AMERICAN PUBLIC EDUCATION INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations In this Quarterly Report on Form 10-Q, or this Quarterly Report, “we,” “our,” “us,” the “Company” and similar terms refer to American Public Education, Inc., or APEI, and its subsidiary institutions collectively unless the context indicates otherwise. All quarterly information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is unaudited. The following discussion of our historical results of operations and our liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements and related notes that appear elsewhere in this Quarterly Report and the audited financial information and related notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, or our Annual Report. Forward-Looking Statements This Quarterly Report contains forward-looking statements intended to be covered by the safe harbor provisions for forward-looking statements in Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or “may,” or other words or expressions that convey future events, conditions, circumstances, or outcomes to identify these forward-looking statements. Forward-looking statements in this Quarterly Report include, without limitation, statements regarding: • changes in and our efforts and ability to comply with the extensive regulatory framework applicable to our industry, including the 90/10 Rule and financial responsibility standards, as well as state law and regulations and accrediting agency requirements, and the expected impacts of our efforts to comply and any non-compliance; • federal appropriations and other budgetary matters, including government shutdowns, and the estimated impact of such matters on us and our prospective and current students, and our efforts to mitigate impacts; • actions by the U.S. Department of Education, or ED, institutional and programmatic accreditors, and state authorizing agencies and expectations regarding the effects of those actions; • 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 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 ability to maintain, develop, and grow our technology infrastructure, including with respect to any current or planned use of artificial intelligence or transform our technology infrastructure and realize the benefits of any such transformation; • our cash needs and expectations regarding cash flow from operations, including the impacts of our debt service; • our ability to undertake initiatives to improve the learning experience, attract students who are likely to persist, and improve student outcomes; • 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 conversion of prospective students to enrolled students and our retention of active students; • our ability to update and expand the content of existing programs and develop new programs to meet emerging student needs and marketplace demands, and our ability to do so in a cost-effective manner or on a timely basis; • the branding and marketing of our institutions; • our ability to leverage our investments in support of our initiatives, students, and institutions; • 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 U.S. Armed Forces, including actions related to participating in DoD tuition assistance, or TA, programs, our responses to those actions, and expectations regarding the effects of those actions and responses; • changes in enrollment in postsecondary degree-granting institutions and workforce needs; • the competitive environment in which we operate; • our ability to achieve the intended benefits of our cost savings initiatives and revenue-generating efforts; • the expected benefits of insourcing and outsourcing information technology services to our operations and third-party vendors, respectively; • the expected impact on our students and our business from campus closures and consolidations; • our financial performance generally; and 19 • our expectations and estimates regarding tax and accounting matters. Forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account information currently available to us, and are not guarantees of future results. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. Risks and uncertainties involved in the 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 and actions to dismantle ED; • any adverse impacts of government shutdowns on APUS’s net course registrations and our results of operations, and our inability to realize the intended benefits of any efforts to mitigate any such impacts; • our dependence on the effectiveness of our ability to attract students who persist in our institutions’ programs; • our inability to effectively market our programs or expand into new markets; • the loss of our and our students’ ability to receive funds under TA programs, the reduction, elimination, or suspension of TA, or disruptions due to systems used to request TA; • our inability to maintain enrollments from military students, including due to changes in military activity and deployments, budgets, and government shutdowns; • our inability to predict whether ED will grant borrower defense to repayment, or BDTR, claims; • adverse