What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-06 compared with 2024-03-05 · 219 added, 251 removed, 1052 unchanged (31% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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

Opinion on the Financial Statements

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

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

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 6, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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Critical Audit Matter Description

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

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

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

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

During December 31, 2023, the Company recorded non-cash impairment charges of $53.0 million and $11.0 million, reducing the carrying values of RU goodwill and indefinite-lived intangible assets to $33.0 million and $24.5 million, respectively.

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

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

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

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

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

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

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

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

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

Such factors considered in the Company’s

assessment include, but are not limited to, enrollment trends, financial performance, macroeconomic conditions, regulatory environment, as well as industry and market considerations.

When a quantitative impairment test is performed, if the fair value of the reporting unit or indefinite-lived intangible assets is less than its carrying amount, an impairment loss is recorded for the excess of the carrying value over the fair value.

During the fourth quarter of 2024, the Company completed their annual assessment of goodwill and indefinite-lived intangibles for the RU reporting unit.

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

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

Given the significant estimates and assumptions made by management to estimate the fair value of the RU reporting unit, including the fair value of indefinite-lived intangible assets, and the sensitivity of the estimated fair value to changes in those estimates and assumptions, performing audit procedures to evaluate the reasonableness of management's estimates and assumptions utilized in its impairment assessment, particularly the prospective financial information, growth rates, terminal value, discount rates, comparable multiples from publicly traded companies in the higher education market, forecasts of future revenue, the EBITDA margin, and the selection of the royalty rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

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

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

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

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

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

• We evaluated the impact of changes in management’s forecasts from the previous annual impairment test date of October 31, 2023, and the annual impairment test date of October 31, 2024.

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

• We evaluated the work of management’s expert as audit evidence and assessed the level of knowledge, skill, and ability of the expert in the particular field.

• We compared the carrying value for the reporting unit and indefinite-lived intangible assets to amounts recorded by the Company.

/s/ Deloitte & Touche LLP

McLean, Virginia

March 6, 2025

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Income tax receivable 474 949

Assets held for sale — 8,561

Assets held for sale (Note 6) 8,561 24,469

Total current assets 217,382 260,572

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Accumulated other comprehensive income 1,644 ( 7 )

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

Accumulated deficit ( 49,096 ) ( 41,805 )

Total stockholders’ equity 291,976 303,879

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Loss on assets held for sale (Note 6) — 2,425 1,618

Loss on leases (Note 8) — — 3,715

Loss on disposals of long-lived assets 1,176 554 383

Total costs and expenses 743,676 648,851 591,493

Income (loss) from operations before interest and income taxes 30,371 ( 137,348 ) ( 48,306 )

(Loss) income from operations before interest and income taxes ( 137,348 ) ( 48,306 ) 33,066

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

Interest expense, net ( 17,728 ) ( 4,459 ) ( 2,127 )

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

Income tax expense (benefit) 7,511 ( 36,276 ) ( 10,715 )

(Loss) income from operations before income taxes ( 151,248 ) ( 52,765 ) 30,939

Income tax (benefit) expense ( 36,276 ) ( 10,715 ) 10,419

Equity investment loss ( 21 ) ( 5,236 ) ( 4,407 )

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

Net (loss) income ( 114,993 ) ( 47,286 ) 16,113

Preferred stock dividends 48 6,008 6,056

Net income (loss) available to common stockholders $ 17,752 $ ( 115,041 ) $ ( 53,294 )

Net income (loss) per common share:

Net (loss) income available to common stockholders $ ( 115,041 ) $ ( 53,294 ) $ 10,057

Net (loss) income per common share:

Basic $ ( 6.10 ) $ ( 2.94 ) $ 0.57

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(In thousands)

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

Net (loss) income $ ( 114,993 ) $ ( 47,286 ) $ 16,113

Other comprehensive (loss) income, net of tax:

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Total other comprehensive income (loss) $ 2,994 $ ( 1,458 ) $ ( 1,651 )

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

Comprehensive (loss) income $ ( 111,999 ) $ ( 48,744 ) $ 14,462

The accompanying notes are an integral part of these consolidated statements.

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

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

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

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

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

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

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

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

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

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

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

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

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

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Preferred Stock Dividends — — — — — — ( 6,056 ) ( 6,056 )

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

Issuance of common stock under employee benefit plans — — 475,740 4 ( 4 ) — — —

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Other comprehensive loss — — — ( 1,651 ) — ( 1,651 )

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

Net income — — — — — — 16,113 16,113

Balance as of December 31, 2024

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Operating activities (In thousands)

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

Net (loss) income $ ( 114,993 ) $ ( 47,286 ) $ 16,113

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

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

Other 15 16 —

Changes in operating assets and liabilities:

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Preferred stock dividends paid — ( 6,005 ) ( 6,056 )

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

Cash received from exercise of stock options — — 67

Cash received from issuance of preferred stock 39,691 — —

Cash paid for principal on borrowings and finance leases ( 73,864 ) ( 114 ) ( 2,964 )

Cash received from borrowings 175,000 — —

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

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

Net cash used in financing activities ( 35,711 ) ( 16,858 ) ( 13,191 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 20,169 ) 14,884 14,599

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

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

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

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

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

RU is institutionally accredited by HLC.

