AMERICAN PUBLIC EDUCATION INC 10-Q

Item 1. Financial Statements AMERICAN PUBLIC EDUCATION, INC. Consolidated Balance Sheets (In thousands, except share and per share amounts) As of March 31, 2025 As of December 31, 2024 ASSETS (Unaudited) Current assets: Cash, cash equivalents, and restricted cash (Note 2) $ 187,502 $ 158,941 Accounts receivable, net of allowance of $ 19,547 in 2025 and $ 19,280 in 2024 41,872 62,465 Prepaid expenses 20,667 13,748 Income tax receivable — 949 Assets held for sale 22,467 24,469 Total current assets 272,508 260,572 Property and equipment, net 73,038 73,383 Operating lease assets, net 92,649 94,776 Deferred income taxes 46,066 47,311 Intangible assets, net 28,221 28,221 Goodwill 59,593 59,593 Other assets, net 6,586 6,247 Total assets $ 578,661 $ 570,103 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 7,849 $ 7,847 Accrued compensation and benefits 18,039 20,546 Accrued liabilities 18,790 13,735 Deferred revenue and student deposits 25,087 23,474 Income tax payable 177 — Lease liabilities, current 13,489 13,553 Total current liabilities 83,431 79,155 Lease liabilities, long-term 91,471 93,645 Long-term debt, net 93,747 93,424 Total liabilities 268,649 266,224 Commitments and contingencies (Note 10) Stockholders’ equity: Preferred stock, $ .01 par value; 10,000,000 shares authorized; 400 shares issued and outstanding in 2025 and 2024, respectively ($ 112,471 and $ 117,439 liquidation preference per share, $ 44,988 and $ 46,976 in aggregate, for 2025 and 2024, respectively) (Note 12) 39,691 39,691 Common stock, $ .01 par value; 100,000,000 shares authorized; 18,036,421 issued and outstanding in 2025; 17,712,575 issued and outstanding in 2024 180 177 Additional paid-in capital 304,533 305,823 Accumulated other comprehensive loss ( 48 ) ( 7 ) Accumulated deficit ( 34,344 ) ( 41,805 ) Total stockholders’ equity 310,012 303,879 Total liabilities and stockholders’ equity $ 578,661 $ 570,103 The accompanying notes are an integral part of these Consolidated Financial Statements. 3 AMERICAN PUBLIC EDUCATION, INC. Consolidated Statements of Income (In thousands, except per share amounts) Three Months Ended March 31, 2025 2024 (Unaudited) Revenue $ 164,551 $ 154,432 Costs and expenses: Instructional costs and services 74,944 72,425 Selling and promotional 35,205 32,456 General and administrative 36,407 36,277 Depreciation and amortization 3,992 5,128 Loss on assets held for sale (Note 4) 1,527 — Loss on leases (Note 5) — 2,936 Loss on disposals of long-lived assets 230 28 Total costs and expenses 152,305 149,250 Income from operations before interest and income taxes 12,246 5,182 Interest expense, net ( 887 ) ( 126 ) Income before income taxes 11,359 5,056 Income tax expense 2,466 1,213 Equity investment loss — ( 3,327 ) Net income $ 8,893 $ 516 Preferred stock dividends 1,432 1,535 Net income (loss) available to common stockholders $ 7,461 $ ( 1,019 ) Income (loss) per common share: Basic $ 0.42 $ ( 0.06 ) Diluted $ 0.41 $ ( 0.06 ) Weighted average number of common shares: Basic 17,840 17,510 Diluted 18,417 17,811 The accompanying notes are an integral part of these Consolidated Financial Statements. 4 AMERICAN PUBLIC EDUCATION, INC. Consolidated Statements of Comprehensive Income (Loss) (In thousands) Three Months Ended March 31, 2025 2024 (Unaudited) Net income $ 8,893 $ 516 Other comprehensive (loss) income, net of tax: Unrealized (loss) gain on hedging derivatives ( 63 ) 396 Tax effect 17 ( 98 ) Unrealized (loss) gain on hedging derivatives, net of taxes ( 46 ) 298 Reclassification of loss (gain) to net income 7 ( 787 ) Tax effect ( 2 ) 195 Reclassifications of loss (gain) to net income, net of taxes 5 ( 592 ) Total other comprehensive loss ( 41 ) ( 294 ) Comprehensive income $ 8,852 $ 222 The accompanying notes are an integral part of these Consolidated Financial Statements. 5 AMERICAN PUBLIC EDUCATION, INC. Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share amounts) Additional Paid-in Capital Accumulated Other Comprehensive Income (loss) Accumulated Deficit Total Stockholders’ Equity Preferred Stock Common Stock Shares Amount Shares Amount Balance as of December 31, 2024 400 $ 39,691 17,712,575 $ 177 $ 305,823 $ ( 7 ) $ ( 41,805 ) $ 303,879 Preferred stock dividends — — — — — — ( 1,432 ) ( 1,432 ) Exercise of stock options — — 14,431 — 143 — — 143 Issuance of common stock under employee benefit plans — — 480,515 5 ( 5 ) — — — Deemed repurchased shares of common and restricted stock for tax withholding — — ( 171,100 ) ( 2 ) ( 3,691 ) — — ( 3,693 ) Stock-based compensation — — — — 2,263 — — 2,263 Other comprehensive loss — — — — — ( 41 ) — ( 41 ) Net income — — — — — — 8,893 8,893 Balance as of March 31, 2025 400 $ 39,691 18,036,421 $ 180 $ 304,533 $ ( 48 ) $ ( 34,344 ) $ 310,012 Additional Paid-in Capital Accumulated Other Comprehensive Income (loss) Accumulated Deficit Total Stockholders’ Equity Preferred Stock Common Stock Shares Amount Shares Amount Balance as of December 31, 2023 400 $ 39,691 17,604,371 $ 176 $ 299,561 $ 1,644 $ ( 49,096 ) $ 291,976 Preferred stock dividends — — — — — — ( 1,535 ) ( 1,535 ) Issuance of common stock under employee benefit plans — — 331,781 3 ( 3 ) — — — Deemed repurchased shares of common and restricted stock for tax withholding — — ( 113,911 ) ( 1 ) ( 1,339 ) — — ( 1,340 ) Stock-based compensation — — — — 1,918 — — 1,918 Repurchased and retired shares of common stock — — ( 251,146 ) ( 2 ) — — ( 2,766 ) ( 2,768 ) Other comprehensive loss — — — — — ( 294 ) — ( 294 ) Net income — — — — — — 516 516 Balance as of March 31, 2024 400 $ 39,691 17,571,095 $ 176 $ 300,137 $ 1,350 $ ( 52,881 ) $ 288,473 The accompanying notes are an integral part of these Consolidated Financial Statements. 6 AMERICAN PUBLIC EDUCATION, INC. Consolidated Statements of Cash Flows (In thousands) Three Months Ended March 31, 2025 2024 (Unaudited) Operating activities Net income $ 8,893 $ 516 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 3,992 5,128 Amortization of debt issuance costs 348 383 Stock-based compensation 2,263 1,918 Equity investment loss — 3,327 Deferred income taxes 1,245 343 Loss on assets held for sale 1,527 — Loss on disposals of long-lived assets 230 28 Changes in operating assets and liabilities: Accounts receivable, net of allowance for bad debt 20,593 6,402 Prepaid expenses ( 6,919 ) ( 4,078 ) Income tax receivable/payable 1,126 156 Operating leases, net ( 58 ) 1,507 Other assets ( 405 ) ( 584 ) Accounts payable 2 ( 1,325 ) Accrued compensation and benefits ( 2,507 ) 31 Accrued liabilities 5,055 3,888 Deferred revenue and student deposits 1,613 3,104 Net cash provided by operating activities 36,998 20,744 Investing activities Capital expenditures ( 3,902 ) ( 6,218 ) Proceeds from the sale of real property 500 — Net cash used in investing activities ( 3,402 ) ( 6,218 ) Financing activities Cash paid for repurchase of common stock ( 3,693 ) ( 4,108 ) Cash received from exercise of stock options 143 — Preferred stock dividends paid ( 1,432 ) ( 1,535 ) Cash paid for principal on borrowings and finance leases ( 53 ) ( 28 ) Net cash used in financing activities ( 5,035 ) ( 5,671 ) Net increase in cash, cash equivalents, and restricted cash 28,561 8,855 Cash, cash equivalents, and restricted cash at beginning of period 158,941 144,342 Cash, cash equivalents, and restricted cash at end of period $ 187,502 $ 153,197 Supplemental disclosure of cash flow information Interest paid $ 2,398 $ 2,713 Income taxes paid $ 80 $ 618 The accompanying notes are an integral part of these Consolidated Financial Statements. 