effects of changes our institutions make to improve the student experience and enhance each institution’s ability to identify and enroll students who are likely to succeed; • our failure to successfully adjust to future market demands; • risks associated with the Combination, including changes in its anticipated timeline; • 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; • our failure to meet applicable National Council Licensure Examination, or NCLEX, pass rates and other NCLEX standards, and the consequences thereof; • our failure to comply with the 90/10 Rule; • our loss of eligibility to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs, or ability to process Title IV financial aid; • our inability to recognize the intended benefits of our cost savings and reduction and revenue-generating efforts; • economic and market conditions in the United States and abroad and changes in interest rates; • 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 indebtedness; and • our dependence on and need to continue to invest in our technology infrastructure. Forward-looking statements should be considered in light of these factors and the factors described elsewhere in this Quarterly Report, in the “Risk Factors” section of this Quarterly Report and our Annual Report, and elsewhere in our various filings with the Securities and Exchange Commission, or the SEC. It is important that you read these factors and the other cautionary statements made in this Quarterly Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance, or achievements may vary materially from any future results, performance, or achievements expressed or implied by these forward-looking statements. You should also read the more detailed description of our business in our Annual Report when considering forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly update any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, or otherwise, except as required by law. Overview Background We are a provider of online and campus-based postsecondary education to approximately 108,900 students through our subsidiary, American Public University System, Inc. which currently operates three separately accredited institutions, APUS, RU, and HCN. Our institutions offer purpose-built education programs designed to prepare individuals for productive contributions to their professions and society, and opportunities designed to advance students in their current professions or to help them prepare for their next career. Our institutions are accredited and licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent the institution believe such licenses or authorizations are required and 20 are certified by ED to participate in Title IV programs. In January 2025, we announced the planned combination of our three institutions, or the Combination, which will result in a combined Higher Learning Commission-accredited institution named American Public University System. Effective March 2, 2026, or the Merger Date, we completed the merger of the legal entities that owned and operated our three institutions, with American Public University System, Inc. surviving the merger, or the Legal Merger, and we subsequently notified ED that the Legal Merger occurred. We currently expect the Combination to occur during the third quarter of 2026, subject to obtaining required approvals. We previously provided our educational services through three reportable segments: the APUS Segment, the RU Segment, and the HCN Segment. Beginning in fiscal 2026, in connection with the Combination, we now provide our educational services through the following two reportable segments: • Military+, which was formerly the APUS Segment, provides online postsecondary education to approximately 89,500 adult learners, directed primarily at the needs of the military, veterans, extended military and veteran families, and other public service and service-minded communities through APUS, which operates through two brands: American Military University, and American Public University. As of March 31, 2026, approximately 62% of Military+ students self-reported that they served in the military on active duty at the time of initial enrollment. • Health+, consisting of the businesses that formerly comprised the RU Segment and the HCN Segment, provides nursing- and health sciences-focused and other postsecondary education, including business, technology, and education. Health+ provides these education services to approximately 19,400 students at 27 campuses in eight states and online (excluding one campus planned to close during 2026) through RU and HCN. As of March 31, 2026, on-ground enrollment was approximately 11,000, and online enrollment was approximately 8,400 students. 