What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-12 · 178 added, 338 removed, 172 unchanged (75% of the section changed)

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• our ability to manage, grow, and diversify our business and execute our business initiatives and strategy;

• the impact, timing, projected benefits, and terms of the planned combination of American Public University System, or APUS, Rasmussen University, or RU, and Hondros College of Nursing, or HCN, into one consolidated institution that will be a system encompassing all APUS, RU, and HCN programs, campuses, and operations, or the Combination;

• legislative and regulatory changes, shifts in regulatory priorities, restrictions on the function, operations, and budgets of federal agencies, including ED, as a result of U.S.

presidential and administration transitions and presidential directives regarding governmental actions;

• our cash needs and expectations regarding cash flow from operations, including the impacts of our debt service and the dividend payments that are required to be paid on our Series A Senior Preferred Stock;

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• changes to and expectations regarding our student enrollment, net course registrations, and the composition of our student body, including the pace of such changes;

• our ability to maintain, develop, and grow our technology infrastructure to support our student body;

• our ability to maintain, develop, and grow our technology infrastructure to support our student body and remain competitive;

• our conversion of prospective students to enrolled students and our retention of active students;

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• our maintenance and expansion of our relationships and partnerships and the development of new relationships and partnerships;

• actions by the Department of Defense, or DoD, or branches of the United States Armed Forces, including actions related to the disruption and suspension of DoD tuition assistance, or TA, programs and ArmyIgnitED, our responses to those actions, and expectations regarding the effects of those actions and responses;

• actions by the Department of Defense, or DoD, or branches of the U.S.

Armed Forces, including actions related to the participating in DoD tuition assistance, or TA, programs, our responses to those actions, and expectations regarding the effects of those actions and responses;

• federal appropriations and other budgetary matters, including government shutdowns;

• changes in enrollment in postsecondary degree-granting institutions and workforce needs;

• the competitive environment in which we operate;

• our ability to recognize the intended benefits of our cost savings and revenue-generating efforts;

• challenges related to insourcing and outsourcing information technology services to our operations and third-party vendors, respectively;

• our ability to manage and influence our bad debt expense;

• the expected impact on our students and our business from campus closures and consolidations;

• our plans with respect to potential strategic alternatives for Graduate School USA, or GSUSA;

• our financial performance generally;

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Risks and uncertainties involved in forward-looking statements include, among others:

• potential changes to the ED’s, and other federal government agencies’, structure, policies, priorities, and oversight, including as a result of federal elections and the Trump administration’s stated intention to dismantle ED;

• our dependence on the effectiveness of our ability to attract students who persist in our institutions’ programs;

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• our failure to comply with regulatory and accrediting agency requirements or to maintain institutional accreditation, the consequences thereof, and risks related to any actions we may take to prevent or correct such failure;

• adverse impacts of recent ED negotiated rulemakings;

• our failure to meet applicable National Council Licensure Examination, or NCLEX, pass rates and other NCLEX standards, and the consequences thereof;

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• economic and market conditions in the United States and abroad and changes in interest rates;

• risks related to business combinations and acquisitions, including integration challenges, business disruption, dilution of stockholder value, and diversion of management attention;

• risks related to business combinations, acquisitions, divestitures, and other strategic transactions, including, as applicable, integration challenges, business disruption, dilution of stockholder value, financial charges, and diversion of management attention;

• risks related to our substantial indebtedness and our Series A Preferred Stock;

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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.

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 ED to participate in Title IV programs.

Our Institutions

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

As of September 30, 2024, approximately 66% of APUS students self-reported that they served in the military on active duty at the time of initial enrollment.

As of March 31, 2025, approximately 64% of APUS students self-reported that they served in the military on active duty at the time of initial enrollment.

• Rasmussen College, LLC, referred to herein as Rasmussen University, or RU, provides nursing- and health sciences-focused postsecondary education to approximately 14,500 students at 20 campuses in six states and online.

As of September 30, 2024, on-ground enrollment was 6,000, of which approximately 5,300 students were pursuing nursing degrees at RU, approximately 90% of whom were enrolled in RU’s pre-licensure nursing degree programs.

At September 30, 2024, online enrollment was approximately 7,500 students.

As of March 31, 2025, on-ground enrollment was 6,500, of which approximately 5,600 students were pursuing nursing degrees at RU, approximately 90% of whom were enrolled in RU’s pre-licensure nursing degree programs.

At March 31, 2025, online enrollment was approximately 8,000 students.

• National Education Seminars, Inc., referred to herein as Hondros College of Nursing, or HCN, provides nursing education to approximately 3,600 students at eight campuses in three states.

All of HCN’s students are enrolled in its pre-licensure nursing degree programs.

HCN’s students are enrolled in its pre-licensure nursing degree programs or its Medical Assisting Diploma program.

• American Public Training LLC, referred to herein as Graduate School USA, or GSUSA, provides career learning and leadership training in-person and online to the federal workforce.

GSUSA operational activities are presented within Corporate and Other.

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

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

Tuition Increases

Providing affordable degree and certificate programs is an important element of our competitive strategy.

APUS implemented modest tuition and fee increases for non-military and veteran students in the second and third quarters of 2023.

In April 2024, APUS implemented an additional modest 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.

We believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities.

RU implemented modest tuition increases for all students for select programs in the first quarter of 2023 and 2024, for new students for select programs in August 2024, and for returning students for select programs in October 2024.

HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs.

The tuition and fee increases at RU and HCN are intended to reflect adjustments to be consistent with the local campus markets.

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.

Cost and Expense Reductions

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.

As a result, we incurred an aggregate of approximately $3.0 million of pre-tax cash expenses associated with employee severance costs, all of which were incurred in the third quarter of 2023.

Campus Closures

During the nine months ended September 30, 2024, our RU Segment consolidated two Minnesota campuses, and in May 2024, RU notified the Wisconsin Educational Approval Program, or EAP, that it intends to voluntarily close its two Wisconsin campuses, effective December 31, 2025, and 2026, respectively.

All students enrolled at the two Wisconsin campuses have expected graduation dates on or before the applicable campus closing date.

These actions impacted approximately 90 students, or less than 1% of RU’s current total enrollment.

The Planned Combination of APUS, RU, and HCN

On January 28, 2025, we announced the planned combination of APUS, RU, and HCN (the “Combination”), which will result in a combined institution named American Public University System comprised of two divisions tentatively named (i) APUS Global, comprised of AMU and APU, and (ii) Rasmussen, comprised of RU’s campus-based and online nursing programs, RU’s healthcare programs, HCN’s campus-based nursing and healthcare programs, and RU’s non-healthcare programs, with final division names to be determined closer to closing of the Combination.

The Combination constitutes a Change of Control, Structure or Organization pursuant to HLC policy and, accordingly, we must receive HLC approval prior to effectuating the Combination.

APUS and RU have jointly submitted an application for Change of Control, Structure or Organization.

For HLC purposes, APUS will be the surviving institution, and the application seeks approval for the Combination and the expansion of APUS’s HLC accreditation to include the RU and HCN programs and locations.

We anticipate completing the Combination in the third quarter of 2025 subject to obtaining required approvals and ED taking related actions.

HLC conducted a site visit in March 2025 related to the joint application and is expected to complete its review of the joint application in June 2025.

In May 2025, APUS and RU received the site visit report, and HLC has confirmed that the application for Change of Structure will be placed on the agenda for HLC’s June 2025 meeting.

Regulatory and Legislative Activity

American Public University System

A team of Higher Learning Commission, or HLC, peer reviewers conducted a focused visit at APUS in March 2024, after HLC raised concerns regarding compliance with standards related to program development oversight and program assessment processes as a result of course availability in one program.

Following the focused visit, the team found that the concerns were appropriately addressed, and no additional monitoring is required.

Their recommendations were sent to the HLCs Institutional Action Council, or IAC, for review and action.

At the June 2024 meeting, the IAC concurred with the team’s findings and affirmed that APUS addressed all concerns regarding compliance with HLC standards.

In July 2024, ED notified APUS that it had approved APUS’s continued participation in the Title IV programs under a Provisional Program Participation Agreement, or PPPA, that is effective July 15, 2024, and expires June 30, 2026.

ED granted approval on a provisional basis because APUS was subject to an open program review at the time of recertification.

The PPPA imposes new reporting requirements on APUS related to accrediting agency actions, governmental actions, and class actions.

Additionally, APEI co-signed the PPPA pursuant to new regulations effective July 1, 2024, which require an entity with a direct or indirect ownership interest and the power to exercise control over the institution to co-sign the PPPA and assume joint and several liability for the participating institution’s Title IV liabilities.

In September 2024, APUS received from ED 408 borrower defense to repayment, or BDTR, claims, all of which had submission dates between June 23, 2022, and November 15, 2022, for students first attending APUS between 2006 and 2021, seeking in the aggregate a discharge of approximately $6.6 million in loans.

