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Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.11pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.08pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.15pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
shutdown+8
incidents+4
incident+4
scrutiny+3
loss+2
Positive rising
greater+6
satisfy+2
success+2
successfully+1
benefit+1
Risk Factors (Item 1A)
26,651 words
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. Before making an investment, you should carefully consider the following risks, as well as the other information contained in this Annual Report, including our “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Any of the risk factors described below could significantly and adversely affect our business, financial condition, results of operations, cash flows, and prospects. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also adversely affect our business, financial condition, results of operations, cash flows, and prospects. As a result of the risks and uncertainties described below, as well as such additional risks and uncertainties, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Attracting and Retaining Students
Our success and financial performance depend on the effectiveness of our ability to attract students who persist in our institutions’ programs.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
shutdown+15
delayed+3
inability+2
delay+2
unpaid+2
Positive rising
improvement+3
beautiful+3
greater+2
improved+2
able+1
MD&A (Item 7)
12,558 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
OVERVIEW
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.
Building awareness and reputation among potential students of our institutions and the programs they offer is critical to our institutions’ ability to attract new students. In order to maintain and increase our revenue, profits, and cash flows, our institutions must continue to enroll new, qualified students in a cost-effective manner, and these students must remain active and be successful in our institutions’ programs. In addition, because our institutions experience declines in their student populations as a result of graduation, transfers to other academic institutions, withdrawals, military deployments, and other reasons, in order to grow, we need to first attract sufficient students to replace those who have left. In addition to broader challenges with attracting qualified students, any negative effects resulting from the occurrence of risks set forth in this “Risk Factors” section, from action or inaction by us, regulators or accrediting agencies, or events beyond our control could prevent us from successfully advertising and marketing our institutions’ programs and from successfully enrolling and retaining qualified students in those programs. If we are unable to continue to develop awareness and a positive reputation of our institutions and the programs we offer, and to recruit and enroll students that persist in our programs over time, our enrollments will suffer and there could be a material adverse effect on our financial condition and results of operations.
If we are unable to effectively market our programs or expand into new markets, our results of operations would be negatively affected.
Our marketing strategy for APUS has traditionally focused on building long-term, mutually beneficial relationships with businesses, other organizations, and individuals in military, veterans, extended military families, and other public service and service-minded communities, with a focus on educating those who serve. We must continue to develop and expand marketing channels that attract college-ready students who use non-federal funds as a payment source and may perform well at APUS, including in order to maintain compliance with the 90/10 Rule. However, we have experienced challenges attracting such students, and there is no assurance that we will be able to do so on a cost-effective basis or to prevent declines in these types of enrollments at APUS.
Furthermore, because APUS’s tuition is generally lower than that of most of its competitors, it has fewer dollars to spend per student on marketing and advertising than its competitors. Our pricing structure and margin profile may limit the availability of financial resources to be used for marketing and enrollment in general. Nevertheless, we have tried to, and may in the future try to, implement new marketing tactics and channels, including those with which we have no experience, and there is no guarantee that our marketing and branding efforts will achieve the desired results. If we are unable to develop and optimize marketing and advertising programs that are effective in developing awareness of our institutions and the programs we offer and their value propositions, and we are unable to enroll and retain qualified students in the markets we serve, our enrollments would suffer, and there could be a material adverse effect on our financial condition and results of operations.
In April 2024, APU announced its intention to expand its reach to become a global digital university that integrates emerging technologies and enhanced teaching and learning opportunities for faculty and students, adopted a new visual identity, a new tagline: Digital Learning for Real Life TM , an expanded global focus, and a suite of digital student services. In connection with this transition, APU aims to provide students with highly collaborative learning experiences, AI-powered classroom support, and personalized digital services. This transition and rebranding initiative may be difficult to complete, divert management attention, and require us to expend resources and incur expenses. Additionally, despite APU’s efforts, this transition and rebranding initiative may not yield increased enrollments, and, even if it does, any increased enrollments may not offset expenses we incur and could potentially impact the mix of students attracted to APU, which could have a negative effect on our compliance with the 90/10 Rule. If APU fails to successfully transition into a global digital university or incurs substantial
expenses in an unsuccessful attempt to do so, we may fail to attract new enrollments to the extent necessary to realize a sufficient return on our efforts. Accordingly, our business, results of operations, and financial condition could be impacted.
As described more fully under “Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN”, and in the Risk Factor that begins with the caption “The planned combination of APUS, RU, and HCN”, the planned Combination may impact our ability to maintain and increase student enrollments.
The success of RU and HCN depends, in part, on our ability to maintain and increase student enrollments in those institutions’ programs. As part of our strategy to continue to build a national nursing platform, we intend to open new campuses and other operating locations; however, as a result of back-to-back changes of control, composite score concerns and limitations imposed by the U.S. Department of Education, RU is currently and may continue to be limited in its ability to grow enrollment and expand in new geographical markets. Accordingly, there is no assurance that we will be able to effectuate this expansion strategy at RU or if such strategy will achievedesired results. For more on the limitations on our ability to expand our nursing programs into new geographical markets, see also the Risk Factors that begin with the captions “If our institutions are unable to successfully adjust…”, “If we or our institutions fail to comply with the extensive regulatory…,” “Failure to improve certain of our programs’ NCLEX pass rates...,” as well as “Business – Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements” generally.
Opening new campuses and locations requires us to obtain appropriate federal, state, and accrediting agency approvals and to comply with any related requirements from those agencies. In addition, with the opening of new campuses, we have been and will be marketing in geographic areas in which our institutions did not previously have a campus, and these marketing efforts may not be successful. If in the future we are unable to effectively market RU’s and HCN’s programs in these geographies, we may not be able to successfully maintain and increase those institutions’ enrollments, which would negatively affect our results of operations.
If we are unable to, or suffer any delay in our ability to, obtain appropriate approvals and accreditations, open, and attract additional students to new campus locations, offer programs at new campuses in a cost-effective manner, identify appropriate clinical placements, or otherwise effectively manage the operations of newly established campuses, our results of operations and financial condition could be adversely affected. In addition, the inability to expand existing programs efficiently, or successfully, pursue new program initiatives, and add new campuses, including as a result of marketing failures, would harm our ability to grow our business and could have an adverse impact on our financial condition.
If APUS does not have strong relationships with, and access to, various military installations and installation education centers, our ability to maintain enrollments from military students and our future growth may be impaired.
At APUS, we are highly dependent on our relationship with the military and its members, and our ability to attract and retain military service members as students. Because APUS relies on referrals and personal relationships for recruiting, impediments to access can have an adverse effect on maintaining and generating registrations from military students.
DoD requires us to meet certain criteria in order to access installations solely to provide counseling and generally prohibits us from holding regular or recurring office hours on installations solely to provide counseling. Furthermore, the DoD MOU, which specifies the terms and conditions of participation in tuition assistance, or TA, and is discussed in more depth in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense”, and the related increased focus by DoD on relationships with and oversight of educational providers, or additional DoD restrictions, could lead to adverse changes in the nature of our relationships with military installations and their education centers and our access to military service members.
An inability to maintain strong relationships with installation education centers and with military service members would have an adverse effect on APUS’s ability to attract and retain qualified students, resulting in an adverse effect on our financial condition.
Enrollments and course registrations have been, and may in the future be, adversely affected by a variety of factors not directly related to education programs, including changes in military activity, budgets and government shutdowns.
Events not directly related to education programs, including a government shutdown, personnel reductions, or a drawdown of U.S. active-duty military forces have led, and may in the future lead, to a reduction in enrollments and course registrations. For example, Congressional inaction on budgetary matters has led to lapses in funding or has resulted in government shutdowns, and policy changes have affected federal student aid programs at the DoD. As discussed in greater detail
below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – U.S. Federal Government Shutdown”, the 2025 Shutdown occurred due to failure by Congress to pass appropriations legislation, which resulted in, among other things, the temporary suspension of TA programs. The scope and effectiveness of mitigation measures we implemented or may still implement remain uncertain. However, the 2025 Shutdown has had an adverse impact on APUS’s and our course registrations, cash flows, results of operations, and financial condition. There can be no assurance that there will not be another federal government shutdown in 2026 or future years that results in disruption to TA or other financial aid programs. The OBBBA also appropriated $100 million in funding for TA that is separate and apart from ordinary course appropriations and are available for use through September 30, 2029. However, we understand that a significant portion of this allocation may have been obligated or spent, and such funds therefore may be available if at all on a limited basis in the event of another government shutdown or budgetary disruption.
Budget cuts or constraints, including in connection with the failure to increase or a delay in increasing the federal debt ceiling, could negatively affect us by leading to force reductions or cuts to services and tools that we or APUS’s students rely upon for recruitment, enrollment, access, and TA. Even temporary changes to military activity and budgets may adversely affect operations. Increased operations and overseas deployments, increased demands on active-duty service members, and limited internet access associated with some deployments could also negatively impact the ability of certain active-duty military students to pursue higher education.
We will remain subject to the risk of events that occur within and with respect to the military, even where they do not directly relate to the use of TA. Because of APUS’s dependence on active-duty military students, changes that occur within and with respect to the military could have a material adverse effect on our results of operations.
Declines in enrollments at RU could have a material adverse effect on RU’s and our profitability, financial condition, results of operations, and cash flows.
RU enrollments have been impacted by adverse findings by accrediting agencies and state regulatory bodies as a result of failures to meet applicable NCLEX benchmarks, operational challenges, self-imposed enrollment caps, the pause on new enrollments, and the consolidation and closure of campuses, as discussed in greater detail in “Risks Related to the Regulation of Our Industry”. In addition, RU enrollments may be affected by challenges related to implementation of our integrated curriculum and testing services, along with any resulting student complaints and our approach to resolving such complaints. Declines in RU’s enrollments could have a material adverse effect on RU’s and our reputation, profitability, financial condition, results of operations, and cash flows. While we have identified, and continue to work to identify, new marketing strategies and other initiatives that we believe will attract and enroll quality students, there can be no assurance that these efforts will be successful.
Changes our institutions may make to their operations to improve the student experience and enhance our institutions’ ability to identify and enroll students who are likely to succeed may adversely affect our institutions’ enrollment, profitability, financial condition, results of operations, and cash flows.
We have identified, and continue to work to identify, potential changes and initiatives that we believe will more effectively attract and lead to the enrollment of students who are ready for and who are likely to persist in our institutions’ programs. We continue to support those students, and help improve their educational outcomes, including through changes to admissions, initiatives to increase the level of engagement and collaboration in the classroom, to improve the educational outcomes of our students, and strengthen the bond with students. We also have implemented initiatives dedicated to helping students pass the NCLEX exam the first time by identifying student-specific challenge areas, providing customized tutoring resources and faculty training, and making changes to curriculum and course retake policies at RU and HCN.
Additional initiatives have included and may in the future include the following:
• altering our institutions’ marketing efforts to target the appropriate prospective students;
• changing tuition costs and payment options;
• further revising admissions standards and requirements;
• adding technology to improve student support;
• evaluating curriculum for alignment and timeliness of learning;
• increasing staff support and faculty readiness;
• further updating the admissions process and procedures; and
• implementing more stringentsatisfactory academic progress standards.
These initiatives require significant time, energy, and resources, and may adversely impact our institutions’ business, financial condition, results of operations, and cash flows, particularly in the near term. We may not succeed in achieving our
objectives due to organizational, operational, regulatory, resource, or other constraints. If our efforts are not successful, we may experience reduced enrollment, increased expense, or other impacts on our business that materially and adversely impact our results of operations, cash flows, and financial condition. Even if these initiatives successfully lead to the identification and enrollment of students who are likely to succeed and to improvements in student experience, they could result in adverse impacts on enrollments. Due to the many factors that can impact enrollments, we may not appropriately identify the cause of any adverse impacts, and therefore may not be able to appropriately modify our initiatives to address such impacts.
If our institutions are unable to successfully adjust to future market demands by updating and expanding the content of existing programs and developing new programs, specializations, and modes of teaching on a timely basis and in a cost-effective manner, our performance may be impaired.
We believe that our institutions need to continuously update and expand the content of their existing programs and develop new programs, specializations, and modes of teaching in order to continue to attract and retain qualified students and remain competitive in the postsecondary education market. However, the updates and expansions of our institutions’ existing programs and the development of new programs and specializations may not be accepted by accreditors, state and federal regulators such as ED, existing or prospective students, or employers. If we cannot respond to changes in market requirements, our business may be adversely affected. Even if our institutions are able to develop acceptable new programs, they may not be able to introduce these new programs as quickly as students require or as quickly as competitors introduce competing programs. To offer a new academic program, our institutions may be required to obtain appropriate federal, state, and accrediting agency approvals, which may be conditioned or delayed in a manner that could significantly affect our growth plans. In addition, growth restrictions imposed on our institutions in connection with changes in ownership or otherwise may adversely impact our ability to adjust to future market demands. For example, due to the change in ownership from APEI’s acquisition of RU, RU is currently subject to ED-imposed restrictions on the number of students receiving Title IV who can be enrolled at RU. Additionally, BON imposed constraints on RU nursing enrollments in Kansas. These restrictions may limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, and limiting its ability to continue to evolve to address current needs by providing new or modified programs. If we are unable to respond adequately to changes in market requirements due to financial constraints, regulatory limitations, or other factors, our institutions’ ability to attract and retain students could be impaired and our financial results could suffer.
Establishing new academic programs, specializations, and modes of teaching or modifying or eliminating existing programs requires our institutions to make investments in management, academic resources including faculty, and capital expenditures, incur marketing expenses, and reallocate other resources. Our institutions may have limited experience providing courses in new fields of study or new modes of teaching (including non-degree credentials) and may need to modify systems and strategies or enter into arrangements with other institutions and organizations to provide new programs effectively and profitably. If our institutions are unable to establish new academic programs, increase the number of students enrolling in new academic programs, offer programs in a cost-effective manner, hire faculty to administer new programs or deliver specialized instruction, or otherwise manage effectively the operations of those programs, our results of operations and financial condition could be adversely affected.
Continued strong competition in the postsecondary education market could decrease our institutions’ market share and increase our cost of acquiring students.
Within the postsecondary education market, our institutions compete primarily with not-for-profit public and private two-year and four-year colleges, as well as other for-profit schools. Public institutions receive substantial government subsidies, and public and private not-for-profit institutions have access to government and foundation grants, tax-deductible contributions, and other financial resources generally not available to for-profit schools. These institutions may have instructional and support resources, or course delivery tools, that are superior to those of our institutions and other for-profit schools. Many of these competitors, whether for-profit, not-for-profit, or public, may also be able to leverage their greater scale, size, name recognition, and financial and other resources to compete for potential students, or to provide instructional and support resources that may be superior to those of our institutions and other for-profit schools. In addition, as indicated in “Our Market and Competition – Competition – Institutions Serving Military Students”, the Armed Forces have established, and may in the future establish, their own postsecondary education programs. Within the nursing education market, we compete with other schools offering similar programs, including for-profit and not-for-profit public and private colleges, that may have greater resources or a greater market presence or reputation in the local areas we serve. In addition, because of the relatively local focus of RU’s and HCN’s nursing programs, our competitive environment is impacted by various factors that are specific to the particular areas where our campuses are located, including local supply and demand dynamics for our programs, nurses, and nursing schools. RU’s and HCN’s results are therefore more susceptible to the actions of single competitors than the results of an institution that draws from a broader geographical area. For example, a particularly effective or ineffective marketing approach by another school, or the opening or closing of another school, could have unanticipateddetriments or benefits to RU’s and HCN’s competitive position.
Within the postsecondary education market generally, we have experienced increased competition from new market entrants providing both online and non-traditional programs, including providers partnering with Online Program Management, and a shift of for-profit institutions to not-for-profit status. In the fall of 2025, there was an industry-wide increase of approximately 2% in undergraduate enrollment as compared to an approximate 3% increase in the fall of 2024. However, despite overall increases in online postsecondary enrollments at the undergraduate and graduate levels, data suggest that previous growth in enrollment in postsecondary degree-granting institutions is slowing. The combination of reduced growth or declines in the postsecondary student population and the entrance of additional providers in the online postsecondary education market will further intensify competition, and any resulting decline in the number of enrollments could have an adverse effect on our results of operations. In addition, increased competition for college-ready students has led to an increase in the cost of advertising in certain marketing channels in 2025. Increases in our advertising costs, and continued increases in the cost of advertising in certain marketing channels, may adversely impact our ability to attract college-ready students and/or increase our student acquisition costs.
We expect to continue to face greater competition from non-traditional offerings, provided by both educational institutions and non-traditional providers.
Competing institutions and others provide non-traditional education programs without charge or at low costs, including CBE programs, coding bootcamps, micro-credentialing, massive open online courses, and other flexible and individualized programs. We believe that our institutions will continue to face new competition from non-traditional programs, including lower cost programs. We offer or are working to develop our own alternatives in some of these areas. However, these efforts may not be successful. Other institutions have programs that are more fully developed, and our offerings may not be as successful, broad, or large enough or receive market acceptance. Our institutions may not be able to compete successfullyagainst current or future competitors and may face competitive pressures that could adversely affect their business or results of operations. Increased availability of federal student financial aid for CBE programs could create additional competition and drive additional students toward non-traditional education programs. These factors could cause our institutions’ enrollments, revenue, and profitability to decrease significantly.
Tuition and fee increases at RU, APUS, and HCN could have an adverse impact on enrollment, our financial condition and our results of operations.
As more fully described in “Our Institutions and Operations – Our Institutions – Accreditation – Affordability and Cost of Attendance”, all of our institutions implemented tuition and fee increases for certain or all students across select or all programs, as the case may be. Even with these increases, tuition and fees for our institutions 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. However, higher tuition and fees may cause potential students to be unwilling, or unable, to enroll at our institutions and/or in affected programs, and existing students may be unwilling, or unable, to remain enrolled, resulting in lower enrollments at our institutions and adverse impacts on our financial condition and results of operations.
RU’s actual and planned closure of campuses or termination of programs on certain campuses may adversely impact RU and us.
In August 2023, RU decided to voluntarily pause new enrollments in the Bloomington, Minnesota ADN program beginning in November 2023, and, after informing in December 2023 MBN that it intended to voluntarily close the program, RU closed the program, effective June 15, 2024. This program had been subject to adverse action and heightened scrutiny from regulators as a result of a continued failure to meet applicable regulatory and accreditor requirements.
In July 2024, RU closed its Lake Elmo, Minnesota campus and moved all enrolled students at the campus to RU’s Eagan, Minnesota campus, which is located less than 10 miles from the Lake Elmo campus. In addition, in May 2024, RU notified the Wisconsin Educational Approval Program, or WEAP, that it planned to voluntarily close its Green Bay, and Wausau, Wisconsin campuses, effective December 31, 2025, and 2026, respectively. RU closed the Green Bay, Wisconsin campus, effective December 31, 2025, as planned, and six students who had not yet graduated, were transferred to the Wausau campus. As of December 31, 2025, less than ten students were enrolled at the Wausau, Wisconsin campus.