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, prior to July 25, 2025, or the GSUSA Sale Date, the operational activities of Graduate School USA, or GSUSA. Prior period segment disclosures have been recast to conform to the current period presentation. Legislative and Regulatory Activity The Planned Combination of APUS, RU, and HCN We were required to obtain HLC approval prior to effectuating the Combination, and pursuant to ED’s requirements, are pursuing the Combination in two steps: (i) the Legal Merger and (ii) combination of APUS, RU, and HCN into one HLC-accredited institution, or the Institutional Combination. In February 2026, HLC approved the continuation of accreditation of APUS and RU after the Legal Merger with an acknowledgment that the intent is to consolidate the three institutions into one HLC accreditation. On April 28, 2026, HLC approved the continuation of accreditation after the Institutional Combination. HLC has scheduled a site visit in August 2026 in connection with the Legal Merger. We currently expect to complete implementation of the Institutional Combination in the third quarter of 2026, subject to obtaining required approvals from ED and state agencies. For additional details regarding regulatory treatment of the Combination, see the Regulatory Environment in our Annual Report captioned “Regulatory Environment – Accreditation – Institutional Accreditation” and “Regulatory Environment – Accreditation – The Planned Combination of APUS, RU, and HCN”, and for additional information regarding risks related to the Combination, see the Risk Factor in our Annual Report with the caption beginning “The planned combination of APUS, RU, and HCN...” Borrower Defense to Repayment Claims Between January 1, 2026 and April 30, 2026, our institutions received 646 BDTR claims from ED, seeking in the aggregate a discharge of approximately $11.0 million in loans. Each of our institutions disputes the validity of these claims and has 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 our institutions. For additional information regarding risks related to BDTR claims, see the Risk Factor in our Annual Report captioned “ED rules related to BDTR claims may create significant liability that could have an adverse effect on our business and results of operations”. 21 Summary of Results Consolidated revenue for the three months ended March 31, 2026, increased to $174.7 million from $164.6 million, or by 6.2%, as compared to the prior year period. The growth was primarily driven by higher net course registrations in our Military+ segment and increased enrollment in our Health+ segment, partially offset by the absence of revenue from GSUSA following its sale in July 2025. Our net income for the three months ended March 31, 2026, was $17.7 million, compared to $8.9 million in the prior year period, an increase of $8.8 million. The increase in net income for the three months ended March 31, 2026, was primarily related to the increase in revenue of $10.2 million, as compared to the prior year period, partially offset by the extinguishment of debt recognized in the three months ended March 31, 2026 of $1.7 million. Our operating margin improved to 12.4% for the three months ended March 31, 2026, as compared to 7.4% in the prior year period. Military+ segment net course registrations for the three months ended March 31, 2026, increased to approximately 106,600 from approximately 102,500, an increase of 4,100, or 4.0%, as compared to the prior year period. Military+ segment revenue for the three months ended March 31, 2026, increased to $89.4 million from $83.9 million, or by 6.5%, as compared to the prior year period. Military+ segment operating margin increased to 34.3% for the three months ended March 31, 2026, from 28.7% in the prior year period. Health+ segment total enrollment for the three months ended March 31, 2026, increased to approximately 19,400 from approximately 18,000, an increase of 1,400, or 7.8%, as compared to the prior year period. Health+ segment revenue for the three months ended March 31, 2026, increased to $85.4 million from $76.9 million, or by 11.0%, as compared to the prior year period. Health+ segment operating margin improved to 0.6% for the three months ended March 31, 2026, from negative 1.1% in the prior year period. Our financial results for the three months ended March 31, 2025, reflect the financial results of GSUSA in Corporate and Other. Critical Accounting Estimates Goodwill and indefinite-lived intangible assets. Goodwill is the excess of the purchase price of an acquired business over the fair value of the assets acquired and liabilities assumed, including identifiable intangible assets. Goodwill is not amortized. Goodwill is reported at the reporting unit level that we have defined as our reportable segments. Before the Merger Date, in connection with our acquisitions of RU and HCN, we recorded $217.4 million and $38.6 million of goodwill, respectively, in our Health+ segment. We later recorded non-cash impairment charges reducing the carrying value of Health+ segment goodwill to $33.0 million and $26.6 million for RU and HCN, respectively. No goodwill was recorded in our Military+ segment. In addition to goodwill, before the Merger Date, 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 Health+ segment, 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. There were no indefinite-lived intangible assets in our Military+ segment. We recorded $35.5 million and $4.4 million of