APUS disputes the validity of these claims and filed responses to them with ED.

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

Refer to the Risk Factor captioned “ED rules related to BDTR claims may create significant liability that could have an adverse effect on our business” for additional information.

Rasmussen University

In March 2024, the Florida Board of Nursing, or FBN, placed RU’s Associate Degree in Nursing, or ADN, programs at its Tampa, and Ocala, Florida, campuses, along with the Ocala campus satellite program at North Orlando, Florida, on probationary status due to two consecutive years of NCLEX pass rates not meeting the state standard.

If a program’s pass rate continues to not satisfy the required standard in any of the two years following the program’s placement on probationary status, but the program shows adequate progress toward the required pass rate, FBN may allow the program to continue on probation for one additional year.

If the program fails to show adequate progress toward the required pass rate, FBN may choose to disapprove the program.

In February 2023, FBN placed RU’s ADN program at its Fort Myers, Florida, campus on probation due to two consecutive years of NCLEX pass rates not meeting the state standard.

In February 2024, FBN notified RU that the program will be allowed to continue on probation for one additional year.

If the program fails to achieve the required NCLEX pass rate at the end of this additional one-year period, but the program continues to show adequate progress toward the required pass rate, FBN may allow the program to continue on probation for one additional year.

If the program fails to show adequate progress toward the required pass rate, FBN may choose to disapprove the program.

At its May 2024 meeting, the Florida Commission on Independent Education, or FCIE, reviewed RU for a substantive change due to financial stability concerns and the Fort Myers, Ocala, and Tampa, Florida ADN programs being placed on probation by FBN.

FCIE subsequently placed RU on a provisional license, which will run through November 30, 2024.

To fulfill a condition of licensure, RU submitted an interim report on its financial condition and NCLEX pass rates for the Fort Myers, Ocala, and Tampa, Florida ADN programs to FCIE in July 2024.

RU’s annual renewal will be reviewed by FCIE in November 2024.

Failure to improve financial stability and NCLEX pass rates by that time could lead to further adverse action by FCIE, which could have an adverse impact on RU’s ability to enroll students and to continue offering ADN programs in Florida.

In September 2022, ACEN granted RU’s ADN and PN programs in Moorhead, Minnesota and RU’s ADN program in Overland Park, Kansas continued accreditation with conditions, in each case because the program experienced first-time NCLEX pass rates below ACEN’s required threshold.

For the two Moorhead, Minnesota programs, ACEN also identified evidence of noncompliance with respect to analysis and use of assessment data in program decision-making.

In April 2024, after review of the follow-up report, ACEN removed the conditions for RU’s Moorhead, Minnesota PN program, granting continuing accreditation with the next evaluation in Spring 2030.

In July 2024, RU’s Moorhead, Minnesota ADN program and the Overland Park, Kansas ADN program submitted to ACEN their follow-up reports and applications for continuing accreditation for good cause.

In September 2024, after review of the follow-up reports, ACEN removed the conditions for RU’s Moorhead, Minnesota ADN program and Overland Park, Kansas ADN program, granting continuing accreditation with the next evaluation in Spring 2030.

RU’s Moorhead, Minnesota PN program is currently approved with the MBN, but first-time NCLEX pass rates have been below the standard for three consecutive years.

On August 1, 2024, MBN placed RU’s Moorhead, Minnesota PN program on conditional approval status and issued a corrective action order.

The program’s NCLEX pass rate must meet the state standard by the end of June 2025, measured using cumulative pass rates from the preceding four quarters (i.e., July 2024 to June 2025).

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

In October 2024, the Minnesota Office of Higher Education, or MOHE, notified RU that it had determined that RU had used an impermissible nondisclosure agreement with one student.

For more information on the risks related to this determination, see the risk factor in Part II, Item 1A of this Quarterly Report with the caption beginning “If we or our institutions fail to comply with the extensive regulatory requirements for the operation of postsecondary education institutions …”

The Florida legislature passed legislation in May 2025 that will subject RU nursing programs to additional regulatory scrutiny by the Florida Board of Nursing, or FBN, and the Florida Department of Health, or FDH.

The legislation, which will take effect July 1, 2025, unless vetoed by Florida’s governor, is expected to lead to increased challenges in hiring and retaining qualified nursing program directors and increased expenses related to compliance with new requirements, such as those related to standardized admissions criteria, exit examinations, remedial programs for students, and tuition and fees reimbursement to students who fail the NCLEX if RU’s pass rate is less than 30%.

In addition, the legislation shortens the period before a program will be placed on probation due to low NCLEX scores and shortens the length of time a program can spend on probation, and it allows FBN to impose disciplinary remedies on an approved program against which an adverse action has been taken by another regulatory jurisdiction in the United States.

The Florida ADN programs and several RU nursing programs in other states have previously been, and may in the future be, subject to disciplinary actions by state regulatory bodies for failure to meet applicable NCLEX pass rates or other requirements including disciplinary actions that could be deemed adverse actions by FBN for purposes of the legislation’s requirements.

Failure to comply with the new legislation and any adverse action taken as a result could adversely impact our business, operations, financial results, and reputation, including RU’s ability to expand or operate in Florida.

See the “Risk Factors” section of this Quarterly Report below for additional information.

Hondros College of Nursing

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

As a result, the Accrediting Bureau for Health Education Schools, or ABHES, required HCN to submit reports for each of these programs demonstrating their retention rate through the first three quarters of the 2023-2024 reporting year by May 2024.

In May 2024, HCN submitted the required mid-year retention reports for the programs that fell below the 70% benchmark in the 2022-2023 reporting year (Columbus PN, Dayton PN and ADN, Cleveland PN, Toledo PN, and Akron ADN).

These reports demonstrated compliance with the 70% benchmark through the first three quarters of the 2023-2024 reporting year.

As a result, the ABHES Commission voted to remove retention reporting requirements for all affected HCN programs at its July 2024 meeting.

For the reporting year ended June 30, 2024, the Cleveland and Dayton PN programs, and the Akron ADN program were below the 70% benchmark for retention.

HCN expects these programs will be placed back on retention outcomes reporting following January 2025 ABHES Commission meeting.

ABHES will likely require HCN to submit reports for each of these programs demonstrating their retention rate through the first three quarters of the 2024-2025 reporting year by May 2025.

At its July 2024 meeting, ABHES voted to affirm its July 2022 grant of accreditation of the Detroit, Michigan campus following a team visit to the campus from February 29, 2024, to March 1, 2024.

In January 2023, the Ohio Board of Nursing, or OBN, placed HCN’s PN program on provisional approval for a period of 18 months due to two self-reported instances of noncompliance with faculty credential and program records requirements.

As a result, HCN was required to submit to OBN progress reports evidencing that it meets and maintains nursing program requirements.

In July 2024, OBN restored the PN program to full approval status for a five-year period after HCN hosted a site visit from OBN.

Gainful Employment

Pursuant to new gainful employment, or GE, regulations that took effect July 1, 2024, ED will determine the Title IV eligibility of GE programs based in part on satisfaction of specified performance levels of two new measures, as discussed in more detail in our Annual Report.

Institutions will generally be required to report certain information used to calculate these measures to ED by July 31 of each year, provided that for 2024, ED announced in March 2024 that the reporting deadline would be October 1, 2024, and in September 2024, announced that the deadline would be further extended to January 15, 2025.

Other Recent Legislative and Regulatory Activity

In July 2024, ED proposed regulations related to, among other matters, distance education and Return to Title IV, or R2T4, rules.

Proposed changes related to distance education include additional reporting requirements for programs offered entirely through distance education and students’ distance education status, in part to allow students to obtain closed school loan discharges when an institution ends a program offered in-person or online.

Proposed changes related to R2T4 rules, which govern an institution’s obligations to return Title IV funds to ED when a student withdraws, would require an institution to take attendance, for purposes of the R2T4 calculation, for each course offered entirely through distance education.

Under the Higher Education Act of 1965, as amended, or the HEA, the earliest any final regulations would be effective is July 1, 2026.

Cohort Default Rate

To remain eligible to participate in Title IV programs, an educational institution’s student loan cohort default rates must remain below certain levels.

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

If an institution’s cohort default rate is equal to or greater than 30% in any year, it must establish a default prevention task force.

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

These rates were favorably impacted by regulatory

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

In connection with these developments, ED implemented a 12-month “on-ramp” to repayment, running from October 1, 2023, to September 30, 2024, during which borrowers were not placed into default for missed payments.

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

Additional information regarding student loan default rates, prior year default rates, and potential risks associated with them is available in our Annual Report.

ABHES may withdraw accreditation if it determines that an institution fails to demonstrate at least a 70% retention rate for each program.