As RU evaluates its other campuses and programs, it could make similar consolidation and closure decisions about other campuses or programs. The closure of RU’s Bloomington, Minnesota ADN program, Green Bay, and Wausau, Wisconsin and Lake Elmo, Minnesota campuses, or any consolidation and closure of other campuses or programs may have an adverse impact on RU’s enrollments and reputation, which could further impact RU’s enrollments, operations, cash flows, and financial condition. Consolidation and closure decisions could also adversely impact online enrollment in the areas surrounding the closed
campuses. In addition, any future consolidation and closure could have a more significant impact on RU’s overall student body than these closures.
Risks Related to the Regulation of Our Industry
We and our institutions are subject to extensive regulatory requirements for the operation of postsecondary education institutions, and could face penalties and significant restrictions on operations if we or our institutions fail to comply with these requirements, including loss of federal student loans and grants and access to DoD TA programs and education programs administered by the VA.
We and our institutions are regulated by (i) accrediting agencies, (ii) state regulatory bodies, and (iii) the federal government through ED. Our institutions are also subject to DoD and VA oversight because our institutions participate in TA and veterans’ education benefits programs administered by the VA. Regulations, standards, and policies of these agencies affect the vast majority of our operations, including our educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, and financial operations and condition. These regulatory requirements can also affect our ability to acquire new institutions, open new locations, add new or expand existing educational programs, change our corporate structure or ownership, and make other substantive changes related to our company. Compliance with these requirements increases our cost of operations.
Findings of noncompliance with these laws, regulations, standards, and policies could result in any of the respective regulatory agencies taking certain actions, including: (i) imposing monetary fines, penalties, or injunctions; (ii) limiting operations, including restricting our institutions’ ability to offer new programs of study or to open new locations, or imposing limits on our growth; (iii) limiting or terminating our ability to grant degrees; (iv) restricting or revoking our institutions’ accreditation, licensure, or other approval required to operate; (v) limiting, suspending, or terminating our institutions’ eligibility to participate in Title IV programs, TA, or VA education benefit programs; (vi) requiring us to repay funds, post a letter of credit, or become subject to payment methods for Title IV programs that are not the advance payment system; (vii) subjecting us to civil or criminalpenalties; or (viii) other actions that could have a material adverse effect on our business. See also the Risk Factor that begins “Government and regulatory agencies and third parties…” below.
If one of our institutions were to lose its eligibility to participate in Title IV, TA, or VA education benefit programs, or if the amount of available funds under these programs were reduced, we could seek to arrange or provide alternative sources of revenue or financial aid for students. Although we believe that one or more private organizations would be willing to provide financial assistance to students attending our institutions, there is no assurance that this would be the case, and the terms of such financial aid might not be as favorable as those for funds under the Title IV, TA, or VA education benefit programs. We may be required to guarantee all or part of such alternative assistance or might incur other additional costs in connection with securing alternative sources of financial aid. Accordingly, the loss of our eligibility to participate in these programs, or a reduction in the amount of available federal student financial aid, would be expected to have a material adverse effect on our financial condition and results of operations, even if we could arrange or provide alternative sources of revenue or student financial aid.
The regulations, standards, and policies of ED, state regulatory bodies, and our institutions’ accrediting agencies change frequently and are subject to interpretive ambiguities. Recent and pending changes in, or new interpretations of, applicable laws, regulations, standards, or policies, or our noncompliance with any applicable laws, regulations, standards, or policies, could have a material adverse effect on our accreditation, authorization to operate in various states, permissible activities, receipt of funds under TA, ability to participate in Title IV programs, ability to participate in VA education benefit programs, or costs of doing business. We cannot predict with certainty how these regulatory requirements will be applied or whether we will be able to comply, or will be deemed by others to have complied, with all of the requirements, but these requirements or our noncompliance with them could adversely impact our business, operations, financial results, and reputation. For example, pending nursing education legislation in Florida could, if passed and not vetoed, lead to increased challenges in hiring and retaining qualified nursing program directors, and increased expenses related to compliance with new requirements. The legislation would also allow FBN to impose disciplinary remedies on an approved program against which an adverse action has been taken by another regulatory jurisdiction in the United States.
In addition, in some circumstances of noncompliance or allegednoncompliance, we may be subject to lawsuits under the federal FalseClaims Act, similar state false claim statutes, or various “whistleblower” statutes. These lawsuits in some cases can be prosecuted by a private plaintiff in respect of some action taken by us, even if ED or another regulatory body does not agree with the plaintiff’s theory of liability, or the government can intervene and become a party to the lawsuit. These lawsuits have the potential to generate significant financial liability linked to our receipt of government funds, including Title IV funds
and TA funds. Noncompliance or allegednoncompliance may also result in derivative litigation or litigation involving other stakeholders. Any such litigation could result in substantial costs and a diversion of our management’s attention and resources.
If our institutions fail to maintain their institutional accreditation, they will lose the ability to participate in Title IV, DoD TA programs, and VA programs and our student enrollments would decline.
Accreditation at the institutional level by an accrediting agency recognized by ED is necessary to participate in Title IV and TA programs. Our institutions’ accrediting agencies may impose restrictions on their accreditation or may terminate their accreditation. To remain accredited, our institutions must continuously meet certain criteria and standards relating to, among other things, performance, governance, institutional integrity, educational quality, faculty, administrative capability, resources, and financial stability. Our institutions also must comply with accrediting agency policies and requirements, such as the requirements to apply and wait for approval before making certain changes. For example, as it did with the Rasmussen Acquisition, HLC requires approval before the closing of a transaction in order for an institution to maintain accredited status after closing. The standards of accrediting agencies that accredit our institutions and programs can and do vary, and accrediting agencies may prescribe more rigorous standards than are currently in place. Complying with more rigorous accreditation standards could require significant changes to the way we operate our business and increase our administrative and other costs. No assurances can be given that our institutions or programs would be able to comply with more rigorous accreditation standards in a timely manner or at all. Failure to meet accreditation criteria or standards or to comply with accreditation policies and requirements could result in the loss, limitation, modification, or suspension of accreditation at the discretion of the accrediting agency. The complete loss of institutional accreditation at one of our institutions would, among other things, render the institution and its students ineligible to participate in Title IV, TA, and VA programs, and have a material adverse effect on our enrollments, revenue, and results of operations. In addition, accrediting bodies may adopt new or revised criteria, standards, and policies that are intended to monitor, regulate, or limit the growth of our programs or for-profit institutions like ours.
Colleges and universities depend, in part, on accreditation in evaluating transfers of credit and applications to graduate schools. Many institutions will only accept transfer credit from institutions with certain institutional accreditation. Students and sponsors of tuition reimbursement programs look to accreditation for quality assurance, and employers rely on institutions’ accredited status when evaluating a candidate’s credentials. In addition, certain of our programs are accredited by programmatic accrediting agencies or recognized by professional organizations. If our institutions fail to satisfy the standards of these programmatic accrediting agencies, including as it relates to specific student achievement indicators, and professional organizations, the relevant programs could lose the programmatic accreditation or professional recognition, which could result in materially reduced student enrollments in those programs and have a material adverse effect on us. In addition, in certain cases, professional licensure will not be granted if an applicant for licensure earned the relevant educational credential from an institution or educational program that lacks institutional or programmatic accreditation. Failure to obtain or maintain programmatic accreditation or professional recognition for certain programs could prevent our students from seeking and obtaining licensure or employment, result in materially reduced student enrollments in affected programs, and have a material adverse effect on us.
If one or more of our institutions does not comply with the 90/10 Rule for two consecutive years, it or they will lose eligibility to participate in federal student financial aid programs.
The HEA requires all for-profit education institutions to comply with what is commonly referred to as the 90/10 Rule, which imposes sanctions on institutions that derive more than 90% of their total revenue on a cash accounting basis from Title IV programs, TA, and VA programs, and other federal educational assistance funds, as calculated under ED’s regulations. As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – The ‘90/10 Rule’” for fiscal years beginning on or after January 1, 2023, federal educational assistance funds used to calculate the “90%” side of the ratio include Title IV funds, TA, and VA programs, 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. As a result, effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio. 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. The
Combination (as defined above) is expected to benefit 90/10 Rule compliance and other regulatory considerations; however, there can be no assurance that the Combination will be completed on its anticipated timeline or at all, will have the expected benefits, or when those benefits will be realized.
As a result of the circumstances with TA discussed in further detail in the Risk Factor that begins “Our student registrations, revenue, and cash flow have been adversely impacted...” below, approximately $18.4 million in cash payments from the Army to APUS that were expected to be received in 2021 and 2022 were received in 2023. This together with the January 1, 2023, change to the 90/10 Rule and enrollment growth among service members as compared to declines in students who use non-federal educational assistance funds, caused APUS’s 90/10 Rule percentage to increase.
In September 2023, APUS changed its approach to invoicing for TA, taking longer to bill TA, which had the effect of delaying payments from 2023 to 2024. Due to this change in the approach to invoicing TA in the fourth quarter of 2023, in 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.
In December 2024, APUS again changed its approach to invoicing for TA, taking longer to bill TA, and, as a result of this change, in 2025, APUS collected approximately $32.5 million from TA related to periods prior to 2025. The change in billing approach positively impacted the “90%” side of the ratio and reduced operating cash flow in 2024. In 2025, the change in billing approach increased operating cash flow and bad debt expense. While the 90% side of the ratio remained consistent in 2025, 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. 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”. In July 2025, APUS again delayed billing to certain branches, further delaying payments until 2026. We estimate that this delay in APUS’s billing approach implemented beginning in July 2025 will result in approximately $34.1 million of receivables that we would have expected to receive in 2025 to be received in 2026.
As noted in the Risk Factor with the caption beginning “Government and regulatory agencies and third parties...”, ED is currently conducting a regular program review at APUS, which includes, among other things, a review of APUS’s compliance with the 90/10 Rule. APUS has not yet received a program review report from ED, and accordingly, at this time we cannot predict whether ED could have further feedback or findings on APUS’s 90/10 Rule compliance and related practices, whether as a result of the program review or otherwise.
We cannot predict whether Congress or ED will continue to modify the 90/10 Rule with respect to relevant sources of funds or other aspects of the calculation. For example, in recent years Congress has considered various other proposals that would modify the 90/10 Rule, including proposals to decrease the limit on Title IV funds from 90% to 85% or prohibit the use of federal funds to implement, administer, or enforce the 90/10 Rule. Such proposals, or other similar legislation, should they become law, could have a material impact on the operations of our institutions. In addition, states have passed or may in the future pass, their own versions of the 90/10 Rule that like the new federal 90/10 Rule include TA and VA education benefits or other sources of funds in the “90%” side of the ratio. To the extent that any additional laws or regulations are adopted that further limit or condition the participation of for-profit schools or distance education programs in TA, VA education benefits programs, or in Title IV programs, or that further limit or condition the amount of TA, or VA education benefits for which for-profit schools or distance education programs are eligible to receive, our financial condition and results of operations could be materially and adversely affected.
For the past three years, RU has derived less than 80% and HCN has derived more than 80% of its total revenue on a cash accounting basis from Title IV programs and, as applicable, other federal educational assistance funds as calculated under ED’s modified regulations. If our institutions are unable to attract students who do not depend on Title IV program aid or TA or VA benefits, such as students who finance their own education or receive full or partial tuition reimbursement from non-government employers, their 90/10 Rule percentage may increase.
While each of our institutions was in compliance with the 90/10 Rule for 2025, there is no assurance that we will continue to be able to comply in future years, particularly at APUS. Enrollments at APUS from students who use TA and VA funds have been trending upward, while enrollments from students who use non-federal educational assistance funds continued to decline. This makes it more difficult to satisfy the 90/10 Rule at APUS. In order to try and address the challenges with respect to 90/10 at APUS, we may pursue strategic transactions, including business combinations and acquisitions. Those transactions may not be successful or could cause disruption to our operations. For examples of some of the challenges that some types of
strategic transactions could have, see the Risk Factors with the captions beginning with “The planned combination of APUS, RU, and HCN” and “Business combinations and acquisitions may be difficult to integrate …” below.
If any of our institutions fails to satisfy the 90/10 Rule and loses eligibility to participate in Title IV programs, it would also lose the ability to participate in TA because DoD requires institutions to participate in Title IV programs in order to participate in TA, and ineligibility of either or both of our institutions to participate in Title IV programs and TA would have a material adverse effect on our enrollments, revenue, results of operations, and cash flows. Similarly, failure of one of our institutions to meet the 90/10 Rule for any fiscal year would require the institution to notify ED and students of this failure, would result in the institution being on provisional status for two fiscal years, could subject the institution to heightened regulatory scrutiny and possible adverse regulatory action, and could damage the institution’s reputation, which would have a material adverse impact on our results of operation, cash flow, and financial condition. Failure of an institution to meet the 90/10 Rule for two consecutive fiscal years results in the institution becoming ineligible to participate in Title IV programs for at least two fiscal years, which would have a material adverse impact on our results of operation, cash flow, and financial condition.
The OBBBA may adversely impact us or our students’ ability to participate in federal student financial aid programs, which could have a significant adverse impact on enrollments and our business, operations, and financial results.
As discussed in “Business – Regulatory Actions and Restrictions on Operations – Other Regulations – The One Big Beautiful Bill Act”, on July 4, 2025, President Trump signed into law the OBBBA, which, among other things, makes significant changes to federal student financial aid programs and eligibility requirements for such programs. New caps on federal loans for graduate and professional students and parents of undergraduates may limit borrowing options for our students and the accountability framework and related earnings test may limit the availability of certain programs due to a potential loss of Direct Loan eligibility. On September 29, 2025, ED established the RISE Committee and initiated the negotiated rulemaking process for the OBBBA student loan provisions. On November 6, 2025, the RISE Committee reached consensus with ED on proposed changes regarding the Repayment Assistance Plan, including the treatment of income for borrowers filing taxes jointly and the minimum monthly loan payment, and the definition of “professional” student, among other changes. As discussed in greater detail in “Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Gainful Employment Regulations”, on December 8, 2025, ED convened AHEAD and initiated the negotiated rulemaking process for the OBBBA accountability framework. On January 9, 2026, AHEAD reached consensus on proposed modifications to GE regulations. On January 30, 2026, ED published a notice of proposed rulemaking that incorporated the consensus language, and accepted public comments to the notice of proposed rulemaking until March 2, 2026. These changes may impact our students’ ability to participate in federal student loan programs, which may have a significant adverse impact on enrollments and our business, operations, and financial results.
The DoD’s MOU imposes extensive regulatory requirements on our institutions with respect to participation in DoD TA programs, and our revenue and number of students would decrease if our institutions were no longer able to receive funds under DoD TA programs or if TA is reduced, eliminated, or suspended.
As described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense” and “Business – Regulatory Environment – Compliance with Regulatory Standards and the Effect of Regulatory Violations – Compliance Reviews”, each institution participating in TA is party to an MOU in a similar form outlining certain commitments and agreements in connection with accepting funds from TA. For example, the DOD MOU includes an agreement to participate in the DoD’s Voluntary Education Institutional Compliance Program, or ICP, in order to participate in TA. An institution that is found noncompliant with DoD requirements through the ICP and demonstrates an unwillingness to resolve a finding may be subject to a range of penalties from a written warning to termination of the institution’s participation in TA.
The DoD MOU also provides that an institution may only participate in TA if it is accredited by an accrediting agency recognized by ED, approved for VA funding, and a participant in Title IV programs. Failure to comply with the DoD MOU could result in an institution losing its ability to participate in TA. We also believe that in certain circumstances DoD may impose sanctions for a failure to comply instead of denying an institution the ability to participate in TA, including restricting student enrollment in TA programs, suspending an institution from enrolling new students, limiting access to military installations, subjecting the institution to heightened compliance oversight, or otherwise limiting an institution’s ability to participate in TA. In February 2025, ICP notified APUS that it would conduct a review of APUS’s compliance with the DoD MOU. On May 14, 2025, DoD issued a report that informed APUS that the review had been completed with no findings. If an institution fails to comply with the requirements of an MOU, it could result in sanctions, up to losing the ability to participate in TA, that could have a significant adverse effect on our results of operations and financial condition.
Students participating in TA constituted approximately 41% of APUS’s adjusted net course registrations for 2025. We do not know the scale or nature of future actions that may be taken with respect to TA, which could include eliminating those programs, reducing the funds, benefits, or level of reimbursement available thereunder, changing the eligibility criteria for beneficiaries, enacting new restrictions on institutional participation, or imposing other eligibility criteria on institutions, all of which could impact enrollments from service members. Other administrative changes to DoD programs could also have negative effects on our enrollments.
There have been previous changes to eligibility requirements under TA that have impacted us, and additional changes that impact us could occur in the future. Additional changes to TA could occur due to Congressional action or DoD policy and funding changes. For example, the failure of Congress to pass appropriations legislation has limited the release of funds at times in the past and could do so in the future as well, including as a result of budget disputes related to the federal debt ceiling. Annual TA funding is limited and could be exhausted in any given year due to budget constraints or changes in demand or policy. We are unable to predict whether and to what extent the Armed Forces will impose limitations on TA approvals in the future as a result of limited funding. Furthermore, we expect each military branch and the DoD to continually evaluate their approaches to education, including by launching or expanding their own institutions, as discussed in further detail in the Risk Factor that begins “Continued strong competition in the postsecondary education market...” above, and such actions could have an impact on the funds available to service members to pursue their education at our institutions. Changes in funding allocations could have a material adverse effect on APUS’s enrollments.
If we are no longer able to receive funds from TA, or if those programs are modified, reduced, eliminated, or temporarily suspended, our enrollments, revenue, and cash flow could be significantly reduced, which would result in a material adverse effect on our results of operations and financial condition. See also the Risk Factor captioned “Our student registrations, revenue, and cash flows have been adversely impacted and we could experience additional adverse impacts as a result of the Army’s transition to new systems for soldiers to request TA” below.
HLC could identify deficiencies during its mid-cycle comprehensive evaluation of APUS and take adverse action against APUS based on such deficiencies.
In 2023, APUS transitioned from the Open Pathway designation to the Standard Pathway designation because of the decision to conduct a focused visit in March 2024 due to concerns regarding course availability in one program. Under the Standard Pathway, APUS is subject to a mid-cycle comprehensive evaluation. For more details on this evaluation and related details involving the Combination, see “Business – Regulatory Environment – Accreditation – Institutional Accreditation.” We cannot be sure that HLC will not identify deficiencies at APUS during the mid-cycle comprehensive evaluation site visit or call for negative accreditation-related action against APUS as a result.
ED’s gainful employment requirements could materially and adversely affect our business.
As discussed in greater detail in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Gainful Employment Regulations”, GE regulations, effective July 1, 2024, establish an accountability framework to determine the Title IV eligibility of GE programs based in part on satisfaction of specified performance levels of two measures defined by the GE regulations: the debt-to-earnings rates (which include two rates, the discretionary debt-to-earnings rate and the annual debt-to-earnings rate) and the earnings premium measure. The OBBBA also establishes an accountability framework, effective July 1, 2026, that will require institutions to satisfy the OBBBA earnings test.
