations during the acquisition and integration processes;

• inability to obtain, or delay in obtaining, approval of the acquisition from the necessary regulatory agencies, or the imposition of operating restrictions or a letter of credit requirement on us or on the acquired institution such as in the case of the Rasmussen Acquisition;

• expenses associated with the integration efforts;

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For example, we recorded a non-cash charges of $146.9 million and $64.0 million, and to reflect the corresponding tax impact of $36.0 million and $15.8 million, during the fiscal years ended December 31, 2022 and 2023, respectively, to reduce the carrying value of RU goodwill and intangible assets as a result of determining that the fair value of RU was less than its carrying value.

In June 2023, we completed a qualitative assessment of RU and HCN Segment goodwill to determine if an interim goodwill impairment testing was necessary.

We 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 our market value.

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

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

The Rasmussen Acquisition was, and our acquisition of any other educational institution would also likely be, considered a change in ownership and control of the acquired institution under applicable regulatory standards.

For the Rasmussen Acquisition, we needed, and for any such acquisition, we would need approval from ED, and we would need to notify or obtain approval from applicable state agencies and accrediting agencies, and possibly other regulatory bodies, to the

extent those agencies or bodies require such actions.

A number of these approvals can only be requested after completion of an acquisition.

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In addition, future acquisitions could result in dilutive issuances of securities or could require use of substantial portions of our available cash, or issuances of debt or equity, as in connection with the Rasmussen Acquisition, which could adversely affect our financial condition.

We have not yet been able to fully achieve the anticipated benefits of the Rasmussen Acquisition, as evidenced by the reduction in carrying value of goodwill and intangible assets discussed above and may not be able to achieve the anticipated benefits of any future acquisition, including cost savings and other synergies and growth opportunities, during the anticipated time frame, or at all.

For example, events outside our control, such as changes in regulation and laws and economic trends, could adversely affect our ability to realize the expected benefits.

A continued inability to realize the full extent of the anticipated benefits of the Rasmussen Acquisition or an inability to realize in full anticipated benefits of any future acquisition could have an adverse effect on our revenue, results of operations, and level of expenses, which may adversely affect the value of our common stock.

Efforts to diversify our business outside of the traditional areas served by our institutions may provide strategic and operational challenges that we are not prepared or able to address.

We intend to continue to explore opportunities to invest in the education industry, which could include purchasing or investing in other education-related companies or companies developing new technologies.

As we seek opportunities to expand our business and serve markets beyond those traditionally served by our institutions, such as the federal government training market through the acquisition of GSUSA, we may encounter strategic and operational challenges different from those within our existing institutions.

We or our institutions may have limited experience operating in new businesses and markets or new modes of teaching and may need to modify systems and strategies or enter into arrangements with other institutions and organizations.

In addition, our systems and infrastructure may not be able to respond quickly enough to support new business opportunities, or we may not otherwise be able to address the strategic or operational differences of or compliance challenges associated with these new opportunities.

If we are unable to successfully capitalize on new opportunities, the value of our common stock may decline over time, including because of the challenges of growing our core business under our current model.

We may not be able to achieve the anticipated benefits of any future acquisition, including cost savings and other synergies and growth opportunities, during the anticipated time frame, or at all, as has occurred to an extent with respect to the Rasmussen Acquisition.

For example, events outside our control, such as changes in regulation and laws, public health crises and disease epidemics and pandemics, and economic trends, could adversely affect our ability to realize the expected benefits.

The continued inability to realize the full extent of the anticipated benefits of the Rasmussen Acquisition or an inability to realize in full anticipated benefits of any future acquisition could have an adverse effect on our revenue, results of operations, and level of expenses, which may adversely affect the value of our common stock.

We have implemented a shared services model for services to our institutions, and challenges encountered due to the ongoing operation and expansion of this model could cause strategic or operational challenges and adversely impact us.

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We rely on third-party vendors whose service may be of lower quality than ours, whose responsiveness may be less timely than ours, and whose compliance practices may increase our operational and compliance risk.

We rely on third-party vendors to provide certain services to our institutions and their students primarily related to information technology services, our learning management system, and financial aid processing, and expect to rely more heavily on such vendors, particularly through cloud computing services, in the future.

For example, in December 2023, we entered into an agreement to outsource certain of our information technology operations to a managed service provider, including service desk, end user support, network support, and other information technology managed service operations.

We rely on third-party vendors to provide certain services to our institutions and their students primarily related to information technology services, our learning management system, our integrated curriculum and testing services, and financial aid processing, and expect to rely more heavily on such vendors, particularly through cloud computing services, in the future.