7 AMERICAN PUBLIC EDUCATION, INC. Notes to Consolidated Financial Statements Note 1. Nature of the Business American Public Education, Inc., or APEI, which together with its subsidiaries is referred to as the “Company,” is a provider of online and campus-based postsecondary education and career learning to students through the following subsidiary institutions: • American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military, veterans, extended military families, and other public service and service-minded communities, through American Military University, or AMU, and American Public University, or APU. APUS is institutionally accredited by the Higher Learning Commission, or HLC. • Rasmussen College, LLC, which is referred to herein as Rasmussen University, or RU, a nursing- and health sciences-focused institution, provides postsecondary education to students at 20 campuses in six states and online. RU is institutionally accredited by HLC. • National Education Seminars, Inc., which is referred to herein as Hondros College of Nursing, or HCN, provides nursing education to students at eight campuses in three states. HCN is institutionally accredited by the Accrediting Bureau for Health Education Schools, or ABHES. • American Public Training LLC, which is referred to herein as Graduate School USA, or GSUSA, provides career learning and leadership training in-person and online to the federal workforce. GSUSA is accredited by the Accrediting Council for Continuing Education and Training, or ACCET. The Company’s subsidiary institutions are licensed or otherwise authorized by state authorities to offer education programs to the extent the institutions believe such licenses or authorizations are required, and APUS, RU, and HCN are certified by the United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs. The Company’s operations are organized into the following reportable segments: • American Public University System Segment, or APUS Segment. This segment reflects the operational activities of APUS. • Rasmussen University Segment, or RU Segment . This segment reflects the operational activities of RU. • Hondros College of Nursing Segment, or HCN Segment. This segment reflects the operational activities of HCN. Adjustments to reconcile segment results to the Consolidated Financial Statements are included in Corporate and Other. These adjustments include unallocated corporate activity and eliminations, and the operational activities of GSUSA. GSUSA operates as a stand-alone subsidiary of APEI but does not meet the quantitative thresholds to qualify as a reportable segment and does not have other requisite characteristics as a reportable segment. Therefore, GSUSA’s results are combined with and presented within Corporate and Other. Please refer to “Note 9. Segment Information” for more information on the Company’s reporting segments. Note 2. Summary of Significant Accounting Policies A summary of the Company’s significant accounting policies follows: Basis of Presentation and Accounting The accompanying unaudited, interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. 8 Business Combinations The Company accounts for business combinations in accordance with Financial Accounting Standards Board Accounting Standards Codification 805, Business Combinations , or FASB ASC 805, which requires the acquisition method to be used for all business combinations. Under ASC 805, the assets and liabilities of an acquired company are reported at business fair value along with the fair value of acquired intangible assets at the date of acquisition. Principles of Consolidation The accompanying unaudited interim Consolidated Financial Statements include the accounts of APEI and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Unaudited Interim Consolidated Financial Information The unaudited interim Consolidated Financial Statements do not include all the information and notes required by GAAP for audited annual financial statement presentations. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s financial position, results of operations, and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for future periods, including the year ending December 31, 2025. This Quarterly Report on Form 10-Q, or this Quarterly Report, should be read in conjunction with the Consolidated Financial Statements and accompanying notes in its audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, or the Annual Report. Use of Estimates In preparing financial statements in conformity with GAAP, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company evaluates these estimates and assumptions on an ongoing basis and bases its estimates on experience, current and expected future conditions and various other assumptions that the Company believes are reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions, and the impact of such differences may be material to the Consolidated Financial Statements. Cash and Cash Equivalents The Company considers all short-term highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of demand deposits with financial institutions, money market funds, and U.S. Treasury bills. Cash and cash equivalents are Level 1 assets in the fair value reporting hierarchy. Restricted Cash Restricted cash includes funds held for students for unbilled educational services that were received from Title IV programs. As a trustee of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of the program participation agreement with ED. Restricted cash also includes a $ 24.2 million restricted certificate of deposit to secure a letter of credit for the benefit of ED on behalf of RU in connection with RU’s 2020 composite score, which is used by ED for determining compliance with financial responsibility standards, being below the minimum required. Restricted cash on the accompanying Consolidated Balance Sheets as of March 31, 2025, and December 31, 2024, excluding the restricted certificate of deposit, was $ 1.7 million and $ 1.5 million, respectively. Total restricted cash as of March 31, 2025, and December 31, 2024, was $ 25.9 million and $ 27.0 million, respectively. 