On December 8, 2025, ED convened AHEAD and initiated the negotiated rulemaking process for the OBBBA accountability framework. On January 9, 2026, AHEAD reached consensus with ED on proposed modifications to GE regulations that would eliminate debt-to-earnings rates, change student warning requirements, limit the consequences for failing GE the earnings premium measure, and add an appeal process for programs that lose Title IV eligibility under this framework. Further, under the consensus language, an institution would lose Pell grant eligibility for a program if at least half of the institution’s Title IV recipients or half of an institution’s Title IV funds come from failing programs. On January 30, 2026, ED published a notice of proposed rulemaking that incorporated the consensus language, and accepted public comments to the notice of proposed rulemaking until March 2, 2026. We cannot predict the language to be included in the final rule, or if a final rule will go into effect.
The current GE regulations will remain in effect until a final rule implementing the AHEAD consensus language is effective and the effective date of the OBBBA accountability framework. Under the current GE regulations, programs that fail to satisfy the specified performance levels of the GE measures in two of any three successive years for which the debt-to-earnings rates or the earnings premium measure are calculated will lose access to Title IV funding. At this time, it is difficult to predict
whether our institutions’ programs will satisfy current GE performance levels should ED calculate the GE measures. Though ED has released PPD that include calculations of the GE earning premium measure and debt-to-earnings rates and the OBBBA earnings test, PPD are of limited use because ED has not used the methodology it will use under the current GE regulations or the OBBBA accountability framework, primarily due to data limitations. Accordingly, it is difficult to predict the impact, if any, current GE regulations or the OBBBA accountability framework may have on our institutions.
Failure to improve certain of our programs’ NCLEX pass rates and to more generally satisfy NCLEX requirements could reduce our enrollments, revenue, and cash flow, lead to adverse actions taken by state boards of nursing, and limit our ability to offer educational programs.
The majority of RU’s graduates, HCN graduates, and certain APUS graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing. Their success in obtaining these outcomes depends on numerous factors, including (i) individual merits of the graduate; (ii) whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association; (iii) whether the program meets all state requirements for professional licensure; and (iv) the accreditation of the institution and the specific program. Failure to satisfy NCLEX pass rate requirements imposed by state boards of nursing can result in the state boards of nursing and other regulators taking certain adverse actions, including placement of a program on provisional approval status or withdrawal of approval pursuant to an adjudication proceeding, and NCLEX exam pass rate requirements could limit our institutions’ ability to expand into new geographies.
As discussed more fully in “Business – Regulatory Environment – State Authorization/Licensure – State Authorization/Licensure of Our Institutions”, each of the RU PN and BSN programs met their respective state-established first-time NCLEX benchmarks based on the 2025 results. Three of the RU ADN programs did not meet the benchmarks, resulting in one program continuing its mandated corrective action. If the affected program is unable to improve its NCLEX score by the Board of Nursing-imposed deadline, this could adversely affect our ability to continue offering the ADN program at that campus. In addition, other negative impacts could result, including damage to our reputation and making it more difficult to recruit students who are likely to succeed. The success of the majority of programs demonstrates the impact of targeted intervention plans and student-readiness initiatives; however, implementation and execution of new academic resources in 2025 have presented challenges across all programs. These challenges required RU to make academic policy decisions that affected student progression. As a result, both NCLEX readiness and outcomes were impacted as students advanced through the program under these new conditions. RU is focused on achievingstronger consistency and improved first-time NCLEX pass rates in 2026 by (i) strengthening readiness strategies at both early and late stages of the program, (ii) sustaining academic support and accountability through data-driven decision-making, and (iii) prioritizing the evaluation of instructional quality and delivery across didactic, simulation, and clinical earning environments, to achieve consistent and repeatable practices that impact student learning.
Although variability in regulator and accreditor approach to and use of discretion in enforcement of NCLEX pass rate standards makes it difficult to predict consequences, failure to abide by the terms of any restrictive status placed on these programs, take appropriate corrective action, or reach applicable threshold rates within a required timeframe could subject impacted programs to additional adverse action, including withdrawal of approval, and we could take voluntary action to curtail or terminate affected programs, any of which would have an adverse effect on our results of operations, cash flows, and financial condition. Even if the affected programs have long-term success in complying with NCLEX pass rate standards, the actions we take to comply could result in increased costs or decreased enrollments, and goodwill impairment.
RU’s Illinois ADN program was previously adversely impacted by regulatory action, including as a result of the failure to meet applicable NCLEX pass rates, and further action by regulators and accreditors could result in additional adverse impacts.
As discussed more fully in “Business – Regulatory Environment – State Authorization/Licensure – State Authorization/Licensure of Our Institutions”, RU’s Illinois ADN program had not met state-established first-time NCLEX benchmarks for three consecutive years. In February 2022, RU’s Illinois ADN program was placed on probationary status by Illinois Department of Financial and Professional Regulation, or IDFPR, as a result of which RU was required to temporarily reduce admitted students in the program by 25% and was given two years to demonstrate evidence of implementing strategies to correct deficiencies and satisfy the required NCLEX pass rate. The State of Illinois enacted legislation effective January 2024 that changed the Illinois NCLEX pass rate requirements from a one-year measurement based on first attempts only to include a three-year average that includes all test attempts, and temporarily removed all nursing programs, including RU’s Illinois ADN program, from probationary status until September 2026. RU’s Illinois ADN program is currently approved; however, Illinois Department of Financial and Professional Regulation, or IDFPR, has publicly reported that RU’s Illinois ADN program has not
met the required NCLEX pass rate for the prior six years. There can be no assurance that IDFPR will not seek to impose different or additional requirements prior to September 2026 as a result of failures to satisfy the required NCLEX pass rate, and it is unknown what actions IDFPR may take regarding RU’s Illinois ADN program after September 2026, which could include reinstatement of probationary status or withdrawal of approval.
The inability of our institutions’ graduates to obtain professional licensure, employment, or other outcomes in their chosen fields of study, particularly in nursing, could reduce our enrollments and revenue, limit our ability to offer educational programs, and potentially lead to litigation that could be costly to us.
Certain graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing. State requirements for licensure are subject to change, as are professional certification standards, and we may not become aware of changes that may impact our students in certain instances. In addition, as further discussed in “Business – Regulatory Environment – State Licensure/Authorization – Federal Requirements for State Authorization/Licensure - State Authorization and Professional Licensure”, ED regulations require institutions that offer postsecondary education programs leading to employment in an occupation that requires licensure or certification to meet certain additional requirements in order for those programs to maintain eligibility to participate in Title IV programs. In each state in which the institution is located, in which students enrolled in distance education are located, and where a student enrolled after July 1, 2024, attests that they intend to seek employment, the program must satisfy the applicable state education requirements for professional licensure or certification so that a student seeking employment may qualify to take any licensure or certification exam needed to practice or find employment in the state. In the event that one or more states refuse to recognize our institutions’ students for professional licensure based on factors relating to our institutions or programs, the potential and actual growth of our institutions’ programs would be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Further, requirements for employment vary from employer to employer and from field to field. To the extent our graduates fail to satisfy requirements for employment by particular employers or in a particular profession based on characteristics of our programs, the ability to maintain enrollments, as well as the potential for growth of our institutions’ programs would be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. In addition, if our institutions’ graduates fail to obtain professional licensure, employment, or other outcomes in their chosen fields of study, we and our institutions could be exposed to litigation, including class-action litigation, claiming that we are at fault for such failure, which would force us to incur legal and other expenses that could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
A failure of HCN to satisfy ABHES accreditation standards, including specific student achievement indicators, could have a material adverse impact on HCN’s student enrollment, revenue, results of operations, and cash flows.
ABHES annually reviews student achievement indicators, including retention rate, placement rate, and licensing and credentialing examination pass rate. Under ABHES policy, ABHES may withdraw accreditation at any time if it determines that an institution fails to demonstrate at least a 70% retention rate for each program, a 70% placement rate for each program, and a 70% first-time pass rate on mandatory licensing and credentialing examinations or fails to meet the state-mandated results for credentialing or licensure. Alternatively, ABHES may in its discretion provide an opportunity for a program to come into compliance within a period of time specified by ABHES, and ABHES may extend the period for achieving compliance if a program demonstrates improvement over time or for other good cause.
As more fully described in “Business – Regulatory Environment – Accreditation – Institutional Accreditation”, in prior years, several HCN programs at certain HCN campuses have failed to satisfy ABHES’ student achievement measures, and, as a result, ABHES has placed certain locations and programs on program-specific warning or outcomes reporting status and required action plans. If ABHES determines that HCN’s response to the program-specific warning status is insufficient, it could take action that could have an adverse impact on our results of operations, cash flow, and financial condition, including limiting program enrollment, suspending program enrollment and new starts until HCN meets terms and conditions established by ABHES, or withdraw approval for one or more programs. HCN is also required to disclose the program-specific warnings to current and prospective students, which could adversely affect HCN’s reputation and enrollments.
If any HCN campus or program fails to satisfy ABHES achievement measures, enrollment at such HCN campus or program could decline, or we could be forced to cease enrollments at that campus or in that program, which could have a material adverse impact on HCN’s student enrollment and our and HCN’s revenue, results of operations, and cash flows. The actions HCN takes to comply with ABHES requirements may not be successful in resolving existing issues and, if those actions are targeted at specific campuses or programs, they may fail to prevent additional issues arising with respect to those or other
campuses or programs. Similarly, even if HCN is successful in the long term in complying with these standards, the actions HCN takes to comply could result in increased costs or decreased enrollments, and impairment of HCN goodwill.
If our institutions fail to maintain state authorization in the states where they are physically located, the institutions would lose their ability to grant degrees and other credentials and to participate in Title IV programs and DoD TA programs.
As discussed in “Business – Regulatory Environment – State Licensure/Authorization”, to participate in Title IV programs and TA, an institution must be legally authorized by the relevant education agency of the state in which its main campus is physically located, and, in the case of APUS, West Virginia. Loss of “home state” authorization by one of our institutions would render that institution unable to participate in Title IV programs, and therefore also TA and VA, to operate in the state and grant credentials, and to maintain institutional accreditation. If one of our institutions were to lose state authorization as to a non-main campus location, it would be unable to award Title IV aid to students at that location, and it would be unable to operate at that location.
ED regulations provide that an institution is considered legally authorized by a state if the state has a process to review and appropriately act on complaints concerning the institution, including enforcing applicable state laws, and the institution complies with any applicable state approval or licensure requirements. If a state in which one of our institutions is located fails in the future to satisfy the provisions of those regulations, our institutions’ ability to operate in that state and to participate in Title IV programs could be limited or terminated.
Our institutions’ failure to comply with the requirements of SARA or regulations of ED or various states related to state authorization could result in actions that would have a material adverse effect on our enrollments, revenue, and results of operations.
Various states impose regulatory requirements on educational institutions operating within their boundaries, including registration requirements applicable to online education institutions that have no physical location or other presence in the state but offer educational services to students who reside in the state or advertise to or recruit prospective students in the state. As described more fully in “Business – Regulatory Environment – State Authorization/Licensure”, APUS and RU must comply with the requirements of California, which is the only state that does not participate in State Agency Reciprocity Agreement, or SARA, and APUS, RU, and HCN must comply with SARA with regard to the interstate offering of postsecondary distance education and online education. Those requirements may change from time to time and, in some instances, are ambiguous or are left to the interpretative discretion of state regulators.
Changes in requirements to participate in SARA, including those policy changes approved by SARA’s coordinating entity, the NC-SARA, board of directors, or changes to state laws and regulations and the interpretation of those laws and regulations may limit our ability to participate in the reciprocity agreements, offer education programs and award degrees.
If one of our institutions were to fail to comply with such requirements, the institution could lose its ability to participate in SARA or may be subject to the loss of state licensure or authorization to provide distance education. If one of our institutions were to fail to comply with state requirements to obtain licensure or authorization, it could also be subject to injunctive actions or penalties. We cannot predict the extent to which states will retain membership in SARA, the manner in which SARA’s rules may be modified, interpreted, and enforced, our institutions’ ability to comply with SARA’s requirements and retain eligibility, or the impact that failure to meet the SARA requirements may have on our business.
Our institutions must periodically seek recertification to participate in Title IV programs, and may, in certain circumstances, be subject to review by ED prior to seeking recertification, and our future success may be adversely affected if our institutions are unable to successfully maintain certification or obtain recertification.
As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, APUS, RU, and HCN must periodically seek recertification from ED to continue participation in Title IV programs, and ED may review our institutions’ eligibility and certification to participate in Title IV programs, or the scope thereof. However, also as described in the foregoing section, ED must in some cases provisionally certify an institution, which imposes additional conditions on the institution’s receipt of Title IV funds. For example, APUS and RU are currently provisionally certified with ED.
If our institutions are unable to successfully maintain certification, including provisional certification, or obtain recertification to participate in ED’s Title IV programs, they will not be able to participate in TA because each DoD MOU
requires an institution to be certified to participate in Title IV programs in order to participate in TA. Similarly, an institution is required to be certified to participate in the Title IV programs in order to be eligible to participate in the VA education benefits programs. Loss of participation in Title IV programs, TA, and the VA education benefits programs would have a material adverse effect on our enrollments, revenue, results of operations, and financial condition.
Our subsidiary institutions’ failure to meet financial responsibility standards may result in additional regulatory requirements that may negatively impact cash flow or the loss of eligibility by one of our institutions to participate in Title IV programs.
To participate in Title IV programs, an eligible institution must satisfy specific measures of financial responsibility prescribed by ED or post a letter of credit in favor of ED, and possibly accept other conditions, such as provisional certification, additional reporting requirements, or regulatory oversight of its participation in Title IV programs. As described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility”, ED’s annual evaluations for compliance with financial responsibility standards include a composite score calculation based on line items from an institution’s audited financial statements, and such composite score must be at 1.5 or above for the institution to be deemed financially responsible. A composite score between 1.0 and 1.4 is considered by ED to be in the “zone.” An institution in the “zone” may still participate in Title IV programs as a financially responsible institution through the “zone alternative” or the “financial protection alternative” as set forth in ED regulations.
In April 2025, ED notified us that according to its calculations, we had a fiscal year end 2023 consolidated composite score of 1.3 and our institutions were therefore in the “zone,” and we selected the “zone alternative” as the alternative basis on which we establish financial responsibility. Thereafter, APUS, RU and HCN operated under the zone alternative to establish financial responsibility, which imposed on us certain restrictions and obligations, including HCM1. On March 10, 2026, ED notified us that, as of such date, APUS, RU, and HCN were no longer required to comply with the zone alternative requirements due to a composite score for fiscal 2024 of 2.6. However, there is no assurance that the composite score will remain at or above 1.5 in the future or that if it falls in the “zone” in the future that we will be able to demonstrate financial responsibility. A determination that we are in the zone has resulted, and could in the future result, in additional adverse regulatory and accreditor requirements, limitations, and actions, including with respect to SARA eligibility or action related to being in the zone.
For more on the financial responsibility requirements, please refer to “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs”.
A failure to demonstrate “administrative capability” may result in the loss of eligibility to participate in Title IV programs.
As more fully discussed in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Administrative Capability”, ED’s regulations specify extensive criteria that an institution must satisfy to establish that it has the requisite administrative capability to participate in Title IV programs and the sanctions ED may impose if an institution fails to satisfy any of those criteria. If an institution fails to satisfy any of the administrative capability requirements, ED may require the repayment of Title IV program funds, transfer the institution from the “advance” method of payment of Title IV program funds to heightened cash monitoring status, or to the “reimbursement” method of payment, place the institution on provisional certification status, or commence a proceeding to impose a fine or to limit, suspend, or terminate the participation of the institution in Title IV programs, which would adversely affect our enrollment, revenue, results of operations, and financial condition.
ED rules related to BDTR claims may create significant liability that could have an adverse effect on our business and results of operations.
Under the HEA, ED is authorized to specify in regulations which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a Direct Loan. As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Borrower Defenses”, ED may initiate a proceeding to collect from an institution the amount of relief resulting from a borrower defense brought by an individual borrower. If ED determines that borrowers of Direct Loans who attended our institutions have a defense to repayment of their Direct Loans, we could be subject to repayment liability to ED that could have a material adverse effect on our financial condition, results of operations, and cash flows. The OBBBA delays implementation of the 2022 Borrower Defense Regulations until July 1, 2035. Accordingly, BDTR regulations that were in effect on July 1, 2020, have been reinstated. As discussed in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Borrower
Defenses”, APUS, RU, and HCN have received from ED BDTR claims for students seeking a discharge of loans. Each of the respective institutions disputes the validity of these claims and has filed responses to them with ED. We cannot predict whether ED will grant BDTR relief for the claims, or if so, whether it will seek recoupment from our institutions. However, if in the future our institutions are subject to ED recoupment actions, our business, reputation, enrollments, and financial condition may be adversely impacted.
The postsecondary education regulatory environment has changed and may change in the future as a result of United States federal elections.
Changes in Presidential administrations and control of Congress as a result of the outcome of elections or other events have in the past resulted and could in the future result in changes in or new legislation, appropriations, regulations, standards, policies and enforcement actions that could materially affect our business, including material consequences for our institutions’ accreditation, authorization to operate in various states, permissible activities, receipt of funds under student financial assistance programs, and cost of doing business. The Trump administration has acted and may act further to change, alter, or eliminate ED regulations and to change ED policies and practices with respect to matters related to postsecondary education institutions, and the current Congress may act to change or eliminate education-related legislation and ED regulations and to enact new legislation to alter existing regulations with respect to matters related to postsecondary education institutions.
President Trump and members of his administration have also stated that the administration intends to dismantle ED, limiting its functions to only those that are statutorily required or transferring oversight of certain functions to other agencies. On March 11, 2025, ED announced a reduction in force, or RIF, effective March 21, 2025, resulting in office, staff, and program cuts. ED has claimed the RIF will not directly impact students and families and will empower states and localities. On May 22, 2025, a federal judge ordered ED to reverse the RIF, which ED has appealed. On July 14, 2025, the order was stayed by the U.S. Supreme Court pending disposition of the appeal, thus allowing the RIF to proceed. Relatedly, on March 20, 2025, President Trump signed an Executive Order titled “Improving Education Outcomes by Empowering Parents, States, and Communities”, or the Executive Order, which, among other things, instructed the Secretary of Education to facilitate the closure of ED and maintain certain services, programs, and benefits, including student loans and Pell grants. We cannot predict the extent to which the RIF or the Executive Order will impact our results of operations and business, including as it relates to the Combination.
There were additional layoffs at ED in connection with the 2025 Shutdown, but we cannot predict what additional actions the Trump administration will take with respect to the operations of ED or the response of the staff of ED to any such actions. We also cannot predict the extent to which the Trump administration and Congress, or any future administration or Congress, will act to change or eliminate or to implement new laws, regulations, standards, policies, and practices, nor can we predict the form that new laws, regulations, standards, policies, or practices may take or the extent to which those regulations, practices or policies may impact us or our institutions or federal funds disbursed to schools through Title IV programs, TA, or VA programs, nor can we predict whether any challenges to actions taken by the Trump administration will be successful. For example, even without changes being made to Title IV programs, more general changes or uncertainty at ED could cause disruptions or delays in the processing of Title IV or other necessary interactions with ED. Significant changes to ED or to federal regulation of higher education could have a material adverse impact on our enrollment, revenue, results of operations, and financial condition.
A failure by our institutions to comply with ED’s incentive payment rule could result in sanctions and liability under the FalseClaims Act.