While we monitor and assess vendor service, it is possible that the quality of service and the timeliness of vendor responses may be less than the service and responsiveness that we or our institutions would provide.

In addition, the transition of services to new third-party vendors may take longer than expected or pose other operational challenges.

Using third-party vendors increases compliance risk that the vendors may not adequately protect personal information, or that they may not comply with applicable federal or state regulations.

Further, transitioning from vendors or from in-house processes to new providers or from third-party providers to in-house processes or vice versa, such as the transition of RU marketing from Collegis to our in-house centralized marketing team

and the transition of information technology and related services previously outsourced to Collegis to our control and management or to cloud services or third-party vendors, involves inherent risks, including the risk of significant disruption of integral processes or the decrease in quality of service as compared to the prior provider.

In the event third-party vendors fail to provide services, lack adequate business continuity planning, or fail to provide necessary implementation or transition services, our financial condition and results of operations could be adversely affected.

In the event third-party vendors fail to provide services or provide inadequate services, lack adequate business continuity planning, or fail to provide necessary implementation or transition services, our financial condition and results of operations could be adversely affected.

See also the Risk Factor with the caption beginning “Significant system disruptions to our computer networks, technology infrastructure, or online classroom infrastructure, or to the networks, infrastructure, and systems, or business of third parties…”

There can be no guarantee that our business will generate sufficient cash flow from operations or that future capital or borrowings will be available to us in an amount sufficient to enable us to fund our other liquidity needs.

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Our business may not generate sufficient cash flow from operations, and future capital or borrowings may not be available to us in an amount sufficient to enable us to service our indebtedness, pay dividends on our Series A Senior Preferred Stock when due, or fund our other liquidity needs.

Failure to achieve business performance consistent with our expectations, to reverse the decline in enrollments at RU, including as a result of regulatory action, or any government shutdown could adversely impact our cash flows and results of operations.

In addition, our efforts to comply with the 90/10 Rule, including APUS’s change to its billing approach to delay invoicing for TA, could lead us to reduce enrollments, require us to make expenditures, or result in other outcomes that would reduce our existing cash available for operations.

Failure to achieve business performance consistent with our expectations, to address any downtrends in enrollments at RU, including as a result of regulatory action, or any government shutdown could adversely impact our cash flows and results of operations.

In addition, our efforts to comply with the 90/10 Rule, including APUS’s change to its billing approach to delay invoicing for TA and the Combination, could lead us to reduce enrollments, require us to make expenditures, or result in other outcomes that would reduce our existing cash available for operations.

We have incurred substantial indebtedness under our credit agreement, the cost of servicing that debt could adversely affect our business and financial results, and we may not be able in the future to service that debt.

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We may need additional capital in the future, but there is no assurance that funds will be available on acceptable terms.

We may need additional capital in the future for various reasons, including to finance business acquisitions, as we did with the Rasmussen Acquisition or to assist APUS in addressing 90/10 Rule compliance, or investments in technology or to achieve growth or fund other business initiatives.

We may need additional capital in the future for various reasons, including to finance business acquisitions, to make investments in technology, or to achieve growth or fund other business initiatives.

There is no assurance that capital will be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders.

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If we are unable to obtain needed capital on terms acceptable to us, we may have to limit strategic initiatives or take other actions that materially adversely affect our business, financial condition, results of operations, and cash flows.

We may not be able to successfully manage and limit our exposure to bad debt.

In recent years, we have experienced increases in bad debt in each of our reportable segments.

There is no assurance that we will be able to limit our exposure to bad debt or that steps we take to limit bad debt will be effective.

Bad debt increases at our institutions could have a material adverse effect on our financial condition, cash flows, and results of operations.

If our institutions fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our institutions may lose the ability to participate in Title IV programs or DoD TA programs or have participation in these programs conditioned or limited.

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We cannot be certain that our institutions’ systems and processes will continue to be adequate in the face of increasingly sophisticated fraud schemes, or that we will be able to expand such systems and processes at a pace consistent with the changing nature of these fraud schemes.

Our institutions, in particular APUS, have been the target of fraudulent and abusive activity, including related to Title IV program funds.

Our institutions, in particular APUS and RU online programs, have been the target of fraudulent and abusive activity, including related to Title IV program funds.

We believe the risk of outside parties attempting to perpetrate fraud in connection with the award and disbursement of Title IV program funds at APUS, including as a result of identity theft, is heightened due to its being an exclusively online education provider and its relatively low tuition.

