What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2025-02-19 compared with 2024-02-13 · 141 added, 139 removed, 338 unchanged (45% of the section changed)

4 unchanged sentences

See “Forward-Looking Statements.” These risk factors should be read in conjunction with other information set forth in this Annual Report, including Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, Consolidated Financial Statements and Supplementary Data, including the related Notes to Consolidated Financial Statements.

We currently provide services to 25 university partners across the United States, GCU is, and will for the foreseeable future remain, our most significant university partner.

Although we currently provide services to 22 university partners across the United States, GCU is, and will for the foreseeable future remain, our most significant university partner.

Accordingly, the risk factors set forth below also include risks attributable to GCU’s operations, which could materially affect us.

1 unchanged sentence

The following is a summary of the material risk factors that could adversely affect our business, financial condition, and operating results:

● A large percentage of our revenue is attributable to our contractual relationship as a service provider to GCU, and the loss of, or a decline in enrollment in, GCU programs could significantly reduce our revenue and impact our overall financial performance.

● We earn a large percentage of our revenue through our contractual relationship as a service provider to GCU, and a decline in GCU’s enrollment could significantly reduce our revenue and impact our overall financial performance.

● GCU’s board of trustees and management have fiduciary and other duties that require them to focus on the best interests of GCU and, over time, those interests could diverge from those of GCE.

1 unchanged sentence

● If we are determined to have paid improper incentive compensation to our covered employees, or tuition sharing arrangements are deemed to violate the incentive compensation regulations, our business will be impaired.

● Our success depends, in part, on the effectiveness of our marketing and advertising programs in recruiting new students to enroll with our university partners.

● Our success depends, in part, on our ability to recruit new students to enroll with our university partners.

● A decline in the overall growth of enrollment in post-secondary institutions, or in the number of students seeking degrees online, could cause our university partner institutions to experience lower enrollment, which could negatively impact our future growth.

8 unchanged sentences

● If ED does not recertify a university partner institution to continue participating in the Title IV programs, the students we assist would lose their access to Title IV program funds, or a university partner institution could be recertified but be required to accept significant limitations as a condition of its continued participation in the Title IV programs.

● A university partner institution could lose the ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and our university partners’ student enrollments could decline if a client institution fails to maintain any of its accreditations or approvals.

● A university partner institution could lose the ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and our university partners’ student enrollments could decline if a university partner institution fails to maintain any of its accreditations or approvals.

● A university partner institution may lose eligibility to participate in the Title IV programs if its student loan default rates are too high.

5 unchanged sentences

Risks Related to Our Relationship with GCU

A large percentage of our revenue is attributable to our contractual relationship as a service provider to GCU, and the loss of, or a decline in enrollment in, GCU programs could significantly reduce our revenue and impact our overall financial performance.

We earn a large percentage of our revenue through our contractual relationship as a service provider to GCU, and a decline in GCU’s enrollment could significantly reduce our revenue and impact our overall financial performance.

We expect the revenue derived from our Master Services Agreement with GCU to account for a large percentage of our revenue for the foreseeable future.

Any decline in reputation or changes in policies of GCU that

adversely affect its student enrollment and its overall financial and operating results, including as a result of adverse government actions taken against GCU, could materially impact us.

Furthermore, GCU has the right to terminate the Master Services Agreement early after seven (7) years and, upon the termination or expiration of the Master Services Agreement, GCU is not required to continue using us as the provider of the services thereunder.

If GCU were to terminate or not renew its relationship with us, or if its programs were to materially underperform for any reason, it could negatively affect our reputation and materially adversely impact our revenue and operating results.

Any decline in reputation or changes in GCU policies that adversely affect its student enrollment and its overall financial and operating results, including as a result of adverse government actions taken against GCU, could materially impact us.

Furthermore, GCU has the right to terminate the Master Services Agreement after July 1, 2025 upon at least eighteen (18) months prior written notice, and, upon the termination or expiration of the Master Services Agreement, GCU is not required to continue using us as the provider of the services thereunder.

If GCU were to terminate or not renew its relationship with us, or if its enrollment were to materially decline for any reason, it could negatively affect our reputation and materially adversely impact our revenue and operating results.

GCU’s board of trustees and management have fiduciary and other duties that require them to focus on the best interests of GCU and, over time, those interests could diverge from those of GCE.

GCE believes that its relationship with GCU is and will remain strong.

We believe that our relationship with GCU is and will remain strong.

However, GCU has an independent board of trustees that, along with its management, have fiduciary and other duties that require them to focus on the best interests of GCU.

Over time, and for various reasons, those interests could diverge from the interests of GCE.

Should those interests diverge in a meaningful way, it could lead to changes in the relationship that would be adverse to GCE.

Should those interests diverge in a meaningful way, it could lead to changes in the relationship that would be adverse to us.

Our Chief Executive Officer’s role as President of GCU may adversely affect his ability to run GCE .

Mueller has served as the Chief Executive Officer of GCE since 2008, the Chairman of the Board of GCE since 2017 and the President of GCU since 2012.

Mueller has served as the Chief Executive Officer of GCE since 2008, the Chairman of the Board of Directors since 2017 and the President of GCU since 2012.

In connection with the Transaction, the Board of Directors of GCE and the board of trustees of GCU each independently determined that Mr.

1 unchanged sentence

Accordingly, Mr.

Mueller serves as the Chairman of the Board and Chief Executive Officer of GCE and as the President of GCU, although he is prohibited from serving on the board of trustees of GCU.

Mueller serves as the Chairman of the Board of Directors and Chief Executive Officer of GCE and as the President of GCU, although he is prohibited from serving on the board of trustees of GCU.

In continuing to retain Mr.

Mueller’s services, our Board and the board of trustees of GCU each recognize that Mr.

Mueller’s services, our Board of Directors and the board of trustees of GCU each recognize that Mr.

Mueller’s dual role could raise conflict of interest issues.

1 unchanged sentence

Mueller from serving on the board of trustees of GCU.

In addition, we and GCU also jointly imposed a structure, through GCU’s governance documents and through express provisions of the Master Services Agreement, that prevent Mr.

In addition, we and GCU also jointly imposed a structure, through GCU’s governance documents and through express provisions of the Master Services Agreement, which prevent Mr.

Mueller from participating in day-to-day management of, or negotiations between GCE and GCU relating to, the Master Services Agreement .

6 unchanged sentences

An institution that participates in the Title IV programs may not provide any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entity engaged in any student recruitment, admissions, or financial aid awarding activity.

Current regulations provide that higher education institutions agree that it will not “ provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of title IV, HEA program funds.

” Pursuant to this regulation, we are prohibited from offering our “ covered employees, ” who are generally those GCE employees involved with or responsible for recruiting or admissions activities on behalf of our university partners, any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students into a postsecondary institution.

Since we are involved in recruiting and admissions activities, on behalf of our university partners, under current regulations, we are prohibited from offering our “ covered employees, ” who are generally those GCE employees involved with or responsible for recruiting or admissions activities on behalf of our university partners, any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students into a postsecondary institution.

We are also precluded from offering our covered employees that work on financial aid matters (if any), any bonus or incentive-based compensation based on the award of financial aid to students enrolled in a postsecondary institution.