If one of our institutions pays a bonus, commission, or other incentive payment in violation of the HEA’s prohibition on such payments, commonly referred to as the incentive payment rule, the institution could be subject to sanctions, which could have a material adverse effect on our business. If ED determines that one of our institutions violated the incentive payment rule, it will calculate institutional liability for noncompliance by calculating the cost to ED of all Title IV funds improperly received by the institution and may require the institution to modify its payment arrangements to ED’s satisfaction. ED may also fine the institution or initiate action to limit, suspend, or terminate the institution’s participation in Title IV programs. ED may also seek to recover Title IV funds disbursed in connection with the prohibited incentive payments. As described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Incentive Payment Rule”, changes in the interpretation of this prohibition may create uncertainty about what constitutes impermissible incentive payments and errors in the implementation of our compensation programs and arrangements may also lead to impermissible payments. Ambiguities as to how the incentive payment rule is interpreted also may influence our approach, or limit our alternatives, with respect to employment policies and practices and consequently may negatively affect our ability to recruit, retain, and motivate employees.
DoD MOUs require that institutions participating in TA have policies in place that are compliant with regulations issued by ED related to restrictions on incentive payments. In addition, the Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020 bans incentive payments based on success in securing enrollments or financial aid with regard to VA benefits.
In addition, third parties may file “qui tam” or “whistleblower” suits on behalf of the federal government under the federal FalseClaims Act allegingviolation of the incentive payment rule. Such suits may prompt ED investigations, and the federal government may determine to intervene in the lawsuits. Particularly in light of the uncertainty surrounding interpretation of the incentive payment rule, the existence of, the costs of responding to, and the outcome of, such suits or ED investigations could have a material adverse effect on our reputation, causing our enrollments to decline, could cause us to incur costs that are material to our business, and could impact the ability of our institutions to participate in Title IV programs, among other things. As a result, our business could be materially and adversely affected.
Our institutions may lose eligibility to participate in Title IV programs if their student loan default rates are too high, and our future growth could be impaired as a result.
As described more fully under “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Student Loan Defaults” and “ – Cohort Default Rate”, if an institution’s cohort default rate for any year exceeds 40% in any single year, or exceeds 30% for three consecutive years, that institution loses eligibility to participate in Title IV programs. If an institution’s cohort default rate equals or exceeds 30% for any given year, it must establish a defaultprevention task force and develop a defaultprevention plan with measurable objectives for improving the cohort default rate.
In September 2025, ED released final official cohort default rates for institutions for federal fiscal year 2022, with ED reporting a zero percent cohort default rate for APUS, RU, and HCN. These rates were favorably impacted by regulatory relief provided in connection with the COVID-19 pandemic pursuant to which borrowers with Title IV program student loans were not required to make payments on their federal loans, and no interest accrued on these loans during this period. Interest accrual on forborne federal student loans resumed on September 1, 2023, and payments became due beginning October 1, 2023. In connection with these developments, ED implemented a 12-month “on-ramp” to repayment, running from October 1, 2023, to September 30, 2024, during which borrowers were not placed into default for missed payments. The end of COVID-19 pandemic-related student loan forbearance and the 12-month “on-ramp” period may lead to higher default rates in the future. ED has also announced other actions intended to provide debt relief and support for student loan borrowers, such as instituting a new income-driven repayment plan. However, there can be no assurance that our institutions’ cohort default rates will benefit from these efforts.
If one of our institutions loses its eligibility to participate in Title IV programs because of high student loan default rates, students would no longer be eligible to use Title IV program funds at that institution, and the institution would no longer be eligible to participate in the TA program, which would significantly reduce that institution’s enrollments and revenue and cash flows and have a material adverse effect on our results of operations. In addition, if Congress or ED restricts permitted types of defaultprevention assistance, the default rates of our former students may be negatively impacted. Congress could also increase the measuring period, which could also negatively impact student default rates.
We rely on third parties to administer elements of APUS’s, RU’s, and HCN’s participation in Title IV programs and their failure to perform services as agreed or to comply with applicable regulations could cause us to lose our eligibility to participate in Title IV programs.
ED’s regulations permit an institution to enter into a written contract with a third-party servicer for the administration of any aspect of the institution’s participation in Title IV programs. The third-party servicer must, among other obligations, comply with Title IV requirements and be jointly and severally liable with the institution to ED for any violation by the servicer of any Title IV provision. An institution must report to ED new contracts with or any significant modifications to contracts with third-party servicers and other matters related to third-party servicers. If any third-party servicer that we have engaged does not comply with applicable statutes and regulations, our institutions may be liable for its actions, and our institutions could lose eligibility to participate in Title IV programs. The failure of one of our third-party servicers to perform the services as agreed may adversely impact our ability to operate, our eligibility to participate in Title IV programs, and our financial condition. Further, in the event that our institutions transition to or from a third-party servicer for any of its services, there would be costs and risks related to the transition, which could have a material adverse effect on our financial condition.
Our institutions will be subject to sanctions that could be material to our results and damage our reputation if ED determines that our institutions failed to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program.
As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Title IV Return of Funds”, an institution participating in Title IV programs must calculate unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion and must timely return those funds. Under ED regulations, late returns of Title IV program funds for 5% or more of students sampled in connection with the institution’s annual Title IV compliance audit constitute material noncompliance for which an institution generally must submit an irrevocable letter of credit.
Our institutions’ failure to comply with ED’s substantial misrepresentation rules could result in material sanctions.
As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Substantial Misrepresentation”, ED may fine, suspend or terminate the participation in Title IV programs by an institution that engages in substantial misrepresentation regarding the nature of its education program, its financial charges, or the employability of its graduates. If administrative actions or litigationclaiming substantial misrepresentation were brought against our institutions, we could incur legal costs related to their investigation and defense, which could materially and adversely impact our financial condition.
Enforcement of laws related to the accessibility of technology continues to evolve, which could result in increased information technology development costs and compliance risks.
Our institutions make certain course content available to students through personal computers, mobile devices, and other technological devices. The curriculum makes use of a combination of graphics, pictures, videos, animations, sounds, and interactive content. We also communicate to both the general public and our enrolled students through our websites, which also triggers accessibility requirements under federal law. Federal agencies, including ED and the Department of Justice, have considered or are considering how electronic and information technology should be made accessible to persons with disabilities, including via specific technical standards. For example, as discussed further in “Business – Regulatory Environment – Department of Education – Regulation of Title IV Financial Aid Programs – Accessibility for Students and Disabilities”, ED’s Office for Civil Rights, or OCR, has in recent years taken enforcement action against higher education institutions in connection with the inaccessibility of their websites and online learning management platforms to persons with a disability. In 2022, OCR initiated a compliance review of APUS’s learning management system and courses. In August 2024, OCR identified APUS was out of compliance with certain accessibility requirements for people with disabilities for ten courses. Currently, APUS is cooperating with OCR on a resolution to bring APUS into compliance. At this time, we cannot predict when the compliance review will be completed, additional costs associated with compliance, whether there will be any further findings, or whether OCR will place any liability or other limitations on APUS as a result of the compliance review.
As a result of such enforcement action or as a result of new laws and regulations that require greater accessibility or accessibility in accordance with specific technical standards, our institutions may have to modify their online classrooms and other uses of technology to satisfy applicable requirements, which could require substantial financial investment. As with all nondiscrimination laws that apply to recipients of federal financial assistance, an institution may lose access to federal financial assistance if it does not comply with Section 504 requirements. In addition, private parties may file or threaten to file lawsuits allegingfailure to comply with laws that prohibit discrimination on the basis of disability.
Government and regulatory agencies and third parties may conduct compliance reviews, bring claims, or initiate investigations, enforcement actions, or litigationagainst us, any of which could disrupt our institutions’ operations and adversely affect their performance.
Our institutions are subject to audits, compliance reviews, inquiries, complaints, investigations, claims of noncompliance, enforcement proceedings, and lawsuits by government agencies, regulatory agencies, students, employees, and third parties, including claims brought by third parties on behalf of the federal government. For example, ED regularly conducts program reviews of educational institutions that are participating in Title IV programs, and ED OIG may conduct inspections, audits, and investigations of our institutions and certain of our third-party service providers.
In July 2023, ED began a program review of APUS’s administration of Title IV programs during the 2021-2022 and 2022-2023 award years that, among other things, includes a review of compliance with the 90/10 Rule. APUS has not yet received a program review report from ED. Accordingly, at this time, we cannot predict the outcome of the APUS program
review, when it will be completed, whether there will be any adverse findings in the resulting program review report, what findings there may be related to 90/10 Rule compliance, if any, or whether ED will place any liability or other limitations on APUS as a result of the review.
In addition, the Federal Trade Commission, or FTC, has investigated and, in some cases, brought lawsuits against for-profit institutions alleging that the institutions engaged in deceptive trade practices, and the Consumer Financial Protection Bureau, or CFPB, has sued for-profit institutions for engaging in allegedlyillegalpredatory lending practices. The FTC announced that it would be enhancing its enforcement cooperation with other agencies with oversight of educational institutions, including ED’s Office of Federal Student Aid and the Department of Veterans Affairs. Also in October 2021, ED announced that it had restored an Office of Enforcement within ED’s Office of Federal Student Aid to strengthen oversight of and enforcement actions against postsecondary institutions that participate in federal student loan, grant, and work-study programs. Any civil penalties or enforcement actions could have a material and adverse effect on our financial condition and results of operations.
If the results of compliance reviews or other proceedings are unfavorable to our institutions, or if they are unable to defendsuccessfullyagainstnegative regulatory or administrative actions, lawsuits, or claims, our institutions may be required to pay monetary damages or be subject to fines, limitations, loss of Title IV funding, injunctions, or other penalties, including the requirement to make refunds. Even if our institutions adequately address issues raised by a compliance review or successfullydefend a lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those reviews or to defendagainst those lawsuits or claims. Claims and lawsuits brought against us or one of our institutions may result in reputational damage, even if such claims and lawsuits are without merit, which could materially adversely affect our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our institutions, which may materially adversely affect our ability to operate.
Investigations by state Attorneys General, Congress, and governmental agencies into the company and other for-profit institutions may result in increased regulatory burdens and costs and may impact our reputation.
Regulatory investigations and civil litigation brought against other for-profit education institutions have attracted adverse media and social media coverage, have been the subject of federal and state legislative hearings, and have in some cases resulted in legislation or rulemaking. In some cases, institutions have ceased operations while under multiple government investigations. Broader allegationsagainst the overall for-profit school sector, including allegations of improper recruiting, compensation, and deceptive marketing practices, among other issues, have negatively affected public perceptions of for-profit education institutions, including our institutions, and this trend could continue or broaden. In addition, reports on student lending practices of various lending institutions and schools, including for-profit schools, and investigations by a number of state attorneys general, Congress, and governmental agencies have led to adverse media and social media coverage of postsecondary and for-profit education. Adverse media or social media coverage regarding others in our industry, or us or our institutions directly, could damage our reputation, could result in lower enrollments at our institutions, lower revenue, and increased expenses, and could have a negative impact on our stock price. Such allegations could also result in increased scrutiny and regulation by ED, Congress, accrediting bodies, state legislatures, state attorneys general, or other governmental authorities with respect to all for-profit institutions, including us and our institutions. State attorneys general may also take adverse positions on laws and apply them to institutions that offer wholly online education to students in the state. For these reasons or others, not-for-profit or public education institutions may act to differentiate themselves from the for-profit education institutions, including by choosing not to enter into collaborations with for-profit institutions, including us, or by excluding for-profit institutions from membership in industry groups. Similarly, some corporations have chosen and may in the future choose not to collaborate with for-profit providers such as us for programs for their employees or for other training purposes.
If we undergo a change in ownership or control, ED will place our institutions on provisional certification if they are not already on provisional status, and the terms of that provisional certification could limit our institutions’ potential for growth and adversely affect our institutions’ enrollment, our revenue, and results of operations.
As described more fully under “Business – Regulatory Environment – Regulatory Actions and Restrictions on Operations”, an institution whose parent undergoes a change in ownership resulting in a change of control loses its eligibility to participate in Title IV programs and must apply to ED in order to reestablish such eligibility. For example, as described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, ED imposed growth restrictions on RU, certain of which ED has released RU from, in connection with RU’s 2019 change in ownership and continued those restrictions after the Rasmussen Acquisition as part of RU’s provisional certification, with certain qualifications more fully described in “Business – Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “ – Student Financing Sources and Related Regulations/Requirements”. These growth restrictions have previously limited and could
adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students.
Future transactions could constitute a change in ownership or control under ED’s regulations and could cause ED to leave provisional certification in place for our institutions as required by the HEA. The conditions of provisional certification or heightened scrutiny by ED could impact, among other things, our institutions’ ability to add educational programs, or additional locations, our ability to acquire other institutions, or our ability to make other significant changes. In addition, if ED were to determine that our institutions were unable to meet their responsibilities while they were provisionally certified, as APUS and RU currently are, ED could seek to revoke our institutions’ certification to participate in Title IV programs with fewer due process protections than if they were fully certified. Limitations on our institutions’ operations could, and the loss of our institutions’ certification to participate in Title IV programs would also result in the loss of their ability to participate in TA programs, and would adversely affect our institutions’ enrollments, and our revenue and results of operations.
If regulators do not approve or delay their approval of transactions involving a change of control of APEI or its institutions that we own or acquire, our and our institutions’ ability to operate could be impaired.
If we or one of our institutions experiences a change of ownership or control under the standards of applicable state regulatory bodies, accrediting agencies, ED, or other regulators, we or the institution governed by such agencies must notify or seek the approval of each relevant regulatory agency. Transactions or events that constitute a change of control include significant acquisitions or dispositions of an institution’s common stock, significant changes in the composition of an institution’s Board of Directors, internal restructurings, acquisitions of institutions, including the Rasmussen Acquisition, or certain other transactions. Some of these transactions or events may be beyond our control. Our or our institutions’ failure to obtain, or a delay in obtaining, approval of any change of control from the relevant regulatory agencies following a transaction involving a change of ownership or control could result in a suspension of operating authority, loss of accreditation, or suspension, loss of ability to participate in Title IV programs or certain growth restrictions including with respect to adding locations and programs, which could have a material adverse effect on our institutions and our financial condition. Our failure to obtain, or a delay in receiving, any approval of any change of control from other states in which we are currently licensed or authorized could require our institutions to suspend activities in that state or otherwise impair our institutions’ operations. The potential adverse effects of a change of control could influence, among other things, future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance, or redemption of our stock. Growth restrictions that ED could impose as a result of change in ownership are more fully described in “Business – Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “– Student Financing Sources and Related Regulations/Requirements”.
Congress has in the past changed, and may in the future change, eligibility standards and funding levels for federal student financial aid programs, DoD TA, and other programs. Other governmental or regulatory bodies may also change similar laws or regulations relating to such programs, which could adversely affect our student population, revenue, and financial condition.
Title IV programs are made available pursuant to the provisions of the HEA. The HEA must be periodically reauthorized by Congress and each Title IV program must be funded through appropriations acts on an annual basis. We cannot predict whether, in what form, or when, HEA reauthorization legislation will be enacted. Modifications to the HEA could occur as part of reauthorization, which could require us to modify our business practices and increase administrative costs, thereby negatively impacting our results of operations.
Future Congressional action, including in reauthorizations or appropriations acts, may result in legislative changes that could adversely affect the ability of our institutions to participate in Title IV programs, TA, and the availability of such funding sources for our students. Members of Congress may propose legislation to alter or modify the terms under which our institutions participate in the federal student financial aid programs. Any action by Congress that significantly reduces funding for Title IV programs or the ability of our institutions or students to participate in these programs could materially harm our institutions’ business. A reduction in government funding levels could lead to lower enrollments at our institutions and require our institutions to arrange for alternative sources of financial aid for their students. Lower student enrollments at our institutions or their students’ inability to arrange alternative sources of funding could adversely affect our financial condition. Congressional action may also require our institutions to modify their practices in ways that could result in increased administrative and regulatory expenses.
We are not in a position to predict the extent to which, or whether, Congress may focus on for-profit education institutions or whether any particular legislation that could adversely affect the for-profit education sector will be passed by Congress or signed into law in the future. The reallocation of funding among Title IV programs, material changes in the
requirements for participation in such programs, or the substitution of materially different Title IV programs could reduce the ability of certain students to finance their education at our institutions and adversely affect our revenue and results of operations.
Failure to comply with the various federal and state laws and regulations governing HCN’s extended payment plan options could subject us to fines, penalties, obligations to discharge loans and other injunctive requirements.
HCN offers extended payment plan options designed to assist students with educational costs, including tuition and fees. The extended payment plan is subject to various federal and state laws and regulations, as discussed in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Additional Sources of Student Payments”. If we do not comply with these laws and regulations, we could be subject to fines, penalties, obligations to discharge loans and other injunctive requirements, which could have a material adverse effect on our financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate. Additionally, an adverseallegation, finding or outcome in any of these matters could also materially and adversely affect our ability to maintain, obtain or renew licenses, approvals or accreditation and maintain eligibility to participate in Title IV programs or serve as a basis for ED to discharge certain Title IV student loans and seek recovery for some or all of its resulting losses from us, either of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows, and result in the imposition of significant restrictions on us and our ability to operate.
Risks Related to Our Business
Our student registrations, revenue, and cash flow have been adversely impacted, and we could experience additional adverse impacts as a result of the Armed Forces’ TA processing system upgrades or a transition to new systems for service members to request TA or accessing VA education benefit programs.
APUS relies on the ability of the Armed Forces to process service members’ participation in TA programs, and, from time to time, changes to processes have impacted the ability of service members to participate in these programs. The Armed Forces use third-party service providers and systems to process service members’ TA requests, approvals, and the processing of payments to APUS. For example, in August 2022, the Army transitioned from an initial version of ArmyIgnitED with a third-party service provider to an upgraded ArmyIgnitED 2.0, with a new third-party service provider, and announced that all TA requests for courses would be required to be submitted via ArmyIgnitED 2.0. As part of this change, the Army stopped allowing institutions to submit invoices for a portion of 2022, which delayed our ability to collect on our accounts receivable and caused our accounts receivable to increase.
Difficulties associated with system upgrades or a transition to a new service provider, including the related data migration, could cause further disruption to service members’ ability to seek and obtain TA and to the processing of invoices and payments to APUS. We could experience similar challenges with any other system transitions undertaken by other branches of the DoD or the government. For example, in February 2025, the third-party service provider for the Army and Air Force experienced difficulties with routine system maintenance and upgrades resulting in an approximate two-week service outage. Additionally, VA has announced multi-year plans to upgrade systems used for veteran education benefits, and we have no assurance that upgrades will not disrupt veteran access to those benefits and our ability to collect on related accounts receivable. The inability of soldiers to participate in TA programs, or of veterans to access VA education benefit programs, or continued or additional limitations on their ability to apply and participate, would have an adverse effect on our results of operations and financial condition.
Economic and market conditions in the United States and abroad and changes in interest rates could affect our enrollments, success with placement and persistence and cohort default rates.