9 Cash and cash equivalents and restricted cash as of March 31, 2025, and December 31, 2024, were as follows (in thousands): As of March 31, 2025 As of December 31, 2024 (Unaudited) Cash, cash equivalents, and restricted cash $ 187,502 $ 158,941 Less: restricted cash ( 25,905 ) ( 27,015 ) Total unrestricted cash $ 161,597 $ 131,926 Assets Held for Sale Assets held for sale represent excess real property located in Charles Town, West Virginia for the Company’s APUS Segment. Long-lived assets are classified as held for sale when the assets are expected to be sold within the next 12 months and meet the other relevant held for sale criteria. As such, properties are recorded at the lower of the carrying value or fair value, less costs to sell, until such time the asset is sold. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. Goodwill and indefinite-lived intangible assets are not amortized. The Company accounts for goodwill and indefinite-lived intangible assets in accordance with FASB ASC 350, Intangibles Goodwill and Other , and Accounting Standards Update, or ASU, 2017-04, Intangibles – Goodwill and Other (Topic 350) : Simplifying the Test for Goodwill Impairment . The Company’s goodwill and intangible assets are deductible for tax purposes. Indefinite-lived and finite-lived intangible assets acquired in business combinations are recorded at fair value on the acquisition date. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful life of the asset. The Company annually assesses goodwill and intangible assets for impairment in the fourth quarter, or more frequently if events or circumstances indicate that goodwill might be impaired or the carrying amount of an asset may not be recoverable. Goodwill impairment testing consists of an optional qualitative assessment as well as a quantitative test. The quantitative test compares the fair value of a reporting unit to its carrying value. If the carrying value of the reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the carrying value is greater than the fair value, and such assets are not recoverable, the difference between the two values is recorded as an impairment. For additional details regarding goodwill and intangible assets, please refer to “Note 6. Goodwill and Intangible Assets” in these Consolidated Financial Statements. Investments Prior to December 31, 2024, the Company accounted for its investments in less than majority owned companies in accordance with FASB ASC 323, Investments – Equity Method and Joint Ventures and FASB ASC 321, Investments – Equity Securities. The Company applied ASC 323 to investments w hen it has the ability to exercise significant influence but does not control the operating and financial policies of the company, this generally represented by equity ownership of at least 20 percent but not more than 50 percent. Investments accounted for under the equity method were initially recorded at cost and subsequently adjusted by the Company’s share of equity in income or losses after the date of acquisition. The pro rata share of the operating results of the investee was reported in the accompanying Consolidated Statements of Income as equity investment income or loss. Investments that did not meet the equity method requirements were accounted for using the cost method under ASC 321 with changes in the fair value of the investment reported in the accompanying Consolidated Statements of Income as equity investment income or loss. During the first quarter of 2024, the Company evaluated its equity investments for indicators of impairment and concluded the fair value of a cost method investment was less than its carrying amount. As a result, the Company recorded an investment loss of $ 3.3 million during the first quarter of 2024 on a 2015 cost method investment. This investment loss was due to the investee entering into a new convertible debt agreement that resulted in the conversion of the Company’s preferred stock holdings in the investee into common shares, and the dilution of the Company’s ownership percentage. The investment loss recorded reduced the book value of the cost method investment to zero. 10 During the second quarter of 2024, the Company sold its remaining equity method investment back to the investee, as it was no longer considered a strategic investment. As a result, the Company no longer has any investments accounted for under ASC 323 and ASC 321 as of March 31, 2025, and December 31, 2024. Stock-based Compensation The Company accounts for stock-based compensation in accordance with FASB ASC 718, Stock Compensation , which requires companies to expense share-based compensation based on fair value, and ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . Stock-based payments may include incentive stock options or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance shares, performance units, cash-based awards, other stock-based awards, including unrestricted shares, or any combination of the foregoing. Stock-based compensation cost is recognized as an expense generally over a three-year vesting period using the straight-line method for employees and the graded-vesting method for members of the Company’s Board of Directors, or the Board. It is measured using the Company’s closing stock price on the date of the grant. An accelerated one-year period is used to recognize stock-based compensation cost for employees who have reached certain service and retirement eligibility criteria on the date of grant. The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model that uses certain assumptions. The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of the Company’s common stock. In addition, the Company determines the risk-free interest rate by selecting the U.S. Treasury constant maturity for the same maturity as the estimated life of the option quoted on an investment basis in effect at the time of grant for that business day. Judgment is required in estimating the percentage of share-based awards that are expected to vest, and in the case of performance stock units, or PSUs, the level of performance that will be achieved and the number of shares that will be earned. The Company estimates forfeitures of share-based awards at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from original estimates. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. If actual results differ significantly from these estimates, stock-based compensation expense could be higher or lower and have a material impact on the Consolidated Financial Statements. Estimates of fair value are subjective and are not intended to predict actual future events, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made under ASC 718. Stock-based compensation expense for the three months ended March 31, 2025, and 2024 was as follows (in thousands): Three Months Ended March 31, 2025 2024 (Unaudited) Instructional costs and services $ 239 $ 223 Selling and promotional 204 139 General and administrative 1,820 1,556 Total stock-based compensation expense $ 2,263 $ 1,918 Incentive-based Compensation The Company provides incentive-based compensation opportunities to certain employees through cash incentive and equity awards. The expense associated with these awards is reflected within the Company’s operating expenses. For the years ending December 31, 2025, and 2024, the Management Development and Compensation Committee of the Board approved annual incentive arrangements for senior management employees. The aggregate amount of awards payable, if any, is dependent upon the achievement of certain Company financial and operational goals and the satisfaction of individual performance goals. Given that the awards are generally contingent upon achieving annual objectives, final determination of the current year incentive awards cannot be made until after the results for the year are finalized. The Company recognizes the estimated fair value of performance-based restricted stock units by assuming the satisfaction of any performance-based objectives at the “target” level, which is the most probable outcome determined for accounting purposes at the time of grant and multiplying the corresponding number of shares earned based upon such achievement by the closing price of the Company’s stock on the date of grant. To the extent performance goals are not met, compensation cost is not ultimately recognized against the goals and, to the extent previously recognized, compensation cost is reversed. Amounts accrued are subject to change in 11 future interim periods if actual future financial results or operational performance are better or worse than expected. During the three months ended March 31, 2025, and 2024, the Company recognized an aggregate incentive-based compensation expense of $ 1.8 million and $ 1.9 million, respectively. Income Taxes The Company accounts for income taxes in accordance with FASB ASC 740, Accounting for Income Taxes . The Company determines its interim tax provision by applying the estimated income tax rate expected for the full calendar year to income before income taxes for the period adjusted for discrete items. Recent Accounting Pronouncements The Company considers the applicability and impact of all ASUs issued by the FASB. All ASUs issued subsequent to the filing of the Annual Report on March 6, 2025, were assessed and determined to be either inapplicable or not expected to have a material impact on the Company’s consolidated financial position and/or results of operations. Note 3. Revenue Disaggregation of Revenue In the following table, revenue, shown net of grants and scholarships, is disaggregated by type of service provided. The table also includes a reconciliation of the disaggregated revenue within the reportable segments (in thousands): Three Months Ended March 31, 2025 (Unaudited) APUS RU HCN Corporate and Other Consolidated Instructional services, net of grants and scholarships $ 82,551 $ 49,963 $ 14,152 $ 3,678 $ 150,344 Graduation fees 1,087 — — — 1,087 Textbook and other course materials — 8,601 3,221 — 11,822 Other fees 308 687 303 — 1,298 Total Revenue $ 83,946 $ 59,251 $ 17,676 $ 3,678 $ 164,551 Three Months Ended March 31, 2024 (Unaudited) APUS RU HCN Corporate and Other Consolidated Instructional services, net of grants and scholarships $ 79,805 $ 44,677 $ 13,600 $ 4,194 $ 142,276 Graduation fees 660 — — — 660 Textbook and other course materials — 7,911 2,553 — 10,464 Other fees 191 547 294 — 1,032 Total Revenue $ 80,656 $ 53,135 $ 16,447 $ 4,194 $ 154,432 Corporate and Other includes tuition and contract training revenue earned by GSUSA and the elimination of intersegment revenue for courses taken by employees of one segment at other segments. 12 Contract Balances and Performance Obligations The Company has no contract assets or deferred contract costs as of March 31, 2025, and December 31, 2024. The Company recognizes a contract liability, or deferred revenue, when a student begins a course, in the case of APUS and GSUSA, or starts a term, in the case of RU and HCN. Deferred revenue at March 31, 2025, was $ 25.1 million and included $ 15.8 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $ 9.3 million in consideration received in advance for future courses or terms, or student deposits, and represents the Company’s performance obligation to transfer future instructional services to students. Deferred revenue at December 31, 2024, was $ 23.5 million and included $ 14.1 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $ 9.4 million in student deposits. The Company has elected, as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with students that have an expected duration of one year or less. When the Company begins providing the performance obligations, a contract receivable is created, resulting in accounts receivable on the accompanying Consolidated Balance Sheets. The Company accounts for receivables in accordance with FASB ASC 310, Receivables . The Company uses the portfolio approach, a practical expedient, to evaluate if a contract exists and to assess collectability at the time of contract inception based on historical experience. Contracts are subsequently reviewed for collectability if significant events or circumstances indicate a change. The allowance for doubtful accounts is based on management’s evaluation of the status of existing accounts receivable. Among other factors, management considers the age of the receivable, the anticipated source of payment, and historical allowance considerations. Consideration is also given to any specific known risk areas among the existing accounts receivable balances. Recoveries of receivables previously written off are recorded when received. APUS, RU, and GSUSA do not charge interest on past due accounts receivable. HCN charges interest on payment plans when a student graduates or otherwise exits the program. Interest charged by HCN on payment plans was immaterial for the periods presented. Note 4. Assets held for sale Assets held for sale at March 31, 2025, and December 31, 2024, represents excess real properties located in Charles Town, West Virginia, for the Company’s APUS Segment. In the first quarter of 2025, the Company entered into an agreement to sell a building classified in assets held for sale as of December 31, 2024, for $ 7.0 million, and recorded a loss of $ 1.5 million, based on the contract amount less estimated costs to sell of $ 0.4 million. The loss is included in Loss on assets held for sale in the accompanying Consolidated Statements of Income for the three months ended March 31, 2025. At March 31, 2025, the carrying value of the building included in Assets held for sale in the accompany Consolidated Balance Sheets is $ 6.6 million. The sale is expected to close in the third quarter of 2025. In the fourth quarter of 2024, APUS entered into an agreement to sell a building currently in use for $ 16.6 million. As a