Alternatively, it may provide an opportunity for a program not meeting ABHES’ outcomes thresholds to come into compliance within a specified time period, and may extend such period if a program demonstrates improvement or for other good cause.

For the reporting year ended June 30, 2024, HCN’s Cleveland and Dayton Diploma in Practical Nursing, or PN, programs, and the Akron Associate Degree in Nursing, or ADN, program were below the 70% benchmark for retention.

As a result, ABHES placed the Cleveland and Dayton PN programs and Akron ADN program on outcomes reporting status and required HCN to submit reports for each of these programs demonstrating their retention rate through the first three quarters of the 2024-2025 reporting year by May 2025.

These three programs have met the 70% benchmark for retention through the first three quarters of the 2024-2025 reporting year.

As a result, we expect the ABHES Commission to vote to remove retention reporting requirements for all affected HCN programs at its July 2025 meeting.

Graduate School USA

GSUSA provides contract training to federal government agency customers and through direct enrollment by federal, state, and municipal government employees, contractors, and non-government employees.

Changing priorities and policies under the Trump administration, including reductions in force, or RIFS, at government agencies, and including other actions taken by the Department of Government Efficiency, or DOGE, have resulted in significant uncertainty relating to the provision of career learning and contract training at federal government agencies, including whether they will remain a priority for our federal government agency customers.

These changes have begun to adversely impact, and may continue to adversely impact, GSUSA’s business, and, as a result, we are exploring a range of paths to stabilize the business and considering alternatives for GSUSA.

Any divestiture of GSUSA or other significant transaction, whether by sale or otherwise, may require an investment of time and resources, may distract management from other responsibilities, and may result in losses on disposition or continued financial involvement in GSUSA.

Tuition Increases

Providing affordable degree and certificate programs is an important element of our competitive strategy.

In April 2024, APUS implemented a 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.

We believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities.

RU implemented modest tuition increases for all students in select programs in the first quarter of 2024, for new students in select programs in August 2024, and for returning students in select programs in October 2024.

In the third quarter of 2025, RU plans to implement a tuition increase, similar to the increases implemented in the third and fourth quarters of 2024.

The tuition and fee increases at RU are intended to reflect adjustments to be consistent with the local campus markets.

Even with these increases, RU 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.

Reportable Segments

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Summary of Results

Consolidated revenue for the three months ended September 30, 2024, increased to $153.1 million from $150.8 million, or by 1.5%, as compared to the prior year period.

Our net income for the three months ended September 30, 2024, was $2.3 million, compared to a net loss of $3.3 million in the prior year period, an increase of $5.6 million.

The results for the three months ended September 30, 2024, include $1.1 million of information technology transition services costs in all our segments as well as Corporate and Other.

The results in the prior year period include a non-cash investment loss of $5.2 million on one of our cost method equity investments in Corporate and Other.

Our operating margin declined to 2.7% for the three months ended September 30, 2024, compared to 4.2% in the prior year period.

Excluding the information technology transition services costs in 2024, our operating margin was 3.4% for the three months ended September 30, 2024.

Consolidated revenue for the nine months ended September 30, 2024, increased to $460.4 million from $447.7 million, or by 2.8%, as compared to the prior year period.

Our net income for the nine months ended September 30, 2024, was $3.1 million, compared to a net loss of $60.3 million in the prior year period, an increase of $63.4 million.

The results for the nine months ended September 30, 2024, include non-cash losses on investments of $4.4 million in Corporate and Other, a $3.7 million pre-tax loss on leases in our RU Segment, $3.1 million of information technology transition services costs in all our segments as well as Corporate and Other, and $0.5 million in severance costs related to the former president of GSUSA in Corporate and Other, and the planned closure of the Wisconsin campuses in our RU Segment.

The results in the prior year period include a non-cash impairment charge of $64.0 million in our RU Segment to reduce the carrying value of RU Segment goodwill and intangible assets and reflect the corresponding tax impact, a non-cash investment loss of $5.2 million on one of our cost method investments in Corporate and Other, and $2.4 million in transition services fees related to the termination of the Collegis LLC, or Collegis, marketing contract in our RU Segment.

Our operating margin improved to 2.5% for the nine months ended September 30, 2024, compared to negative 14.3%, in the prior year period.

Excluding the loss on leases, information technology transition services costs and severance costs in 2024, and the non-cash impairment charge on goodwill and intangible assets and marketing transition services fees in 2023, our operating margin was 4.1% for the nine months ended September 30, 2024, compared to 0.5% for the nine months ended September 30, 2023.

APUS net course registrations for the three months ended September 30, 2024, increased to approximately 92,500 from approximately 92,300, an increase of 200, or 0.2%, as compared to the prior year period.

APUS Segment revenue for the three months ended September 30, 2024, increased to $77.0 million from $76.4 million, or by 0.8%, as compared to the prior year period.

The revenue increase for the period was greater than the increase in net course registrations due to the tuition and fee increases in the second quarter of 2024.

APUS net course registrations for the nine months ended September 30, 2024, increased to approximately 281,300 from approximately 276,900, an increase of 4,400, or 1.6%, as compared to the prior year period.

APUS Segment revenue for the nine months ended September 30, 2024, increased to $234.7 million from $223.9 million, or by 4.8%, as compared to the prior year period.

The revenue increase for the period was greater than the increase in net course registrations due to the tuition and fee increases in 2023 and 2024 and the timing of course starts within the respective periods.

APUS Segment operating margin decreased to 27.0% for the three months ended September 30, 2024, from

28.7% in the prior year period and increased to 26.5% from 25.9% for the nine months ended September 30, 2024, as compared to the prior year period.

RU total enrollment was approximately 13,500 for both the three months ended September 30, 2024, and 2023.

RU Segment revenue for the three months ended September 30, 2024, increased to $52.6 million from $52.1 million, or by 1.0%, as compared to the prior year period.

The revenue increase, with flat enrollment for the comparable prior year period, was due to tuition increases effective in the first quarter of 2023 and 2024 and the third quarter of 2024 for select programs.

RU total enrollment for the nine months ended September 30, 2024, decreased approximately 2.7%, as compared to the prior year period.

RU Segment revenue for the nine months ended September 30, 2024, decreased to $158.8 million from $161.5 million, or by 1.7%, as compared to the prior year period.

RU Segment operating margin improved to negative 14.5% from negative 20.3% for the three months ended September 30, 2024, as compared to the prior year period.

Excluding the impact of the non-cash impairment charge in the prior year period, RU Segment operating margin improved to negative 16.0% from negative 22.7% for the nine months ended September 30, 2024, as compared to the prior year period.

HCN total enrollment for the three months ended September 30, 2024, increased to approximately 3,100 from approximately 2,800, an increase of 300, or 10.4%, as compared to the prior year period.

HCN Segment revenue for the three months ended September 30, 2024, increased to $15.5 million from $13.7 million, or by 12.8%, as compared to the prior year period.

HCN total enrollment for the nine months ended September 30, 2024, increased approximately 13.3%, as compared to the prior year period, primarily due to enrollment growth at the Detroit, Michigan campus.

HCN Segment revenue for the nine months ended September 30, 2024, increased to $48.3 million from $41.1 million, or by 17.5%, as compared to the prior year period.

The revenue increase was greater than the enrollment increase due to the tuition increase in the second quarter of 2023.

HCN Segment operating margin decreased to negative 5.0% from negative 4.7% for the three months ended September 30, 2024, and improved to negative 3.8% from negative 5.3% for the nine months ended September 30, 2024, as compared to the prior year period.

Consolidated revenue for the three months ended March 31, 2025, increased to $164.6 million from $154.4 million, or by 6.6%, as compared to the prior year period.

Our net income for the three months ended March 31, 2025, was $8.9 million, compared to $0.5 million in the prior year period, an increase of $8.4 million.

The results for the three months ended March 31, 2025, include a non-cash $1.5 million loss on assets held for sale in our APUS Segment, and $1.0 million in professional fees in Corporate and Other relating to the Combination, both on a pre-tax basis.

The results in the prior year period include a non-cash investment loss of $3.3 million on one of our cost method equity investments in Corporate and Other, a $2.9 million pre-tax

loss on leases in our RU Segment, and $1.9 million in information technology transition service costs, on a pre-tax basis.

Our operating margin improved to 7.4% for the three months ended March 31, 2025, compared to 3.4% in the prior year period.

Excluding the loss on assets held for sale and professional fees relating to the Combination in 2025, and the loss on leases and information technology transition services costs in 2024, our operating margin was 9.0% and 6.5% for the three months ended March 31, 2025, and 2024, respectively.

APUS net course registrations for the three months ended March 31, 2025, increased to approximately 102,500 from approximately 99,000, an increase of 3,500, or 3.5%, as compared to the prior year period.