Our business has been and may in the future be adversely affected by a general economic slowdown, recession, or other adverse economic developments in the United States or abroad, including rising interest rates and inflation. Our institutions derive a significant portion of their revenue from Title IV programs, which include student loans with interest rates subsidized by the federal government. Additionally, some students finance their education through private loans that are not government subsidized. Historically low interest rates have in the past created a favorable borrowing environment for students. However, our students may have to pay higher interest rates on their Title IV program loans and private loans as a result of increases in interest rates. Increases in applicable interest rates could result in a corresponding increase in educational costs to our existing and prospective students, which could result in a reduction in our enrollment. Higher interest rates could also contribute to higher default rates with respect to our students’ repayment of their education loans. Higher default rates may in turn adversely impact our eligibility to participate in some Title IV programs, which could adversely impact our operations and financial condition. In
addition, inflation has resulted and, in the future, could result in increased costs of labor and materials, which could adversely impact our operations and financial condition.
Adverse economic developments, such as those that resulted from the COVID-19 pandemic, that affect the United States could also result in a reduction in the number of jobs available to our graduates and lower salaries being offered in connection with available employment, which, in turn, could result in declines in our success with placements and persistence. In addition, adverse economic developments could adversely affect the ability or willingness of our former students to repay student loans, which could increase our institutions’ student loan cohort default rates and require increased time, attention, and resources to manage these defaults. Our institutions’ students are able to borrow Title IV loans in excess of their tuition and fees. The excess is received by such students as a credit balance refund. However, if a student withdraws, our institutions must return any unearned Title IV funds (which may include a portion of the credit balance refund) and must seek to collect from the student any resulting amounts owed to the institution. A protracted economic slowdown could negatively impact such students’ abilities to pay unpaid balances due us, including debts that result from returns of unearned Title IV amounts. As a result, the amount of Title IV funds we would have to return without repayment from our institutions’ students could increase, and our financial results could suffer.
Our business could be harmed if our institutions experience a disruption in their ability to process Title IV financial aid.
We collected a substantial portion of our fiscal year 2025 consolidated revenue from receipt of Title IV financial aid program funds. Any processing disruptions by ED, by our institutions, or by third-party service providers may impact the ability of our institutions’ students to obtain Title IV financial aid on a timely basis. If our institutions experience a disruption in their ability to process Title IV financial aid, either because of administrative challenges on their part or the part of their vendors, or the inability of ED to process Title IV funds on a timely basis, it could have a material adverse effect on our institutions’ business and on our financial condition, results of operations, and cash flows. If our institutions experience a disruption in their ability to process Title IV financial aid because of administrative challenges on their part or the part of their vendors, ED could require that our institutions become subject to payment methods for Title IV programs that are not the advance payment system, which could have a material adverse effect on our institutions’ cash flows.
The planned combination of APUS, RU, and HCN may not be completed, or may not be completed on the terms or timeline currently contemplated, and if it is, the expected benefits may not be realized, any of which could have a material adverse impact on our business, financial condition, and results of operations.
As discussed in greater detail under “ Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN”, on January 28, 2025, we announced the Combination, which will result in one combined institution named American Public University System comprised of two divisions named (i ) APU Global, comprised of AMU and APU, and (ii) RU Health+, comprised of RU’s campus-based and online nursing programs, RU’s healthcare programs, HCN’s campus-based nursing and healthcare programs, and RU’s non-healthcare programs. As a result of the process change described under “ Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN” , APUS and RU submitted a new joint application for Change of Control, Structure or Organization to HLC in September 2025 containing substantially the same information that had been submitted previously and reflecting the two-step process. In February 2026, HLC approved the continuation of accreditation of APUS and RU after the legal entity merger with an acknowledgment that the intent is to eventually consolidate the three institutions into one HLC accreditation. ABHES has also informed HCN that it will continue HCN’s ABHES accreditation after the legal entity merger. On March 2, 2026, we completed the merger of the legal entities that own and operate APUS, RU, and HCN with the APUS entity surviving the merger, and subsequently notified ED that the merger occurred and resulted in RU and HCN being directly owned by the same legal entity that directly owns APUS. We currently expect to complete implementation of step two of the Combination in the third quarter of 2026, but there can be no assurances of this timing. We may experience challenges with respect to maintaining and increasing student enrollments, delays, business disruption, increased costs, including from lost synergies, negative market reaction to the announcement and planning for the Combination, and other challenges during or following the Combination, which could adversely affect our business, financial condition, and results of operations. We may also experience challenges in attracting, retaining, and motivating key personnel during the pendency of the Combination and following its completion, which could harm our business. In addition, the Combination will require substantial management attention and could detract attention from our and our institutions’ day-to-day business operations, which may disrupt our ongoing business and may adversely impact relationships with students, employees, and other counterparties .
In addition, APUS, as the surviving institution, will need to obtain required approvals from state agencies, including state boards of nursing, in order to operate in the states where HCN and RU currently operate. There can be no assurance that APUS will obtain the required state and ED approvals, including ED approval to expand APUS’s Title IV certification to
encompass the RU and HCN programs and location, nor can there be any assurance that APUS will obtain those approvals on a timely basis. If required approvals and accreditation are not obtained, we may not be able to complete the Combination. If we are not able to complete the Combination, or to complete it in a timely fashion, or if there is a negative reaction from students, employees, or other material stakeholders, our reputation, business, results of operations, and our ability to comply with regulatory requirements may be materially adversely impacted.
Business combinations and acquisitions may be difficult to integrate, disrupt our business, dilute stockholder value, or divert management attention, and we may not realize the expected benefits of any consummated business combinations or acquisitions.
From time to time, we explore or enter into business combinations and acquisitions, which are typically accompanied by a number of risks, including:
• failure to consummate or delay in consummating the transactions;
• lack of understanding of the target business;
• unrealistic expectations for the benefits of the acquisitions or underestimation of the difficulties and costs of integration and impact on cash flow;
• failure to achieve anticipated transaction benefits or projected financial results and operational synergies;
• difficulties consolidating operations and integrating financial, information technology and other systems, as well as challenges in maintaining uniform, effective, or compliant standards, controls, policies, and procedures, including financial reporting procedures;
• disruption or termination of relationships with students or business partners;
• distraction of management’s and other key personnel’s attention from normal business operations during the acquisition and integration processes;
• inability to obtain, or delay in obtaining, approval of the acquisition from the necessary regulatory agencies, or the imposition of operating restrictions or a letter of credit requirement on us or on the acquired institution;
• expenses associated with the integration efforts;
• increased costs of strategic transactions as a result of recent inflation and higher interest rates;
• adverse tax or accounting impact; and
• unidentified issues not discovered in the due diligence process, including legal and regulatory contingencies.
Any inability to integrate completed acquisitions in an efficient and timely manner could have an adverse impact on our results of operations. Further, many acquisitions result in the acquirer recording goodwill. If any acquisitions for which we record goodwill are not successful or experience challenges, that goodwill may become impaired and have an adverse impact on our results of operations.
The Rasmussen Acquisition was, and our acquisition of any other educational institution would also likely be, considered a change in ownership and control of the acquired institution under applicable regulatory standards. For the Rasmussen Acquisition, we needed, and for any such acquisition, we would need approval from ED, and we would need to notify or obtain approval from applicable state agencies and accrediting agencies, and possibly other regulatory bodies, to the extent those agencies or bodies require such actions. A number of these approvals can only be requested after completion of an acquisition. Our inability to obtain such approvals with respect to a completed acquisition could have a material adverse effect on our business, financial condition, results of operations, and cash flows. If we are not successful in completing acquisitions, we may incur substantial expenses and devote significant management time and resources without a productive result. In addition, future acquisitions could result in dilutive issuances of securities or could require use of substantial portions of our available cash, or issuances of debt or equity, as in connection with the Rasmussen Acquisition, which could adversely affect our financial condition.
We may not be able to achieve the anticipated benefits of any future acquisition, including cost savings and other synergies and growth opportunities, during the anticipated time frame, or at all, as has occurred to an extent with respect to the Rasmussen Acquisition. For example, events outside our control, such as changes in regulation and laws, public health crises and disease epidemics and pandemics, and economic trends, could adversely affect our ability to realize the expected benefits. An inability to realize in full anticipated benefits of any future acquisition could have an adverse effect on our revenue, results of operations, and level of expenses, which may adversely affect the value of our common stock.
We rely on third-party vendors whose service may be of lower quality than ours, whose responsiveness may be less timely than ours, and whose compliance practices may increase our operational and compliance risk.
We rely on third-party vendors to provide certain services to our institutions and their students primarily related to information technology services, our learning management system, our integrated curriculum and testing services, and financial aid processing, and we may rely more heavily on such vendors, particularly through cloud computing services, in the future. While we monitor and assess vendor service, it is possible that the quality of service and the timeliness of vendor responses may be less than the service and responsiveness that we or our institutions would provide. In addition, the transition of services to new third-party vendors may take longer than expected or pose other operational challenges. Using third-party vendors increases compliance risk that the vendors may not adequately protect personal information, or that they may not comply with applicable federal or state regulations. In the event that third-party vendors fail to provide services or provide inadequate services, lack adequate business continuity planning, or fail to provide necessary implementation or transition services, our financial condition and results of operations could be adversely affected. See also the Risk Factor with the caption beginning “Significant system disruptions to our computer networks, technology infrastructure, or online classroom infrastructure, or to the networks, infrastructure, and systems, or business of third parties….”
There can be no guarantee that our business will generate sufficient cash flow from operations or that future capital or borrowings will be available to us in an amount sufficient to enable us to fund our other liquidity needs.
Although we believe our cash flow from operations and our existing cash and cash equivalents will provide adequate funds for ongoing operations, debt and interest obligations, and planned capital expenditures for the next 12 months and the foreseeable future, our future capital requirements, and our ability to generate sufficient cash to fund our future operations will depend on a number of factors. Our business may not generate sufficient cash flow from operations, and future capital or borrowings may not be available to us in an amount sufficient to enable us to service our indebtedness or fund our other liquidity needs. Failure to achieve business performance consistent with our expectations, to address any downtrends in enrollments, including as a result of regulatory action, or any government shutdown could adversely impact our cash flows and results of operations. In addition, our efforts to comply with the 90/10 Rule, including APUS’s change to its billing approach to delay invoicing for TA and the Combination, could lead us to reduce enrollments, require us to make expenditures, or result in other outcomes that would reduce our existing cash available for operations.
We have incurred indebtedness under our credit agreement, the cost of servicing that debt could adversely affect our business and financial results, and we may not be able in the future to service that debt.
Our ability to make scheduled payments required under our credit agreement will depend on our financial and operating performance, which will be affected by economic, financial, competitive, business, and other factors, some of which are beyond our control. The indebtedness we incurred in connection with the Rasmussen Acquisition requires us to dedicate a portion of our cash flow to servicing this debt, thereby reducing the availability of cash to fund other business initiatives. There can be no assurance that our business will generate sufficient cash flow from operations to service our indebtedness. If we are unable to meet our debt obligations or fund our other liquidity needs, we may need to restructure or refinance all or a portion of our indebtedness on or before maturity or sell certain of our assets. There can be no assurance that we will be able to restructure or refinance any of our indebtedness on terms favorable to us or commercially reasonable terms, if at all, which could cause us to default on our debt obligations and impair our liquidity. In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness. If we are unable to generate or borrow sufficient cash to make payments on our indebtedness, our business and financial condition would be materially harmed. For more information, see the Risk Factor that begins with the caption “If one or more of our institutions does not comply...”
We may need additional capital in the future, but there is no assurance that funds will be available on acceptable terms.
We may need additional capital in the future for various reasons, including to finance business acquisitions, to make investments in technology, or to achieve growth or fund other business initiatives. There is no assurance that capital will be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders. Additionally, any securities issued to raise capital may have rights, preferences, or privileges senior to those of existing stockholders. If adequate capital is not available or is not available on acceptable terms, our and our institutions’ ability to expand, develop or enhance services or products, or respond to competitive pressures, will be limited.
Our access to capital markets and sourcing for additional funding to expand or operate our business is subject to market conditions. Credit concerns regarding the for-profit postsecondary education industry as a whole also may impede our access to capital markets. If we are unable to obtain needed capital on terms acceptable to us, we may have to limit strategic initiatives or take other actions that materially adversely affect our business, financial condition, results of operations, and cash flows.
If our institutions fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our institutions may lose the ability to participate in Title IV programs or DoD TA programs or have participation in these programs conditioned or limited.
Our institutions must maintain systems and processes to identify and prevent fraudulent applications for enrollment and financial aid. We cannot be certain that our institutions’ systems and processes will continue to be adequate in the face of increasingly sophisticated fraud schemes, or that we will be able to expand such systems and processes at a pace consistent with the changing nature of these fraud schemes. Our institutions, in particular APUS and RU online programs, have been the target of fraudulent and abusive activity, including related to Title IV program funds. We believe the risk of outside parties attempting to perpetratefraud in connection with the award and disbursement of Title IV program funds at APUS and RU online, including as a result of identity theft, is heightened due to its being an online education provider and their relatively low tuition.
ED requires institutions that participate in Title IV programs to refer to ED OIG credible information about fraud or other illegal conduct involving Title IV programs, and in the past our institutions have referred to the OIG information with respect to potential fraud by applicants and students. If the systems and processes that our institutions have established to prevent and detect fraud are inadequate, ED may find that our institutions do not satisfy ED’s administrative capability requirements, which could have the adverse effects described in the Risk Factor captioned “A failure to demonstrate administrative capability may result in the loss of eligibility to participate in Title IV programs”. In addition, our institutions’ ability to participate in Title IV programs and TA is conditioned on maintaining accreditation by an accrediting agency that is recognized by ED. Any significant failure to adequately prevent and detect fraudulent activity related to student enrollment and financial aid could cause our institutions to fail to meet their accreditors’ standards. Furthermore, accrediting agencies that evaluate institutions offering online programs must require such institutions to have processes through which the institution establishes that a student who registers for such a program is the same student who participates in and receives credit for the program. Failure to meet the requirements of our institutions’ accrediting agencies could result in the loss of accreditation of one or more of our institutions, which could result in their loss of eligibility to participate in Title IV programs, TA, or both.
If we are unable to attract, retain, and develop skilled personnel and management, our business and growth prospects could be severelyharmed, and changes in management could cause disruption and uncertainty.
We must attract, retain, and develop highly qualified faculty, management, administrators, and other skilled personnel to our institutions. We strive to retain our talent and closely track retention among our employees, both faculty and non-faculty staff. We need to ensure effective succession for key executive and employee roles in order to meet the growth, development, and profitability goals of our business. Hiring competition may be intense, especially for faculty in specialized areas and qualified executives, and in areas such as information technology and finance. We also believe that current job market dynamics, including low unemployment, have further increased the challenge of hiring and employee retention.
Certain markets continue to experience challenges in attracting and retaining qualified nursing faculty, which may influence our ability to staff programs across our nursing and healthcare‑focused institutions. Ensuring a stable, qualified nursing faculty base is essential for our institutional success and sustainability. If faculty‑to‑student ratios fall below desired levels, we may consider initiatives such as adjusting admissions standards or limiting cohort sizes to help maintain a strong learning environment, support student satisfaction and success, and continue improving NCLEX outcomes. While these steps are intended to protect program quality, they may also affect overall enrollment.
Any failure to develop and maintain a positive culture and strong employee morale or to continue fostering the growth and development of our personnel, including through the use of staff performance evaluation systems and processes, training and professional development opportunities, and changes in faculty oversight, could have a material adverse effect on our business and results of operations. In addition, to the extent our leaders behave in a manner that is not consistent with our values, such as leading with integrity, we could experience significant impact to our brand and reputation, as well as to our culture. Hiring and retention may also depend on our ability to build and maintain a workplace culture that enables our employees to thrive. We are investing resources into supporting the development of our leaders and in engaging our employees through meaningful employee engagement efforts and councils.
We must manage leadership development and succession planning throughout our business. We have had executive officers retire or otherwise depart our company over the last several years and we continually evaluate our leadership structure, including in connection with anticipated departures. To the extent that we lose experienced personnel, it is critical that we develop other employees, hire new qualified personnel, and successfully manage the transfer of critical knowledge. Management turnover and vacancies may negatively impact operations, morale, and our ability to execute. While we have processes in place
for management transition and the transfer of knowledge, the loss of key personnel, coupled with an inability to adequately train other personnel, hire new personnel, or transfer knowledge, could significantly impact our business and results of operations.
While we seek to attract and retain high-caliber talent, including through various human resources programs and what we believe are competitive market compensation and benefits practices, our efforts may not be successful. If we fail to attract new faculty, management, administrators, or skilled personnel or fail to retain, develop, and motivate our existing faculty, management, administrators, and skilled personnel, our institutions and our ability to serve our students, acquire new students, expand our programs, open new locations, make investments or acquisitions, and update or enhance our technology could be severelyharmed, and changes in management could disrupt our business and cause uncertainty.
We may not achieve the anticipated benefits of our cost savings initiatives, including reductions in force, any benefits may be offset by increased costs in other areas.
We have in the past and may in the future conduct headcount reductions or other cost savings activities. For example, as a result of the 2025 Shutdown, we implemented various cost savings measures, including a reduction in force, hiring freeze, and reduction in travel and discretionary costs, among other activities, There can be no assurance that we will recognize the benefits we anticipate from these initiatives. Some cost savings realized may be offset by increases to wages and salaries and benefits necessary to remain competitive, or by additional hiring if we determine it is necessary, or other costs. Reductions in force may also result in increased costs, as opposed to cost savings, including due to associated legal risks, and could distract management and employees. Headcount reductions, including together with previous headcount reductions, could also adversely affect employee morale and make it more difficult to hire and retain qualified personnel. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Reductions in Force” and “– U.S. Federal Government Shutdown” for more information.
Our limited ability to obtain exclusive proprietary rights and protect our intellectual property, as well as disputes we may encounter from time to time with third parties regarding our use of their intellectual property, could harm our operations and prospects.
In the ordinary course of business, our institutions develop intellectual property of many kinds that is or will be the subject of patents, copyrights, trademarks, service marks, domain names, agreements, and other registrations. Our institutions rely on agreements under which we obtain rights to use course content developed by faculty members and other third-party content experts.
We cannot ensure that any measures we and our institutions take to protect our intellectual property or obtain rights to the intellectual property of others will be adequate, or that we have secured, or will be able to secure, appropriate protections for all of our institutions’ proprietary rights in the U.S. or foreign jurisdictions, or that third parties will not infringe upon or violate the proprietary rights of our institutions. Despite our efforts to protect these rights, third parties may attempt to develop competing programs or copy aspects of our institutions’ curriculum, online resource material, quality management, and other proprietary content. Any such attempt, if successful, could adversely affect our institutions’ business. Protecting these types of intellectual property rights can be difficult, particularly as it relates to the development by our institutions’ competitors of competing courses and programs.
Our institutions may encounter disputes from time to time over rights and obligations concerning intellectual property and may not prevail in these disputes. Third parties may raise a claim against our institutions alleging an infringement or violation of their intellectual property. Some third-party intellectual property rights may be extremely broad, and it may not be possible for our institutions to conduct operations in such a way as to avoid disputes regarding those intellectual property rights. Any such dispute could subject our institutions to costlylitigation and impose a significant strain on our financial resources and management personnel regardless of whether that dispute has merit. Our insurance may not cover potential claims of this type adequately or at all, and our institutions may be required to alter the content of their courses or pay monetary damages, which may be significant.
We may incur liability for the unauthorized duplication or distribution of course materials posted online for course discussions.