result, the building was reclassified to held for sale as of December 31, 2024 at the contract amount less estimated costs to sell of $ 0.7 million, or $ 15.9 million. The sale is expected to close in the third quarter of 2025. In the fourth quarter of 2024, APUS entered into an agreement to sell the undeveloped parcel of land for $ 0.5 million which approximated its carrying value. As a result, the land was classified as held for sale as of December 31, 2024. The sale closed in the first quarter of 2025. Note 5. Leases The Company has operating leases for office space and campus facilities and finance leases for certain copiers and printers. Leases are classified as operating leases unless they meet any of the criteria below to be classified as a finance lease: • the lease transfers ownership of the asset at the end of the lease; • the lease grants an option to purchase the asset that the lessee is expected to exercise; • the lease term reflects a major part of the asset’s economic life; • the present value of the lease payments equals or exceeds the fair value of the asset; or • the asset is specialized with no alternative use to the lessor at the end of the term. 13 Operating Leases The Company has operating leases for office space and campus facilities. Some leases include options to terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. The Company leases corporate office space in Florida, under an operating lease that expires in January 2026. The RU Segment leases administrative office space in Minneapolis, Minnesota, and leases 20 campuses located in six states under operating leases that expire through March 2034. The HCN Segment leases administrative office space in suburban Columbus, Ohio, and leases eight campuses located in three states under operating leases that expire through December 2034. GSUSA leases classroom and administrative office space in Washington, D.C. and Honolulu, Hawaii, under operating leases that expire through September 2036. Operating lease assets are right-of-use assets, or ROU assets, which represent the right to use an underlying asset for the lease term. Operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating leases are included in the Operating lease assets, net, and Operating lease liabilities, current and long-term, on the accompanying Consolidated Balance Sheets. These assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. When the lease does not provide an implicit interest rate, the Company uses an incremental borrowing rate based on information available at lease commencement to determine the present value of the lease payments. The ROU asset includes all lease payments and excludes lease incentives. Lease expense for operating leases is recognized on a straight-line basis over the lease term. There are no variable lease payments. Lease expense for the three months ended March 31, 2025, and 2024, was $ 4.9 million and $ 5.2 million, respectively. These costs are primarily related to long-term operating leases but also include amounts for short-term leases with terms greater than 30 days that are not material. Cash paid for amounts included in the present value of operating lease liabilities during the three months ended March 31, 2025, and 2024, was $ 4.7 million and $ 4.8 million, respectively, and is included in operating cash flows. Loss on leases During the three months ended March 31, 2024, the Company elected to terminate its RU Segment lease for a planned Dallas, Texas campus. The Company paid a lease termination fee of $ 2.2 million and recorded a loss of $ 2.1 million as a result of this lease termination. Additionally, in the first quarter of 2024, the Company’s RU Segment began consolidating two Minnesota campuses and recorded a loss of $ 0.8 million on the Minnesota campus lease obligations. Lease losses on lease termination and campus consolidation totaling $ 2.9 million for the three months ended March 31, 2024, are included in Loss on leases in the accompanying Consolidated Statements of Income. In conjunction with the lease termination and campus consolidation, the Company reduced Operating lease assets, net, and Lease liabilities, current and long term by $ 5.0 million and $ 4.2 million, respectively, during the three months ended March 31, 2024. There was no loss on leases during the three months ended March 31, 2025. Finance Leases The Company leases copiers and printers pursuant to leases that are classified as finance leases and that expire in 2027. The Company pledged the assets financed to secure the outstanding leases. As of March 31, 2025, the total finance lease liability was $ 0.4 million, with an average interest rate of 7.00 %. The ROU assets are recorded within Property and equipment, net on the accompanying Consolidated Balance Sheets. Lease amortization expense associated with the Company’s finance leases was $ 46,000 and $ 27,000 for the three months ended March 31, 2025, and 2024, respectively, and is recorded in Depreciation and amortization expense in the accompanying Consolidated Statements of Income. The following tables present information about the amount and timing of cash flows arising from the Company’s operating and finance leases as of March 31, 2025 (in thousands): 14 Maturity of Lease Liabilities (Unaudited) Operating Leases Finance Leases 2025 (remaining) $ 14,327 $ 160 2026 18,313 213 2027 17,204 36 2028 15,887 — 2029 13,694 — 2030 13,946 — 2031 and beyond 39,605 — Total future minimum lease payments $ 132,976 $ 409 Less: imputed interest ( 28,398 ) ( 27 ) Present value of operating lease liabilities $ 104,578 $ 382 Less: lease liabilities, current ( 13,296 ) ( 193 ) Lease liabilities, long-term $ 91,282 $ 189 Balance Sheet Classification (Unaudited) Current: Operating lease liabilities, current $ 13,296 Finance lease liabilities, current 193 Long-term: Operating lease liabilities, long-term 91,282 Finance lease liabilities, long-term 189 Total lease liabilities $ 104,960 Other Information (Unaudited) Weighted average remaining lease term (in years): Operating leases 7.91 Finance leases 1.91 Weighted average discount rate: Operating leases 5.6 % Finance leases 7.0 % Note 6. Goodwill and Intangible Assets During the three months ended March 31, 2025, in connection with the preparation of this Quarterly Report, the Company performed a qualitative assessment for potential impairment of the RU and HCN Segment goodwill and indefinite-lived intangible assets. As part of the assessment, the Company considered the events and circumstances expressly required by ASC 350, in addition to other entity-specific factors. Factors considered included RU and HCN’s financial and enrollment performance against internal targets, economic factors, and the continued favorable growth outlook for nursing education. After completing the qualitative review of goodwill and indefinite-lived intangible assets for the RU and HCN Segments, the Company concluded it was more likely than not that the fair value of each of the RU and HCN Segments was more than the respective carrying value, and therefore, no quantitative impairment test and no impairment charge was necessary. 