APUS Segment revenue for the three months ended March 31, 2025, increased to $83.9 million from $80.7 million, or by 4.1%, as compared to the prior year period.

The revenue increase for the period was greater than the increase in net course registrations due to the tuition and fee increases in the second quarter of 2024, and the timing of course starts within the respective periods.

APUS Segment operating margin increased to 28.7% for the three months ended March 31, 2025, from 28.6% in the prior year period.

RU total enrollment for the three months ended March 31, 2025, increased to approximately 14,500 from approximately 13,500, an increase of 1,000, or 7.4%, as compared to the prior year period.

RU Segment revenue for the three months ended March 31, 2025, increased to $59.3 million from $53.1 million, or by 11.5%, as compared to the prior year period.

The revenue increase for the period was greater than enrollment for the comparable prior year period due to tuition increases in the third and fourth quarters of 2024.

RU Segment operating margin improved to negative 0.1% for the three months ended March 31, 2025, from negative 16.9% in the prior year period.

HCN total enrollment for the three months ended March 31, 2025, increased to approximately 3,600 from approximately 3,300, an increase of 300, or 9.6%, as compared to the prior year period.

HCN Segment revenue for the three months ended March 31, 2025, increased to $17.7 million from $16.4 million, or by 7.5%, as compared to the prior year period.

The revenue increase was less than enrollment increase due to higher student enrollment from community partners which is at a lower revenue per student.

HCN Segment operating margin decreased to negative 4.2% for the three months ended March 31, 2025, from negative 1.8% in the prior year period.

Critical Accounting Policies and Use of Estimates

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No goodwill is recorded in our APUS Segment.

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.

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 included intangible assets related to trade name, accreditation, licensing, and Title IV, and affiliate agreements.

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

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Our methodology for determining fair values remained consistent for the periods presented.

During the three months ended September 30, 2024, we completed a qualitative assessment of RU and HCN Segment goodwill and indefinite-lived intangible assets.

During the three months ended March 31, 2025, we completed a qualitative assessment for potential impairment of the RU and HCN Segment goodwill and indefinite-lived intangible assets.

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

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After completing this qualitative assessment, we concluded it was more likely than not that the fair value of each of the RU and HCN Segments was greater than the respective carrying value, and therefore no quantitative impairment test and no impairment charge was necessary.

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

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

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

There were no indicators of impairment at HCN.

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

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

As a result, we recorded a non-cash impairment charge of $53.0 million and the corresponding tax impact of $15.8 million to reduce the carrying value of RU Segment goodwill to $33.0 million during the three months ended June 30, 2023.

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

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

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

There were no indicators of impairment at HCN.

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

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

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.

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.

For more information regarding our Critical Accounting Policies and Use of Estimates, see the “Critical Accounting Policies and Use of Estimates” section of “Item 7.

For more information regarding our Critical Accounting Policies and Use of Estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

Results of Operations

Below we have included a discussion of our operating results and material changes in our operating results during the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023.

Below we have included a discussion of our operating results and material changes in our operating results during the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Our revenue and operating results normally fluctuate as a result of seasonal or other variations in our enrollments and the level of expenses in our reportable segments.

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We expect quarterly fluctuations in operating results to continue as a result of various enrollment patterns and changes in revenue and expenses.

The increase in net course registrations was primarily due to an increase in registrations by military-affiliated students utilizing education benefit programs administered by the U.S.

Department of Veterans Affairs, or VA.

APUS Segment operating margin decreased to 27.0% from 28.7% for the three months ended September 30, 2024, and increased to 26.5% from 25.9% for the nine months ended September 30, 2024, as compared to the prior year period.

The decrease in operating margin for the three months ended September 30, 2024, was primarily due to increases in information technology costs, including transition services costs, professional fees, and employee compensation costs, partially offset by a decrease in advertising costs, as compared to the prior year period.

The increase in operating margin for the nine months ended September 30, 2024, was primarily due to an increase in revenue and a decrease in advertising costs, partially offset by increases in employee compensation costs and information technology costs, including transition services costs, and professional fees, as compared to the prior year period.

RU total enrollment was approximately 13,500 for both the three months ended September 30, 2024, and 2023, driven by a 6.3% decrease in on-ground enrollment, offset by a 4.2% increase in online enrollment, which has a lower revenue per student.

RU total enrollment for the nine months ended September 30, 2024, decreased approximately 2.7%, driven by a 9.1% decrease in on-ground enrollment, partially offset by a 3.3% increase in online enrollment, as compared to the prior year period.

We believe the decline in on-ground enrollment can be attributed to several factors, including 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.

RU Segment operating margin improved to negative 14.5% from negative 20.3% for the three months ended September 30, 2024.

Excluding the loss on leases and severance costs in 2024 and the non-cash impairment charge on goodwill and intangible assets, and marketing transition services fees in 2023, operating margin improved to negative 13.6% from negative 21.2% for the nine months ended September 30, 2024, as compared to the prior year period.

The improvement in the operating margin for the three and nine months ended September 30, 2024, was primarily due to decreases in depreciation and amortization expenses and decreases in employee compensation costs.

HCN total enrollment for the three months ended September 30, 2024, increased to approximately 3,100 from approximately 2,800, an increase of 300, or 10.4%, as compared to the prior year period.

HCN total enrollment for the nine months ended September 30, 2024, increased approximately 13.3%, as compared to the prior year period.

The increase in total student enrollment during the nine month period is primarily due to enrollment growth at the Detroit, Michigan campus.

The decrease in the operating margin for the three months ended September 30, 2024, was primarily due to increases in employee compensation costs, classroom and course materials costs, and bad debt expense, partially offset by an increase in revenue, as compared to the prior year period.

The increase in the operating margin for the nine months ended September 30, 2024, was primarily due to an increase in revenue, partially offset by increases in employee compensation costs, classroom and course materials costs, bad debt expense, and information technology costs, as compared to the prior year period.

Department of Veterans Affairs, or VA, and an increase in students utilizing federal student aid from Title IV programs, partially offset by a decrease in military students utilizing TA.

APUS Segment operating margin increased to 28.7% for the three months ended March 31, 2025, from 28.6% in the prior year period.

The increase in operating margin for the three months ended March 31, 2025, was primarily due to the increase in revenue and a decrease in professional fees, partially offset by the loss on assets held for sale, and an increase in employee compensation costs, as compared to the prior year period.

RU total enrollment for the three months ended March 31, 2025, increased to approximately 14,500 from approximately 13,500, an increase of 1,000, or 7.4%, as compared to the prior year period, driven by an 11.1% increase in online enrollment and a 3.2% increase in on-ground enrollment.

RU Segment operating margin improved to negative 0.1% for the three months ended March 31, 2025, from negative 16.9% in the prior year period.

The improvement in the operating margin for the three months ended March 31, 2025, was primarily due to the increase in revenue as well as decreases in loss on leases, depreciation and amortization expenses, and information technology costs, partially offset by an increase in employee compensation costs, as compared to the prior year period.

HCN total enrollment for the three months ended March 31, 2025, increased to approximately 3,600 from approximately 3,300, an increase of 300, or 9.6%, as compared to the prior year period.

HCN Segment operating margin decreased to negative 4.2% for the three months ended March 31, 2025, from negative 1.8% in the prior year period.

The decrease in the operating margin for the three months ended March 31, 2025, was primarily due to increases in employee compensation costs, classroom and course materials costs, and bad debt expense, partially offset by the increase in revenue, as compared to the prior year period.

For a more detailed discussion of our results by reportable segment, refer to “Analysis of Operating Results by Reportable Segment” below.

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The following table sets forth statements of income data as a percentage of revenue for each of the periods indicated:

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

2024 2023 2024 2023

Three Months Ended March 31,

Revenue 100.0 % 100.0 %

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Depreciation and amortization 2.4 3.3

Impairment of goodwill and intangible assets — — — 14.3

Loss on assets held for sale 0.9 —

Loss on leases — 1.9

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Total costs and expenses 92.6 96.6

Income (loss) from operations before interest and income taxes 2.7 4.2 2.5 (14.3)

Income from operations before interest and income taxes 7.4 3.4

Interest expense, net (0.5) (0.1)

Income (loss) from operations before income taxes 2.3 3.7 2.2 (15.1)

Income tax (benefit) expense 0.8 2.5 0.5 (2.9)

Income from operations before income taxes 6.9 3.3

Income tax expense 1.5 0.8

Equity investment loss — (2.2)

Net income (loss) 1.5 (2.2) 0.7 (13.5)

Net income 5.4 0.3

Preferred stock dividend 0.9 1.0

Net loss available to common shareholders 0.5 % (3.2) % (0.3) % (14.5) %

Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023

Our consolidated revenue for the three months ended September 30, 2024, was $153.1 million, an increase of $2.3 million, or 1.5%, compared to $150.8 million for the three months ended September 30, 2023.