If it were determined that any of our compensation practices violated the incentive compensation law, we could experience an adverse outcome in pending litigation and be subject to substantial monetary liabilities, fines, and other sanctions, any of which could have a material adverse effect on our business,

prospects, financial condition and results of operations and could adversely affect our stock price.

See Part 1, Item 3 – Litigation for a discussion of certain litigation matters to which we are a party.

In addition, the regulation raises a question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners.

In addition, the incentive compensation rule raises a question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners.

On March 17, 2011, ED issued official agency guidance, known as a “Dear Colleague Letter,” or the DCL, providing guidance on this point.

3 unchanged sentences

“A third party that is not affiliated with the institution it serves and is not affiliated with any other institution that provides educational services, provides bundled services to the institution including marketing, enrollment application assistance, recruitment services, course support for online delivery of courses, the provision of technology, placement services for internships, and student career counseling.

The institution may pay the entity an amount based on tuition generated for the institution by the entity’s activities for all the bundled services that are offered and provided collectively, as long as the entity does not make prohibited compensation payments to its employees, and the institution does not pay the entity separately for student recruitment services provided by the entity.”

payments to its employees, and the institution does not pay the entity separately for student recruitment services provided by the entity.”

The DCL guidance indicates that an arrangement that complies with Example 2-B will be deemed to be in compliance with the incentive compensation provisions of the HEA and ED’s regulations.

2 unchanged sentences

Because the bundled services rule was promulgated in the form of agency guidance issued by ED in the form of a DCL and is not codified by statute or regulation, the rule could be altered or removed without prior notice, public comment period or other administrative procedural requirements that accompany formal agency rulemaking.

In fact, on February 15, 2023, ED launched a review of the prohibition on incentive compensation for college recruiters, including the use of the bundled service provider rule for OPMs like us.

The Department offered the public an opportunity to comment on this issue (the comment period concluded March 16, 2023) and held a “listening session” on this topic on March 8 and 9, 2023.

It is unclear at this point if or when the Department will revise guidance related to this issue.

Similarly, a court could invalidate the rule in an action involving our company or our university partners, or in action that does not involve us at all.

The revision, removal or invalidation of the bundled services rule by Congress, ED or a court could require us to change our business model in ways that could be detrimental to our business.

Our success depends, in part, on the effectiveness of our marketing and advertising programs in recruiting new students to enroll with our university partners.

Our success depends, in part, on our ability to recruit new students to enroll with our university partners.

Building awareness of our university partner institutions, and the programs they offer, is critical to our ability to attract prospective students to those institutions.

It is also critical to our success that we convert prospective students to enrolled students in a cost-effective manner and that these enrolled students remain active in the programs of our client institutions.

The tightness of the job market has historically had an impact on our ability to successfully recruit new students especially for students considering re-careering into a different field.

Historically the percentage of students we recruited that were re-careering was low but with the increase in university partners and off-campus classroom and laboratory sites and the growth in new online licensure programs by GCU, the number of students we recruit that are re-

careering is growing.

Historically the percentage of students we recruited who were re-careering was low but with the increase in university partners and off-campus classroom and laboratory sites and the growth in new online licensure programs by GCU, the number of students we recruit who are re-careering is growing.

Therefore, changes in the job market will impact our ability to recruit students.

4 unchanged sentences

● p erformance problems with our online systems;

● f ailure of our client institutions to maintain institutional and specialized accreditations;

● t he requirements of the education agencies that regulate our client institutions which could restrict their initiation of new programs and modification of existing programs;

● t he requirements of the education agencies that regulate our university partner institutions which restrict the ways schools can compensate their recruitment personnel;

● f ailure of our university partner institutions to maintain institutional and specialized accreditations;

● t he requirements of the education agencies that regulate our university partner institutions which could restrict their initiation of new programs and modification of existing programs;

● t he requirements of the education agencies that regulate our university partner institutions which restrict the ways schools can compensate persons involved in their recruiting activities;

● i ncreased regulation of online education, including in states in which our university partner institutions do not have a physical presence;

1 unchanged sentence

● s tudent dissatisfaction with our services and programs;

● lack of employment opportunities for graduates of our university partners in fields related to their educational programs:

● d amage to our reputation, or to the reputations of our university partners or other adverse effects as a result of negative publicity in the media, in industry or governmental reports, or otherwise, affecting us or other companies in the post-secondary education sector;

1 unchanged sentence

● a decline in the acceptance of online education;

● a n adverse economic or other development that affects job prospects in our core disciplines;

● a decrease in the perceived or actual economic benefits that students derive from the programs offered by any university partner institution.

If we are unable to continue to develop awareness of the programs of our university partners, and to provide services to successfully recruit, enroll, and retain students on their behalf, enrollments at our university partners would suffer and our ability to increase revenues and maintain profitability would be significantly impaired.

Our failure to keep pace with changing market needs and technology could harm our ability to meet the needs of our client institutions.

We have invested significant resources to develop and implement features that enhance the online classroom experience, such as delivering course content through streaming video, simulations, and other interactive enhancements as well as technology to meet the back-office support needs of our client institutions’ students.

Macroeconomic conditions and aversion to debt could adversely affect the ability of our university partner institutions to recruit new students and adversely affect our business.

Enrollment in our university partner institutions is affected by changes in economic conditions.

Affordability concerns associated with increased living expenses, relocation expenses and the availability of jobs for students attending classes have made it more challenging for our university partner institutions to attract and retain students.

Additionally, adverse market conditions could negatively impact the ability of borrowers to borrow the necessary student loans at an acceptable interest rate, which could lead to a decrease in student enrollment in certain cases.

If our university partner institutions are unable to attract and maintain students due to unfavorable macroeconomic conditions it could adversely affect our financial condition and results of operations.

Our failure to keep pace with changing market needs and technology could harm our ability to meet the needs of our university partner institutions.

Our information technology systems and tools could become impaired or obsolete due to our action or failure to act.

For instance, we could install new information technology without accurately assessing its costs or benefits, or we could experience delayed or ineffective implementation of new information technology.

We could fail to respond in a timely manner for future technological developments in our industry.

We also could fail to respond in a timely manner to future technological developments in our industry.

Should our actions or failure to act impair or render our information technology less effective, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.

1 unchanged sentence

Based on industry analyses, enrollment growth in degree-granting, post-secondary institutions is slowing and the number of high school graduates that are eligible to enroll in degree-granting, post-secondary institutions is expected to continue to decrease over the next few years.

In order to maintain current growth rates, we will need to attract a larger percentage of students in existing markets to our client institutions and work with university partner institutions to

create new academic programs to attract those students.

In addition, if job growth in the fields related to our university partners’ core disciplines is weaker than expected, as a result of any regional or national economic downturn or otherwise, fewer students may seek the types of degrees that our clients offer.

In order to maintain current growth rates, we will need to attract a larger percentage of students in existing markets to our university partner institutions and work with our university partner institutions to create new academic programs to attract those students.

Our failure to attract new students for our university partners, or the decisions by prospective students to seek degrees in disciplines not offered by our university partners, would have an adverse impact on our future growth.

1 unchanged sentence

We expect existing competitors and new entrants to the educational services market to revise and improve their business models constantly in response to challenges from competing businesses, including ours.