identified intangible assets with a definite useful life in connection with the acquisitions of RU and HCN, respectively. There were no definite-lived intangible assets in our Military+ segment. We test goodwill and indefinite-lived intangible assets for impairment at least annually, and more frequently if events and circumstances exist that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The process of evaluating goodwill and indefinite-lived intangible assets for impairment is subjective and requires significant judgment and estimates. When performing an optional qualitative analysis, we consider many factors, including general economic conditions, industry and market conditions, certain cost factors, financial performance and key business drivers (for example, student enrollment), long-term operating plans, and potential changes to significant assumptions and estimates used in the most recent fair value analysis. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions and estimates. Actual results may differ and have a material impact on our results of operations and financial position, and subsequent events are not necessarily indicative of the reasonableness of the original assumptions or estimates. 22 We estimate fair value in our quantitative analysis by weighting the results from two different valuation approaches. They are: (i) discounted cash flow and (ii) guideline public company. Under the discounted cash flow method, we determined fair value by discounting the estimated future cash flows of RU and HCN at their estimated weighted-average cost of capital. We incorporate the use of projected financial information and a discount rate that are developed using market participant-based assumptions. The cash-flow projections are based on three-year financial forecasts developed by management that include revenue projections, capital spending trends, and investment in working capital to support anticipated revenue growth, which are updated at least annually and approved by management. Under the guideline public company method, we used pricing multiples from other public companies in the public higher education market to determine the fair value of RU and HCN. Values derived under the two valuation methods are then weighted to estimate RU and HCN’s enterprise values. If we determine that the carrying amount of a reporting unit exceeds its fair value, we then calculate the implied fair value of the reporting unit goodwill as compared to its carrying amount to determine the appropriate impairment charge. Although we believe our assumptions are reasonable, actual results may vary significantly and may expose us to material impairment charges in the future. Our methodology for determining fair values remained consistent for the periods presented. During the three months ended March 31, 2026, in connection with the Combination and just prior to the Merger Date, we completed a quantitative assessment of goodwill and indefinite-lived intangibles for our RU and HCN. The assessment concluded that the fair value of goodwill for each of RU and HCN exceeded its carrying values by approximately $90.8 million, or 60%, and $26.0 million, or 55%, respectively. Significant assumptions in the forecast used in the discounted cash flow valuation model include continued growth in our RU enrollment and cost containment measures. HCN’s significant assumptions in the forecast relate to future campus openings and tuition increases. These assumptions are subject to risks and uncertainties that could negatively impact results, including, but not limited to, changes in the regulatory environment, declines in student enrollment, adverse actions by state boards of nursing (such as enrollment caps), and unplanned increases in expenses. In addition, we determined the fair value of our RU and HCN indefinite-lived intangible asset was greater than their carrying values. Therefore, as of the Merger Date, there was no impairment of RU and HCN goodwill and indefinite-lived intangible assets. Significant assumptions inherent to valuation methodologies for goodwill and indefinite-lived intangible assets include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in the higher education market. Future changes, including minor changes in the significant assumption or other factors including revenue, operating income, valuation multiples, and other inputs to the valuation process may result in future impairment charges, and those charges could be material. For more information regarding our Critical Accounting Policies and Use of Estimates, see the “Critical Accounting 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 months ended March 31, 2026, compared to the three months ended March 31, 2025. 