In some instances, our institutions’ faculty members or students may post various articles or other third-party content online in course discussion boards or in other venues. The laws governing the fair use of these third-party materials are imprecise and adjudicated on a case-by-case basis, which makes it challenging to adopt and implement appropriately balanced institutional policies governing these practices. Third parties may raise claimsagainst us, our institutions, or our institutions’ faculty members or students for the unauthorized duplication of this material. Any such claims could subject us and our institutions to costly
litigation, impose a significant strain on financial resources and management personnel, and harm our institutions’ reputations and relationships with members of the military and government, regardless of whether the claims have merit. Our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages and our institutions may be required to alter the content of their courses.
We rely on dividends, distributions and other payments, advances, and transfers of funds from our operating subsidiaries to meet our obligations and to fund acquisitions and certain investments.
We rely on dividends, distributions and other payments, advances, and transfers of funds from our operating subsidiaries to meet our obligations and to fund acquisitions and certain investments and generate all of our operating income through our subsidiaries. The ability of our operating subsidiaries to pay dividends or to make distributions or other payments to us depends on their respective operating results and may be restricted by, among other things, the laws of their respective jurisdictions of organization, regulatory requirements such as obligations to maintain certain restricted cash or post letters of credit, financial performance, accreditation requirements, agreements entered into by those operating subsidiaries, and the covenants of any future obligations that we or our subsidiaries may incur. For example, due to financial performance, RU did not pay a distribution in 2023 and 2024, and HCN has not paid a dividend since 2019. If our operating subsidiaries are unable to pay dividends or make other payments or distributions, and we are instead required to fund their operations, or we are otherwise required to keep capital in these operating subsidiaries, then our business, financial condition, and results of operations could be materially adversely impacted.
Legal proceedings, particularly class action lawsuits, may require human and financial resources, distract our management, and negatively affect our reputation and results of operations.
From time to time, we and our institutions have been and may be involved in various legal proceedings. We have observed litigation brought against for-profit schools, including class actions brought by students and prospective students based on allegedmisrepresentations about a school’s programs, “qui tam” lawsuits, investigations by state attorneys general into for-profit postsecondary education institutions, and compliance reviews or similar proceedings brought by regulatory agencies, which are described above under the heading “Risks Related to the Regulation of Our Industry”. Even if we are able to successfullydefendagainst lawsuits or claims, such matters can be time-consuming, require significant human and financial resources to investigate and respond to claims brought in any future litigation, and may divert management’s attention from operating our business. Furthermore, such matters are unpredictable and could lead to larger payments or liabilities, including adverse regulatory action, monetary damages, fines, limitations, loss of Title IV funding, injunctions, or other penalties, including the requirement to make refunds, and, as a result, negatively affect our results of operations.
Risks Related to Our Technology Infrastructure
We have expended, and need to continue to expend, time, money, and resources into our and our institutions’ information technology, which may place a strain on our operational capacity and budgets that could adversely affect our systems, controls, and operating efficiency, and those of our institutions.
We have invested and need to continue to invest capital, time, and resources to update and innovate our information technology, including our hardware and student-facing systems, in response to market conditions and evolving user expectations. These investments have included and may in the future include replacing legacy infrastructure, introducing new digital capabilities, and integrating acquired systems. For example, in April 2024, APUS announced its plan to expand its reach to become a global digital university that integrates emerging technology and enhanced teaching and learning opportunities for faculty and students. We have also made investments to integrate the technology system of RU in recent years. In addition, as discussed in greater detail in “Business – Information Technology”, in 2026, we plan to begin implementing significant changes to or replacing certain core student information and services platforms of APUS, RU, and HCN. We will likely make similar investments for any other business we may acquire in the future and the Combination.
Our efforts to maintain, improve, and replace information technology systems may not be successful, may cost more than expected, may increase our level of spending, not all of which can be capitalized, may take longer than expected or require us to devote more of our information technology resources than expected, or may otherwise disrupt our operations or adversely affect our financial condition. Furthermore, hardware, software, and instructional technologies may become outdated faster than anticipated, requiring more frequent upgrades or replacements. As a result of replacing outdated hardware, software, technologies, or other technology-related assets, we have in the past had, and may in the future have, assets that become impaired, which may increase our risk of a cybersecurity incident. Also, the nature and age of our current information technology may limit our business opportunities if we are unable to improve and replace technology-related assets or information technology systems successfully or at all. Faculty, staff, or students may resist changes to current technologies or fail to use
newly adopted technologies effectively. In addition, failure to address poor data quality and integrity as well as a lack of consistency and standardization in defining, collecting, managing, using, and storing data may adversely affect our business and results of operations and may subject us to complex legal or contractual obligations. Furthermore, we may leverage technology systems that are subject to evolving federal, state, and international privacy, accessibility, and data protection laws, which may increase costs and complexity and subject us to regulatory scrutiny and civil litigation.
If we are unable to expand or update the capacity of our institutions’ technology resources appropriately, their ability to support future growth, attract or retain students, and our financial condition and results of operations could be adversely affected. Even if capacity is expanded or updated, higher levels of spending may still negatively impact our financial condition and results of operations.
Significant system disruptions to our computer networks, technology infrastructure, or online classroom infrastructure, or to the networks, infrastructure, systems, or business of third parties, could negatively impact our ability to generate revenue and could damage our reputation, limiting our ability to attract and retain students.
The performance and reliability of our and our institutions’ networks and technology infrastructure, including those of third parties’ systems we use or rely on, is critical to our operations and our institutions’ reputation and ability to attract and retain students. Any system error or failure, including as a result of outages and other difficulties that may result from having or relying on outdated systems or infrastructure, or a sudden and significant increase in bandwidth usage, could interrupt our or our institutions’ ability to operate and could result in the unavailability of our online classrooms, preventing students from accessing their courses and adversely affecting our results of operations. In addition, our institutions’ technology infrastructure, and the technology infrastructure of our third-party vendors, could be vulnerable to interruption or malfunction due to events beyond our control, including natural disasters, cyber-attacks, mistakes or malfeasance by our workforce, terrorist activities, and telecommunications failures, as well as our own failure to fully develop or test our business continuity and disaster recovery plans.
At APUS, PAD has been predominantly developed in-house, with limited support from outside vendors. To the extent that we have utilized third-party vendors to provide certain software products for our systems, we have generally needed to integrate those products into, and ensure that they function with, PAD. We continuously work on upgrades to modernize the architecture of PAD, and our employees devote substantial time to its development and to the successful integration of third-party products into PAD. To the extent that we face system disruptions, malfunctions or vulnerabilities with PAD or the failure of PAD to meet internal or industry standards, or lose employees with experience on our systems, we may not have the capacity to address such disruptions, malfunctions, vulnerabilities, or failures or to continue to administer or make adequate modifications to PAD with our internal resources, and we may not be able to identify outside contractors with expertise relevant to our custom system.
We rely on third parties for certain information technology capabilities. We use third-party services such as cloud computing and software-as-a-service for certain aspects of our operations, and a managed service provider for certain services, including service desk, student support, and other student-facing technology functions, end-user support, and network management and operations, and are reliant on the capabilities of the third parties for such functions. Reliance on these providers exposes us to risks inherent in outsourced relationships, including reduced control over systems and processes, potential service disruptions, delays in cybersecurity incident response, and challenges in maintaining consistent service quality. These third parties may take actions beyond our control or experience financial, organizational, or other disruptions that could adversely affect our access to their services, delay or otherwise impact our ability to address cybersecurity incidents, or increase costs, including by discontinuing or limiting our access to their platforms, modifying or interpreting their terms of service or other policies in a manner that impacts our ability to run our business and adversely impacts our operations, or providing us with quality or speed of service that does not meet our expectations, standards, or needs or those of our students or employees. Differences between our cybersecurity practices and standards, and those of our third-party service providers may increase the likelihood of cybersecurity incidents. If a third party’s controls, monitoring, or incident response procedures are inadequate or misaligned with our practices and standards, threats may not be detected or contained in a timely manner. Moreover, if a third-party service provider fails to perform as expected, including with respect to contractual service-level obligations, or if services cannot be transitioned to alternative providers cost effectively in a timely manner, our operations, reputation, and results of operations could be adversely affected. There is no assurance that we will renew, or be able to renew, contracts with third parties that are subject to expiration or that any renewals will be on the same or substantially similar terms or on conditions that are commercially reasonable to us. Any transition of third-party services, whether to another vendor or directly to us or our institutions, could be difficult to implement and cause us to incur significant time and expense. Reliance on a managed service provider may also expose us to service pricing increases or vendor financial instability. In addition, changes in the scope, pricing, or availability of outsourced services, or the termination or non-renewal of a provider agreement, could require us to incur significant transition costs or implement interim solutions that may not fully meet operational needs. Any significant downtime
or other interruption or disruption of these services, whether due to cyber-attacks, other cybersecurity incidents, or other causes, could adversely impact our operations and our business.
Any significant interruption in the operation of our or our vendors’ data centers or server rooms could cause a loss of data. Even with redundancy, a significant interruption in the operation of these facilities or the loss of institutional and operational data due to a natural disaster, fire, power interruption, act of terrorism, or another unanticipatedcatastrophic event, including as a result of climate change, may not be preventable. Any significant interruption in the operation of these facilities, including an interruption caused by the failure to successfully expand or upgrade systems, or to manage transitions and implementations, or a failure by us or our partners to promptly activate and execute our business continuity and disaster recovery plans could reduce the ability to manage network and technological infrastructure, which could adversely affect our institutions’ operations and reputations. Additionally, our institutions do not necessarily control the operation of the facilities hosting our technology infrastructure and may be required to rely on other parties to provide physical security, facilities management, and communications infrastructure services. If any third-party vendors encounter financial difficulties or other events beyond our control occur that cause them to fail to adequately secure and maintain their facilities or provide necessary connectivity or capacity, our institutions and their students may experience interruptions in service or the loss or theft of important data, which could adversely affect our financial condition.
Cybersecurity incidents could compromise sensitive information, including personal information, and cause system disruptions and significant damage to our business and reputation.
We process and maintain on our network systems certain information that is confidential, proprietary, personal, or otherwise sensitive, including financial and confidential business information. Our computer networks, and the networks of our third-party vendors or other third parties on which we rely, may be vulnerable to, without limitation, unauthorized access, social engineering (including phishing), cyber-attacks (including ransomware, malware attacks, unauthorized access attempts, and denial of service and other unintentional intrusions or malicious cyber-attacks), computer viruses, and other interruptions, fraudulent schemes, or cybersecurity incidents, including vulnerabilities in software and software code. Cybersecurity incidents may be caused by a third party, including individuals or highly sophisticated organizations, or by employee error, negligence, or fraud. An individual or group, either internal or external, that circumvents security measures or exploitsvulnerabilities could misappropriate confidential, proprietary, or personal information or cause interruptions or malfunctions in operations. In addition, errors in the storage, use, or transmission of confidential, proprietary, personal, or otherwise sensitive information, errors with our network systems or those on which we rely, or intentional or unintentionaldisruption to or misuse, corruption, or loss of such information could impact student or employee privacy. Furthermore, these incidents could impact our or our institutions’ ability to operate and could result in the unavailability of our online classrooms, preventing students from accessing their courses, and adversely affecting our results of operations. Our network systems and the systems maintained by our third-party providers have been subject to attempts to gainunauthorized access and other system disruptions, although to date no such incidents have been material to us, and these and similar incidents could happen again. It may be difficult to anticipate or to promptly detect such incidents, the scope of such incidents and the damage caused thereby, and we may not yet be aware of, or know the scope of and damage caused by, prior incidents. Due to the complexity and interconnectedness of our network systems, and those upon which we rely, the process of upgrading or patching our protective measures could itself create a risk of cybersecurity issues or system disruptions for us, as well as for educational institutions who rely upon, or have exposure to, such network systems. If we or third parties with which we engage for critical business processes or with access to our network systems, or to confidential, proprietary, personal, or otherwise sensitive information experience cyber-attacks or cybersecurity incidents in the future or we learn of a past cybersecurity incident that we or third parties have experienced, we may be required to expend significant resources to investigate, remediate, recover from, disclose these incidents, or to address resulting regulatory scrutiny or investigations, including as a result of a failure to disclose the incident to the extent required by law or in a timely fashion, litigation, misstated or unreliable data, or other impacts. Such incidents and failures could result in imposition of penalties, disruption to our operations, damage to our reputation, or damage to our network systems or sensitive information, any of which could have a material adverse effect on our business and financial condition. Our increased use and reliance on cloud computing could expose us to additional risks. While our contractual arrangements with third-party providers such as cloud computing vendors include provisions requiring the protection of information, we cannot control these vendors or their systems and cannot guarantee that an incident will not occur in the future.
We use external vendors to perform security assessments on a periodic basis to review and assess our information security. We utilize this information to audit ourselves, monitor the security of our technology infrastructure, and assess whether and how to prioritize the allocation of resources to protect data and systems. However, we cannot ensure that these security assessments and audits will identify or appropriately categorize all relevant risks or result in sufficient protection of our computer networks against cyber-attacks and other cybersecurity incidents. Similarly, although we require our third-party vendors contractually to maintain a level of security that is acceptable to us and work closely with vendors to address potential and actual security concerns and attacks, we cannot ensure that they will protect confidential, proprietary, personal, or otherwise
sensitive information on their systems. Incidents at third-party vendors or other third parties on which we rely may also affect us. System disruptions and cybersecurity incidents affecting our online computer networks, technology infrastructure, or online classroom infrastructure, or to the networks, infrastructures, and systems of third parties could have an adverse effect on our financial condition. While we may be entitled to damages if our third-party service providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
We face an ever-increasing number of threats to our computer network systems, including unauthorized activity and access, malicious penetration, system viruses, ransomware, phishing, other malicious code and vulnerabilities in software and software code and cyber-attacks, including individual or organized cyber-attacks. Any of these threats could impact our security and disrupt our systems. These risks increase when we make changes to our network systems or implement new ones. Our size makes us a prominent target for hacking and other cyber-attacks within the education industry. From time to time, we experience security events and incidents, and these reflect an increasing level of sophistication, organization, and innovation. We have devoted and will continue to devote significant resources to the security of our computer systems, but they may still be vulnerable to these threats and may subsequently be deemed to have been inadequate by regulators or courts. Threat actors may use AI tools to automate and enhance cybersecurity attacks against us. We employ measures designed to detect cybersecurity threats, including AI-based tools, but these threats could become more sophisticated and harder to detect, which may pose significant risks to the security of our information systems and data. Further, the lack of prescriptive measures in data security and cybersecurity laws could contribute to any such regulator or court findings of inadequacy. Although we maintain insurance in respect of these types of events, there is no assurance that available insurance proceeds would be adequate to compensate us for damages sustained due to these events. Increased regulation of data collection, use, and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, including changes in interpretation, enactment of new laws and regulations, and increased enforcement activity could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm us.
Failure to comply with privacy laws or regulations could have an adverse effect on our business.
As discussed in greater detail in “Business – Regulatory Environment – Student Financing Sources and Related Regulations and Requirements – Department of Education – Other Department of Education and Privacy Regulation”, various federal, state, and international laws and regulations govern the collection, use, retention, sharing, and security of personal information, including student, faculty, alumni, and consumer data. These laws could be applied in a manner that results in costs, the imposition of fines and operational conditions on our business. In addition, this area of the law and interpretations of applicable laws and regulations differ and are evolving. State and federal legislatures in the United States and countries globally have been enacting and considering new legislation. These evolving laws and interpretations are difficult to predict, may impose conflicting or unclear obligations, and could adversely impact our business, including, without limitation, by increasing compliance costs, by for example, restricting use or sharing of consumer data, including for marketing or advertising purposes. Claims of failure by us or third parties who process data on our behalf to comply with our institutions’ privacy policies, public statements regarding our handling of personal information, or applicable federal, state, and international laws or regulations could form the basis of governmental or private-party actions against us. Such claims and actions may cause damage to our institutions’ reputation and could have an adverse effect on our financial condition. The enactment of additional privacy and data security laws or amendments to existing laws could result in significant costs and require us to change some of our business practices.
Increased use of AI may present operational, reputational, legal, regulatory, and competitive risks and could result in additional costs, each of which could materially and adversely affect our business, financial condition, and results of operations.
Our increased use of AI may present operational, reputational, legal, regulatory, and competitive risks and could result in additional costs, each of which could materially and adversely affect our business, financial condition, and results of operations.
We are making investments in the use of AI across our business, with plans to increase our use of systems and tools that incorporate AI-based technologies for students, employees, faculty, and staff. We are implementing AI governance structures, policies, and safety controls to promote security and responsible use, but these measures may not fully mitigate the risks associated with rapid adoption of AI. AI is an emerging technology and, as such, presents the following inherent risks:
• Other postsecondary institutions may more successfully and quickly integrate AI as a means to facilitate business growth, reduce operating expenses, and improve the student experience, which may result in our reduced ability to attract or retain students, faculty, and staff.
• We may be unable to implement AI technologies in a cost-effective manner or in a manner that appeals or is satisfactory to current or prospective students relative to other postsecondary institutions.
• AI may hallucinate or be error-prone, demonstrate biases or discriminatory practices and responses, and its use may result in other perceived or actual legal, compliance, privacy, security, and ethical risks.
• Due to evolving regulatory conditions and related compliance obligations and otherwise, we may be unable to develop or maintain effective policies and provide adequate training regarding proper use of AI, which could lead to misuse by employees, faculty, and staff. AI may also subject to misuse by students.
• Although AI technologies may help provide more personalized learning experiences, its use in this manner, and the associated risks, including the risks of increased plagiarism, cheating, and academic integrity, is subject to ongoing debate in the education industry.
• The use of AI technologies may make us more susceptible to cybersecurity incidents, including those affecting personal or confidential information, and such incidents may be more complicated to discover due to the nature of AI.
• Compliance with new or changing laws, regulations, and industry standards related to AI may impose significant operational costs and may limit our ability to develop, deploy, or use AI technologies.
• We have and may continue to communicate externally regarding AI-related initiatives, which subjects us to the risk of allegations of inaccurate or misleading statements regarding our ability to avail ourselves of the potential benefits of AI technologies.
• Any disruption or failure of our AI systems, tools, or supporting infrastructure could adversely impact our operations.
Some or all of the foregoing risks could result in additional costs, subject us to regulatory action or increased regulatory scrutiny, litigation, reputational harm, or other liability, and could materially and adversely affect our business, financial condition, reputation, and results of operations.
Risks Related to Owning our Common Stock
The price of our common stock may be volatile, and as a result returns on an investment in our common stock may be volatile.
Trading in our common stock has historically been limited and, at times, volatile. An active trading market for our common stock may not be sustained, and the trading price of our common stock may fluctuate substantially. The price of our common stock may fluctuate as a result of some or all of the following:
• price and volume fluctuations in the overall stock market from time to time;
• significant volatility in the market price and trading volume of comparable companies;
• the actual, anticipated, or perceived impact of changes in the political environment, government policies, laws and regulations, or similar changes made by accrediting bodies;
• adverse rulings or findings by relevant governmental bodies;
• general economic conditions and trends;
• catastrophic events;
• actions of others in our industry, including but not limited to acquisitions, investments, or strategic alliances.