Our primary competitors have historically included EmbanetCompass (formerly owned by Pearson), Wiley Education Services, and 2U.

Our primary competitors have historically included EmbanetCompass (formerly owned by Pearson) and Wiley Education Services.

There are also several new and existing vendors providing some or all of the services we provide to other segments of the education market, and these vendors may pursue the institutions we target.

1 unchanged sentence

Increased competition may result in changes in the revenue share percentage we are able to negotiate to receive from a university partner.

The competitive landscape may also result in longer and more complex sales cycles with a prospective university partner, which would negatively affect our ability to add additional university partners and thus our ability to grow our business.

The competitive landscape may also result in longer and more complex sales cycles with prospective university partners, which would negatively affect our ability to add additional university partners and thus our ability to grow our business.

A number of competitive factors could cause us to lose potential university partner opportunities or force us to offer our solutions on less favorable economic terms, including:

6 unchanged sentences

If we cannot compete successfully against our competitors, our ability to grow our business could be impaired.

Artificial intelligence is an emerging area of technology that has and may further impact various aspects of our business operations and that of our university partners, and we may not be successful in our artificial intelligence initiatives, which could adversely affect our business, financial condition and/or operating results.

We have made, and expect to continue making, investments in the integration of artificial intelligence (“AI”) into our platforms, products, and services.

However, AI presents various risks, challenges, and potential unintended consequences that could disrupt our ability to effectively integrate and leverage these technologies.

The process of refining and expanding AI-driven offerings may involve significant costs, and there can be no assurance that our efforts will ultimately succeed.

Additionally, competitors may develop more effective or efficient AI solutions, potentially undermining our competitive position.

The regulatory environment surrounding AI is still in development, and new laws or regulations could emerge that require substantial adjustments to our business practices.

These changes could impose unexpected costs or operational disruptions, and the full scope and impact of such regulatory developments remain uncertain.

AI technologies also carry the risk of generating content that is factually incorrect or infringing on third-party intellectual property rights.

If we suffer adverse consequences due to any of these factors, it could in turn have a material adverse effect on our reputation, financial performance, and operations.

We are subject to laws and regulations as a result of our collection and use of personal information, and any violations of such laws or regulations, or any breach, theft, or loss of such information, could adversely affect our reputation and operations.

10 unchanged sentences

A user who circumvents security measures could misappropriate sensitive information or cause interruptions or malfunctions in our operations.

Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee data and privacy.

Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business

controls, which could result in a breach of student or employee data and privacy.

In addition, errors in the storage, use, or transmission of personal information could result in a breach of privacy for current or prospective students or employees.

1 unchanged sentence

Similarly, California passed the California Consumer Privacy Act (CCPA) in 2018 (which went into effect in 2020), and there are similar bills that have been passed or are pending in a number of other states, as well.

These state laws represent a trend toward stronger privacy protections and greater data transparency in the U.S.

These state laws represent a trend toward stronger privacy protections and greater data transparency in the United States.

Currently, federal law legislates privacy on an industry-by-industry basis.

12 unchanged sentences

As an entity that provides services to institutions participating in Title IV programs, we are indirectly subject to FERPA, and we may not transfer or otherwise disclose any personally identifiable information from a student record to another party other than in a manner permitted under the statute.

If we violate FERPA, it could result in a material breach of contract with one or more of our university partners and could harm our reputation.

If we violate FERPA, it could result in a material breach of our contract with one or more of our university partners and could harm our reputation.

Further, in the event that we disclose student information in violation of FERPA, ED could require a university partner to suspend our access to their student information for at least five years, which would significantly and adversely impact our ability to provide our contracted services.

Capacity constraints, system disruptions, or security breaches in our online computer networks and phone systems could have a material adverse effect on our ability to attract and retain students.

The performance and reliability of the infrastructure of our computer networks and phone systems, including the online programs of our university partners, is critical to our operations, reputation and to our ability to attract and retain students on our university partners’ behalf.

The performance and reliability of the infrastructure of our computer networks and phone systems, including the online programs of our university partners, is critical to our operations, our reputation and our ability to attract and retain students on our university partners’ behalf.

Any computer system disruption or failure, or a sudden and significant increase in traffic on the servers that host our online operations, may result in the online courses and programs being unavailable for a period of time.

In addition, any significant failure of our computer networks or servers, whether as a result of third-party actions or in connection with planned upgrades and conversions, could disrupt our operations.

Individual, sustained, or repeated occurrences could significantly damage the reputation of our technology/services and result in a loss of potential or existing students of our university partner institutions.

Additionally, our operations are vulnerable to interruption or malfunction due to events beyond our control, including natural disasters and network and telecommunications failures.

Individual, sustained, or repeated occurrences could significantly damage the reputation of our technology and services and result in a loss of potential or existing students of our university partner institutions.

Additionally, our operations are vulnerable to interruption or malfunction due to events beyond our control, including natural disasters and network and

telecommunications failures.

Our computer networks may also be vulnerable to unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems.

6 unchanged sentences

● i f we incur significant debt to finance a future acquisition and our business does not perform as expected, we may have difficulty complying with debt covenants;

● w e may be unable to make a future acquisition which is in our best interest due to our existing indebtedness;

● i f we use our stock to make a future acquisition, it will dilute existing stockholders;

● w e may have difficulty integrating the operations and personnel of any acquired company;

● t he challenge and additional investment involved with integrating new products, services and technologies into our sales and marketing process;

● o ur ongoing business may be disrupted by transition and integration issues;

● we may face t he challenges and additional investments involved with integrating new products, services and technologies into our sales and marketing process associated with any acquired business;

● o ur ongoing business may be disrupted by transition and integration issues with any acquired business;

● t he costs and complexity of integrating the internal information technology infrastructure of each acquired business with ours may be greater than expected and may require additional capital investments;

1 unchanged sentence

● w e may have difficulty in maintaining controls, procedures and policies during the transition and integration period following a future acquisition;

● o ur relationships with existing clients could be adversely affected;

● o ur relationships with existing university partners could be adversely affected following an acquisition;

● a s successor we may be subject to certain liabilities of our acquisition targets.

Our failure to effectively integrate any future acquisition would adversely affect the benefit of such transaction, including potential synergies or sales growth opportunities, in the time frame anticipated.

Our cash and cash equivalents are held at three financial institutions.

Approximately 80% of our cash and cash equivalents are held at a single financial institution and are in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”).

This financial institution is among the largest in the United States, and we therefore believe that such funds are stable and at very low risk.

The remaining approximately 20% of our cash and cash equivalents are held at two regional banks.

We believe that both of these regional banks have strong balance sheets with high liquidity and low debt, and that their percentage of total uninsured deposits are similar or better than the nation’s largest banks.

We believe that we have mitigated as much risk as possible

by dispersing the operating funds between three banks.

However, we may be subject to losses in excess of the FDIC insured limit in the event of a failure of any of these financial institutions and the subsequent lack of intervention by the federal government.

In the first quarter of 2023, we moved the majority of our operational banking services to one of the aforementioned regional banks;

therefore, a larger portion of our cash and cash equivalents may be transferred to the same regional bank’s institutional sweep and depository accounts in the future.