The increase in revenue was primarily due to a $1.8 million, or 12.8%, increase in revenue in our HCN Segment, a $0.6 million, or 0.8%, increase in revenue in our APUS Segment, and a $0.5 million, or 1.0%, increase in revenue in our RU Segment, partially offset by a $0.5 million, or 6.3%, decrease in GSUSA revenue included in Corporate and Other.

Net income (loss) available to common shareholders 4.5 % (0.7) %

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

Our consolidated revenue for the three months ended March 31, 2025, was $164.6 million, an increase of $10.1 million, or 6.6%, compared to $154.4 million for the three months ended March 31, 2024.

The increase in revenue was primarily due to a $6.1 million, or 11.5%, increase in revenue in our RU Segment, a $3.3 million, or 4.1%, increase in revenue in our APUS Segment, and a $1.2 million, or 7.5%, increase in revenue in our HCN Segment, partially offset by a $0.5 million, or 12.5%, decrease in GSUSA revenue included in Corporate and Other.

The RU Segment revenue increase was primarily due to a 7.4% increase in total student enrollment and the impact of tuition increases in the third and fourth quarters of 2024.

The APUS Segment revenue increase was primarily due to a 3.5% increase in net course registrations, tuition and fee increases in the second quarter of 2024, and the timing of course starts, as compared to the prior year period.

The HCN Segment revenue increase was primarily due to a 9.6% increase in total student enrollment, as compared to the prior year period.

The APUS Segment revenue increase was primarily due to a 0.2% increase in net course registrations and tuition and fee increases in the second quarter of 2024, as compared to the prior year period.

The RU Segment revenue increase was primarily due to an increase in tuition rates effective in the first quarter of 2023 and 2024 for select programs, which was partially offset by a change in mix of the total student enrollment resulting in a 6.3% decrease in on-ground enrollment, partially offset by a 4.2% increase in online enrollment, which has a lower revenue per student, as compared to the prior year period.

Costs and expenses.

Costs and expenses for the three months ended September 30, 2024, were $149.0 million, an increase of $4.6 million, or 3.2%, compared to $144.4 million for the three months ended September 30, 2023.

Costs and expenses for the three months ended September 30, 2024, include $1.1 million of information technology transition services costs in all our segments as well as Corporate and Other.

Costs and expenses for the three months ended September 30, 2024, as compared to the prior year period, excluding information technology transition services costs in 2024, increased $3.5 million, due primarily to increases in employee compensation costs, and professional fees, partially offset by decreases in depreciation and amortization expenses, rent costs, bad debt expense, and advertising costs.

Costs and expenses as a percentage of revenue increased to 97.3% for the three months ended September 30, 2024, from 95.8% for the three months ended September 30, 2023.

Instructional costs and services expenses.

Our instructional costs and services expenses for the three months ended September 30, 2024, were $75.4 million, an increase of $2.2 million, or 3.0%, compared to $73.2 million for the three months ended September 30, 2023.

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 professional fees in our RU Segment, and an increase in classroom and course materials costs in our HCN Segment, partially offset by decreases in information technology costs and rent costs in our RU Segment, and employee compensation costs in our RU Segment and Corporate and Other.

Instructional costs and services expenses as a percentage of revenue increased to 49.2% for the three months ended September 30, 2024, from 48.5% for the three months ended September 30, 2023.

Selling and promotional expenses.

Our selling and promotional expenses for the three months ended September 30, 2024, were $33.5 million, an increase of $0.2 million, or 0.4%, compared to $33.3 million for the three months ended September 30, 2023.

The increase in selling and promotional expenses was primarily due to increases in professional fees in our APUS Segment, marketing support costs in our RU Segment and Corporate and Other, and advertising costs and employee compensation costs in our HCN Segment and Corporate and Other, partially offset by decreases in employee compensation costs in our RU and APUS Segments, and advertising costs in our APUS Segment.

Selling and promotional expenses as a percentage of revenue decreased to 21.9% for the three months ended September 30, 2024, from 22.1% for the three months ended September 30, 2023.

General and administrative expenses.

Our general and administrative expenses for the three months ended September 30, 2024, were $35.0 million, an increase of $4.1 million, or 13.4%, compared to $30.9 million for the three months ended September 30, 2023.

General and administrative expenses for the three months ended September 30, 2024, include $1.1 million in information technology transition services costs in all our segments as well as Corporate and Other.

The increase in general and administrative expenses is primarily due to increases in other information technology costs in all our segments, employee compensation costs in Corporate and Other, professional fees in our APUS Segment and Corporate and Other, and bad debt expense in our HCN Segment, partially offset by decreases in employee compensation costs in all our segments, information technology costs in Corporate and Other, and bad debt expense in our APUS and RU Segments.

Consolidated bad debt expense for the three months ended September 30, 2024, was $4.2 million, or 2.7% of revenue, compared to $4.5 million, or 3.0% of revenue in the prior year period.

General and administrative expenses as a percentage of revenue increased to 22.9% for the three months ended September 30, 2024, from 20.5% for the three months ended September 30, 2023.

As we continue to evaluate enhancements to our business capabilities, particularly in technology, we expect to incur additional costs and that our general and administrative expenses will vary from time to time, but we will also consider the capitalization of information technology development costs.

Depreciation and amortization expenses.

Depreciation and amortization expenses were $5.1 million for three months ended September 30, 2024, compared to $7.0 million in the prior year period, a decrease of $1.9 million, primarily related to the full amortization of certain definite lived intangible assets in our RU Segment in the third quarter of 2023.

Depreciation and amortization expenses as a percentage of revenue was 3.3% and 4.7% for the three months ended September 30, 2024, and 2023, respectively.

Loss (gain) on disposals of long-lived assets.

The loss on disposal of long-lived assets was $23,000 for the three months ended September 30, 2024, compared to a gain of $16,000 for the three months ended September 30, 2023.

Stock-based compensation expenses.

Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $1.8 million and $1.7 million for the three months ended September 30, 2024, and 2023, respectively.

Stock-based compensation costs include accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Interest expense, net.

Interest expense, net of interest and other income, was $0.6 million and $0.8 million for the three months ended September 30, 2024, and 2023, respectively.

The decrease in net interest expense was primarily due to the increase in interest income earned in the three months ended September 30, 2024, as compared to the prior year period.

Income tax expense (benefit).

We recognized income tax expense of $1.2 million and $3.7 million for the three months ended September 30, 2024, and 2023, respectively, or an effective tax rate of 35.3% and 66.2% in 2024 and 2023, respectively.

The effective tax rate in 2024 was impacted by non-deductible compensation expenses.

Equity investment loss.

There was no equity investment loss for the three months ended September 30, 2024, compared to a $5.2 million investment loss in the prior year period.

The prior year equity investment loss is due to the sale of the investee with no sales proceeds to us.

Net income (loss).

Our net income was $2.3 million, compared to a net loss of $3.3 million, for the three months ended September 30, 2024, and 2023, respectively, an increase of $5.6 million.

This increase was related to the factors discussed above.

Preferred stock dividends.

Preferred stock dividends were $1.5 million for both the three months ended September 30, 2024, and 2023.

Net income (loss) available to common stockholders.

The net income available to common stockholders was $0.7 million for the three months ended September 30, 2024, compared to a net loss of $4.9 million for the three months ended September 30, 2023, an improvement of $5.6 million in net income available to common stockholders.

This improvement was related to the factors discussed above.

Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023

Our consolidated revenue for the nine months ended September 30, 2024, was $460.4 million, an increase of $12.7 million, or 2.8%, compared to $447.7 million for the nine months ended September 30, 2023.

The increase in revenue was primarily due to a $10.7 million, or 4.8% increase in revenue in our APUS Segment, and a $7.2 million, or 17.5%, increase in revenue in our HCN Segment, partially offset by $2.7 million, or 1.7%, decrease in revenue in our RU Segment and a $2.4 million, or 11.3%, decrease in GSUSA revenue included in Corporate and Other.

The APUS Segment revenue increase was primarily due to a 1.6% increase in net course registrations, tuition and fee increases in 2023 and 2024 and the timing of course starts within the respective periods, as compared to the prior year period.

The HCN Segment revenue increase was primarily due to a 13.3% increase in total student enrollment primarily due to enrollment growth at the Detroit, Michigan campus and a 5% tuition increase across all programs implemented in the second quarter of 2023, as compared to the prior year period.

The RU Segment revenue decrease, as compared to the prior year period, was primarily due to a 2.7% decrease in total student enrollment driven by a 9.1% decrease in on-ground enrollment, partially offset by a 3.3% increase in online enrollment, which has a lower revenue per student.