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Any significant failure to adequately detect fraudulent activity related to student enrollment and financial aid could cause our institutions to fail to meet their accreditors’ standards.

Furthermore, accrediting agencies that evaluate institutions offering

online programs, like APUS’s programs, must require such institutions to have processes through which the institution establishes that a student who registers for such a program is the same student who participates in and receives credit for the program.

Furthermore, accrediting agencies that evaluate institutions offering online programs must require such institutions to have processes through which the institution establishes that a student who registers for such a program is the same student who participates in and receives credit for the program.

Failure to meet the requirements of our institutions’ accrediting agencies could result in the loss of accreditation of one or more of our institutions, which could result in their loss of eligibility to participate in Title IV programs, TA, or both.

If we are unable to attract, retain, and develop skilled personnel and management, our business and growth prospects could be severely harmed, and changes in management could cause disruption and uncertainty.

We must attract, retain, and develop diverse and highly qualified faculty, management, administrators, and other skilled personnel to our institutions.

We must attract, retain, and develop highly qualified faculty, management, administrators, and other skilled personnel to our institutions.

We strive to retain our talent and closely track retention among our employees, both staff and faculty.

We need to ensure effective succession for key executive and employee roles in order to meet the growth, development, and profitability goals of our business.

Hiring competition is intense, especially for faculty in specialized areas and qualified executives, and in areas such as information technology and finance.

Hiring competition may be intense, especially for faculty in specialized areas and qualified executives, and in areas such as information technology and finance.

We also believe that current job market dynamics, including low unemployment, have further increased the challenge of hiring and employee retention.

There continues to be a shortage in access to nursing faculty, which may impact our ability to recruit and retain qualified nursing faculty at both RU and HCN.

A nursing faculty shortage continues in certain markets, which may impact our ability to recruit and retain qualified nursing faculty for programs at our nursing and healthcare-focused institutions.

If we are unable to keep faculty to student ratios at satisfactory levels, we may implement certain initiatives, including, without limitation, increasing admissions standards and capping the number of students that can be accepted to the programs, in order to concentrate on student satisfaction and success and focus on improving NCLEX scores.

These measures could have an adverse impact on enrollment.

We strive to retain our talent and closely track retention among our employees, both staff and faculty.

In 2023, we had full-time employee turnover of approximately 19%, of which 73% was voluntary and 27% was involuntary.

In 2022 we had full-time employee turnover of 28%, of which, 70% was voluntary and 30% was involuntary.

Any failure to develop and maintain a positive culture and strong employee morale or to continue fostering the growth and development of our personnel, including through the use of staff performance evaluation systems and processes, could have a material adverse effect on our business and results of operations.

In addition, to the extent our leaders behave in a manner that is not consistent with our values, such as leading with integrity, we could experience significant impact to our brand and reputation, as well as to our culture.

Hiring and retention may also depend on our ability to build and maintain a diverse and inclusive workplace culture that enables our employees to thrive.

Hiring and retention may also depend on our ability to build and maintain a workplace culture that enables our employees to thrive.

We are investing resources into supporting the development of our leaders and our network of inclusion and equity focused councils and committees.

We must manage leadership development and succession planning throughout our business.

We have had a number of other executive officers retire or otherwise depart our Company over the last several years and we continually evaluate our leadership structure.

While we have employment agreements with our Chief Executive Officer and our Chief Financial Officer, we do not have employment agreements with other executives or personnel, and the employment agreements that we do have do not prevent our executives from voluntarily ceasing to work for us.

We have had executive officers retire or otherwise depart our Company over the last several years and we continually evaluate our leadership structure, including in connection with anticipated departures.

While we have entered into employment agreements with certain executives, these employment agreements do not prevent the executives from voluntarily ceasing to work for us.

To the extent that we lose experienced personnel, it is critical that we develop other employees, hire new qualified personnel, and successfully manage the transfer of critical knowledge.

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While we have processes in place for management transition and the transfer of knowledge, the loss of key personnel, coupled with an inability to adequately train other personnel, hire new personnel, or transfer knowledge, could significantly impact our business and results of operations.

For example, during 2022, we had unexpected leadership departures at RU that we believe contributed to declines in enrollment at RU in 2022 and that had a negative impact on the first half of 2023 and overall fiscal 2023 results of operations.

While we continue to work to strengthen our management team and to attract and retain high-caliber talent, including through various human resources programs and what we believe are competitive market compensation and benefits practices, our efforts may not be successful.

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We may not achieve the anticipated benefits of our cost savings efforts, including reductions in force, and any savings may be offset by increased costs in other areas.