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Under ASC 805, the assets and liabilities of an acquired company are reported at business fair value along with the fair value of acquired intangible assets at the date of acquisition.

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

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

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

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

Principles of consolidation.

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In preparing financial statements in conformity with GAAP, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

The Company evaluates these estimates and judgments on an ongoing basis and bases its estimates on experience, current and expected future conditions and various other assumptions that the Company believes are reasonable under the circumstances.

The Company evaluates these estimates and assumptions on an ongoing basis and bases its estimates on experience, current and expected future conditions and various other assumptions that the Company believes are reasonable under the circumstances.

Actual results may differ from those estimates under different assumptions or conditions, and the impact of such differences may be material to the Consolidated Financial Statements.

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

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

Restricted cash on the Consolidated Balance Sheets as of December 31, 2022 and 2023, excluding the restricted certificates of deposit, was $ 2.0 million and $ 2.7 million, respectively.

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

Restricted cash on the Consolidated Balance Sheets as of December 31, 2023 and 2024, excluding the restricted certificate of deposit, was $ 2.7 million and $ 1.5 million, respectively.

Total restricted cash as of December 31, 2023, and 2024, was $ 27.7 million and $ 27.0 million, respectively.

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

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

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

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

RU and HCN also offer extended payment plan options.

HCN also offers extended payment plan options.

When a student remits payment after a course or term has begun, accounts receivable is reduced.

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Generally, if no receipt is confirmed or payment option secured, the student will be dropped from the course or not allowed to start the term.

Therefore, billed accounts receivable represent charges that have been prepared and sent to students or the applicable third-party payor according to the terms agreed upon in advance.

Therefore, billed accounts receivable represents charges that have been prepared and sent to students or the applicable third-party payor according to the terms agreed upon in advance.

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

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

after the course start date.

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

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

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Assets held for sale.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As a result, the Company recorded an investment loss of $ 5.2 million during the third quarter of 2023, on a 2012 cost method investment.

This investment loss was due to the investee entering into an agreement to be sold which resulted in no sales proceeds to the Company, and the loss reduced the book value of the cost method investment to zero .

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

As a result, the Company recorded an investment loss of $ 3.3 million during the first quarter of 2024, on a 2015 cost method investment.

This investment loss was due to the investee entering into a new convertible debt agreement that resulted in the conversion of the Company’s preferred stock holdings in the investee into common shares, and the dilution of the Company’s ownership percentage.

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

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

As a result, the Company recorded an investment loss of $ 1.1 million, during the second quarter of 2024, on a 2013 equity method investment.

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

These investment losses are included in equity investment loss on the Consolidated Statements of Income.

There were no indicators of impairment during the year ended December 31, 2022.

Prior to December 31, 2024, the Company’s equity method and cost method investments were included in Other assets, net on the accompanying Consolidated Balance Sheets.

As of December 31, 2024, the Company no longer has any investments accounted for under ASC 323 and ASC 321.

Derivatives and hedging.

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Deferred revenue and student deposits.

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

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

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

Deferred revenue and student deposits at December 31, 2023, and 2024, was $ 23.8 million and $ 23.5 million, respectively.

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

Series A Senior Preferred Stock.

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Revenue” in these Consolidated Financial Statements.

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

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

Advertising costs.

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

An accelerated one-year period is used to recognize stock-based compensation cost for employees who have reached certain service and retirement eligibility criteria on the date of grant.

An accelerated one-year period is used to recognize stock-

based compensation cost for employees who have reached certain service and retirement eligibility criteria on the date of grant.

The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model that uses certain assumptions.

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Stockholders’ Equity” in these Consolidated Financial Statements.

Net Income (loss) per common share.

Net (loss) income per common share.

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

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

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

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

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

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Improvements to Reportable Segment Disclosures .

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

This standard requires the Company to disclose significant segment expenses that are regularly provided

to the chief operating decision-maker, or CODM, and are included within each reported segments operating results.

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

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

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

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

Early adoption is permitted.

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

The Company adopted this standard effective January 1, 2024, using the retrospective approach.

Additional information regarding the Company’s adoption of this standard is located in “Note 16.

Segment Information” in these Consolidated Financial Statements.