We will continually review all three institutions’ financial conditions to ensure that our assets are as safeguarded as possible.

Our failure to effectively integrate any future acquisition would materially limit the benefit of such transaction, including potential synergies or sales growth opportunities, in the time frame anticipated.

Risks Related to the Extensive Regulation of the Higher Education Industry

1 unchanged sentence

To participate in the Title IV programs, a school must be authorized by the appropriate state post-secondary agency or agencies, be accredited by an accrediting commission recognized by ED, and be certified as an eligible institution by ED.

In addition, the operations and programs of our university partners, and any future university partners, are regulated by other state education agencies and additional accrediting commissions.

In addition, the operations and programs of our university partners, and any future university partners, are regulated by other state education agencies and additional specialized accrediting commissions.

As a result of these requirements, we are subject to extensive regulation from state entities, institutional accrediting commissions, specialized accrediting commissions, and ED.

5 unchanged sentences

Any misinterpretation of regulatory requirements could materially adversely affect us.

If we fail, or any university partner institution fails, to comply with any of these regulatory requirements, we or any university partner could suffer financial penalties, limitations on our operations, or other sanctions, each of which could materially adversely affect us.

If we fail, or any university partner institution fails, to comply with any of these regulatory requirements, we or any university partner could suffer financial penalties, limitations on operations, or other sanctions, each of which could materially adversely affect us.

In addition, if we or any university partner are charged with regulatory violations, our reputation could be damaged, which could have a negative impact on our stock price and enrollments at university partner institutions.

ED and other regulators have increased the frequency and severity of their enforcement actions against post-secondary schools, including our primary university partners.

In some cases, these enforcement actions have resulted in material sanctions, loss of Title IV eligibility, or closure in schools.

ED and other regulators have increased the frequency and severity of their enforcement actions against post-secondary schools, including our primary university partner.

In some cases, these enforcement actions have resulted in material sanctions, loss of Title IV eligibility, or closure in

We cannot predict with certainty how all of these regulatory requirements will be applied, or whether we will be able to comply with all of the applicable requirements in the future.

1 unchanged sentence

Over the past few years, ED has regularly promulgated new regulations and guidance that impact our university partners and our business directly.

These and other regulations and guidance documents, including those discussed above under “Business – Regulation,” can increase our operating costs and, in some cases, change the manner in which we operate our business.

These and other regulations and guidance documents, including those discussed above under “Regulation of our Education Services Business,” can increase our operating costs and, in some cases, change the manner in which we operate our business.

In addition, because certain of these regulations have been vacated or blocked as a result of litigation challenging the regulations, there remains substantial uncertainty regarding their present or future effectiveness or enforcement.

1 unchanged sentence

Recently published regulations could materially and adversely affect our business.

In addition to other regulations discussed elsewhere (such as the new Gainful Employment regulations), on October 31, 2023, ED published final regulations regarding financial responsibility, administrative capability, certification standards and procedures, and ability to benefit.

The regulations have a general effective date of July 1, 2024.

In addition to other regulations discussed elsewhere (such as the new Gainful Employment regulations), on July 1, 2024 new regulations became effective covering the areas of financial responsibility, administrative capability, certification standards and procedures, and ability to benefit.

Financial Responsibility :

The final regulations include an expanded list of mandatory and discretionary triggering events that could result in ED determining that an institution lacks financial responsibility and must submit to ED a letter of credit or other form of acceptable financial protection and accept other conditions on the institution’s Title IV Program eligibility.

The final regulations would, among other things, modify and substantially expand the number of triggers and, as a result, increase the likelihood that ED could impose a financial protection requirement and other conditions on our university partners.

The final regulations, among other things, modify and substantially expand the number of triggers and, as a result, increase the likelihood that ED could impose a financial protection requirement and other conditions on our university partners.

The final rules require the institution to notify ED of a triggering event and provide information demonstrating why the event does not warrant the submission of a letter of credit or imposition of other requirements.

13 unchanged sentences

Examples of discretionary triggering events under the final regulations include certain accrediting agency actions, certain accreditor events, fluctuations in Title IV volume, high annual dropout rates, indicators of significant change in the financial condition of the institution, the formation by ED of a group process to consider borrower defense claims against the institution, the institution’s discontinuation of education programs affecting at least 25 percent of enrolled students receiving Title IV funds, the institution’s closure of locations that enroll more than 25 percent of its students who receive Title IV funds, certain state licensing agency actions, the loss of institutional or program eligibility in another federal educational assistance program, a requirement to disclose in a public filing that the company is under investigation for possible violations of law, or if the institution is cited and faces loss of education assistance funds from another federal agency if it does not comply with agency requirements.

The final regulations also establish new rules for evaluating financial responsibility during a change in ownership.

The final regulations also established new rules for evaluating financial responsibility during a change in ownership.

Administrative Capability :

1 unchanged sentence

Failure to satisfy any of the standards may lead ED to find the institution ineligible to participate in Title IV programs or to place the institution on provisional certification as a condition of its participation.

The final rules add more standards related to topics such as the provision of adequate financial aid counseling and career services, ensuring the availability of clinical and externship opportunities, the disbursement of Title IV funds in a timely manner, compliance with high school diploma requirements, preventing substantial misrepresentations, complying with gainful employment requirements, and avoiding significant negative actions with a federal, state, or accrediting agency.

disbursement of Title IV funds in a timely manner, compliance with high school diploma requirements, preventing substantial misrepresentations, complying with gainful employment requirements, and avoiding significant negative actions with a federal, state, or accrediting agency.

Certification Regulations :

The final regulations expand the grounds for placing institutions on provisional certification, expand the types of conditions ED may impose on provisionally certified institutions, and expand the number of requirements contained in the institution’s program participation agreement with ED (including, among other requirements, an obligation to comply with all state laws related to closure).

The final regulations expanded the grounds for placing institutions on provisional certification, expanded the types of conditions ED may impose on provisionally certified institutions, and expanded the number of requirements contained in the institution’s program participation agreement with ED (including, among other requirements, an obligation to comply with all state laws related to closure).

The final regulations, allow ED to place institutions on provisional certification if, among other reasons, the institution does not meet financial responsibility factors or administrative capability standards, if the institution is required by ED to submit a letter of credit as a result of a mandatory or discretionary triggering event, or if ED deems the institution to be at risk of closure.

An institution that is provisionally certified receives fewer due process rights than those received by other institutions in the event ED takes certain adverse actions against the institution, is required to obtain prior ED approvals

of new campuses and educational programs and may be subject to heightened scrutiny by ED.

Provisional certification makes it easier for ED to revoke or decline to renew our university partners’ Title IV eligibility if ED under the current administration chooses to take such an action against us and other provisionally certified for-profit schools without undergoing a formal administrative appeal process.

Provisional certification makes it easier for ED to revoke or decline to renew an institution’s Title IV eligibility without undergoing a formal administrative appeal process.

The regulations also expand the conditions to which institutions must agree as part of their participation in the Title IV programs.

The final regulations also allow ED to determine whether to certify or impose conditions on an institution based on consideration of factors including, for example, the institution’s withdrawal rate, the amounts the institution spent on recruiting activities, advertising, and other pre-enrollment activities, and the passage rate for licensure exams for programs that are designed to meet the educational requirements for a professional license required for employment in an occupation.

The final regulations expand the types of conditions ED can impose on provisionally certified institutions including, for example, restrictions on the addition of new programs or locations, restrictions on the rate of growth or new enrollment of students or of Title IV volume, restrictions on the institution providing a teach-out on behalf of another institution, restrictions on the acquisition of another participating institution (including financial protection requirements), additional reporting requirements, limitations on entering into certain written arrangements with institutions or entities for providing part of an educational program, requirements to submit marketing and recruiting materials to ED for approval (if the institution is alleged or found to have engaged in substantial misrepresentations to students, engaged in aggressive recruiting practices, or violated incentive compensation rules), reporting requirements for institutions that received a government formal inquiry such as a subpoena related to its marketing or recruitment or its federal financial aid, and other potential conditions imposed by ED.

We are still reviewing the final regulations and cannot predict the ultimate impact of the final regulations on gainful employment and the other topics discussed above, but the final regulations impose a broad range of additional requirements on institutions, which increase the possibility that our university partners could be subject to additional reporting requirements, potential liabilities and sanctions, and potential loss of Title IV eligibility if our efforts, or the efforts of our university partners, to modify operations to comply with the new regulations are unsuccessful, which could have a significant impact on our business and results of operations.

ED commenced negotiated rulemaking meetings in October 2023 aimed at developing new regulations related to providing student debt relief.

The meetings concluded in December 2023 and are expected to lead to the publication of proposed regulations next year and, after a period of public notice and comment, final regulations.

The rulemaking process is in its earliest stages.

We cannot predict the timing, content, or potential impact of any final regulations that might emerge from this process.

These final regulations also allow ED to determine whether to certify or impose conditions on an institution based on consideration of factors including, for example, the institution’s withdrawal rate, the amounts the institution spent on recruiting activities, advertising, and other pre-enrollment activities, and the passage rate for licensure exams for programs that are designed to meet the educational requirements for a professional license required for employment in an occupation.

These final regulations expand the types of conditions ED can impose on provisionally certified institutions including, for example, restrictions on the addition of new programs or locations;

restrictions on the rate of growth or new enrollment of students or of Title IV volume;

restrictions on the institution providing a teach-out on behalf of another institution;

restrictions on the acquisition of another participating institution (including financial protection requirements);

additional reporting requirements;

limitations on entering into certain written arrangements with institutions or entities for providing part of an educational program, requirements to submit marketing and recruiting materials to ED for approval (if the institution is alleged or found to have engaged in substantial misrepresentations to students, engaged in aggressive recruiting practices, or violated incentive compensation rules);

reporting requirements for institutions that received a government formal inquiry such as a subpoena related to its marketing or recruitment or its federal financial aid, and other potential conditions imposed by ED.

Additionally, in January 2025, ED published another set of regulations.

The regulations include:

● A new definition of “distance education course” which provides that a course is considered a distance education course if all instruction occurs exclusively through distance education methods, as defined in existing regulations.

This designation applies even if the course includes in-person, non-instructional activities sch as orientation, testing or academic support services;

● Technical changes to the TRIO programs that focus on providing services to individuals from disadvantaged backgrounds;

● Revisions to the return to Title IV process;

● A requirement that an institution is required to document a student’s withdrawal date within 14 days of the last date of attendance;

● Clarification regarding the academic progressions of students returning from a leave of absence from a clock-hour/non-term credit hour, subscription-based, and eligible prison education programs;

● Clarification related to programs offered in modules;

● A requirement that institutions report student enrollment in distance education or correspondence courses.

These changes are effective July 1, 2026, except for the reporting requirements related to distance education and correspondence courses, which take effect on July 1, 2027.

We are still reviewing the final regulations and cannot predict the ultimate impact of the final regulations discussed above, but the final regulations do impose a broad range of additional requirements on institutions, which increases the possibility that our university partners could be subject to additional reporting requirements, potential

liabilities and sanctions, and potential loss of Title IV eligibility if our efforts, or the efforts of our university partners, to modify operations to comply with the new regulations are unsuccessful, which could have a significant impact on our business and results of operations.

If ED does not recertify a university partner institution to continue participating in the Title IV programs, the students we assist would lose their access to Title IV program funds, or a university partner institution could be recertified but be required to accept significant limitations as a condition of its continued participation in the Title IV programs.

1 unchanged sentence

An institution must also apply for recertification by ED if it undergoes a change in control, as defined by ED regulations, and may be subject to similar review if it expands its operations or educational programs in certain ways.

As an example, on November 6, 2019, ED informed GCU that it had approved the Transaction and granted to GCU a provisional PPA, permitting GCU to participate in Title IV, HEA programs on a provisional basis for the period through September 30, 2022.

This PPA, which was granted on a provisional basis due to the fact that the Transaction constituted a change of control of GCU, was granted without any requirement to post a letter of credit or any growth restrictions.

Accordingly, GCU is authorized to participate in Title IV, HEA programs for the stated period.

As required, GCU filed a renewal application three months in advance of the scheduled expiration date and continued to participate on a month-to-month extension of the PPA while the Department completed its review of the application.

As of June 30, 2023, the University continued to participate in Title IV programs under the terms of the PPA pursuant to the month-to-

month extension.

The Department approved and the parties executed a new Provisional Program Participation Agreement on September 29, 2023, which expires June 30, 2026.

Certification can be granted on a full or provisional basis and, in instances where ED is reviewing an application for renewal but does not complete the review by the stated date of expiration, may be continued on a month-to-month basis until the review is complete.

For a school that is certified on a provisional basis, ED may revoke the institution’s certification without advance notice or advance opportunity for the institution to challenge that action.

For a school that is certified on a month-to-month basis, ED may allow the institution’s certification to expire at the end of any month without advance notice, and without any formal procedures for review of such action.

To our knowledge, such action is very rare and has only occurred upon a determination that an institution is in substantial violation of material Title IV requirements .

Our primary university partner, GCU, currently operates under a provisional program participation agreement that expires on June 30, 2026.

There can be no assurance that ED will recertify any university partner institution or that it will not impose conditions or other restrictions on any university partner institution as a condition of approving any future recertification.

2 unchanged sentences

Any of these outcomes could have a material adverse effect on our university partners’ enrollments and us.

A university partner institution could lose the ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and our university partners’ student enrollments could decline if a client institution fails to maintain any of its accreditations or approvals.

A university partner institution could lose the ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and our university partners’ student enrollments could decline if a university partner institution fails to maintain any of its specialized accreditations or approvals.

An institution must be accredited by an accrediting commission recognized by ED in order to participate in the Title IV programs.

Our primary university partner, GCU, has been regionally accredited by the HLC and its predecessor since 1968, most recently obtaining reaccreditation in 2017 for the ten-year period through 2027, and the HLC approved the Transaction in February 2018.

Our primary university partner, GCU, has been regionally accredited by the HLC and its predecessor since 1968, most recently obtaining reaccreditation in 2017 for the ten-year period through 2027.

Some of our other university partners are accredited by HLC while the others are accredited by different accrediting bodies that are likely to have standards that are different from those of the HLC.

Accrediting bodies review the accredited status of institutions periodically (for example, the HLC reviews institutions every ten years, along with a mid-term report in year four).

If any client institution fails to satisfy the relevant accrediting standards, it could lose accreditation, which would cause a revocation of its eligibility to participate in the Title IV programs.

If any university partner institution fails to satisfy the relevant accrediting standards, it could lose accreditation, which would cause a revocation of its eligibility to participate in the Title IV programs.

This could cause a significant decline in student enrollments and could have a material adverse effect on us.

2 unchanged sentences

A university partner institution may lose eligibility to participate in the Title IV programs if its student loan default rates are too high.

An institution may lose its eligibility to participate in some or all of the Title IV programs if, for three consecutive years, 30% or more of its students who were required to begin repayment on their student loans in one year default on their payment by the end of the second year.

In addition, an institution may lose its eligibility to participate in some or all of the Title IV programs if the default rate of its students exceeds 40% for any single year.

8 unchanged sentences

These tests may also be applied to an institution’s parent company or other related entity.

The operating restrictions that may be placed on an institution that does not meet the quantitative standards of financial responsibility include being transferred from the advance payment method of receiving Title IV program funds to either the reimbursement or the heightened cash monitoring system, which could result in a significant delay in the institution’s receipt of those funds.

As a service provider, we are not directly subject to this regulation.

However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and to comply with or accept other limitations on the ability to increase the number of programs offered by our client institutions or the number of students they enroll, any of which sanctions could have an adverse impact on our business.

However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and to comply with or accept other limitations on the ability to increase the number of programs offered by our university partner institutions or the number of students they enroll, any of which sanctions could have an adverse impact on our business.

For example , GCU, calculated its composite score with respect to its fiscal years ending June 30, 2024 and 2023.

1 unchanged sentence

If GCU’s future composite scores do not exceed 1.5, ED could impose sanctions.

If any such sanctions were imposed on GCU or one of our other partners, it could have a negative impact on our ability to conduct our business.

If any such sanctions were imposed on GCU or one of our other university partners, it could have a negative impact on our ability to conduct our business.

In addition, if its composite score dropped low enough, it could cause GCU to be ineligible for participation in NC-SARA, which would require GCU to become authorized in numerous states in which it operates or has students.

In addition, there are a number of other financial responsibility standards that institutions must comply with, some of which were revised on October 31, 2023 and are discussed above.

The failure to comply with these standards could also result in the imposition of various sanctions, such as the imposition of letters of credit on GCU or one of our other partners.

If any such sanctions were imposed on GCU or one of our other partners, it could have a negative impact on our ability to conduct our business.

In addition, there are a number of other financial responsibility standards with which institutions must comply, including those discussed above.

See “Recently published regulations could materially and adversely affect our business”.

The failure to comply with these standards could also result in the imposition of various sanctions, such as the imposition of letters of credit.

If any such sanctions were imposed on GCU or one of our other university partners, it could have a negative impact on our ability to conduct our business.

If our university partner institutions do not comply with ED’s administrative capability standards, we could suffer harm.

2 unchanged sentences

As a service provider, we assist our university partners with some facets of these areas.

As such, we must be mindful of, and compliant with, the administrative capability requirements.

As such, we must be mindful of, and

compliant with, the administrative capability requirements.

If our university partner institutions fail to satisfy any of these criteria, ED may assess financial penalties against such institutions, restrict the manner in which those institutions receive Title IV funds, require them to post a letter of credit, place them on provisional certification status, or limit or terminate participation in the Title IV programs, any of which could materially adversely affect us.

These regulations were also recently revised, as discussed, and there may be additional restrictions or requirements that may create additional hurdles to compliance or otherwise materially adversely affect us.

These regulations were also recently revised, as discussed above, and there may be additional restrictions or requirements that may create additional hurdles to compliance or otherwise materially adversely affect us.

As a third-party servicer, if we are the cause of the administrative deficiency, we may also face monetary sanctions and actions to limit, suspend, or terminate our ability to offer those and other services to institutions of higher education.

6 unchanged sentences

We and our employees and subcontractors, as agents of our university partners, must use a high degree of care to comply with such rules and are prohibited by contract from making any false, erroneous or misleading statements about our university partners.

To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are approved in advance by our university partners before they are used by our employees and we carefully monitor our employees and subcontractors conversations with students and prospective students.

Despite our best efforts, we or our university partners may face complaints from our university partners’ students and prospective students over statements made by us and our agents throughout the conduct of all our services which would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act.

To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are approved in advance by our university partners before they are used by our employees and we carefully monitor our employees and subcontractors in their conversations with students and prospective students.

Despite our best efforts, we or our university partners may face complaints from our university partners’ students and prospective students over statements made by us and our agents throughout the conduct of our services that would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act.

Also, if ED determines that an institution (including its contractors) has engaged in substantial misrepresentation, ED may revoke an institution’s program participation agreement, impose limitations on the institution’s participation in Title IV programs, deny applications from the institution for approval of new programs or locations or other matters, or initiate proceedings to fine the institution or limit, suspend, or terminate its eligibility to participate in Title IV programs.

1 unchanged sentence

Similar rules apply under state laws or are incorporated in institutional accreditation standards.

The FTC applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector and recently filed a complaint against us and GCU related in part to these matters.

The FTC applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector and has pursued litigation against us and GCU related in part to these matters.

See Part I, Item 3 – Legal Proceedings – FTC Complaint .

If ED or another regulator determines that statements made by us or on our university partner’s behalf are in violation of the regulations, we could be subject to sanctions, legal actions, and other liability, which could have a material adverse effect on our business.

If ED or another regulator determines that statements made by us or on our university partners’ behalf are in violation of the regulations, we could be subject to sanctions, legal actions, and other liability, which could have a material adverse effect on our business.

To the extent we are performing return to Title IV calculations for our university partner institutions, we are subject to sanctions if we fail to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program.

A school participating in the Title IV programs must calculate the amount of unearned Title IV program funds that it has disbursed to students who withdraw from their educational programs before completing such programs and must return those unearned funds to the appropriate lender or ED in a timely manner, generally within 45 days of the date the school determines that the student has withdrawn.

To the extent our services for a university partner include conducting returns to Title IV, as they do with our primary university partner, GCU, we would likely be jointly and severally liable to ED, along with the relevant client, for return of those funds.

Further, we could be fined or otherwise sanctioned by ED, which could increase our cost of regulatory compliance and materially adversely affect us.

Further, a failure to comply with these regulatory requirements could result in termination of our ability to continue providing these services to other university partner institutions, which would materially affect us.

A reduction in funding or new restrictions on eligibility for the Federal Pell Grant Program, or the elimination of subsidized Stafford loans, could make college less affordable for certain students at our university partner institutions, which could negatively impact our university partner institutions’ enrollments, and thus our revenue and results of operations.

2 unchanged sentences

Changes to the HEA, including changes in eligibility and funding for Title IV programs, are likely to occur in subsequent reauthorizations, but we cannot predict the scope or substance of any such changes.

Any action by Congress that significantly reduces Title IV program funding, whether through across-the-board funding reductions, sequestration or otherwise, or materially impacts the eligibility of our client institutions or students to participate in Title IV programs would have a material adverse effect on our client institutions enrollment, financial condition, results of operations and cash flows.

Any action by Congress that significantly reduces Title IV program funding, whether through across-the-board funding reductions, sequestration or otherwise, or materially impacts the eligibility of our university partner institutions or students to participate in Title IV programs would have a material adverse effect on our university partner institutions’ enrollment, financial condition, results of operations and cash flows.

Congressional action could also require us to modify our practices in ways that could increase our administrative costs and reduce our operating income, which could have a material adverse effect on our financial condition, results of operations and cash flows.

6 unchanged sentences

To maintain their state authorization, our university partner institutions must continuously meet standards relating to, among other things, educational programs, facilities, instructional and administrative staff, marketing and recruitment, financial operations, addition of new locations and educational programs, and various operational and administrative procedures.

If our client institutions fail to satisfy any of these standards, they could lose state authorization to offer educational programs, which would also cause them to lose eligibility to participate in the Title IV programs and have a material adverse effect on us.

If our university partner institutions fail to satisfy any of these standards, they could lose state authorization to offer educational programs, which would also cause them to lose eligibility to participate in the Title IV programs and have a material adverse effect on us.

In addition, almost every state imposes regulatory requirements on educational institutions that have physical facilities located within the state’s boundaries.

2 unchanged sentences

State regulatory requirements for online education have historically varied among the states.

To address this issue and to meet new ED requirements many schools have applied and have been approved to be an approved institutional participant in the State Authorization Reciprocity Agreement (“SARA”).

To address this issue and to meet new ED requirements many schools have applied and have been approved to be approved institutional participants in the State Authorization Reciprocity Agreement (“SARA”).

SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs.

It is intended to make it easier for students to take online courses

offered by post-secondary institutions based in another state.

It is intended to make it easier for students to take online courses offered by post-secondary institutions based in another state.

SARA is overseen by a national council (NC-SARA) and administered by four regional education compacts.

GCU, for example, is a member of SARA in Arizona (AZ-SARA), which is administered by the Western Interstate Commission for Higher Education (referred to as W-SARA).

GCU, for example, is a member of SARA in Arizona (AZ-SARA), which is

administered by the Western Interstate Commission for Higher Education (referred to as W-SARA).

There is a yearly renewal for participating in NC-SARA and AZ-SARA and institutions must agree to meet certain requirements to participate.

All states other than California are members of SARA.

Any state that does not participate in SARA may impose regulatory requirements on out-of-state post-secondary institutions operating within their boundaries, such as those having a physical facility or conducting certain academic activities within the state.

Any state that does not participate in SARA may impose regulatory requirements on out-of-state post-secondary institutions operating within its boundaries, such as those having a physical facility or conducting certain academic activities within the state.

GCU, for example, enrolls students in all 50 states and the District of Columbia.

Although it is currently licensed, authorized, in-process, or exempt in all non-SARA jurisdictions in which it operates, if GCU fails to comply with state licensing or authorization requirements for a state, or fails to obtain licenses or authorizations when required, it could lose its state license or authorization by that state or be subject to other sanctions, including restrictions on its activities in, and fines and penalties imposed by, that state, as well as fines, penalties, and sanctions imposed by ED.

The loss of licensure or authorization in any non-SARA state by a client institution could prohibit us from recruiting prospective students or offering services to current students in that state, which could significantly reduce our university partner’s enrollments.

Although it is currently licensed, authorized, in-process, or exempt in all non-SARA jurisdictions in which it operates, if GCU fails to comply with state licensing or authorization requirements for a non-SARA jurisdiction, or fails to obtain licenses or authorizations when required, it could lose its license or authorization by that jurisdiction or be subject to other sanctions, including restrictions on its activities in, and fines and penalties imposed by, that jurisdiction, as well as fines, penalties, and sanctions imposed by ED.

The loss of licensure or authorization in any non-SARA jurisdiction by a university partner institution could prohibit us from recruiting prospective students or offering services to current students in that jurisdiction, which could significantly reduce our university partner’s enrollments.

Laws, regulations, or interpretations related to doing business over the Internet could also increase our cost of doing business and affect our ability to recruit students in particular states, which could, in turn, negatively affect enrollments and revenues and have a material adverse effect on our business.

5 unchanged sentences

The loss of licensure or authorization in a state other than a state in which a university partner institution is physically located could prohibit us from recruiting prospective students or assisting with offering educational services to current students in that state, which could significantly reduce enrollments.

Furthermore, our university partners must typically maintain a composite score of at least 1.5 to maintain their membership in a State Authorization Reciprocity Agreement, or SARA.

Furthermore, our university partners must typically maintain a composite score of at least 1.5 to maintain their membership in SARA.

Failure to maintain that score, and loss of eligibility for SARA, could result in the loss of the ability to offer online programs in various states unless the university partner is otherwise eligible to do so.

7 unchanged sentences

In addition, our largest university partner, GCU, has been subject to additional scrutiny.

In October 2021, the FTC issued a public statement indicating that it would coordinate efforts with ED and the VA to investigate for-profit universities, a category that includes GCU due to ED’s 2019 decision that GCU does not satisfy ED’s definition of a non-profit entity and, as a

result, that ED will continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs.

Since the FTC’s statement, ED, the VA and the FTC have initiated multiple actions against GCU, including audits, compliance reviews, civil investigative demands, fines and lawsuits, and the FTC has initiated civil investigative demands and a lawsuit against us, that allege, among other things, misrepresentations made in connection with marketing activities, including statements made related to GCU’s non-profit status.

See “– Regulation of Our University Partners - Coordinated action by federal agencies.” These actions, taken as a whole, appear to be coordinated in the manner described in the 2021 FTC statement.

In October 2021, the FTC issued a public statement indicating that it would coordinate efforts with ED and the VA to investigate for-profit universities, a category that at that time included GCU due to ED’s 2019 decision that GCU did not satisfy ED’s definition of a non-profit entity and, as a result, that ED would continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs.

In the period following the FTC’s statement, ED, the VA and the FTC initiated multiple actions against GCU, including audits, compliance reviews, civil investigative demands, fines and lawsuits, and the FTC has initiated civil investigative demands and a lawsuit against us, that allege, among other things, misrepresentations made in connection with marketing activities, including statements made related to GCU’s non-profit status.

See “– Regulation of Our University Partners - Coordinated action by federal agencies.” These actions, taken as

a whole, appear to be coordinated in the manner described in the 2021 FTC statement.

These actions, or any future actions by ED, FTC or any other federal or state government agencies or accrediting bodies with oversight over us or GCU, if ultimately resolved adversely to us or GCU, could result in monetary penalties and liabilities, further impact GCU’s non-profit status, and/or cause reputational harm.

In addition, given the importance of the non-profit designation to GCU, it is also possible that GCU might request changes to our contract with them to resolve any disputes it has with government agencies over its non-profit status.

At this time, we cannot predict what changes those could be or what effect any of those outcomes could have on our business.