• actual or anticipated changes in our earnings, our institutions’ net course registrations or enrollments, or seasonal and other fluctuations in our results of operations as a result of variances to the student populations of our institutions and related fluctuations in expenses;
• potential or actual government shutdowns, government budgets and federal workforce uncertainty;
• our ability to meet or exceed, or changes in, the expectations of securities analysts, or the extent or accuracy of analyst coverage of our company;
• the depth and liquidity of the market for our common stock;
• purchases or sales of large blocks of our stock;
• future issuances or repurchases of our common stock;
• recruitment or departure of key personnel;
• regulatory burdens and risks associated with a change of control or ownership;
• an inability to realize in full anticipated benefits of acquisitions; and
• investment strategies or other actions by those trading in our stock.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and monetary damages and could divert
management’s attention and resources from our business, and our insurance may not be available or adequate to cover these claims.
We may face risks associated with stockholder activism.
Publicly traded companies are subject to campaigns by stockholders advocating corporate actions related to matters such as corporate governance, operational practices, and strategic direction. We have previously been subject to stockholder activism and demands and may be subject to further activism and demands in the future. Such activism could interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, and divert the attention of management, any of which could have an adverse effect on our business or the price of our common stock.
Our future results of operations and financial condition may not meet our guidance or expectations.
We provide guidance on our expected results of operations, financial condition, and other measures. Such forecasts are speculative and subject to risks and uncertainties, including those described in this “Risk Factors” section and elsewhere in this Annual Report, and reflect management’s estimates and assumptions as of the date of the guidance, which may turn out to be incorrect. Actual results may vary significantly from our guidance and could fall outside any range of expected outcomes we provide. Failure to successfully implement our plans or the occurrence of events or circumstances expressed or implied in this “Risk Factors” section, and any actions we may take to comply with the extensive regulatory framework applicable to our industry, including the 90/10 Rule, state law and regulations, and accrediting agency requirements, could result in actual results differing materially from our guidance, which could have a material adverse impact on our results of operations, cash flow, financial condition and the trading price of our common stock.
Prior to 2024 we only provided quarterly guidance but are now providing annual guidance to emphasize our focus on long-term value creation. Annual guidance, while based on outcomes and assumptions that we believe, at the time guidance is given, are reasonable, may to a greater extent than quarterly guidance be unable to reflect the impact of certain actions taken by us, changes in legislation, changes in U.S. government spending authorizations, regulatory actions, or accrediting agency decisions affecting any of our institutions, or other events, and may be less accurate than quarterly guidance.
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.
Our operations for the periods covered by this Annual Report are organized into three reporting segments:
• American Public University System, or APUS Segment. This segment reflects the operational activities of APUS.
• Rasmussen University Segment, or RU Segment . This segment reflects the operational activities of RU.
• Hondros College of Nursing Segment, or HCN Segment. This segment reflects the operational activities of HCN.
Beginning in fiscal year 2026, we will have two reporting segments: APU Global, formerly the APUS Segment, and RU Health+, the business that formerly comprised the RU Segment and HCN Segment.
On January 28, 2025, we announced the planned combination of APUS, RU, and HCN, or the Combination, which will result in a combined institution named American Public University System comprised of two divisions named (i) APU Global, comprised of AMU and APU, and (ii) RU Health+, comprised of RU’s campus-based and online nursing programs, RU’s healthcare programs, HCN’s campus-based nursing and healthcare programs, and RU’s non-healthcare programs. The Combination constitutes a Change of Control, Structure or Organization pursuant to HLC policy and, accordingly, we were required to obtain HLC approval prior to effectuating the Combination. In December 2024, APUS and RU jointly submitted an application for Change of Control, Structure or Organization to HLC. Subsequently, ED informed us that we would need to follow a different process to implement the Combination that entails two steps instead of one: (i) merger of the legal entities that own and operate APUS, RU, and HCN, with the APUS entity surviving following the merger, and (ii) combination of the institutions into one HLC-accredited institution. As a result of this process change, HLC required APUS and RU to submit a new joint application for Change of Control, Structure or Organization to HLC in September 2025 containing substantially the same information that had been submitted previously and reflecting the two-step process. In February 2026, HLC approved the continuation of accreditation of APUS and RU after the legal entity merger with an acknowledgment that the intent is to eventually consolidate the three institutions into one HLC accreditation. ABHES has also informed HCN that it will continue HCN’s ABHES accreditation after the legal entity merger. On March 2, 2026, we completed the merger of the legal entities that
own and operate APUS, RU, and HCN with the APUS entity surviving the merger, and subsequently notified ED that the merger occurred and resulted in RU and HCN being directly owned by the same legal entity that directly owns APUS. We currently expect to complete the implementation of step two of the Combination in the third quarter of 2026 , subject to obtaining required approvals . We will evaluate changes to our segment reporting as a result of the Combination. For the years ended December 31, 2024, and 2025, we incurred $2.2 million and $3.5 million in professional fees, respectively, and we expect to incur between approximately $2.0 million and $4.0 million in professional fees in 2026 to complete the Combination. See the Risk Factor with the caption beginning “The planned combination of APUS, RU, and HCN …” and “Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN” for more information.
U.S. Federal Government Shutdown. On October 1, 2025, the U.S. federal government shut down due to a failure by Congress to pass appropriations legislation, resulting in, among other things, suspension of the DoD TA programs and ultimately an inability of APUS students seeking to use TA as a payment source to register, or in some cases stay registered, for courses. The 2025 Shutdown ended on November 12, 2025.
In connection with the 2025 Shutdown, APUS TA course registrations decreased by approximately 20,600 in the fourth quarter 2025, when compared to the prior year period. This was the first time since 2013 that APUS had dropped course registrations as a result of a government shutdown because the Defense Appropriations Bill, which annually funds TA, was not passed before the 2025 Shutdown.
Prior to the end of the 2025 Shutdown, on October 24, 2025, the Navy announced that TA funding was restored for classes starting on or before December 31, 2025, using TA funds appropriated as part of the OBBBA, or OBBBA TA Funds. Also, prior to the end of the 2025 Shutdown, certain individuals responsible for oversight of the voluntary education programs at the Army, Air Force, Navy, and Marines returned to their roles and, in the cases of the Army, Air Force, and Navy, began approving TA requests using OBBBA TA Funds. As of November 10, 2025, APUS estimated that it was able to recover approximately 5,000 course registrations for November 2025 course starts by students using OBBBA TA funds. As a result of the 2025 Shutdown, we implemented various cost savings measures, including a reduction in force, hiring freeze, and a reduction in travel and discretionary costs.
The One Big Beautiful Bill Act . As discussed in “Business –Regulatory Actions and Restrictions on Operations – Other Regulations – The One Big Beautiful Bill Act”, President Trump recently signed into law the OBBBA, which, among other things, makes significant changes to federal student financial aid programs and related eligibility requirements. New caps on federal loans may limit borrowing options for our students and a new accountability framework could limit the availability of certain programs due to a potential loss of Direct Loans, which could have a significant adverse impact on enrollments and our business, operations, and financial results. See “Risk Factors – Risks Related to the Regulation of Our Industry – “The One Big Beautiful Bill Act . . . .” for additional information regarding risks relating to the OBBBA.
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.
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”.
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.
In the fourth quarter of 2025, as a result of the 2025 Shutdown, we completed a reduction in force that resulted in the termination of approximately 40 non-faculty employees at APUS, representing approximately 6.5% of the APUS non-faculty workforce. Separately, in the fourth quarter of 2025, approximately 20 information technology employees at APEI were terminated in connection with our ongoing efforts to optimize certain information technology functions. We incurred an aggregate of approximately $1.3 million of pre-tax cash expenses associated with employee severance costs as a result of these reductions in force.
We recorded expenses for termination benefits related to the workforce reductions in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 420, Exit or Disposal Cost Obligations.
Tuition Increases. Providing affordable degree and certificate programs is an important element of our competitive strategy. As more fully described in “Business – Our Institutions and Operations – Our Institutions – Accreditation – Affordability and Cost of Attendance”, certain of our institutions implemented tuition and fee increases in 2023, 2024, and 2025. Even with these increases, tuition and fees at our institutions 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.
Our Initiatives. Our revenue may decline, and our costs and expenses may increase, as our institutions adjust to changes in their student composition, undertake initiatives to improve the learning experience, and work to attract students who are more likely to persist in their programs. Additional initiatives that we are implementing or may implement that may increase costs and expenses or adversely affect our revenue may include the following:
• altering our institutions’ marketing programs to target the appropriate prospective students;
• the Combination;
• opening new campuses or entering new markets;
• offering new degree programs;
• investing in technology related to our overall information technology program, including AI, to support our students’ current and future needs;
• changing admissions standards, requirements, processes, and procedures;
• implementing more stringentsatisfactory academic progress standards;
• changing tuition costs and payment options;
• continuing to improve our RU Segment enrollment, financial results, and NCLEX pass rates;
• improving student retention and NCLEX pass rates at our HCN Segment; and
• implementing alternative learning delivery methods.
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.
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.
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.
As discussed more fully in “Business – Company Overview – Information Technology, in 2026, we plan to begin migrating HCN to a new SIS platform as part of our broader strategy to reduce fragmentation and complexity across student information systems. Additionally, we plan to transition RU from Blackboard Ultra to D2L to consolidate our LMS environment across our institutions, which we expect will reduce operational complexity and support a more consistent academic experience.
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”.
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.
“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.
As a result of the problems with TA discussed in further detail in the Risk Factor that begins “Our student registrations, revenue, and cash flow have been adversely impacted...”, approximately $18.4 million in cash payments from the Army to APUS that were expected to be received in 2021 and 2022 were received in 2023. This, together with the January 1, 2023, change to the 90/10 Rule and enrollment growth among service members as compared to declines in students who use non-federal educational assistance funds, caused APUS’s 90/10 Rule percentage to increase.
In September 2023, APUS changed its approach to invoicing for TA, taking longer to bill TA, which had the effect of delaying payments from 2023 to 2024. Due to this change in the approach to invoicing TA in the fourth quarter of 2023, in
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.
In December 2024, APUS again changed its approach to invoicing for TA, taking longer to bill TA, and as a result of this change, in 2025, APUS collected approximately $32.5 million from TA related to periods prior to 2025. The change in billing approach positively impacted the “90%” side of the ratio and reduced operating cash flow in 2024. In 2025, the change in billing approach increased operating cash flow. In July 2025, APUS again delayed billing to certain branches, further delaying payments until 2026. We estimate that this delay in APUS’s billing approach implemented beginning in July 2025 will result in approximately $34.1 million of receivables that we would have expected to receive in 2025 to be received in 2026.
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”.
Regulated Industry. Our institutions operate in a highly regulated industry. For more information on the regulations to which our institutions are subject and recent regulatory developments, please refer to “Business – Regulatory Environment” in this Annual Report. Regulations may impact our financial results in a way that we cannot predict and may have an adverse impact on our financial condition.
OUR KEY FINANCIAL METRICS
Revenue
When reviewing our revenue, we evaluate the following elements: net course registrations and enrollment; tuition rate; net tuition; and other fees.
Net course registrations and enrollment . For financial reporting and analysis purposes, APUS measures its student population in terms of aggregate course enrollments, or net course registrations. Net course registrations, which include one-credit lab courses combined with their related three-credit courses, represent the aggregate number of courses in which students remain enrolled after the date by which they may drop the course without financial penalty. RU and HCN measure their student population in terms of student enrollments. Student enrollment represents the total number of students enrolled in a term immediately after the date students may drop a term without financial penalty.
At APUS, because we recognize revenue over the length of a course, net course registrations and student enrollments in a financial reporting period do not correlate directly with revenue for that period because revenue recognized from courses is not necessarily recognized in the financial reporting period in which the course registrations or enrollments occur. For example, at APUS, revenue in a quarter reflects a portion of the revenue from courses that began in a prior quarter and continued into the quarter, all revenue from courses that began and ended in the quarter, and a portion of the revenue from courses that began but did not end in the quarter. At RU and HCN, generally terms begin and end in a calendar quarter.
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.
You should not rely on the results of any prior periods as an indication of future net course registrations at APUS, student enrollments at RU and HCN, or consolidated revenue. The composition of our students, changing market demands, and competition make forecasting very difficult, and we are unable to determine if we will continue to grow or what level of growth we will achieve, if any.
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.
Net tuition. Tuition revenue varies from period to period based on the number of students enrolled at our institutions, the number of and types of courses that students take, student payor source, the mix of programs students attend, the number of students starting courses each month during the period, and the timing of course starts each month or term. Tuition revenue is adjusted to reflect amounts for students who withdraw from a course in the month or term in which the withdrawal occurs. We also provide tuition grants and scholarships to certain students to assist them financially with their educational goals. The cost of these grants and scholarships is reported as a reduction of tuition revenue in the period incurred for purposes of establishing net tuition revenue.
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.
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.
Costs and Expenses
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.
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.
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.
General and administrative expenses. General and administrative expenses include salaries and benefits of employees engaged in corporate management, finance, financial aid processing, information technology, human resources, finance, legal, and compliance, and other corporate functions, the cost of renting and maintaining administrative facilities, technology expenses, and costs for professional services. General and administrative expenses also include bad debt expense. General and administrative expenses are generally affected by the costs of salaries and benefits for our general and administrative personnel, the efficiency of delivering back-office support, including technology services, the costs of services purchased from third-party vendors, including information technology managed service providers, and the level of expenditures for supporting company initiatives.
Depreciation and amortization. We incur depreciation and amortization expenses for costs related to the capitalization of property, equipment, software, and program development on a straight-line basis over the estimated useful lives of the assets. In addition, prior to September 30, 2024, we incurred amortization expense for the amortization of identified intangible assets with a definite life resulting from the Rasmussen Acquisition.
Impairment of goodwill and intangible assets . Impairment of goodwill and intangible assets recognizes the difference between the carrying value of goodwill and intangible asset and the fair value of goodwill and intangible asset.
Loss on sale of subsidiary. Loss on sale of subsidiary is the difference between the net asset value of the subsidiary sold and the consideration received, less closing costs and customary adjustments, including for net working capital and cash.
Loss on assets held for sale. Loss on assets held for sale is the difference between the asset’s estimated fair value less estimated costs to sell and the asset’s book value at the time the asset is no longer used for operations and reclassified as held for sale in accordance with the held-for-sale criteria.
Loss on leases. Loss on leases recognizes the difference between the estimated remaining economic benefit to the Company and the carrying value of lease’s right-of-use assets, as well as losses incurred as the result of lease terminations.
Loss on disposals of long-lived assets . Loss on disposals of long-lived assets is the difference between the long-lived asset’s residual value and their book value at the time of the asset’s disposition or abandonment.
Interest expense, net. Interest expense, net, consists primarily of interest incurred on our long-term debt, net of any interest income earned on cash and cash equivalents.
Equity Investment Loss. Equity investment loss consists of our proportional share of after-tax income or losses attributable to our equity investment as well as the loss from any other-than-temporary impairment charges, which represents the difference between the carrying value of and fair value of the investment.
CRITICAL ACCOUNTING ESTIMATES
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.
Goodwill and indefinite-lived intangible assets.
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.
Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, and more frequently if events and circumstances exist that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The process of evaluating goodwill and indefinite-lived intangible assets for impairment is subjective and requires significant judgment and estimates. When performing an optional qualitative analysis, we consider many factors, including general economic conditions, industry and market conditions, certain cost factors, financial performance, and key business drivers (for example, student enrollment), long-term operating plans, and potential changes to significant assumptions and estimates used in the most recent fair value analysis. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions and estimates. Actual results may differ and have a material impact or our results of operations and financial position, and subsequent events are not necessarily indicative of the reasonableness of the original assumptions or estimates.
We estimate fair value in our quantitative analysis by weighting the results from two different valuation approaches. They are: (i) discounted cash flow and (ii) guideline public company. Under the discounted cash flow method, fair value was determined by discounting the estimated future cash flows of RU and HCN at their estimated weighted-average cost of capital. We incorporate the use of projected financial information and a discount rate that are developed using market participant-based assumptions. The cash-flow projections are based on three-year financial forecasts developed by management that include revenue projections, capital spending trends, and investment in working capital to support anticipated revenue growth, which are updated at least annually and approved by management. Under the guideline public company method, pricing multiples from other public companies in the public higher education market were used to determine the fair value of RU and HCN. Values derived under the two valuation methods are then weighted to estimate RU and HCN’s enterprise values. If we determine that the carrying amount of a reporting unit exceeds its fair value, we then calculate the implied fair value of the reporting unit goodwill as compared to its carrying amount to determine the appropriate impairment charge. Although we believe our assumptions are reasonable, actual results may vary significantly and may expose us to material impairment charges in the future. Our methodology for determining fair values remained consistent for the periods presented.
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.
Significant assumptions inherent to valuation methodologies for goodwill and indefinite-lived intangible assets include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in the higher education market. Future changes, including minor changes in the significant assumption or other factors including revenue, operating income, valuation multiples, and other inputs to the valuation process may result in future impairment charges, and those charges could be material.
At December 31, 2025, after recording non-cash impairment charges for RU and HCN Segment goodwill and intangible assets in 2022 and 2023, the carrying value of RU and HCN Segments goodwill was $33.0 million and $26.6 million, respectively, and the carrying value of RU and HCN Segments intangible assets was $24.5 million and $3.7 million, respectively.
For additional details regarding goodwill and indefinite-lived intangible assets please refer to “Note 6. Goodwill and Intangible Assets” included in our Consolidated Financial Statements.
RECENT ACCOUNTING PRONOUNCEMENTS
We consider the applicability and impact of all Accounting Standards Updates, or ASUs. Please refer to “Note 2 Significant Accounting Policies” included in our Consolidated Financial Statements for information relating to our discussion of the effects of recent accounting pronouncements.
Results of Operations
The following table sets forth statements of income data as a percentage of revenue for each of the years ended:
Year Ended December 31,
Revenue
Costs and expenses:
Instructional costs and services
Selling and promotional
General and administrative
Depreciation and amortization
Loss on sale of subsidiary
Loss on assets held for sale
Loss on leases
Loss on disposals of long-lived assets
Total costs and expenses
Income from operations before interest and income taxes
Interest expense, net
Income from operations before income taxes
Income tax expense
Equity investment loss
Net income
Preferred Stock Dividend
Loss on redemption of preferred stock
Net income available to common stockholders
Year Ended December 31, 2025, Compared to Year Ended December 31, 2024
Revenue
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.
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.
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.
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.
Costs and Expenses
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.
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.
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.
Selling and promotional expenses. For the year ended December 31, 2025, selling and promotional expenses were $137.3 million, an increase of $8.5 million, or 6.6%, compared to $128.8 million in 2024. The increase in selling and promotional expenses was primarily due to increases of $6.0 million in advertising costs and $3.7 million in employee compensation costs relating to an increase in employees to support our growth in all segments, and a $0.7 million increase in other marketing materials in our RU Segment, partially offset by a $2.0 million decrease in selling and promotional expenses in Corporate and Other due to the sale of GSUSA. Selling and promotional expenses as a percentage of revenue increased to 21.2% in 2025, compared to 20.6% in 2024.
General and administrative expenses. For the year ended December 31, 2025, general and administrative expenses were $144.6 million, an increase of $2.6 million, or 1.8%, compared to $142.0 million in 2024. General and administrative expenses for the year ended December 31, 2025, included $3.7 million in professional fees relating to the Combination and the
sale of GSUSA in Corporate and Other, and $1.4 million in severance costs in Corporate and Other, and in our HCN and APUS Segments, all on a pre-tax basis. General and administrative expenses for the year ended December 31, 2024, included $2.2 million in professional fees relating to the Combination, and $0.4 million in severance costs in Corporate and Other, all on a pre-tax basis. The increase in general and administrative expenses was primarily due to $5.8 million increases in employee compensation costs, which includes severance costs, in all segments and Corporate and Other, a $3.3 million increase in bad debt expense in all segments, and $2.3 million increase in professional fees, which included fees associated with combination, in Corporate and Other. These increases were partially offset by a decreases of $6.1 million information technology costs, which included costs associated with our offshore initiatives, in our APUS and RU Segments and Corporate and Other, a $2.5 million decrease in Corporate and Other costs due to the sale of GSUSA, and a $1.5 million decrease in professional fees in all segments primarily due to less outside legal and consulting services. General and administrative expenses as a percentage of revenue decreased to 22.3% in 2025 compared to 22.7% in 2024.
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.
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.
Loss on sale of subsidiary. For the year ended December 31, 2025, we recorded a $3.9 million pre-tax loss on sale of subsidiary relating to the sale of GSUSA. There was no loss on sale of subsidiary in the prior year.
Loss on assets held for sale. For the years ended December 31, 2025, and 2024, we recorded a $1.5 million and a $1.6 million pre-tax non-cash loss, respectively, on assets held for sale for real property located in Charles Town, West Virginia in our APUS Segment.
Loss on leases. RU Segment loss on leases was $0.1 million and $3.7 million for the years ended December 31, 2025 and 2024, respectively. In 2024, we elected to terminate a lease in Dallas, Texas, consolidate two Minnesota campuses, and voluntarily close Wisconsin campuses, and, as a result, we recorded losses in the RU Segment of $2.1 million, $1.2 million, and $0.4 million, respectively. In 2025, we recorded an additional loss of $0.1 million in the RU Segment associated with the pending closure of a Wisconsin campus.
Loss on disposal of long-lived assets . The loss on disposal of long-lived assets was $0.4 million in 2025 and 2024.
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.
The table below reflects our stock-based compensation expense recorded in our Consolidated Statements of Income included in our Consolidated Financial Statements for the years ended 2024 and 2025 (in thousands):
Year Ended December 31,
Instructional costs and services
Selling and promotional
General and administrative
Total stock-based compensation expense
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.
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.
Equity investment loss. There was no equity investment loss in 2025. The equity investment loss of $4.4 million for the year ended December 31, 2024 was related to a $3.3 million non-cash investment loss on an equity investment due to the investee entering into a new convertible debt agreement, which resulted in the conversion of our preferred stock holdings in the investee into common shares, and the dilution of our ownership percentage, and a $1.1 million loss on sale of our remaining equity method investment.
Net income. Net income in 2025 was $31.6 million, compared to $16.1 million in 2024, an increase of $15.4 million. This increase was related to the factors discussed above.
Preferred stock dividends. Preferred stock dividends for the year ended December 31, 2025, were $2.8 million compared to $6.1 million in 2024. The decrease in preferred stock dividends in 2025 was due to the redemption of all 400 outstanding shares of our Series A Senior Preferred Stock in June 2025.
Loss on redemption of preferred stock. In June 2025, we redeemed all outstanding Series A Senior Preferred Stock for $43.1 million, excluding unpaid and accrued dividends of $1.4 million, resulting in a loss of $3.5 million related to the redemption premium and fees.
Net income available to common stockholders. Net income available to common stockholders in 2025 was $25.3 million, compared to $10.1 million in 2024, an increase of $15.2 million. This increase was related to the factors discussed above.
Operating Results by Reportable Segment - Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
The table below details our operating results by reportable segment for the periods indicated (in thousands):
Year Ended December 31,
$ Change
% Change
Revenue
APUS Segment
RU Segment
HCN Segment
Corporate and Other
Total Revenue
Income (loss) from operations before interest and income taxes
APUS Segment
RU Segment
HCN Segment
Corporate and Other
Total income from operations before interest and income taxes
APUS Segment
Our APUS Segment revenue was $319.8 million in 2025, an increase of $2.8 million, or 0.9%, compared to $317.0 million in 2024, which was primarily attributable to higher net course registrations, as compared to the prior year, and the impact of the 2024 tuition increases. Net course registrations at APUS increased 0.7% to approximately 381,000 in 2025
compared to the prior year 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, partially offset by a decrease in military registrations from students utilizing TA due to the government shutdown in the fourth quarter 2025. Income from operations before interest and income taxes was $90.8 million in 2025, an increase of $1.4 million, or 1.6%, compared to the 2024 period. The increase in income from operations before interest and income taxes was due to the increase in revenue and decreases in information technology costs, depreciation and amortization expenses, and professional fees, partially offset by increases in advertising costs, bad debt expense, and employee compensation costs, as compared to the prior year period.
RU Segment
Our RU Segment revenue was $246.2 million in 2025, an increase of $30.0 million, or 13.9%, compared to $216.3 million in 2024, primarily due to an 8.7% increase in year over year total student enrollment, driven by a 9.6% increase in online enrollment, and a 7.7% increase in on-ground enrollment, as compared to the prior year period, and the impact of tuition increases in 2024 and 2025. During 2025, RU experienced improvements with both on-ground and online enrollment as compared to prior year periods. Income from operations before interest and income taxes was $4.0 million in 2025 compared to a loss from operations before income taxes of $21.8 million in 2024. The RU Segment improvement was primarily due to the increase in revenue as well as decreases in information technology costs, loss on leases, depreciation and amortization expenses, and occupancy costs partially offset by increases in employee compensation costs, classroom and course materials costs, advertising costs, and bad debt expense, as compared to the prior year period.
HCN Segment
Our HCN Segment revenue was approximately $75.0 million in 2025, an increase of $7.7 million, or 11.4%, compared to $67.3 million in 2024, primarily due to an increase in student enrollment, as compared to the prior year period. HCN student enrollment increased approximately 12.3% during the year ended December 31, 2025, as compared to the prior year 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. Loss from operations before interest and income taxes in the HCN Segment was approximately $0.9 million in 2025 compared to a loss from operations of $1.1 million in 2024, an improvement of $0.3 million. The HCN Segment improvement was primarily due to the increase in revenue, partially offset by increases in employee compensation costs, bad debt expense, classroom and course materials costs, and advertising costs, as compared to the prior year period.
Liquidity and Capital Resources
Cash, cash equivalents, and restricted cash was $158.9 million and $176.5 million at December 31, 2024, and 2025, respectively, representing an increase of $17.6 million, or 11.0%, in the 2025 period. The increase was primarily due to the improved financial performance at RU and the proceeds from the sale of assets held for sale of $23.0 million, partially offset by cash used to redeem our Series A Senior Preferred Stock of $43.2 million. We have historically financed operating activities and capital expenditures with cash provided by operating activities. We expect to continue to fund our costs and expenses through cash generated from operations for the next twelve months and beyond. For more on our material cash requirements from known contractual and other obligations, please refer to “Contractual Obligations” below in this Annual Report.
We derive a significant portion of our revenue from our participation in ED’s Title IV programs, for which disbursements are governed by federal regulations. We have typically received disbursements under Title IV programs within 30 days of the start of the applicable course or term. Another significant source of revenue is derived from TA from the DoD and programs from the VA. Generally, these funds are received within 60 days of the start of the courses to which they relate, however, as discussed in “90/10 Rule” Compliance and Delayed Billing” above, APUS has repeatedly changed its approach to invoicing for TA, taking longer to bill TA, which has had the effect of delaying payments from one period into another. In July 2025, APUS again delayed billing to certain branches, further delaying payments until 2026, which could have an adverse impact on APUS’s ability to comply with the 90/10 Rule in 2026 or future years. The change in TA billing practice added to our accounts receivable as of December 31, 2025, and resulted in an increase to our leverage ratio as of December 31, 2025, under our Credit Agreement as defined and discussed in “Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 8. Long-term Debt”. We estimate that this delay in APUS’s billing approach implemented beginning in July 2025 will result in approximately $34.1 million of receivables that we would have expected to receive in 2025 to be received in 2026. For additional detail, please refer to the Risk Factor that begins “Our student registrations, revenue, and cash flow have been adversely impacted...”, in this Annual Report.
ED evaluates institutions on an annual basis for compliance with specified financial responsibility standards, including a complex formula based on line items from the institution’s audited financial statements. Generally, an institution’s financial
ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible. A composite score between 1.0 and 1.4 is considered by ED to be in the “zone.” An institution in the “zone” may still participate in Title IV programs as a financially responsible institution through the “zone alternative” as set forth in ED regulations. In April 2025, ED notified us that according to its calculations, we had a fiscal year end 2023 consolidated composite score of 1.3 and our institutions were therefore in the “zone,” and we selected the “zone alternative” as the alternative basis on which we establish financial responsibility. Thereafter, APUS, RU and HCN operated under the zone alternative to establish financial responsibility, which imposed on us certain restrictions and obligations, including HCM1. On March 10, 2026, ED notified us that, as of such date, APUS, RU, and HCN were no longer required to comply with the zone alternative requirements due to a composite score for fiscal 2024 of 2.6. Our previous placement on HCM1 status did not have a significant impact on our 2025 financial results. Additionally, RU was required to provide a letter of credit for the benefit of ED on behalf of RU in connection with RU’s 2020 composite score, which is used by ED for determining compliance with financial responsibility standards being below the minimum required. Restricted cash at December 31, 2024, included a $25.4 million restricted certificate of deposit to secure a letter of credit. In May 2025, the letter of credit was released by ED, and the related cash was thereby no longer restricted.
Our Credit Agreement as defined and discussed in “Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 8. Long-term Debt” contained financial covenants that required us to maintain a Total Net Leverage Ratio of no greater than 2.00 to 1.00. Our Total Net Leverage Ratio under the Credit Agreement at December 31, 2024, and 2025, was 0.20 and negative 0.30, respectively. Our Credit Agreement as defined and discussed in “Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 16. Subsequent Events – 2026 Credit Agreement”, discussed in more detail in Item 9B below, contains financial covenants that requires us to maintain a Total Net Leverage Ratio of no greater than 2.50 to 1.00.
Budget cuts or constraints, particularly those that impact DoD or include suspension or modifications to TA programs, reductions in military forces, or cuts to services and tools that we or APUS students rely upon for recruitment, enrollment access, and TA, including in connection with congressional action or inaction relating to the federal debt ceiling, could have a material adverse effect on APUS’s enrollments and on our cash flows, results of operations, and financial condition. Even temporary changes to military activity and budgets may adversely affect operations. For example, funding for the federal government or portions thereof, including the DoD, Department of Homeland Security, and Coast Guard, lapsed as a result of the 2025 Shutdown. As discussed in greater detail in the Risk Factor captioned “Enrollments and course registrations may be adversely affected by a variety of factors not directly related to education programs, including changes in military activity, budgets and government shutdowns” and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – U.S. Federal Government Shutdown” section, the 2025 Shutdown resulted in, among other things, an inability of APUS students seeking to use TA as a payment source to register, or in some cases stay registered, for courses, and APUS course registration drops. The 2025 Shutdown has and could continue to have, and any future government shutdown may have, an adverse effect on APUS’s enrollments and on our cash flows and results of operations, and a U.S. government default on its debt would have broad adverse macroeconomic effects that would materially affect our cash flow and results of operations.
Our operating expenditures may increase in future periods as we continue to invest in the modernization of our information technology systems, advertising, and other expenditures. We are in the midst of a multi-year technology transformation program that we expect will enable us to enhance the learning experience for students, better accommodate new flexible learning modalities, and improve the operational effectiveness of our enterprise. In 2024, we completed a transition with a managed service provider to outsource a number of our information technology operations, including service desk, student support, end user support, and network management and operations, and we completed the insourcing of information technology services. For the year ended December 31, 2024, we incurred approximately $3.8 million in information technology transition services costs.
Operating and capital expenditures may also increase as we continue to update and invest in our core enterprise systems. As discussed in greater detail in “Business – Company Overview – Information Technology”, in 2026, we plan to begin move non-core SIS data and workflow functions for RU and HCN into Salesforce to preserve core regulatory and academic-record functions within the SIS while shifting surrounding processes into a more stable and standardized platform. In 2026 we also plan to begin migrating HCN to a new SIS platform as part of our broader strategy to reduce fragmentation and complexity across student information systems, and transition RU from Blackboard Ultra to D2L to consolidate our LMS environment across our institutions.
Capital expenditures could be higher in the future as a result of, among other things, additional expenditures for technology or other business capabilities, the maintenance of existing campuses at RU and HCN, the opening or closing of campuses or the consolidation of existing campuses at RU and HCN, the acquisition or lease of existing structures or potential new construction projects, and necessary tenant improvements that arise as a result of our ongoing evaluation of our space
needs and opportunities for physical growth. We also expect to continue to explore opportunities to invest in the education industry, which could include purchasing or investing in other education-related companies or companies developing new technologies.
On January 28, 2025, we announced the Combination. On March 2, 2026, we completed the first step of the Combination, and w e anticipate completing the Combination fully in the third quarter of 2026, subject to obtaining required approvals. For the years ended December 31, 2024, and 2025, we incurred $2.2 million and $3.5 million in professional fees, respectively, and expect to incur between approximately $2.0 million and $4.0 million in professional fees in 2026 to complete the Combination. See the Risk Factor with the caption beginning “The planned combination of APUS, RU, and HCN …”, “Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RN, and HCN” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview” for more information.
On June 23, 2025, APEI redeemed all 400 outstanding shares of Series A Senior Preferred Stock for $43.1 million, excluding unpaid and accrued dividends of $1.4 million. Accordingly, no shares of preferred stock were issued or outstanding at December 31, 2025. For additional details regarding the redemption of the Series A Senior Preferred Stock, please refer to “Note 12. Preferred Stock” included in our Consolidated Financial Statements.
In connection with the completion of the Rasmussen Acquisition, we entered into a credit agreement with Macquarie Capital Funding LLC, as administrative agent and collateral agent, Macquarie Capital (USA) Inc., and Truist Securities, Inc. as joint lead arrangers and bookrunners, and a syndicate of lenders that provided us with (i) a $175.0 million term loan, of which $96.4 million was outstanding at December 31, 2025, and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $20.0 million. On March 9, 2026, we entered into a Credit Agreement with PNC Bank, National Association, as administrative agent and collateral agent, PNC Capital Markets LLC as joint lead arranger and bookrunner, and a syndicate of lenders, or the Lenders. Pursuant to the Credit Agreement, the Lenders provided us with (i) the $90.0 million Term Loan, and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $40.0 million, or together with the Term Loan, the Facilities. The Facilities will be used to refinance the $20.0 million senior secured revolving loan facility and repay $96.4 million outstanding under the $175.0 million term loan. For more information on the Facilities and their terms, please refer to “Note 8. Long-Term Debt” included in the Consolidated Financial Statements in this Annual Report.
We believe our cash flow from operations and our existing cash and cash equivalents will provide adequate funds for ongoing operations, debt, and interest obligations, and planned capital expenditures for the next 12 months and the foreseeable future. However, our future capital requirements and our ability to generate sufficient cash to fund our future operations will depend on a number of factors. There can be no guarantee that our business will generate sufficient cash flow from operations or that future capital or borrowings will be available to us in an amount sufficient to enable us to service our indebtedness, or to fund our other liquidity needs. Failure to achieve business performance consistent with our expectations, including as a result of regulatory action, or to comply with the 90/10 Rule or meet the financial responsibility requirements, or any government shutdown could adversely impact our cash flows and results of operations. In addition, our efforts to comply with the 90/10 Rule could lead us to reduce enrollments or require us to make expenditures that would reduce our existing cash available for operations. In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness, which would also reduce our existing cash available for operations. There can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
Operating Activities
Net cash provided by operating activities was $48.9 million and $62.0 million in 2024, and 2025, respectively. The increase in cash from operating activities was primarily due to the improved financial performance at RU and other changes in working capital due to the timing of receipts and payments. Accounts receivable at December 31, 2025, increased approximately $5.3 million compared to December 31, 2024, primarily related to delayed billings in our APUS Segment. Income tax receivable at December 31, 2025, increased approximately $2.5 million compared to December 31, 2024, primarily related to the timing of estimated tax payments.
Investing Activities
Net cash used in investing activities was $21.1 million for the year ended December 31, 2024, compared to $4.8 million in net cash provided by investing activities in the current year period. For the year ended December 31, 2024, capital expenditures were $21.1 million compared to $15.9 million in 2025. In 2025, investing activities includes $23.0 million in proceeds from the sale of excess real property located in Charles Town, West Virginia. Prior year period capital expenditures were higher than the current year period primarily due to the planned campus consolidations at RU and relocations at HCN that occurred in the prior year period.
Financing Activities
Net cash used in financing activities was $13.2 million and $49.2 million in 2024 and 2025, respectively. The increase in cash used in financial activities is primarily due to the redemption of our Series A Senior Preferred Stock in June 2025 for $43.2 million. Financing activities for the year ended December 31, 2024, included preferred stock dividends paid of $6.1 million, $2.8 million paid for the repurchase of 251,146 shares of common stock, and $2.6 million in principal payments on our long-term debt due to a mandatory prepayment relating to the excess cash flow, compared to $2.8 million preferred stock dividends paid in the current year period.
Contractual Obligations
Long-term debt
We had long-term debt outstanding under the Credit Agreement of $96.4 million as of December 31, 2025. No principal payments are due in 2026 as a result of the December 2022 prepayments. Interest payable of $9.2 million is due in 2026, assuming the variable interest rate as of December 31, 2025. For more information on the timing and amount of our future principal and interest payments, please refer to “Note 8. Long-Term Debt” included in the Consolidated Financial Statements in this Annual Report.
Lease obligations
We have leases for campus facilities and office space. As of December 31, 2025, we had lease payment obligations of $87.3 million, with $15.1 million payable in 2026. For more information on the timing and amount of our future lease obligations, please refer to “Note 7. Leases” included in the Consolidated Financial Statements in this Annual Report.
Other purchase obligations
As of December 31, 2025, we had other purchase obligations of $12.8 million, with $5.1 million payable in 2026. In July 2024, RU entered into a contract with a third-party to provide nursing program curriculum upgrades and course materials, and testing services to nursing students, replacing an existing third-party provider. Total annual expense under this contract is estimated to be between approximately $8.0 million and $9.0 million annually through December 31, 2027, based on enrollment.
Impact of Inflation
Recently, the U.S. economy experienced the highest rates of inflation since the 1980s. Historically, we have not experienced significant inflation risk in our business arising from fluctuations in market prices; however, our ability to raise our tuition and fees depends on market conditions. APUS and RU increased certain tuition and fees in 2024, RU and HCN increased certain tuition in 2025, and APUS and RU increased tuition in the first quarter of 2026, in order to offset increased faculty costs and other costs, but there may be periods during which we are unable to fully recover increases in our costs.