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. Our student population varies as a result of new enrollments, graduations, student attrition, the success of our marketing programs, and other reasons that we cannot always anticipate. We expect quarterly fluctuations in operating results to continue as a result of various enrollment patterns and changes in revenue and expenses. Military+ net course registrations for the three months ended March 31, 2026, increased to approximately 106,600 from approximately 102,500, an increase of 4,100, or 4.0%, as compared to the prior year period primarily due to increases in military registrations from students utilizing TA and military-affiliated students utilizing education benefit programs administered by the U.S. Department of Veterans Affairs, or VA. Military+ operating margin increased to 34.3% for the three months ended March 31, 2026, from 28.7% in the prior year period. Operating margin for the three months ended March 31, 2026, increased primarily due to the $5.5 million increase in revenue and a $1.5 million decrease in loss on assets held for sale, partially offset by a $1.3 million increase in advertising costs, as compared to the prior year period. Health+ total enrollment for the three months ended March 31, 2026, increased to approximately 19,400 from approximately 18,000, an increase of 1,400, or 7.8%, as compared to the prior year period, driven by a 10.0% increase in on-ground enrollment, and a 5.0% increase in online enrollment. Health+ operating margin improved to 0.6% for the three months ended March 31, 2026, from negative 1.1%, in the prior year period. The improvement in the operating margin for the three months ended March 31, 2026, was primarily due to the $8.4 million revenue increase, partially offset by increases of $2.8 23 million in classroom and course materials costs, $1.9 million in advertising costs, $1.3 million in employee compensation costs, and $0.8 million in bad debt expense, 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. Analysis of Consolidated Statements of Income The following table sets forth statements of income data as a percentage of revenue for the period indicated: Three Months Ended March 31, 2026 2025 (Unaudited) Revenue 100.0 % 100.0 % Costs and expenses: Instructional costs and services 42.7 45.5 Selling and promotional 21.7 21.4 General and administrative 20.8 22.1 Depreciation and amortization 2.4 2.4 Loss on assets held for sale — 0.9 Loss on disposals of long-lived assets 0.1 0.1 Total costs and expenses 87.6 92.6 Income from operations before interest and income taxes 12.4 7.4 Loss on extinguishment of debt (1.0) — Interest expense, net (0.4) (0.5) Income from operations before income taxes 11.0 6.9 Income tax expense 0.9 1.5 Net income 10.1 5.4 Preferred stock dividend — 0.9 Net income available to common stockholders 10.1 % 4.5 % Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025 Revenue. Our consolidated revenue for the three months ended March 31, 2026, was $174.7 million, an increase of $10.2 million, or 6.2%, compared to $164.6 million for the three months ended March 31, 2025. Revenue increased primarily due to an $8.4 million, or 11.0%, increase in revenue in our Health+ segment, a $5.5 million, or 6.5%, increase in revenue in our Military+ segment, partially offset by a $3.7 million decrease in GSUSA revenue included in Corporate and Other for the period prior to the GSUSA Sale Date. Our Health+ segment revenue increase was primarily due to a 7.8% increase in total student enrollment and the impact of tuition increases in the second half of 2025. Our Military+ segment revenue increase was primarily due to a 4.0% increase in net course registrations, as compared to the prior year period. Costs and expenses. Costs and expenses for the three months ended March 31, 2026, were $153.1 million, an increase of $0.8 million, or 0.5%, compared to $152.3 million for the three months ended March 31, 2025. Costs and expenses for the three months ended March 31, 2026, include $0.9 million in professional fees related to the Combination in Corporate and Other. The results in the prior year period included a $1.5 million loss on assets held for sale in our Military+ segment and $1.0 million in professional fees in Corporate and Other relating to the Combination. Costs and expenses for the three months ended March 31, 2026, as compared to the prior year period, excluding the items noted above, increased $2.4 million, or 1.6%, primarily due to increases of $2.9 million in advertising costs, $2.7 million in classroom and course materials costs due to increased vendor costs and enrollment, and $1.3 million in bad debt expense, partially offset by decreases of $1.6 million in employee compensation costs, $1.6 million in occupancy costs, and $0.7 million in information technology costs related to our ongoing efforts to reduce operating costs. Costs and expenses as a percentage of revenue decreased to 87.6% for the three months ended March 31, 2026, from 92.6% for the three months ended March 31, 2025. 