In December 2023, the FASB issued ASU No.

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Early adoption is permitted.

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

The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures , which requires disaggregated disclosure of certain costs and expenses, including purchases of inventory, employee compensation, depreciation, amortization, and depletion, within relevant income statement captions.

The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating this ASU to determine the impact of adoption on its consolidated financial statements and related disclosures.

Acquisition Activity

On the RU Closing Date, the Company completed the Rasmussen Acquisition for an adjusted aggregate purchase price, subject to post-closing working capital adjustments, and net of cash acquired, of $ 325.5 million in cash.

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

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

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

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

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

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

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

Goodwill and Intangible Assets” in these Consolidated Financial Statements.

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

Purchase Price Allocation Amount

Cash and cash equivalents $ 329,000

Working capital adjustment and additional cash contributions 2,333

Total consideration 331,333

Assets acquired:

Cash and cash equivalents 5,200

Accounts receivable 10,700

Prepaid expenses 4,600

Property and equipment, net 36,996

Operating lease assets 75,800

Deferred tax asset 3,049

Intangible assets 86,500

Other assets 600

Total assets acquired 223,445

Liabilities assumed:

Accounts payable and accrued liabilities 7,342

Deferred revenue 22,700

Operating lease liabilities, current 11,200

Operating lease liabilities, long-term 67,000

Other liabilities 1,300

Total liabilities assumed 109,542

Net assets acquired 113,903

Goodwill $ 217,430

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

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

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

Intangible Assets Useful life Amount

Trade name Indefinite $ 26,500

Accreditation, licensing, and Title IV Indefinite 24,500

Student roster 2 years 20,000

Curricula 3 years 14,000

Lead conversions 2 years 1,500

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

Goodwill and Intangible Assets” in these Consolidated Financial Statements.

Pro Forma Financial Information

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

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

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

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

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

Revenue $ 600,984

Net Income 21,933

Acquisition of Graduate School USA

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

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

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

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

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

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

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

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

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

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

The Company incurred approximately $ 7.6 million and $ 1.9 million of acquisition-related expenses related to RU and GSUSA, for the years ended December 31, 2021 and December 31, 2022, respectively.

For the year ended December 31, 2022, the Company incurred approximately $ 1.4 million of acquisition-related expenses related to GSUSA.

These expenses are included in general and administrative expenses on the Consolidated Statements of Income.

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Instructional services.

Instructional services revenue includes tuition, contract training, technology, and laboratory fees.

Instructional services revenue includes tuition, contract training, and technology and laboratory fees.

The Company generally recognizes revenue ratably as instructional services are provided over the course or term, which is, for APUS, either an eight- or sixteen-week course, for RU and HCN, a quarterly term, and for GSUSA, the length of the training program.

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

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

Effective April 2023, the fee was increased from $ 100 to $ 150 and was increased again in October 2024 from $ 150 to $ 250 per degree.

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

The Company recognizes revenue once graduation review services are completed.

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Textbook and other course material fees .

Textbook and other course materials revenue represent fees related to the sale of textbooks and other course materials to RU and HCN students.

Textbook and other course materials fees represent revenue and fees related to the sale of textbooks and other course materials to RU and HCN students.

Revenue is recognized at the beginning of the term when the textbooks and other course materials fees are billed.

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

In April 2024, APUS increased the Veteran Grant on master’s level courses to 15 %, and added a 10 % APUS-funded Opportunity Grant for veterans and veteran’s family members on standard undergraduate and master’s level courses.

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

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RU also extends the grant to eligible spouses and dependents of active-duty military, retired military, and veterans.

APUS, RU, and HCN also provide grants and scholarships to certain students to assist them financially with their educational goals.

HCN provides performance-based grants and offers an institutional affordability grant to students demonstrating financial need to cover the difference between the total cost of tuition and fees less the amount of all eligible financial aid resources.

The institutional affordability grant is designed to limit a student’s monthly payment to $ 200 through an award of up to $ 200 per month, or $ 600 per term after consideration of financial aid, employer tuition reimbursement, and other financial resources.

APUS, RU, and HCN tuition grants and scholarships of $ 68.8 million, $ 80.7 million, and $ 29.9 million were provided for the years ended December 31, 2022, 2023, and 2024, respectively, and are included as a reduction to revenue in the accompanying Consolidated Statements of Income.

Disaggregation of Revenue

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Total Revenue $ 317,049 $ 216,262 $ 67,290 $ 23,958 $ 624,559

The RU Segment reflects the operations of RU, which was acquired on the RU Closing Date.

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

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

Corporate and Other includes tuition and contract training revenue earned by GSUSA and the elimination of intersegment revenue.