15 The following table summarizes the carrying amount of goodwill by reportable segment (in thousands): APUS Segment RU Segment HCN Segment Total Goodwill (Unaudited) Goodwill as of December 31, 2024 $ — $ 33,030 $ 26,563 $ 59,593 Impairment — — — $ — Goodwill as of March 31, 2025 $ — $ 33,030 $ 26,563 $ 59,593 Goodwill and indefinite-lived intangible assets are reviewed for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. The Company’s annual assessment during the fourth quarter of 2024 concluded that the fair value of RU and HCN exceeded their carrying values by approximately $ 71.9 million, or 62 %, and $ 8.6 million, or 24 %, respectively. The following table represents the balance of the Company’s intangible assets as of March 31, 2025, and December 31, 2024 (in thousands): Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Amount (Unaudited) Finite-lived intangible assets Student roster $ 20,000 $ 20,000 $ — $ — Curricula 14,563 14,563 — — Student and customer contracts and relationships 4,614 4,614 — — Lead conversions 1,500 1,500 — — Non-compete agreements 86 86 — — Tradename 35 35 — — Accreditation and licenses 28 28 — — Total finite-lived intangible assets $ 40,826 $ 40,826 $ — $ — Indefinite-lived intangible assets Trade name 28,498 — 8,000 20,498 Accreditation, licensing, and Title IV 26,186 — 18,500 7,686 Affiliation agreements 37 — — 37 Total indefinite-lived intangible assets 54,721 — 26,500 28,221 Total intangible assets $ 95,547 $ 40,826 $ 26,500 $ 28,221 All recorded identified intangible assets with a definite useful life related to the acquisitions of RU, HCN, and GSUSA, were fully amortized as of December 31, 2024. Finite-lived intangible assets were amortized in a manner that reflected the estimated economic benefit of the intangible assets and were amortized on a straight-line basis. For the three months ended March 31, 2024, the Company recorded amortization expense related to definite-lived intangible assets of approximately $ 1.3 million. For additional information on goodwill and intangible assets, see the Consolidated Financial Statements and accompanying notes in the Annual Report. Note 7. Income (Loss) Per Common Share Income (loss) per common share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) available to common stockholders is net income (loss) adjusted for preferred stock dividends declared. Diluted income (loss) per common share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding, increased by the shares used in the per share calculation by the dilutive effects of restricted stock and option awards. The table below reflects the calculation of income (loss) per common share and the weighted average 16 number of common shares outstanding, on an as if converted basis, used in computing basic and diluted income (loss) per common share (in thousands, expect per share amounts). Three Months Ended March 31, 2025 2024 (Unaudited) Income (loss) per common share Net income (loss) $ 8,893 516 Preferred stock dividend 1,432 1,535 Net income (loss) available to common shareholders 7,461 ( 1,019 ) Basic weighted average shares outstanding 17,840 17,510 Income (loss) per common share $ 0.42 $ ( 0.06 ) Diluted income (loss) per common share Net income (loss) available to common shareholders $ 7,461 $ ( 1,019 ) Basic weighted average shares outstanding 17,840 17,510 Effect of dilutive restricted stock and options 577 301 Diluted weighted average shares outstanding 18,417 17,811 Diluted income (loss) per common share $ 0.41 $ ( 0.06 ) The table below reflects a summary of securities that could potentially dilute basic income (loss) per common share in future periods that were not included in the computation of diluted loss per share because the effect would have been antidilutive (in thousands). Three Months Ended March 31, 2025 2024 (Unaudited) Antidilutive securities: Stock options 73 136 Restricted shares — 74 Total antidilutive securities 73 210 Note 8. Long-Term Debt In connection with the acquisition of RU, APEI, as borrower, entered into a Credit Agreement with Macquarie Capital Funding LLC, or the Credit Agreement, as administrative agent and collateral agent, or the Agent, Macquarie Capital USA Inc. and Truist Securities, Inc., as lead arrangers and joint bookrunners, and certain lenders party thereto, or the Lenders. The Credit Agreement provides for (i) a senior secured term loan facility in an aggregate original principal amount of $ 175.0 million, or the Term Loan, with a scheduled maturity date of September 1, 2027 and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $ 20.0 million, or the Revolving Credit Facility, and, together with the Term Loan, is referred to as the Facilities, with a scheduled maturity date of September 1, 2026, the full capacity of which may be utilized for the issuance of letters of credit. The Revolving Credit Facility also includes a $ 5.0 million sub-facility for swing line loans. The Term Loan, the proceeds of which were used as part of the cash consideration for the RU acquisition, was fully funded on September 1, 2021, or the RU Closing Date, and is presented net of deferred financing fees on the accompanying Consolidated Balance Sheets. Deferred financing fees are being amortized using the effective interest method over the term of the Term Loan. As of March 31, 2025, and December 31, 2024, the remaining unamortized deferred financing fees were $ 2.7 million and $ 3.0 million, respectively. Deferred financing fees of $ 0.5 million related to the Revolving Credit Facility were recorded as an asset and are being amortized to interest expense over the term of the Revolving Credit Facility. There were no borrowings outstanding under the Revolving Credit Facility as of March 31, 2025, and December 31, 2024. In June 2023, in connection with the cessation of publication of the London Interbank Offered Rate, or LIBOR, the Credit Agreement was amended to change the applicable floating index rate at which interest on borrowings under the Facilities 17 would accrue from LIBOR to Term Secured Overnight Financing Rate, or Term SOFR (as defined in the Credit Agreement, as amended), a forward-looking term rate. Outstanding borrowings under the Facilities bear interest at a per annum rate equal to Term SOFR (plus a credit spread adjustment ranging from 0.11448 % to 0.42826 % depending on the interest period selected by APEI and subject to a 0.75 % floor after giving effect to such adjustment) plus 5.50 %, which shall increase by an additional 2.00 % on all past due obligations if APEI fails to pay any amount when due. As of March 31, 2025, the Facilities’ borrowing rate was 9.94 %. An unused commitment