Costs and expenses.

Costs and expenses for the nine months ended September 30, 2024, were $448.9 million, a decrease of $63.1 million, or 12.3%, compared to $512.0 million for the nine months ended September 30, 2023.

Costs and expenses for the nine months ended September 30, 2024, include $3.7 million pre-tax loss on leases in our RU Segment, $3.1 million in information technology transition services costs in all our segments as well as Corporate and Other, $0.5 million in severance costs related to the former president of GSUSA in Corporate and Other, and the planned campus closures of our campuses located in Wisconsin in our RU Segment.

Costs and expenses for the nine months ended September 30, 2023, include a non-cash impairment charge of $64.0 million for our RU Segment and to reflect the corresponding tax impact, 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.

Costs and expenses for the nine months ended September 30, 2024, as compared to the prior year period, excluding loss on leases, information technology transition services costs, and severance costs in 2024, and goodwill and intangible asset impairment charges and marketing transition services fees in 2023, decreased $4.0 million, due primarily to decreases in depreciation and amortization expenses and advertising, marketing support, and rent costs, partially offset by increases in other technology costs, professional fees and classroom and course materials costs.

Costs and expenses as a percentage of revenue decreased to 97.5% for the nine months ended September 30, 2024, from 114.3% for the nine months ended September 30, 2023.

Costs and expenses for the three months ended March 31, 2025, were $152.3 million, an increase of $3.1 million, or 2.0%, compared to $149.3 million for the three months ended March 31, 2024.

Costs and expenses for the three months ended March 31, 2025, included a $1.5 million loss on assets held for sale in our APUS Segment and $1.0 million in professional fees in Corporate and Other relating to the Combination, both on a pre-tax basis.

Costs and expenses in the prior year period included a $2.9 million pre-tax loss on leases in our RU Segment and $1.9 million in information technology transition service costs, both on a pre-tax basis.

Costs and expenses for the three months ended March 31, 2025, as compared to the prior year period, excluding the items noted above, increased $5.3 million, or 3.7%, due primarily to increases in employee

compensation costs and advertising costs, partially offset by a decrease in information technology costs, and depreciation and amortization expenses.

Costs and expenses as a percentage of revenue decreased to 92.6% for the three months ended March 31, 2025, from 96.6% for the three months ended March 31, 2024.

Instructional costs and services expenses.

Our instructional costs and services expenses for the nine months ended September 30, 2024, were $224.0 million, an increase of $1.9 million, or 0.9%, compared to $222.1 million for the nine months ended September 30, 2023.

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, and an increase in professional fees in our RU 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 and rent costs in our RU Segment.

Instructional costs and services expenses as a percentage of revenue decreased to 48.7% for the nine months ended September 30, 2024, from 49.6% for the three months ended September 30, 2023.

Our instructional costs and services expenses for the three months ended March 31, 2025, were $74.9 million, an increase of $2.5 million, or 3.5%, compared to $72.4 million for the three months ended March 31, 2024.

The increase in instructional costs and services expenses was primarily due to increases in faculty compensation costs in our RU, APUS, and HCN Segments due to an increase in registrations at APUS and enrollments at RU and HCN and an increase in classroom and course materials costs in our HCN Segment, partially offset by decreases information technology costs in our RU Segment.

Instructional costs and services expenses as a percentage of revenue decreased to 45.5% for the three months ended March 31, 2025, from 46.9% for the three months ended March 31, 2024.

Selling and promotional expenses.

Our selling and promotional expenses for the nine months ended September 30, 2024, were $99.8 million, a decrease of $6.5 million, or 6.1%, compared to $106.2 million for the nine months ended September 30, 2023.

Selling and promotional expenses for the nine months ended September 30, 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.

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, partially offset by increases professional fees in our APUS Segment and advertising costs in our HCN Segment.

Selling and promotional expenses as a

percentage of revenue decreased to 21.7% for the nine months ended September 30, 2024, from 23.7% for the nine months ended September 30, 2023.

Our selling and promotional expenses for the three months ended March 31, 2025, were $35.2 million, an increase of $2.7 million, or 8.5%, compared to $32.5 million for the three months ended March 31, 2024.

The increase in selling and promotional expenses was primarily due to increases in employee compensation costs and advertising costs in all our segments, professional fees in our APUS Segment, and marketing support costs in our RU Segment.

Selling and promotional expenses as a percentage of revenue increased to 21.4% for the three months ended March 31, 2025, from 21.0% for the three months ended March 31, 2024.

General and administrative expenses.

Our general and administrative expenses for the nine months ended September 30, 2024, were $105.7 million, an increase of $8.8 million, or 9.1%, compared to $96.9 million for the nine months ended September 30, 2023.

General and administrative expenses for the nine months ended September 30, 2024, include $3.1 million in information technology transition services costs in all our segments as well as Corporate and Other.

The increase in general and administrative expenses was primarily due to increases in other information technology costs in all our 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 Corporate and Other, and bad debt expense, partially offset by decreases in employee compensation costs in our APUS Segment, and other information technology costs in Corporate and Other.

Consolidated bad debt expense for the nine months ended September 30, 2024, was $12.7 million, or 2.8% of revenue, compared to $12.3 million, or 2.7% of revenue in the prior year period.

General and administrative expenses as a percentage of revenue increased to 23.0% for the nine months ended September 30, 2024, from 21.6% for the nine months ended September 30, 2023.

Our general and administrative expenses for the three months ended March 31, 2025, were $36.4 million, an increase of $0.1 million, or 0.4%, compared to $36.3 million for the three months ended March 31, 2024.

For the three months ended March 31, 2025, general and administrative expenses included $1.0 million in professional fees relating to the Combination in Corporate and Other.

Consolidated bad debt expense for the three months ended March 31, 2025, was $5.0 million, or 3.0% of revenue, compared to $4.2 million, or 2.7% of revenue in the prior year period.

General and administrative expenses as a percentage of revenue decreased to 22.1% for the three months ended March 31, 2025, from 23.5% for the three months ended March 31, 2024.

As we continue to evaluate enhancements to our business capabilities, we expect to incur additional costs and that our general and administrative expenses will vary from time to time.

Depreciation and amortization expenses.

Depreciation and amortization expenses were $15.4 million for nine months ended September 30, 2024, compared to $22.7 million in the prior year period, a decrease of $7.3 million primarily related to the full amortization of certain definite lived intangible assets in our RU Segment in 2023.

Depreciation and amortization expenses as a percentage of revenue was 3.4% and 5.1% for the nine months ended September 30, 2024, and 2023, respectively.

Impairment of goodwill and intangible assets.

For the nine months ended September 30, 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 5.

Goodwill and Intangible Assets” included in the Consolidated Financial Statements in this Quarterly Report.

There were no impairment charges on goodwill and intangible assets for the nine months ended September 30, 2024.

Loss on leases.

RU Segment loss on leases was $3.7 million for the nine months ended September 30, 2024.

There was no losses on leases in the prior year period.

Depreciation and amortization expenses were $4.0 million for three months ended March 31, 2025, compared to $5.1 million in the prior year period, a decrease of $1.1 million, primarily related to the full amortization of all definite lived intangible assets in our RU Segment in 2024.

Depreciation and amortization expenses as a percentage of revenue was 2.4% and 3.3% for the three months ended March 31, 2025, and 2024, respectively.

Loss on assets held for sale.

For the three months ended March 31, 2025, the $1.5 million non-cash loss on assets held for sale is for real property in Charles Town, West Virginia in our APUS Segment.

There were no losses on assets held for sale in the comparable prior year period.

Loss on disposals of long-lived assets.

The loss on disposal of long-lived assets was $0.2 million and $17,000 for the nine months ended September 30, 2024, and 2023, respectively.

The loss on disposal of long-lived assets was $230,000 for the three months ended March 31, 2025, compared to $28,000 for the three months ended March 31, 2024.

Stock-based compensation expenses.

Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $5.5 million and $6.0 million for the nine months ended September 30, 2024, and 2023, respectively.

The decrease in stock compensation was due to fewer shares granted in 2024 compared to 2023.

Stock-based compensation costs include accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $2.3 million and $1.9 million for the three months ended March 31, 2025, and 2024, respectively.

Stock-based compensation costs included accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Interest expense, net.

Interest expense, net of interest and other income, was $1.5 million and $3.7 million for the nine months ended September 30, 2024, and 2023, respectively.

The decrease in net interest expense was primarily due to the increase in interest income earned in the nine months ended September 30, 2024, as compared to the prior year period.

Income tax expense (benefit).

We recognized income tax expense of $2.4 million for the nine months ended September 30, 2024, compared to an income tax benefit of $12.8 million in the prior year period, or an effective tax rate of 43.6% in 2024, compared to an effective tax rate benefit of 18.9% in 2023.