In the third quarter of 2023 we completed a reduction in force that resulted in the termination of 74 employees and the elimination of 57 open positions across a variety of roles and departments.

The reduction in force is expected to result in pre-tax labor and benefit savings of approximately $15.5 million on an annualized basis.

The headcount reductions reflect our ongoing

efforts focused on realigning our organizational structure, eliminating redundancies, and optimizing certain functions.

We continue to examine our cost structure for additional opportunities.

There can be no assurance that we will be successful or recognize the benefits we anticipate from our cost savings efforts.

Furthermore, some of the anticipated savings may be offset by increases to wages and salaries and benefits necessary to remain competitive, or by additional hiring if we determine it is necessary.

We have in the past and may in the future conduct headcount reductions or other cost savings exercises.

There can be no assurance that we will recognize the benefits we anticipate from these efforts.

Some cost savings efforts may be offset by increases to wages and salaries and benefits necessary to remain competitive, or by additional hiring if we determine it is necessary.

Reductions in force may also result in increased costs, as opposed to cost savings, including due to associated legal risks, and could distract management and employees.

Headcount reductions, including together with previous headcount reductions, could also adversely affect employee morale and make it more difficult to hire and retain qualified personnel.

We have limited experience in making investments in other entities, and any such investments may not result in strategic benefits for our business or could expose us to other risks.

From time to time we may pursue strategic investments in or partnerships or joint ventures with other schools, service providers, education technology-related companies, and other types of entities.

These types of investments involve significant challenges and risks, including that the investment does not advance our business strategy, that we do not realize a satisfactory return on our investment, that we acquire unknown liabilities, or that management’s attention is diverted from our core business, and expose us to the operating and financial risks of the entities in which we invest.

We may not have the ability to control the policies, management, or affairs of entities in which we do not have sole control, which could negatively affect our ability to realize the strategic benefits of those investments.

We may not realize strategic benefits from investments and as a result may be required to, and in the past have been required to, reduce the carrying value of investments.

If we wish to dispose of an investment due to failure to realize benefits, underperformance, or otherwise, we may not be able to do so in a timely fashion or may have to sell at less than our carrying value, as we did in 2021 with our interest in an investment, initially invested in 2014, and in 2023 with our interest in an investment, initially invested in 2012, where the investee entered into an agreement to be sold which will result in no sales proceeds.

Any of these events could harm our operating results or financial condition.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Reductions in Force” for more information.

Our limited ability to obtain exclusive proprietary rights and protect our intellectual property, as well as disputes we may encounter from time to time with third parties regarding our use of their intellectual property, could harm our operations and prospects.

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Any such attempt, if successful, could adversely affect our institutions’ business.

Protecting these types of intellectual property rights can be difficult, particularly as it relates to the development by our institutions’ competitors of competing courses and programs.

Protecting these types of

intellectual property rights can be difficult, particularly as it relates to the development by our institutions’ competitors of competing courses and programs.

Our institutions may encounter disputes from time to time over rights and obligations concerning intellectual property and may not prevail in these disputes.

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In some instances, our institutions’ faculty members or students may post various articles or other third-party content online in course discussion boards or in other venues.

The laws governing the fair use of these third-party materials are imprecise and adjudicated on a case-by-case basis, which makes it challenging to adopt and implement appropriately balanced institutional

policies governing these practices.

We and our institutions may incur liability for the unauthorized duplication or distribution of this material posted online.

Third parties may raise claims against us and our institutions for the unauthorized duplication of this material.

Any such claims could subject us and our institutions to costly litigation and impose a significant strain on financial resources and management personnel regardless of whether the claims have merit.

Our institutions’ faculty members or students could also post classified material on course discussion boards, which could expose us to civil and criminal liability and harm our institutions’ reputations and relationships with members of the military and government.

Third parties may raise claims against us, our institutions, or our institutions’ faculty members or students for the unauthorized duplication of this material.

Any such claims could subject us and our institutions to costly litigation, impose a significant strain on financial resources and management personnel, and harm our institutions’ reputations and relationships with members of the military and government, regardless of whether the claims have merit.

Our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages and our institutions may be required to alter the content of their courses.

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The ability of our operating subsidiaries to pay dividends or to make distributions or other payments to us depends on their respective operating results and may be restricted by, among other things, the laws of their respective jurisdictions of organization, regulatory requirements such as obligations to maintain certain restricted cash or post letters of credit, financial performance, accreditation requirements, agreements entered into by those operating subsidiaries, and the covenants of any future obligations that we or our subsidiaries may incur.