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

Contract Balances and Performance Obligations

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

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

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

Deferred revenue at December 31, 2023, was $ 23.8 million and includes $ 13.8 million in future revenue that has not yet been earned for courses and terms that are in progress, as well as $ 10.0 million in consideration received in advance for future courses or terms, or student deposits, and represents the Company’s performance obligation to transfer future instructional services to students.

Deferred revenue at December 31, 2023 was also

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

Deferred revenue at December 31, 2024, was $ 23.5 million and includes $ 14.1 million in future revenue that has not yet been earned for courses and terms that are in progress as well as $ 9.4 million in student deposits.

The Company has elected, as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with students that have an expected duration of one year or less.

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The Company provides a stated period of time during which students may withdraw from a course for APUS, or a term for RU and HCN, without further financial obligation resulting in a refund liability.

If a student withdraws during the academic term, the Company calculates the portion of tuition that is non-refundable based on the tuition refund policy and the applicable state laws and recognizes it as revenue in the period the withdrawal occur.

For GSUSA, a refund is provided only if the student cancels before the start of a course.

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

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

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

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

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Assets Held For Sale

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

Assets held for sale at December 31, 2023, and 2024, represents excess real properties located in Charles Town, West Virginia, for the Company’s APUS Segment.

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

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

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

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

For the year ended December 31, 2023, the Company estimated the fair value of a building and an undeveloped parcel of land designated as held for sale are $ 9.0 million, which, after reduction for the estimated cost to sell of approximately $ 0.4 million, resulted in a loss of $ 2.4 million.

The loss is included in loss on assets held for sale in these Consolidated Financial Statements for the year ended December 31, 2023.

During the three months ended December 31, 2024, APUS entered into an agreement to sell the undeveloped parcel of land for $ 0.5 million which approximates its carrying value.

The sale closed in the first quarter of 2025.

In the fourth quarter of 2024, APUS entered into an agreement to sell a building currently in use for $ 16.6 million.

As a result, the building was reclassified to held for sale as of December 31, 2024, resulting in a loss of $ 1.6 million based on the expected net proceeds from the sale, less estimated costs to sell.

The loss is included in loss on assets held for sale in these Consolidated Financial Statements for the year ended December 31, 2024.

The sale is expected to close in the third quarter of 2025.

Goodwill and Intangible Assets

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

In connection with the acquisitions of RU, HCN, and GSUSA, the Company applied FASB ASC 805, Business Combinations , using the acquisition method of accounting.

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

The Company recorded non-cash impairment charges in 2022 and

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

The Company recorded non-cash impairment charges in 2022 and 2023 for RU, and 2016 and 2019 for HCN, reducing the carrying value of RU and HCN goodwill to $ 33.0 million and $ 26.6 million, respectively.

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

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

During the fourth quarter of 2023, the Company completed its annual assessment of RU Segment goodwill for impairment and determined that the fair value was greater than the carrying value and therefore there was no impairment of RU Segment goodwill as of the valuation date which was October 31.

For the year ended December 31, 2024, the Company completed its annual assessment of RU goodwill and concluded that RU’s fair value was more than the carrying value.

For the years ended December 31, 2022, 2023, and 2024, the Company completed its annual assessment of HCN goodwill and concluded that HCN’s fair value was more than the carrying value;

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

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

(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.

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

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

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

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

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

Changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 2023, and 2024, are as follows (in thousands):

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$ — $ 86,030 $ 26,563 $ 112,593

Goodwill acquired — —

Impairment — ( 53,000 ) — ( 53,000 )

Adjustments 507 507

Goodwill as of December 31, 2023

$ — $ 33,030 $ 26,563 $ 59,593

Goodwill acquired — — — —

Impairment — — — —

Adjustments — — — —

Goodwill as of December 31, 2024

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The Company 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.

During the years ended December 31, 2022 and 2023, the Company recorded amortization expense related to definite lived intangible assets of $ 15.8 million and $ 12.2 million, respectively.

As of December 31, 2021, all recorded identified intangible assets with a definite useful life related to the acquisition of HCN were fully amortized.

At the acquisition dates, the useful life assigned to each type of intangible asset with a definite useful life was as follows:

During the years ended December 31, 2022, 2023, and 2024, the Company recorded amortization expense related to definite lived intangible assets of $ 15.8 million, $ 12.2 million, and $ 3.3 million, respectively.

The useful life assigned to each type of intangible asset with a definite useful life was as follows:

Student contracts and relationships 2.5 years - 6 years

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

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

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

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

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

$ 6.0 million, or $ 3.0 million less than the carrying value during the second quarter.

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

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

The Company’s annual assessment completed during the fourth quarter of 2024 concluded that the fair value of RU and HCN’s indefinite-lived intangible assets were more than the carrying values.

Accordingly, there were no impairment charges related to indefinite-lived intangible assets recorded during the year ended December 31, 2024.

The following table represents the balance of the Company’s intangible assets as of December 31, 2023 (in thousands):

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$ 95,547 $ 40,826 $ 26,500 $ 28,221

Finite-lived intangible assets are amortized in a manner that reflects the estimated economic benefit of the intangible assets and are amortized on a straight-line basis.

The future amortization of finite-lived intangible assets is as follows (in thousands):

Future Amortization of Intangibles Amortization

Total $ 3,318

Finite-lived intangible assets were amortized in a manner that reflected the estimated economic benefit of the intangible assets and were amortized on a straight-line basis.

As of December 31, 2024, all recorded identified intangible assets with a definite useful life related to the acquisitions of RU, HCN, and GSUSA, were fully amortized.

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

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

The Company has operating leases for office space and campus facilities.

As a result of the GSUSA Acquisition, the Company acquired leases for copiers and printers that have been classified as finance leases.

The Company has operating leases for office space and campus facilities and finance leases for certain copiers and printers.

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

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

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

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

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

The Company leases corporate office space in Florida, under an operating lease that expires in January 2026.

The RU Segment leases administrative office space in Minneapolis, Minnesota, and leases 20 campuses located in six states under operating leases that expire through March 2034.

The HCN Segment leases administrative office space in suburban Columbus,

Ohio, and leases eight campuses located in three states under operating leases that expire through December 2034.

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

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

Cash paid for amounts included in the present value of operating lease liabilities during the years ended December 31, 2022 and 2023 was $ 19.5 million and $ 20.2 million, respectively, and is included in operating cash flows.

Cash paid for amounts included in the present value of operating lease liabilities during the years ended December 31, 2022, 2023, and 2024, was $ 19.5 million, $ 20.2 million, and $ 18.5 million, respectively, and is included in operating cash flows.

Loss on leases

During the first quarter of 2024, the Company elected to terminate its RU Segment lease for a planned Dallas, Texas campus.

The Company paid a lease termination fee of $ 2.2 million and recorded a loss of $ 2.1 million as a result of this lease termination.

Additionally, during the second quarter of 2024, the Company paid a lease termination fee of $ 1.2 million related to the consolidation of two RU campuses in Minnesota.

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

As a result, the Company recorded a lease impairment of $ 0.4 million during the second quarter of 2024.

The total loss on leases during the year ended December 31, 2024, was $ 3.7 million and is included in Loss on leases in the Consolidated Statements of Income.

Finance Leases

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

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

The Company pledged the assets financed to secure the outstanding lease obligations.

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

Lease amortization expense associated with the Company’s finance leases was approximately $ 0.1 million for the year ended December 31, 2023, and is recorded within Depreciation and amortization expense on the Consolidated Statements of Income.

Lease amortization expense associated with the Company’s finance leases was approximately $ 0.1 million, $ 0.1 million, and $ 0.2 million for the years ended December 31, 2022, 2023, and 2024, respectively, and is recorded within Depreciation and amortization expense on the Consolidated Statements of Income.

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

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Long-Term Debt

In connection with the Rasmussen Acquisition, APEI, as borrower, entered into a Credit Agreement with Macquarie Capital Funding LLC, or the Credit Agreement, as administrative agent and collateral agent, or the Agent, Macquarie Capital USA Inc.

In connection with the acquisition of RU, or the Rasmussen Acquisition, APEI, as borrower, entered into a Credit Agreement with Macquarie Capital Funding LLC, or the Credit Agreement, as administrative agent and collateral agent, or the Agent, Macquarie Capital USA Inc.

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

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

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

The Term Loan, the proceeds of which were used as part of the cash consideration for the Rasmussen Acquisition, was fully funded on September 1, 2021, or the RU Closing Date, and is presented net of deferred financing fees on the Consolidated Balance Sheets.

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

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

The Credit Agreement provides the Company with the option, subject to certain conditions, including obtaining commitments from one or more lenders, to increase the total commitments under the Revolving Credit Facility, increase the amount of the Term Loan and/or incur incremental term loan facilities in an aggregate amount not to exceed the sum of (A) the greater of (1) $ 91.0 million and (2) an amount equal to consolidated EBITDA on a pro forma basis for the most recently ended four-quarter period (less the aggregate amount of certain other incremental indebtedness permitted to be incurred by APEI, and plus the aggregate amount of voluntary prepayments of certain other incremental indebtedness permitted to be incurred by APEI) and (B) an amount (1) in the case of secured incremental facilities that rank pari passu with the Facilities, such that the First Lien Net Leverage Ratio would not be greater than 1.50 to 1.00 and the Total Net Leverage Ratio would not be greater than 2.00 to 1.00, (2) in the case of secured incremental facilities that rank junior to the Facilities, such that the Secured Net Leverage Ratio would not be greater than 1.75 to 1.00 and the Total Net Leverage Ratio would not be greater than 2.00 to 1.00, and (3) in the case of unsecured incremental facilities, such that the Total Net Leverage Ratio would not be greater than 2.00 to 1.00 or the Interest Coverage Ratio would not be less than 2.00 to 1.00.