24 Instructional costs and services expenses. Our instructional costs and services expenses for the three months ended March 31, 2026, were $74.6 million, a decrease of $0.3 million, or 0.4%, compared to $74.9 million for the three months ended March 31, 2025. Instructional costs and services expenses decreased primarily due to the $3.2 million decrease in Corporate and Other due to the sale of GSUSA, a $0.9 million decrease in employee compensation costs in our Military+ segment, and a $0.5 million decrease in occupancy costs in our Health+ segment related to campus and office space closures in 2025, partially offset by increases of $2.8 million in classroom and course material costs due to increased vendor costs and enrollment, and $1.4 million in employee compensation costs in our Health+ segment related to increased enrollment. Instructional costs and services expenses as a percentage of revenue decreased to 42.7% for the three months ended March 31, 2026, from 45.5% for the three months ended March 31, 2025. Selling and promotional expenses. Our selling and promotional expenses for the three months ended March 31, 2026, were $37.9 million, an increase of $2.7 million, or 7.6%, compared to $35.2 million for the three months ended March 31, 2025. Selling and promotional expenses increased primarily due to an aggregate increase of $3.1 million in advertising costs across both segments to further drive enrollment, partially offset by a decrease of $1.1 million in Corporate and Other due to the sale of GSUSA. Selling and promotional expenses as a percentage of revenue increased to 21.7% for the three months ended March 31, 2026, from 21.4% for the three months ended March 31, 2025. General and administrative expenses. Our general and administrative expenses for the three months ended March 31, 2026, were $36.3 million, a decrease of $0.1 million, or 0.3%, compared to $36.4 million for the three months ended March 31, 2025. For the three months ended March 31, 2026 and 2025, general and administrative expenses included $0.9 million and $1.0 million, respectively, in professional fees relating to the Combination in Corporate and Other. General and administrative expenses decreased primarily due to a $1.6 million decrease in Corporate and Other due to the sale of GSUSA, partially offset by a $1.4 million increase in bad debt expense in both segments. Consolidated bad debt expense for the three months ended March 31, 2026, was $6.3 million, or 3.6% of revenue, compared to $5.0 million, or 3.0% of revenue in the prior year period. General and administrative expenses as a percentage of revenue decreased to 20.8% for the three months ended March 31, 2026, from 22.1% for the three months ended March 31, 2025. As we continue to evaluate enhancements to our business capabilities, we may incur additional costs, and our general and administrative expenses will vary from time to time. Depreciation and amortization expenses. Depreciation and amortization expenses were $4.2 million for the three months ended March 31, 2026, compared to $4.0 million in the prior year period, a decrease of $0.2 million. Depreciation and amortization expenses as a percentage of revenue were 2.4% for the three months ended March 31, 2026, and 2025, respectively. Loss on extinguishment of debt. For the three months ended March 31, 2026, we recorded a $1.7 million loss on extinguishment of debt relating to the refinance of our corporate debt. There was no loss on extinguishment of debt in the prior year. Loss on assets held for sale. There were no losses on assets held for sale in the three months ended March 31, 2026. 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 Military+ segment. Loss on disposals of long-lived assets. The loss on disposal of long-lived assets was $0.2 million for the three months ended March 31, 2026, as compared to $0.2 million for the three months ended March 31, 2025. Stock-based compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $2.3 million for each of the three months ended March 31, 2026, and 2025. 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 $0.7 million and $0.9 million for the three months ended March 31, 2026, and 2025, respectively. Net interest expense in the three months ended March 31, 2026, as compared to the prior year period, decreased primarily due to a decrease in interest expense due to the refinance of corporate debt and the decrease in market rates paid in the comparable periods. Income tax expense. We recognized income tax expense of $1.5 million and $2.5 million for the three months ended March 31, 2026, and 2025, respectively, or an effective tax rate of 7.9% in 2026 and 21.7% in 2025. The effective tax rate in both periods was positively impacted by excess tax benefits related to stock compensation as the first quarter typically includes 25 the majority of annual vested stock awards. The impact on the first quarter of 2026 was more significant due to the increase in share price, in comparison to the prior period. Net income. Our net income was $17.7 million and $8.9 million for the three months ended March 31, 2026, and 2025, respectively, an increase of $8.8 million. This increase was due to the factors discussed above. Preferred stock dividends. There were no preferred stock dividends for the three months ended March 31, 2026 due to the redemption of all outstanding shares of our Series A Senior Preferred Stock in June 2025. Preferred stock dividends for the three months ended March 31, 2025 were $1.4 million. Net income available to common stockholders. The