UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | ||||||||
| SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended March 31, 2025
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | ||||||||
| SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the transition period from ______ to ______
Commission File Number: 001-33810
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | ||||
| incorporation or organization) | Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(304 ) 724-3700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☒ | |||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||
| Emerging growth company | |||||||||||||||||
If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The total number of shares of common stock outstanding as of May 9, 2025 was 18,039,666 .
AMERICAN PUBLIC EDUCATION, INC.
FORM 10-Q
INDEX
| Page | |||||
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN PUBLIC EDUCATION, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
| As of March 31, 2025 | As of December 31, 2024 | ||||||||||
| ASSETS | (Unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash, cash equivalents, and restricted cash (Note 2) | $ | $ | |||||||||
Accounts receivable, net of allowance of $ | |||||||||||
| Prepaid expenses | |||||||||||
| Income tax receivable | |||||||||||
| Assets held for sale | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease assets, net | |||||||||||
| Deferred income taxes | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Other assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued compensation and benefits | |||||||||||
| Accrued liabilities | |||||||||||
| Deferred revenue and student deposits | |||||||||||
| Income tax payable | |||||||||||
| Lease liabilities, current | |||||||||||
| Total current liabilities | |||||||||||
| Lease liabilities, long-term | |||||||||||
| Long-term debt, net | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 10) | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
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AMERICAN PUBLIC EDUCATION, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Revenue | $ | $ | |||||||||
| Costs and expenses: | |||||||||||
| Instructional costs and services | |||||||||||
| Selling and promotional | |||||||||||
| General and administrative | |||||||||||
| Depreciation and amortization | |||||||||||
| Loss on assets held for sale (Note 4) | |||||||||||
| Loss on leases (Note 5) | |||||||||||
| Loss on disposals of long-lived assets | |||||||||||
| Total costs and expenses | |||||||||||
| Income from operations before interest and income taxes | |||||||||||
| Interest expense, net | ( | ( | |||||||||
| Income before income taxes | |||||||||||
| Income tax expense | |||||||||||
| Equity investment loss | ( | ||||||||||
| Net income | $ | $ | |||||||||
| Preferred stock dividends | |||||||||||
| Net income (loss) available to common stockholders | $ | $ | ( | ||||||||
| Income (loss) per common share: | |||||||||||
| Basic | $ | $ | ( | ||||||||
| Diluted | $ | $ | ( | ||||||||
| Weighted average number of common shares: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
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AMERICAN PUBLIC EDUCATION, INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||
| Unrealized (loss) gain on hedging derivatives | ( | ||||||||||
| Tax effect | ( | ||||||||||
| Unrealized (loss) gain on hedging derivatives, net of taxes | ( | ||||||||||
| Reclassification of loss (gain) to net income | ( | ||||||||||
| Tax effect | ( | ||||||||||
| Reclassifications of loss (gain) to net income, net of taxes | ( | ||||||||||
| Total other comprehensive loss | ( | ( | |||||||||
| Comprehensive income | $ | $ | |||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
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AMERICAN PUBLIC EDUCATION, INC.
Consolidated Statements of Stockholders’ Equity (Unaudited)
(In thousands, except share amounts)
| Additional Paid-in Capital | Accumulated Other Comprehensive Income (loss) | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee benefit plans | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Deemed repurchased shares of common and restricted stock for tax withholding | — | — | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Additional Paid-in Capital | Accumulated Other Comprehensive Income (loss) | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||
| Issuance of common stock under employee benefit plans | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Deemed repurchased shares of common and restricted stock for tax withholding | — | — | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Repurchased and retired shares of common stock | — | — | ( | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
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AMERICAN PUBLIC EDUCATION, INC.
Consolidated Statements of Cash Flows
(In thousands)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Operating activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Stock-based compensation | |||||||||||
| Equity investment loss | |||||||||||
| Deferred income taxes | |||||||||||
| Loss on assets held for sale | |||||||||||
| Loss on disposals of long-lived assets | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable, net of allowance for bad debt | |||||||||||
| Prepaid expenses | ( | ( | |||||||||
| Income tax receivable/payable | |||||||||||
| Operating leases, net | ( | ||||||||||
| Other assets | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Accrued compensation and benefits | ( | ||||||||||
| Accrued liabilities | |||||||||||
| Deferred revenue and student deposits | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Investing activities | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from the sale of real property | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities | |||||||||||
| Cash paid for repurchase of common stock | ( | ( | |||||||||
| Cash received from exercise of stock options | |||||||||||
| Preferred stock dividends paid | ( | ( | |||||||||
| Cash paid for principal on borrowings and finance leases | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net increase in cash, cash equivalents, and restricted cash | |||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid | $ | $ | |||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
7
AMERICAN PUBLIC EDUCATION, INC.
Notes to Consolidated Financial Statements
Note 1. Nature of the Business
American Public Education, Inc., or APEI, which together with its subsidiaries is referred to as the “Company,” is a provider of online and campus-based postsecondary education and career learning to students through the following subsidiary institutions:
•American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military, veterans, extended military families, and other public service and service-minded communities, through American Military University, or AMU, and American Public University, or APU. APUS is institutionally accredited by the Higher Learning Commission, or HLC.
•Rasmussen College, LLC, which is referred to herein as Rasmussen University, or RU, a nursing- and health sciences-focused institution, provides postsecondary education to students at 20 campuses in six states and online. RU is institutionally accredited by HLC.
•National Education Seminars, Inc., which is referred to herein as Hondros College of Nursing, or HCN, provides nursing education to students at eight campuses in three states. HCN is institutionally accredited by the Accrediting Bureau for Health Education Schools, or ABHES.
•American Public Training LLC, which is referred to herein as Graduate School USA, or GSUSA, provides career learning and leadership training in-person and online to the federal workforce. GSUSA is accredited by the Accrediting Council for Continuing Education and Training, or ACCET.
The Company’s subsidiary institutions are licensed or otherwise authorized by state authorities to offer education programs to the extent the institutions believe such licenses or authorizations are required, and APUS, RU, and HCN are certified by the United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs.
The Company’s operations are organized into the following reportable segments:
•American Public University System Segment, or APUS Segment. This segment reflects the operational activities of APUS.
•Rasmussen University Segment, or RU Segment. This segment reflects the operational activities of RU.
•Hondros College of Nursing Segment, or HCN Segment. This segment reflects the operational activities of HCN.
Adjustments to reconcile segment results to the Consolidated Financial Statements are included in Corporate and Other. These adjustments include unallocated corporate activity and eliminations, and the operational activities of GSUSA. GSUSA operates as a stand-alone subsidiary of APEI but does not meet the quantitative thresholds to qualify as a reportable segment and does not have other requisite characteristics as a reportable segment. Therefore, GSUSA’s results are combined with and presented within Corporate and Other.
Note 2. Summary of Significant Accounting Policies
A summary of the Company’s significant accounting policies follows:
Basis of Presentation and Accounting
8
Business Combinations
The Company accounts for business combinations in accordance with Financial Accounting Standards Board Accounting Standards Codification 805, Business Combinations, or FASB ASC 805, which requires the acquisition method to be used for all business combinations. Under ASC 805, the assets and liabilities of an acquired company are reported at business fair value along with the fair value of acquired intangible assets at the date of acquisition.
Principles of Consolidation
The accompanying unaudited interim Consolidated Financial Statements include the accounts of APEI and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.
Unaudited Interim Consolidated Financial Information
The unaudited interim Consolidated Financial Statements do not include all the information and notes required by GAAP for audited annual financial statement presentations. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s financial position, results of operations, and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for future periods, including the year ending December 31, 2025. This Quarterly Report on Form 10-Q, or this Quarterly Report, should be read in conjunction with the Consolidated Financial Statements and accompanying notes in its audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, or the Annual Report.
Use of Estimates
In preparing financial statements in conformity with GAAP, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company evaluates these estimates and assumptions on an ongoing basis and bases its estimates on experience, current and expected future conditions and various other assumptions that the Company believes are reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions, and the impact of such differences may be material to the Consolidated Financial Statements.
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of demand deposits with financial institutions, money market funds, and U.S. Treasury bills. Cash and cash equivalents are Level 1 assets in the fair value reporting hierarchy.
Restricted Cash
9
Cash and cash equivalents and restricted cash as of March 31, 2025, and December 31, 2024, were as follows (in thousands):
| As of March 31, 2025 | As of December 31, 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Cash, cash equivalents, and restricted cash | $ | $ | |||||||||
| Less: restricted cash | ( | ( | |||||||||
| Total unrestricted cash | $ | $ | |||||||||
Assets Held for Sale
Assets held for sale represent excess real property located in Charles Town, West Virginia for the Company’s APUS Segment. Long-lived assets are classified as held for sale when the assets are expected to be sold within the next 12 months and meet the other relevant held for sale criteria. As such, properties are recorded at the lower of the carrying value or fair value, less costs to sell, until such time the asset is sold.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. Goodwill and indefinite-lived intangible assets are not amortized. The Company accounts for goodwill and indefinite-lived intangible assets in accordance with FASB ASC 350, Intangibles Goodwill and Other, and Accounting Standards Update, or ASU, 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The Company’s goodwill and intangible assets are deductible for tax purposes.
Indefinite-lived and finite-lived intangible assets acquired in business combinations are recorded at fair value on the acquisition date. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful life of the asset.
The Company annually assesses goodwill and intangible assets for impairment in the fourth quarter, or more frequently if events or circumstances indicate that goodwill might be impaired or the carrying amount of an asset may not be recoverable. Goodwill impairment testing consists of an optional qualitative assessment as well as a quantitative test. The quantitative test compares the fair value of a reporting unit to its carrying value. If the carrying value of the reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the carrying value is greater than the fair value, and such assets are not recoverable, the difference between the two values is recorded as an impairment.
For additional details regarding goodwill and intangible assets, please refer to “Note 6. Goodwill and Intangible Assets” in these Consolidated Financial Statements.
Investments
Prior to December 31, 2024, the Company accounted for its investments in less than majority owned companies in accordance with FASB ASC 323, Investments – Equity Method and Joint Ventures and FASB ASC 321, Investments – Equity Securities. The Company applied ASC 323 to investments when it has the ability to exercise significant influence but does not control the operating and financial policies of the company, this generally represented by equity ownership of at least 20 percent but not more than 50 percent. Investments accounted for under the equity method were initially recorded at cost and subsequently adjusted by the Company’s share of equity in income or losses after the date of acquisition. The pro rata share of the operating results of the investee was reported in the accompanying Consolidated Statements of Income as equity investment income or loss. Investments that did not meet the equity method requirements were accounted for using the cost method under ASC 321 with changes in the fair value of the investment reported in the accompanying Consolidated Statements of Income as equity investment income or loss.
During the first quarter of 2024, the Company evaluated its equity investments for indicators of impairment and concluded the fair value of a cost method investment was less than its carrying amount. As a result, the Company recorded an investment loss of $3.3 million during the first quarter of 2024 on a 2015 cost method investment. This investment loss was due to the investee entering into a new convertible debt agreement that resulted in the conversion of the Company’s preferred stock holdings in the investee into common shares, and the dilution of the Company’s ownership percentage. The investment loss recorded reduced the book value of the cost method investment to zero.
10
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with FASB ASC 718, Stock Compensation, which requires companies to expense share-based compensation based on fair value, and ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. Stock-based payments may include incentive stock options or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance shares, performance units, cash-based awards, other stock-based awards, including unrestricted shares, or any combination of the foregoing.
Stock-based compensation cost is recognized as an expense generally over a three-year vesting period using the straight-line method for employees and the graded-vesting method for members of the Company’s Board of Directors, or the Board. It is measured using the Company’s closing stock price on the date of the grant. An accelerated one-year period is used to recognize stock-based compensation cost for employees who have reached certain service and retirement eligibility criteria on the date of grant. The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model that uses certain assumptions. The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of the Company’s common stock. In addition, the Company determines the risk-free interest rate by selecting the U.S. Treasury constant maturity for the same maturity as the estimated life of the option quoted on an investment basis in effect at the time of grant for that business day.
Judgment is required in estimating the percentage of share-based awards that are expected to vest, and in the case of performance stock units, or PSUs, the level of performance that will be achieved and the number of shares that will be earned. The Company estimates forfeitures of share-based awards at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from original estimates. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. If actual results differ significantly from these estimates, stock-based compensation expense could be higher or lower and have a material impact on the Consolidated Financial Statements. Estimates of fair value are subjective and are not intended to predict actual future events, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made under ASC 718.
Stock-based compensation expense for the three months ended March 31, 2025, and 2024 was as follows (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Instructional costs and services | $ | $ | |||||||||
| Selling and promotional | |||||||||||
| General and administrative | |||||||||||
| Total stock-based compensation expense | $ | $ | |||||||||
Incentive-based Compensation
The Company provides incentive-based compensation opportunities to certain employees through cash incentive and equity awards. The expense associated with these awards is reflected within the Company’s operating expenses. For the years ending December 31, 2025, and 2024, the Management Development and Compensation Committee of the Board approved annual incentive arrangements for senior management employees. The aggregate amount of awards payable, if any, is dependent upon the achievement of certain Company financial and operational goals and the satisfaction of individual performance goals. Given that the awards are generally contingent upon achieving annual objectives, final determination of the current year incentive awards cannot be made until after the results for the year are finalized. The Company recognizes the estimated fair value of performance-based restricted stock units by assuming the satisfaction of any performance-based objectives at the “target” level, which is the most probable outcome determined for accounting purposes at the time of grant and multiplying the corresponding number of shares earned based upon such achievement by the closing price of the Company’s stock on the date of grant. To the extent performance goals are not met, compensation cost is not ultimately recognized against the goals and, to the extent previously recognized, compensation cost is reversed. Amounts accrued are subject to change in
11
future interim periods if actual future financial results or operational performance are better or worse than expected. During the three months ended March 31, 2025, and 2024, the Company recognized an aggregate incentive-based compensation expense of $1.8 million and $1.9 million, respectively.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740, Accounting for Income Taxes. The Company determines its interim tax provision by applying the estimated income tax rate expected for the full calendar year to income before income taxes for the period adjusted for discrete items.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all ASUs issued by the FASB. All ASUs issued subsequent to the filing of the Annual Report on March 6, 2025, were assessed and determined to be either inapplicable or not expected to have a material impact on the Company’s consolidated financial position and/or results of operations.
Note 3. Revenue
Disaggregation of Revenue
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
| APUS | RU | HCN | Corporate and Other | Consolidated | |||||||||||||||||||||||||
| Instructional services, net of grants and scholarships | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Graduation fees | |||||||||||||||||||||||||||||
| Textbook and other course materials | |||||||||||||||||||||||||||||
| Other fees | |||||||||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
| APUS | RU | HCN | Corporate and Other | Consolidated | |||||||||||||||||||||||||
| Instructional services, net of grants and scholarships | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Graduation fees | |||||||||||||||||||||||||||||
| Textbook and other course materials | |||||||||||||||||||||||||||||
| Other fees | |||||||||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Corporate and Other includes tuition and contract training revenue earned by GSUSA and the elimination of intersegment revenue for courses taken by employees of one segment at other segments.
12
Contract Balances and Performance Obligations
The Company has no
The Company recognizes a contract liability, or deferred revenue, when a student begins a course, in the case of APUS and GSUSA, or starts a term, in the case of RU and HCN. Deferred revenue at March 31, 2025, was $25.1 million and included $15.8 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $9.3 million in consideration received in advance for future courses or terms, or student deposits, and represents the Company’s performance obligation to transfer future instructional services to students. Deferred revenue at December 31, 2024, was $23.5 million and included $14.1 million in future revenue that had not yet been earned for courses and terms that were in progress, as well as $9.4 million in student deposits.
The Company has elected, as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with students that have an expected duration of one year or less.
When the Company begins providing the performance obligations, a contract receivable is created, resulting in accounts receivable on the accompanying Consolidated Balance Sheets. The Company accounts for receivables in accordance with FASB ASC 310, Receivables. The Company uses the portfolio approach, a practical expedient, to evaluate if a contract exists and to assess collectability at the time of contract inception based on historical experience. Contracts are subsequently reviewed for collectability if significant events or circumstances indicate a change.
The allowance for doubtful accounts is based on management’s evaluation of the status of existing accounts receivable. Among other factors, management considers the age of the receivable, the anticipated source of payment, and historical allowance considerations. Consideration is also given to any specific known risk areas among the existing accounts receivable balances. Recoveries of receivables previously written off are recorded when received. APUS, RU, and GSUSA do not charge interest on past due accounts receivable. HCN charges interest on payment plans when a student graduates or otherwise exits the program. Interest charged by HCN on payment plans was immaterial for the periods presented.
Note 4. Assets held for sale
Assets held for sale at March 31, 2025, and December 31, 2024, represents excess real properties located in Charles Town, West Virginia, for the Company’s APUS Segment.
In the first quarter of 2025, the Company entered into an agreement to sell a building classified in assets held for sale as of December 31, 2024, for $7.0 million, and recorded a loss of $1.5 million, based on the contract amount less estimated costs to sell of $0.4 million. The loss is included in Loss on assets held for sale in the accompanying Consolidated Statements of Income for the three months ended March 31, 2025. At March 31, 2025, the carrying value of the building included in Assets held for sale in the accompany Consolidated Balance Sheets is $6.6 million. The sale is expected to close in the third quarter of 2025.
In the fourth quarter of 2024, APUS entered into an agreement to sell a building currently in use for $16.6 million. As a result, the building was reclassified to held for sale as of December 31, 2024 at the contract amount less estimated costs to sell of $0.7 million, or $15.9 million. The sale is expected to close in the third quarter of 2025.
In the fourth quarter of 2024, APUS entered into an agreement to sell the undeveloped parcel of land for $0.5 million which approximated its carrying value. As a result, the land was classified as held for sale as of December 31, 2024. The sale closed in the first quarter of 2025.
Note 5. Leases
The Company has operating leases for office space and campus facilities and finance leases for certain copiers and printers. Leases are classified as operating leases unless they meet any of the criteria below to be classified as a finance lease:
•the lease transfers ownership of the asset at the end of the lease;
•the lease grants an option to purchase the asset that the lessee is expected to exercise;
•the lease term reflects a major part of the asset’s economic life;
•the present value of the lease payments equals or exceeds the fair value of the asset; or
•the asset is specialized with no alternative use to the lessor at the end of the term.
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Operating Leases
The Company has operating leases for office space and campus facilities. Some leases include options to terminate or extend for or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. The Company leases corporate office space in Florida, under an operating lease that expires in January 2026. The RU Segment leases administrative office space in Minneapolis, Minnesota, and leases 20 campuses located in six states under operating leases that expire through March 2034. The HCN Segment leases administrative office space in suburban Columbus, Ohio, and leases eight campuses located in three states under operating leases that expire through December 2034. GSUSA leases classroom and administrative office space in Washington, D.C. and Honolulu, Hawaii, under operating leases that expire through September 2036.
Operating lease assets are right-of-use assets, or ROU assets, which represent the right to use an underlying asset for the lease term. Operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating leases are included in the Operating lease assets, net, and Operating lease liabilities, current and long-term, on the accompanying Consolidated Balance Sheets. These assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. When the lease does not provide an implicit interest rate, the Company uses an incremental borrowing rate based on information available at lease commencement to determine the present value of the lease payments. The ROU asset includes all lease payments and excludes lease incentives.
Lease expense for operating leases is recognized on a straight-line basis over the lease term. There are no variable lease payments. Lease expense for the three months ended March 31, 2025, and 2024, was $4.9 million and $5.2 million, respectively. These costs are primarily related to long-term operating leases but also include amounts for short-term leases with terms greater than 30 days that are not material. Cash paid for amounts included in the present value of operating lease liabilities during the three months ended March 31, 2025, and 2024, was $4.7 million and $4.8 million, respectively, and is included in operating cash flows.
Loss on leases
During the three months ended March 31, 2024, the Company elected to terminate its RU Segment lease for a planned Dallas, Texas campus. The Company paid a lease termination fee of $2.2 million and recorded a loss of $2.1 million as a result of this lease termination. Additionally, in the first quarter of 2024, the Company’s RU Segment began consolidating two Minnesota campuses and recorded a loss of $0.8 million on the Minnesota campus lease obligations. Lease losses on lease termination and campus consolidation totaling $2.9 million for the three months ended March 31, 2024, are included in Loss on leases in the accompanying Consolidated Statements of Income. In conjunction with the lease termination and campus consolidation, the Company reduced Operating lease assets, net, and Lease liabilities, current and long term by $5.0 million and $4.2 million, respectively, during the three months ended March 31, 2024. There was no loss on leases during the three months ended March 31, 2025.
Finance Leases
The Company leases copiers and printers pursuant to leases that are classified as finance leases and that expire in 2027. The Company pledged the assets financed to secure the outstanding leases. As of March 31, 2025, the total finance lease liability was $0.4 million, with an average interest rate of 7.00 %. The ROU assets are recorded within Property and equipment, net on the accompanying Consolidated Balance Sheets. Lease amortization expense associated with the Company’s finance leases was $46,000 and $27,000 for the three months ended March 31, 2025, and 2024, respectively, and is recorded in Depreciation and amortization expense in the accompanying Consolidated Statements of Income.
The following tables present information about the amount and timing of cash flows arising from the Company’s operating and finance leases as of March 31, 2025 (in thousands):
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| Maturity of Lease Liabilities (Unaudited) | Operating Leases | Finance Leases | ||||||
| 2025 (remaining) | $ | $ | ||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| 2031 and beyond | ||||||||
| Total future minimum lease payments | $ | $ | ||||||
| Less: imputed interest | ( | ( | ||||||
| Present value of operating lease liabilities | $ | $ | ||||||
| Less: lease liabilities, current | ( | ( | ||||||
| Lease liabilities, long-term | $ | $ | ||||||
| Balance Sheet Classification (Unaudited) | |||||
| Current: | |||||
| $ | |||||
| Long-term: | |||||
| Total lease liabilities | $ | ||||
| Other Information (Unaudited) | |||||
| Weighted average remaining lease term (in years): | |||||
| Operating leases | |||||
| Finance leases | |||||
| Weighted average discount rate: | |||||
| Operating leases | % | ||||
| Finance leases | % | ||||
Note 6. Goodwill and Intangible Assets
During the three months ended March 31, 2025, in connection with the preparation of this Quarterly Report, the Company performed a qualitative assessment for potential impairment of the RU and HCN Segment goodwill and indefinite-lived intangible assets. As part of the assessment, the Company considered the events and circumstances expressly required by ASC 350, in addition to other entity-specific factors. Factors considered included RU and HCN’s financial and enrollment performance against internal targets, economic factors, and the continued favorable growth outlook for nursing education. After completing the qualitative review of goodwill and indefinite-lived intangible assets for the RU and HCN Segments, the Company concluded it was more likely than not that the fair value of each of the RU and HCN Segments was more than the respective carrying value, and therefore, no quantitative impairment test and no impairment charge was necessary.
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The following table summarizes the carrying amount of goodwill by reportable segment (in thousands):
| APUS Segment | RU Segment | HCN Segment | Total Goodwill | |||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Goodwill as of December 31, 2024 | $ | $ | $ | $ | ||||||||||||||||||||||
| Impairment | $ | |||||||||||||||||||||||||
| Goodwill as of March 31, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||
Goodwill and indefinite-lived intangible assets are reviewed for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. The Company’s annual assessment during the fourth quarter of 2024 concluded that the fair value of RU and HCN exceeded their carrying values by approximately $71.9 million, or 62 %, and $8.6 million, or 24 %, respectively.
The following table represents the balance of the Company’s intangible assets as of March 31, 2025, and December 31, 2024 (in thousands):
| Gross Carrying Amount | Accumulated Amortization | Impairment | Net Carrying Amount | ||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Finite-lived intangible assets | |||||||||||||||||||||||
| Student roster | $ | $ | $ | — | $ | ||||||||||||||||||
Curricula | — | ||||||||||||||||||||||
| Student and customer contracts and relationships | — | ||||||||||||||||||||||
| Lead conversions | — | ||||||||||||||||||||||
Non-compete agreements | — | ||||||||||||||||||||||
| Tradename | — | ||||||||||||||||||||||
| Accreditation and licenses | — | ||||||||||||||||||||||
| Total finite-lived intangible assets | $ | $ | $ | — | $ | ||||||||||||||||||
| Indefinite-lived intangible assets | |||||||||||||||||||||||
Trade name | — | ||||||||||||||||||||||
| Accreditation, licensing, and Title IV | — | ||||||||||||||||||||||
| Affiliation agreements | — | — | |||||||||||||||||||||
Total indefinite-lived intangible assets | — | ||||||||||||||||||||||
Total intangible assets | $ | $ | $ | $ | |||||||||||||||||||
All recorded identified intangible assets with a definite useful life related to the acquisitions of RU, HCN, and GSUSA, were fully amortized as of December 31, 2024. Finite-lived intangible assets were amortized in a manner that reflected the estimated economic benefit of the intangible assets and were amortized on a straight-line basis. For the three months ended March 31, 2024, the Company recorded amortization expense related to definite-lived intangible assets of approximately $1.3 million. For additional information on goodwill and intangible assets, see the Consolidated Financial Statements and accompanying notes in the Annual Report.
Note 7. Income (Loss) Per Common Share
Income (loss) per common share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) available to common stockholders is net income (loss) adjusted for preferred stock dividends declared. Diluted income (loss) per common share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding, increased by the shares used in the per share calculation by the dilutive effects of restricted stock and option awards. The table below reflects the calculation of income (loss) per common share and the weighted average
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number of common shares outstanding, on an as if converted basis, used in computing basic and diluted income (loss) per common share (in thousands, expect per share amounts).
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Income (loss) per common share | |||||||||||
| Net income (loss) | $ | ||||||||||
| Preferred stock dividend | |||||||||||
| Net income (loss) available to common shareholders | ( | ||||||||||
| Basic weighted average shares outstanding | |||||||||||
| Income (loss) per common share | $ | $ | ( | ||||||||
| Diluted income (loss) per common share | |||||||||||
| Net income (loss) available to common shareholders | $ | $ | ( | ||||||||
| Basic weighted average shares outstanding | |||||||||||
| Effect of dilutive restricted stock and options | |||||||||||
| Diluted weighted average shares outstanding | |||||||||||
| Diluted income (loss) per common share | $ | $ | ( | ||||||||
The table below reflects a summary of securities that could potentially dilute basic income (loss) per common share in future periods that were not included in the computation of diluted loss per share because the effect would have been antidilutive (in thousands).
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Antidilutive securities: | |||||||||||
| Stock options | |||||||||||
| Restricted shares | |||||||||||
| Total antidilutive securities | |||||||||||
Note 8. Long-Term Debt
In connection with the acquisition of RU, APEI, as borrower, entered into a Credit Agreement with Macquarie Capital Funding LLC, or the Credit Agreement, as administrative agent and collateral agent, or the Agent, Macquarie Capital USA Inc. and Truist Securities, Inc., as lead arrangers and joint bookrunners, and certain lenders party thereto, or the Lenders. The Credit Agreement provides for (i) a senior secured term loan facility in an aggregate original principal amount of $175.0 million, or the Term Loan, with a scheduled maturity date of September 1, 2027 and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $20.0 million, or the Revolving Credit Facility, and, together with the Term Loan, is referred to as the Facilities, with a scheduled maturity date of September 1, 2026, the full capacity of which may be utilized for the issuance of letters of credit. The Revolving Credit Facility also includes a $5.0 million sub-facility for swing line loans. The Term Loan, the proceeds of which were used as part of the cash consideration for the RU acquisition, was fully funded on September 1, 2021, or the RU Closing Date, and is presented net of deferred financing fees on the accompanying Consolidated Balance Sheets. Deferred financing fees are being amortized using the effective interest method over the term of the Term Loan. As of March 31, 2025, and December 31, 2024, the remaining unamortized deferred financing fees were $2.7 million and $3.0 million, respectively. Deferred financing fees of $0.5 million related to the Revolving Credit Facility were recorded as an asset and are being amortized to interest expense over the term of the Revolving Credit Facility. There were no
In June 2023, in connection with the cessation of publication of the London Interbank Offered Rate, or LIBOR, the Credit Agreement was amended to change the applicable floating index rate at which interest on borrowings under the Facilities
17
would accrue from LIBOR to Term Secured Overnight Financing Rate, or Term SOFR (as defined in the Credit Agreement, as amended), a forward-looking term rate. Outstanding borrowings under the Facilities bear interest at a per annum rate equal to Term SOFR (plus a credit spread adjustment ranging from 0.11448 % to 0.42826 % depending on the interest period selected by APEI and subject to a 0.75 % floor after giving effect to such adjustment) plus 5.50 %, which shall increase by an additional 2.00 % on all past due obligations if APEI fails to pay any amount when due. As of March 31, 2025, the Facilities’ borrowing rate was 9.94 %. An unused commitment fee in the amount of 0.50 % is payable quarterly in arrears based on the average daily unused amount of the commitments under the Revolving Credit Facility.
Interest expense, including offsets from the interest rate cap agreement in 2024 was $2.4 million and $1.9 million for the three months ended March 31, 2025, and 2024, respectively.
In December 2022, APEI made prepayments totaling $65.0 million on the Term Loan. With this prepayment, APEI is not required to make quarterly principal payments on the Term Loan until payment of the outstanding principal amount at maturity in September 2027, subject to certain exceptions, including with respect to annual excess cash flows, proceeds from the sale of certain assets, casualty and condemnation events, and prohibited debt issuances. APEI had no mandatory prepayment obligation for the year ended December 31, 2024.
The Facilities are and will be guaranteed by APEI’s subsidiaries and certain of APEI’s future subsidiaries that are required to become a party thereto as guarantors, or Guarantors. The obligations of APEI and the Guarantors are secured by a pledge of substantially all of their respective assets, pursuant to the terms of the Collateral Agreement dated as of the RU Closing Date, by and among APEI, the Agent and the Guarantors from time to time party thereto.
The Credit Agreement contains customary affirmative and negative covenants, including limitations on APEI’s and its subsidiaries’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, and enter into affiliate transactions, in each case, subject to certain exceptions, as well as customary representations, warranties, events of default, and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Facilities. In addition, the Credit Agreement contains a financial covenant that requires APEI to maintain a Total Net Leverage Ratio of no greater than 2.00 to 1.00. As of March 31, 2025, the Company was in compliance with all debt covenants.
For additional information on certain restrictions placed on the Company’s indebtedness pursuant to the terms of the Company’s Series A Senior Preferred Stock, please refer to “Note 12. Preferred Stock” in these Consolidated Financial Statements.
Long-term debt consists of the following as of March 31, 2025, and December 31, 2024 (in thousands):
| As of March 31, 2025 | As of December 31, 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Credit agreement | $ | $ | |||||||||
| Deferred financing fees | ( | ( | |||||||||
| Total debt | |||||||||||
| Less: Current portion | |||||||||||
| Long-Term Debt | $ | $ | |||||||||
Scheduled maturities of long-term debt as of March 31, 2025, are as follows (in thousands):
| Maturities of Long-Term Debt (Unaudited) | Loan Payments | ||||
| 2027 | $ | ||||
| Total | $ | ||||
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Derivatives and Hedging
The Company is subject to interest rate risk, as all outstanding borrowings under the Credit Agreement are subject to a variable rate of interest. On September 30, 2021, the Company entered into an interest rate cap agreement to manage its exposure to the variable rate of interest with a total notional value of $87.5 million. This interest rate cap agreement, designated as a cash flow hedge, provided the Company with interest rate protection in the event the LIBOR rate exceeded 2.0 %. The interest rate cap was effective October 1, 2021, and was scheduled to expire on January 1, 2025.
In connection with cessation of publication of LIBOR, the Company terminated its existing interest rate cap agreement and entered into a new interest rate cap agreement that transitioned the benchmark rate to Term SOFR, effective June 30, 2023. The new interest rate cap agreement was structured in a way that there was no change in the value to the Company and provided the Company with interest rate protection in the event that the Term SOFR rate exceeded 1.78 %. The interest rate cap agreement expired on December 31, 2024.
In January 2025, the Company entered into a new interest rate cap agreement, with a notional value of $50.0 million. This new interest rate cap agreement, designated as a cash flow hedge, provides the Company with interest rate protection in the event that the Term SOFR rate exceeds 5.00 %, and is scheduled expire on June 30, 2026.
Changes in the fair value of the interest rate cap designated as a hedging instrument that effectively offset the variability of cash flows associated with the Company’s variable-rate long-term debt obligations are reported in accumulated other comprehensive income. These amounts subsequently are reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings.
Note 9. Segment Information
The Company’s Chief Executive Officer, as the chief operating decision maker, or CODM, organizes the company, manages resource allocations, and measures performance among three
The CODM reviews information about each reportable segment’s revenue and categorized expenses, and allocates resources to, and measures the performance of, each reportable segment using reportable segment operating income (loss). The CODM does not evaluate reportable segment asset or liability information.
A summary of financial information by reportable segment is as follows (in thousands):
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| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
| APUS Segment | ||||||||||||||
| Revenue | ||||||||||||||
| Instructional costs and services | ||||||||||||||
| Selling and promotional | ||||||||||||||
| General and administrative | ||||||||||||||
Other (1) | ||||||||||||||
| Income from operations before interest and income taxes | ||||||||||||||
| RU Segment | ||||||||||||||
| Revenue | ||||||||||||||
| Instructional costs and services | ||||||||||||||
| Selling and promotional | ||||||||||||||
| General and administrative | ||||||||||||||
Other (2) | ||||||||||||||
| Loss from operations before interest and income taxes | ( | ( | ||||||||||||
| HCN Segment | ||||||||||||||
| Revenue | ||||||||||||||
| Instructional costs and services | ||||||||||||||
| Selling and promotional | ||||||||||||||
| General and administrative | ||||||||||||||
Other (3) | ||||||||||||||
| Loss from operations before interest and income taxes | ( | ( | ||||||||||||
| Corporate and Other | ||||||||||||||
| Revenue | ||||||||||||||
| Instructional costs and services | ||||||||||||||
| Selling and promotional | ||||||||||||||
| General and administrative | ||||||||||||||
Other (3) | ||||||||||||||
| Loss from operations before interest and income taxes | ( | ( | ||||||||||||
| Total reportable segment revenue | ||||||||||||||
| Corporate and other revenue | ||||||||||||||
| Total consolidated revenue | ||||||||||||||
| Total reportable segment income from operations before interest and income taxes | ||||||||||||||
| Corporate and other (loss) from operations before interest and income taxes | ( | ( | ||||||||||||
| Total consolidated income from operations before interest and income taxes | ||||||||||||||
(1) Includes loss on assets held for sale, loss on disposal of long-lived assets, and depreciation and amortization expense.
(2) Includes loss on disposal of long-lived assets and depreciation and amortization expense.
(3) Includes depreciation and amortization expense.
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| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| APUS Segment | ||||||||||||||
| RU Segment | ||||||||||||||
| HCN Segment | ||||||||||||||
| Total reportable segment depreciation and amortization | ||||||||||||||
| Corporate and Other | ||||||||||||||
| Total consolidated depreciation and amortization | ||||||||||||||
| Interest expense, net | ||||||||||||||
| APUS Segment | ||||||||||||||
| RU Segment | ||||||||||||||
| HCN Segment | ||||||||||||||
| Total reportable segment interest expense, net | ||||||||||||||
| Corporate and Other | ( | ( | ||||||||||||
| Total consolidated interest expense, net | ( | ( | ||||||||||||
| Income tax expense (benefit) | ||||||||||||||
| APUS Segment | ||||||||||||||
| RU Segment | ( | ( | ||||||||||||
| HCN Segment | ( | ( | ||||||||||||
| Total reportable segment income tax expense | ||||||||||||||
| Corporate and Other | ( | ( | ||||||||||||
| Total consolidated income tax expense | ||||||||||||||
Note 10. Contingencies
The Company accrues for costs associated with contingencies, including, but not limited to, regulatory compliance and legal matters, when such costs are probable and can be reasonably estimated. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved. The Company bases these accruals on management’s estimate of such costs, which may vary from the ultimate costs and expenses, associated with any such contingency.
From time to time, the Company is involved in legal matters in the normal course of its business.
Note 11. Concentration
The Company’s students utilize various payment sources and programs to finance their education expenses, including funds from: the U.S. Department of Defense, or DoD, tuition assistance programs, or TA; education benefit programs administered by the U.S. Department of Veterans Affairs, or VA; federal student aid from Title IV programs; and cash and other sources.
| Three Months Ended March 31, | |||||||||||
| (Unaudited) | |||||||||||
| 2025 | 2024 | ||||||||||
| DoD tuition assistance programs | |||||||||||
| VA education benefits | |||||||||||
| Title IV programs | |||||||||||
| Cash and other sources | |||||||||||
A summary of RU Segment revenue derived from students by primary funding source is as follows:
| Three Months Ended March 31, | |||||||||||
| (Unaudited) | |||||||||||
| 2025 | 2024 | ||||||||||
| Title IV programs | |||||||||||
| Cash and other sources | |||||||||||
| VA education benefits | |||||||||||
A summary of HCN Segment revenue derived from students by primary funding source is as follows:
| Three Months Ended March 31, | |||||||||||
| (Unaudited) | |||||||||||
| 2025 | 2024 | ||||||||||
| Title IV programs | |||||||||||
| Cash and other sources | |||||||||||
| VA education benefits | |||||||||||
Note 12. Preferred Stock
On December 28, 2022, APEI issued $40 million of the Series A Senior Preferred Stock, $0.01 par value per share, to affiliates of existing common stockholders of the Company.
The Series A Senior Preferred Stock has cumulative dividends that accrue daily at the annual rate which is equal to Term (selected by the Company for each divided period), plus 10.00 %. On the 30-month anniversary of issuance, the dividend rate spread shall increase by 2.00 % per annum and shall increase by 0.50 % per annum at the beginning of each full fiscal quarter thereafter. The dividend rate spread increases 6.00 % in the event of default, a change of control, or other non-compliance as noted in the related Certificate of Designation and the purchase agreement for the shares of Series A Senior Preferred Stock, or the Purchase Agreement. Other than an increase in the dividend rate spread relating to default, in no event will the dividend rate spread exceed SOFR plus 25.00 %. As of March 31, 2025, the dividend rate was 14.32 % based on a three-month dividend period. Dividend periods will be monthly, every three months or every six months , at the Company’s option, and the Company currently anticipates using a three-month period. Dividends will be paid, after declaration by the Board, for each dividend period. If the Company selects a six-month dividend period, an interim dividend payment will be required for each three-month period therein. During the three months ended March 31, 2025, and 2024, dividends declared and paid on the Series A Senior Preferred Stock were $1.4 million and $1.5 million, respectively.
The Series A Senior Preferred Stock has no stated maturity, is not convertible, is not subject to any mandatory redemption, sinking fund or other similar provisions, and will remain outstanding unless redeemed at the Company’s option. The Company has the right to redeem the Series A Senior Preferred Stock pro rata in whole or in part at the price per share equal to the liquidation preference, or the Liquidation Preference, plus any applicable early premium amount noted in the Certificate of Designation and Purchase Agreement.
The Liquidation Preference of $45.0 million and $47.0 million as of March 31, 2025, and December 31, 2024, respectively, is based on the occurrence of a liquidation event, which is also considered an event of default as defined in the Certificate of Designation. The Liquidation Preference includes an early redemption premium amount and a make-whole payment for any redemption of the securities prior to June 30, 2025. As of March 31, 2025, and December 31, 2024, the make-whole payment included in the Liquidation Preference was $2.0 million and $4.0 million, respectively. The make-whole payment included in the Liquidation Preference will be reduced quarterly until June 30, 2025, at which time it will be eliminated. Events of default trigger an increase of the dividend rate spread of 6.00 % and an early premium amount, as defined in the Certificate of Designation.
The following table lists the components of the liquidation preference for the periods presented below (in thousands):
| As of March 31, 2025 | As of December 31, 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Series A Senior Preferred Stock (plus accrued and unpaid dividends) | $ | $ | |||||||||
| Make whole payment | |||||||||||
| Early redemption premium | |||||||||||
| Liquidation Preference | $ | $ | |||||||||
The Series A Senior Preferred Stock has no voting rights for directors or otherwise, except as required by law or with respect to certain protective provisions. Without the consent of at least 60 % of the then outstanding shares of Series A Senior Preferred Stock, with certain exceptions, the Company may not, among other things, (i) incur any indebtedness if such incurrence would cause the Company’s Total Net Leverage Ratio (as defined in the Purchase Agreement) to exceed 0.75 :1, (ii) issue any capital stock senior to or pari passu with the Series A Senior Preferred Stock, (iii) declare or pay any cash dividends on the Company’s common stock, or (iv) repurchase more than an aggregate of $30 million of the Company’s common stock.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this Quarterly Report on Form 10-Q, or Quarterly Report, “we,” “our,” “us,” “the Company” and similar terms refer to American Public Education, Inc., or APEI, and its subsidiary institutions collectively unless the context indicates otherwise. All quarterly information in this Management’s Discussion and Analysis is unaudited. The following discussion of our historical results of operations and our liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements and related notes that appear elsewhere in this Quarterly Report and the audited financial information and related notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, or our Annual Report.
Forward-Looking Statements
This Quarterly Report contains forward-looking statements intended to be covered by the safe harbor provisions for forward-looking statements in Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or “may,” or other words or expressions that convey future events, conditions, circumstances, or outcomes to identify these forward-looking statements. Forward-looking statements in this Quarterly Report include, without limitation, statements regarding:
•changes in and our efforts and ability to comply with the extensive regulatory framework applicable to our industry, including the 90/10 Rule and financial responsibility standards, as well as state law and regulations and accrediting agency requirements, and the expected impacts of our efforts to comply and any non-compliance;
•actions by the U.S. Department of Education, or ED, institutional and programmatic accreditors, and state authorizing agencies and expectations regarding the effects of those actions;
•our ability to manage, grow, and diversify our business and execute our business initiatives and strategy;
•the impact, timing, projected benefits, and terms of the planned combination of American Public University System, or APUS, Rasmussen University, or RU, and Hondros College of Nursing, or HCN, into one consolidated institution that will be a system encompassing all APUS, RU, and HCN programs, campuses, and operations, or the Combination;
•legislative and regulatory changes, shifts in regulatory priorities, restrictions on the function, operations, and budgets of federal agencies, including ED, as a result of U.S. presidential and administration transitions and presidential directives regarding governmental actions;
•our cash needs and expectations regarding cash flow from operations, including the impacts of our debt service and the dividend payments that are required to be paid on our Series A Senior Preferred Stock;
•our ability to undertake initiatives to improve the learning experience, attract students who are likely to persist, and improve student outcomes;
•changes to and expectations regarding our student enrollment, net course registrations, and the composition of our student body, including the pace of such changes;
•our ability to maintain, develop, and grow our technology infrastructure to support our student body and remain competitive;
•our conversion of prospective students to enrolled students and our retention of active students;
•our ability to update and expand the content of existing programs and develop new programs to meet emerging student needs and marketplace demands, and our ability to do so in a cost-effective manner or on a timely basis;
•the branding and marketing of our institutions;
•our ability to leverage our investments in support of our initiatives, students, and institutions;
•our maintenance and expansion of our relationships and partnerships and the development of new relationships and partnerships;
•actions by the Department of Defense, or DoD, or branches of the U.S. Armed Forces, including actions related to the participating in DoD tuition assistance, or TA, programs, our responses to those actions, and expectations regarding the effects of those actions and responses;
•federal appropriations and other budgetary matters, including government shutdowns;
•changes in enrollment in postsecondary degree-granting institutions and workforce needs;
•our ability to recognize the intended benefits of our cost savings and revenue-generating efforts;
•the expected impact on our students and our business from campus closures and consolidations;
•our plans with respect to potential strategic alternatives for Graduate School USA, or GSUSA;
•our financial performance generally; and
•our expectations and estimates regarding tax and accounting matters.
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Forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account information currently available to us, and are not guarantees of future results. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. Risks and uncertainties involved in forward-looking statements include, among others:
•potential changes to the ED’s, and other federal government agencies’, structure, policies, priorities, and oversight, including as a result of federal elections and the Trump administration’s stated intention to dismantle ED;
•our dependence on the effectiveness of our ability to attract students who persist in our institutions’ programs;
•our inability to effectively market our programs or expand into new markets;
•the loss of our ability to receive funds under TA programs or the reduction, elimination, or suspension of TA, or continued disruption due to systems used to request TA;
•our inability to maintain enrollments from military students;
•adverse effects of changes our institutions make to improve the student experience and enhance each institutions ability to identify and enroll students who are likely to succeed;
•our failure to successfully adjust to future market demands;
•our failure to comply with regulatory and accrediting agency requirements or to maintain institutional accreditation, the consequences thereof, and risks related to any actions we may take to prevent or correct such failure;
•our failure to meet applicable National Council Licensure Examination, or NCLEX, pass rates and other NCLEX standards, and the consequences thereof;
•our failure to comply with the 90/10 Rule;
•our loss of eligibility to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs, or ability to process Title IV financial aid;
•our inability to recognize the benefits of our cost savings efforts;
•economic and market conditions in the United States and abroad and changes in interest rates;
•risks related to business combinations, acquisitions, divestitures, and other strategic transactions, including, as applicable, integration challenges, business disruption, dilution of stockholder value, financial charges, and diversion of management attention;
•risks related to our substantial indebtedness and our Series A Preferred Stock; and
•our dependence on and need to continue to invest in our technology infrastructure.
Forward-looking statements should be considered in light of these factors and the factors described elsewhere in this Quarterly Report, including in the “Risk Factors” section of our Annual Report, and in our various filings with the Securities and Exchange Commission, or the SEC. It is important that you read these factors and the other cautionary statements made in this Quarterly Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report. If any of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance, or achievements may differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. You should also read the more detailed description of our business in our Annual Report when considering forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements herein, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly update any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, or otherwise, except as required by law.
Overview
Background
We are a provider of online and campus-based postsecondary education to approximately 106,400 students and career learning to approximately 23,000 individuals, through four subsidiary institutions, American Public University System, or APUS, Rasmussen University, or RU, Hondros College of Nursing, or HCN, and Graduate School USA, or GSUSA. Our subsidiary institutions offer purpose-built education programs and career learning designed to prepare individuals for productive contributions to their professions and society, and to offer opportunities designed to advance students in their current professions or to help them prepare for their next career. Our subsidiary institutions are licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent the institutions believe such licenses or authorizations are required, and APUS, RU, and HCN are certified by the ED to participate in Title IV programs.
Our Institutions
Our wholly owned operating subsidiary institutions include the following:
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•American Public University System, Inc., referred to herein as APUS, provides online postsecondary education to approximately 88,300 adult learners, directed primarily at the needs of the military, veterans, extended military families, and other public service and service-minded communities through two brands: American Military University, or AMU, and American Public University, or APU. As of March 31, 2025, approximately 64% of APUS students self-reported that they served in the military on active duty at the time of initial enrollment.
•Rasmussen College, LLC, referred to herein as Rasmussen University, or RU, provides nursing- and health sciences-focused postsecondary education to approximately 14,500 students at 20 campuses in six states and online. As of March 31, 2025, on-ground enrollment was 6,500, of which approximately 5,600 students were pursuing nursing degrees at RU, approximately 90% of whom were enrolled in RU’s pre-licensure nursing degree programs. At March 31, 2025, online enrollment was approximately 8,000 students.
•National Education Seminars, Inc., referred to herein as Hondros College of Nursing, or HCN, provides nursing education to approximately 3,600 students at eight campuses in three states. HCN’s students are enrolled in its pre-licensure nursing degree programs or its Medical Assisting Diploma program.
•American Public Training LLC, referred to herein as Graduate School USA, or GSUSA, provides career learning and leadership training in-person and online to the federal workforce. GSUSA operational activities are presented within Corporate and Other.
The Planned Combination of APUS, RU, and HCN
On January 28, 2025, we announced the planned combination of APUS, RU, and HCN (the “Combination”), which will result in a combined institution named American Public University System comprised of two divisions tentatively named (i) APUS Global, comprised of AMU and APU, and (ii) Rasmussen, 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, with final division names to be determined closer to closing of the Combination. The Combination constitutes a Change of Control, Structure or Organization pursuant to HLC policy and, accordingly, we must receive HLC approval prior to effectuating the Combination. APUS and RU have jointly submitted an application for Change of Control, Structure or Organization. For HLC purposes, APUS will be the surviving institution, and the application seeks approval for the Combination and the expansion of APUS’s HLC accreditation to include the RU and HCN programs and locations. We anticipate completing the Combination in the third quarter of 2025 subject to obtaining required approvals and ED taking related actions.
HLC conducted a site visit in March 2025 related to the joint application and is expected to complete its review of the joint application in June 2025. In May 2025, APUS and RU received the site visit report, and HLC has confirmed that the application for Change of Structure will be placed on the agenda for HLC’s June 2025 meeting.
Regulatory and Legislative Activity
Rasmussen University
The Florida legislature passed legislation in May 2025 that will subject RU nursing programs to additional regulatory scrutiny by the Florida Board of Nursing, or FBN, and the Florida Department of Health, or FDH. The legislation, which will take effect July 1, 2025, unless vetoed by Florida’s governor, is expected to lead to increased challenges in hiring and retaining qualified nursing program directors and increased expenses related to compliance with new requirements, such as those related to standardized admissions criteria, exit examinations, remedial programs for students, and tuition and fees reimbursement to students who fail the NCLEX if RU’s pass rate is less than 30%. In addition, the legislation shortens the period before a program will be placed on probation due to low NCLEX scores and shortens the length of time a program can spend on probation, and it allows 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. The Florida ADN programs and several RU nursing programs in other states have previously been, and may in the future be, subject to disciplinary actions by state regulatory bodies for failure to meet applicable NCLEX pass rates or other requirements including disciplinary actions that could be deemed adverse actions by FBN for purposes of the legislation’s requirements. Failure to comply with the new legislation and any adverse action taken as a result could adversely impact our business, operations, financial results, and reputation, including RU’s ability to expand or operate in Florida. See the “Risk Factors” section of this Quarterly Report below for additional information.
Hondros College of Nursing
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ABHES may withdraw accreditation if it determines that an institution fails to demonstrate at least a 70% retention rate for each program. Alternatively, it may provide an opportunity for a program not meeting ABHES’ outcomes thresholds to come into compliance within a specified time period, and may extend such period if a program demonstrates improvement or for other good cause. For the reporting year ended June 30, 2024, HCN’s Cleveland and Dayton Diploma in Practical Nursing, or PN, programs, and the Akron Associate Degree in Nursing, or ADN, program were below the 70% benchmark for retention. As a result, ABHES placed the Cleveland and Dayton PN programs and Akron ADN program on outcomes reporting status and required HCN to submit reports for each of these programs demonstrating their retention rate through the first three quarters of the 2024-2025 reporting year by May 2025. These three programs have met the 70% benchmark for retention through the first three quarters of the 2024-2025 reporting year. As a result, we expect the ABHES Commission to vote to remove retention reporting requirements for all affected HCN programs at its July 2025 meeting.
Graduate School USA
GSUSA provides contract training to federal government agency customers and through direct enrollment by federal, state, and municipal government employees, contractors, and non-government employees. Changing priorities and policies under the Trump administration, including reductions in force, or RIFS, at government agencies, and including other actions taken by the Department of Government Efficiency, or DOGE, have resulted in significant uncertainty relating to the provision of career learning and contract training at federal government agencies, including whether they will remain a priority for our federal government agency customers. These changes have begun to adversely impact, and may continue to adversely impact, GSUSA’s business, and, as a result, we are exploring a range of paths to stabilize the business and considering alternatives for GSUSA. Any divestiture of GSUSA or other significant transaction, whether by sale or otherwise, may require an investment of time and resources, may distract management from other responsibilities, and may result in losses on disposition or continued financial involvement in GSUSA.
Tuition Increases
Providing affordable degree and certificate programs is an important element of our competitive strategy. In April 2024, APUS implemented a tuition increase to master’s level students across all categories, including military, non-military and veteran students, and in September 2024, APUS returned the military rate for master’s level students to the $250 per credit hour rate in effect prior to the April 2024 tuition increase. We believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities. RU implemented modest tuition increases for all students in select programs in the first quarter of 2024, for new students in select programs in August 2024, and for returning students in select programs in October 2024. In the third quarter of 2025, RU plans to implement a tuition increase, similar to the increases implemented in the third and fourth quarters of 2024. The tuition and fee increases at RU are intended to reflect adjustments to be consistent with the local campus markets. Even with these increases, RU 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.
Reportable Segments
Our operations are organized into three reportable segments:
•American Public University System Segment, or APUS Segment. This segment reflects the operational activities of APUS.
•Rasmussen University Segment, or RU Segment. This segment reflects the operational activities of RU.
•Hondros College of Nursing Segment, or HCN Segment. This segment reflects the operational activities of HCN.
Adjustments to reconcile segment results to the Consolidated Financial Statements are included in Corporate and Other. These adjustments include unallocated corporate activity and eliminations, and the operational activities of GSUSA.
Summary of Results
Consolidated revenue for the three months ended March 31, 2025, increased to $164.6 million from $154.4 million, or by 6.6%, as compared to the prior year period. Our net income for the three months ended March 31, 2025, was $8.9 million, compared to $0.5 million in the prior year period, an increase of $8.4 million. The results for the three months ended March 31, 2025, include a non-cash $1.5 million loss on assets held for sale in our APUS Segment, and $1.0 million in professional fees in Corporate and Other relating to the Combination, both on a pre-tax basis. The results in the prior year period include a non-cash investment loss of $3.3 million on one of our cost method equity investments in Corporate and Other, a $2.9 million pre-tax
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loss on leases in our RU Segment, and $1.9 million in information technology transition service costs, on a pre-tax basis. Our operating margin improved to 7.4% for the three months ended March 31, 2025, compared to 3.4% in the prior year period. Excluding the loss on assets held for sale and professional fees relating to the Combination in 2025, and the loss on leases and information technology transition services costs in 2024, our operating margin was 9.0% and 6.5% for the three months ended March 31, 2025, and 2024, respectively.
APUS net course registrations for the three months ended March 31, 2025, increased to approximately 102,500 from approximately 99,000, an increase of 3,500, or 3.5%, as compared to the prior year period. APUS Segment revenue for the three months ended March 31, 2025, increased to $83.9 million from $80.7 million, or by 4.1%, as compared to the prior year period. The revenue increase for the period was greater than the increase in net course registrations due to the tuition and fee increases in the second quarter of 2024, and the timing of course starts within the respective periods. APUS Segment operating margin increased to 28.7% for the three months ended March 31, 2025, from 28.6% in the prior year period.
RU total enrollment for the three months ended March 31, 2025, increased to approximately 14,500 from approximately 13,500, an increase of 1,000, or 7.4%, as compared to the prior year period. RU Segment revenue for the three months ended March 31, 2025, increased to $59.3 million from $53.1 million, or by 11.5%, as compared to the prior year period. The revenue increase for the period was greater than enrollment for the comparable prior year period due to tuition increases in the third and fourth quarters of 2024. RU Segment operating margin improved to negative 0.1% for the three months ended March 31, 2025, from negative 16.9% in the prior year period.
HCN total enrollment for the three months ended March 31, 2025, increased to approximately 3,600 from approximately 3,300, an increase of 300, or 9.6%, as compared to the prior year period. HCN Segment revenue for the three months ended March 31, 2025, increased to $17.7 million from $16.4 million, or by 7.5%, as compared to the prior year period. The revenue increase was less than enrollment increase due to higher student enrollment from community partners which is at a lower revenue per student. HCN Segment operating margin decreased to negative 4.2% for the three months ended March 31, 2025, from negative 1.8% in the prior year period.
Critical Accounting Policies and Use of Estimates
Goodwill and indefinite-lived intangible assets. Goodwill is the excess of the purchase price of an acquired business over the fair value of the assets acquired and liabilities assumed, and the fair value assigned to identifiable intangible assets. Goodwill is not amortized. Goodwill is reported at the reporting unit level that we have defined as our reporting segments. In connection with our acquisitions of RU and HCN, we recorded $217.4 million and $38.6 million of goodwill, respectively, in our RU and HCN Segments. We later recorded non-cash impairment charges reducing the carrying value of RU and HCN Segment goodwill to $33.0 million and $26.6 million, respectively. There was no goodwill recorded in connection with the acquisition of GSUSA. No goodwill is recorded in our APUS Segment.
In addition to goodwill, in connection with the acquisitions of RU and HCN, we recorded identified intangible assets with an indefinite useful life in the aggregate amount of $51.0 million and $3.7 million, respectively, in our RU and HCN Segments, which included intangible assets related to trade name, accreditation, licensing, and Title IV, and affiliate agreements. We later recorded non-cash impairment charges reducing the carrying value of RU indefinite-lived identified intangible assets to $24.5 million. There were no indefinite useful life intangible assets identified as a result of the acquisition of GSUSA. There are no indefinite-lived intangible assets in our APUS Segment.
We recorded $35.5 million, $4.4 million, and $1.0 million of identified intangible assets with a definite useful life in connection with the acquisitions of RU, HCN, and GSUSA, respectively. There are no 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 or changes in 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. Impairment testing consists of an optional qualitative assessment as well as a quantitative test. When performing a qualitative assessment, 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.
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We estimate fair value in our quantitative analysis by weighting the results from two different valuation approaches. They are: (1) discounted cash flow and (2) guideline public company. Under the discounted cash flow method, fair value is 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 are 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.
During the three months ended March 31, 2025, we completed a qualitative assessment for potential impairment of the RU and HCN Segment goodwill and indefinite-lived intangible assets. As part of the assessment, we considered the events and circumstances expressly required by ASC 350, in addition to other entity-specific factors. Factors considered included RU and HCN’s financial and enrollment performance against internal targets, economic factors, and the continued favorable growth outlook for nursing education. After completing this qualitative assessment, we concluded it was more likely than not that the fair value of each of the RU and HCN Segments was greater than the respective carrying value, and therefore no quantitative impairment test and no impairment charge was necessary.
Significant assumptions inherent to valuation methodologies for goodwill include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in the higher education market. Future changes, including minor changes in the significant assumption or other factors including revenue, operating income, valuation multiples, and other inputs to the valuation process may result in future impairment charges, and those charges could be material.
For more information regarding our Critical Accounting Policies and Use of Estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.
Results of Operations
Below we have included a discussion of our operating results and material changes in our operating results during the three months ended March 31, 2025, compared to the three months ended March 31, 2024. Our revenue and operating results normally fluctuate as a result of seasonal or other variations in our enrollments and the level of expenses in our reportable segments. Our student population varies as a result of new enrollments, graduations, student attrition, the success of our marketing programs, and other reasons that we cannot always anticipate. We expect quarterly fluctuations in operating results to continue as a result of various enrollment patterns and changes in revenue and expenses.
APUS net course registrations for the three months ended March 31, 2025, increased to approximately 102,500 from approximately 99,000, an increase of 3,500, or 3.5%, as 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 education benefit programs administered by the U.S. Department of Veterans Affairs, or VA, and an increase in students utilizing federal student aid from Title IV programs, partially offset by a decrease in military students utilizing TA. APUS Segment operating margin increased to 28.7% for the three months ended March 31, 2025, from 28.6% in the prior year period. The increase in operating margin for the three months ended March 31, 2025, was primarily due to the increase in revenue and a decrease in professional fees, partially offset by the loss on assets held for sale, and an increase in employee compensation costs, as compared to the prior year period.
RU total enrollment for the three months ended March 31, 2025, increased to approximately 14,500 from approximately 13,500, an increase of 1,000, or 7.4%, as compared to the prior year period, driven by an 11.1% increase in online enrollment and a 3.2% increase in on-ground enrollment. RU Segment operating margin improved to negative 0.1% for the three months ended March 31, 2025, from negative 16.9% in the prior year period. The improvement in the operating margin for the three months ended March 31, 2025, was primarily due to the increase in revenue as well as decreases in loss on leases, depreciation and amortization expenses, and information technology costs, partially offset by an increase in employee compensation costs, as compared to the prior year period.
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HCN total enrollment for the three months ended March 31, 2025, increased to approximately 3,600 from approximately 3,300, an increase of 300, or 9.6%, as compared to the prior year period. HCN Segment operating margin decreased to negative 4.2% for the three months ended March 31, 2025, from negative 1.8% in the prior year period. The decrease in the operating margin for the three months ended March 31, 2025, was primarily due to increases in employee compensation costs, classroom and course materials costs, and bad debt expense, partially offset by the increase in revenue, as compared to the prior year period.
For a more detailed discussion of our results by reportable segment, refer to “Analysis of Operating Results by Reportable Segment” below.
Analysis of Consolidated Statements of Income
The following table sets forth statements of income data as a percentage of revenue for each of the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Revenue | 100.0 | % | 100.0 | % | |||||||
| Costs and expenses: | |||||||||||
| Instructional costs and services | 45.5 | 46.9 | |||||||||
| Selling and promotional | 21.4 | 21.0 | |||||||||
| General and administrative | 22.1 | 23.5 | |||||||||
| Depreciation and amortization | 2.4 | 3.3 | |||||||||
| Loss on assets held for sale | 0.9 | — | |||||||||
| Loss on leases | — | 1.9 | |||||||||
| Loss on disposals of long-lived assets | 0.1 | — | |||||||||
| Total costs and expenses | 92.6 | 96.6 | |||||||||
| Income from operations before interest and income taxes | 7.4 | 3.4 | |||||||||
| Interest expense, net | (0.5) | (0.1) | |||||||||
| Income from operations before income taxes | 6.9 | 3.3 | |||||||||
| Income tax expense | 1.5 | 0.8 | |||||||||
| Equity investment loss | — | (2.2) | |||||||||
| Net income | 5.4 | 0.3 | |||||||||
| Preferred stock dividend | 0.9 | 1.0 | |||||||||
| Net income (loss) available to common shareholders | 4.5 | % | (0.7) | % | |||||||
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024
Revenue. Our consolidated revenue for the three months ended March 31, 2025, was $164.6 million, an increase of $10.1 million, or 6.6%, compared to $154.4 million for the three months ended March 31, 2024. The increase in revenue was primarily due to a $6.1 million, or 11.5%, increase in revenue in our RU Segment, a $3.3 million, or 4.1%, increase in revenue in our APUS Segment, and a $1.2 million, or 7.5%, increase in revenue in our HCN Segment, partially offset by a $0.5 million, or 12.5%, decrease in GSUSA revenue included in Corporate and Other. The RU Segment revenue increase was primarily due to a 7.4% increase in total student enrollment and the impact of tuition increases in the third and fourth quarters of 2024. The APUS Segment revenue increase was primarily due to a 3.5% increase in net course registrations, tuition and fee increases in the second quarter of 2024, and the timing of course starts, as compared to the prior year period. The HCN Segment revenue increase was primarily due to a 9.6% increase in total student enrollment, as compared to the prior year period.
Costs and expenses. Costs and expenses for the three months ended March 31, 2025, were $152.3 million, an increase of $3.1 million, or 2.0%, compared to $149.3 million for the three months ended March 31, 2024. Costs and expenses for the three months ended March 31, 2025, included a $1.5 million loss on assets held for sale in our APUS Segment and $1.0 million in professional fees in Corporate and Other relating to the Combination, both on a pre-tax basis. Costs and expenses in the prior year period included a $2.9 million pre-tax loss on leases in our RU Segment and $1.9 million in information technology transition service costs, both on a pre-tax basis. Costs and expenses for the three months ended March 31, 2025, as compared to the prior year period, excluding the items noted above, increased $5.3 million, or 3.7%, due primarily to increases in employee
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compensation costs and advertising costs, partially offset by a decrease in information technology costs, and depreciation and amortization expenses. Costs and expenses as a percentage of revenue decreased to 92.6% for the three months ended March 31, 2025, from 96.6% for the three months ended March 31, 2024.
Instructional costs and services expenses. Our instructional costs and services expenses for the three months ended March 31, 2025, were $74.9 million, an increase of $2.5 million, or 3.5%, compared to $72.4 million for the three months ended March 31, 2024. The increase in instructional costs and services expenses was primarily due to increases in faculty compensation costs in our RU, APUS, and HCN Segments due to an increase in registrations at APUS and enrollments at RU and HCN and an increase in classroom and course materials costs in our HCN Segment, partially offset by decreases information technology costs in our RU Segment. Instructional costs and services expenses as a percentage of revenue decreased to 45.5% for the three months ended March 31, 2025, from 46.9% for the three months ended March 31, 2024.
Selling and promotional expenses. Our selling and promotional expenses for the three months ended March 31, 2025, were $35.2 million, an increase of $2.7 million, or 8.5%, compared to $32.5 million for the three months ended March 31, 2024. The increase in selling and promotional expenses was primarily due to increases in employee compensation costs and advertising costs in all our segments, professional fees in our APUS Segment, and marketing support costs in our RU Segment. Selling and promotional expenses as a percentage of revenue increased to 21.4% for the three months ended March 31, 2025, from 21.0% for the three months ended March 31, 2024.
General and administrative expenses. Our general and administrative expenses for the three months ended March 31, 2025, were $36.4 million, an increase of $0.1 million, or 0.4%, compared to $36.3 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, general and administrative expenses included $1.0 million in professional fees relating to the Combination in Corporate and Other. Consolidated bad debt expense for the three months ended March 31, 2025, was $5.0 million, or 3.0% of revenue, compared to $4.2 million, or 2.7% of revenue in the prior year period. General and administrative expenses as a percentage of revenue decreased to 22.1% for the three months ended March 31, 2025, from 23.5% for the three months ended March 31, 2024. As we continue to evaluate enhancements to our business capabilities, we expect to incur additional costs and that our general and administrative expenses will vary from time to time.
Depreciation and amortization expenses. Depreciation and amortization expenses were $4.0 million for three months ended March 31, 2025, compared to $5.1 million in the prior year period, a decrease of $1.1 million, 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 was 2.4% and 3.3% for the three months ended March 31, 2025, and 2024, respectively.
Loss on assets held for sale. For the three months ended March 31, 2025, the $1.5 million non-cash loss on assets held for sale is for real property in Charles Town, West Virginia in our APUS Segment. There were no losses on assets held for sale in the comparable prior year period.
Loss on disposals of long-lived assets. The loss on disposal of long-lived assets was $230,000 for the three months ended March 31, 2025, compared to $28,000 for the three months ended March 31, 2024.
Stock-based compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $2.3 million and $1.9 million for the three months ended March 31, 2025, and 2024, respectively. Stock-based compensation costs included accelerated expense for retirement-eligible employees and performance stock unit incentive costs.
Interest expense, net. Interest expense, net of interest and other income, was $0.9 million and $0.1 million for the three months ended March 31, 2025, and 2024, respectively. The increase in net interest expense in the three months ended March 31, 2025, as compared to the prior year period, 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.
Income tax expense. We recognized income tax expense of $2.5 million and $1.2 million for the three months ended March 31, 2025, and 2024, respectively, or an effective tax rate of 21.7% and 70.2% in 2025, and 2024, respectively. The effective tax rate in 2025 was positively impacted by excess tax benefits related to stock compensation. The high effective tax rate in 2024 was due to the $3.3 million equity investment loss not deductible for tax purposes, and non-deductible stock compensation expense in relation to taxable income in the three months ended March 31, 2024.
Equity investment loss. There was no equity investment loss for the three months ended March 31, 2025. The $3.3 million non-cash investment loss in the prior year period is related to a cost method investment and was due to the investee entering into a new convertible debt agreement which resulted in the conversion of the Company’s preferred stock holdings in the investee into common shares, and the dilution of the Company’s ownership percentage.
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Net income. Our net income was $8.9 million and $0.5 million for the three months ended March 31, 2025, and 2024, respectively, an increase of $8.4 million. This increase was related to the factors discussed above.
Preferred stock dividends. Preferred stock dividends were $1.4 million and $1.5 million for the three months ended March 31, 2025, and 2024, respectively.
Net income (loss) available to common stockholders. The net income available to common stockholders was $7.5 million for the three months ended March 31, 2025, compared to a net loss of $1.0 million for the three months ended March 31, 2024, an improvement of $8.5 million. This improvement was related to the factors discussed above.
Analysis of Operating Results by Reportable Segment
The following table provides details on our operating results by reportable segment for the respective periods (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Unaudited) | |||||||||||
| Revenue: | |||||||||||
| APUS Segment | $ | 83,946 | $ | 80,656 | |||||||
| RU Segment | 59,251 | 53,135 | |||||||||
| HCN Segment | 17,676 | 16,447 | |||||||||
| Corporate and Other | 3,678 | 4,194 | |||||||||
| Total revenue | $ | 164,551 | $ | 154,432 | |||||||
| Income (loss) from operations before interest and income taxes: | |||||||||||
| APUS Segment | $ | 24,126 | $ | 23,087 | |||||||
| RU Segment | (72) | (8,966) | |||||||||
| HCN Segment | (746) | (304) | |||||||||
| Corporate and Other | (11,062) | (8,635) | |||||||||
| Total income from operations before interest and income taxes | $ | 12,246 | $ | 5,182 | |||||||
APUS Segment
For the three months ended March 31, 2025, the $3.3 million, or 4.1%, increase to approximately $83.9 million in revenue in our APUS Segment was primarily attributable to higher net course registrations and tuition and fee increases in the second quarter of 2024, as compared to the prior year period. Net course registrations increased 3.5% to approximately 102,500 from approximately 99,000 in the prior year period. Income from operations before interest and income taxes increased to $24.1 million, or by 4.5%, during the three months ended March 31, 2025, from $23.1 million in the prior year period, an increase of $1.0 million, and was primarily due to an increase in revenue and a decrease in professional fees, partially offset by the loss on assets held for sale and an increase in employee compensation costs, as compared to the prior year period.
RU Segment
For the three months ended March 31, 2025, the $6.1 million, or 11.5%, increase to approximately $59.3 million in revenue in the RU Segment was primarily due to an increase in enrollment of 7.4% and tuition increases effective in the third and fourth quarters 2024 for select programs. The loss from operations before interest and income taxes was $0.1 million and $9.0 million for the three months ended March 31, 2025, and 2024, respectively, an improvement of $8.9 million in the current year period primarily due to the increase in revenue as well as decreases in loss on leases, depreciation and amortization expenses, and information technology costs, partially offset by an increase in employee compensation costs, as compared to the prior year period.
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HCN Segment
For the three months ended March 31, 2025, the $1.2 million, or 7.5%, increase to approximately $17.7 million in revenue in our HCN Segment was primarily due to a 9.6% increase in total student enrollment, as compared to the prior year period. The loss from operations before interest and income taxes was $0.7 million and $0.3 million during the three months ended March 31, 2025, and 2024, respectively, a decrease of $0.4 million, as compared to the prior year period.
Liquidity and Capital Resources
Liquidity
Cash and cash equivalents were $187.5 million and $158.9 million at March 31, 2025, and December 31, 2024, respectively, representing an increase of $28.6 million, or 18.0%. The increase in cash was primarily due to the collection of TA accounts receivable at APUS, and a reduction in operating losses at RU. We have historically financed operating activities and capital expenditures with cash provided by operating activities. We expect to continue to fund our costs and expenses through cash generated from operations for the next twelve months and beyond. For more on our material cash requirements from known contractual and other obligations, please refer to the section entitled “Contractual Obligations” in Item 7 of Part II of our Annual Report.
We derive a significant portion of our revenue from our participation in ED’s Title IV programs, for which disbursements are governed by federal regulations. We have typically received disbursements under Title IV programs within 30 days of the start of the applicable course or term. Another significant source of revenue is derived from TA from DoD and programs from VA. Generally, these funds are received within 60 days of the start of the courses to which they relate. However, 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, APUS collected approximately $22.1 million from TA related to periods prior to 2024. 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. In December 2024, APUS again changed its approach to invoicing for TA, taking longer to bill TA, which had the effect of delaying payments from 2024 to 2025. As a result, during the three months ended March 31, 2025, due to this change in the approach to invoicing TA in the fourth quarter of 2024, APUS collected approximately $25.9 million from TA related to periods prior to 2025.
While the change in billing approach positively impacted the “90%” side of the ratio in 2024, it reduced operating cash flow in 2024, may result in increased bad debt expense in 2025, and may cause the “90%” side of the ratio to increase in 2025 or future years, which could have an adverse impact on our cash flow and results of operations, as well as APUS’s ability to comply with the 90/10 Rule in 2025 or future years. The change in billing practice added to our accounts receivable as of December 31, 2024, and resulted in an increase to our leverage ratios as of December 31, 2024, under our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock as further discussed in “Note 8. Long-Term Debt” and “Note 12. Preferred Stock” included in the Consolidated Financial Statements in this Quarterly Report.
ED evaluates institutions on an annual basis for compliance with specified financial responsibility standards, including a composite score calculation based on a complex formula using line items from the institution’s audited financial statements. Generally, an institution’s composite score must be 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. On April 9, 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.” On April 13, 2025, we timely informed ED that we selected the “zone alternative” as the alternative basis on which we establish financial responsibility. As a result, APUS, RU and HCN currently operate under the zone alternative to establish financial responsibility. Under the zone alternative, we are required to: (i) make Title IV disbursements to eligible students and parents under the heightened cash monitoring payment method, or HCM1, pursuant to which we would be required to first make disbursements to eligible students and parents and pay any credit balances before we request or receive funds from ED for the amount of those disbursements; (ii) notify ED of certain events, such as an adverse action taken by any of our institutions’ accreditors or state authorizing agencies; (iii) provide regular reports to ED relating to our institutions’ current operations and future plans; and (iv) require our auditors to express an opinion on our compliance with the requirements under the zone alternative. Our placement on HCM1 status did not have a significant impact on our 2024 financial results. Additionally, RU is required to provide a letter of credit for the benefit of ED on behalf of RU in connection with RU’s 2020 composite score being below the minimum required. Restricted cash includes a $24.3 million restricted certificate of deposit to secure a letter of credit.
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Our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock, or the Purchase Agreement, contain financial covenants that require us to maintain a Total Net Leverage Ratio (as defined in each respective agreement) of no greater than 2.00 to 1.00 and 0.75 to 1.00, respectively, subject to certain exceptions. Our Total Net Leverage Ratio, under the Credit Agreement, at March 31, 2025, was negative 0.19 due to the growth in both cash and earnings. The net leverage ratio at December 31, 2024 was 0.20. While we do not anticipate that a higher leverage ratio will have material limitations on our expected operations for 2025, it could result in reduced operational flexibility in 2026 and future years.
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 of new 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, which we anticipate completing in the third quarter of 2025 subject to obtaining required approvals and ED taking related actions. For the period ended March 31, 2025, we incurred approximately $1.0 million in professional fees related to the Combination, and we expect to incur between approximately an additional $2.0 million and $4.0 million in professional fees for the remainder of 2025 to complete the Combination.
Operating Activities
Net cash provided by operating activities was $37.0 million and $20.7 million for the three months ended March 31, 2025, and 2024, respectively. The increase in cash from operating activities was primarily due to the collection of TA accounts receivable at APUS related to the 2024 change in TA billing approach, and other changes in working capital due to the timing of receipts and payments. Accounts receivable at March 31, 2025, decreased approximately $20.6 million compared to December 31, 2024, primarily related TA collections in our APUS Segment. Accounts payable, accrued liabilities, and accrued compensation and benefits at March 31, 2025, were approximately $2.6 million higher than December 31, 2024.
Investing Activities
Net cash used in investing activities was $3.4 million and $6.2 million for the three months ended March 31, 2025, and 2024, respectively. For the three months ended March 31, 2025, capital expenditures were $3.9 million compared to capital expenditures of $6.2 million for the three months ended March 31, 2024. Prior year period capital expenditures were higher than the current year period primarily due to campus consolidations at RU and relocations at HCN that occurred in the prior year period.
Financing Activities
Net cash used in financing activities was $5.0 million and $5.7 million for the three months ended March 31, 2025, and 2024, respectively. The decrease in cash used in financial activities is primarily due to a decrease in cash used to repurchase our common stock. For the three months ended March 31, 2024, we repurchased 251,146 shares of common stock for an aggregate purchase price of $2.8 million. Financing activities for the three months ended March 31, 2025, and 2024, included $1.4 million and $1.5 million, respectively, related to the payment of dividends on our preferred stock.
Contractual Commitments
We have various contractual obligations consisting of operating leases and purchase obligations. Purchase obligations include agreements with consultants, contracts with third-party service providers, and other future contracts or agreements. For a summary of our contractual obligations, please refer to Item 7 of Part II of our Annual Report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risk
We had no material derivative financial instruments or derivative commodity instruments as of March 31, 2025. We maintain our cash and cash equivalents in bank deposit accounts, money market funds, and short-term U.S. Treasury bills. The bank deposits exceed federally insured limits. We have historically not experienced any losses in such accounts. We believe we are not exposed to any significant credit risk on cash and cash equivalents. Due to the short-term duration of our investment
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portfolio, the low yield on the portfolio, and the low risk profile of our investments, a 10% increase or decrease in interest rates would not have a material impact on the fair value of our portfolio.
Interest Rate Risk
We are subject to risk from changes in interest rates primarily relating to our investment of funds in short-term U.S. Treasury bills issued at a discount to their par value. Our future investment income will vary due to changes in interest rates.
In the normal course of business, we employ established policies and procedures to manage our exposure to changes in interest rates. For every 100 basis points increase in Term SOFR, we would incur an incremental $1.0 million in interest expense per year, excluding any impact offset from the interest rate cap agreement. To reduce our exposure to market risks from increases in interest rates on our variable rate indebtedness we have entered into hedging arrangements in the form of interest rate cap agreements. As further discussed in “Note 8. Long-Term Debt” included in the Notes to the Consolidated Financial Statements in this Quarterly Report, prior to December 31, 2024, an interest rate cap agreement provided us with interest rate protection in the event the one-month Term SOFR rate increases above 1.78%. In January 2025, upon the expiration of the prior agreement, we entered into a new interest rate cap agreement with a notional value of $50.0 million, which provides us with interest rate protection in the event that the Term SOFR rate exceeds 5.00%. This interest rate cap agreement will expire in June 2026.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of March 31, 2025. Based upon the evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we have been and may be involved in various legal proceedings. We currently have no material legal proceedings pending.
Item 1A. Risk Factors
An investment in our stock involves a high degree of risk. You should carefully consider the risks set forth in the “Risk Factors” section of our Annual Report and the other information set forth in this Quarterly Report on Form 10-Q, our Annual Report, and the additional information in the other reports we file with the SEC. If any of the risks contained in those reports actually occur, our business, results of operation, financial condition, and liquidity could be harmed, the value of our securities could decline, and you could lose all or part of your investment. With the exception of the following, there have been no material changes in the risk factors set forth in the “Risk Factors” section of our Annual Report.
The postsecondary education regulatory environment has changed and may change in the future as a result of U.S. federal elections.
Changes in Presidential administrations and control of Congress as a result of the outcome of elections or other events has 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 and current Congress may act to change or eliminate
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education-related legislation and ED regulations, to enact new legislation to alter existing regulations, and to change existing ED policies and practices 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; however, ED claimed the reduction in force will not directly impact students and families but will empower states and localities. Subsequently, 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 planned combination of American Public University System, or APUS, Rasmussen University, or RU, and Hondros College of Nursing, or HCN, into one consolidated institution that will encompass all APUS, RU, and HCN programs, campuses, and operations.
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, nor can we 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 or TA, 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.
RU’s Florida ADN programs may be adversely impacted by recently enacted legislation, which could have a significant adverse impact on RU’s business, operations, financial results, and reputation.
In May 2025, the Florida legislature passed legislation, which absent a veto by Florida’s governance will take effect July 1, 2025, that, among other things:
•allows FBN to consider adverse actions taken against RU nursing programs in other states when determining whether to approve a program, to deny approval if an RU program in another state is terminated (or a similar action is taken), and to take other actions in instances of adverse actions other than termination upon an investigation into any such action;
•reduces from two years to one year the amount of time an approved nursing program can fail to meet the state standard for NCLEX pass rates before being placed on probation;
•reduces from three years to two years the length of time a nursing program can spend on probation;
•requires FBN to terminate a nursing program upon the program’s failure to meet NCLEX pass rate requirements following two years of probation and upon failure to submit to FBN a legally compliant annual report;
•subjects nursing program directors to disciplinary action and penalties for failing to submit to FBN a legally compliant annual report or for failing to submit a remediation plan, or timely present such plan to FBN, following one year of NCLEX pass rates not meeting the state standard;
•requires FBN to deny approval of an application for a new prelicensure nursing program if an institution has an existing program that is on probation;
•requires standardization of certain admissions criteria;
•requires establishment of an exit examination and criteria for remediation for those who do not pass the exit examination, which must be provided to and approved by FBN;
•requires nursing programs placed on probation to provide free remediation to students who do not pass the exit examination or NCLEX and reimburse the total cost of tuition and fees for all first-time NCLEX takers who do not pass after completing a program with a passage rate of below 30% for the calendar year;
•authorizes FBN to deny an application for approval of a nursing program if FBN determines that the applicant is owned by an entity that owns, controls, or holds 25% or more financial or ownership interest in a program on probation at the time of its closure; and
•authorizes FDH staff to conduct on-site inspections or evaluations of nursing programs to assess compliance with statutory requirements or for prosecution, as necessary.
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The legislation is expected to lead to increased challenges in hiring and retaining qualified nursing program directors and increased expenses related to compliance with new requirements, such as those related to standardized admissions criteria, exit examinations, remedial programs for students, and tuition and fees reimbursement to students who fail the NCLEX if RU’s pass rate is less than 30%. In addition, the legislation shortens the period before a program will be placed on probation due to low NCLEX scores and shortens the length of time a program can spend on probation, and it allows 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 without defining what constitutes an adverse action or when a program in another jurisdiction would be considered equivalent to an approved program in Florida. The Florida ADN programs and several RU nursing programs in other states have previously been, and may in the future be, subject to disciplinary actions by state regulatory bodies for failure to meet applicable NCLEX pass rates or other requirements, including disciplinary actions that could be deemed adverse actions by FBN for purposes of the legislation’s requirements. The full impact of the legislation is unclear at this time, including because the legislation will be subject to rule-making that could clarify or expand the potential impact. Failure to comply with the new legislation and any adverse action taken as a result could adversely impact our business, operations, financial results, and reputation, including RU’s ability to expand or operate in Florida.
In previous years, RU’s Florida ADN programs at its Fort Myers, Tampa, and Ocala, Florida, campuses, along with the Ocala campus satellite program at North Orlando, Florida, have been episodically placed on and then removed from probation. In February 2023, FBN placed RU’s Fort Myers, Florida ADN program on probation based on failure to satisfy the state’s NCLEX pass rate standard for two consecutive years. In March 2024, FBN placed RU’s ADN programs at its Tampa, and Ocala, Florida, campuses, along with the Ocala campus satellite program at North Orlando, Florida, on probationary status based on failure to satisfy the state’s NCLEX pass rate standard for two consecutive years. In January 2025, RU’s ADN programs at its Fort Myers, Tampa, and Ocala, Florida campuses received notification from FBN that the programs met NCLEX pass rate requirements, and they were removed from probationary status at FBN’s February 2025 Board meeting. In addition, in May 2024, the Florida Commission for Independent Education, or FCIE, reviewed RU for a substantive change due to financial stability concerns and concerns related to FBN’s probation action related to the Fort Myers, Tampa and Ocala, Florida ADN programs. FCIE subsequently placed RU on a provisional license. In May 2025, in light of the ADN programs’ removal from probation and RU’s positive working capital, FCIE moved RU from a provisional license back to a full License by Means of Accreditation.
In addition, as previously disclosed, the planned combination of APUS, RU, and HCN into one consolidated institution will result in part in a division tentatively named Rasmussen that will be 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. Under the new legislation, following completion of the Combination, FBN and FDH could take action based on adverse actions that a different state agency takes with respect to HCN or Rasmussen nursing programs offered outside Florida.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases
The table and footnotes below provide details regarding our repurchase programs (unaudited):
| Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) | ||||||||||||||||||||||||||||
| January 1, 2025 | — | — | — | — | 5,979,687 | |||||||||||||||||||||||||||
| January 1, 2025 - January 31, 2025 | — | — | — | 362,072 | 5,979,687 | |||||||||||||||||||||||||||
| February 1, 2025 - February 28, 2025 | — | — | — | 555,630 | 5,979,687 | |||||||||||||||||||||||||||
| March 1, 2025 - March 31, 2025 | — | — | — | 556,518 | 5,979,687 | |||||||||||||||||||||||||||
| Total | — | — | — | 556,518 | $ | 5,979,687 | ||||||||||||||||||||||||||
(1)On December 9, 2011, our Board of Directors, or Board, approved a stock repurchase program for our common stock, under which we could annually purchase up to the cumulative number of shares issued or deemed issued in each year under our equity incentive and stock purchase plans. Repurchases may be made from time to time in the open market at prevailing market prices or in privately negotiated transactions based on business and market conditions. The stock repurchase program does not obligate us to repurchase any shares, may be suspended or discontinued at any time, and is funded using our available cash.
(2)On May 2, 2019, our Board of Directors authorized the repurchase of up to $35.0 million of shares of our common stock, and on December 5, 2019, our Board approved an additional authorization of up to $25.0 million of shares. Further, on November 27, 2023, our Board approved an additional authorization of up to $10.0 million of shares. We may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. We may from time to time enter into Rule 10b5-1 plans to facilitate repurchases of shares under this authorization. The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow, stock price, and general business and market conditions. We have no obligation to repurchase shares and may modify, suspend, or discontinue the repurchase program at any time. The authorization under this program is in addition to our repurchase program under which we may annually purchase up to the cumulative number of shares issued or deemed issued in that year under our equity incentive and stock purchase plan.
(3)During the three months ended March 31, 2025, we were deemed to have repurchased 171,100 shares of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants. These repurchases were not part of the stock repurchase program authorized by our Board as described in footnotes 1 and 2 of this table.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
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Item 5. Other Information
During the three months ended March 31, 2025, none of our directors or officers adopted terminated
Item 6. Exhibits
| Exhibit No. | Exhibit Description | ||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
| EX-101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||
| EX-101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||
| EX-101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| EX-101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
| EX-101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||
| EX-101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||
| (1) | Filed herewith. | ||||
| (2) | Furnished herewith. | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AMERICAN PUBLIC EDUCATION, INC. | ||||||||
| /s/ Angela Selden | May 12, 2025 | |||||||
| Angela Selden | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
| /s/ Richard W. Sunderland, Jr. | May 12, 2025 | |||||||
| Richard W. Sunderland, Jr. | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
| (Principal Financial Officer and Principal Accounting Officer) | ||||||||
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