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 the nine months ended September 30, 2024, as compared to the prior year period.

The nine months ended September 30, 2023 includes a $15.8 million income tax benefit related to the impairment of goodwill and intangible assets.

Interest expense, net of interest and other income, was $0.9 million and $0.1 million for the three months ended March 31, 2025, and 2024, respectively.

The increase in net interest expense in the three months ended March 31, 2025, as compared to the prior year period, was primarily due to an increase in interest expense due to the expiration of the interest rate cap in December 2024, and a decrease in interest income earned.

Income tax expense.

We recognized income tax expense of $2.5 million and $1.2 million for the three months ended March 31, 2025, and 2024, respectively, or an effective tax rate of 21.7% and 70.2% in 2025, and 2024, respectively.

The effective tax rate in 2025 was positively impacted by excess tax benefits related to stock compensation.

The high effective tax rate in 2024 was due to the $3.3 million equity investment loss not deductible for tax purposes, and non-deductible stock compensation expense in relation to taxable income in the three months ended March 31, 2024.

Equity investment loss.

Equity investment loss was $4.4 million for the nine months ended September 30, 2024, compared to an equity investment loss of $5.2 million in the prior year period.

Equity investment loss for the nine months ended September 30, 2024, included a $3.3 million non-cash investment loss on an 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 equity method investment.

Equity investment loss for the nine months ended September 30, 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).

Our net income was $3.1 million, compared to a net loss of $60.3 million, for the nine months ended September 30, 2024, and 2023, respectively, an improvement of $63.4 million.

There was no equity investment loss for the three months ended March 31, 2025.

The $3.3 million non-cash investment loss in the prior year period is related to a cost method investment and was due to the investee entering into a new convertible debt agreement which resulted in the conversion of the Company’s preferred stock holdings in the investee into common shares, and the dilution of the Company’s ownership percentage.

Our net income was $8.9 million and $0.5 million for the three months ended March 31, 2025, and 2024, respectively, an increase of $8.4 million.

This increase was related to the factors discussed above.

Preferred stock dividends.

Preferred stock dividends were $4.6 million, compared to $4.5 million, for the nine months ended September 30, 2024, and 2023, respectively.

Net loss available to common stockholders.

The net loss available to common stockholders was $1.4 million and $64.8 million for the nine months ended September 30, 2024, and 2023, respectively, an improvement in net loss available to common stockholders of $63.3 million.

Preferred stock dividends were $1.4 million and $1.5 million for the three months ended March 31, 2025, and 2024, respectively.

Net income (loss) available to common stockholders.

The net income available to common stockholders was $7.5 million for the three months ended March 31, 2025, compared to a net loss of $1.0 million for the three months ended March 31, 2024, an improvement of $8.5 million.

This improvement was related to the factors discussed above.

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The following table provides details on our operating results by reportable segment for the respective periods (in thousands):

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

2024 2023 2024 2023

Three Months Ended March 31,

APUS Segment $ 83,946 $ 80,656

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Corporate and Other (11,062) (8,635)

Total income (loss) from operations before interest and income taxes $ 4,129 $ 6,400 $ 11,531 $ (64,238)

For the three months ended September 30, 2024, the $0.6 million, or 0.8%, increase to approximately $77.0 million in revenue in our APUS Segment was primarily attributable to higher net course registrations, and tuition and fee increases in the second quarter of 2024, as compared to the prior year period.

Total income from operations before interest and income taxes $ 12,246 $ 5,182

For the three months ended March 31, 2025, the $3.3 million, or 4.1%, increase to approximately $83.9 million in revenue in our APUS Segment was primarily attributable to higher net course registrations and tuition and fee increases in the second quarter of 2024, as compared to the prior year period.

Net course registrations increased 3.5% to approximately 102,500 from approximately 99,000 in the prior year period.

Income from operations before interest and income taxes decreased to $20.8 million, or by 5.4%, during the three months ended September 30, 2024, from $21.9 million in the prior year period, a decrease of $1.1 million, as a result of an increase in expenses as compared to the same period in 2023.

For the nine months ended September 30, 2024, the $10.7 million, or 4.8%, increase to approximately $234.7 million in revenue in our APUS Segment was primarily attributable to higher net course registrations, tuition and fee increases in 2023 and 2024, and the timing of course starts within the respective periods, as compared to the prior year period.

Net course registrations increased 1.6% to approximately 281,300 from approximately 276,900 in the prior year period, primarily due to an increase in registrations by military-affiliated students utilizing VA.

Income from operations before interest and income taxes increased to $62.1 million, or by 7.2%, during the nine months ended September 30, 2024, from $58.0 million in the prior year period, an increase of $4.1 million, as a result of the increase in revenue, partially offset by an increase in expenses as compared to the same period in 2023.

For the three months ended September 30, 2024, the $0.5 million, or 1.0%, increase to approximately $52.6 million in

revenue in the RU Segment was due to tuition increases effective in the first quarter of 2023 and 2024 for select programs, partially offset by a change in mix of the total student enrollment, which included a 6.3% decrease in on-ground enrollment, offset by a 4.2% increase in online enrollment, which has a lower revenue per student, as compared to the prior year period.

The loss from operations before interest and income taxes was $7.6 million and $10.6 million for the three months ended September 30, 2024, and 2023, respectively, an improvement of $3.0 million in the current year period primarily related to the full amortization of certain definite lived intangible assets in 2023.

For the nine months ended September 30, 2024, the $2.7 million, or 1.7%, decrease to approximately $158.8 million in revenue in the RU Segment, as compared to the prior year period, was primarily due to a 2.7% decrease in total student enrollment which was driven by a 9.1% decrease in on-ground enrollment, partially offset by a 3.3% increase in online enrollment, which has a lower revenue per student, partially offset by tuition increases effective in the first quarter of 2023 and 2024, and the third quarter of 2024 for select programs, as compared to the prior year period.

The loss from operations before interest and income taxes was $25.4 million and $100.7 million for the nine months ended September 30, 2024, and 2023, respectively, an improvement of $75.3 million in the current year period primarily due to the $64.0 million goodwill and intangible asset impairment charges, and to reflect the corresponding tax impact recognized during the three months ended June 30, 2023.

For the three months ended September 30, 2024, the $1.8 million, or 12.8%, increase to approximately $15.5 million in revenue in our HCN Segment was primarily due to a 10.4% increase in total student enrollment, as compared to the prior year period.

The loss from operations before interest and income taxes was $0.8 million and $0.6 million during the three months ended September 30, 2024, and 2023, respectively, a decrease of $0.2 million, as compared to the prior year period.

For the nine months ended September 30, 2024, the $7.2 million, or 17.5% increase to approximately $48.3 million in revenue in our HCN Segment was primarily due the 13.3% year-over-year increase in total student enrollment, and the 5% increase in tuition and fees effective in the second quarter of 2023 across all programs, as compared to the prior year period.

The increase in total student enrollment is primarily due to enrollment growth at the Detroit, Michigan campus.

The loss from operations before interest and income taxes was $1.8 million and $2.2 million during the nine months ended September 30, 2024, and 2023, respectively, an improvement of $0.4 million, as compared to the prior year period.

Income from operations before interest and income taxes increased to $24.1 million, or by 4.5%, during the three months ended March 31, 2025, from $23.1 million in the prior year period, an increase of $1.0 million, and was primarily due to an increase in revenue and a decrease in professional fees, partially offset by the loss on assets held for sale and an increase in employee compensation costs, as compared to the prior year period.

For the three months ended March 31, 2025, the $6.1 million, or 11.5%, increase to approximately $59.3 million in revenue in the RU Segment was primarily due to an increase in enrollment of 7.4% and tuition increases effective in the third and fourth quarters 2024 for select programs.

The loss from operations before interest and income taxes was $0.1 million and $9.0 million for the three months ended March 31, 2025, and 2024, respectively, an improvement of $8.9 million in the current year period primarily due to the increase in revenue as well as decreases in loss on leases, depreciation and amortization expenses, and information technology costs, partially offset by an increase in employee compensation costs, as compared to the prior year period.

For the three months ended March 31, 2025, the $1.2 million, or 7.5%, increase to approximately $17.7 million in revenue in our HCN Segment was primarily due to a 9.6% increase in total student enrollment, as compared to the prior year period.

The loss from operations before interest and income taxes was $0.7 million and $0.3 million during the three months ended March 31, 2025, and 2024, respectively, a decrease of $0.4 million, as compared to the prior year period.

Liquidity and Capital Resources

Cash and cash equivalents were $162.2 million and $144.3 million at September 30, 2024, and December 31, 2023, respectively, representing an increase of $17.9 million, or 12.4%.