greater of (a) $ 91.0 million and (b) an amount equal to consolidated EBITDA on a pro forma basis for the most recently ended four-quarter period (less the aggregate amount of certain other incremental indebtedness permitted to be incurred by APEI, and plus the aggregate amount of voluntary prepayments of certain other incremental indebtedness permitted to be incurred by APEI) and (ii) an amount (a) in the case of secured incremental facilities that rank pari passu with the Facilities, such that the First Lien Net Leverage Ratio would not be greater than 1.50 to 1.00 and the Total Net Leverage Ratio would not be greater than 2.00 to 1.00, (b) in the case of secured incremental facilities that rank junior to the Facilities, such that the Secured Net Leverage Ratio would not be greater than 1.75 to 1.00 and the Total Net Leverage Ratio would not be greater than 2.00 to 1.00, and (c) in the case of unsecured incremental facilities, such that the Total Net Leverage Ratio would not be greater than 2.00 to 1.00 or the Interest Coverage Ratio would not be less than 2.00 to 1.00.

The First Lien Net Leverage Ratio, the Secured Net Leverage Ratio and the Total Net Leverage Ratio are each defined in the Credit Agreement and reflect a ratio of (x) in the case of the First Lien Net Leverage Ratio, consolidated first lien indebtedness (net of unrestricted cash and cash equivalents in excess of $ 50.0 million) to consolidated EBITDA, (y) in the case of the Secured Net Leverage Ratio, consolidated secured indebtedness (net of unrestricted cash and cash equivalents in excess of $ 50.0 million) to consolidated EBITDA, and (z) in the case of the Total Net Leverage Ratio, consolidated total indebtedness to consolidated EBITDA.

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

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

APEI is required to make principal payments of the Term Loan on the last day of each quarter in an amount equal to $ 2.2 million per quarter.

During the years ended December 31, 2022, 2023, and 2024, APEI paid $ 18.7 million, $ 9.6 million, and $ 9.4 million, respectively, of interest, amortization of debt issuance costs and unused commitment fees related to its Term Loan and Revolving Credit Facility.

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

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

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

During second quarter of 2024, as a result of the annual 2023 excess cash flow calculation, APEI paid $ 2.6 million in principal on the Term Loan.

The Facilities are and will be guaranteed by APEI’s subsidiaries and certain of APEI’s future subsidiaries that are required to become a party thereto as guarantors, or Guarantors.

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

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

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

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

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

The interest rate cap agreement expired on December 31, 2024.

In January 2025, the Company entered into a new interest rate cap agreement, with a notional value of $ 50.0 million.

This new interest rate cap agreement, designated as a cash flow hedge, provides the Company with interest rate protection in the event that the Term SOFR rate exceeds 5.00 %, and is scheduled to expire on June 30, 2026.

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

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

At December 31, 2023, the $ 2.6 million fair value of the interest rate cap is recorded in other assets in the Consolidated Balance Sheets.

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

For the years ended December 31, 2023, and 2024, the Company reclassified approximately $ 2.9 million and $ 3.0 million, respectively, from other comprehensive income to interest expense.

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

The components of income tax expense were as follows (in thousands):

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6,379 4,814 5,829

Deferred income tax expense (benefit):

Deferred income tax (benefit) expense:

Federal ( 36,395 ) ( 12,713 ) 3,722

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( 42,655 ) ( 15,529 ) 4,590

Income tax expense (benefit) $ 7,511 $ ( 36,276 ) $ ( 10,715 )

Income tax (benefit) expense $ ( 36,276 ) $ ( 10,715 ) $ 10,419

The tax effects of principal temporary differences are as follows (in thousands):

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Property and equipment ( 3,722 ) ( 3,597 )

Accounts receivable ( 1,434 ) —

Prepaid expenses ( 167 ) ( 49 )

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The amount of state net operating losses that can be carried forward indefinitely is $ 4.7 million.

The Company’s utilization of net operating loss carryforwards may be subject to annual limitations due to ownership change provisions of Section 382 of Internal Revenue Code of 1986, as amended.

Income tax expense (benefit) differs from the amount of tax determined by applying the United States Federal income tax rates to pretax income and loss due to the application of state apportionment laws, permanent tax differences, and other temporary differences (in thousands):

Company’s utilization of net operating loss carryforwards may be subject to annual limitations due to ownership change provisions of Section 382 of Internal Revenue Code of 1986, as amended.