net income available to common stockholders was $17.7 million for the three months ended March 31, 2026, compared to a net income available to common stockholders of $7.5 million for the three months ended March 31, 2025, an improvement of $10.3 million. This improvement was due to the factors discussed above. Analysis of Operating Results by Reportable Segment The following table provides details on our operating results by reportable segment for the respective periods (in thousands): Three Months Ended March 31, 2026 2025 (Unaudited) Revenue: Military+ $ 89,443 $ 83,946 Health+ 85,356 76,927 Corporate and Other (61) 3,678 Total revenue $ 174,738 $ 164,551 Income (loss) from operations before interest and income taxes: Military+ $ 30,718 $ 24,126 Health+ 517 (818) Corporate and Other (9,592) (11,062) Total income from operations before interest and income taxes $ 21,643 $ 12,246 Military+ For the three months ended March 31, 2026, the $5.5 million, or 6.5%, increase to approximately $89.4 million in revenue in our Military+ segment was primarily attributable to higher net course registrations, as compared to the prior year period. Net course registrations increased 4.0% to approximately 106,600 from approximately 102,500 in the prior year period, primarily due to increases in military registrations from students utilizing TA, and military-affiliated students utilizing VA education benefits. Income from operations before interest and income taxes increased to $30.7 million during the three months ended March 31, 2026, from $24.1 million in the prior year period, an increase of $6.6 million, or 27.3%, primarily due to the $5.5 million revenue increase as well as the $1.5 million decrease in loss on assets held for sale, partially offset by a $1.3 million increase in advertising costs, in each case as compared to the prior year period. Health+ For the three months ended March 31, 2026, the $8.4 million, or 11.0%, increase to approximately $85.4 million in revenue in the Health+ segment was primarily due to a 7.8% increase in total student enrollment which was driven by an 10.0% increase in on-ground enrollment, and a 5.0% increase in online enrollment, as compared to the prior year period, and the impact of tuition increases in the second half of 2025. Income from operations before interest and income taxes was $0.5 million for the three months ended March 31, 2026, and a loss of $0.8 million for the three months ended March 31, 2025, respectively, an improvement of $1.3 million. The increase was primarily due to the increase in revenue of $8.4 million, partially offset by increases of $2.8 million in classroom and course materials costs, $1.9 million in advertising costs, $1.4 million in instructional cost and services employee compensation costs, and $0.8 million in bad debt expense, as compared to 26 the prior year period. Liquidity and Capital Resources Liquidity Cash, cash equivalents, and restricted cash were $221.0 million and $176.5 million at March 31, 2026, and December 31, 2025, respectively, representing an increase of $44.5 million, or 25.2%. The increase was primarily due to the collection of TA accounts receivable in the Military+ segment, and our improved financial performance, partially offset by cash used to repurchase common stock and the additional principal paydown of corporate debt. 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 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 the start of the applicable course or term. Another significant source of revenue is derived from TA from the DoD and programs from the VA. Generally, VA funds are received within 60 days of the start of the courses to which they relate, and TA funds received within 30 days of the invoice date. APUS generally invoices for TA approximately nine weeks after the start of a course, and may change its billing approach as in the past, which has had the effect of delaying payments from one period into another. For example, in July 2025, APUS delayed billing to certain branches, further delaying payments until 2026, which could have an adverse impact on APUS’s ability to comply with the 90/10 Rule in 2026 or future years. The change in TA billing practice added to our accounts receivable as of December 31, 2025, and resulted in an increase to our leverage ratio as of December 31, 2025, under our Credit Agreement as defined and discussed in “Note 7. Long-term Debt”. During the three months ended March 31, 2026, APUS collected approximately $33.3 million from TA related to the 2025 delayed billings. On March 2, 2026, we completed the first step of the Combination, and we anticipate completing the Combination in the third quarter of 2026, subject to obtaining required approvals. For the years ended December 31, 2025, and 2024, we incurred $3.5 million and $2.2 million in professional fees, respectively, related to the Combination. For the three months ended March 31, 2026, we incurred $0.9 million in professional fees and expect to incur between approximately $1.0 million and $3.0 million in professional fees in 2026 to complete the Combination. That certain