For example, due to financial performance, RU and HCN did not pay a dividend and GSUSA did not make a distribution to APEI in 2023.

If our operating subsidiaries are unable to pay dividends or make other payments or distributions, and we are instead required to fund their operations, then our business, financial condition, and results of operations could be materially adversely impacted.

For example, due to financial performance, RU and HCN did not pay a dividend and GSUSA did not make a distribution to APEI in 2023 or 2024.

Furthermore, in order to demonstrate compliance with regulatory metrics related to our operations in Florida, in the fourth quarter of 2024 we had to make a capital contribution to RU.

If our operating subsidiaries are unable to pay dividends or make other payments or distributions, and we are instead required to fund their operations, or we are otherwise required to keep capital in these operating subsidiaries, then our business, financial condition, and results of operations could be materially adversely impacted.

Legal proceedings, particularly class action lawsuits, may require human and financial resources, distract our management, and negatively affect our reputation and results of operations.

From time to time, we and our institutions have been and may be involved in various legal proceedings.

In recent years, we have observed litigation brought against for-profit schools, including class actions brought by students and prospective students based on alleged misrepresentations about a school’s programs, “qui tam” lawsuits, and investigations by state attorneys general into for-profit postsecondary education institutions, which are described above under the heading “Risks Related to the Regulation of Our Industry”.

Such matters can be time-consuming, require significant human and financial resources to investigate and respond to claims brought in any future litigation, and may divert management’s attention from operating our business.

Furthermore, such matters are unpredictable and could lead to larger payments or liabilities, including adverse regulatory action, and, as a result, negatively affect our results of operations.

In recent years, we have observed litigation brought against for-profit schools, including class actions brought by students and prospective students based on alleged misrepresentations about a school’s programs, “qui tam” lawsuits, investigations by state attorneys general into for-profit postsecondary education institutions, and compliance reviews or similar proceedings brought by regulatory agencies, which are described above under the heading “Risks Related to the Regulation of Our Industry”.

Even if we are able to successfully defend against lawsuits or claims, such matters can be time-consuming, require significant human and financial resources to investigate and respond to claims brought in any future litigation, and may divert management’s attention from operating our business.

Furthermore, such matters are unpredictable and could lead to larger payments or liabilities, including adverse regulatory action, monetary damages, fines, limitations, loss of Title IV funding, injunctions, or other penalties, including the requirement to make refunds, and, as a result, negatively affect our results of operations.

Risks Related to Our Technology Infrastructure

Our ongoing transition away from Collegis for outsourced RU marketing and information technology functions to a new provider may not be timely, efficient, or cost-effective, or may pose other operational challenges.

RU has historically relied on Collegis for a variety of outsourced marketing services and information technology functions under one contract for marketing services and another for information technology functions.

In April 2022, we notified Collegis that we intended to permit the contracts to expire by their terms on September 30, 2024.

The marketing services contract was thereafter mutually terminated effective January 31, 2023.

We have transitioned the marketing services and are in the midst of transitioning the information technology services currently outsourced to Collegis back to our operations or to one or more other third-party vendors by September 30, 2024.

We expect to conduct the majority of information technology transition and incur most of the associated expenses in 2024.

The transition has caused and will in the future cause us to incur additional expense related to transferring assets and services.

The complexity and breadth of this insourcing creates inherent risks, including the risk of inefficiencies and significant disruption of typical information technology and business processes as new operations are coming online, a decrease in quality or speed of service as compared to the third-party provider, and unexpected additional expenses.

We need to continue to expend time, money, and resources into our and our institutions’ information technology, which may place a strain on our capacity that could adversely affect our systems, controls, and operating efficiency, and those of our institutions.

We need to invest capital, time, and resources to update our information technology, including our hardware and student-facing systems, in response to competitive pressures in the marketplace and student expectations, including data analytics, artificial intelligence, interactive and immersive user and learning experience technologies such as those that leverage virtual and augmented reality, multi-channel customer engagement, and robotic process automation, to update or replace older systems and infrastructure, and to enhance functionality.

We have made investments to integrate the technology systems of RU and GSUSA and will likely have to make similar investments for any other business we may acquire in the future.

Transitioning outsourced RU marketing and information technology functions to internal functions and for certain information technology functions, a managed service provider may not be efficient or cost-effective, or may pose other operational challenges.

RU historically relied on Collegis for a variety of outsourced marketing services and information technology functions under one contract for marketing services and another for information technology services.

We have transitioned the marketing and certain information technology services back to our operations, and, on April 1, 2024, as part of our technology transformation program, we transitioned portions of our technology function to a managed service provider for certain services including service desk, student support, end user support, and network management and operations.