fee in the amount of 0.50 % is payable quarterly in arrears based on the average daily unused amount of the commitments under the Revolving Credit Facility. Interest expense, including offsets from the interest rate cap agreement in 2024 was $ 2.4 million and $ 1.9 million for the three months ended March 31, 2025, and 2024, respectively. In December 2022, APEI made prepayments totaling $ 65.0 million on the Term Loan. With this prepayment, APEI is not required to make quarterly principal payments on the Term Loan until payment of the outstanding principal amount at maturity in September 2027, subject to certain exceptions, including with respect to annual excess cash flows, proceeds from the sale of certain assets, casualty and condemnation events, and prohibited debt issuances. APEI had no mandatory prepayment obligation for the year ended December 31, 2024. The Facilities are and will be guaranteed by APEI’s subsidiaries and certain of APEI’s future subsidiaries that are required to become a party thereto as guarantors, or Guarantors. The obligations of APEI and the Guarantors are secured by a pledge of substantially all of their respective assets, pursuant to the terms of the Collateral Agreement dated as of the RU Closing Date, by and among APEI, the Agent and the Guarantors from time to time party thereto. The Credit Agreement contains customary affirmative and negative covenants, including limitations on APEI’s and its subsidiaries’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, and enter into affiliate transactions, in each case, subject to certain exceptions, as well as customary representations, warranties, events of default, and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Facilities. In addition, the Credit Agreement contains a financial covenant that requires APEI to maintain a Total Net Leverage Ratio of no greater than 2.00 to 1.00. As of March 31, 2025, the Company was in compliance with all debt covenants. For additional information on certain restrictions placed on the Company’s indebtedness pursuant to the terms of the Company’s Series A Senior Preferred Stock, please refer to “Note 12. Preferred Stock” in these Consolidated Financial Statements. Long-term debt consists of the following as of March 31, 2025, and December 31, 2024 (in thousands): As of March 31, 2025 As of December 31, 2024 (Unaudited) Credit agreement $ 96,425 $ 96,425 Deferred financing fees ( 2,678 ) ( 3,001 ) Total debt 93,747 93,424 Less: Current portion — — Long-Term Debt $ 93,747 $ 93,424 Scheduled maturities of long-term debt as of March 31, 2025, are as follows (in thousands): Maturities of Long-Term Debt (Unaudited) Loan Payments 2027 $ 96,425 Total $ 96,425 18 Derivatives and Hedging The Company is subject to interest rate risk, as all outstanding borrowings under the Credit Agreement are subject to a variable rate of interest. On September 30, 2021, the Company entered into an interest rate cap agreement to manage its exposure to the variable rate of interest with a total notional value of $ 87.5 million. This interest rate cap agreement, designated as a cash flow hedge, provided the Company with interest rate protection in the event the LIBOR rate exceeded 2.0 %. The interest rate cap was effective October 1, 2021, and was scheduled to expire on January 1, 2025. In connection with cessation of publication of LIBOR, the Company terminated its existing interest rate cap agreement and entered into a new interest rate cap agreement that transitioned the benchmark rate to Term SOFR, effective June 30, 2023. The new interest rate cap agreement was structured in a way that there was no change in the value to the Company and provided the Company with interest rate protection in the event that the Term SOFR rate exceeded 1.78 %. The interest rate cap agreement expired on December 31, 2024. In January 2025, the Company entered into a new interest rate cap agreement, with a notional value of $ 50.0 million. This new interest rate cap agreement, designated as a cash flow hedge, provides the Company with interest rate protection in the event that the Term SOFR rate exceeds 5.00 %, and is scheduled expire on June 30, 2026. Changes in the fair value of the interest rate cap designated as a hedging instrument that effectively offset the variability of cash flows associated with the Company’s variable-rate long-term debt obligations are reported in accumulated other comprehensive income. These amounts subsequently are reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings. Note 9. Segment Information The Company’s Chief Executive Officer, as the chief operating decision maker, or CODM, organizes the company, manages resource allocations, and measures performance among three operating and reportable segments: APUS; RU; and HCN. Corporate and Other includes GSUSA revenue and expenses, and unallocated corporate activity and eliminations to reconcile segment results to the Consolidated Financial Statements. GSUSA does not meet the quantitative thresholds to qualify as a reportable segment. The CODM reviews information about each reportable segment’s revenue and categorized expenses, and allocates resources to, and measures the performance of, each reportable segment using reportable segment operating income (loss). The CODM does not evaluate reportable segment asset or liability information. A summary of financial information by reportable segment is as follows (in thousands): 19 Three Months Ended March 31, 2025 2024 (In thousands) APUS Segment Revenue 83,946 80,656 Instructional costs and services 27,311 25,788 Selling and promotional 15,701 15,184 General and administrative 14,234 15,354 Other (1) 2,574 1,243 Income from operations before interest and income taxes 24,126 23,087 RU Segment Revenue 59,251 53,135 Instructional costs and services 33,144 33,097 Selling and promotional 16,452 15,122 General and administrative 7,390 7,637 Other (2) 2,337 6,245 Loss from operations before interest and income taxes ( 72 ) ( 8,966 ) HCN Segment Revenue 17,676 16,447 Instructional costs and services 11,310 10,552 Selling and promotional 1,947 1,105 General and administrative 4,660 4,773 Other (3) 505 321 Loss from operations before interest and income taxes ( 746 ) ( 304 ) Corporate and Other Revenue 3,678 4,194 Instructional costs and services 3,179 2,988 Selling and promotional 1,105 1,045 General and administrative 10,123 8,513 Other (3) 333 283 Loss from operations before interest and income taxes ( 11,062 ) ( 8,635 ) Total reportable segment revenue 160,873 150,238 Corporate and other revenue 3,678 4,194 Total consolidated revenue 164,551 154,432 Total reportable segment income from operations before interest and income taxes 23,308 13,817 Corporate and other (loss) from operations before interest and income taxes ( 11,062 ) ( 8,635 ) Total consolidated income from operations before interest and income taxes 12,246 5,182 (1) Includes loss on assets held for sale, loss on disposal of long-lived assets, and depreciation and amortization expense. (2) Includes loss on disposal of long-lived assets and depreciation and amortization expense. (3) Includes depreciation and amortization expense. 