The increase in cash was primarily due to higher revenue and operating income at APUS, the receipt of fourth quarter 2023 APUS TA billing in the first quarter of 2024, and a decrease in cash paid for repurchases of common stock, partially offset by the change in the APUS TA billing policy effective January 1, 2024, and higher capital expenditures.

Cash and cash equivalents were $187.5 million and $158.9 million at March 31, 2025, and December 31, 2024, respectively, representing an increase of $28.6 million, or 18.0%.

The increase in cash was primarily due to the collection of TA accounts receivable at APUS, and a reduction in operating losses at RU.

We have historically financed operating activities and capital expenditures with cash provided by operating activities.

We expect to continue to fund our costs and expenses through cash generated from operations.

We expect to continue to fund our costs and expenses through cash generated from operations for the next twelve months and beyond.

For more on our material cash requirements from known contractual and other obligations, please refer to the section entitled “Contractual Obligations” in Item 7 of Part II of our 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.

We have typically received disbursements under Title IV programs within 30 days of invoicing the applicable course or 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.

After the change in TA billing policy, these funds are generally received within 90 days of the start of the course to which they relate.

Another significant source of revenue is derived from the U.S.

Department of Veterans Affairs.

We have typically received disbursements under Title IV programs within 30 days of the start of the applicable course or term.

Another significant source of revenue is derived from TA from DoD and programs from VA.

Generally, these funds are received within 60 days of the start of the courses to which they relate.

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.

Generally, an institution’s financial ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible.

A composite score between 1.0 and 1.4 is considered by ED to be in the “zone.” An institution in the “zone” may still participate in Title IV

programs as a financially responsible institution through the “zone alternative” or the “financial protection alternative” as set forth in ED regulations.

On March 4, 2024, ED notified us that in calculating our composite score for the fiscal year-ended December 31, 2022, it excluded our deferred tax assets from its calculation of our assets.

As a result, ED calculated that we had a 2022 consolidated composite score of 1.1 and our institutions were therefore in the “zone.” We disagree with ED’s calculation and conclusion and submitted a rebuttal to ED on March 18, 2024.

On April 10, 2024, ED indicated that it disagrees with our position and reiterated that our institutions must establish financial responsibility on an alternative basis.

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

However, in September 2023, APUS changed its approach to invoicing for TA, taking longer to bill TA, which had the effect of delaying payments from 2023 to 2024.

Due to this change in the approach to invoicing TA in the fourth quarter of 2023, APUS collected approximately $22.1 million from TA related to periods prior to 2024.

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.

In December 2024, APUS again changed its approach to invoicing for TA, taking longer to bill TA, which had the effect of delaying payments from 2024 to 2025.

As a result, during the three months ended March 31, 2025, due to this change in the approach to invoicing TA in the fourth quarter of 2024, APUS collected approximately $25.9 million from TA related to periods prior to 2025.

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

The change in billing practice added to our accounts receivable as of December 31, 2024, and resulted in an increase to our leverage ratios as of December 31, 2024, under our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock as further discussed in “Note 8.

Long-Term Debt” and “Note 12.

Preferred Stock” included in the Consolidated Financial Statements in this Quarterly Report.

ED evaluates institutions on an annual basis for compliance with specified financial responsibility standards, including a composite score calculation based on a complex formula using line items from the institution’s audited financial statements.

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

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

On April 9, 2025, ED notified us that according to its calculations, we had a fiscal year end 2023 consolidated composite score of 1.3 and our institutions were therefore in the “zone.” On April 13, 2025, we timely informed ED that we selected the “zone alternative” as the alternative basis on which we establish financial responsibility.

As a result, APUS, RU and HCN currently operate under the zone alternative to establish financial responsibility.

Under the zone alternative, we are required to:

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

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

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

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

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

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

While RU 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 Credit Agreement with Macquarie Capital Funding LLC, or the 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.

Changes in TA invoicing in the fourth quarter of 2023 added to our accounts receivable as of December 31, 2023, as compared to prior practice and policy, and resulted in an increase to our leverage ratio as of December 31, 2023, under our Credit Agreement and the Purchase Agreement.

As of September 30, 2024, the ratio decreased due to our improved operating results, a reduction in accounts receivable and the corresponding increase in cash, and the $2.6 million debt principal payment in the second quarter.

As a result, our Total Net Leverage Ratio, under the Credit Agreement, at September 30, 2024, and December 31, 2023, was 0.17 and 0.51, respectively.

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.

Our placement on HCM1 status did not have a significant impact on our 2024 financial results.

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 being below the minimum required.

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.

Our Total Net Leverage Ratio, under the Credit Agreement, at March 31, 2025, was negative 0.19 due to the growth in both cash and earnings.

The net leverage ratio at December 31, 2024 was 0.20.

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 2026 and future years.

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.

On April 1, 2024, as part of our technology transformation program, we transitioned to a managed service provider for certain services including service desk, end user support, and network support and operations.

The second phase of the project included the insourcing of technology from Collegis for our RU Segment and was substantially completed as of September 2024.

For the nine months ended September 30, 2024, we incurred approximately $3.1 million in information technology transition services costs.

We estimate we will incur an additional $0.7 million in information technology transition services costs for the remainder of 2024.

Share Repurchase Program

In January 2024, we repurchased 251,146 shares of common stock for an aggregate purchase price of $2.8 million.

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

On January 28, 2025, we announced the Combination, which we anticipate completing in the third quarter of 2025 subject to obtaining required approvals and ED taking related actions.

For the period ended March 31, 2025, we incurred approximately $1.0 million in professional fees related to the Combination, and we expect to incur between approximately an additional $2.0 million and $4.0 million in professional fees for the remainder of 2025 to complete the Combination.

Operating Activities

Net cash provided by operating activities was $47.3 million and $48.7 million for the nine months ended September 30, 2024, and 2023, respectively.

The decrease in cash from operating activities was primarily due to changes in working capital due to the timing of receipts and payments.

Accounts receivable at September 30, 2024, decreased approximately $8.3 million compared to December 31, 2023, primarily related to our APUS Segment.

Accounts payable, accrued liabilities, and accrued compensation and benefits at September 30, 2024, were approximately $11.7 million higher than December 31, 2023, primarily due to higher incentive-based compensation accruals and the timing of payment processing.

Net cash provided by operating activities was $37.0 million and $20.7 million for the three months ended March 31, 2025, and 2024, respectively.

The increase in cash from operating activities was primarily due to the collection of TA accounts receivable at APUS related to the 2024 change in TA billing approach, and other changes in working capital due to the timing of receipts and payments.

Accounts receivable at March 31, 2025, decreased approximately $20.6 million compared to December 31, 2024, primarily related TA collections in our APUS Segment.

Accounts payable, accrued liabilities, and accrued compensation and benefits at March 31, 2025, were approximately $2.6 million higher than December 31, 2024.

Investing Activities

Net cash used in investing activities was $17.7 million and $9.4 million for the nine months ended September 30, 2024, and 2023, respectively.

For the nine months ended September 30, 2024, capital expenditures were $17.7 million compared to capital expenditures of $9.5 million for the nine months ended September 30, 2023.

The increase in capital expenditures for the nine months ended September 30, 2024, was primarily due to campus relocations at our HCN and RU Segments and an increase in information technology capital expenditures.

Net cash used in investing activities was $3.4 million and $6.2 million for the three months ended March 31, 2025, and 2024, respectively.

For the three months ended March 31, 2025, capital expenditures were $3.9 million compared to capital expenditures of $6.2 million for the three months ended March 31, 2024.

Prior year period capital expenditures were higher than the current year period primarily due to campus consolidations at RU and relocations at HCN that occurred in the prior year period.

Financing Activities

Net cash used in financing activities was $11.6 million and $13.6 million for the nine months ended September 30, 2024, and 2023, respectively.

Net cash used in financing activities was $5.0 million and $5.7 million for the three months ended March 31, 2025, and 2024, respectively.

The decrease in cash used in financial activities is primarily due to a decrease in cash used to repurchase our common stock.

For the nine months ended September 30, 2024, we repurchased 251,146 shares of common stock for an aggregate purchase price of $2.8 million, compared to 1,335,357 shares for an aggregate purchase price of $8.0 million during the nine months ended September 30, 2023.

Financing activities for the nine months ended September 30, 2024, include $4.6 million related to the payment of dividends on our preferred stock, $2.6 million in principal payments on our long term debt, and $1.5 million for the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock.

For the three months ended March 31, 2024, we repurchased 251,146 shares of common stock for an aggregate purchase price of $2.8 million.

Financing activities for the three months ended March 31, 2025, and 2024, included $1.4 million and $1.5 million, respectively, related to the payment of dividends on our preferred stock.

Contractual Commitments

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For a summary of our contractual obligations, please refer to Item 7 of Part II of our Annual Report.

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.

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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis