AMERICAN PUBLIC EDUCATION INC

Previous wording

You should read the following discussion together with the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K, or this Annual Report. This discussion contains forward-looking statements that are based on management’s current expectations, estimates, and projections about our business and operations, and involves risks and uncertainties. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those we discuss under “Risk Factors”, “Special Note Regarding Forward-Looking Statements”, and elsewhere in this Annual Report. For a discussion of our financial condition and results of operations for 2023 compared to 2022, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 5, 2024, which discussion is incorporated in this Annual Report by reference and which is available free of charge on the SECs website at www.sec.gov.

Current wording

You should read the following discussion together with the consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that are based on management’s current expectations, estimates, and projections about our business and operations, and involves risks and uncertainties. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those we discuss under “Risk Factors”, “Special Note Regarding Forward-Looking Statements”, and elsewhere in this Annual Report. For a discussion of our financial condition and results of operations for 2024 compared to 2023, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC, on March 6, 2025, which discussion is incorporated in this Annual Report by reference and which is available free of charge on the SECs website at www.sec.gov.

Previous wording

We are a provider of online and campus-based postsecondary education to approximately 106,700 students, and career learning to approximately 24,600 individuals, through four subsidiary institutions, American Public University System, or APUS, Rasmussen University, or RU, Hondros College of Nursing, or HCN, and Graduate School USA, or GSUSA. Our subsidiary institutions offer purpose-built education programs and career learning designed to prepare individuals for productive contributions to their professions and society, and to offer opportunities designed to advance students in their current professions or to help them prepare for their next career. Our subsidiary institutions are licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent the institutions believe such licenses or authorizations are required, and APUS, RU, and HCN are certified by the Department of Education, or ED to participate in Title IV programs. Additional information regarding our subsidiary institutions and their regulation is included in the “Business” section of this Annual Report.

Current wording

We are a provider of online and campus-based postsecondary education to approximately 108,600 students through three subsidiary institutions, American Public University System, or APUS, Rasmussen University, or RU, and Hondros College of Nursing, or HCN. Our subsidiary institutions offer purpose-built education programs designed to prepare individuals for productive contributions to their professions and society, and offer opportunities designed to advance students in their current professions or to help them prepare for their next career. Our subsidiary institutions are licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent the institutions believe such licenses or authorizations are required and are certified by ED to participate in Title IV programs. Additional information regarding our subsidiary institutions and their regulation is included in the “Business” section of this Annual Report.

Previous wording

Our revenue is largely driven by the number of students enrolled at our institutions, the number of and types of courses that students take, student payor source, and the mix of programs students attend. Our consolidated revenue in 2024 was $624.6 million, representing a $24.0 million, or 4.0%, increase from $600.5 million in 2023. A significant portion of our revenue comes from our institutions’ participation in Title IV programs, APUS’s participation in the Department of Defense, or DoD, tuition assistance, or TA, programs, and other government programs, and this creates significant risks to our operations.

Current wording

Our revenue is largely driven by the number of students enrolled at our institutions, the number of and types of courses that students take, student payor source, and the mix of programs students attend. Our consolidated revenue in 2025 was $648.9 million, representing a $24.3 million, or 3.9%, increase from $624.6 million in 2024. This includes revenue from GSUSA through July 25, 2025, or the GSUSA Sale Date. A significant portion of our revenue comes from our institutions’ participation in Title IV programs, and APUS’s participation in the DoD TA programs, and VA education programs, and this creates significant risks to our operations.

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Our operations are organized into three reporting segments:

Current wording

Our operations for the periods covered by this Annual Report are organized into three reporting segments:

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Student Body. At APUS, all coursework is delivered online. As of December 31, 2024, approximately 65% of APUS’s students self-reported that they served in the military on active duty at the time of initial enrollment, and as a result APUS is particularly reliant on TA programs, and the DoD budget. At APUS, active-duty military students generally take fewer courses per year on average than non-military students and have a lower revenue per net course registration than students utilizing other funding sources. A significant portion of APUS’s registrations is also attributable to students using Department of Veterans Affairs, or VA education benefits, and funds from Title IV programs. RU nursing students and HCN students generally attend classes at physical campuses and use Title IV program funds. At APUS and for RU programs outside pre-licensure nursing and allied health, all coursework is delivered online. For the fiscal year ended December 31, 2024, 37% of RU students were enrolled in nursing programs, 26% in health sciences programs, 17% in business programs, with the remainder of students in education, technology, design and justice studies programs. For the fiscal year ended December 31, 2024, approximately 65% of HCN students were enrolled in the Practical Nursing, or PN program, while 35% were enrolled in the Associate Degree in Nursing, or ADN program.

Current wording

Student Body. At APUS and for RU programs excluding pre-licensure nursing and allied health programs, all coursework is delivered online. As of December 31, 2025, approximately 62% of APUS’s students self-reported that they served in the military on active duty at the time of initial enrollment, and as a result APUS is particularly reliant on TA programs, and the DoD budget. At APUS, active-duty military students generally take fewer courses per year on average than non-military students and have a lower revenue per net course registration than students utilizing other funding sources. A significant portion of APUS’s registrations is also attributable to students using VA education benefits, and funds from Title IV programs. RU nursing students and HCN students generally attend classes at physical campuses and use Title IV program funds. For the fiscal year ended December 31, 2025, 39% of RU students were enrolled in nursing programs, 26% in health sciences programs, 15% in business programs, with the remainder of students in education, technology, design and justice studies programs. For the fiscal year ended December 31, 2025, approximately 67% of HCN students were enrolled in the PN program, while 32% were enrolled in the ADN program.

Previous wording

We believe that in order to continue to attract and retain qualified students our institutions need to continuously update and expand the content of their existing programs and develop new programs, specializations and modes of teaching, faculty engagement initiatives, and co-curricular initiatives. These efforts may require obtaining appropriate regulatory approvals, incurring marketing expenses, and making investments in management and capital expenditures, including technology-related expenditures. Initiatives to attract and retain qualified students require significant time, energy, and resources, and if our efforts are not successful, our results of operations, cash flows, and financial condition may be adversely impacted. For more information about the risks related to attracting and retaining qualified students please refer to “Risk Factors – Risks Related to Attracting and Retaining Students”.

Current wording

Efforts to Attract and Retain Students. We believe that in order to continue to attract and retain qualified students our institutions need to continuously update and expand the content of their existing programs and develop new programs, specializations and modes of teaching, faculty engagement initiatives, and co-curricular initiatives. These efforts may require obtaining appropriate regulatory approvals, incurring marketing expenses, and making investments in management and capital expenditures, including technology-related expenditures. Initiatives to attract and retain qualified students require significant time, energy, and resources, and if our efforts are not successful, our results of operations, cash flows, and financial condition may be adversely impacted. For more information about the risks related to attracting and retaining qualified students please refer to “Risk Factors – Risks Related to Attracting and Retaining Students”.

Previous wording

In the third quarter of 2023, we completed a reduction in force that resulted in the termination of 74 employees, primarily non-faculty, and the elimination of 57 open positions across a variety of roles and departments at APEI, RU, HCN and GSUSA. We incurred an aggregate of approximately $3.0 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force.

Current wording

Reductions in Force. In the third quarter of 2023, we completed a reduction in force that resulted in the termination of 74 employees, primarily non-faculty, and the elimination of 57 open positions across a variety of roles and departments at APEI, RU, HCN and GSUSA. We incurred an aggregate of approximately $3.0 million of pre-tax cash expenses associated with employee severance costs as a result of this reduction in force. These headcount reductions reflect our ongoing efforts focused on realigning our organizational structure, eliminating redundancies, and optimizing certain functions.

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•investing in technology related to our overall information technology program to support our current and future needs;

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•investing in technology related to our overall information technology program, including AI, to support our students’ current and future needs;

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•improving student retention at our HCN Segment; and

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•improving student retention and NCLEX pass rates at our HCN Segment; and

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Information technology systems are an essential part of the student experience and our business operations, as discussed more fully in “Business – Information Technology” in this Annual Report. APEI provides information technology services to its institutions through a shared services model. We believe we will need to continue, and potentially increase, our investment of time and money in technology operations and enhancements to support our systems and mission and evaluate when it is appropriate to make significant changes, modifications, or upgrades. We believe we will also need to continue to make investments in information technology in response to competitive pressures in the marketplace, including increased demand for interactive solutions and access from multiple platforms, and to update older systems and to enhance functionality. Information technology operating and capital expenditures may increase in future periods as we accelerate the investment in and refreshment of our information technology systems.

Current wording

Information technology systems are an essential part of the student experience and our business operations, as discussed more fully in “Business – Company Overview – Information Technology” in this Annual Report. APEI provides information technology services to its institutions through a shared services model. We continue, and may need to increase, our investment of time and money into technology operations and enhancements to support our systems and mission and evaluate when it is appropriate to make significant changes, modifications, or upgrades. We are making investments in information technology, including AI, in response to competitive pressures in the marketplace, including increased demand for interactive solutions and access from multiple platforms, to update older systems and to enhance functionality. Information technology operating and capital expenditures may increase in future periods as we accelerate the investment in and refreshment of our information technology systems.

Previous wording

Changes and upgrades to our information technology systems have resulted and may continue to result in our incurring significant costs, including in the short term, and carry risk to our operations and financial results. In 2022, we incurred approximately $3.2 million in information technology costs in our APUS Segment related to our multi-year technology transformation program. In early 2023, we launched a new native mobile application to improve the student experience at APUS. In 2024, we completed the consolidation of APUS’s customer relationship management systems onto a single platform. We also have several other systems that support the student experience, financial aid processing, financial management, human resources processes, marketing, and decision support.

Current wording

Changes and upgrades to our information technology systems have resulted and may continue to result in our incurring significant costs, including in the short term, and carry risk to our operations and financial results. For example, in 2024, we completed the consolidation of APUS’s customer relationship management systems onto a single platform and announced the plan to expand APU to become a global digital university that integrates emerging technology and enhanced teaching and learning opportunities for faculty and students.

Previous wording

In April 2024, as part of our technology transformation program, we transitioned to a managed service provider for certain services including service desk, student support, end user support, and network support and operations. The second phase of the project included the insourcing of information technology to APEI for RU and was completed as of October 1, 2024. We incurred approximately $3.8 million in information technology transition services costs in 2024. Not all of our information technology spending can be capitalized, and our investments may cost more than expected or fail to be successful. Furthermore, as a result of unsuccessful development efforts, or a result of replacing outdated technology, software, or other technology related assets, we may have assets that become impaired.

Current wording

In 2024, as part of our technology transformation program, we transitioned to a managed service provider for certain services including service desk, student support, end user support, and network support and operations, and completed the insourcing of information technology to APEI for RU. We incurred approximately $3.8 million in information technology transition services costs in 2024. Not all of our information technology spending can be capitalized, and our investments may cost more than expected or fail to be successful. Furthermore, as a result of unsuccessful development efforts, or a result of replacing outdated technology, software, or other technology related assets, we may have assets that become impaired.

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RU Change in Ownership. The acquisition of RU, or the Rasmussen Acquisition, was required to be reported to, and in some cases approved by, various education regulatory bodies. An institution must obtain ED approval for a change in ownership and control in order to continue to participate in Title IV programs under the new ownership. In September 2021, in connection with the Rasmussen Acquisition, RU timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership. ED and RU entered into a Temporary Provisional Program Participation Agreement, or TPPPA, effective in October 2021, that allowed RU to continue disbursing Title IV funds during the period of ED’s review of the change in ownership application. The TPPPA continued the growth restrictions that ED imposed as a result of RU’s March 2019 change in ownership and control, which was prior to our acquisition of RU, including limitations on new programs and locations, and an enrollment cap, until after ED reviewed and accepted financial statements and compliance audits that cover complete fiscal periods of RU’s Title IV participation under our ownership. For more information on the regulatory review related to the Rasmussen Acquisition and RU’s previous change in ownership and related risks, please refer to “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures” and “– Regulatory Actions and Restrictions on Operations – Change in Ownership Resulting in a Change of Control”.

Current wording

RU Change in Ownership. The Rasmussen Acquisition, was required to be reported to, and in some cases approved by, various education regulatory bodies. An institution must obtain ED approval for a change in ownership and control in order to continue to participate in Title IV programs under the new ownership. In September 2021, in connection with the Rasmussen Acquisition, RU timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership. ED and RU entered into a TPPPA that allowed RU to continue disbursing Title IV funds during ED’s review of the application. The TPPPA continued growth restrictions that ED imposed as a result of RU’s March 2019 change in ownership and control, which was prior to our acquisition of RU, including limitations on new programs and locations, and an enrollment cap, until after ED reviewed and accepted financial statements and compliance audits that cover complete fiscal periods of RU’s Title IV participation under our ownership. In May 2025, ED released RU from temporary growth restrictions imposed in connection with RU’s 2019 change in ownership. For more information on the regulatory review related to the Rasmussen Acquisition and RU’s previous change in ownership and related risks, please refer to “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures” and “– Regulatory Actions and Restrictions on Operations – Change in Ownership Resulting in a Change of Control”.

Previous wording

Competition. The U.S. postsecondary education market is characterized by intense competition, with approximately 4,500 institutions of higher learning. Due to the increase in online postsecondary offerings, coupled with the prospect of continued uncertainty in postsecondary enrollment in the United States, we face increased competition as students pursue degree-based postsecondary education from a wider selection of offerings. We expect each branch of the Armed Forces and the DoD to continually evaluate their approaches to education, and any resulting changes could have a material adverse effect on APUS’s enrollments. For more information on our competition and its potential impacts, please refer to “Business – Our Market and Competition – Competition” in this Annual Report.

Current wording

Competition. The U.S. postsecondary education market is characterized by intense competition, with more than 4,500 institutions of higher learning. Due to the increase in online postsecondary offerings, coupled with the prospect of continued uncertainty in postsecondary enrollment in the United States, we face increased competition as students pursue degree-based postsecondary education from a wider selection of offerings. We expect each branch of the Armed Forces and the DoD to continually evaluate their approaches to education, and any resulting changes could have a material adverse effect on APUS’s enrollments. For more information on our competition and its potential impacts, please refer to “Business – Our Market and Competition – Competition” in this Annual Report.

Previous wording

“90/10 Rule” Compliance and Delayed Billing. For fiscal years beginning on or after January 1, 2023, which for our institutions means the year ended December 31, 2023, federal educational assistance funds used to calculate the “90%” side of the ratio include Title IV funds and all other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal educational assistance funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges. The 90/10 Rule no longer permits institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio. Effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio, and our institutions’ 90/10 Rule percentages increased, particularly at APUS. While each of our institutions was in compliance with the 90/10 Rule for 2024, with APUS’s relevant percentage for 2024 being 89%, there is no assurance that we will continue to be able to comply in future years, particularly at APUS.

Current wording

“90/10 Rule” Compliance and Delayed Billing. For fiscal years beginning on or after January 1, 2023, which for our institutions means the year ended December 31, 2023, federal educational assistance funds used to calculate the “90%” side of the ratio include Title IV funds, and all other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal educational assistance funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges. The 90/10 Rule no longer permits institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio. Effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio, and our institutions’ 90/10 Rule percentages increased, particularly at APUS. In addition, on July 7, 2025, ED issued an interpretative rule that specifies that for-profit schools will be allowed to count non-federal funds generated from programs offered entirely through distance education, if such programs satisfy certain criteria, as non-federal revenue in their 90/10 calculations, and may revise 90/10 Rule calculations for prior fiscal years to include revenue from distance education programs in the “10%” side of the ratio. While each of our institutions was in compliance with the 90/10 Rule for 2025, with APUS’s relevant percentage for 2025 being 89%, there is no assurance that we will continue to be able to comply in future years, particularly at APUS, including following the Combination.

Previous wording

In September 2023, APUS changed its approach to invoicing for TA to offset the effect of the receipt of the delayed payments from the Army. APUS took longer to bill TA, which had the effect of delaying into 2024 payments for TA that ordinarily would have been received in 2023. APUS’s change in billing approach resulted in approximately $22.1 million of receivables that we would have expected to receive in 2023 being received in 2024. The change in billing approach positively impacted the “90%” side of the ratio in 2023. In January 2024, APUS separately revised its billing policy for students utilizing TA from two weeks to five weeks after course start date to nine weeks after the course start date. The change in billing approach positively impacted the “90%” side of the ratio in 2024.

Current wording

2024 APUS collected approximately $22.1 million from TA related to periods prior to 2024. The change in billing approach positively impacted the “90%” side of the ratio in 2023. In January 2024, APUS separately revised its billing policy for students utilizing TA from two weeks to five weeks after course start date to nine weeks after the course start date. The change in billing approach positively impacted the “90%” side of the ratio in 2024.

Previous wording

In January 2024, APUS revised its billing policy for students utilizing TA from two weeks to five weeks after course start date to nine weeks after the course start date. The changes in billing approach positively impacted the “90%” side of the ratio in 2024. In December 2024, APUS implemented another change to its approach to invoicing for TA, delaying into 2025 payments for TA that ordinarily would have been received in 2024. We estimate that APUS’s change in billing approach resulted in approximately $26.4 million of receivables that we would have expected to receive in 2024 being received in 2025. While the change in billing approach positively impacted the “90%” side of the ratio in 2024, it reduced operating cash flow in 2024, may result in increased bad debt expense in 2025, and may cause the “90%” side of the ratio to increase in 2025 or future years, which could have an adverse impact on our cash flow and results of operations, as well as APUS’s ability to comply with the 90/10 Rule in 2025 or future years. The change in billing practice added to our accounts receivable as of December 31, 2024, and resulted in an increase to our leverage ratios as of December 31, 2024, under our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock as further discussed in “Note 9. Long-Term Debt” and “Note 13. Preferred Stock” included in the Consolidated Financial Statements in this Annual Report.

Current wording

The change in billing approach could have an adverse impact on our cash flow and results of operations, as well as APUS’s ability to comply with the 90/10 Rule in 2026, including and following the Combination. The change in 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 “Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 9. Long-term Debt”.

Previous wording

The average number of courses taken by students at APUS varies by payor type. For example, Title IV students take more courses on average than TA students. As a result, should the number of APUS’s students who utilize ED’s Title IV programs decrease (or the number of students using TA increase), we anticipate that it may cause the average number of courses per student per term to decrease.

Current wording

The average number of courses taken by students at APUS varies by payor type. For example, Title IV students take more courses on average than TA students. As a result, should the number of APUS’s students who utilize ED’s Title IV programs decrease (or the number of students using TA increase), we anticipate that it may cause the average number of courses per student to decrease.

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Tuition rate. Providing affordable degree and certificate programs is an important element of our competitive strategy. APUS implemented modest tuition and fee increases for non-military and veteran students in the second and third quarters of 2023. In April 2024, APUS implemented an additional tuition increase to master’s level students across all categories, including military, non-military and veteran students, and in September 2024, APUS returned the military rate for master’s level students to the $250 per credit hour rate in effect prior to the April 2024 tuition increase. We believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities. RU implemented modest tuition increases for select programs in the first quarters of 2023 and 2024 for new students for select programs in August 2024, and for returning students for select programs in October 2024. HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs. In the third quarter of 2025, RU plans to implement a tuition increase, similar to the increase implemented in the third and fourth quarters of 2024. The tuition and fee increases at RU and HCN are intended to reflect adjustments to be consistent with the local campus markets. Even with these increases, RU and HCN’s tuition and fees are designed to be affordable and competitive when compared to the tuition and fees at similar institutions offering the same level of flexibility, accessibility, and student experience.

Current wording

Tuition rate. Providing affordable degree and certificate programs is an important element of our competitive strategy. APUS implemented modest tuition and fee increases for non-military and veteran students in the second and third quarters of 2023. In April 2024, APUS implemented an additional tuition increase to master’s level students across all categories, including military, non-military and veteran students, and in September 2024, APUS returned the military rate for master’s level students to the $250 per credit hour rate in effect prior to the April 2024 tuition increase. In February 2026 APUS implemented modest tuition increases for all nonmilitary undergraduate and graduate students. We believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities. RU implemented modest tuition increases for all students in select programs in the first quarters of 2023 and 2024, for new students in select programs in August 2024, and for returning students in select programs in October 2024. RU implemented modest tuition increases for new and re-entering students in August 2025. RU implemented modest increases for current students in non-prelicensure nursing programs in October 2025 and implemented a modest tuition increase for prelicensure nursing program students in January 2026. In October 2026, RU plans to implement a modest tuition increase for all students. HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs, and in October 2025 for its ADN and PN programs. The tuition and fee increases at RU and HCN are intended to reflect adjustments to be consistent with the local campus markets. Even with these increases, RU and HCN’s tuition and fees are designed to be affordable and competitive when compared to the tuition and fees at similar institutions offering the same level of flexibility, accessibility, and student experience.

Previous wording

Other fees. In addition to tuition, prior to the second quarter of 2023, APUS charged a technology fee of $65 per course to all non-military students. In the second quarter of 2023, the technology fee increased to $85 per course, and in the third quarter of 2023 the technology fee per course was eliminated for all undergraduate students. APUS students are also charged certain additional fees, such as graduation, late registration, transcript request, and comprehensive examination fees, when applicable. APUS provides an APUS-funded grant to cover the technology fee for certain students. Technology fee revenue net of technology fee grants was approximately $7.3 million in 2022, $8.1 million in 2023, and $4.7 million in 2024, or 2.6%, 2.7%, and 1.5% of revenue, respectively.

Current wording

Other fees. In addition to tuition, prior to the second quarter of 2023, APUS charged a technology fee of $65 per course to all non-military students. In the second quarter of 2023, the technology fee increased to $85 per course, and in the third quarter of 2023 the technology fee per course was eliminated for all undergraduate students. APUS students are also charged certain additional fees, such as graduation, late registration, transcript request, and comprehensive examination fees, when applicable. APUS provides an APUS-funded grant to cover the technology fee for certain students. Technology fee revenue net of technology fee grants was approximately $8.1 million in 2023, $4.7 million in 2024, and $5.0 million in 2025, or 2.7%, 1.5%, and 1.6% of APUS revenue, respectively.

Previous wording

RU and HCN students are charged fees for various items such as applications, testing, books and supplies, laboratory work, technology, and graduation. For example, RU charges a course technology and resource fee of $195 per course and a one-time administrative fee for certain programs, up to $495, for all new, reentering, and program transfer students. Textbook and other course materials revenue for RU and HCN was approximately $49.6 million in 2022, $43.3 million in 2023, and $45.7 million in 2024, or 16.5%, 16.0%, and 16.1% of revenue, respectively.

Current wording

RU and HCN students are charged fees for various items such as applications, testing, books and supplies, laboratory work, technology, and graduation. For example, RU charges a course technology and resource fee of $200 per course and a one-time administrative fee for certain programs, up to $495, for all new, reentering, and program transfer students. In addition, RU students may purchase required textbooks or e-books through RU for a flat fee of $15 for each textbook (traditional or e-book) for each course. HCN charges an application fee of $25, an enrollment fee of $50, as well as other fees for books and technology that vary by program. Textbook and other course materials revenue for RU and HCN was approximately $43.3 million in 2023, $45.7 million in 2024, and $52.0 million in 2025, or 16.0%, 16.1%, and 16.2% of RU and HCN revenue, respectively.

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We categorize our costs and expenses in the following categories: instructional costs and services expenses; selling and promotional expenses; general and administrative expenses; depreciation and amortization; impairment of goodwill and intangible assets; loss on assets held for sale; loss on leases; and loss on disposals of long-lived assets.

Current wording

We categorize our costs and expenses in the following categories: instructional costs and services expenses; selling and promotional expenses; general and administrative expenses; depreciation and amortization; impairment of goodwill and intangible assets; loss on sale of subsidiary; loss on assets held for sale; loss on leases; and loss on disposals of long-lived assets.

Previous wording

Instructional costs and services expenses. Instructional costs and services expenses are directly attributable to the educational services our institutions provide to their students. Instructional costs and services expenses include salaries and benefits for full-time faculty, administrators, and academic advisors, and costs associated with part-time faculty. Instructional costs and services expenses also include costs associated with curriculum development, academic records and graduation, and other services provided by our institutions, such as evaluating transcripts. Instructional costs and services expenses are generally affected by the cost of academic resources, including technology related costs, the efficiency of delivering academic products and services to our students, salaries and benefits for our faculty and other academic and administration personnel, and the level of expenditures for new and existing academic programs. At RU and HCN, instructional costs and services expenses also includes operating expenses directly associated with campus operations, including rent. At APUS, instructional costs and services expenses include expenses related to course materials, learning resources, the library, the APUS-funded book grant program, and instructional pay for part-time faculty that are primarily dependent on the number of students taught.

Current wording

Instructional costs and services expenses. Instructional costs and services expenses are directly attributable to the educational services our institutions provide to their students. Instructional costs and services expenses include salaries and benefits for full-time faculty, administrators, and academic advisors, and costs associated with part-time faculty. Instructional costs and services expenses also include costs associated with curriculum development, academic records and graduation, and other services provided by our institutions, such as evaluating transcripts. Instructional costs and services expenses are generally affected by the cost of academic resources, including technology related costs, the efficiency of delivering academic products and services to our students, salaries and benefits for our faculty and other academic and administration personnel, and the level of expenditures for new and existing academic programs. At RU and HCN, instructional costs and services expenses also includes operating expenses directly associated with campus operations, including rent and technology costs. At APUS, instructional costs and services expenses include expenses related to course materials, learning resources, the library, the APUS-funded book grant program, and instructional pay for part-time faculty that are primarily dependent on the number of students taught.

Previous wording

Selling and promotional expenses. Selling and promotional expenses include salaries and benefits of personnel engaged in student enrollment, advertising costs, and marketing material production costs, and, prior to January 31, 2023, include expenses from the third-party contract with Collegis, LLC, or Collegis, to provide marketing services to RU. Our selling and promotional expenses are generally affected by the cost of advertising media, the efficiency of our selling efforts, salaries and benefits for our selling and admissions personnel, and the level of expenditures for advertising initiatives for new and existing academic programs.

Current wording

Selling and promotional expenses. Selling and promotional expenses include salaries and benefits of personnel engaged in student enrollment, advertising costs, and marketing material production costs. Our selling and promotional expenses are generally affected by the cost of advertising media, the efficiency of our selling efforts, salaries and benefits for our selling and admissions personnel, and the level of expenditures for advertising initiatives for new and existing academic programs.

Previous wording

The discussion of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. During the preparation of these financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition and the valuation of goodwill and indefinite-lived intangible assets and assets held for sale. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ and have a material impact on our Consolidated Financial Statements, or our results of operations and financial position, and subsequent events are not necessarily indicative of the reasonableness of the original assumptions or estimates. The following discussion of our critical accounting policies and estimates is intended to supplement the accounting policies presented in “Note 2. Significant Accounting Policies” included in our Consolidated Financial Statements.

Current wording

The discussion of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. During the preparation of these financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition and the valuation of goodwill and indefinite-lived intangible assets and assets held for sale. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ and have a material impact on our Consolidated Financial Statements, or our results of operations and financial position, and subsequent events are not necessarily indicative of the reasonableness of the original assumptions or estimates. The following discussion of our critical accounting estimates is intended to supplement the accounting policies presented in “Note 2. Significant Accounting Policies” included in our Consolidated Financial Statements.

Previous wording

In connection with the acquisitions of RU and HCN, we recorded goodwill and identified 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. Goodwill is not amortized. Goodwill is reported at the reporting unit level that we have defined as our reporting segments. There was no goodwill recorded in connection with the acquisition of GSUSA reported in Corporate and Other, and there is no goodwill in our APUS Segment. In connection with the acquisitions of RU and HCN, we also recorded identified intangible assets with an indefinite useful life which include trade name, accreditation, licensing, and Title IV, and affiliate agreements, and a definite useful life which include student roster, curricula, student contracts and relationships, lead conversions, and non-compete agreements. There are no indefinite-lived or definite-lived intangible assets in our APUS Segment.

Current wording

In connection with the acquisitions of RU and HCN, we recorded goodwill and identified 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 identified intangible assets. Goodwill is not amortized. Goodwill is reported at the reporting unit level that we have defined as our reporting segments. There was no goodwill recorded in connection with the acquisition of GSUSA reported in Corporate and Other, and there is no goodwill in our APUS Segment. In connection with the acquisitions of RU and HCN, we also recorded identified intangible assets with an indefinite useful life which include trade name, accreditation, licensing, and Title IV, and affiliate agreements, and a definite useful life which include student roster, curricula, student contracts and relationships, lead conversions, and non-compete agreements. There are no indefinite-lived or definite-lived intangible assets in our APUS Segment.

Previous wording

At October 31, 2024, we completed our annual assessment of goodwill and indefinite-lived intangibles for our RU and HCN Segments. The annual assessment concluded that the fair value of goodwill for RU and HCN exceeded their carrying values by approximately $71.9 million, or 62%, and $8.6 million, or 24%, respectively. Significant assumptions in the forecast used in the discounted cash flow valuation model include continued improvement in our RU Segment enrollment and cost containment measures. Our HCN Segment’s significant assumptions in the forecast relate to future campus openings and tuition increases. These assumptions could be negatively affected by and of the following including, but not limited to, changes in our regulatory environment, declines in student enrollment, adverse actions by state boards of nursing including enrollment caps, and increases in our expenses not in our plan. In addition, we determined the fair value of our RU and HCN Segment indefinite-lived intangible asset was greater than their carrying values. Therefore, for the year ended December 31, 2024, there was no impairment of RU and HCN Segment goodwill and indefinite-lived intangible assets.

Current wording

At October 31, 2025, we completed our annual assessment of goodwill and indefinite-lived intangibles for our RU and HCN Segments. The annual assessment concluded that the fair value of goodwill for RU and HCN exceeded their carrying values by approximately $92.9 million, or 64%, and $27.3 million, or 78%, respectively. Significant assumptions in the forecast used in the discounted cash flow valuation model include continued improvement in our RU Segment enrollment and cost containment measures. Our HCN Segment’s significant assumptions in the forecast relate to future campus openings and tuition increases. These assumptions could be negatively affected by and of the following including, but not limited to, changes in our regulatory environment, declines in student enrollment, adverse actions by state boards of nursing including enrollment caps, and increases in our expenses not in our plan. In addition, we determined the fair value of our RU and HCN Segment indefinite-lived intangible asset was greater than their carrying values. Therefore, for the year ended December 31, 2025, there was no impairment of RU and HCN Segment goodwill and indefinite-lived intangible assets.

Previous wording

For the year ended December 31, 2024, our consolidated revenue was $624.6 million, an increase of $24.1 million, or 4.0%, compared to $600.5 million in 2023. The increase in revenue was primarily due to a $13.7 million, or 4.5%, increase in revenue in our APUS Segment, a $10.4 million, or 18.2%, increase in revenue in our HCN Segment, and a $2.2 million, or 1.0%, increase in revenue in our RU Segment, partially offset by a $2.0 million, or 7.5%, decrease in GSUSA revenue included in Corporate and Other.

Current wording

For the year ended December 31, 2025, our consolidated revenue was $648.9 million, an increase of $24.3 million, or 3.9%, compared to $624.6 million in 2024. The increase in revenue was due to a $30.0 million, or 13.9%, increase in revenue in our RU Segment, a $7.7 million, or 11.4%, increase in revenue in our HCN Segment, and a $2.8 million, or 0.9%, increase in revenue in our APUS Segment, partially offset by a $16.3 million, or 67.1%, decrease in GSUSA revenue included in Corporate and Other for the period prior to the GSUSA Sale Date.

Previous wording

APUS net course registrations increased approximately 2.9% to 378,400 for the year ended December 31, 2024, from approximately 367,600 in the 2023 period. The increase in net course registrations was primarily due to an increase in registrations by military-affiliated students utilizing VA. Net course registrations represent the total number of courses for which students remain enrolled after the date by which they may drop a course without financial penalty.

Current wording

The increase in APUS revenue was driven by an increase in net course registrations when compared to the prior year, and the impact of the 2024 tuition increases. APUS net course registrations increased approximately 0.7% to 381,000 for the year ended December 31, 2025, from approximately 378,400 in the 2024 period. The increase in net course registrations was primarily due to an increase in registrations by military-affiliated students utilizing VA benefits, and an increase in students using financial aid, which was partially offset by a decrease in registrations from military students utilizing TA due to the government shutdown in the fourth quarter 2025. Net course registrations represent the total number of courses for which students remain enrolled after the date by which they may drop a course without financial penalty.

Previous wording

For the year ended December 31, 2024, RU enrollment decreased 1.3% as compared to the 2023 period. This decline in enrollment was driven by a 7.5% decrease in on-ground enrollment, partially offset by a 4.5% increase in online enrollment, which has a lower revenue per student. While enrollment declined, revenue increased due to tuition increases effective in the first quarters of 2023 and 2024 and the third and fourth quarters of 2024 for select students and programs, as compared to the prior year period. We believe the overall decline in on-ground enrollment can be attributed to several factors, including self-imposed caps on nursing student enrollment and the overall environment in which RU operates, including as a result of the effects of regulatory matters and competition. During the third and fourth quarters of 2024, RU experienced improvements with both on-ground and online enrollment as compared to prior year periods. RU total student enrollment represents the total number of students enrolled in a course immediately after the date by which students may drop a course without financial penalty.

Current wording

The increase in RU revenue was driven by an increase in enrollment and the impact of the 2024 and 2025 tuition increases. For the year ended December 31, 2025, RU student enrollment increased 8.7% as compared to the 2024 period. This increase in enrollment was driven by a 9.6% increase in online enrollment, which has a lower revenue per student, and a 7.7% increase in on-ground enrollment. The increase in RU enrollment was primarily due to the improvement in marketing and admissions efficiencies as well as increased student retention rates driven in part by course redesigns. RU total student enrollment represents the total number of students enrolled in a term immediately after the date by which students may drop a course without financial penalty.

Previous wording

For the year ended December 31, 2024, HCN student enrollment increased approximately 14.9% as compared to the 2023 period. The increase in total student enrollment is primarily due to the continued enrollment growth at the Detroit, Michigan campus that opened in October 2022, the Dayton, Ohio campus which relocated in 2023, and the Columbus and Toledo campuses, in Ohio, which relocated in 2024. HCN total student enrollment represents the total number of students enrolled in a course immediately after the date by which students may drop a course without financial penalty.

Current wording

The increase in HCN revenue was driven by an increase in enrollment. For the year ended December 31, 2025, HCN student enrollment increased approximately 12.3% as compared to the 2024 period. The increase in total student enrollment was primarily due to the continued enrollment growth across all of our campuses. The revenue increase for the year was less than the enrollment increase due to more students taking repeat courses in the current year as compared to the prior year. Revenue per student is lower for students taking a repeat course. HCN total student enrollment represents the total number of students enrolled in a term immediately after the date by which students may drop a course without financial penalty.

Previous wording

For the year ended December 31, 2024, costs and expenses were $591.5 million, a decrease of $57.4 million, or 8.8%, compared to $648.9 million in 2023. Costs and expenses for the year ended December 31, 2024, include $3.8 million in information technology transition services costs in all our segments as well as Corporate and Other, a $3.7 million loss on leases in our RU Segment, $2.2 million in professional fees in Corporate and Other relating to the Combination, and a $1.6 million loss on assets held for sale in our APUS Segment, all on a pre-tax basis. Costs and expenses for the year ended December 31, 2023, include a non-cash goodwill and intangible asst impairment charge of $64.0 million in our RU Segment, and to reflect the corresponding tax impact, a $2.4 million pre-tax loss on assets held for sale in our APUS Segment, and a pre-tax charge of $2.4 million in transition services fees in our RU Segment selling and promotional expenses related to the termination of the marketing contract with Collegis effective January 31, 2023. Costs and expenses for the year ended December 31, 2024, as compared to the prior year period, excluding the items noted above, increased $0.1 million, primarily due to increases in employee compensation costs, other technology costs, bad debt expense, and classroom and course materials costs, partially offset by decreases in depreciation and amortization expenses, advertising costs, and rent costs

Current wording

For the year ended December 31, 2025, costs and expenses were $600.9 million, an increase of $9.4 million, or 1.6%, compared to $591.5 million in 2024, and included GSUSA costs and expenses in Corporate and Other only for the period prior to the GSUSA Sale Date. Costs and expenses for the year ended December 31, 2025, included a $3.9 million loss on sale of subsidiary in Corporate and Other relating to the sale of GSUSA, $3.7 million in professional fees relating to the Combination and the sale of GSUSA in Corporate and Other, $3.3 million in severance costs in all segments and Corporate and Other, a $1.5 million loss on assets held for sale in our APUS Segment, $0.8 million in other transition services costs relating to the retirement of our former Chief Financial Officer in Corporate and Other, and a $0.1 million loss on leases in our RU Segment, all on a pre-tax basis. Costs and expenses for the year ended December 31, 2024, included $3.8 million in information technology transition services costs in all segments as well as Corporate and Other, $3.7 million loss on leases in our RU Segment, $2.2 million in professional fees in Corporate and Other relating to the Combination, $1.6 million loss on assets held for sale in our APUS Segment, and $0.5 million in severance costs in Corporate and Other and the completed and pending campus closures in Wisconsin in our RU Segment, all on a pre-tax basis. Costs and expenses for the year ended December 31, 2025, as compared to the prior year period, excluding the items noted above, increased $8.5 million, primarily due to increases in employee compensation costs, advertising costs, bad debt expense, classroom and course materials costs, and title IV processing fees, partially offset by decreases in information technology costs, occupancy costs, depreciation and amortization expenses, and other professional fees.

Previous wording

Costs and expenses as a percentage of revenue decreased to 94.7% in 2024 from 108.0% in 2023. Excluding the impairment charges, loss on leases, information technology transition services costs, losses on assets held for sale, Collegis transition fees, and professional fees relating to the Combination, costs and expenses were 92.9% of revenue for the year ended December 31, 2024, compared to 96.6% of revenue in the prior year period. Our income before interest and income taxes as a percentage of revenue, or our operating margin, improved to 5.3% in 2024 from negative 8.0% compared to the prior year period. Excluding the charges noted above, our operating margin improved to 7.1% in 2024 from 3.4% compared to the prior year period. The decrease in our costs and expenses as a percentage of revenue and improvement in our operating margin was primarily due to the factors discussed above.

Current wording

Costs and expenses as a percentage of revenue decreased to 92.7% in 2025 from 94.7% in 2024. Excluding items noted above, costs and expenses were 90.6% of revenue for the year ended December 31, 2025, compared to 92.9% of revenue in the prior year period. Our income before interest and income taxes as a percentage of revenue, or our operating margin, improved to 7.3% in 2025 from 5.3% compared to the prior year period. Excluding the charges noted above, our operating margin improved to 9.4% in 2025 from 7.1% compared to the prior year period. The decrease in our costs and expenses as a percentage of revenue and improvement in our operating margin was primarily due to the factors discussed above.

Previous wording

Instructional costs and services expenses. For the year ended December 31, 2024, instructional costs and services expenses were $295.7 million, an increase of approximately $2.8 million, or 1.0%, compared to $292.9 million in 2023. The increase in instructional costs and services expenses was primarily due to increases in employee compensation costs in our APUS and HCN Segments due to an increase in registrations at APUS and enrollments at HCN, an increase in classroom and course materials costs in our HCN Segment, partially offset by decreases in employee compensation costs in our RU Segment and Corporate and Other due to lower enrollments at RU and GSUSA and decreases in technology costs, rent costs, and professional fees in our RU Segment. Instructional costs and services expenses as a percentage of revenue decreased to 47.3% in 2024, compared to 48.8% in 2023.

Current wording

Instructional costs and services expenses. For the year ended December 31, 2025, instructional costs and services expenses were $297.0 million, an increase of approximately $1.3 million, or 0.4%, compared to $295.7 million in 2024. The increase in instructional costs and services expenses was driven by a $8.9 million increase in employee compensation costs and a $3.6 million increase in classroom and course materials costs in our RU and HCN Segments due to increases in enrollment. These increases were partially offset by decreases of $7.7 million in Corporate and Other costs due to the sale of GSUSA, $2.4 million in information technology costs primarily relating to the insourcing of technology and $1.1 million in occupancy costs and services expenses in our RU Segment primarily related to campus closures in 2024 and 2025. Instructional costs and services expenses as a percentage of revenue decreased to 45.8% in 2025 compared to 47.3% in 2024.

Previous wording

For the year ended December 31, 2024, consolidated bad debt expense increased to $18.5 million, or approximately 3.0% of revenue, from $16.5 million, or approximately 2.7% of revenue, in 2023. The increase in bad debt expense was primarily due to an increase in the HCN, RU, and APUS Segments of $1.4 million, $0.5 million and $0.1 million, respectively, as compared to the prior year period.

Current wording

For the year ended December 31, 2025, consolidated bad debt expense increased to $21.7 million, or approximately 3.3% of revenue, from $18.5 million, or approximately 3.0% of revenue, in 2024. The increase in bad debt expense was due to an increase in the RU, HCN, and APUS Segments of $1.4 million, $1.2 million and $0.8 million, respectively, as compared to the prior year period.

Previous wording

Depreciation and amortization. Depreciation and amortization expenses were $19.3 million in 2024, compared to $27.8 million in 2023, a decrease of $8.5 million or 30.6%, primarily related to the full amortization of certain definite lived intangible assets in our RU Segment in 2023. Depreciation and amortization expenses as a percentage of revenue decreased to 3.1% in 2024 compared to 4.6% in 2023.

Current wording

Depreciation and amortization. Depreciation and amortization expenses were $16.1 million and $19.3 million for the years ended December 31, 2025, and 2024, respectively, a decrease of $3.2 million or 16.6%, primarily related to the full amortization of all definite lived intangible assets in our RU Segment in 2024. Depreciation and amortization expenses as a percentage of revenue decreased to 2.5% in 2025 compared to 3.1% in 2024.

Previous wording

Loss on disposal of long-lived assets. The loss on disposal of long-lived assets was $0.4 million in 2024, compared to $0.6 million in 2023.

Current wording

Loss on disposal of long-lived assets. The loss on disposal of long-lived assets was $0.4 million in 2025 and 2024.

Previous wording

Stock-based compensation. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses was $7.7 million in both 2024 and 2023. Stock-based compensation costs include performance stock unit incentive costs and accelerated expense for retirement-eligible employees.

Current wording

Stock-based compensation. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses was $8.4 million and $7.7 million for the years ended December 31, 2025 and 2024, respectively. Stock-based compensation costs includes accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Previous wording

Interest expense, net. Interest expense, net of interest income, was $2.1 million in 2024, compared to $4.5 million in 2023. The decrease in interest expense, net was primarily due to the increase in interest income earned for the year ended December 31, 2024, as compared to the prior year period.

Current wording

Interest expense, net. Interest expense, net of interest income was $4.2 million and $2.1 million for the years ended December 31, 2025 and 2024, respectively. The increase in net interest expense was primarily due to an increase in interest expense due to the expiration of the interest rate cap in December 2024 and a decrease in interest income earned, as compared to the prior year period.

Previous wording

Income tax (benefit) expense. For the year ended December 31, 2024, we recognized an income tax expense of $10.4 million, compared to an income tax benefit of $10.7 million in 2023. The effective tax rate was 39.3% and 18.5% in 2024 and 2023, respectively. The effective tax rate in 2024 was impacted by a $4.4 million equity investment loss not deductible for tax purposes, and an increase in non-deductible stock compensation expense in relation to taxable income in 2024, as compared to the prior year period. The year ended December 31, 2023, includes a $15.8 million income tax benefit related to the impairment of goodwill and intangible assets.

Current wording

Income tax expense. For the year ended December 31, 2025, we recognized an income tax expense of $12.1 million, compared to an income tax expense of $10.4 million in 2024. The effective tax rate was 27.8% and 39.3% in 2025 and 2024, respectively. The effective tax rate in 2025 was impacted by excess tax benefits related to stock compensation offset by non-deductible employee compensation. The effective tax rate in 2024 was primarily due to the $4.4 million equity investment loss not deductible for tax purposes, and an increase in non-deductible stock compensation expense in relation to taxable income in the period.