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For a discussion of our financial condition and results of operations for 2023 compared to 2022, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 5, 2024, which discussion is incorporated in this Annual Report by reference and which is available free of charge on the SECs website at www.sec.gov.
−Removed: We are a provider of online and campus-based postsecondary education, and career learning, to approximately 107,000 students through four subsidiary institutions, American Public University System, or APUS, Rasmussen University, or RU, Hondros College of Nursing, or HCN, and Graduate School USA, or GSUSA.
+Added: We are a provider of online and campus-based postsecondary education to approximately 106,700 students, and career learning to approximately 24,600 individuals, through four subsidiary institutions, American Public University System, or APUS, Rasmussen University, or RU, Hondros College of Nursing, or HCN, and Graduate School USA, or GSUSA.
Our subsidiary institutions offer purpose-built education programs and career learning designed to prepare individuals for productive contributions to their professions and society, and to offer opportunities designed to advance students in their current professions or to help them prepare for their next career.
−Removed: Our subsidiary institutions are licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent the institutions believe such licenses or authorizations are required, and APUS, RU, and HCN and are certified by the U.S.
−Removed: Department of Education, or ED, to participate in Title IV programs.
+Added: Our subsidiary institutions are licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent the institutions believe such licenses or authorizations are required, and APUS, RU, and HCN are certified by the Department of Education, or ED to participate in Title IV programs.
Additional information regarding our subsidiary institutions and their regulation is included in the “Business” section of this Annual Report.
−Removed: On January 1, 2022, or the GSUSA Closing Date, our wholly owned subsidiary, American Public Training LLC, completed our acquisition, or the GSUSA Acquisition, of substantially all the assets of Graduate School USA.
Our revenue is largely driven by the number of students enrolled at our institutions, the number of and types of courses that students take, student payor source, and the mix of programs students attend.
−Removed: Our consolidated revenue in 2023 was $600.5 million, representing a $5.8 million, or 1.0%, decrease from $606.3 million in 2022.
−Removed: A significant portion of our revenue comes from our institutions’ participation in Title IV programs, APUS’s participation in the TA programs, and other government programs, and this creates significant risks to our operations.
+Added: Our consolidated revenue in 2024 was $624.6 million, representing a $24.0 million, or 4.0%, increase from $600.5 million in 2023.
+Added: A significant portion of our revenue comes from our institutions’ participation in Title IV programs, APUS’s participation in the Department of Defense, or DoD, tuition assistance, or TA, programs, and other government programs, and this creates significant risks to our operations.
Our operations are organized into three reporting segments:
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Financial information regarding each of our reportable segments is reported in this Annual Report in the sections “Financial Statements and Supplementary Data” and “– Operating Results by Reportable Segment Year Ended December 31, 2024, Compared to Year Ended December 31, 2023”.
+Added: On January 28, 2025, we announced our plan to combine APUS, RU, and HCN into one consolidated HLC-accredited institution that will be a university system encompassing all APUS, RU, and HCN programs, campuses, and operations, or the Combination.
+Added: The combined institution will be named American Public University System, or the Combined Institution.
+Added: As a result of the Combination, the Combined Institution will have two divisions, tentatively named (i) APUS Global, comprised of American Military University and American Public University, or 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 division names to be determined closer to closing of the Combination.
+Added: The structure will allow each
+Added: institution to continue to serve its particular student populations while benefiting from being part of a single university system.
+Added: The structure is designed to leverage each institution’s strengths to focus our efforts on supporting the military and veterans and expanding our nursing and healthcare platforms to better serve our students.
+Added: We believe combining our subsidiary institutions into a single university system will strengthen the financial position of our Company as a whole, enable us to operate with greater efficiency, and facilitate innovation across the Company through more direct collaboration among the educational divisions.
+Added: We anticipate completing the Combination in the third quarter of 2025 subject to obtaining required approvals and ED taking related actions.
+Added: We anticipate changes to our segment reporting, combining our HCN Segment with our RU Segment.
+Added: For the year ended December 31, 2024, we incurred approximately $2.2 million in professional fees and expect to incur between approximately $3.0 million and $5.0 million in professional fees in 2025 to complete the Combination.
+Added: See the Risk Factor with the caption beginning “The planned combination of APUS, RU, and HCN …” and “Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN” for more information.
Student Body.
−Removed: As of December 31, 2023, approximately 66% of APUS’s students self-reported that they served in the military on active duty at the time of initial enrollment, and as a result APUS is particularly reliant on tuition assistance, or TA, programs, and the Department of Defense, or DoD, budget.
+Added: At APUS, all coursework is delivered online.
+Added: As of December 31, 2024, approximately 65% of APUS’s students self-reported that they served in the military on active duty at the time of initial enrollment, and as a result APUS is particularly reliant on TA programs, and the DoD budget.
At APUS, active-duty military students generally take fewer courses per year on average than non-military students and have a lower revenue per net course registration than students utilizing other funding sources.
−Removed: A significant portion of APUS’s registrations are also attributable to students using VA
−Removed: education benefits, and funds from Title IV programs.
+Added: A significant portion of APUS’s registrations is also attributable to students using Department of Veterans Affairs, or VA education benefits, and funds from Title IV programs.
RU nursing students and HCN students generally attend classes at physical campuses and use Title IV program funds.
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Increased Costs and Expenses.
−Removed: Our costs and expenses have increased over time due in part to the acquisitions of RU and GSUSA, campus relocations for RU and HCN, the addition of new HCN campuses, including HCN’s new campus located in suburban Detroit, which opened in October 2022, increases in nursing faculty and employee compensation costs, and the changing needs of our students, including costs for technology required to support students at our institutions.
+Added: Our costs and expenses have increased, excluding impairment charges on goodwill and intangible assets, due in part to the loss on leases for campus closures and consolidations at RU, and campus relocations for HCN.
+Added: Other cost and expense increases include increases in nursing faculty and employee compensation costs, professional fees associated with the Combination, information technology transition services costs, and the changing needs of our students, including costs for technology required to support students at our institutions.
We believe that in order to continue to attract and retain qualified students our institutions need to continuously update and expand the content of their existing programs and develop new programs, specializations and modes of teaching, faculty engagement initiatives, and co-curricular initiatives.
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These headcount reductions reflect our ongoing efforts focused on realigning our organizational structure, eliminating redundancies, and optimizing certain functions.
−Removed: In the third quarter of 2021, we completed a reduction in force that resulted in the termination of 11 full-time faculty members at APUS and 28 non-faculty employees across a variety of roles and departments at APEI and APUS, representing approximately 3.2% of the APUS full-time faculty workforce, and 3.1% of the APEI and APUS non-faculty workforce.
−Removed: We incurred approximately $1.0 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force.
−Removed: The reduction in force resulted in approximately $1.4 million in pre-tax labor and benefit savings in 2021.
In the first quarter of 2022, RU completed a reduction in force that resulted in the termination of nine full-time faculty members and 19 non-faculty employees across a variety of roles and departments at RU, representing approximately 3.0% of RU’s full-time faculty workforce, and 2.1% of RU’s non-faculty workforce.
We incurred an aggregate of approximately $0.4 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force.
−Removed: The reduction in force resulted in pre-tax labor and benefit savings of approximately $2.7 million in 2022.
In the fourth quarter of 2022, we completed a reduction in force that resulted in the termination of 98 non-faculty employees and the elimination of 78 open positions across a variety of roles and departments at APEI, APUS, RU and HCN representing approximately 5.8% of our non-faculty workforce.
We incurred an aggregate of approximately $3.1 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force.
−Removed: The reduction in force resulted in an additional pre-tax labor and benefit savings of approximately $2.3 million in 2022.
In the third quarter of 2023, we completed a reduction in force that resulted in the termination of 74 employees, primarily non-faculty, and the elimination of 57 open positions across a variety of roles and departments at APEI, RU, HCN and GSUSA.
We incurred an aggregate of approximately $3.0 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force.
−Removed: The reduction in force resulted in an additional pre-tax labor and benefit savings of approximately $6.2 million in 2023, or $15.5 million on an annualized basis.
−Removed: The cost savings noted above do not include expenses associated with employee severance benefits.
We recorded expenses for termination benefits related to the workforce reductions in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 420, Exit or Disposal Cost Obligations.
+Added: Tuition Increases.
+Added: Providing affordable degree and certificate programs is an important element of our competitive strategy.
+Added: As more fully described in “Business – Our Institutions and Operations – Our Institutions – Accreditation – Affordability and Cost of Attendance”, certain of our institutions implemented tuition and fee increases in 2023 and 2024.
+Added: Even with these increases, tuition and fees at 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.
Our Initiatives.
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• altering our institutions’ marketing programs to target the appropriate prospective students;
+Added: • combining our institutions into a single university system to strengthen our financial position and enable us to facilitate innovation across the Company through more direct collaboration among the educational units;
• investing in technology related to our overall information technology program to support our current and future needs;
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• improving our RU Segment financial results, NCLEX pass rates, and stabilizing enrollment;
−Removed: • upgrading or relocating existing campuses and opening additional campuses to meet student needs;
• changing fund disbursement methods;
+Added: • improving student retention at our HCN Segment;
• implementing alternative learning delivery methods.
Information technology systems are an essential part of the student experience and our business operations, as discussed more fully in “Business – Information Technology” in this Annual Report.
−Removed: APEI provides information technology services to APUS, HCN, RU, and GSUSA through a shared services model.
+Added: APEI provides information technology services to its institutions through a shared services model.
We believe we will need to continue, and potentially increase, our investment of time and money in technology operations and enhancements to support our systems and mission and evaluate when it is appropriate to make significant changes, modifications, or upgrades.
−Removed: We believe we will also need to continue to make investments in information technology in response to competitive pressures in the marketplace, including increased demands for interactive solutions and access from multiple platforms, and to update older systems and to enhance functionality.
+Added: We believe we will also need to continue to make investments in information technology in response to competitive pressures in the marketplace, including increased demand for interactive solutions and access from multiple platforms, and to update older systems and to enhance functionality.
Information technology operating and capital expenditures may increase in future periods as we accelerate the investment in and refreshment of our information technology systems.
Changes and upgrades to our information technology systems have resulted and may continue to result in our incurring significant costs, including in the short term, and carry risk to our operations and financial results.
−Removed: In 2021 and 2022, we incurred approximately $6.0 million, and $3.2 million, respectively, in information technology costs in our APUS Segment related to our multi-year technology transformation program.
−Removed: In 2021, we completed work to consolidate HCN and APUS onto a single, cloud-based LMS platform, Brightspace by D2L.
−Removed: We are continuing to consolidate APUS’s customer relationship management systems onto a single platform, the first phases of which we completed in 2022.
−Removed: We also have several other systems that support the student experience, financial aid processing, financial management, human resources processes, marketing, and decision support.
+Added: In 2022, we incurred approximately $3.2 million in information technology costs in our APUS Segment related to our multi-year technology transformation program.
In early 2023, we launched a new native mobile application to improve the student experience at APUS.
+Added: In 2024, we completed the consolidation of APUS’s customer relationship management systems onto a single platform.
+Added: We also have several other systems that support the student experience, financial aid processing, financial management, human resources processes, marketing, and decision support.
+Added: In April 2024, as part of our technology transformation program, we transitioned to a managed service provider for certain services including service desk, student support, end user support, and network support and operations.
+Added: The second phase of the project included the insourcing of information technology to APEI for RU and was completed as of October 1, 2024.
+Added: We incurred approximately $3.8 million in information technology transition services costs in 2024.
Not all of our information technology spending can be capitalized, and our investments may cost more than expected or fail to be successful.
Furthermore, as a result of unsuccessful development efforts, or a result of replacing outdated technology, software, or other technology related assets, we may have assets that become impaired.
−Removed: We plan to transition all of RU’s information technology services currently outsourced to Collegis back to our operations or to one or more other third-party vendors.
−Removed: As part of that transition and our overall multi-year technology transformation program, in December 2023, we entered into an agreement to outsource a number of our information technology operations to a managed service provider, including service desk, end user support, and network support and operations.
−Removed: As we continue to develop our transition plans, at this time we estimate that the cost of the transition will be between approximately $2.9 million and $3.6 million in 2024.
−Removed: Opening new campuses and maintaining existing campuses at RU and HCN may result in our incurring significant costs in the future.
−Removed: At RU and HCN, adding new campuses is a necessary step to extend our student reach throughout the United States.
−Removed: For example, during 2021 and 2022, HCN opened new campuses in Akron, Ohio, and Detroit, Michigan, respectively, and in July 2022, RU opened a consolidated Hennepin/Anoka, Minnesota campus by merging two existing campuses and relocating to a new space.
−Removed: Operating and capital expenditures to increase in future periods as we continue to add new campuses and incur maintenance costs at existing campuses.
+Added: 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.
+Added: As fully described in “Risk Factors – Risks Related to Attracting and Retaining Students – Planned and actual closure of campuses or termination of programs on certain campuses may adversely impact us and our institutions”, opening new
+Added: campuses, maintaining existing campuses, and closing or consolidating campuses at RU and HCN may result in our incurring significant costs in the future.
+Added: We expect operating and capital expenditures to increase in future periods as we continue to add new campuses, consolidate existing campuses, and incur maintenance costs at existing campuses.
RU Change in Ownership.
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ED and RU entered into a Temporary Provisional Program Participation Agreement, or TPPPA, effective in October 2021, that allowed RU to continue disbursing Title IV funds during the period of ED’s review of the change in ownership application.
−Removed: The TPPPA continued the growth restrictions that ED
−Removed: imposed as a result of RU’s March 2019 change in ownership and control, which was prior to our acquisition of RU, including limitations on new programs and locations, and an enrollment cap, until after ED reviewed and accepted financial statements and compliance audits that cover complete fiscal periods of RU’s Title IV participation under our ownership.
−Removed: In August 2023, ED notified RU that it had approved RU’s continued participation in the Title IV programs under APEI ownership under a Provisional Program Participation Agreement, or PPPA.
−Removed: The PPPA 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.
−Removed: ED continues the prior requirement that RU to submit periodic financial and Title IV enrollment reports.
−Removed: The PPPA also imposes new reporting requirements related to accrediting agency actions, government actions, and class actions and new reporting requirements related to student complaints.
−Removed: 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 our ownership, RU may seek removal of the enrollment cap and approval for new programs that replace current programs.
−Removed: Although one complete fiscal year of RU’s Title IV participation under APEI’s ownership has passed and we believe that we may now seek approval for new programs that replace current programs, we have not yet confirmed with ED that it has accepted the financial statements and compliance audits for such purpose.
−Removed: The PPPA also specifies that 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.
−Removed: For the second and third fiscal years of RU’s Title IV participation under APEI’s ownership, RU is also subject to enrollment growth limitations, after which RU can request that ED release RU from further enrollment restrictions.
−Removed: 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.
−Removed: We believe we have met all obligations for the release of the letter of credit.
−Removed: For more information on the regulatory review related to the Rasmussen Acquisition and RU’s previous change in ownership and related risks, please refer to “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures” and “– Regulatory Actions and Restrictions on Operations – Change in Ownership Resulting in a Change of Control” and “Risk Factor – Risk Related to the Regulation of Our Industry - RU is currently on provisional certification with ED, and the terms of that provisional certification could limit its potential for growth”.
+Added: The TPPPA continued the growth restrictions that ED imposed as a result of RU’s March 2019 change in ownership and control, which was prior to our acquisition of RU, including limitations on new programs and locations, and an enrollment cap, until after ED reviewed and accepted financial statements and compliance audits that cover complete fiscal periods of RU’s Title IV participation under our ownership.
+Added: For more information on the regulatory review related to the Rasmussen Acquisition and RU’s previous change in ownership and related risks, please refer to “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures” and “– Regulatory Actions and Restrictions on Operations – Change in Ownership Resulting in a Change of Control”.
postsecondary education market is characterized by intense competition, with approximately 4,500 institutions of higher learning.
−Removed: Due to the increase in online postsecondary offerings, which accelerated as a result of the COVID-19 pandemic, coupled with the prospect of continued uncertainty in postsecondary enrollment in the United States, we face increased competition as fewer students pursue degree-based postsecondary education from a wider selection of offerings.
−Removed: For example, in 2019, the Navy launched the U.S.
−Removed: Naval Community College, or the USNCC, which supports naval education for enlisted service members.
−Removed: While a number of schools with which APUS competes are participating partners with the USNCC, APUS, as a for-profit educator, is not an eligible partner.
−Removed: Navy-related registrations were 5% of total net registrations, using TA as their primary pay type, in each of the years ended December 31, 2021, 2022, and 2023, respectively.
−Removed: We expect each military branch and the DoD to continually evaluate their approaches to education, and any resulting changes could have a material adverse effect on APUS’s enrollments.
+Added: Due to the increase in online postsecondary offerings, coupled with the prospect of continued uncertainty in postsecondary enrollment in the United States, we face increased competition as students pursue degree-based postsecondary education from a wider selection of offerings.
+Added: We expect each branch of the Armed Forces and the DoD to continually evaluate their approaches to education, and any resulting changes could have a material adverse effect on APUS’s enrollments.
For more information on our competition and its potential impacts, please refer to “Business – Our Market and Competition – Competition” in this Annual Report.
“90/10 Rule” Compliance and Delayed Billing.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: 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 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.
+Added: 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.
+Added: 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.
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.
−Removed: 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...” cash payments from the Army to APUS that were expected in 2021 and 2022 were delayed and were received in 2023.
−Removed: These delayed payments, 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 APUS’s 90/10 Rule percentage to increase.
−Removed: For the year ended December 31, 2023, APUS received approximately $56.3 million in payments from the Army, as compared to $48.8
−Removed: million for the year ended December 31, 2022.
−Removed: Of the amount received from the Army in 2023, approximately $18.4 million represented delayed payments that had been expected in prior years.
−Removed: 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.
−Removed: If we are unable to collect aged amounts due from the Army, this may cause our bad debt expense to increase.
−Removed: Moreover, delayed invoicing 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.
−Removed: In September 2023, APUS changed its approach to invoicing for TA, which had the effect of offsetting the receipt of the delayed payments from the Army.
−Removed: 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.
−Removed: 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, which may cause the “90%” side of the ratio to increase in 2024 or future years.
−Removed: 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.
−Removed: The change in billing practice also added to our accounts receivable as of December 31, 2023 and resulted in an increase to our leverage ratio 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.
−Removed: In addition, effective January 1, 2024, APUS revised its billing policy for students utilizing TA, which previously ranged from two weeks to five weeks after course start date to nine weeks after the course start date.
−Removed: Billed accounts receivable are considered past due if the invoice has been outstanding for more than 30 days.
+Added: 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...”, 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: The change in billing approach positively impacted the “90%” side of the ratio in 2023.
+Added: 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.
+Added: The change in billing approach positively impacted the “90%” side of the ratio in 2024.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: The change in billing practice added to our accounts receivable as of December 31,
+Added: 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 as further discussed in “Note 9.
+Added: Long-Term Debt” and “Note 13.
+Added: Preferred Stock” included in the Consolidated Financial Statements in this Annual Report.
Regulated Industry.
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The composition of our students, changing market demands, and competition make forecasting very difficult, and we are unable to determine if we will continue to grow or what level of growth we will achieve, if any.
−Removed: Similarly, you should not rely on our operating margins in any prior periods as an indication of our future operating margins.
Tuition rate.
Providing affordable degree and certificate programs is an important element of our competitive strategy.
−Removed: APUS implemented modest tuition and fee increases for non-military and veteran students in the second and third quarters of 2023, but we estimate that APUS’s tuition and fees remain lower than the average in-state cost at public universities.
−Removed: RU implemented modest tuition increases effective in the first quarter of 2023 for select programs, and HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs.
−Removed: At RU and HCN, the tuition increases are adjusted to be consistent with the local campus markets.
−Removed: Even inclusive of these increases, RU and HCN’s tuition and fees 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.
−Removed: In the second quarter of 2024, as part of the continuous improvement initiatives in education quality, APUS plans to implement a modest tuition increase to master’s students across all categories, including military, non-military, and veteran students.
+Added: APUS implemented modest tuition and fee increases for non-military and veteran students in the second and third quarters of 2023.
+Added: In April 2024, APUS implemented an additional tuition increase to master’s level students across all categories, including military, non-military and veteran students, and in September 2024, APUS returned the military rate for master’s level students to the $250 per credit hour rate in effect prior to the April 2024 tuition increase.
+Added: We believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities.
+Added: RU implemented modest tuition increases for select programs in the first quarters of 2023 and 2024 for new students for select programs in August 2024, and for returning students for select programs in October 2024.
+Added: HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs.
+Added: In the third quarter of 2025, RU plans to implement a tuition increase, similar to the increase implemented in the third and fourth quarters of 2024.
+Added: The tuition and fee increases at RU and HCN are intended to reflect adjustments to be consistent with the local campus markets.
+Added: Even with these increases, RU and HCN’s tuition and fees 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.
Tuition revenue varies from period to period based on the number of students enrolled at our institutions, the number of and types of courses that students take, student payor source, the mix of programs students attend, the number of students starting courses each month during the period, and the timing of course starts each month or term.
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We also provide tuition grants and scholarships to certain students to assist them financially with their educational goals.
−Removed: The cost of these grants and scholarships is reported as a reduction of tuition revenue in the period incurred for purposes of establishing net tuition revenue.
−Removed: In addition to tuition, APUS charges a technology fee of $85 to $100 per course, depending on the course.
−Removed: In the second quarter of 2023, the technology fee increased from $65 per course, and in the third quarter of 2023 the technology fee per course was eliminated for all undergraduate students.
+Added: of these grants and scholarships is reported as a reduction of tuition revenue in the period incurred for purposes of establishing net tuition revenue.
+Added: In addition to tuition, prior to the second quarter of 2023, APUS charged a technology fee of $65 per course to all non-military students.
+Added: In the second quarter of 2023, the technology fee increased to $85 per course, and in the third quarter of 2023 the technology fee per course was eliminated for all undergraduate students.
APUS students are also charged certain additional fees, such as graduation, late registration, transcript request, and comprehensive examination fees, when applicable.
−Removed: Prior to September 2023, APUS provided a grant to cover the technology fee for students using TA and other programs, as applicable.
−Removed: Technology fee revenue net of grants was approximately $7.9 million in 2021, $7.3 million in 2022, and $8.1 million in 2023, or 2.8%, 2.6%, and 2.7% of revenue, respectively.
+Added: APUS provides an APUS-funded grant to cover the technology fee for certain students.
+Added: Technology fee revenue net of technology fee grants was approximately $7.3 million in 2022, $8.1 million in 2023, and $4.7 million in 2024, or 2.6%, 2.7%, and 1.5% of revenue, respectively.
RU and HCN students are charged fees for various items such as applications, testing, books and supplies, laboratory work, technology, and graduation.
9 unchanged sentences
loss on assets held for sale;
+Added: loss on leases;
and loss on disposals of long-lived assets.
3 unchanged sentences
Instructional costs and services expenses also include costs associated with curriculum development, academic records and graduation, and other services provided by our institutions, such as evaluating transcripts.
−Removed: Instructional costs and services expenses are generally affected by the cost of academic resources, the efficiency of delivering academic products and services to our students, salaries and benefits for our faculty and other academic and administration personnel, and the level of expenditures for new and existing academic programs.
+Added: Instructional costs and services expenses are generally affected by the cost of academic resources, including technology related costs, the efficiency of delivering academic products and services to our students, salaries and benefits for our faculty and other academic and administration personnel, and the level of expenditures for new and existing academic programs.
At RU and HCN, instructional costs and services expenses also includes operating expenses directly associated with campus operations, including rent.
1 unchanged sentence
Selling and promotional expenses.
−Removed: Selling and promotional expenses include salaries and benefits of personnel engaged in student enrollment, advertising costs, and marketing material production costs, and, prior to January 31, 2023, include expenses from the third-party contract with Collegis to provide marketing services to RU.
+Added: Selling and promotional expenses include salaries and benefits of personnel engaged in student enrollment, advertising costs, and marketing material production costs, and, prior to January 31, 2023, include expenses from the third-party contract with Collegis, LLC, or Collegis, to provide marketing services to RU.
Our selling and promotional expenses are generally affected by the cost of advertising media, the efficiency of our selling efforts, salaries and benefits for our selling and admissions personnel, and the level of expenditures for advertising initiatives for new and existing academic programs.
General and administrative expenses.
−Removed: General and administrative expenses include salaries and benefits of employees engaged in corporate management, finance, financial aid processing, information technology, including expenses from the third-party contract with Collegis to provide IT services to RU, human resources, finance, legal, and compliance, and other corporate functions, the cost of renting and maintaining administrative facilities, technology expenses, and costs for professional services.
+Added: General and administrative expenses include salaries and benefits of employees engaged in corporate management, finance, financial aid processing, information technology, human resources, finance, legal, and compliance, and other corporate functions, the cost of renting and maintaining administrative facilities, technology expenses, and costs for professional services.
General and administrative expenses also include bad debt expense.
−Removed: General and administrative expenses are generally affected by the costs of salaries and benefits for our general and administrative personnel, the efficiency of delivering back-office support including technology services, and the level of expenditures for supporting company initiatives.
+Added: General and administrative expenses are generally affected by the costs of salaries and benefits for our general and administrative personnel, the efficiency of delivering back-office support, including technology services, the costs of services purchased from third-party vendors, including information technology managed service providers, and the level of expenditures for supporting company initiatives.
Depreciation and amortization.
We incur depreciation and amortization expenses for costs related to the capitalization of property, equipment, software, and program development on a straight-line basis over the estimated useful lives of the assets.
−Removed: In addition, we incur amortization expense for the amortization of identified intangible assets with a definite life resulting from the Rasmussen Acquisition.
+Added: In addition, prior to September 30, 2024, we incurred amortization expense for the amortization of identified intangible assets with a definite life resulting from the Rasmussen Acquisition.
Impairment of goodwill and intangible assets .
2 unchanged sentences
Loss on assets held for sale is the difference between the asset’s estimated fair value less estimated costs to sell and the asset’s book value at the time the asset is no longer used for operations and reclassified as held for sale in accordance with the held-for-sale criteria.
+Added: Loss on leases.
+Added: Loss on leases recognizes the difference between the estimated remaining economic benefit to the Company and the carrying value of lease’s right-of-use assets, as well as losses incurred as the result of lease terminations.
Loss on disposals of long-lived assets .
7 unchanged sentences
During the preparation of these financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.
−Removed: On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition and the valuation of goodwill and indefinite-lived intangible assets.
+Added: On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition and the valuation of goodwill and indefinite-lived intangible assets and assets held for sale.
We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances.
10 unchanged sentences
Goodwill and indefinite-lived intangible assets.
+Added: In connection with the acquisitions of RU and HCN, we recorded goodwill and identified intangible assets.
Goodwill is the excess of the purchase price of an acquired business over the fair value of the assets acquired and liabilities assumed.
Goodwill is not amortized.
−Removed: Goodwill is reported at the reporting unit level that we have defined as our
−Removed: reporting segments.
−Removed: In connection with our acquisitions of RU and HCN, we recorded $217.4 million and $38.6 million of goodwill, respectively, in our RU and HCN Segments.
−Removed: We recorded non-cash impairment charges in 2022 and 2023 for RU, and 2016 and 2019 for HCN, reducing the carrying value of RU and HCN Segments goodwill to $33.0 million and $26.6 million, respectively.
+Added: Goodwill is reported at the reporting unit level that we have defined as our reporting segments.
There was no goodwill recorded in connection with the acquisition of GSUSA reported in Corporate and Other, and there is no goodwill in our APUS Segment.
−Removed: In addition to goodwill, in connection with the acquisitions of RU and HCN, we recorded identified intangible assets with an indefinite useful life in the aggregate amount of $51.0 million and $3.7 million, respectively, in our RU and HCN Segments, which include intangible assets related to trade name, accreditation, licensing, and Title IV, and affiliate agreements.
−Removed: We recorded non-cash impairment charges in 2023 and 2022, reducing the carrying value of RU identified intangible assets with an indefinite useful life to $24.5 million.
−Removed: There were no indefinite useful life intangible assets identified as a result of the acquisition of GSUSA reported in Corporate and Other.
−Removed: There are no indefinite-lived intangible assets in our APUS Segment.
−Removed: We recorded $35.5 million, $4.4 million, and $1.0 million of identified intangible assets with a definite useful life in connection with the acquisitions of RU, HCN, and GSUSA, respectively, reported in our RU and HCN Segments, and in Corporate and Other.
−Removed: There are no definite-lived intangible assets in our APUS Segment.
+Added: In connection with the acquisitions of RU and HCN, we also recorded identified intangible assets with an indefinite useful life which include trade name, accreditation, licensing, and Title IV, and affiliate agreements, and a definite useful life which include student roster, curricula, student contracts and relationships, lead conversions, and non-compete agreements.
+Added: There are no indefinite-lived or definite-lived intangible assets in our APUS Segment.
Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, and more frequently if events and circumstances exist that would more likely than not reduce the fair value of the reporting unit below its carrying amount.
The process of evaluating goodwill and indefinite-lived intangible assets for impairment is subjective and requires significant judgment and estimates.
−Removed: When performing an optional qualitative analysis, we consider many factors, including general economic conditions, industry and market conditions, certain cost factors, financial performance and key business drivers (for example, student enrollment), long-term operating plans, and potential changes to significant assumptions and estimates used in the most recent fair value analysis.
+Added: When performing an optional qualitative analysis, we consider many factors, including general economic conditions, industry and market conditions, certain cost factors, financial performance, and key business drivers (for example, student enrollment), long-term operating plans, and potential changes to significant assumptions and
+Added: estimates used in the most recent fair value analysis.
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions and estimates.
1 unchanged sentence
We estimate fair value in our quantitative analysis by weighting the results from two different valuation approaches.
−Removed: (1) discounted cash flow and (2) guideline public company.
+Added: (i) discounted cash flow and (ii) guideline public company.
Under the discounted cash flow method, fair value was determined by discounting the estimated future cash flows of RU and HCN at their estimated weighted-average cost of capital.
6 unchanged sentences
Our methodology for determining fair values remained consistent for the periods presented.
−Removed: During the second quarter of 2022, we completed a qualitative assessment to determine if an interim goodwill impairment test was necessary.
−Removed: The assessment concluded that due to our RU Segment under performance when compared to projections at the time of acquisition, along with our decline in market value and that of comparable companies, it was more likely than not that the fair value of our RU Segment was less than its carrying value.
−Removed: Therefore, we proceeded with a quantitative impairment test.
−Removed: As a result of these assessments, we recorded a non-cash goodwill impairment charge of $131.4 million, and to reflect the corresponding tax impact, in the second quarter of 2022, to reduce the carrying value of the RU Segment goodwill.
−Removed: In addition, we concluded there were indicators of impairment of the RU Segment intangible assets during the second quarter of 2022 and during the annual assessment.
−Removed: We determined the fair value of the RU Segment accreditation, licensing and Title IV indefinite-lived intangible asset was $13.5 million, during the second quarter of 2022, and $2.0 million, during the annual assessment, less than its carrying value.
−Removed: As a result, we recorded total non-cash impairment charges of $15.5 million during 2022 to reduce the carrying value of our RU Segment indefinite-lived intangible assets.
−Removed: There were no indicators of impairment for our HCN Segment.
−Removed: During the second quarter of 2023, we completed qualitative assessments to determine if an interim goodwill impairment test was necessary.
−Removed: The assessment concluded that due to our RU Segment underperformance when compared to the 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, it was more likely than not that the fair value of our RU Segment was
−Removed: less than its carrying value.
−Removed: Therefore, we proceeded with a quantitative impairment test.
−Removed: As a result of these assessments, we recorded a non-cash goodwill impairment charge of $53.0 million, which reflects the corresponding tax impacts, to reduce the carrying value of the RU Segment goodwill.
−Removed: In addition, we concluded there were indicators of impairment of the RU Segment’s intangible assets.
−Removed: As a result, we recorded non-cash impairment charges of $11.0 million to reduce the carrying value of our RU Segment indefinite-lived intangible assets.
−Removed: There were no indicators of impairment for our HCN Segment.
At October 31, 2024, we completed our annual assessment of goodwill and indefinite-lived intangibles for our RU and HCN Segments.
The annual assessment concluded that the fair value of goodwill for RU and HCN exceeded their carrying values by approximately $71.9 million, or 62%, and $8.6 million, or 24%, respectively.
−Removed: Significant assumptions in the forecast used in the discounted cash flow valuation model include the recovery in our RU Segment enrollment in year three to historical norms and two future campus openings in our HCN Segment.
−Removed: These assumptions could be negatively affected by and of the following including, but not limited to, changes in our regulatory environment, declines in student enrollment, adverse actions by state boards of nursing including enrollment caps, and increases in our expenses not in our plan.
−Removed: In addition, as described above, we determined the fair value of our RU Segment’s indefinite-lived intangible asset was less than its carrying value.
−Removed: As a result, we recorded a $2.0 million non-cash impairment charge to reduce the carrying value of our RU Segment indefinite-lived intangible assets for accreditation, licensing and Title IV.
−Removed: There was no impairment to HCN goodwill or indefinite-lived intangible assets.
−Removed: The estimated fair value of our RU Segment does not significantly exceed its carrying amount at the date of testing.
−Removed: We applied a hypothetical ten percent decrease to the fair values of our RU and HCN Segments, which at December 31, 2022, would have triggered additional impairment testing and analysis for our RU Segment.
−Removed: Applying the hypothetical decrease to the fair value of our HCN Segment did not result in an additional impairment.
−Removed: At October 31, 2023, we completed our annual assessment of goodwill and indefinite-lived intangibles for our RU and HCN Segments.
−Removed: The annual assessment concluded that the fair value of goodwill for RU and HCN exceeded their carrying values by approximately $32.4 million, or 25%, and $7.4 million, or 21%, respectively.
−Removed: Significant assumptions in the forecast used in the discounted cash flow valuation model include the recovery in our RU Segment enrollment and cost containment measures.
−Removed: Our HCN Segment’s significant assumptions in the forecast relate to the addition of a medical assistant program in all Ohio campuses, a future campus opening and future tuition increases.
+Added: Significant assumptions in the forecast used in the discounted cash flow valuation model include continued improvement in our RU Segment enrollment and cost containment measures.
+Added: Our HCN Segment’s significant assumptions in the forecast relate to future campus openings and tuition increases.
These assumptions could be negatively affected by and of the following including, but not limited to, changes in our regulatory environment, declines in student enrollment, adverse actions by state boards of nursing including enrollment caps, and increases in our expenses not in our plan.
−Removed: In addition, we determined the fair value of our RU Segment’s indefinite-lived intangible asset was greater than its carrying value.
−Removed: As a result, no impairment charge recorded regarding the carrying value of our RU Segment indefinite-lived intangible assets.
−Removed: Additionally, there was no impairment to HCN goodwill or indefinite-lived intangible assets.
−Removed: At December 31, 2023, after the reduction in carrying value due to the goodwill and intangible assets in 2022 and 2023, and, in the case impairment charges in prior years in the HCN Segment, goodwill is $33.0 million and $26.6 million in the RU and HCN Segments, respectively.
−Removed: Significant assumptions inherent to valuation methodologies for goodwill include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in the higher education market.
+Added: In addition, we determined the fair value of our RU and HCN Segment indefinite-lived intangible asset was greater than their carrying values.
+Added: Therefore, for the year ended December 31, 2024, there was no impairment of RU and HCN Segment goodwill and indefinite-lived intangible assets.
+Added: Significant assumptions inherent to valuation methodologies for goodwill and indefinite-lived intangible assets include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in the higher education market.
Future changes, including minor changes in the significant assumption or other factors including revenue, operating income, valuation multiples, and other inputs to the valuation process may result in future impairment charges, and those charges could be material.
+Added: At December 31, 2024, after recording non-cash impairment charges for RU and HCN Segment goodwill and intangible assets in 2022 and 2023, the carrying value of RU and HCN Segments goodwill was $33.0 million and $26.6 million, respectively, and the carrying value of RU and HCN Segments intangible assets was $24.5 million and $3.7 million, respectively.
For additional details regarding goodwill and indefinite-lived intangible assets please refer to “Note 7.
4 unchanged sentences
The Series A Senior Preferred Stock is recorded net of issuance costs.
−Removed: Dividends accrued on the Series A Senior Preferred Stock are presented in preferred stock dividends on the Consolidated Statements of Income.
−Removed: Our preferred stock dividends are cumulative and accrue as contractually obligated.
−Removed: Dividends will be paid upon approval by our Board of Directors.
The determination as to permanent equity treatment considered the obligations to the shareholder.
4 unchanged sentences
As of December 31, 2022, the embedded features identified for bifurcation were determined to have minimal or no value and therefore deemed to not be material to the financial statements.
−Removed: We reviewed the embedded features as of December 31, 2023 and determined that they are not material to the financial statements.
−Removed: The Series A Senior Preferred Stock has no stated maturity, is not convertible, is not subject to any mandatory redemption, sinking fund or other similar provisions and will remain outstanding unless redeemed at our option.
−Removed: We have the right to redeem the preferred stock pro rata in whole or in part at the price per share equal to the liquidation preference, plus any applicable early premium amount noted in the Certificate of Designation and Purchase Agreement.
−Removed: The Series A Senior Preferred Stock has no voting rights for directors or otherwise, except as required by law or with respect to certain protective provisions.
−Removed: However, holders of our Series A Senior Preferred Stock have certain consent rights that limit our ability to obtain debt or preferred stock financing or take certain other corporate actions.
−Removed: Without the consent of at least 60% of the then outstanding shares of Series A Senior Preferred Stock, with certain exceptions, we may not, among other things, (i) incur any indebtedness if such incurrence would cause our Total Net Leverage Ratio (as defined in the Purchase Agreement) to exceed 0.75 to 1.00, (ii) issue any capital stock senior to or pari passu with the Series A Senior Preferred Stock, (iii) declare or pay any cash dividends on our common stock, or (iv) repurchase more than an aggregate of $30 million of our common stock.
+Added: We reviewed the embedded features as of December 31, 2023, and 2024 and determined that they are not material to the financial statements.
For additional details regarding the Series A Senior Preferred Stock, please refer to “Note 13.
5 unchanged sentences
The following table sets forth statements of income data as a percentage of revenue for each of the years ended:
+Added: Year Ended December 31,
Revenue 100.0 % 100.0 %
6 unchanged sentences
Loss on assets held for sale 0.4 % 0.3 %
+Added: Loss on leases — % 0.6 %
Loss on disposals of long-lived assets 0.1 % 0.1 %
Total costs and expenses 108.0 % 94.7 %
−Removed: Loss from operations before interest and income taxes (22.7) % (8.0) %
−Removed: Gain on acquisition 0.6 % — %
+Added: (Loss) income from operations before interest and income taxes (8.0) % 5.3 %
Interest income (expense) (0.7) % (0.3) %
−Removed: Loss from operations before income taxes (25.0) % (8.8) %
−Removed: Income tax expense (6.0) % (1.8) %
+Added: (Loss) income from operations before income taxes (8.8) % 5.0 %
+Added: Income tax (benefit) expense (1.8) % 1.7 %
Equity investment loss (0.9) % (0.7) %
−Removed: Net loss (19.0) % (7.9) %
+Added: Net (loss) income (7.9) % 2.6 %
Preferred Stock Dividend 1.0 % 1.0 %
−Removed: Net loss available to common stockholders (19.0) % (8.9) %
+Added: Net (loss) income available to common stockholders (8.9) % 1.6 %
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
−Removed: For the year ended December 31, 2023, our consolidated revenue was $600.5 million, a decrease of $5.8 million, or 1.0%, compared to $606.3 million in 2022.
−Removed: The decrease in revenue was primarily due to a $39.2 million, or 15.5% decrease in revenue in our RU Segment, partially offset by a $18.2 million, or 6.4% increase in revenue in our APUS Segment, a $9.9 million, or 20.9%, increase in revenue in our HCN Segment, and a $5.3 million, or 25.0%, increase in GSUSA revenue included in Corporate and Other.
+Added: For the year ended December 31, 2024, our consolidated revenue was $624.6 million, an increase of $24.1 million, or 4.0%, compared to $600.5 million in 2023.
+Added: The increase in revenue was primarily due to a $13.7 million, or 4.5%, increase in revenue in our APUS Segment, a $10.4 million, or 18.2%, increase in revenue in our HCN Segment, and a $2.2 million, or 1.0%, increase in revenue in our RU Segment, partially offset by a $2.0 million, or 7.5%, decrease in GSUSA revenue included in Corporate and Other.
APUS net course registrations increased approximately 2.9% to 378,400 for the year ended December 31, 2024, from approximately 367,600 in the 2023 period.
−Removed: The increase in net course registrations was primarily due to an increase in military related registrations from students utilizing TA, which generate a lower revenue per registration.
+Added: The increase in net course registrations was primarily due to an increase in registrations by military-affiliated students utilizing VA.
Net course registrations represent the total number of courses for which students remain enrolled after the date by which they may drop a course without financial penalty.
For the year ended December 31, 2024, RU enrollment decreased 1.3% as compared to the 2023 period.
−Removed: We believe this decline in enrollment, which reflects year-over-year declines in new and total nursing enrollment, and which was partially offset by an increase in non-nursing program enrollment, can be attributed to several factors, including the prior departure of leadership accountable for enrollment and nursing operations and caps on nursing student enrollment at certain RU campuses.
+Added: This decline in enrollment was driven by a 7.5% decrease in on-ground enrollment, partially offset by a 4.5% increase in online enrollment, which has a lower revenue per student.
+Added: While enrollment declined, revenue increased due to tuition increases effective in the first quarters of 2023 and 2024 and the third and fourth quarters of 2024 for select students and programs, as compared to the prior year period.
+Added: We believe the overall decline in on-ground enrollment can be attributed to several factors, including self-imposed caps on nursing student enrollment and the overall environment in which RU operates, including as a result of the effects of regulatory matters and competition.
+Added: During the third and fourth quarters of 2024, RU experienced improvements with both on-ground and online enrollment as compared to prior year periods.
RU total student enrollment represents the total number of students enrolled in a course immediately after the date by which students may drop a course without financial penalty.
For the year ended December 31, 2024, HCN student enrollment increased approximately 14.9% as compared to the 2023 period.
−Removed: We believe that the increase in total student enrollment is primarily due to the opening of new campuses, including the Detroit, Michigan campus, which opened in October 2022.
+Added: The increase in total student enrollment is primarily due to the continued enrollment growth at the Detroit, Michigan campus that opened in October 2022, the Dayton, Ohio campus which relocated in 2023, and the Columbus and Toledo campuses, in Ohio, which relocated in 2024.
HCN total student enrollment represents the total number of students enrolled in a course immediately after the date by which students may drop a course without financial penalty.
1 unchanged sentence
For the year ended December 31, 2024, costs and expenses were $591.5 million, a decrease of $57.4 million, or 8.8%, compared to $648.9 million in 2023.
−Removed: The decrease in costs and expenses as compared to the prior year period was primarily due to a decrease in the non-cash goodwill and intangible asset impairment charge compared to the prior year period.
−Removed: Costs and expenses for the year ended December 31, 2023, include a non-cash goodwill and intangible asset impairment charge of $64.0 million to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact compared to a non-cash impairment charge and the corresponding tax impact of $146.9 million in the prior year period, a decrease of $82.9 million in the current year period.
−Removed: Other decreases in costs and expenses for the year ended December 31, 2023, as compared to the prior year period include decreases in advertising costs in all segments and decreases in depreciation and amortization costs, partially offset by an increase in employee compensation costs in Corporate and Other and our HCN Segment and a $2.4 million loss on assets held for sale in our APUS Segment.
−Removed: In 2023, costs and expenses also include the following on a pretax basis:
−Removed: $3.0 million in severance costs related to a reduction in force, and $2.4 million in selling and promotional costs related to the termination of the marketing contract with Collegis.
−Removed: In 2022, costs and expenses also include the following items on a pretax basis:
−Removed: $3.9 million in selling and promotional costs related to the termination of the marketing contract with Collegis, $3.5 million of severance costs related to reductions in force, $3.2 million in information technology costs related to our multi-year technology transformation program, and $1.9 million in professional services costs primarily related to the Rasmussen and GSUSA Acquisitions.
+Added: Costs and expenses for the year ended December 31, 2024, include $3.8 million in information technology transition services costs in all our segments as well as Corporate and Other, a $3.7 million loss on leases in our RU Segment, $2.2 million in professional fees in Corporate and Other relating to the Combination, and a $1.6 million loss on assets held for sale in our APUS Segment, all on a pre-tax basis.
+Added: Costs and expenses for the year ended December 31, 2023, include a non-cash goodwill and intangible asst impairment charge of $64.0 million in our RU Segment, and to reflect the corresponding tax impact, a $2.4 million pre-tax loss on assets held for sale in our APUS Segment, and a pre-tax charge of $2.4 million in transition services fees in our RU Segment selling and promotional expenses related to the termination of the marketing contract with Collegis effective January 31, 2023.
+Added: Costs and expenses for the year ended December 31, 2024, as compared to the prior year period, excluding the items noted above, increased $0.1 million, primarily due to increases in employee compensation costs, other technology costs, bad debt expense, and classroom and course materials costs, partially offset by decreases in depreciation and amortization expenses, advertising costs, and rent costs
Costs and expenses as a percentage of revenue decreased to 94.7% in 2024 from 108.0% in 2023.
−Removed: Excluding impairment charges, losses on assets held for sale and Collegis transition fees, costs and expenses were 96.6% of revenue for the year ended December 31, 2023, compared to 97.8% of revenue in the prior year period.
−Removed: Our income before interest and income taxes as a percentage of revenue, or our operating margin, improved to negative 8.0% from negative 22.7% compared to the same prior year period.
−Removed: Excluding impairment charges, loss on assets held for sale, and Collegis transition fees, our operating margin improved to 3.4% from 2.2% compared to the same prior year period.
−Removed: The decrease in our costs and expenses as a percentage of revenue and decrease in our operating margin was primarily due to the factors discussed above.
+Added: Excluding the impairment charges, loss on leases, information technology transition services costs, losses on assets held for sale, Collegis transition fees, and professional fees relating to the Combination, costs and expenses were 92.9% of revenue for the year ended December 31, 2024, compared to 96.6% of revenue in the prior year period.
+Added: Our income before interest and income taxes as a percentage of revenue, or our operating margin, improved to 5.3% in 2024 from negative 8.0% compared to the prior year period.
+Added: Excluding the charges noted above, our operating margin improved to 7.1% in 2024 from 3.4% compared to the prior year period.
+Added: The decrease in our costs and expenses as a percentage of revenue and improvement in our operating margin was primarily due to the factors discussed above.
Instructional costs and services expenses.
For the year ended December 31, 2024, instructional costs and services expenses were $295.7 million, an increase of approximately $2.8 million, or 1.0%, compared to $292.9 million in 2023.
−Removed: The increase in instructional costs and services expenses was primarily due to increases in employee and faculty compensation costs in our APUS and HCN Segments due to an increase in registrations at APUS and enrollment at HCN, and Corporate and Other due to higher revenue at GSUSA, an increase in classroom materials costs in our RU and HCN Segments, and an increase in facilities maintenance costs in our RU and HCN Segments, partially offset by a decrease in employee and faculty compensation costs in our RU Segment due to a decrease in enrollment, and a decrease in classroom materials costs in our APUS Segment.
−Removed: Instructional costs and services expenses as a percentage of revenue increased to 48.8% in 2023, compared to 47.6% in 2022.
+Added: The increase in instructional costs and services expenses was primarily due to increases in employee compensation costs in our APUS and HCN Segments due to an increase in registrations at APUS and enrollments at HCN, an increase in classroom and course materials costs in our HCN Segment, partially offset by decreases in employee compensation costs in our RU Segment and Corporate and Other due to lower enrollments at RU and GSUSA and decreases in technology costs, rent costs, and professional fees in our RU Segment.
+Added: Instructional costs and services expenses as a percentage of revenue decreased to 47.3% in 2024, compared to 48.8% in 2023.
Selling and promotional expenses.
For the year ended December 31, 2024, selling and promotional expenses were $128.8 million, a decrease of $4.2 million, or 3.2%, compared to $133.0 million in 2023.
−Removed: The decrease in selling and promotional expenses was primarily due to a decrease in advertising costs in all segments and Corporate and Other, a decrease in employee compensation costs in our APUS Segment, and the transition from Collegis to our in-house marketing function in our RU Segment, partially offset by an increase in employee compensation costs in Corporate and Other.
−Removed: In 2023 and 2022, selling and promotional costs include $2.4 million and $3.9 million, respectively, related to the termination of the Collegis marketing contract effective January 31, 2023.
+Added: Selling and promotional expenses for the year ended December 31, 2023, include $2.4 million in transition services fees in our RU Segment related to the termination of the Collegis marketing contract, effective January 31, 2023.
+Added: Other decreases in selling and promotional expenses were primarily due to decreases in advertising costs in our APUS and RU Segments and employee compensation costs and marketing support costs in our RU Segment.
+Added: The decreased costs were partially offset by increases in employee compensation costs in our APUS and HCN Segments and Corporate and Other, professional fees in our APUS Segment and advertising costs in our HCN Segment.
Selling and promotional expenses as a percentage of revenue decreased to 20.6% in 2024, compared to 22.1% in 2023.
−Removed: Excluding the Collegis transition service fees, selling and promotional expenses were 21.7% in 2023 compared to 24.9% in 2022.
+Added: Excluding the Collegis transition service fees, selling and promotional expenses were 21.7% of revenue in 2023.
General and administrative expenses.
For the year ended December 31, 2024, general and administrative expenses were $142.0 million, an increase of $13.8 million, or 10.8%, compared to $128.2 million in 2023.
−Removed: The increase in general and administrative expenses was primarily due to increases in employee compensation costs in Corporate and Other and our RU and HCN Segments, increases in bad debt expense in all segments, and increases in technology costs in all segments and Corporate and Other, partially offset by a decrease in employee compensation costs in our APUS Segment, and a decrease in professional services costs in our APUS and RU Segments.
+Added: The increase in general and administrative expenses was primarily due to increases in information technology transition services costs in our APUS and HCN Segments as well as Corporate and Other, and increases in other information technology costs our APUS, RU, and HCN Segments, employee compensation costs in our RU and HCN Segments and Corporate and Other, as well as professional fees in our APUS and RU Segments, and bad debt expense in our HCN Segment, partially offset by decreases in employee compensation costs in our APUS Segment, and other information technology costs in Corporate and Other.
General and administrative expenses as a percentage of revenue increased to 22.7% in 2024 compared to 21.3% in 2023.
For the year ended December 31, 2024, consolidated bad debt expense increased to $18.5 million, or approximately 3.0% of revenue, from $16.5 million, or approximately 2.7% of revenue, in 2023.
−Removed: The increase in bad debt expense was primarily due to an increase in the APUS, HCN, and RU Segments of $1.3 million, $1.0 million and $0.5 million, respectively, as compared to the prior year period.
+Added: The increase in bad debt expense was primarily due to an increase in the HCN, RU, and APUS Segments of $1.4 million, $0.5 million and $0.1 million, respectively, as compared to the prior year period.
Depreciation and amortization .
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Impairment of goodwill and intangible assets.
−Removed: For the year ended December 31, 2023, we recorded $64.0 million in non-cash impairment charges in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets, and to reflect the corresponding tax impact, compared to $146.9 million in 2022.
+Added: For the year ended December 31, 2024, there were no impairment charges on goodwill and intangible assets.
+Added: For the year ended December 31, 2023, the non-cash impairment of goodwill and intangible assets of $64.0 million resulted from the reduction of the carrying value of goodwill and intangible assets in our RU Segment, and the corresponding tax impact.
For additional information regarding the impairment of goodwill and intangible assets, and a discussion of the potential for future impairment charges for goodwill and intangible assets, please refer to the discussion in “Note 7.
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Loss on assets held for sale.
−Removed: For the year ended December 31, 2023, we recorded a $2.4 million loss to reduce the carrying value of real property held for sale in our APUS Segment.
−Removed: There was no loss on assets held for sale in the year ended December 31, 2022.
+Added: For the year ended December 31, 2024, we recorded a $1.6 million loss to reduce the carrying value of a real property reclassified to held for sale in our APUS Segment in the fourth quarter of 2024.
+Added: For the year ended December 31, 2023, we recorded a $2.4 million loss to reduce the carrying value of a real property reclassified to held for sale in our APUS Segment in the fourth quarter of 2023.
Loss on disposal of long-lived assets .
The loss on disposal of long-lived assets was $0.4 million in 2024, compared to $0.6 million in 2023.
−Removed: The prior year loss was primarily related to the sale of excess facilities located in Charles Town, West Virginia.
Stock-based compensation.
−Removed: Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses in 2023 were $7.7 million in the aggregate, representing a decrease of $0.3 million, or 3.4%, compared to $8.0 million in 2022.
+Added: Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses was $7.7 million in both 2024 and 2023.
Stock-based compensation costs include performance stock unit incentive costs and accelerated expense for retirement-eligible employees.
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Interest expense, net.
−Removed: Interest expense, net of interest income, was $4.5 million in 2023, compared to interest expense, net of interest income of $17.7 million in 2022.
−Removed: The decrease in interest expense was primarily due to the decrease in the outstanding balance in our senior secured term loan facility.
−Removed: In December 2022, we made $65.0 million in prepayments to reduce our outstanding debt and as a result of these prepayments, we wrote off a proportionate amount of unamortized debt issuance costs in the amount of $3.9 million.
−Removed: The write off in 2022 is recorded in interest expense on the Consolidated Statements of Income for the year ended December 31, 2022.
+Added: Interest expense, net of interest income, was $2.1 million in 2024, compared to $4.5 million in 2023.
+Added: The decrease in interest expense, net was primarily due to the increase in interest income earned for the year ended December 31, 2024, as compared to the prior year period.
Income tax (benefit) expense .
−Removed: For the year ended December 31, 2023, we recognized an income tax benefit of $10.7 million, compared to an income tax benefit of $36.3 million in 2022.
+Added: For the year ended December 31, 2024, we recognized an income tax expense of $10.4 million, compared to an income tax benefit of $10.7 million in 2023.
The effective tax rate was 39.3% and 18.5% in 2024 and 2023, respectively.
−Removed: The year ended December 31, 2023 and 2022 includes a $15.8 million and $36.0 million income tax benefit related to the impairment of goodwill and intangible assets, respectively.
−Removed: The 2023 effective tax rate was impacted by higher non-deductible expenses in relation to the pre-tax losses for the period, compared to 2022.
+Added: The effective tax rate in 2024 was impacted by a $4.4 million equity investment loss not deductible for tax purposes, and an increase in non-deductible stock compensation expense in relation to taxable income in 2024, as compared to
+Added: the prior year period.
+Added: The year ended December 31, 2023, includes a $15.8 million income tax benefit related to the impairment of goodwill and intangible assets.
Equity investment loss.
−Removed: Equity investment loss was $5.2 million in 2023, compared to equity investment loss of $21,000 in 2022.
−Removed: The increase is primarily due to a $5.2 million non-cash investment loss related to the investee entering into an agreement to be sold which resulted in no sales proceeds.
+Added: Equity investment loss was $4.4 million for the year ended December 31, 2024, compared to an equity investment loss of $5.2 million in the prior year period.
+Added: Equity investment loss for the year ended December 31, 2024, includes a $3.3 million non-cash investment loss on a cost method equity investment due to the investee entering into a new convertible debt agreement, which resulted in the conversion of our preferred stock holdings in the investee into common shares, and the dilution of our ownership percentage, and a $1.1 million loss on the sale of the remaining cost method equity investment.
+Added: Equity investment loss for the year ended December 31, 2023, included a $5.2 million non-cash investment loss related to the sale of the investee with no sales proceeds to us.
Net income (loss).
−Removed: The net loss in 2023 was $47.3 million, compared to net loss of $115.0 million in 2022, a decrease in loss of $67.7 million.
−Removed: This decrease was related to the factors discussed above.
+Added: Net income in 2024 was $16.1 million, compared to net loss of $47.3 million in 2023, an increase of $63.4 million.
+Added: This increase was related to the factors discussed above.
Preferred stock dividends.
−Removed: Preferred stock dividends for the year ended December 31, 2023 were $6.0 million compared to $48,000 in 2022.
−Removed: The Series A Senior Preferred Stock was issued on December 28, 2022.
+Added: Preferred stock dividends for the year ended December 31, 2024, were $6.1 million compared to $6.0 million in 2023.
Net income (loss) available to common stockholders.
−Removed: The net loss available to common stockholders in 2023 was $53.3 million, compared to net income available to common stockholders of $115.0 million in 2022, a decrease of $61.7 million.
−Removed: This decrease was related to the factors discussed above.
+Added: Net income available to common stockholders in 2024 was $10.1 million, compared to net loss available to common stockholders of $53.3 million in 2023, an increase of $63.4 million.
+Added: This increase was related to the factors discussed above.
Operating Results by Reportable Segment - Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
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Total Revenue $ 600,545 $ 624,559 $ 24,014 4.0 %
−Removed: Income (loss) from operations before interest and income taxes
+Added: (Loss) income from operations before interest and income taxes
APUS Segment $ 84,426 $ 89,422 4,996 5.9 %
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Corporate and Other $ (27,761) $ (33,436) (5,675) 20.4 %
−Removed: Total income (loss) from operations before interest and income taxes $ (137,348) $ (48,306) $ 89,042 (64.8) %
−Removed: Our APUS Segment revenue was $303.3 million in 2023, an increase of $18.2 million, or 6.4%, compared to $285.1 million in 2022, which is primarily attributable to higher net course registrations and the impact of tuition and fee increases in the second and third quarters.
+Added: Total (loss) income from operations before interest and income taxes $ (48,306) $ 33,066 $ 81,372 (168.5) %
+Added: Our APUS Segment revenue was $317.0 million in 2024, an increase of $13.7 million, or 4.5%, compared to $303.3 million in 2023, which was primarily attributable to higher net course registrations and the impact of tuition and fee increases in 2023 and 2024.
Net course registrations at APUS increased 2.9% to approximately 378,400 in 2024 compared to the 2023 period.
−Removed: The increase in net course registrations was primarily due to an increase in military related registrations from students utilizing TA, which generate a lower revenue per registration.
+Added: The increase in net course registrations was primarily due to an increase in registrations by military-affiliated students utilizing VA.
Income from operations before interest and income taxes was approximately $89.4 million in 2024, an increase of $5.0 million, or 5.9%, compared to the 2023 period.
−Removed: The increase in income from operations before interest and income taxes is due to the changes in revenue and expenses discussed above.
−Removed: Our RU Segment revenue was $214.1 million in 2023, a decrease of $39.2 million, or 15.5%, compared to $253.3 million in 2022, which was primarily due to lower enrollments.
+Added: The increase in income from operations before interest and income taxes was due to the changes in revenue and expenses discussed above.
+Added: Our RU Segment revenue was $216.3 million in 2024, an increase of $2.2 million, or 1.0%, compared to $214.1 million in 2023, which was due to tuition increases in 2023 and 2024, partially offset by lower enrollments in 2024.
Enrollment at RU decreased approximately 1.3% during the year ended December 31, 2024, as compared to the 2023 period.
−Removed: We believe this decline in enrollment, which reflects year-over-year declines in new and total nursing enrollment, which was partially offset by an increase in non-nursing program enrollment, can be attributed to several factors, including the prior departure of leadership accountable for enrollment and nursing operations and caps on nursing student enrollment at certain RU campuses.
+Added: This decline in enrollment was driven by a 7.5% decrease in on-ground enrollment, partially offset by a 4.5% increase in online enrollment, which has a lower revenue per student.
+Added: We believe the decline in on-ground enrollment can be attributed to several factors, including self-imposed caps on nursing student enrollment and the overall environment in which RU operates, including as a result of the effects of regulatory matters and competition.
+Added: During the third and fourth quarters of 2024, RU experienced improvements with on-ground and online enrollments as compared to prior year periods.
RU Segment loss from operations before interest and income taxes was $21.8 million in 2024 compared to a loss from operations before income and taxes was $103.6 million in 2023.
−Removed: The RU Segment loss includes impairment charges on goodwill and intangible assets of $64.0 million in 2023 and $146.9 million in 2022 and the corresponding tax impacts of $15.8 million and $36.0 million, respectively.
−Removed: Our HCN Segment revenue was approximately $56.9 million in 2023, an increase of $9.9 million, or 20.9% compared to $47.1 million in the 2022 period, which is primarily attributable to an increase in student enrollment and a 5% tuition increase in the second quarter of 2023.
+Added: The RU Segment loss includes impairment charges on goodwill and intangible assets of $64.0 million in 2023, and to reflect the corresponding tax impact.
+Added: Our HCN Segment revenue was approximately $67.3 million in 2024, an increase of $10.4 million, or 18.2%, compared to $56.9 million in the 2023 period, which was primarily attributable to an increase in student enrollment and a 5% tuition increase in the second quarter of 2023.
HCN student enrollment increased approximately 14.9% during the year ended December 31, 2024, as compared to the 2023 period.
−Removed: The increase in HCN total student enrollment was primarily due to the opening of new campuses, including the Detroit, Michigan campus, which opened in October 2022.
+Added: The increase in total student enrollment is primarily due to the continued enrollment growth at the Detroit, Michigan campus which opened in October 2022, the Dayton, Ohio campus which relocated in 2023, and the Columbus and Toledo campuses which relocated in 2024.
Loss from operations before interest and income taxes in the HCN Segment was approximately $1.1 million in 2024 compared to a loss from operations of $1.4 million in 2023, an improvement of $0.3 million.
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Cash, cash equivalents, and restricted cash was $144.3 million and $158.9 million at December 31, 2023, and 2024, respectively, representing an increase of $14.6 million, or 10.1%, in the 2024 period.
−Removed: The increase in cash was primarily due to higher revenue and operating income at APUS, increased payments received from the Army including payments related to periods prior to 2023, and the timing of other receipts and payments, partially offset by our investment in capital expenditures, payment of preferred dividends, repurchases of common stock in 2023, and the change in billing approach for TA at APUS.
+Added: The increase in cash was primarily due to higher revenue and operating income at APUS, TA receivables that we would have expected to receive in 2023 being received in 2024, and a decrease in cash paid for the repurchases of common stock, offset by the change in TA billing policy effective January 1, 2024, the change to how we bill TA at APUS in the fourth quarter of 2024, and higher capital expenditures.
We have historically financed operating activities and capital expenditures with cash provided by operating activities.
−Removed: We expect to continue to fund our costs and expenses through cash generated from operations for twelve months and beyond.
−Removed: For more on our material cash requirements from known contractual and other obligations, please refer to “Contractual Obligations” in this Annual Report.
+Added: We expect to continue to fund our costs and expenses through cash generated from operations for the next twelve months and beyond.
+Added: For more on our material cash requirements from known contractual and other obligations, please refer to “Contractual Obligations” below in this Annual Report.
We derive a significant portion of our revenue from our participation in ED’s Title IV programs, for which disbursements are governed by federal regulations.
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Another significant source of revenue is derived from TA from the DoD and programs from the Department of Veterans Affairs.
−Removed: Generally, these funds are received within 60 days of the start of the courses to which they relate.
−Removed: In 2021, the Army transitioned from its legacy system, GoArmyEd, to a new system, ArmyIgnitED, for soldiers to use to request TA.
−Removed: This transition was beset by delays and disruption of the Army’s TA programs.
−Removed: In connection with the transition, we experienced challenges related to system performance, process changes, and third-party software defects.
−Removed: The disruption to Army TA and resulting decreases in Army registrations had an adverse impact on registrations and revenue, profits and cash flow in the second and third quarters of 2021.
−Removed: 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 beginning on or after October 1, 2022 must be submitted via ArmyIgnitED 2.0.
−Removed: In early 2023, we experienced an improvement in Army’s processing of current invoices and payments, while continuing to work with the Army on invoices submitted during the transition to ArmyIgnitED 2.0.
−Removed: For example, due to the transition, ArmyIgnitED does not currently reflect all courses previously taken by soldiers at APUS in the relevant period, and ArmyIgnitED does not reflect all amounts due to APUS.
−Removed: For the year ended December 31, 2023, APUS received approximately $56.3 million in payments from the Army.
−Removed: 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.
−Removed: 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 .
−Removed: As discussed in greater detail above in “Overview - 90/10 Rule - Compliance and Delayed Billing”, payments from the Army that were expected in 2021 and 2022 were delayed.
−Removed: Approximately $18.4 million of those delayed payments were received in 2023, which counted toward the “90” side of the 90/10 Rule.
−Removed: In September 2023, APUS changed its approach to invoicing for TA, which offset the receipt of the delayed payments from the Army, resulting in approximately $22.1 million of receivables that we would have expected to receive in 2023 being received in 2024.
−Removed: 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.
−Removed: In addition to the $22.1 million of receivables expected to be 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.
−Removed: Effective January 1, 2024, APUS revised its billing policy for students utilizing TA, which previously ranged from two weeks to five weeks after course start date to nine weeks after the course start date.
−Removed: Billed accounts receivable are considered past due if the invoice has been outstanding for more than 30 days.
+Added: Generally, these funds are received within 60 days of the start of the courses to which they relate, however in September 2023, APUS changed its approach to invoicing for TA and is currently taking longer to bill TA, which has the effect of delaying payments.
+Added: 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.
+Added: The change in billing approach positively impacted the “90%” side of the ratio in 2023.
+Added: 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...”, 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.
+Added: 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.
+Added: In January 2024, APUS 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.
+Added: The changes in billing approach positively impacted the “90%” side of the ratio in 2024.
+Added: 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.
+Added: 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.
+Added: 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
+Added: 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.
+Added: 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 as further discussed in “Note 9.
+Added: Long-Term Debt” and “Note 13.
+Added: Preferred Stock” included in the Consolidated Financial Statements in this Annual Report.
+Added: ED evaluates institutions on an annual basis for compliance with specified financial responsibility standards, including a complex formula based on line items from the institution’s audited financial statements.
+Added: Generally, an institution’s financial ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible.
+Added: 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” as set forth in ED regulations.
+Added: As a result of ED’s determination our 2022 composite score was between 1.0 and 1.5, APUS, RU and HCN currently operate under the zone alternative to establish financial responsibility.
+Added: Under the zone alternative, we are required to:
+Added: (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;
+Added: (ii) notify ED of certain events, such as an adverse action taken by any of our institution’s accreditors or state authorizing agencies;
+Added: (iii) provide regular reports to ED relating to our institution’s current operations and future plans;
+Added: and (iv) require our auditors to express an opinion on our compliance with the requirements under the zone alternative.
+Added: HCM1 did not have a significant impact on 2024 financial results.
+Added: Additionally, RU is required to provide a letter of credit for the benefit of ED on behalf of RU in connection with RU’s 2020 composite score, which is used by ED for determining compliance with financial responsibility standards, being below the minimum required.
+Added: Restricted cash includes a $24.3 million restricted certificate of deposit to secure a letter of credit.
Our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock, or the Purchase Agreement, contain financial covenants that require us to maintain a Total Net Leverage Ratio (as defined in each respective agreement) of no greater than 2.00 to 1.00 and 0.75 to 1.00, respectively, subject to certain exceptions.
−Removed: The change in TA
−Removed: invoicing added to our accounts receivable as of December 31, 2023 and resulted in an increase to our leverage ratio as of December 31, 2023 under our Credit Agreement and the Purchase Agreement, as described in Notes 9 and 13 to our audited consolidated financial statements for the year ended December 31, 2023.
Our Total Net Leverage Ratio, under the Credit Agreement, at December 31, 2023, and 2024 was 0.51 and 0.20, respectively.
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.
−Removed: Budget cuts or constraints, including in connection with the failure to increase or a delay in increasing the federal debt ceiling, could negatively affect us by leading to force reductions or cuts to services and tools that we or APUS’s students rely upon for recruitment, enrollment, access, and TA.
+Added: Budget cuts or constraints, particularly those that impact DoD or include suspension or modifications to TA programs, reductions in force, or cuts to services and tools that we or APUS students rely upon for recruitment, enrollment access, and TA, 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.
Even temporary changes to military activity and budgets may adversely affect operations.
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government default on its debt would have broad adverse macroeconomic effects that would materially affect our cash flow and results of operations.
−Removed: 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.
−Removed: If ED does not agree with our position, we intend to submit to what are referred to as the “zone alternative” requirements, under which we would be required to:
−Removed: (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;
−Removed: (ii) notify ED of certain events, such as an adverse action taken by any of our institution’s accreditors or state authorizing agencies;
−Removed: (iii) provide regular reports to ED relating to our institution’s current operations and future plans;
−Removed: and (iv) require our auditors to express an opinion on our compliance with the requirements under the zone alternative.
−Removed: While Rasmussen already complies with HCM1, if HCM1 had applied to APUS and HCN in 2023, we estimate that we would have received approximately $6.2 million from ED at a point in time after we had disbursed the related funds.
Our operating expenditures may increase in future periods as we continue to invest in the modernization of our information technology systems, advertising, and other expenditures.
−Removed: For the years ended December 31, 2021 and 2022, we incurred approximately $6.0 million, and $3.2 million, respectively, of information technology costs related to our multi-year technology transformation program, focusing on specific information technology projects, including replacements of our learning management and customer relationship management systems.
−Removed: We have a legacy customized SIS at APUS that we refer to as Partnership at a Distance™, or PAD, and proprietary information systems and processes to support PAD, into which we have invested considerable time and money.
−Removed: PAD is designed to enable APUS to provide each student with individualized support at appropriate times from pre-enrollment through and beyond graduation, including student advising, administrative support, and community networking.
−Removed: We continually evaluate PAD for changes and upgrades and anticipate that we will eventually make significant changes to or replace this system.
+Added: We are in the midst of a multi-year technology transformation program that we expect will enable us to enhance the learning experience for students, better accommodate new flexible learning modalities, and improve the operational effectiveness of our enterprise.
+Added: In April 2022, we notified Collegis that we intended to permit RU’s information technology services contract to expire by its terms in September 2024.
+Added: In December 2023, we entered into an agreement with a managed service provider to outsource a number of our information technology operations, including some that were previously being provided by Collegis, including service desk, student support, end user support, and network management and operations.
+Added: In April 2024, this transition was completed, and in the third quarter of 2024, we substantially completed the insourcing of information technology services and the outsourcing of certain services to a managed service provider.
+Added: For the year ended December 31, 2024, we incurred approximately $3.8 million in information technology transition services costs.
+Added: Operating and capital expenditures may also increase as we continue to update and invest in our core enterprise systems.
+Added: At APUS, we have a legacy customized student information system, or SIS, that we refer to as Partnership at a Distance™, or PAD, and proprietary information systems and processes to support PAD.
RU uses Anthology Campus Nexus as its SIS.
−Removed: The RU SIS environment is currently hosted with Collegis, which maintains all systems, support, and hosting.
−Removed: RU’s and APUS’s admissions function are managed inside of Salesforce and connected to Anthology for RU and PAD for APUS to ensure all pertinent information is synchronized appropriately.
+Added: The RU SIS environment is currently hosted with Anthology in a cloud environment.
+Added: APUS and RU admissions functions are managed inside of Salesforce and connected to PAD for APUS and Anthology for RU to ensure all pertinent information is synchronized appropriately.
HCN and GSUSA have their own SIS platforms.
−Removed: In 2024, we plan to replace the existing SIS platform used by GSUSA, and will also begin moving HCN to a new SIS platform.
+Added: In 2025, we plan to replace the
+Added: existing SIS platform used by GSUSA and will also begin moving HCN to a new SIS platform.
More broadly, we continue to review and assess our student information and services platforms and their capabilities, including whether to consolidate to a standard platform across more or all our institutions.
−Removed: Capital expenditures could be higher in the future as a result of, among other things, additional expenditures for technology or other business capabilities, the maintenance of existing campuses at RU and HCN, the opening of new campuses at RU and HCN, the acquisition or lease of existing structures or potential new construction projects, and necessary tenant improvements that arise as a result of our ongoing evaluation of our space needs and opportunities for physical growth.
+Added: Capital expenditures could be higher in the future as a result of, among other things, additional expenditures for technology or other business capabilities, the maintenance of existing campuses at RU and HCN, the opening of new campuses or the consolidation of existing campuses at RU and HCN, the acquisition or lease of existing structures or potential new construction projects, and necessary tenant improvements that arise as a result of our ongoing evaluation of our space needs and opportunities for physical growth.
We also expect 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.
−Removed: For the years ended December 31, 2021 and 2022, we incurred approximately $7.6 million and $1.9 million, respectively, of acquisition-related expenses related to the Rasmussen and GSUSA Acquisitions, which are included in general and administrative expenses on the Consolidated Statements of Income.
−Removed: RU has historically relied on Collegis, LLC, or Collegis, for a variety of outsourced marketing services and information technology functions under one contract for marketing services and another for information technology functions.
+Added: On January 28, 2025, we announced the Combination, which w e anticipate completing in the third quarter of 2025 subject to obtaining required approvals and ED taking related actions.
+Added: For the year ended December 31, 2024, we incurred approximately $2.2 million in professional fees and expect to incur between approximately $3.0 million and $5.0 million in professional fees in 2025 to complete the Combination.
+Added: See the Risk Factor with the caption beginning “The planned combination of APUS, RU, and HCN …”, “Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RN, and HCN” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview” for more information.
+Added: 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 both contracts to expire by their terms on September 30, 2024.
In October 2022, RU and Collegis mutually agreed to the termination of the marketing services contract effective January 31, 2023, rather than having the contract expire by its terms in September 2024.
−Removed: Expenses for the fourth quarter of 2022 include $3.9 million in transition fees in connection with the termination of the Collegis marketing services contract as specific transition obligations were completed, and first quarter of 2023 expenses include the remaining $2.4 million in transition service fees, for total non-recurring transition service fees of $6.3 million.
+Added: Expenses for the fourth quarter of 2022 include $3.9 million in transition fees in connection with the termination of the previously outsourced marketing services contract as specific transition obligations were completed, and first quarter of 2023 expenses included the remaining $2.4 million in transition service fees, for total non-recurring transition service fees of $6.3 million.
We completed the transition of RU marketing to our in-house centralized marketing team during the first quarter of 2023.
−Removed: We plan to transition all of the information technology services currently outsourced to Collegis back to our operations and to one or more third-party vendors in 2024.
In December 2022, we issued $40 million of Series A Senior Preferred Stock, $0.01 par value per share, to affiliates of our existing common stockholders of the Company.
12 unchanged sentences
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 service our indebtedness, to pay dividends on our Series A Senior Preferred Stock when due, or to fund our other liquidity needs.
−Removed: 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 to comply with the 90/10 Rule or meet the financial responsibility requirements, or any government shutdown could adversely impact our cash flows and results of operations.
−Removed: In addition, our efforts to comply with the 90/10 Rule could lead us to reduce enrollments or require us to make expenditures that would reduce our existing cash available for operations.
+Added: Failure to achieve business performance consistent with our expectations, including as a result of regulatory action, or to comply with the 90/10 Rule or meet the financial responsibility requirements, or any government shutdown could adversely impact our cash flows and results of operations.
+Added: In addition, our efforts to comply with the 90/10 Rule could lead us to reduce enrollments or require us to
+Added: make expenditures that would reduce our existing cash available for operations.
In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness or pay a special dividend to holders of our Series A Senior Preferred Stock, which would also reduce our existing cash available for operations.
2 unchanged sentences
Net cash provided by operating activities was $45.5 million and $48.9 million in 2023, and 2024, respectively.
−Removed: The increase in cash from operating activities is primarily due to improved financial performance and changes in working capital due to the timing of receipts and payments.
−Removed: Accounts receivable at December 31, 2023 increased approximately $8.6 million compared to December 31, 2022, primarily as a result of the change in the timing of billing for students using TA at APUS, partially offset by a decrease in accounts receivable at RU.
+Added: The increase in cash from operating activities is primarily due to higher revenue and operating income at APUS, the receipt of fourth quarter 2023 cash received in the first quarter of 2024, offset by the change in TA billing policy effective January 1, 2024, and the change to how we bill TA at APUS in the fourth quarter of 2024, and changes in working capital due to the timing of receipts and payments.
+Added: Accounts receivable at December 31, 2024, increased approximately $11.5 million compared to December 31, 2023, primarily related to our APUS Segment as a result of a change in our billing policy during the fourth quarter 2024.
Accounts payable, accrued liabilities, and accrued compensation and benefits at December 31, 2024, were approximately $5.3 million higher than December 31, 2023, primarily due to the timing of payment processing.
2 unchanged sentences
Investing activities for the years ended December 31, 2023, and 2024, include capital expenditures of $13.9 million and $21.1 million, respectively.
−Removed: The results for the year ended December 31, 2022, include $2.0 million in cash received from the GSUSA Acquisition.
+Added: The increase in capital expenditures for the year ended December 31, 2024, was primarily due to campus relocations at our HCN and RU Segments and an increase in information technology capital expenditures.
Financing Activities
Net cash used in financing activities was $16.9 million and $13.2 million in 2023 and 2024, respectively.
−Removed: The cash used in financing activities in 2023 includes $6.0 million related to the payment of dividends on our preferred stock and $9.7 million used for the repurchase of our common shares, and $1.0 million for the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants.
−Removed: The cash used in financing activities in 2022 was due to debt principal prepayments made in December 2022, offset by proceeds from the issuance of our Series A Senior Preferred Stock.
−Removed: As of January 31, 2024, we repurchased an additional 251,000 shares for $2.8 million.
−Removed: Effective February 1, 2024, we ceased purchases under this purchase authorization.
+Added: The decrease in cash used in financial activities is primarily due to a decrease in cash used to repurchase our common stock.
+Added: For the year ended December 31, 2023, we repurchased 1,515,766 shares for an aggregate purchase price of $9.7 million, compared to 251,146 shares of common stock for an aggregate purchase price of $2.8 million, for the year ended December 31, 2024.
+Added: This decrease in cash used for stock repurchases was partially offset by $2.6 million in principal payments made on our long-term debt in 2024.
Contractual Obligations
12 unchanged sentences
As of December 31, 2024, we had other purchase obligations of $15.8 million, with $9.8 million payable in 2025.
−Removed: Collegis, a third-party service provider, was previously engaged with RU for marketing services and is currently engaged with RU for information technology services through September 2024.
−Removed: The original agreements were to expire on September 30, 2024.
−Removed: Notices of the non-renewal of the marketing and information technology services contracts were issued to Collegis in April 2022.
−Removed: In October 2022, RU and Collegis mutually agreed to the termination of the marketing services contract effective January 31, 2023, rather than having the contract expire by its terms in September 2024.
−Removed: Expenses for the fourth quarter of 2022 include $3.9 million in transition fees in connection with the termination of the Collegis marketing services contract as specific transition obligations were completed, and first quarter of 2023 expenses include the remaining $2.4 million in transition service fees, for total non-recurring transition service fees of $6.3 million.
−Removed: We completed the transition of RU marketing to our in-house centralized marketing team during the first quarter of 2023.
−Removed: Outsourced information technology services under the Collegis information technology contract will continue until September 30, 2024 at which time we will complete the transition of information technology services currently provided by Collegis to our operations and to one or more third-party vendors.
−Removed: The total minimum expenses for information technology services through September 30, 2024 is approximately $7.0 million.
−Removed: We plan to transition all of RU’s information technology services currently outsourced to Collegis back to our operations or to one or more other third-party vendors.
−Removed: As part of that transition, we further evaluated the current and future needs of Company’s information technology infrastructure and determined to outsource a number of our information technology operations to a managed service provider, including service desk, end user support, and network support and operations.
−Removed: As we continue to develop our transition plans, at this time we estimate that the cost of the transition will be between approximately $2.9 million and $3.6 million in 2024.
+Added: In July 2024, RU entered into a contract with a third-party to provide nursing program curriculum upgrades and course materials, and testing services to nursing students, replacing an existing third-party provider.
+Added: Total annual expense under this contract is estimated to be between approximately $6.0 million and $7.0 million annually through December 31, 2027, based on enrollment, such amount approximately equal to the prior third-party provider.
Impact of Inflation
1 unchanged sentence
economy experienced the highest rates of inflation since the 1980s.
−Removed: Historically, we have not experienced significant inflation risk in our business arising from fluctuations in market prices, however, our ability to raise our tuition and fees depends on market conditions.
−Removed: APUS, RU, and HCN increased certain tuition and fees beginning in 2023, and APUS intends to increase in 2024, in order to offset increased faculty costs and other costs, but there may be periods during which we are unable to fully recover increases in our costs.
+Added: Historically, we have not experienced significant inflation risk in our business arising from fluctuations in market prices;
+Added: however, our ability to raise our
+Added: tuition and fees depends on market conditions.
+Added: APUS, RU, and HCN increased certain tuition and fees in 2023 and 2024, and RU intends to increase tuition in 2025, in order to offset increased faculty costs and other costs, but there may be periods during which we are unable to fully recover increases in our costs.
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.