The second phase of the technology transformation program, which included the insourcing of the information technology functions to APEI for our RU Segment, and the outsourcing of certain services to a managed service provider, was substantially completed as of September 2024.

This transition has caused and may continue to cause us to incur additional expense related to transferring assets and services.

The complexity and breadth of this insourcing and outsourcing creates inherent risks, including the risk of inefficiencies and significant disruption of typical information technology and business processes as new operations come online, a decrease in quality or speed of service, and unexpected additional expenses.

For more on the risks related to our use of a managed service provider, see the Risk Factor with the caption beginning “Significant system disruptions to our computer networks, technology infrastructure, or online classroom infrastructure, or to the networks, infrastructure, and systems, or business of third parties…”

We have expended and need to continue to expend time, money, and resources into our and our institutions’ information technology, which may place a strain on our capacity that could adversely affect our systems, controls, and operating efficiency, and those of our institutions.

We have invested and need to continue to invest capital, time, and resources to update our information technology, including our hardware and student-facing systems, in response to competitive pressures in the marketplace and student expectations, including data analytics, AI interactive and immersive user and learning experience technologies such as those that leverage AI, virtual and augmented reality, multi-channel customer engagement, and robotic process automation, to update or replace older systems and infrastructure, and to enhance functionality.

For example, in April 2024, APU announced its plan to expand its reach to become a global digital university that integrates emerging technology and enhanced teaching and learning opportunities for faculty and students.

In addition, we have made investments to integrate the technology systems of RU and GSUSA and will likely have to make similar investments for any other business we may acquire in the future, and the Combination.

The nature and age of our current information technology may limit our business opportunities, and our efforts to maintain and improve our information technology systems may not be successful, may cost more than expected, may increase our level of spending, not all of which can be capitalized, may take longer than expected or require us to devote more of our information technology resources than expected, or may otherwise adversely affect our financial condition.

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Similarly, even if we are able to increase the capacity of our institutions’ resources and update their resources appropriately, our financial condition and results of operations could be adversely affected by an increased level of spending.

Significant system disruptions to our online computer networks, technology infrastructure, or online classroom infrastructure, or to the networks, infrastructure, and systems of third parties, could negatively impact our ability to generate revenue and could damage our reputation, limiting our ability to attract and retain students.

Increased use of AI may present operational, reputational, legal, regulatory, and competitive risks and could result in additional costs, each of which could materially and adversely affect our business, financial condition, and results of operations.

We are making investments in the use of AI throughout our business.

We plan to increase our use of systems and tools that incorporate AI-based technologies for students, employees, faculty, and staff.

AI is an emerging technology and, as such, presents the following inherent risks:

• Other postsecondary institutions may more successfully and quickly integrate AI as a means to facilitate business growth, decrease operational expenses, and improve the student experience, which may cause us to be unable to attract or retain students or faculty and staff.

• We may be unable to implement AI technologies in a cost-effective manner or in manner that appeals or is satisfactory to current or prospective students relative to other institutions.

• AI may hallucinate or be error-prone, demonstrate biases or discriminatory practices and responses, and its use may result in other perceived or actual legal, compliance, privacy, security, and ethical risks.

• Due to changing regulatory conditions and related compliance obligations and otherwise, may be unable to develop effective policies and provide adequate training regarding proper use of AI, which could lead to misuse by employees, faculty, and staff.

AI may also subject to misuse by students.

• While AI technologies may help provide more tailored or personalized learner experiences, its use this manner, and the associated risks, including the risks of increased plagiarism, cheating, and academic integrity, is subject to ongoing debate in the education industry.

• The use of AI technologies may make us more susceptible to cybersecurity incidents that affect the personal data of end users of AI applications.

Such cybersecurity incidents may be more complicated to discover due to the nature of AI.

• Compliance with new or changing laws, regulations, or industry standards relating to AI may impose significant operational costs and may limit our ability to develop, deploy, or use AI technologies.

• Any disruption or failure in our AI systems or infrastructure could adversely impact our operations.

Some or all of the foregoing risks could result in additional costs or materially and adversely affect our business, financial condition, reputation, and results of operations.

Significant system disruptions to our computer networks, technology infrastructure, or online classroom infrastructure, or to the networks, infrastructure, systems, or business of third parties, could negatively impact our ability to generate revenue and could damage our reputation, limiting our ability to attract and retain students.

The performance and reliability of our and our institutions’ networks and technology infrastructure, including those of third parties’ systems we use or rely on, is critical to our operations and our institutions’ reputation and ability to attract and retain students.

Any system error or failure, including as a result of outages and other difficulties that may result from having or relying on outdated systems or infrastructure, or a sudden and significant increase in bandwidth usage, could interrupt our or our institutions’ ability to operate and could result in the unavailability of our online classrooms, preventing students from accessing their courses and adversely affecting our results of operations.

In addition, our institutions’ technology infrastructure, and the technology infrastructure of our third-party vendors, could be vulnerable to interruption or malfunction due to events beyond our control, including natural disasters, cyber-attacks, terrorist activities, and telecommunications failures, as well as our own failure to fully develop or test our business continuity and disaster recovery plans.

In addition, our institutions’ technology infrastructure, and the technology infrastructure of our third-party vendors, could be vulnerable to interruption or malfunction due to events beyond our control, including natural disasters, cyber-attacks, mistakes or malfeasance by our workforce, terrorist activities, and telecommunications failures, as well as our own failure to fully develop or test our business continuity and disaster recovery plans.

At APUS, PAD has been predominantly developed in-house, with limited support from outside vendors.

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To the extent that we face system disruptions, malfunctions or vulnerabilities with PAD or the failure of PAD to meet internal or industry standards, or lose employees with experience on our systems, we may not have the capacity to address such disruptions, malfunctions, vulnerabilities, or failures or to continue to administer or make adequate modifications to PAD with our internal resources, and we may not be able to identify outside contractors with expertise relevant to our custom system.

We rely on third parties for certain information technology capabilities.

We use third-party services such as cloud computing and software-as-a-service for certain aspects of our operations and are reliant on the capabilities of vendors for such functions.

Vendors may take actions beyond our control that could adversely affect our access to the providers’ services, including discontinuing or limiting our access to their platforms or modifying or interpreting their terms of service or other policies in a manner that impacts our ability to run our business and operations.

In addition, there is no assurance that we will be able to renew contracts with vendors that are subject to expiration or that such renewals will be on the same or substantially similar terms or on conditions that are commercially reasonable to us.

We rely on third parties for certain information technology capabilities and managed services.

We use third-party services such as cloud computing and software-as-a-service for certain aspects of our operations, and a managed service provider for certain services including service desk, student support, end user support, and network management and operations, and are reliant on the capabilities of the third parties for such functions.

These third parties may take actions beyond our control or experience financial, organizational, or other disruptions that could adversely affect our access to their services, including by discontinuing or limiting our access to their platforms, modifying or interpreting their terms of service or other policies in a manner that impacts our ability to run our business and adversely impacts our operations, or providing us with service quality that does not meet our expectations, standards, or needs.

There is no assurance that we will be able to renew contracts with third parties that are subject to expiration or that such renewals will be on the same or substantially similar terms or on conditions that are commercially reasonable to us.

Any transition of third-party services, whether to another vendor or directly to us or our institutions, could be difficult to implement and cause us to incur significant time and expense.

Any significant downtime or other interruption or disruption of these services, whether due to cyber-attacks, other cybersecurity incidents, or other causes, could adversely impact our operations and our business.

Any significant downtime or

other interruption or disruption of these services, whether due to cyber-attacks, other cybersecurity incidents, or other causes, could adversely impact our operations and our business.

Any significant interruption in the operation of our or our vendors’ data centers or server rooms could cause a loss of data.

Even with redundancy, a significant interruption in the operation of these facilities or the loss of institutional and

operational data due to a natural disaster, fire, power interruption, act of terrorism, or another unanticipated catastrophic event, including as a result of climate change, may not be preventable.

Even with redundancy, a significant interruption in the operation of these facilities or the loss of institutional and operational data due to a natural disaster, fire, power interruption, act of terrorism, or another unanticipated catastrophic event, including as a result of climate change, may not be preventable.

Any significant interruption in the operation of these facilities, including an interruption caused by the failure to successfully expand or upgrade systems, or to manage transitions and implementations, could reduce the ability to manage network and technological infrastructure, which could adversely affect our institutions’ operations and reputations.

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From time to time, we experience security events and incidents, and these reflect an increasing level of sophistication, organization, and innovation.

devoted and will continue to devote significant resources to the security of our computer systems, but they may still be vulnerable to these threats and may subsequently be deemed to have been inadequate by regulators or courts.

We have devoted and will continue to devote significant resources to the security of our computer systems, but they may still be vulnerable to these threats and may subsequently be deemed to have been inadequate by regulators or courts.

The lack of prescriptive measures in data security and cybersecurity laws could contribute to any such regulator or court findings of inadequacy.