Income tax (benefit) expense differs from the amount of tax determined by applying the United States Federal income tax rates to pretax income and loss due to the application of state apportionment laws, permanent tax differences, and other temporary differences (in thousands):

Year Ended December 31,

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Permanent differences 318 ( 0.21 ) % 270 ( 0.47 ) % 502 1.89 %

Loss on equity investment — — % — — % ( 812 ) ( 3.06 ) %

Equity-based compensation benefits 479 ( 0.32 ) % 837 ( 1.44 ) % 194 0.73 %

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$ ( 36,276 ) 23.97 % $ ( 10,715 ) 18.47 % $ 10,419 39.27 %

Permanent differences in the table above are mainly attributable to executive and stock compensation, nondeductible meals and entertainment expenses, and non-deductible employer contributions to the American Public Education, Inc.

Employee Stock Purchase Plan, or the ESPP.

Permanent differences in the table above are mainly attributable to executive and stock compensation, and nondeductible meals and entertainment expenses.

There were no material uncertain tax positions as of December 31, 2022, 2023, or 2024.

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Total/Weighted Average 112,551 $ 5.62 $ 4.77 $ 94,820

March 31, 2023 20,002 $ 5.42 $ 4.61 $ 16,262

June 30, 2023 41,729 $ 4.74 $ 4.03 $ 29,669

September 30, 2023 34,332 $ 4.71 $ 4.00 $ 24,256

December 31, 2023 16,488 $ 9.96 $ 8.47 $ 24,633

Total/Weighted Average 112,551 $ 5.62 $ 4.77 $ 94,820

Stockholders’ Equity

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The 2017 Incentive Plan includes a provision that allows individuals who have reached certain service and retirement eligibility criteria on the date of grant an accelerated service period of one year .

The Company recognizes compensation expense for these individuals over the accelerated period.

The Company recognizes compensation expense for these individuals over the accelerated one year period.

As of December 31, 2024, all shares subject to outstanding awards are under the 2017 Incentive Plan.

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

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

previously recognized, compensation cost is reversed.

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

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

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

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

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

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

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

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

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

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116,332 $ 21.10 6.25 $ 397

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

The following table sets forth the assumptions used in calculating the fair value at the date of grant of each option award granted for the years ended December 31, 2022, and 2023.

There were no options granted during the year ended December 31, 2024:

Year Ended December 31,

2021 2022 2023

Expected volatility 48.08 % 53.50 %

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

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

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

Subject to market conditions, applicable legal requirements, and other factors, the repurchases under these authorizations may be made from time to time in the open market or in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination thereof.

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

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

The Company has no obligation to repurchase shares and may modify, suspend or discontinue the repurchase program at any time.

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

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

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

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

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

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

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

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

During the years ended December 31, 2023, and 2024, the Company repurchased 1,515,766 and 251,146 shares of common stock for $ 9.7 million and $ 2.8 million, respectively.

Effective February 1, 2024, the Company ceased purchases under the November 2023 purchase authorization, and, as of December 31, 2024, the Company has $ 6.0 million remaining under this share repurchase authorization.

During the years ended December 31, 2022, 2023, and 2024, the Company was deemed to have repurchased 80,764 , 91,855 , and 122,186 shares, respectively, of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants.

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

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

During the years ended December 31, 2023, and 2024, $ 6.0 million and $ 6.1 million of dividends were declared and paid on the Series A Senior Preferred Stock, respectively.

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

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

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

As of December 31, 2023

As of December 31, 2024

Series A Senior Preferred Stock (plus accrued and unpaid dividends) $ 40,072 $ 40,068

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Segment Information

The Company has three reportable segments:

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

The Company’s Chief Executive Officer, as the CODM, organizes the company, manages resource allocations, and measures performance among three operating and reportable segments:

Corporate and Other includes GSUSA revenue and expenses, and unallocated corporate activity and eliminations to reconcile segment results to the Consolidated Financial Statements.

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

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

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

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

The Company’s Chief Executive Officer reviews operating results to make decisions about allocating resources and assessing performance for the APUS, RU, and HCN Segments.

The CODM reviews information about each reportable segment’s revenue and categorized expenses, and allocates resources to, and measures the performance of, each reportable segment using reportable segment operating income (loss).

The CODM does not evaluate reportable segment asset or liability information.

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

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2022 2023 2024

APUS Segment $ 283,700 $ 285,128 $ 303,303

RU Segment 89,483 253,257 214,086

HCN Segment 45,803 47,078 56,936

(In thousands)

Revenue 285,128 303,303 317,049

Instructional costs and services 97,549 97,246 103,745

Selling and promotional 65,634 57,580 58,563

General and administrative 56,204 55,992 58,807

7,289 8,059 6,512

Income from operations before interest and income taxes 58,452 84,426 89,422

Revenue 253,257 214,086 216,262

Instructional costs and services 143,443 140,861 133,448

Selling and promotional 79,182 66,571 58,682

General and administrative 25,833 25,401 30,324

171,356 84,828 15,606

Loss from operations before interest and income taxes ( 166,557 ) ( 103,575 ) ( 21,798 )

Revenue 47,078 56,936 67,290

Instructional costs and services 33,603 38,582 43,795

Selling and promotional 5,148 4,312 6,923

General and administrative 11,371 14,182 15,989

967 1,256 1,705

Loss from operations before interest and income taxes ( 4,011 ) ( 1,396 ) ( 1,122 )

Corporate and Other

Total revenue $ 418,803 $ 606,328 $ 600,545

Revenue 20,865 26,220 23,958

Instructional costs and services 13,877 16,173 14,715

Selling and promotional 4,685 4,492 4,642

General and administrative 26,944 32,664 36,841

591 652 1,196

Loss from operations before interest and income taxes ( 25,232 ) ( 27,761 ) ( 33,436 )

Total reportable segment revenue 585,463 574,325 600,601

Corporate and other revenue 20,865 26,220 23,958

Total consolidated revenue 606,328 600,545 624,559

Total reportable segment (loss) income from operations before interest and income taxes ( 112,116 ) ( 20,545 ) 66,502

Corporate and other (loss) from operations before interest and income taxes ( 25,232 ) ( 27,761 ) ( 33,436 )

Total consolidated (loss) income from operations before interest and income taxes ( 137,348 ) ( 48,306 ) 33,066

(1) Includes loss on assets held for sale, loss on disposal of long lived assets and depreciation and amortization expense.

(2) Includes impairment of goodwill and intangible assets, loss on leases, loss on disposal of long lived assets and depreciation and amortization expense.

(3) Includes loss on disposal of long lived assets and depreciation and amortization expense.

(4) Includes loss on disposal of long lived assets and depreciation and amortization expense.

Year Ended December 31,

2022 2023 2024

(In thousands)

Depreciation and amortization

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HCN Segment 958 1,253 1,704

Corporate and Other 41 590 652

Total depreciation and amortization $ 17,832 $ 32,127 $ 27,816

Income (loss) from operations before interest and income taxes

APUS Segment $ 51,050 $ 58,452 $ 84,426

RU Segment 1,630 ( 166,557 ) ( 103,575 )

HCN Segment 1,829 ( 4,011 ) ( 1,396 )

Corporate and Other ( 24,138 ) ( 25,232 ) ( 27,761 )

Total income (loss) from operations before interest and income taxes $ 30,371 $ ( 137,348 ) $ ( 48,306 )

Interest income (expense)

APUS Segment $ 210 $ 219 $ 1,882

RU Segment 132 79 11

HCN Segment 9 23 95

Corporate and Other ( 4,628 ) ( 18,049 ) ( 6,447 )

Total interest income (expense) $ ( 4,277 ) $ ( 17,728 ) $ ( 4,459 )

Income tax expense (benefit)

APUS Segment $ 14,023 $ 16,465 $ 23,530

RU Segment 509 ( 41,651 ) ( 26,103 )

HCN Segment 522 ( 1,026 ) ( 211 )

Total reportable segment depreciation and amortization 31,537 27,164 18,109

Corporate and Other 590 652 1,194

Total income tax expense (benefit) $ 7,511 $ ( 36,276 ) $ ( 10,715 )

Capital expenditures

Total consolidated depreciation and amortization 32,127 27,816 19,303

Interest expense, net

APUS Segment 219 1,882 1,563

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HCN Segment 23 95 216

Total reportable segment interest expense, net 321 1,988 1,773

Corporate and Other ( 18,049 ) ( 6,447 ) ( 3,900 )

Total capital Expenditures $ 11,828 $ 16,389 $ 13,895

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

As of December 31,

Total consolidated interest expense, net ( 17,728 ) ( 4,459 ) ( 2,127 )

Income tax (benefit) expense

APUS Segment 16,465 23,530 24,577

1 unchanged sentence

HCN Segment ( 1,026 ) ( 211 ) ( 62 )

Total reportable segment income tax (benefit) expense ( 26,212 ) ( 2,784 ) 18,996

Corporate and Other ( 10,064 ) ( 7,931 ) ( 8,577 )

Total assets $ 615,056 $ 557,386

Subsequent Event

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

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

Total consolidated income tax (benefit) expense ( 36,276 ) ( 10,715 ) 10,419

Quarterly Financial Summary (unaudited)

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data