Credit Agreement dated as of September 1, 2021, as amended, by and among the Company, as borrower, the lenders from time to time party thereto, and Macquarie Capital Funding, LLC, as administrative agent and collateral agent, or the Prior Credit Agreement, contained financial covenants that required us to maintain a Total Net Leverage Ratio (as defined in the Prior Credit Agreement) of no greater than 2.00 to 1.00 and 0.75 to 1.00, respectively, which was subject to certain exceptions. The Total Net Leverage Ratio under the Prior Credit Agreement at December 31, 2025, was negative 0.30 due to the growth in both cash and earnings and the reduction in restricted cash. On March 9, 2026, we entered into a Credit Agreement with PNC Bank, National Association, as administrative agent and collateral agent, PNC Capital Markets LLC as joint lead arranger and bookrunner, and a syndicate of lenders, or the Lenders, or the 2026 Credit Agreement. The 2026 Credit Agreement provides for (i) a $90.0 million senior secured term loan, or the 2026 Term Loan, and (ii) a senior secured revolving credit facility in an aggregate principal amount of up to $40.0 million, or the 2026 Revolving Credit Facility, or, together with the 2026 Term Loan, the 2026 Facilities. The 2026 Revolving Credit Facility replaces our prior $20.0 million senior secured revolving credit facility under the Prior Credit Agreement, and the proceeds of the 2026 Term Loan, together with cash on hand, were used to repay the approximately $96.4 million principal amount outstanding under our prior $175.0 million term loan under the Prior Credit Agreement. The 2026 Credit Agreement contains financial covenants that require us to (i) maintain a Consolidated Total Net Leverage Ratio of no greater than 2.50:1.00, (ii) maintain a Consolidated Interest Coverage Ratio of no less than 2.50:1.00 and (iii) maintain a minimum balance of domestic unrestricted cash and cash equivalents of $40.0 million. The Consolidated Interest Coverage Ratio (as defined in the 2026 Credit Agreement) reflects a ratio of consolidated EBITDA to consolidated interest expense. The Consolidated Total Net Leverage Ratio, under the 2026 Credit Agreement, at March 31, 2026, was negative 0.10. For more information on the 2026 Facilities and their terms, please refer to “Note 7. Long-Term Debt”. 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 Health+, the opening or closing of campuses or the consolidation of existing campuses at Health+, the acquisition or lease of existing structures or potential new construction 27 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. Share Repurchase Program On March 10, 2026, the Board approved a common stock repurchase program of up to $50 million in the aggregate. The program replaces our prior repurchase authorizations. For the three months ended March 31, 2026, we repurchased 17,840 shares of common stock for an aggregate purchase price of $1.0 million. Operating Activities Net cash provided by operating activities was $63.3 million and $37.0 million for the three months ended March 31, 2026, and 2025, respectively. The increase in cash from operating activities was primarily due to the collection of TA accounts receivable in our Military+ segment, related to the 2024 change in TA billing approach, our improved financial performance, and other changes in working capital due to the timing of receipts and payments. Accounts receivable at March 31, 2026, decreased approximately $27.0 million compared to December 31, 2025, primarily related to TA collections in our Military+ segment. Cash flow provided by accounts payable, accrued liabilities, and accrued compensation and benefits at March 31, 2026, were approximately $12.4 million. Investing Activities Net cash used in investing activities was $2.5 million for the three months ended March 31, 2026, compared to $3.4 million of net cash used in investing activities for the three months ended March 31, 2025, mainly due to a decrease in capital expenditures in the current year period, when compared to prior year. Financing Activities Net cash used in financing activities was $16.3 million and $5.0 million for the three months ended March 31, 2026, and 2025, respectively. The increase in cash used in financing activities in the current year period is primarily due to cash paid for the repurchase of common stock of $8.7 million, mainly relating to the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants. In the three months ended March 31, 2026, we also refinanced our corporate debt which included a $6.5 million net principal paydown and $1.1 million for debt issuance costs. Financing activities for the three months ended March 31, 2025, included preferred stock dividends paid of $1.4 million. Contractual Commitments We have various contractual obligations consisting of operating leases and purchase obligations. Purchase obligations include agreements with consultants, contracts with third-party service providers, and other future contracts or agreements. For a summary of our contractual obligations, please refer to Item 7 of Part II of our Annual Report.