Although we maintain insurance in respect of these types of events, there is no assurance that available insurance proceeds would be adequate to compensate us for damages sustained due to these events.

Higher education institutions also face a growing array of AI-based threats.

Failure to comply with privacy laws or regulations could have an adverse effect on our business.

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These evolving laws and interpretations are difficult to predict and could adversely impact our business, including by increasing compliance costs, by for example, restricting use or sharing of consumer data, including for marketing or advertising.

The CCPA and related regulations is an example of a U.S.

The CCPA, as amended by the CPRA, and related regulations is an example of a U.S.

state law that imposes disclosure obligations on businesses for individuals’ personal information and affords those individuals rights relating to their personal information that may affect our ability to use personal information.

The CCPA provides for penalties and includes a private right to action for certain data breaches.

The CPRA expands the CCPA’s requirements and provides certain rights to consumers to correct personal information and limit its disclosure.

Other comprehensive state privacy laws that our institutions may be subject to with varying requirements also came into effect in 2023.

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• actions of others in our industry, including but not limited to acquisitions, investments, or strategic alliances.

• actual or anticipated changes in our earnings, our institutions’ net course registrations or enrollments, or fluctuations in our results of operations;

• actual or anticipated changes in our earnings, our institutions’ net course registrations or enrollments, or seasonal and other fluctuations in our results of operations as a result of variances to the student populations of our institutions and related fluctuations in expenses;

• our ability to meet or exceed, or changes in, the expectations of securities analysts, or the extent or accuracy of analyst coverage of our company;

3 unchanged sentences

• recruitment or departure of key personnel;

• regulatory burdens and risks associated with a change of control or ownership;

• an inability to realize in full anticipated benefits of acquisitions;

• investment strategies or other actions by those trading in our stock.

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Securities litigation could result in substantial costs and monetary damages and could divert management’s attention and resources from our business, and our insurance may not be available or adequate to cover these claims.

Seasonal and other fluctuations in our results of operations could adversely affect the trading price of our common stock.

Our quarterly results fluctuate and, therefore, the results in any quarter may not represent the results we may achieve in any subsequent quarter or full year.

Our revenue and results of operations normally fluctuate as a result of seasonal or other variations in our institutions’ enrollments and associated expenses.

The student population at our institutions varies as a result of new enrollments, graduations, student attrition, increased military operations and deployments, the success of our marketing programs, and other reasons that we cannot always anticipate.

We expect quarterly fluctuations in results of operations to continue as a result of seasonal enrollment patterns at our institutions and related fluctuations in expenses.

These fluctuations may result in volatility in our results of operations, have an adverse effect on the market price of our common stock, or both.

We may face risks associated with stockholder activism.

Publicly traded companies are subject to campaigns by stockholders advocating corporate actions related to matters such as corporate governance, operational practices, and strategic direction.

We have previously been subject to stockholder activity and demands and may be subject to further activity and demands in the future.

Such activities could interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, and divert the attention of management, any of which could have an adverse effect on our business or the price of our common stock.

We have previously been subject to stockholder activism and demands and may be subject to further activism and demands in the future.

Such activism could interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, and divert the attention of management, any of which could have an adverse effect on our business or the price of our common stock.

Our future results of operations and financial condition may not meet our guidance or expectations.

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Annual guidance, while based on outcomes and assumptions that we believe, at the time guidance is given, are reasonable, may to a greater extent than quarterly guidance be unable to reflect the impact of certain actions taken by us, changes in legislation, regulatory actions, or accrediting agency decisions affecting any of our institutions, or other events, and may be less accurate than quarterly guidance.

Environmental, social, and governance, or ESG, matters and the perception of our activities in these areas by stakeholders may impact our business and reputation.

Governmental authorities, non-governmental organizations, investors, external stakeholders, faculty, employees, and students are increasingly sensitive to ESG-related matters, such as diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency, and addressing human capital matters in our operations.

Our ability to compete could be affected by changing preferences and expectations of our stakeholders and our failure to meet their expectations.

We risk negative stockholder reaction and activism, including from proxy advisory services, as well as damage to its brand and reputation, if we are perceived as not acting responsibly in key ESG areas.

In addition, stakeholders may disagree with our ESG-related priorities and initiatives.

If we do not meet the evolving and varied expectations of our stakeholders with respect to ESG-related matters, we could experience reduced enrollment, face reputational harm, be subject to adverse governmental action, or experience other negative impacts on our business and results of operations.

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

What changed 10-K

Item 1A. Risk Factors