20 Three Months Ended March 31, 2025 2024 (In thousands) Depreciation and amortization APUS Segment 1,029 1,240 RU Segment 2,125 3,284 HCN Segment 505 322 Total reportable segment depreciation and amortization 3,659 4,846 Corporate and Other 333 282 Total consolidated depreciation and amortization 3,992 5,128 Interest expense, net APUS Segment 319 412 RU Segment 381 — HCN Segment 85 25 Total reportable segment interest expense, net 785 437 Corporate and Other ( 1,672 ) ( 563 ) Total consolidated interest expense, net ( 887 ) ( 126 ) Income tax expense (benefit) APUS Segment 7,734 7,481 RU Segment ( 162 ) ( 2,731 ) HCN Segment ( 259 ) ( 71 ) Total reportable segment income tax expense 7,313 4,679 Corporate and Other ( 4,847 ) ( 3,466 ) Total consolidated income tax expense 2,466 1,213 Note 10. Contingencies The Company accrues for costs associated with contingencies, including, but not limited to, regulatory compliance and legal matters, when such costs are probable and can be reasonably estimated. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved. The Company bases these accruals on management’s estimate of such costs, which may vary from the ultimate costs and expenses, associated with any such contingency. From time to time, the Company is involved in legal matters in the normal course of its business. Note 11. Concentration The Company’s students utilize various payment sources and programs to finance their education expenses, including funds from: the U.S. Department of Defense, or DoD, tuition assistance programs, or TA; education benefit programs administered by the U.S. Department of Veterans Affairs, or VA; federal student aid from Title IV programs; and cash and other sources. A summary of APUS Segment revenue derived from students by primary funding source is as follows: Three Months Ended March 31, (Unaudited) 2025 2024 DoD tuition assistance programs 44 % 48 % VA education benefits 24 % 23 % Title IV programs 18 % 16 % Cash and other sources 14 % 13 % A summary of RU Segment revenue derived from students by primary funding source is as follows: Three Months Ended March 31, (Unaudited) 2025 2024 Title IV programs 77 % 75 % Cash and other sources 22 % 23 % VA education benefits 1 % 2 % A summary of HCN Segment revenue derived from students by primary funding source is as follows: Three Months Ended March 31, (Unaudited) 2025 2024 Title IV programs 85 % 83 % Cash and other sources 14 % 16 % VA education benefits 1 % 1 % Note 12. Preferred Stock On December 28, 2022, APEI issued $ 40 million of the Series A Senior Preferred Stock, $ 0.01 par value per share, to affiliates of existing common stockholders of the Company. The Series A Senior Preferred Stock has cumulative dividends that accrue daily at the annual rate which is equal to Term SOFR (selected by the Company for each divided period), plus 10.00 %. On the 30-month anniversary of issuance, the dividend rate spread shall increase by 2.00 % per annum and shall increase by 0.50 % per annum at the beginning of each full fiscal quarter thereafter. The dividend rate spread increases 6.00 % in the event of default, a change of control, or other non-compliance as noted in the related Certificate of Designation and the purchase agreement for the shares of Series A Senior Preferred Stock, or the Purchase Agreement. Other than an increase in the dividend rate spread relating to default, in no event will the dividend rate spread exceed SOFR plus 25.00 %. As of March 31, 2025, the dividend rate was 14.32 % based on a three-month dividend period. Dividend periods will be monthly, every three months or every six months , at the Company’s option, and the Company currently anticipates using a three-month period. Dividends will be paid, after declaration by the Board, for each dividend period. If the Company selects a six-month dividend period, an interim dividend payment will be required for each three-month period therein. During the three months ended March 31, 2025, and 2024, dividends declared and paid on the Series A Senior Preferred Stock were $ 1.4 million and $ 1.5 million, respectively. The Series A Senior Preferred Stock has no stated maturity, is not convertible, is not subject to any mandatory redemption, sinking fund or other similar provisions, and will remain outstanding unless redeemed at the Company’s option. The Company has the right to redeem the Series A Senior Preferred Stock pro rata in whole or in part at the price per share equal to the liquidation preference, or the Liquidation Preference, plus any applicable early premium amount noted in the Certificate of Designation and Purchase Agreement. The Liquidation Preference of $ 45.0 million and $ 47.0 million as of March 31, 2025, and December 31, 2024, respectively, is based on the occurrence of a liquidation event, which is also considered an event of default as defined in the Certificate of Designation. The Liquidation Preference includes an early redemption premium amount and a make-whole payment for any redemption of the securities prior to June 30, 2025. As of March 31, 2025, and December 31, 2024, the make-whole payment included in the Liquidation Preference was $ 2.0 million and $ 4.0 million, respectively. The make-whole payment included in the Liquidation Preference will be reduced quarterly until June 30, 2025, at which time it will be eliminated. Events of default trigger an increase of the dividend rate spread of 6.00 % and an early premium amount, as defined in the Certificate of Designation. The following table lists the components of the liquidation preference for the periods presented below (in thousands): As of March 31, 2025 As of December 31, 2024 (Unaudited) Series A Senior Preferred Stock (plus accrued and unpaid dividends) $ 40,068 $ 40,068 Make whole payment 2,005 3,993 Early redemption premium 2,915 2,915 Liquidation Preference $ 44,988 $ 46,976 The Series A Senior Preferred Stock has no voting rights for directors or otherwise, except as required by law or with respect to certain protective provisions. Without the consent of at least 60 % of the then outstanding shares of Series A Senior Preferred Stock, with certain exceptions, the Company may not, among other things, (i) incur any indebtedness if such incurrence would cause the Company’s Total Net Leverage Ratio (as defined in the Purchase Agreement) to exceed 0.75 :1, (ii) issue any capital stock senior to or pari passu with the Series A Senior Preferred Stock, (iii) declare or pay any cash dividends on the Company’s common stock, or (iv) repurchase more than an aggregate of $ 30 million of the Company’s common stock. 21