7 unchanged sentences

§ 668.25, which requires third-party servicers, in their contracts with institutions, to be contractually obligated to, among other things:

● Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV, HEA program and any interest or other earnings thereon solely for the purposes specified in and in accordance with that program;

● Refer to the Office of Inspector General of ED for investigation any information indicating there is reasonable cause to believe that the institution might have engaged in fraud or other criminal misconduct in connection with the institution’s administration of any Title IV, HEA program or an applicant for Title IV, HEA program assistance might have engaged in fraud or other criminal misconduct in connection with his or her application;

● Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV program and any interest or other earnings thereon solely for the purposes specified in and in accordance with that program;

● Refer to the Office of Inspector General of ED for investigation any information indicating there is reasonable cause to believe that the institution might have engaged in fraud or other criminal misconduct in connection with the institution’s administration of any Title IV program or an applicant for Title IV program assistance might have engaged in fraud or other criminal misconduct in connection with his or her application;

● Be jointly and severally liable with the institution to the Secretary for any violation by the servicer of any statutory provision of or applicable to Title IV of the HEA, any regulatory provision prescribed under that statutory authority, and any applicable special arrangement, agreement, or limitation entered into under the authority of statutes applicable to Title IV of the HEA.

1 unchanged sentence

To the extent we continue to provide third party servicer functions, we will be subject to these requirements, the compliance with which can materially impact our business model.

Additionally, o n January 4, 2023, ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking including those regulations related to third-party services.

ED has not put forth any specific proposals at this time, although it has indicated an intent to publish sub-regulatory guidance on this topic some time in 2024.

We will monitor this rulemaking as it develops.

Proposed legislation, additional rulemaking or additional examinations from U.S.

5 unchanged sentences

Criticisms of the overall student lending and post-secondary education sectors may impact general public perceptions of educational institutions, including our university partner institutions and us, in a negative manner.

Adverse media coverage regarding educational institutions – whether or not a university partner – or regarding third party services such as us directly could damage our reputation.

Adverse media coverage regarding educational institutions – whether or not a university partner – or regarding third party servicers such as us could damage our reputation.

The environment surrounding access to and the costs of student loans remains in a state of flux.

5 unchanged sentences

Changing requirements related to data privacy may create increased costs and operational difficulties for university partner institutions and, potentially, for GCE.

On December 18, 2020, ED announced that it was finalizing a new Campus Cybersecurity Program framework.

In December 2020, ED announced that it was finalizing a new Campus Cybersecurity Program framework.

This proposed multi-year phased implementation would begin with a self-assessment of the National Institute of Standards and Technology Special Publication 800–171 Rev.

2 unchanged sentences

ED specifically said it was “committed to fully advancing and encouraging all postsecondary institutions’ implementation of NIST 800-171 controls.” This announcement was addressed both to institutions of higher education and their third-party servicers.

On February 9, 2023, ED issued Electronic Announcement GEN 23-09 stating, among other items “The Department will issue guidance on NIST 800-171 compliance in a future Electronic Announcement, but again encourages institutions to begin incorporating the information security controls required under NIST 800-171 into the written information security program required under GLBA as soon as possible.”

In February 2023, ED issued Electronic Announcement GEN 23-09 stating, among other items “The Department will issue guidance on NIST 800-171 compliance in a future Electronic Announcement, but again encourages institutions to begin incorporating the information security controls required under NIST 800-171 into the written information security program required under GLBA as soon as possible.”

While details related to this announcement are few, it does suggest that ED will be taking a greater role in ensuring universities and their service providers meet NIST standards and are protecting the students and ED data received.

Although management is reviewing this letter and the issues it raises, compliance with NIST will likely increase operational cost if required to come into compliance.

Compliance with NIST will likely increase operational cost if required to come into compliance.

Other General Risks

1 unchanged sentence

Our success to date has largely depended on, and will continue to depend on, the skills, efforts, and motivation of our executive officers, who generally have significant experience with our business and the education industry, and we may have difficulties in locating and hiring qualified personnel and in retaining such personnel once hired.

In addition, other than non-compete agreements of limited duration that we have with certain executive officers, we have

not historically sought non-compete agreements with key personnel and they may leave and subsequently compete against us.

In addition, other than non-compete agreements of limited duration that we have with certain executive officers, we have not historically sought non-compete agreements with key personnel and they may leave and subsequently compete against us.

The loss of the services of any of our key personnel, many of whom are not party to employment agreements with us, or our failure to attract and retain other qualified and experienced personnel on acceptable terms, could cause our business to suffer.

1 unchanged sentence

We are dependent on the integrity of our data management systems.

If these systems do not effectively collect, store and process relevant data for the operation of our business, whether due to equipment malfunctions or constraints, software deficiencies, or human error, our ability to effectively report, plan, forecast and execute our business plan and comply with applicable laws and regulations, including the HEA, as reauthorized, and the regulations thereunder, will be impaired, perhaps materially.

If these systems do not effectively collect, store and process relevant data for the operation of our business, whether due to equipment malfunctions or constraints, software deficiencies, or human error, our ability to effectively report, plan, forecast and execute our business plan and comply with applicable laws and regulations, including the HEA and the regulations thereunder, will be impaired, perhaps materially.

Any such impairment could materially and adversely affect our financial condition, results of operations, and cash flows.

3 unchanged sentences

We are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act.

This may require us to incur substantial additional professional fees and internal costs to further expand our accounting and finance functions and expend significant management efforts.

This may require us to incur substantial additional

professional fees and internal costs to further expand our accounting and finance functions and expend significant management efforts.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements.

1 unchanged sentence

Occurrence of natural or man-made catastrophes could materially and adversely affect our business, financial condition, results of operations and prospects.

Natural events, health epidemics (such as the COVID-19 pandemic), acts of God, terrorist attacks and other acts of violence, computer cyber-terrorism or other catastrophes could result in significant worker absenteeism, increased student attrition rates for our university partners, lower asset utilization rates, voluntary or mandatory closure of facilities, our inability to meet dynamic employee health and safety requirements, our inability to meet contractual service levels, our inability to procure essential supplies, travel restrictions on our employees and other disruptions to our business.

Natural events, health epidemics (such as the COVID-19 pandemic), acts of God, terrorist attacks and other acts of violence, cyber-terrorism or other catastrophes could result in significant worker absenteeism, increased student attrition rates for our university partners, lower asset utilization rates, voluntary or mandatory closure of facilities, our inability to meet dynamic employee health and safety requirements, our inability to meet contractual service levels, our inability to procure essential supplies, travel restrictions on our employees and other disruptions to our business.

In addition, these events could adversely affect the economy, financial markets and activity levels of our university partners.

4 unchanged sentences

For example, while we have no present plans to issue any preferred stock, our Board of Directors, without further stockholder approval, may issue shares of undesignated preferred stock and fix the powers, preferences, rights, and limitations of such class or series, which could adversely affect the voting power of your shares.

In addition, our bylaws provide for an

advance notice procedure for nomination of candidates to our Board of Directors that could have the effect of delaying, deterring, or preventing a change in control.

In addition, our bylaws provide for an advance notice procedure for nomination of candidates to our Board of Directors that could have the effect of delaying, deterring, or preventing a change in control.

Further, as a Delaware corporation, we are subject to provisions of the DGCL regarding “business combinations,” which can deter attempted takeovers in certain situations.

14 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors