0001201792us-gaap:RetainedEarningsMember2021-01-012021-03-31

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, 20222023

 
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
 image0a19.jpg
AMERICAN PUBLIC EDUCATION, INC.
(Exact name of registrant as specified in its charter)
Delaware01-0724376
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
111 West Congress Street, Charles Town, West Virginia25414
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueAPEINasdaq Global Select Market
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”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐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 6, 20225, 2023 was 18,856,352.17,718,641.



AMERICAN PUBLIC EDUCATION, INC.
FORM 10-Q
INDEX
 
  
 Page
PART I – FINANCIAL INFORMATION
  
3
26
3736
37
  
  
PART II – OTHER INFORMATION
 
  
3837
3837
4039
4039
4039
40
4140
  
4241
2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN PUBLIC EDUCATION, INC.
Consolidated Balance Sheets
(In thousands)
As of March 31, 2022As of December 31, 2021
ASSETS(Unaudited) 
Current assets:  
Cash, cash equivalents, and restricted cash (Note 2)$170,943 $149,627 
Accounts receivable, net of allowance of $11,769 in 2022 and $11,396 in 202133,664 36,026 
Prepaid expenses15,527 11,681 
Income tax receivable4,766 5,303 
Total current assets224,900 202,637 
Property and equipment, net100,052 102,417 
Operating lease assets, net104,484 77,943 
Goodwill243,993 243,486 
Intangible assets, net82,094 85,082 
Other assets, net15,887 14,043 
Total assets$771,410 $725,608 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities:  
Accounts payable$11,273 $13,497 
Accrued compensation and benefits17,552 15,131 
Accrued liabilities13,791 10,819 
Deferred revenue and student deposits27,920 21,776 
Lease liabilities, current14,416 13,705 
Long-term debt, current8,750 8,750 
Total current liabilities93,702 83,678 
Lease liabilities, long-term96,859 69,488 
Deferred income taxes7,456 5,059 
Long-term debt, net150,212 151,771 
Total liabilities348,229 309,996 
Commitments and contingencies (Note 10)00
Stockholders’ equity:  
Preferred stock, $.01 par value; 10,000 shares authorized; no shares issued or outstanding— — 
Common stock, $.01 par value; 100,000 shares authorized; 18,856 issued and outstanding in 2022; 18,709 issued and outstanding in 2021189 187 
Additional paid-in capital287,295 286,385 
Accumulated other comprehensive income1,432 108 
Retained earnings134,265 128,932 
Total stockholders’ equity423,181 415,612 
Total liabilities and stockholders’ equity$771,410 $725,608 
thousands, except share and per share amounts)
As of March 31, 2023As of December 31, 2022
ASSETS(Unaudited) 
Current assets:  
Cash, cash equivalents, and restricted cash (Note 2)$136,161 $129,458 
Accounts receivable, net of allowance of $14,068 in 2023 and $13,328 in 202237,073 42,353 
Prepaid expenses17,434 11,409 
Income tax receivable5,189 2,871 
Total current assets195,857 186,091 
Property and equipment, net100,285 100,892 
Operating lease assets, net108,048 108,870 
Deferred income taxes34,667 35,355 
Goodwill112,593 112,593 
Intangible assets, net50,790 54,734 
Other assets, net16,282 16,521 
Total assets$618,522 $615,056 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities:  
Accounts payable$6,797 $3,808 
Accrued compensation and benefits16,363 15,010 
Accrued liabilities13,783 13,784 
Deferred revenue and student deposits28,866 23,760 
Lease liabilities, current13,517 14,396 
Total current liabilities79,326 70,758 
Lease liabilities, long-term102,726 101,420 
Long-term debt, net93,557 93,151 
Total liabilities275,609 265,329 
Commitments and contingencies (Note 10)
Stockholders’ equity:  
Preferred stock, $.01 par value; 10,000,000 shares authorized; 400 shares issued and outstanding in 2023 and 2022, respectively. ($151,905 and $155,587 liquidation preference per share, $60,762 and $62,235 in aggregate, for 2023 and 2022, respectively) (Note 12)39,691 39,691 
Common stock, $.01 par value; 100,000,000 shares authorized; 18,978,406 issued and outstanding in 2023; 18,892,791 issued and outstanding in 2022190 189 
Additional paid-in capital294,082 292,854 
Accumulated other comprehensive income2,627 3,102 
Retained earnings6,323 13,891 
Total stockholders’ equity342,913 349,727 
Total liabilities and stockholders’ equity$618,522 $615,056 

The accompanying notes are an integral part of these Consolidated Financial Statements.
3

AMERICAN PUBLIC EDUCATION, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)

Three Months Ended March 31, Three Months Ended March 31,
20222021 20232022
(Unaudited) (Unaudited)
RevenueRevenue$154,747 $88,541 Revenue$149,689 $154,747 
Costs and expenses:Costs and expenses: Costs and expenses:
Instructional costs and servicesInstructional costs and services71,698 32,319 Instructional costs and services73,889 71,698 
Selling and promotionalSelling and promotional39,319 19,402 Selling and promotional39,924 39,319 
General and administrativeGeneral and administrative29,589 23,524 General and administrative33,489 29,589 
Loss on disposals of long-lived assetsLoss on disposals of long-lived assets793 8 Loss on disposals of long-lived assets1 793 
Depreciation and amortizationDepreciation and amortization8,148 2,651 Depreciation and amortization7,756 8,148 
Total costs and expensesTotal costs and expenses149,547 77,904 Total costs and expenses155,059 149,547 
Income from operations before interest and income taxes5,200 10,637 
(Loss) income from operations before interest and income taxes(Loss) income from operations before interest and income taxes(5,370)5,200 
Gain on acquisition (Note 3)Gain on acquisition (Note 3)4,533 — Gain on acquisition (Note 3)— 4,533 
Interest (expense) income(3,355)114 
Income before income taxes6,378 10,751 
Income tax expense1,040 2,639 
Interest expenseInterest expense(1,779)(3,355)
(Loss) income before income taxes(Loss) income before income taxes(7,149)6,378 
Income tax (benefit) expenseIncome tax (benefit) expense(1,414)1,040 
Equity investment lossEquity investment loss(5)(5)Equity investment loss(5)(5)
Net income$5,333 $8,107 
Net (loss) incomeNet (loss) income$(5,740)$5,333 
Preferred stock dividendsPreferred stock dividends1,457 — 
Net (loss) income available to common stockholdersNet (loss) income available to common stockholders$(7,197)$5,333 
Net income per common share:  
Earnings per common share:Earnings per common share:
BasicBasic$0.28 $0.50 Basic$(0.38)$0.28 
DilutedDiluted$0.28 $0.49 Diluted$(0.38)$0.28 
Weighted average number of common shares:Weighted average number of common shares:Weighted average number of common shares:
BasicBasic18,805 16,211 Basic18,982 18,805 
DilutedDiluted18,879 16,422 Diluted19,072 18,879 

The accompanying notes are an integral part of these Consolidated Financial Statements.

4

AMERICAN PUBLIC EDUCATION, INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)


Three Months Ended March 31,
20222021
(Unaudited)
Net income$5,333 $8,107 
Other comprehensive income, net of tax:
Unrealized gain on hedging derivatives, net of taxes1,324 — 
Comprehensive income$6,657 $8,107 
Three Months Ended March 31,
20232022
(Unaudited)
Net (loss) income$(5,740)$5,333 
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on hedging derivatives(28)1,761 
Tax effect6 (437)
Unrealized gains (losses) on hedging derivatives, net of taxes(22)1,324 
Reclassification of (gains) losses to net income(602)— 
Tax effect149 — 
Reclassifications of (gains) losses to net income, net of taxes(453)— 
Total other comprehensive (loss) income(475)1,324 
Comprehensive (loss) income$(6,215)$6,657 


The accompanying notes are an integral part of these Consolidated Financial Statements.
5

AMERICAN PUBLIC EDUCATION, INC.
Consolidated Statements of Stockholders’ Equity (Unaudited)
(In thousands)thousands, except share amounts)

Additional Paid-in CapitalAccumulated Other Comprehensive Income (loss)Retained EarningsTotal Stockholders’ EquityAdditional Paid-in CapitalAccumulated Other Comprehensive Income (loss)Retained EarningsTotal Stockholders’ Equity
Common Stock Preferred StockCommon Stock
SharesAmount SharesAmountSharesAmount
Balance as of December 31, 202014,809 $148 $195,597 $— $111,180 $306,925 
Issuance of common stock in public offering3,680 37 86,168 86,205 
Balance as of December 31, 2021Balance as of December 31, 2021— $— 18,709,171 $187 $286,385 $108 $128,932 $415,612 
Issuance of common stock under employee benefit plansIssuance of common stock under employee benefit plans272 3 (3)— — — Issuance of common stock under employee benefit plans— — 218,512 3 (3)— — — 
Deemed repurchased shares of common and restricted stock for tax withholdingDeemed repurchased shares of common and restricted stock for tax withholding(90)(1)(2,772)— — (2,773)Deemed repurchased shares of common and restricted stock for tax withholding— — (71,331)(1)(1,443)— — (1,444)
Stock-based compensationStock-based compensation— — 2,180 — — 2,180 Stock-based compensation— — — — 2,356 — — 2,356 
Other comprehensive gainOther comprehensive gain— — — — — 1,324 — 1,324 
Net incomeNet income— — — — 8,107 8,107 Net income— — — — — — 5,333 5,333 
Balance as of March 31, 202118,671 $187 $281,170 — $119,287 $400,644 
Balance as of March 31, 2022Balance as of March 31, 2022— $— 18,856,352 $189 $287,295 $1,432 $134,265 $423,181 


Additional Paid-in CapitalAccumulated Other Comprehensive Income (loss)Retained EarningsTotal Stockholders’ Equity
 Common Stock
 SharesAmount
Balance as of December 31, 202118,709 $187 $286,385 $108 $128,932 $415,612 
Issuance of common stock under employee benefit plans218 3 (3)— — — 
Deemed repurchased shares of common and restricted stock for tax withholding(71)(1)(1,443)— — (1,444)
Stock-based compensation— — 2,356 — — 2,356 
Unrealized gain on hedging derivatives, net of taxes— — — 1,324 — 1,324 
Net income— — — — 5,333 5,333 
Balance as of March 31, 202218,856 $189 $287,295 $1,432 $134,265 $423,181 
Additional Paid-in CapitalAccumulated Other Comprehensive Income (loss)Retained EarningsTotal Stockholders’ Equity
 Preferred StockCommon Stock
 SharesAmountSharesAmount
Balance as of December 31, 2022400 $39,691 18,892,791 $189 $292,854 $3,102 $13,891 $349,727 
Preferred Stock dividends— — — — — — (1,457)(1,457)
Issuance of common stock under employee benefit plans— — 245,638 3 (3)— — — 
Deemed repurchased shares of common and restricted stock for tax withholding— — (85,023)(1)(994)— — (995)
Stock-based compensation— — — — 2,224 — — 2,224 
Repurchased and retired shares of common stock— — (75,000)(1)1 — (371)(371)
Other comprehensive loss— — — — — (475)— (475)
Net loss— — — — — — (5,740)(5,740)
Balance as of March 31, 2023400 $39,691 18,978,406 $190 $294,082 $2,627 $6,323 $342,913 

The accompanying notes are an integral part of these Consolidated Financial Statements.
6

AMERICAN PUBLIC EDUCATION, INC.
Consolidated Statements of Cash Flows
(In thousands)
 Three Months Ended March 31,
 20222021
 (Unaudited)
Operating activities  
Net income$5,333 $8,107 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization8,148 2,651 
Amortization of debt issuance costs654 — 
Stock-based compensation2,356 2,180 
Equity investment loss5 5 
Deferred income taxes901 1,646 
Loss on disposals of long-lived assets793 8 
Gain on acquisition(4,533)— 
Other5 3 
Changes in operating assets and liabilities: 
Accounts receivable, net of allowance for bad debt6,644 4,210 
Prepaid expenses(3,623)(2,989)
Income tax receivable/payable537 905 
Operating leases, net1,218 27 
Other assets241 228 
Accounts payable(2,492)(779)
Accrued compensation and benefits2,401 (3,389)
Accrued liabilities2,492 (1,159)
Deferred revenue and student deposits4,175 (428)
Net cash provided by operating activities25,255 11,226 
Investing activities  
Cash received from acquisition, net of cash paid1,932 — 
Capital expenditures(2,965)(1,528)
Proceeds from the sale of real property754 — 
Net cash used in investing activities(279)(1,528)
Financing activities  
Cash paid for repurchase of common stock(1,444)(2,773)
Cash received from issuance of common stock— 86,205 
Cash paid for principal on borrowings and finance leases(2,216)— 
Net cash (used in) provided by financing activities(3,660)83,432 
Net increase in cash, cash equivalents, and restricted cash21,316 93,130 
Cash, cash equivalents, and restricted cash at beginning of period149,627 227,686 
Cash, cash equivalents, and restricted cash at end of period$170,943 $320,816 
Supplemental disclosure of cash flow information  
Interest paid$2,700 $— 
Income taxes paid$41 $62 
 Three Months Ended March 31,
 20232022
 (Unaudited)
Operating activities  
Net (loss) income$(5,740)$5,333 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization7,756 8,148 
Amortization of debt issuance costs431 654 
Stock-based compensation2,224 2,356 
Equity investment loss5 5 
Deferred income taxes688 901 
Loss on disposals of long-lived assets1 793 
Gain on acquisition— (4,533)
Other— 5 
Changes in operating assets and liabilities: 
Accounts receivable, net of allowance for bad debt5,280 6,644 
Prepaid expenses(6,025)(3,623)
Income tax receivable/payable(2,318)537 
Operating leases, net1,277 1,218 
Other assets(268)241 
Accounts payable2,989 (2,492)
Accrued compensation and benefits1,353 2,401 
Accrued liabilities(1)2,492 
Deferred revenue and student deposits5,106 4,175 
Net cash provided by operating activities12,758 25,255 
Investing activities  
Cash received from acquisition, net of cash paid— 1,932 
Capital expenditures(3,206)(2,965)
Proceeds from the sale of real property— 754 
Net cash used in investing activities(3,206)(279)
Financing activities  
Cash paid for repurchase of common stock(1,366)(1,444)
Preferred stock dividends paid(1,455)— 
Cash paid for principal on borrowings and finance leases(28)(2,216)
Net cash used in financing activities(2,849)(3,660)
Net increase in cash, cash equivalents, and restricted cash6,703 21,316 
Cash, cash equivalents, and restricted cash at beginning of period129,458 149,627 
Cash, cash equivalents, and restricted cash at end of period$136,161 $170,943 
Supplemental disclosure of cash flow information  
Interest paid$2,511 $2,700 
Income taxes paid$62 $41 

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 herein as the “Company,” is a provider of online and campus-based postsecondary education, and with the acquisition ofcareer learning through Graduate School USA, 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, military-affiliated, 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, aprovides nursing- and health sciences-focused institution, provides postsecondary education to students at its 2322 campuses across 6in six states and online. The Company completed the acquisition of RU, or the Rasmussen Acquisition, on September 1, 2021, or the RU Closing Date. Please refer to “Note 3. Acquisition Activity” for more information on this acquisition. The Consolidated Financial Statements do not include the operating results or financial position of RU for any periods prior to the RU Closing Date. RU is institutionally accredited by the HLC.

•National Education Seminars, Inc., which is referred to herein as Hondros College of Nursing, or HCN, provides postsecondary nursing education to students enrolled at 6its eight campuses in Ohio and 1 campus in Indianapolis, Indiana, to serve the needs of the nursing and healthcare communities.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 through a catalog of over 300 courses specializing in foundational and continuing professional development, as well as leadership training to advance the performance of government agencies through the competency and career advancement of their employees. The Company completed the acquisition of substantially all the assets of GSUSA, or the GSUSA Acquisition, on January 1, 2022, or the GSUSA Closing Date. Please refer to “Note 3. Acquisition Activity” for more information on this acquisition. The Consolidated Financial Statements do not include the operating results or financial position of GSUSA for any periods prior to the GSUSA Closing Date.workforce. GSUSA is accredited by the Accrediting Council for Continuing Education and Training, or ACCET.

GSUSA operates as a stand-alone subsidiary of APEI, however GSUSA does not meet the quantitative thresholds to qualify as a reportable segment; therefore, this operating segment is combined and presented within “Corporate and Other”. Please refer to “Note 9. Segment Information” for more information on the Company’s reporting segments.

The Company’s 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 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. During the third quarter of 2021, the Company revised its reportable segments, as discussed further in “Note 9. Segment Information”. Prior period segment disclosures have been restated to conform to the current period presentation.

    The Company’s operations are organized into 3the following 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, which generally were previously reported within the APEI Segment, and effective January 1, 2022, 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 and presented within “Corporate and Other”.
8

Please refer to “Note 9. Segment Information” for more information on the Company’s reporting segments.

Note 2. Summary of Significant Accounting Policies

A summary of the Company’s significant accounting policies follows:

Basis of Presentation and Accounting

The accompanying unaudited, interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP.

Business Combinations

8

The Company accounts for business combinations in accordance with Financial Accounting Standards Bureau, or FASB,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. Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed, and the fair value assigned to identifiable intangible assets.

Principles of Consolidation

The accompanying unaudited interim Consolidated Financial Statements include the accounts of APEI and its wholly-ownedwholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Unaudited Interim Financial Information

The unaudited interim Consolidated Financial Statements do not include all of 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 the year ending December 31, 2022.2023. This Quarterly Report on Form 10-Q 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, 2021,2022, 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 judgments 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

Restricted cash includes funds held for students for unbilled educational services that were received from Title IV programs. As a trustee of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of the program participation agreement with ED. Restricted cash also includes amounts to secure letters of credit, including $24.2 million in a restricted certificate of deposit account to secure a letter of credit for the benefit of ED on behalf of RU in connection with RU’s 2020 composite score, which is used by ED for determining compliance with financial responsibility standards, being below the minimum required, and a $0.6$0.7 million restricted certificate of deposit to secure a letter of credit in lieu of a security deposit for a RU leased campus. Restricted cash on the Consolidated Balance Sheets as of
9

March 31, 20222023 and December 31, 2021,2022, excluding the restricted certificates of deposit, was $1.6$2.2 million and $2.2$2.0 million, respectively. Total restricted cash as of March 31, 20222023 and December 31, 20212022 was $26.4$27.2 million and $27.0$26.9 million, respectively.

Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed. Goodwill is not amortized. Intangible assets are recorded at their estimated fair value as of the acquisition date and are classified as either indefinite-lived or definite-lived. GoodwillThe 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
9

2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The Company’s goodwill and intangible assets are assessed at leastdeductible for tax purposes.
The Company annually assesses goodwill for impairment, or more frequently if events and circumstances indicate potentialthat goodwill might be impaired. 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, the difference between the two values is recorded as an impairment.
Definite-lived
Finite-lived intangible assets acquired in business combinations are recorded at fair value on their acquisition date and are amortized on a straight-line basis over the estimated useful life of the asset.

The Company reviews its indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets.

For additional details regarding goodwill and indefinite-lived intangible assets, please refer to “Note 6. Goodwill and Intangible Assets” in these Consolidated Financial Statements.

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 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, andDirectors. 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, includingassumptions. The Company makes assumptions with respect to expected stock price volatility andbased on the average historical volatility of the Company’s common stock. In addition, the Company determines the risk-free interest rate.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 and have a material impact on the Consolidated Financial Statements.Company’s 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.value made under ASC 718.

Stock-based compensation expense for the three months ended March 31, 20222023 and 20212022 was as follows (in thousands):
Three Months Ended March 31,
 20222021
(Unaudited)
Instructional costs and services$459 $466 
Selling and promotional296 309 
General and administrative1,601 1,405 
Total stock-based compensation expense$2,356 $2,180 
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Three Months Ended March 31,
 20232022
(Unaudited)
Instructional costs and services$279 $459 
Selling and promotional229 296 
General and administrative1,716 1,601 
Total stock-based compensation expense$2,224 $2,356 

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, 20222023 and 2021,2022, the Management Development and Compensation Committee of the Company’s Board of Directors approved an annual incentive arrangement for senior management employees. The aggregate amount of any awards payable, if any, is dependent upon the achievement of certain Company financial and operational goals as well asand 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
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recognized against the goals and, to the extent previously recognized, compensation cost is reversed. Amounts accrued are subject to change in future interim periods if actual future financial results or operational performance are better or worse than expected. During the three months ended March 31, 2022 and 2021, theThe Company recognized an aggregate expense associated with the Company’s current year annual incentive-based compensation plans of approximately $2.0 million during the three months ended March 31, 2023, compared to an aggregate expense of approximately $1.8 million and $1.2 million, respectively.during the three months ended March 31, 2022.

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 Accounting Standards Updates, or ASUs issued by the FASB. All ASUs issued subsequent to the filing of the Annual Report on March 2, 202214, 2023 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. Acquisition Activity

Acquisition of Rasmussen University

On the RU Closing Date, the Company completed the Rasmussen Acquisition pursuant to a membership interest purchase agreement dated October 28, 2020, or the Purchase Agreement, acquiring RU for an adjusted aggregate purchase price, subject to post-closing working capital adjustments, and net of cash acquired, of $325.5 million in cash.

The Company applied the acquisition method of accounting to the Rasmussen Acquisition, whereby the excess of the acquisition date fair value of consideration transferred over the fair value of identifiable net assets was allocated to goodwill. Goodwill reflects the fair value associated with the RU workforce and synergies expected from cost savings, operations, and revenue enhancements of the combined company that are expected to result from the acquisition. The goodwill recorded as part of the acquisition was allocated to the RU Segment in the amount of $217.4 million and is deductible for tax purposes.

The preliminary opening balance sheet is subject to adjustment based on a final assessment of the fair values of certain acquired assets and liabilities, primarily intangible assets and goodwill. The Company has up to one year from the RU Closing Date, or the measurement period, to complete the allocation of the purchase price. As the Company finalizes its assessment of the fair values of certain acquired assets and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments occur. During the three months ended March 31, 2022, the Company recorded a $0.5 million increase in goodwill recorded in connection with the Rasmussen Acquisition based on the final working capital adjustment.


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The following table summarizes the components of the estimated consideration along with the purchase price allocation (in thousands):

Purchase Price AllocationAmount
Cash and cash equivalents$329,000 
Working capital adjustment and additional cash contributions2,333 
Total consideration331,333 
Assets acquired:
Cash and cash equivalents5,200 
Accounts receivable10,700 
Prepaid expenses4,600 
Property and equipment, net36,996 
Operating lease assets75,800 
Deferred tax asset3,049 
Intangible assets86,500 
Other assets600 
Total assets acquired223,445 
Liabilities assumed:
Accounts payable1,200 
Accrued expenses6,142 
Deferred revenue22,700 
Operating lease liabilities, current11,200 
Operating lease liabilities, long-term67,000 
Other liabilities1,300 
Total liabilities assumed109,542 
Net assets acquired113,903 
Goodwill$217,430 

The fair value of the identified intangible assets, including the trade name, student roster, and lead conversions were determined using the income-based approach. The fair value of curricula and accreditation, licensing, and Title IV identified intangible assets were determined using the cost approach. The table below presents a summary of intangible assets acquired and the useful lives of these assets (in thousands):

Intangible AssetsUseful lifeAmount
Trade nameIndefinite26,500 
Accreditation, licensing and Title IVIndefinite24,500 
Student roster2 years20,000 
Curricula3 years14,000 
Lead conversions2 years1,500 
$86,500 

Acquisition of Graduate School USA

On January 1, 2022, or the GSUSA Closing Date, the Company completed the GSUSA Acquisition pursuant to an Asset Purchase Agreement dated August 10, 2021 by and amongbetween American Public Training LLC, and Graduate School USA, or the Seller, for an aggregate purchase price of $1.0 million, subject to working capital adjustments. At closing, the Company received
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approximately $1.9 million from the Seller, which represents the estimated net working capital at closing net of the initial cash payment to the Seller of $0.5 million, which is the purchase price less $0.5 million retained by the Company to secure the indemnification obligations of the Seller. The purchase price reflects the $0.5 million due to the Seller post-closing, and additional adjustments to the estimated net working capital at closing.

The Company applied the acquisition method of accounting to the GSUSA Acquisition, whereby the assets acquired and liabilities assumed were recognized at fair value on the GSUSA Closing Date. There was no goodwill recorded as a result of the GSUSA Acquisition, but an approximate $4.5 million noncash, non-taxable gain on the acquisition was recorded and is included as a separate line item on the Consolidated Statements of Income for the three months ended March 31, 2022.

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The preliminary opening balance sheet iswas subject to adjustment based on a final assessment of the fair valuesvalue of certain acquired assets and liabilities assumed. The Company hashad up to one year from the GSUSA Closing Date, or the measurement period, to complete the allocation of the purchase price. As theThe Company finalizescompleted its assessment of the fair values of certain acquired assets and liabilities assumed additional purchase price adjustments may be recorded during the measurement period. Theperiod, and, as a result, during the second quarter of 2022, the Company will reflect measurement period adjustments, if any,recorded a $0.7 million decrease in the periodgain on acquisition for a net gain of $3.8 million in whichconnection with the adjustments occur.GSUSA Acquisition based on the final working capital adjustment.

The following table summarizes the components of the estimated consideration along with the purchase price allocation (in thousands):
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Purchase Price Allocation (Unaudited)Amount
Cash and cash equivalents$1,000 
Working capital adjustment(3,388)(2,450)
Total consideration(2,388)(1,450)
Assets acquired:
Accounts receivable4,282 
Prepaid expenses1,096 
Property and equipment, net400 
Operating lease assets31,635 
Intangible assets965 
Total assets acquired38,378 
Liabilities assumed:
Accounts payable and accrued expensesliabilities810 
Deferred revenue1,969 
Lease liabilities, current1,179 
Lease liabilities, long-term30,779 
Deferred tax liabilityincome taxes1,4961,263 
Total liabilities assumed36,23336,000 
Net assets acquired2,1452,378 
Gain on acquisition$4,5333,828 

The gain on acquisition represents the excess of the fair value of net assets acquired over consideration paid. The consideration paid represents a substantial discount to the book value of GSUSA’s net assets at the GSUSA Closing Date, primarily due to the fair value adjustments related to the trade name, fixed assets, and right-of-use, or ROU, lease assets and liabilities compared to book value. The gain on acquisition was primarily the result of the impact of the COVID-19 pandemic on GSUSA’s revenue and earnings, andprior financial results, a lack of access to capital by the Seller. TheSeller, and the agreed upon purchase price that reflected the fact that GSUSA may need additional capital to fund operating losses.

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The fair valuevalues of the identified intangible assets, including customer contracts and relationships and trade name intangible assets were determined using the income-based approach. The fair valuevalues of the curricula and accreditation and licensing identified intangible assets were determined using the cost approach. The table below presents a summary of intangible assets acquired and the useful lives of these assets (in thousands):

Intangible Assets (Unaudited)Useful lifeAmount
Customer contracts and relationships2.5 years$744 
Curricula3 years158 
Trade name1 year35 
Accreditation and licenses2.5 years28 
$965 

Pro forma financial information relating to the GSUSA Acquisition is not presented because the GSUSA Acquisition did not represent a significant business acquisition for the Company.

For the three months ended March 31, 2022, the Company incurred approximately $0.9 million of acquisition-related expenses related to RU and GSUSA, and for the three months ended March 31, 2021, the Company incurred approximately $0.6 million of acquisition-related expenses related to RU. These expenses are included in general and administrative expenses on the Consolidated Statements of Income.
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Note 4. Revenue
    
Disaggregation of Revenue

    In the following table, revenue, shown net of grants and scholarships, is disaggregated by type of service provided. The table also includes a reconciliation of the disaggregated revenue with the reportable segments (in thousands):

Three Months Ended March 31, 2022Three Months Ended March 31, 2023
(Unaudited)(Unaudited)
APUSRUHCNCorporate and OtherConsolidatedAPUSRUHCNCorporate and OtherConsolidated
Instructional services, net of grants and scholarshipsInstructional services, net of grants and scholarships$72,585 $55,917 $9,733 $3,017 $141,252 Instructional services, net of grants and scholarships$73,422 $48,196 $10,981 $5,104 $137,703 
Graduation feesGraduation fees335 — — — 335 Graduation fees369 — — — 369 
Textbook and other course materialsTextbook and other course materials— 10,294 1,663 — 11,957 Textbook and other course materials— 8,707 1,994 — 10,701 
Other feesOther fees170 888 145 — 1,203 Other fees187 564 165 — 916 
Total RevenueTotal Revenue$73,090 $67,099 $11,541 $3,017 $154,747 Total Revenue$73,978 $57,467 $13,140 $5,104 $149,689 

Three Months Ended March 31, 2021
(Unaudited)
APUSRUHCNCorporate and OtherConsolidated
Instructional services, net of grants and scholarships$76,885 $— $9,365 $(67)$86,183 
Graduation fees373 — — — 373 
Textbook and other course materials— — 1,631 — 1,631 
Other fees218 — 136 — 354 
Total Revenue$77,476 $— $11,132 $(67)$88,541 


The RU Segment reflects the operations of RU, which was acquired on the RU Closing Date. The Company did not consolidate the financial results of the RU Segment prior to the RU Closing Date.
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Three Months Ended March 31, 2022
(Unaudited)
APUSRUHCNCorporate and OtherConsolidated
Instructional services, net of grants and scholarships$72,585 $55,917 $9,733 $3,017 $141,252 
Graduation fees335 — — — 335 
Textbook and other course materials— 10,294 1,663 — 11,957 
Other fees170 888 145 — 1,203 
Total Revenue$73,090 $67,099 $11,541 $3,017 $154,747 

Corporate and Other includes tuition and contract training revenue earned by GSUSA fromand the GSUSA Closing Date through March 31, 2022. Contract career learningelimination of intersegment revenue represents both individual and customized training programs and is recognized when the services are performed. Additionally, the APUS Segment charges the HCN Segment and corporate employees for the value of courses taken by HCN Segment employees of one segment at APUS. The elimination of this intersegment revenue is included within Corporate and Other.other segments.

Contract Balances and Performance Obligations

The Company had no contract assets or deferred contract costs as of March 31, 20222023 and December 31, 2021.2022.
The Company recognizes a contract liability, or deferred revenue, when a student begins an onlinea course, or term, in the case of APUS and GSUSA, or starts a term, in the case of RU and HCN. Deferred revenue at March 31, 20222023 was $27.9$28.9 million and includes $10.7included $17.1 million in future revenue that hashad not yet been earned for courses and terms that arewere in progress, as well as $17.2$11.8 million in consideration received in advance for future courses or terms, or student deposits. Deferred revenue at December 31, 20212022 was $21.8$23.8 million and includes $12.9included $13.0 million in future revenue that hashad not yet been earned for courses and terms that arewere in progress, as well as $8.9$10.8 million in student deposits. Deferred revenue represents the Company’s performance obligation to transfer future instructional services to students. The Company’s remaining performance obligations represent the transaction price allocated to future reporting periods.
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 performing its obligations, a contract receivable is created, resulting in accounts receivable on the 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.
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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 5. Leases

The Company’s principal leasing activities include leases for facilities, which are classified as operating leases, and, as a result of the GSUSA Acquisition, leases for copiers and printers, classified as finance leases.

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 which 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.    

Operating Leases

The Company has operating leases for office space and campus facilities. Some leases include options to terminate or extend for one 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 Maryland and, beginning in January 2023, in Florida, under an operating leaseleases that expiresexpire in May 2023.2024 and January 2026, respectively. The RU Segment leases administrative office space in suburban Chicago, Illinois, and Minneapolis, Minnesota, and leases 2322 campuses located in 6six states under operating leases that expire through October 2033. The HCN Segment leases administrative office space in suburban Columbus, Ohio, and leases 6eight campuses located in Ohio and 1 campus in Indianapolis, Indiana,three states under operating leases that expire through June 2029.2032. GSUSA leases classroom and administrative office space in Washington, D.C. and Honolulu, Hawaii, under operating leases that expire through September 2036.
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Operating lease assets are right-of-use, or ROU assets, which represent the right to use the underlying assets 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 lease liabilities, current and long-term, on the 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 assets include all remaining lease payments and exclude 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 month periodsmonths ended March 31, 2023 and 2022 and 2021 was $5.0$5.3 million and $0.8$5.0 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 month periods ended March 31, 2023 and 2022 and 2021 was $4.8$4.9 million and $0.7$4.8 million, respectively, and is included in operating cash flows.

Finance Leases

In connection with the GSUSA Acquisition, the Company acquired leases for copiers and printers that are classified as finance leases and expire on December 31, 2024. The Company pledged the assets financed to secure the outstanding leases. As of March 31, 2022,2023, the total finance lease liability was $0.3$0.2 million, with an average interest rate of 3.75%. The ROU asset isassets are recorded within Property and equipment, net on the Consolidated Balance Sheets. Lease amortization expense associated with the Company’s finance leases was approximately $0.03 million for both the three months ended March 31, 2023 and 2022, respectively, and is recorded within Depreciation and amortization expense on the Consolidated Statements of Income.

The following tables present information about the amount and timing of cash flows arising from the Company’s financeoperating and operatingfinance leases as of March 31, 20222023 (dollars in thousands):

Maturity of Lease Liabilities (Unaudited)Operating LeasesFinance Leases
2022 (remaining)$14,148 $85 
202316,072 114 
202414,436 113 
202513,284 — 
202612,830 — 
202712,586 — 
2028 and beyond55,551 — 
Total future minimum lease payments$138,907 $312 
Less: imputed interest(27,928)(16)
Present value of operating lease liabilities$110,979 $296 
Less: lease liabilities, current(14,312)(104)
Lease liabilities, long-term$96,667 $192 
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Maturity of Lease Liabilities (Unaudited)Operating LeasesFinance Leases
2023 (remaining)$13,292 $86 
202417,851 113 
202516,323 — 
202615,782 — 
202715,183 — 
202813,990 — 
2029 and beyond52,480 — 
Total future minimum lease payments$144,901 $199 
Less: imputed interest(28,850)(7)
Present value of operating lease liabilities$116,051 $192 
Less: lease liabilities, current(13,409)(108)
Lease liabilities, long-term$102,642 $84 

Balance Sheet Classification (Unaudited)
Current
Operating lease liabilities, current$14,31213,409 
Finance lease liabilities, current104108 
Long-term
Operating lease liabilities, long-term96,667102,642 
Finance lease liabilities, long-term19284 
Total lease liabilities$111,275116,243 

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Other Information (Unaudited)
Weighted average remaining lease term (in years)
Operating leases5.358.86
Finance leases2.751.75
Weighted average discount rate
Operating leases4.04.4 %
Finance leases3.8 %
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Note 6. Goodwill and Intangible Assets

    In connection with its acquisitions, the Company has applied FASB ASC 805,Business Combinations, using the acquisition method of accounting. In connection with the Rasmussen Acquisition, theThe Company recorded $217.4 million and $38.6 million of goodwill in connection with the RU and HCN acquisitions, respectively, representing the excess of the purchase price over the fair value of assets acquired and liabilities assumed, including identifiable intangible assets.The Company previouslylater recorded goodwill in the amount of $38.6 million in connection with its acquisition of HCN, and later recordednon-cash impairment charges reducing the carrying value of ourRU and HCN goodwill to $86.0 million and $26.6 million.million, respectively. There was no goodwill recorded in connection with the acquisition of GSUSA.

The following table summarizesCompany accounts for goodwill and indefinite-lived intangible assets in accordance with FASB ASC 350, Intangibles Goodwill and Other, and ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the changes inTest for Goodwill Impairment. The Company annually assesses goodwill for impairment, or more frequently if events and circumstances indicate that goodwill might be impaired. Goodwill impairment testing consists of an optional qualitative assessment as well as a quantitative test. The quantitative test compares the fair value of the 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, of goodwill by reportable segmentthere is no impairment. If the carrying value is greater than the fair value, the difference between the two values is recorded as of March 31, 2022 (in thousands):an impairment.

RU SegmentHCN SegmentTotal Goodwill
(Unaudited)
Goodwill as of December 31, 2021$216,923 $26,563 $243,486 
Goodwill acquired— — — 
Impairment— — — 
Adjustments507 — 507 
Goodwill as of March 31, 2022$217,430 $26,563 $243,993 

In addition to goodwill, in connection withAt March 31, 2023 the acquisitions ofCompany performed a qualitative analysis for our RU and HCN Segments’ goodwill and indefinite-lived intangible assets. As part of the analysis, the Company recorded identified intangible assets with an indefinite useful lifeconsidered all the events and circumstances listed in FASB ASC 350, Intangibles-Goodwill and Other, in addition to other entity-specific factors. Factors considered include: RU and HCN’s financial and enrollment performance against internal targets; economic factors; RU key leadership changes including the appointment of a new President and appointees to other significant leadership roles; and the continued favorable growth outlook for nursing education. In addition, the Company considered the 2022 annual quantitative analysis performed and concluded that the events in the aggregate amountfirst quarter of $51.0 million2023 did not have a significant impact on the fair value of our RU Segment. After completing the qualitative review of goodwill for the RU and $3.7 million, respectively, which includes trade name, accreditation, licensing and Title IV, and affiliate agreements. There were no indefinite useful life intangible assets identified as a result of the GSUSA Acquisition. The Company recorded $35.5 million, $4.4 million and $1.0 million, respectively, of identified intangible assets with a definite useful life in connection with the acquisitions of RU, HCN and GSUSA. Amortization expense related to definite lived intangibles assets was approximately $4.0 millionSegments for the three months ended March 31, 2022.

The following table represents2023, the balanceCompany concluded it was more likely than not that the fair value of the Company’s intangible assets as of March 31, 2022 (in thousands):
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Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
(Unaudited)
Finite-lived intangible assets
Student roster$20,000 5,833 14,167 
Curricula14,563 3,140 11,423 
Student and customer contracts and relationships4,614 3,944 670 
Lead conversions1,500 438 1,062 
Non-compete agreements86 86 — 
Tradename35 9 26 
Accreditation and licenses28 3 25 
Total finite-lived intangible assets$40,826 $13,453 $27,373 
Indefinite-lived intangible assets
Trade name28,498 — 28,498 
Accreditation, licensing and Title IV26,186 — 26,186 
Affiliation agreements37 — 37 
Total indefinite-lived intangible assets54,721 — 54,721 
Total intangible assets$95,547 $13,453 $82,094 

The following table represents the balance of the Company’s intangible assets as of December 31, 2021 (in thousands):

Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Finite-lived intangible assets
Student roster$20,000 3,333 16,667 
Curricula14,405 1,961 12,444 
Student contracts and relationships3,870 3,870 — 
Lead conversions1,500 250 1,250 
Non-compete agreements86 86 — 
Total finite-lived intangible assets$39,861 $9,500 $30,361 
Indefinite-lived intangible assets
Trade name28,498 — 28,498 
Accreditation, licensing and Title IV26,186 — 26,186 
Affiliation agreements37 — 37 
Total indefinite-lived intangible assets54,721 — 54,721 
Total intangible assets$94,582 $9,500 $85,082 

The Company evaluated events and circumstances related to the valuation of goodwill and intangibles, recorded within our RU and HCN Segments through March 31, 2022were more than the carrying value and 2021, respectively,therefore it was not necessary to determine ifperform a quantitative impairment test. The Company determined that there were indicatorswas no impairment of impairment. This evaluation included consideration of enrollment trendsRU or HCN Segment goodwill and financial performance, as well as industry and market conditions, and the impact of the COVID-19 pandemic. These evaluations concluded there were no indicators of impairmentindefinite-lived intangible assets during the three months ended March 31, 2023 and 2022.

The Company’s 2022 annual assessment concluded that the fair value of RU and 2021,HCN exceeded their carrying values by approximately $10.0 million, or 5%, and consequently, there was no impairment of goodwill$4.9 million, or intangible assets during those periods.13%, respectively.

Determining fair value of goodwill and intangible assets requires judgment and the use of significant estimates and assumptions, including but not limited to, fluctuations in enrollments, revenue growth rates, operating margins, discount rates, and future market conditions.conditions, among others. Given the current competitive and regulatory environment the impact of COVID-19, and the uncertainties regarding the related impact on the business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim and annual goodwill impairment tests will prove to be accurate predictions of the future. If the Company’s assumptions are not realized, the Company may record additional goodwill impairment charges in future periods. It is
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not possible at this time to determine if any such future impairment charge would result or whether such charge would be material.

The following table summarizes the changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, 2023 (in thousands):

APUS SegmentRU SegmentHCN SegmentTotal Goodwill
(Unaudited)
Goodwill as of December 31, 2022$— $86,030 $26,563 $112,593 
Goodwill acquired— — — — 
Impairment— — — — 
Adjustments— — — — 
Goodwill as of March 31, 2023$— $86,030 $26,563 $112,593 

In addition to goodwill, in connection with the acquisitions of RU and HCN, the Company recorded identified intangible assets with an indefinite useful life in the aggregate amount of $51.0 million and $3.7 million, respectively, which include trade name, accreditation, licensing, and Title IV, and affiliate agreements. The Company later recorded non-cash
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impairment charges reducing the carrying value of RU identified intangible assets with an indefinite useful life to $35.5 million. There were no indefinite useful life intangible assets identified as a result of the GSUSA Acquisition. There are no indefinite-lived intangible assets in our APUS Segment.

The Company 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. During the three months ended March 31, 2023 and 2022, the Company recorded amortization expense related to definite lived intangibles assets of $3.9 million and $4.0 million, respectively.

The following table represents the balance of the Company’s intangible assets as of March 31, 2023 (in thousands):

Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying Amount
(Unaudited)
Finite-lived intangible assets
Student roster$20,000 $15,833 $— $4,167 
Curricula14,563 7,860 — 6,703 
Student and customer contracts and relationships4,614 4,242 — 372 
Lead conversions1,500 1,187 — 313 
Non-compete agreements86 86 — — 
Tradename35 35 — — 
Accreditation and licenses28 14 — 14 
Total finite-lived intangible assets$40,826 $29,257 $— $11,569 
Indefinite-lived intangible assets
Trade name28,498 — — 28,498 
Accreditation, licensing, and Title IV26,186 — 15,500 10,686 
Affiliation agreements37 — — 37 
Total indefinite-lived intangible assets54,721 — 15,500 39,221 
Total intangible assets$95,547 $29,257 $15,500 $50,790 


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The following table represents the balance of the Company’s intangible assets as of December 31, 2022 (in thousands):

Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying Amount
Finite-lived intangible assets
Student roster$20,000 $13,333 $— $6,667 
Curricula14,563 6,680 — 7,883 
Student contracts and relationships4,614 4,168 — 446 
Lead conversions1,500 1,000 — 500 
Non-compete agreements86 86 — — 
Tradename35 35 — — 
Accreditation and licenses28 11 — 17 
Total finite-lived intangible assets$40,826 $25,313 $— $15,513 
Indefinite-lived intangible assets
Trade name28,498 — — 28,498 
Accreditation, licensing, and Title IV26,186 — 15,500 10,686 
Affiliation agreements37 — — 37 
Total indefinite-lived intangible assets54,721 — 15,500 39,221 
Total intangible assets$95,547 $25,313 $15,500 $54,734 

For additional information on goodwill and intangible assets, see the Consolidated Financial Statements and accompanying notes in its audited financial statements included in the Annual Report.

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Note 7. Net IncomeEarnings Per Common Share
 
Basic net incomeEarnings per common share is based oncalculated by dividing net (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net (loss) income available to common stockholders is net (loss) income adjusted for preferred stock dividends declared. Diluted net incomeearnings per common share increasesis calculated by dividing net (loss) income 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 earnings per common share and the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted net incomeearnings per common share (in thousands)thousands, expect per share amounts).
Three Months Ended March 31,Three Months Ended March 31,
2022202120232022
(Unaudited)(Unaudited)
Earnings per common shareEarnings per common share
Net (loss) incomeNet (loss) income$(5,740)$5,333 
Preferred Stock DividendPreferred Stock Dividend1,457 — 
Net (loss) income available to common shareholdersNet (loss) income available to common shareholders$(7,197)$5,333 
Basic weighted average shares outstandingBasic weighted average shares outstanding18,982 18,805 
(Loss) earnings per common share(Loss) earnings per common share$(0.38)$0.28 
Diluted earnings per common shareDiluted earnings per common share
Net (loss) income available to common shareholdersNet (loss) income available to common shareholders$(7,197)$5,333 
Basic weighted average shares outstandingBasic weighted average shares outstanding18,805 16,211 Basic weighted average shares outstanding18,982 18,805 
Effect of dilutive restricted stock and optionsEffect of dilutive restricted stock and options74 211 Effect of dilutive restricted stock and options90 74 
Diluted weighted average shares outstandingDiluted weighted average shares outstanding18,879 16,422 Diluted weighted average shares outstanding19,072 18,879 
Diluted (loss) earnings per common shareDiluted (loss) earnings per common share$(0.38)$0.28 

The table below reflects a summary of securities that could potentially dilute basic net incomeearnings per common share in future periods that were not included in the computation of diluted earnings per share because the effect would have been antidilutive (in thousands).

Three Months Ended March 31,Three Months Ended March 31,
2022202120232022
(Unaudited)(Unaudited)
Antidilutive securities:Antidilutive securities:Antidilutive securities:
Stock Options103 18 
Restricted Shares173 3 
Stock optionsStock options136 103 
Restricted sharesRestricted shares666 173 
Total antidilutive securitiesTotal antidilutive securities276 21 Total antidilutive securities802 276 

Note 8. Long-Term Debt

In connection with the Rasmussen Acquisition, 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.thereto, or the Lenders. The Credit Agreement provides for (i) a senior secured term loan facility in an aggregate original principal amount of $175 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, which 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 Rasmussen Acquisition, was fully funded
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on the Closing Date and is presented net of the debt issuance costs at origination of $13.1 milliondeferred financing fees on the Consolidated Balance Sheets. The debt issuance costsDeferred financing fees are being amortized using the effective interest method over the term of the Term Loan. Debt issuance costsAs of March 31, 2023 and December 31, 2022, the remaining unamortized deferred financing fees were $5.5 million and $5.9 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 borrowings outstanding onunder the Revolving Credit Facility atas of March 31, 20222023 and December 31, 2021.2022.

Outstanding borrowings under the Facilities bear interest at a per annum rate equal to LIBOR (subject to a 0.75% floor) 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, 2023, the Facilities borrowing rate was 10.13%, excluding any offset from the interest rate cap agreement described below. An unused commitment fee in the amount of 0.50% is payable quarterly in arrears based on the average daily unused
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amount of the commitments under the Revolving Credit Facility.

In December 2022, APEI made prepayments totaling $65.0 million on the Term Loan. With this prepayment, APEI is alsonot required to make quarterly principal payments ofon the Term Loan onuntil payment of the last day of each quarter,outstanding principal amount at maturity in an amount equal to $2.2 million per quarter.September 2027.

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 2.0 to 1.0. AtAs of March 31, 2022, the Company2023, APEI 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, 2023 and December 31, 2022 (in thousands):

Long-Term debt (Unaudited)
Credit agreement$170,625 
Deferred financing fees(11,663)
Total debt158,962 
Less: Current portion(8,750)
Long-Term Debt$150,212 
As of March 31, 2023As of December 31, 2022
(Unaudited)
Credit agreement$99,063 $99,063 
Deferred financing fees(5,506)(5,912)
Total debt93,557 93,151 
Less: Current portion— — 
Long-Term Debt$93,557 $93,151 

Scheduled maturities of long-term debt at March 31, 20222023 are as follows (in thousands):

Maturities of Long-Term Debt (Unaudited)Loan Payments
2022 (remaining)6,562 
20238,750 
20248,750 
20258,750 
20268,750 
2027129,063 
Total170,625 
Maturities of Long-Term Debt (Unaudited)Loan Payments
202799,063 
Total99,063 

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, provides the Company with interest rate protection in the event the LIBOR rate exceeds 2.0%. The interest rate cap iswas effective October 1, 2021 and will expire on January 1, 2025.

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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 ourthe 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.

AtAs of March 31, 2023 and December 31, 2022, the $2.3 million fair value of the interest rate cap istotaled $3.9 million and $4.5 million, respectively, and was recorded in Other assets on the Consolidated Balance Sheets. The unrealized gainloss of $1.8 million$22,000, net of taxes, is included asin accumulated other comprehensive income. During the three months ended March 31, 2023, the Company reclassified approximately $0.6 million from other comprehensive income to interest expense. The Company estimates that approximately $2.6 million will be reclassified from accumulated other comprehensive income into interest expense during the next twelve months.

Note 9. Segment Information
 
In connection with the Rasmussen Acquisition (as further described in Note 3, “Acquisition Activity”), the Company revised its reportable segments to reflect the manner in which the chief operating decision-maker evaluates performance and allocates resources, and to include RU as a separately reportable segment. Prior to the third quarter of 2021, the Company had
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2 reportable segments: the American Public Education, Inc. Segment, or APEI Segment, and the Hondros College of Nursing, or HCN Segment. Post-acquisition, theThe Company has 3three reportable segments: the APUS Segment, which was previously included within the former APEI Segment; the RU Segment;Segment, and the HCN Segment. The APEI Segment previously reported the results of both APUS and remaining unallocated Company expenses. GSUSA does not meet the quantitative thresholds to qualify as a reportable segment;segment, and does not have other requisite characteristics as a reportable segment, therefore, its operational activities are presented below within “Corporate and Other”. Adjustments to reconcile segment results to the Consolidated Financial Statements, including unallocated corporate activity and eliminations, which generally were previously reported within the APEI Segment, are also included in “Corporate and Other”. Prior periods have been updated to conform to the revised presentation.

In accordance with FASB ASC 280, Segment Reporting, the chief operating decision-maker has been identified as the Company’s Chief Executive Officer. The Company’s Chief Executive Officer reviews operating results to make decisions about allocating resources and assessing performance for the APUS, RU, and HCN Segments.
 
A summary of financial information by reportable segment is as follows (in thousands):    

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Three Months Ended March 31,Three Months Ended March 31,
2022202120232022
(Unaudited)(Unaudited)
Revenue:Revenue:Revenue:
APUS SegmentAPUS Segment$73,090 $77,476 APUS Segment$73,978 $73,090 
RU SegmentRU Segment67,099 — RU Segment57,467 67,099 
HCN SegmentHCN Segment11,541 11,132 HCN Segment13,140 11,541 
Corporate and OtherCorporate and Other3,017 (67)Corporate and Other5,104 3,017 
Total RevenueTotal Revenue$154,747 $88,541 Total Revenue$149,689 $154,747 
Depreciation and amortization:Depreciation and amortization:Depreciation and amortization:
APUS SegmentAPUS Segment$1,701 $2,493 APUS Segment$1,400 $1,701 
RU SegmentRU Segment6,079 — RU Segment5,927 6,079 
HCN SegmentHCN Segment222 148 HCN Segment290 222 
Corporate and OtherCorporate and Other146 10 Corporate and Other139 146 
Total Depreciation and amortizationTotal Depreciation and amortization$8,148 $2,651 Total Depreciation and amortization$7,756 $8,148 
Income (loss) from operations before interest and income taxes:Income (loss) from operations before interest and income taxes:Income (loss) from operations before interest and income taxes:
APUS SegmentAPUS Segment$13,182 $14,031 APUS Segment$17,074 $13,182 
RU SegmentRU Segment891 — RU Segment(12,864)891 
HCN SegmentHCN Segment(995)783 HCN Segment(1,303)(995)
Corporate and OtherCorporate and Other(7,878)(4,177)Corporate and Other(8,277)(7,878)
Total income from operations before interest and income taxes$5,200 $10,637 
Interest (expense) income:
Total (loss) income from operations before interest and income taxesTotal (loss) income from operations before interest and income taxes$(5,370)$5,200 
Interest income (expense):Interest income (expense):
APUS SegmentAPUS Segment$39 $91 APUS Segment$160 $39 
RU SegmentRU Segment3 — RU Segment1 3 
HCN SegmentHCN Segment2 2 HCN Segment19 2 
Corporate and OtherCorporate and Other(3,399)21Corporate and Other(1,959)(3,399)
Total Interest (expense) income$(3,355)$114 
Total Interest expenseTotal Interest expense$(1,779)$(3,355)
Income tax expense (benefit):Income tax expense (benefit):Income tax expense (benefit):
APUS SegmentAPUS Segment$4,674 $3,767 APUS Segment$5,513 $4,674 
RU SegmentRU Segment306 — RU Segment(3,954)306 
HCN SegmentHCN Segment(316)205 HCN Segment(345)(316)
Corporate and OtherCorporate and Other(3,624)(1,333)Corporate and Other(2,628)(3,624)
Total Income tax expense$1,040 $2,639 
Total Income tax (benefit) expenseTotal Income tax (benefit) expense$(1,414)$1,040 
Capital expenditures:Capital expenditures:Capital expenditures:
APUS SegmentAPUS Segment$441 $971 APUS Segment$300 $441 
RU SegmentRU Segment1,924 — RU Segment2,006 1,924 
HCN SegmentHCN Segment500 557 HCN Segment827 500 
Corporate and OtherCorporate and Other100 — Corporate and Other73 100 
Total Capital ExpendituresTotal Capital Expenditures$2,965 $1,528 Total Capital Expenditures$3,206 $2,965 
    

A summary of the Company’s consolidated assets by reportable segment is as follows (in thousands):

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As of March 31, 2022As of December 31, 2021As of March 31, 2023As of December 31, 2022
(Unaudited)(Unaudited)
Assets:Assets:Assets:
APUS SegmentAPUS Segment$136,573 $126,926 APUS Segment$125,170 $113,551 
RU SegmentRU Segment426,073 429,299 RU Segment297,980 300,625 
HCN SegmentHCN Segment50,803 51,936 HCN Segment64,109 59,820 
Corporate and OtherCorporate and Other157,961 117,447 Corporate and Other131,263 141,060 
Total AssetsTotal Assets$771,410 $725,608Total Assets$618,522 $615,056 

Note 10. Commitments and 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

    OurThe 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,TA; education benefit programs administered by the U.S. Department of Veterans Affairs, or VA, andVA; federal student aid from Title IV programs; and cash and other sources.

     A summary of APUS Segment revenue derived from students by primary funding source is as follows (unaudited):follows:
Three Months Ended March 31,
Three Months Ended March 31,(Unaudited)
2022202120232022
DoD tuition assistance programsDoD tuition assistance programs48%45%DoD tuition assistance programs49%48%
VA education benefitsVA education benefits21%21%VA education benefits21%21%
Title IV programsTitle IV programs18%20%Title IV programs16%18%
Cash and other sourcesCash and other sources13%14%Cash and other sources14%13%
A summary of RU Segment revenue derived from students by primary funding source is as follows (unaudited):follows:
Three Months Ended March 31,
Three Months Ended March 31,(Unaudited)
2022202120232022
Title IV programsTitle IV programs74%76%Title IV programs74%74%
Cash and other sourcesCash and other sources24%22%Cash and other sources24%24%
VA education benefitsVA education benefits2%2%VA education benefits2%2%

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    A summary of HCN Segment revenue derived from students by primary funding source is as follows (unaudited):follows:
Three Months Ended March 31,
Three Months Ended March 31,(Unaudited)
2022202120232022
Title IV programsTitle IV programs79%81%Title IV programs79%79%
Cash and other sourcesCash and other sources19%18%Cash and other sources20%19%
VA education benefitsVA education benefits2%1%VA education benefits1%2%

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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 initial annual rate, which is equal to the Secured Overnight Financing Rate, or SOFR (selected by the Company for each divided period), plus 10.00%, or an initial rate of 14.55% for the first dividend period, a quarterly dividend period. 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% 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, 2023, the dividend rate was 14.88% 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 Company’s Board of Directors, 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-month period ended March 31, 2023, $1.5 million of dividends were declared and paid on preferred stock.

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 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 $60.8 million and $62.2 million as of March 31, 2023 and December 31, 2022. 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, as of March 31, 2023 and December 31, 2022, respectively. 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, 2023, and December 31, 2022, the make-whole payment included in the Liquidation Preference was $17.8 million and $19.3 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 include an increase of the dividend rate spread of 6.00% and an early premium amount, as defined in the Certificate of Designation.

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, 2021,2022, 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 “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or “may,” or other words or expressions that convey uncertainty of future events, conditions, circumstances, or outcomes to identify these forward-looking statements. Forward-looking statements in this Quarterly Report include, without limitation, statements regarding:

•our expectations regarding the effects of and our response to the COVID-19 pandemic, including the demand environment for online education or nursing education as the pandemic abates, impacts on business operations and our financial results,changes in and our ability to comply with the extensive regulatory framework applicable to our industry, as well as state law and regulations relatedand accrediting agency requirements, and the expected impacts of any non-compliance;
•our ability to emergency relief;manage, grow, and diversify our business and execute our business initiatives and strategy;
•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 and attract students who are likely to persist, and improve student outcomes;
•integration of Rasmussen University, or RU, and Graduate School USA, or GSUSA;
•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;
•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;
•our plans for, marketing of, and initiatives at, 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 U.S. Department of Defense, or DoD, or branches of the United StatesU.S. Armed Forces, including actions related to the disruption and suspension of DoD tuition assistance programs, or TA, programs, and ArmyIgnitED, and expectations regarding the effects of those actions;
•changes infederal appropriations and our ability to comply with the extensive regulatory framework applicable to our industry, as well as state law and regulations and accrediting agency requirements;
•our ability to undertake initiatives to improve the learning experience and attract students who are likely to persist;other budgetary matters, including government shutdowns;
•changes in enrollment in postsecondary degree-granting institutions and workforce needs;
•the competitive environment in which we operate;
•our cash needs and expectations regarding cash flow from operations;ability to recognize the benefits of our cost savings efforts;
•our ability to manage and influence our bad debt expense;
•our ability to manage, grow, and diversifyuse of our business and execute our business initiatives and strategy;share repurchase program; and
•our financial performance generally.

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:

•the effects, duration and severity of the ongoing COVID-19 pandemic and the adverse effects on demand for online education or nursing education as impacts of the pandemic abate, and the actions we have taken or may take in response, particularly at Hondros College of Nursing, or HCN, and RU and as a result of working remotely;
•the impacts of inflation, increases in labor costs, and enrollment trends, including on our operating margins;
•our dependence on the effectiveness of our ability to attract students who persist in our institutions’ programs;
•changing market demands;
•our inability to effectively market our programs;
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•our inability to maintain strong relationships with the military and maintain enrollments from military students;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;
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•adverse effects of changes our institutions make to improve the student experience and enhance their ability to identify and enroll students who are likely to succeed;
•our needfailure to successfully adjust to future market demands by updating existing programs and developing new programs;demands;
•our failure to comply with regulatory and accrediting agency requirements or to maintain institutional accreditation;accreditation, and risks related to any actions we may take to prevent or correct such failure;
•adverse impacts of recent Department of Education, or ED, negotiated rulemakings;
•our failure to meet applicable 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;
•economic and market conditions in the United States and abroad and changes in interest rates;
•risks related to business combinations and acquisitions, including integration challenges, business disruption, dilution of stockholder value, and diversion of management attention;
•risks related to the acquisition of RU, or the Rasmussen Acquisition, including regulatory approvals, limitations on growth and expansion at RU, effective integration of RU’s business,our substantial indebtedness and our ability to realize the expected benefits of the acquisition;
•risks related to incurring substantial debt under the debt facilities that we have entered into in connection with financing the Rasmussen Acquisition, the cost of servicing that debt, and our ability in the future to service that debt;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, 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, except as required by law.

Overview

Background

    American Public Education, Inc., or APEI, isWe are a provider of online and campus-based postsecondary education to approximately 106,600 students through American Public University System, or APUS, RU, and with the acquisitionHondros College of Graduate School USA,Nursing, or HCN, and career learning to approximately 107,100 students through four subsidiary institutions. OurGSUSA. These subsidiary institutions are purpose built to offer education programs and career learning designed to prepare individuals for productive contributionsto be of service to their professions and society, and to offer opportunities designed to advancecommunities, as well as help students progress 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 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.
    
Acquisitions

On September 1, 2021, or the RU Closing Date, we completed the Rasmussen Acquisition for an adjusted aggregate purchase price, subject to post-closing working capital adjustments of $325.5 million in cash, net of cash acquired. Upon completion of the Rasmussen Acquisition, RU, became a wholly owned subsidiary of APEI. On September 9, 2021, RU timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership. ED and RU entered into a Temporary Provisional Program Participation Agreement, effective as of October 14, 2021, that allows RU to continue disbursing Title IV funds while ED reviews the change in ownership application.

We relied on debt financing pursuant to a Credit Agreement with Macquarie Capital Funding LLC, or the Credit Agreement, as administrative agent and collateral agent, Macquarie Capital USA Inc. and Truist Securities, Inc., as lead arrangers and joint bookrunners, and certain lenders party thereto, or the Lenders, to fund a portion of the consideration for the Rasmussen Acquisition. For more information on this financing, please refer to “– Liquidity and Capital Resources – Liquidity – Acquisition of Rasmussen University” below and “Note 8. Long-Term Debt” included on the Consolidated Financial Statements in this Quarterly Report.

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On January 1, 2022, or the GSUSA Closing Date, weour wholly owned subsidiary, American Public Training, LLC, completed our acquisition of substantially all the assets of American Public Training LLC, which is referred to herein as Graduate School USA,GSUSA, or GSUSAthe Seller, for $1.0 million, subject to working capital adjustments. At closing, the Companywe received approximately $1.9 million from the Seller, which represents the estimated net working capital at closing net of the initial cash payment to the Seller of $0.5 million, which is the purchase price less $0.5 million we retained by the Company to secure the indemnification obligations of the Seller. The purchase price reflects the $0.5 million due to the Seller post-closing and additional adjustments to the estimated net working capital at closing.

Our consolidated results for the three months March 31, 2021 do not reflect the operations of RU and GSUSA. We did not consolidate the RU Segment or GSUSA results prior to the respective acquisition closing dates. Adjustments to reconcile segment results to the Consolidated Financial Statements are included in “Corporate and Other”, which includes unallocated corporate activity and eliminations, and for the three months ended March 31, 2022, the operational activities of GSUSA.

Our results for the three months ended March 31, 2022, included approximately $0.9 million of acquisition-related expenses related to RU and GSUSA, and our results for the three months ended March 31, 2021, include approximately $0.6 million of acquisition-related expenses related to RU, respectively. These expenses are included in general and administrative expenses on the Consolidated Statements of Income.

For more information on the Rasmussen and GSUSA Acquisitions,Acquisition, please refer to, “Note 3. Acquisition Activity” included onin the Notes to the Consolidated Financial Statements in our Annual Report and in this Quarterly Report.

We have continued to monitor the impact of the COVID-19 pandemic and adjust our operations as appropriate in light of state and federal guidance. The COVID-19 pandemic did not materially impact our results of operations during the three month period ended March 31, 2022. For more information on the potential risks related to COVID-19, please refer to our Annual Report and the sections entitled “Results of Operations”, and “Risk Factors”.Our Institutions

    Our wholly-ownedwholly owned operating subsidiary institutions include the following:

•American Public University System, Inc., referred to herein as APUS, provides online postsecondary education to approximately 88,40089,600 adult learners, directed primarily at the needs of the military, military-affiliated, public service and service-minded communities through two brands: American Military University, or AMU, and American Public
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University, or APU. As of March 31, 2022,2023, approximately 64%66% 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 over 16,20014,300 students at its 2322 campuses in six states and online. As of March 31, 2022,2023, approximately 8,4006,800 students are pursuing nursing degrees at RU, approximately 90% of whom are enrolled in RU’s pre-licensure degree programs.

We did not consolidate the financial results of the RU Segment prior to the RU Closing Date.

•National Education Seminars, Inc., referred to herein as Hondros College of Nursing, or HCN, provides nursing education to approximately 2,5002,700 students at sixeight campuses in Ohio and a campus in Indianapolis, Indiana. A campus in Detroit, Michigan is expected to open in Fall of 2022.three states. All of HCN’s students are enrolled in its pre-licensure degree programs.

•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 government workforce, through a catalog of over 300 courses specializing in foundational and continuing professional development, as well as leadership training to advance the performance of government agencies through the competency and career advancement of their employees. GSUSA operational activities are presented within “Corporate and Other”.

28Tuition Increases

In April 2023, APUS implemented tuition and fee increases for its non-military and veteran students. With these tuition and fee increases, we believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities. RU implemented tuition increases, which took effect on January 3, 2023, for select programs to help offset the increased costs of delivering a quality education, and HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs to offset the increased costs of delivering a quality, competitive education.

Cost and Expense Reductions

On January 14, 2022, RU completed a reduction in force that resulted in the termination of nine full-time faculty members and 19 non-faculty employees across a variety of roles and departments at RU, representing approximately 3.0% of RU’s full-time faculty workforce, and 2.1% of RU’s non-faculty workforce. We incurred an aggregate of approximately $0.4 million of pre-tax cash expenses associated with employee severance benefits.benefits as a result of this reduction in force. The reduction in force is expected to resultresulted in pre-tax labor and benefit savings in the range of $2.5 million to $3.5approximately $2.7 million in 2022. These cost savings do not include expenses associated with employee severance benefits.

Regulatory and Legislative Activity
ED recently engaged
The Accreditation Commission for Education in negotiated rulemaking processesNursing, or ACEN, accredits certain RU PN and ADN programs at certain RU locations. In September 2021, ACEN granted RU’s ADN program in Bloomington, Minnesota continued accreditation with conditions. The ADN program had two years from the date the conditions were imposed to develop regulations related to participation indemonstrate compliance with all applicable accreditation criteria. If compliance is not achieved by the student financial aid programs authorized under Title IVend of the Higher Education Actmonitoring period, ACEN may determine to deny continuing accreditation absent good cause. ACEN had a site visit at the Bloomington, Minnesota ADN program in April 2023. We believe that ACEN’s site visit team is planning to recommend withdrawal of 1965, as amended, oraccreditation following its April 2023 site visit. RU will have an opportunity to respond to that recommendation before the HEA. Topics addressed include modifications to what is commonly referred to asACEN board makes a decision, and we believe that we have a strong rationale for why accreditation should not be withdrawn for this program. As explained more fully in “Risk Factors”, if ACEN denies continuing accreditation, RU has the 90/10 Rule, which imposes sanctions on institutions that derive more than 90% of their total revenue on a cash accounting basis from Title IV programs, as calculated under ED’s regulations, gainful employment requirements, public service student loan forgiveness programs, mandatory pre-dispute arbitration, prohibition of class-action lawsuits, ability to benefit provisions, certification proceduresimmediately reapply for accreditation with ACEN or with another national nursing accreditor, the first step of which would be candidacy. If RU is unable to obtain accreditation or candidacy status with ACEN or another national nursing accrediting body, RU would likely have to close the Bloomington, Minnesota ADN program, which would have a material adverse impact on RU’s enrollments and RU’s and our results of operations.

Third-party servicers that institutions engage for the administration of participation in Title IV programs changemust, among other obligations, comply with Title IV requirements and be jointly and severally liable with the institution to ED for any violation by the servicer of any Title IV provision. In February 2023, as more fully described in ‘Regulatory Environment’ in Part I, Item 1 of our Annual Report, ED issued guidance that would have significantly expanded the types of activities and functions that constitute third-party servicer activities for Title IV purposes and that stated ED’s position that an institution may not contract with third-party servicers with specified foreign ties. However, in April 2023, ED effectively rescinded this guidance and indicated that it intended to reissue the guidance in revised form, with an effective date of at least six months after publication, and to remove provisions pertaining to foreign ownership and change in control rules and procedures, financial responsibility standards, and standards of administrative capability, among others. Any final regulations adopted by ED are not expected to go into effect until July 1, 2023 at the earliest. Please refer to “Risk Factors - Recent ED negotiated rulemakings could result in regulations that materially and adversely affect our business.”third-party servicers.

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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.

Prior to the Rasmussen Acquisition, we had two reportable segments: the American Public Education, Inc. Segment, or APEI Segment, and the Hondros College of Nursing, or HCN Segment. Post-acquisition, we have three reportable segments: the APUS Segment, which was previously included within the APEI Segment; the RU Segment; and the HCN Segment. The APEI Segment previously reported the results of both APUS and unallocated Company expenses. GSUSA does not meet the quantitative thresholds to qualify as a reportable segment; therefore, its operational activities are presented below within “Corporate and Other”. Additionally, adjustmentsAdjustments to reconcile segment results to the Consolidated Financial Statements are included in “Corporate and Other”, which primarily includes. These adjustments include unallocated corporate activity and eliminations, which generally were previously reported withinand the APEI Segment. Prior periods have been updated to conform to the revised presentation.operational activities of GSUSA.

Summary of Results

As discussed above, we completed the Rasmussen and GSUSA Acquisitions on September 1, 2021, and January 1, 2022, respectively. We did not consolidate the financial results of these companies prior to their respective acquisition closing dates. Accordingly, the financial resultsConsolidated revenue for the three months ended March 31, 2021 do not include the results of operations of RU and GSUSA, and therefore the prior year period presented is not directly comparable2023 decreased to the current period.

For the three months ended March 31, 2022, our consolidated revenue increased to $154.7$149.7 million from $88.5$154.7 million, or by 74.8%3.3%, compared to the prior year period. Our operating margins decreased to 3.4% from 12.0%negative 3.7% for the three months ended March 31, 2022, compared to2023 from 3.4% in the prior year period. NetOur net loss for the three months ended March 31, 2023 was $5.7 million compared to net income decreased toof $5.3 million from $8.1 million,in the prior year period, a decrease of $2.8 million compared to the prior year period. We expect our operating margins to remain below prior year levels for the remainder of 2022, including as a result of the impacts of inflation, increases in labor costs, particularly at Rasmussen and HCN, and enrollment trends, particularly at Rasmussen.$11.1 million.
For the three months ended March 31, 2022, while2023, APUS net course registrations atincreased 2,300, or by 2.4%, to 96,300, as compared to the prior year period. APUS Segment revenue increased to approximately 94,000$74.0 million from approximately 92,900,$73.1 million, or approximatelyby 1.2%, compared to the prior year period,period. APUS Segment revenueoperating margins increased to 23.1% from 18.0% in the prior year period.

RU total enrollment, for the three months ended March 31, 2023, decreased to $73.1 million from $77.5 million,approximately 14,300, or by 5.7%11.7%, compared to the prior year period. The increase in net course registrations was
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primarily due to an increase in military-related registrations from students utilizing TA. We believe the decrease in APUSRU Segment revenue was a result of two key factors: the difference in timing of registrations within the quarter asdecreased to $57.5 million from $67.1 million, or by 14.4%, compared withto the prior year and lower revenue per net course registration due to an increase in TA registrations which have a lower revenue per net course registration than other funding sources. Net course registrations represent the total number of courses for which students remain enrolled after the date by which they may drop a course without financial penalty.

APUSperiod. RU Segment operating margins decreased to 18.0%negative 22.4% from 18.1% for the three months ended March 31, 2022, compared to1.3% in the prior year period.

For the three months ended March 31, 2022,2023, HCN Segment revenuetotal enrollment increased to $11.5 million from $11.1 million,approximately 2,700, or by 3.7%10.1%, compared to the prior year period. TotalNew student enrollment at HCN for the three months ended March 31, 20222023 increased approximately 200 students to approximately 2,500 from approximately 2,300,730, or approximately 8.1%by 36.0%, as compared to the prior year period. We believe thatperiod, which contributed to the increase in total student enrollment at HCN was due in part to an increase in marketing expenditures and the continued impact of initiatives implemented in 2019 and 2020, such as the direct entry ADN Program and the institutional affordability grant. HCN total student enrollment represents the total number of students enrolled in a course immediately after the date by which students may drop a course without financial penalty.

enrollment. HCN Segment operating margins decreased to anegative 9.9% from negative 8.6% from 7.0% for the three months ended March 31, 2022, compared toin the prior year period. The decrease in the operating margin is due to increases in nursing faculty compensation costs and other employee costs, an increase in marketing expenditures as compared to the prior year period, and costs associated with the ongoing start-up of the new campus in Akron, Ohio, which opened in April 2021.

RU enrollment was approximately 16,200 during the three months ended March 31, 2022, which compares to 17,300 during the three months ended March 31, 2021. We believe this decline in enrollment, which also reflects year over year declines in total nursing enrollment and enrollment from new nursing students, may have been caused, in part, due to a moderation in near-term demand for RU’s programs due to the abatement of the COVID-19 pandemic, record low unemployment in some RU local markets, and increasing pay for nurses resulting in fewer available nursing faculty to educate and oversee clinicals. The factors adversely impacting RU enrollments, including nursing enrollments, are expected to continue to negatively impact RU’s results, and we are unable to predict when we will return to enrollment growth at RU. RU Segment revenue totaled approximately $67.1 million for the three months ended March 31, 2022.
    
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. 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. There was no goodwill recorded in connection with the acquisition of GSUSA reported in Corporate and Other, and there is no goodwill in our APUS Segment.

In 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 includes trade name, accreditation, licensing, Title IV, and affiliate agreements. There were no indefinite useful life intangible assets identified as a result of the acquisition of GSUSA reported in Corporate and Other. There are no indefinite-lived intangible assets in our APUS Segment.

We recorded, at each respective subsidiary, $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, reported in our RU and HCN Segments, and in Corporate and Other. 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 and circumstances exist that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The process of evaluating goodwill and indefinite-lived intangible assets for impairment is subjective and requires significant judgment and estimates. When performing an optional qualitative analysis, we consider many factors, including general economic conditions, industry and market conditions, certain cost factors, financial performance and key business drivers (for example, student enrollment), long-term operating plans, and potential changes to significant assumptions and
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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.

The results of the annual assessment completed as of October 31, 2022 concluded that the fair value of goodwill for RU and HCN exceeded their carrying values by approximately $10.0 million, or by 5%, and $4.9 million, or by 13%, respectively. Significant assumptions in the forecast used in the discounted cash flow valuation model for the October 31, 2022 valuation, include the recovery in our RU Segment enrollment in year three to historical norms and two future campus openings in our HCN Segment. These assumptions could be negatively affected by any of, but not limited to, changes in our regulatory environment, declines in student enrollment, adverse actions by state boards of nursing including enrollment caps, and increases in our expenses not in our budgeted plan. We applied a hypothetical ten percent decrease to the fair values of our RU and HCN Segment, which at December 31, 2022 would have triggered additional impairment testing and analysis for our RU Segment. Applying the hypothetical decrease to the fair value of our HCN Segment did not result in an additional impairment.

At March 31, 2023, we performed a qualitative analysis for our RU and HCN Segments’ goodwill and indefinite-lived intangible assets. As part of our analysis we considered all the events and circumstances listed in Financial Accounting Standards Board Accounting Standards Codification 350, Intangibles-Goodwill and Other, in addition to other entity-specific factors. Factors of consideration included: RU’s and HCN’s financial and enrollment performance against internal targets for the first quarter of 2023; the fact that the overall long-term outlook remains similar to that used in the annual assessment; economic factors; key leadership changes including the appointment of a new President and appointees to other significant leadership roles; and the continued favorable growth outlook for nursing education. In addition, we considered the 2022 quantitative analysis performed and concluded that the events in the first quarter of 2023 did not have a significant impact on the fair value of our RU Segment. After completing the qualitative review of goodwill and indefinite-lived intangible assets for our RU and HCN Segments for the three months ended March 31, 2023, we concluded it was more likely than not that the fair value of the RU and HCN Segments was more than the carrying value and therefore it was not necessary to perform a quantitative goodwill impairment test.

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 Use of 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, 20222023 compared to the three months ended March 31, 2021.2022. 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, including as a result of the Rasmussen and GSUSA Acquisitions.expenses.

We believeAPUS net course registrations for the increase in net registrations at APUSthree months ended March 31, 2023 were 96,300 compared to 94,000 for the three months ended March 31, 2022, an increase of 2,300, or 2.4%. The increase in net course registrations at APUS in 2023 as compared to 2022 was due primarily due to increases in military-relatedmilitary registrations from students utilizing TA atTA. APUS Segment operating margins increased to 23.1% from 18.0% in the prior year period. The increase in the operating margin was primarily due to an increase in revenue during the period and decreases in advertising costs and employee compensation costs partially offset by increases in technology costs as a result of improvements made by the Armycompared to the ArmyIgnitED system. For more information on the impacts of the Army TA program delays on the Company and the risks related to these impacts, please refer to “Overview” in this Management’s Discussion and Analysis of Financial Condition and Results of Operation and the section entitled “Risk Factors” in our Annual Report.prior year period.

We believe that the increase in enrollment at HCN forFor the three months ended March 31, 20222023, RU total enrollment decreased to approximately 14,300, or by 11.7% as compared to the prior year period is dueperiod. We believe this decline in enrollment, which reflects year-over-year declines in new and total nursing enrollment, as well as declines in campus-based non-nursing programs, was caused, in part, by the prior departure of leadership accountable for enrollment and nursing operations, caps on nursing student enrollment at certain RU campuses due to an increasereturning to on-ground nursing education, and increasing pay for nurses resulting in marketing expendituresfewer available nursing faculty to educate students and the continued impact of initiatives implemented in 2019 and 2020, such as the direct entry ADN Program and the institutional affordability grant.

Our consolidated results for the three months ended March 31, 2022 and 2021 reflect the operations of our APUS and HCN Segments only and include the results for ouroversee clinicals. RU Segment and GSUSA foroperating margins decreased to negative 22.4% from 1.3% in the three months ended March 31, 2022. We did not consolidate the RU Segment or GSUSA prior to the respective acquisition closing dates. RU enrollment wasyear
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approximately 16,200period. The decrease in the operating margin was primarily due a decrease in revenue during the period, and $2.4 million in transition services fees related to the termination of the Collegis marketing contract effective January 31, 2023.

At HCN, total enrollment for the three months ended March 31, 2022, which compares2023 increased to 17,300 duringapproximately 2,700, or by 10.1%, as compared to the prior year period. We believe that the increase in new and total student enrollment at HCN is due, in part, to enrollment growth in recently opened campuses including the opening of the Detroit, Michigan campus in October 2022. For the three months ended March 31, 2021. We believe this decline2023, HCN Segment operating margins decreased to negative 9.9% from negative 8.6% in enrollment may have been caused,the prior year period. The decrease in part,the operating margin is primarily due to a moderationincreases in near-term demand for RU’s programs duenursing faculty compensation costs, other employee compensation costs, technology costs, bad debt expense, and Title IV costs partially offset by decreases in advertising costs as compared to the abatement of the COVID-19 pandemic, record low unemployment, and challenges in filling open nursing faculty positions.prior year period.

For a more detailed discussion of our results by reportable segment, refer to “Analysis of Operating Results by Reportable Segment” below.

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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, Three Months Ended March 31,
20222021 20232022
(Unaudited)(Unaudited)
RevenueRevenue100.0 %100.0 %Revenue100.0 %100.0 %
Costs and expenses:Costs and expenses:  Costs and expenses:
Instructional costs and servicesInstructional costs and services46.3 36.5 Instructional costs and services49.4 46.3 
Selling and promotionalSelling and promotional25.4 21.9 Selling and promotional26.7 25.4 
General and administrativeGeneral and administrative19.1 26.6 General and administrative22.4 19.1 
Loss on disposals of long-lived assetsLoss on disposals of long-lived assets0.5 — Loss on disposals of long-lived assets— 0.5 
Depreciation and amortizationDepreciation and amortization5.3 3.0 Depreciation and amortization5.2 5.3 
Total costs and expensesTotal costs and expenses96.6 88.0 Total costs and expenses103.7 96.6 
Income from operations before interest and income taxes3.4 12.0 
Income (loss) from operations before interest and income taxesIncome (loss) from operations before interest and income taxes(3.7)3.4 
Gain on acquisitionGain on acquisition2.9 — Gain on acquisition— 2.9 
Interest (expense) income(2.2)0.1 
Interest expenseInterest expense(1.2)(2.2)
Income from operations before income taxes4.1 12.1 
Income tax expense0.7 3.0 
Income (loss) from operations before income taxesIncome (loss) from operations before income taxes(4.9)4.1 
Income tax (benefit) expenseIncome tax (benefit) expense(0.9)0.7 
Equity investment lossEquity investment loss— — Equity investment loss— — 
Net income3.4 %9.1 %
Net (loss) incomeNet (loss) income(4.0)3.4 
Preferred Stock DividendPreferred Stock Dividend1.0 — 
Net income available to common shareholdersNet income available to common shareholders(5.0)%3.4 %
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Three Months Ended March 31, 20222023 Compared to Three Months Ended March 31, 20212022

Revenue. Our consolidated revenue for the three months ended March 31, 20222023 was $154.7$149.7 million, an increasea decrease of $66.2$5.1 million, or 74.8%3.3%, compared to $88.5$154.7 million for the three months ended March 31, 2021.2022. The increasedecrease in revenue was primarily due to the inclusion ofa $9.6 million, or 14.4% decrease in revenue in our RU Segment revenue andpartially offset by a $2.0 million, or 63.9%, increase in GSUSA revenue for the three months ended March 31, 2022 of $67.1 millionincluded in Corporate and $3.1 million, respectively, andOther, a $0.4$1.6 million, or 3.7%13.9% increase in revenue in our HCN Segment partially offset byand a $4.4$0.9 million, or 5.7% decrease,1.2% increase in revenue in our APUS Segment revenue.Segment. The HCNRU Segment revenue increasedecrease was primarily due to an 8.1% increase11.7% decrease in total student enrollment as compared to the prior year period. The APUS Segment revenue decreaseincrease was primarily due to the timing of registrations within the quarter and lower revenue pera 2.4% increase in net course registrations as compared to the prior year period. The HCN Segment revenue increase was primarily due to a change36.0% increase in new student enrollment included in a 10.1% increase in total student enrollment compared to the mix of registrations toward a greater percentage of military registrations, which generate lower revenue per registration than non-military registrations.prior year period.

Costs and expenses.Costs and expenses for the three months ended March 31, 20222023 were $149.5$155.1 million, an increase of $71.6$5.5 million, or 92.0%3.7%, compared to $77.9$149.5 million for the three months ended March 31, 2021. The increase in costs2022. Costs and expenses as compared tofor the prior year period was primarily due to the inclusion ofthree months ended March 31, 2023 include $2.4 million in transition services fees in our RU Segment costsselling and promotional expenses and GSUSArelated to the termination of the marketing contract with Collegis, LLC, or Collegis, effective January 31, 2023. Other increases in costs and expenses for the three months ended March 31, 2022 of $66.2 million and $4.7 million, respectively,2023 as well ascompared to the prior year period include increases in facultybad debt expense, and employee compensation costs in our HCN Segment and increased employee compensationtechnology costs, in Corporate and Other, advertising costs in our APUS and HCN Segments, and professional fees in Corporate and Other, partially offset by decreasesa decrease in employee compensation costs, professional fees, and legal costs in our APUS Segment. Results for the three months ended March 31, 2022 include the following costs on a pre-tax basis: $0.9 million in professional fees associated with the Rasmussen and GSUSA Acquisitions in Corporate and Other; and $0.8 million in information technology costs related to our multi-year technology transformation program in our APUS Segment. Results for the three months ended March 31, 2021 included the following costs on a pre-tax basis: $1.8 million in information technology costs related to our multi-year technology transformation program in our APUS Segment; and $0.6 million in professional fees associated with the Rasmussen Acquisition in Corporate and Other.advertising costs. Costs and expenses as a percentage of revenue increased to 103.7% for the three months ended March 31, 2023 from 96.6% for the three months ended March 31, 2022, from 88.0% for the three months ended March 31, 2021.2022.
 
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Instructional costs and services expenses. Our instructional costs and services expenses for the three months ended March 31, 20222023 were $71.7$73.9 million, an increase of $39.4$2.2 million, or 121.8%3.1%, compared to $32.3$71.7 million for the three months ended March 31, 2021.2022. The increase in instructional costs and services expenses was primarily due to the inclusion of RU Segment instructionalan increase in nursing faculty compensation costs, technology costs and services expenses and GSUSA instructional costs and services expenses of $35.9 million and $2.9 million, respectively, as well as increases in facultyclassroom costs in our HCN Segment.Segment, increases in employee compensation and related costs, travel costs and technology costs in Corporate and Other, and an increase in technology costs in our RU Segment, partially offset by decreases in employee compensation costs in our APUS and RU Segments. Instructional costs and services expenses as a percentage of revenue increased to 49.4% for the three months ended March 31, 2023 from 46.3% for the three months ended March 31, 2022, from 36.5% for the three months ended March 31, 2021.2022.
Selling and promotional expenses. Our selling and promotional expenses for the three months ended March 31, 20222023 were $39.3$39.9 million, an increase of $19.9$0.6 million, or 102.7%1.5%, compared to $19.4$39.3 million for the three months ended March 31, 2021. The increase in selling2022. Selling and promotional expenses was primarily duefor the three months ended March 31, 2023 include $2.4 million in transition services fees in our RU Segment related to the inclusiontermination of RU Segment selling and promotional expenses and GSUSA selling and promotional expenses of $18.1 million and $0.8 million, respectively, as well as increasesthe Collegis marketing contract effective January 31, 2023. This increase was partially offset by decreases in advertising costs in our APUS and HCN Segments and an increase in employee compensation costs in our HCN Segment partially offset by decreases in employee compensation costs in our APUS Segment. Advertising costs increased $0.9 million in our APUS and HCN Segments compared to the prior year period.Segments. Selling and promotional expenses as a percentage of revenue increased to 26.7% for the three months ended March 31, 2023 from 25.4% for the three months ended March 31, 2022, from 21.9% for the three months ended March 31, 2021.2022.

General and administrative expenses. Our general and administrative expenses for the three months ended March 31, 20222023 were $29.6$33.5 million, an increase of $6.1$3.9 million, or 25.8%13.2%, compared to $23.5$29.6 million for the three months ended March 31, 2021.2022. The increase in general and administrative expenses for the three months ended March 31, 2022 as compared to the prior year period was primarily due to the inclusion of RU Segment generalincreases in technology costs in all segments and administrative expensesCorporate and GSUSA general and administrative expenses of $6.2 million and $0.9 million, respectively, as well asOther, an increase in employee compensation costsbad debt expense in our RU and professional fees in CorporateHCN Segments, and Other, partially offset by decreasesincreases in employee compensation costs professional fees, and legal costs in our APUS Segment. For the three months ended March 31, 2022, APUS Segment general and administrative expenses include the following costs on a pre-tax basis: $0.9 million in professional fees associated with the Rasmussen and GSUSA Acquisitions, included in Corporate and Other; and $0.8 million of information technology costs related to our multi-year technology transformation program in our APUS Segment. For the three months ended March 31, 2021, general and administrative expenses include the following costs on a pre-tax basis: $1.8 million in information technology costs related to our multi-year technology transformation program in our APUS Segment; and $0.6 million in professional fees associated with the Rasmussen Acquisition in Corporate and Other. Consolidated bad debt expense for the three months ended March 31, 20222023 was $3.9 million, or 2.6% of revenue, compared to $2.8 million, or 1.8% of revenue, compared to $1.5 million, or 1.7% of revenue in the prior year period. General and administrative expenses as a percentage of revenue decreasedincreased to 22.4% for the three months ended March 31, 2023 from 19.1% for the three months ended March 31, 2022, from 26.6% for the three months ended March 31, 2021.2022. As we continue to evaluate strategic growth opportunities and enhancements to our business capabilities, we expect to incur additional costs and that our general and administrative expenses related to professional fees will vary from time to time.

Loss on disposals of long-lived assets. The loss on disposals of long-lived assets were $0.8 million and $8,000was $1,000 for the three months ended March 31, 2022 and 2021, respectively. The loss on disposals for long-lived assets2023 compared to $0.8 million for the three months ended March 31, 20222022. The prior year loss was primarily related to the sale of excess facilities located in Charles Town, West Virginia.

Depreciation and amortization expenses. Depreciation and amortization expenses were $8.1$7.8 million and $2.7$8.1 million for the three months ended March 31, 2023 and 2022, and 2021, respectively. The increase in depreciationDepreciation and amortization expenses as a percentage of revenue decreased to 5.2% for the three months ended March 31, 2022 as compared to the prior year period was primarily due to the inclusion of the RU Segment depreciation and amortization expenses of $6.1 million. Depreciation and amortization as a percentage of revenue increased to2023 from 5.3% for the three months ended March 31, 2022, from 3.0% for the three months ended March 31, 2021.2022.

Stock-based compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $2.4$2.2 million and $2.2$2.4 million for the three months ended March 31, 20222023 and 2021,2022, respectively. Stock-based compensation costs include accelerated expense for retirement-eligible employees and performance stock unit incentive costs.
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Gain on acquisition.The $4.5 million gain on acquisition for the period ended March 31, 2022 resulted from the GSUSA Acquisition and represents the excess of the fair value of net assets acquired over consideration paid.

Interest (expense) income.expense. Interest expense was $1.8 million for the three months ended March 31, 2023, compared to $3.4 million for the three months ended March 31, 2022. The decrease in interest expense was primarily due to the decrease in the outstanding balance in our senior secured term loan facility. In December 2022, comparedwe made $65.0 million in prepayments to interestreduce our outstanding debt.
Income tax (benefit) expense. We recognized an income tax benefit of $0.1$1.4 million for the three months ended March 31, 2021. The increase in interest expense was due2023, compared to a senior secured term loan facility in an aggregate original principal amount of $175.0 million, or the Term Loan, issued in connection with the Rasmussen Acquisition.
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Income tax expense. We recognized income tax expense of $1.0 million and $2.6 million for the three months ended March 31, 2022, and 2021, respectively, or an effective tax ratesrate benefit of 19.8% in 2023 compared to an effective tax rate of 16.3% and 24.6%, respectively. In 2022,in 2022. The increase in effective tax rate from the prior year period is primarily related to the non-taxable gain on acquisition resulting from the GSUSA Acquisition is not included in taxable income resulting2022, and an increase in a lower effective tax rate. Excluding the non-recurring gain on acquisition, the effective tax rate was 56.4%, which increased fromnon-deductible stock compensation expense in the three months ended March 31, 2021 due primarily2023 as compared to the impact of non-deductible stock compensation and shortfalls from vesting of restricted stock units recorded in theprior year period.

Equity investment loss.Net (loss) income. Equity investmentOur net loss was $5,000$5.7 million for the three months ended March 31, 2022 and 2021, respectively.

Net income. Our2023, compared to net income wasof $5.3 million for the three months ended March 31, 2022, a decrease of $11.1 million. This decrease was related to the factors discussed above.

Preferred stock dividends. Preferred stock dividends for the three months ended March 31, 2023 were $1.5 million. The Series A Senior Preferred Stock was issued in December 2022, and therefore there were no preferred stock dividends in the comparable prior year period.

Net income (loss) available to common stockholders. The net loss available to common stockholders for the three months ended March 31, 2023 was $7.2 million, compared to net income available to common stockholders of $8.1$5.3 million for the three months ended March 31, 2021,2022, a decrease of $2.8$12.5 million. This decrease 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,Three Months Ended March 31,
2022202120232022
(Unaudited)(Unaudited)
Revenue:Revenue:Revenue:
APUS SegmentAPUS Segment$73,090 $77,476 APUS Segment$73,978 $73,090 
RU SegmentRU Segment67,099 — RU Segment57,467 67,099 
HCN SegmentHCN Segment11,541 11,132 HCN Segment13,140 11,541 
Corporate and OtherCorporate and Other3,017 (67)Corporate and Other5,104 3,017 
Total RevenueTotal Revenue$154,747 $88,541 Total Revenue$149,689 $154,747 
Income (loss) from operations before interest and income taxes:Income (loss) from operations before interest and income taxes:Income (loss) from operations before interest and income taxes:
APUS SegmentAPUS Segment$13,182 $14,031 APUS Segment$17,074 $13,182 
RU SegmentRU Segment891 — RU Segment(12,864)891 
HCN SegmentHCN Segment(995)783 HCN Segment(1,303)(995)
Corporate and OtherCorporate and Other(7,878)$(4,177)Corporate and Other(8,277)$(7,878)
Total income from operations before interest and income taxes$5,200 $10,637 
Total income (loss) from operations before interest and income taxesTotal income (loss) from operations before interest and income taxes(5,370)$5,200 

APUS Segment

For the three months ended March 31, 2022, while net course registrations at APUS increased2023, the $0.9 million, or 1.2%, increase to approximately 94,000 from approximately 92,900 as compared to the same period in 2021, the $4.4 million, or 5.7%, decrease to approximately $73.1$74.0 million in revenue in our APUS Segment was primarily attributable to higher net course registrations. Net course registrations increased 2.4% to approximately 96,300 from approximately 94,000 in the timing of registrations within the quarter andprior year period, due primarily to an increase in registration
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by military students utilizing TA, which generate a lower revenue per net course registration due to a change in mix to a greater percentage of military registrations.than other funding sources. Income from operations before interest and income taxes decreasedincreased to $13.2$17.1 million, or by 29.5%, during the three months ended March 31, 2022,2023 from $14.0$13.2 million a decrease of $0.8 million compared toin the prior year period, an increase of $3.9 million, as a result of the increase in revenue and an overall decrease in revenue.expenses as compared to the same period in 2022.

RU Segment

For the three months ended March 31, 2022,2023, the $9.6 million, or 14.4% decrease to approximately $57.5 million in revenue in the RU Segment revenue was $67.1 million andprimarily due to an 11.7% decrease in total student enrollment to approximately 14,300 from approximately 16,200 in the prior year period. The RU Segment incomeloss from operations before interest and income taxes was $0.9$12.9 million for the period. RU enrollment was approximately 16,200 during the three months ended March 31, 2022, which compares2023, as compared to 17,300 duringincome of $0.9 million in the three months ended March 31, 2021. We believe this decline in enrollment may have been caused, in part, due toprior year period, a moderation in near-term demand for RU’s programs duedecrease of $13.8 million. The 2023 period includes $2.4 million of transition fees related to the abatementtermination of the COVID-19 pandemic, record low unemployment in local RU markets, and challenges in filling open
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nursing faculty and clinical positions.Collegis marketing services contract.

HCN Segment

For the three months ended March 31, 20222023, the $0.4$1.6 million, or 3.7%,13.9% increase to approximately $11.5$13.1 million in revenue in our HCN Segment was attributableprimarily due to anyear-over-year increases in new students, which contributed to the increase inof total student enrollment. New student enrollment at HCN increased 36.0% to approximately 730, and total student enrollment increased 8.1%10.1% to approximately 2,500 from approximately 2,3002,700 students during the three months ended March 31, 2022as compared to the same period in 2021, due in part to an increase in marketing expenditures and the continued impact of initiatives implemented in 2019 and 2020, such as the direct entry ADN Program and the institutional affordability grant.2022. The loss from operations before interest and income taxes in our HCN Segment was $0.9$1.3 million during the three months ended March 31, 2022,2023, compared to incomea loss from operations before interest and income taxes of $0.8$1.0 million in the same period in 2021,2022, a decrease of $1.8 million, primarily due to increases in nursing faculty compensation costs and other employee costs, an increase in marketing expenditures as compared to the prior year period, and costs associated with the ongoing start-up of the new campus in Akron, Ohio, which opened in April 2021.$0.3 million.

Liquidity and Capital Resources

Liquidity
 
Cash and cash equivalents were $170.9$136.2 million and $149.6$129.5 million at March 31, 20222023 and December 31, 2021,2022, respectively, representing an increase of $21.3$6.7 million, or 14.2%5.2%. The increase in cash was primarily due to cash providedpayments received by operating activitiesAPUS from the Army in the first quarter of 2023 related to courses taken in 2022, and $1.9 millionthe timing of net cash received as a result of the GSUSA Acquisition, partially offset by increases in capital expendituresother receipts and payments of principal and interest on our debt obligations.payments. We have historically financed operating activities and capital expenditures with cash provided by operating activities. We anticipate thatexpect to continue to fund our costs and expenses through cash flowgenerated from operationsoperations. 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 existing cash and cash equivalents will provide adequate funds for our working capital needs, capital expenditures, lease commitments, and debt interest and principal obligations for at least the next 12 months and the foreseeable future.Annual Report.

We derive a significant portion of our revenue from our participation in ED’s Title IV programs, for which disbursements are governed by federal regulations. We have typically received disbursements under Title IV programs within 30 days of the start of the applicable course or term.
Another significant source of revenue is derived from TA from the DoD and programs from the U.S. Department of Veterans Affairs, or the VA. Generally, these funds are received within 60 days of the start of the courses to which they relate. In 2021, disruptions related

The Higher Education Act of 1965, as amended, requires for-profit education institutions to comply with what is commonly referred to as the 90/10 Rule, which imposes sanctions on institutions that derive more than 90% of their total revenue on a cash accounting basis from Title IV programs, as calculated under ED’s regulations. Some payments from the Army that were expected in 2022 are being received in 2023, which, together with recent changes to the Army’s transition90/10 Rule and faster enrollment growth among service members than non-military growth, has caused APUS’s 90/10 Rule percentage to increase and could make it more difficult for APUS to meet the 90/10 Rule requirements for 2023. Failure to meet the 90/10 Rule for fiscal 2023, which would require APUS to notify ED and students of this failure, would lead to placement of APUS on provisional certification status for two years with respect to its Title IV participation, could subject us to heightened regulatory scrutiny and possible adverse regulatory action, and could damage our reputation, which would have a material adverse impact on our results of operation, cash flow, and financial condition. Steps that we may take to reduce our 90/10 Rule percentage in order to comply with the 90/10 Rule may require us to make significant cash expenditures to acquire new students who do not receive educational assistance funds provided by a federal agency, which would reduce the amount of cash we have available to fund our operations. Furthermore, any future delays in receipt of funds from the Army or other service branches could have an adverse impact on our cash flow and results of operations. For more information please refer to the section entitled “Risk Factors” in our Annual Report.

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During the third quarter of 2022, the Army transitioned from the initial version of ArmyIgnitED, a system for soldiers to use to request TA, adverselyto ArmyIgnitED 2.0, with a new third-party service provider, and announced that all TA requests for courses beginning on or after October 1, 2022 must be submitted via ArmyIgnitED 2.0. As part of this change, the Army stopped allowing institutions to submit invoices from July 30, 2022 until August 29, 2022, which impacted APUS’sour ability to invoice the Army for Army registrations and adversely impactedcollect on our accounts receivable balances and cash flow from operations. During the three months ended March 31, 2022 we saw improvement in Army’s processing of invoices and paymentscaused our accounts receivable to APUS. During the period Army paid approximately $20.6 million to APUS.increase. As of March 31, 2022,2023, approximately $19.4$19.2 million, in accounts receivable, of which $10.5$10.0 million is older than 60 days from the course start date, was due from the Army, as a resultcompared to $26.0 million due from the Army as of December 31, 2022, of which $16.5 million was older than 60 days from the disruption associated withcourse start date. In early 2023 we have experienced an improvement in Army’s processing of invoices and payments. During the three months ended March 31, 2023, APUS received approximately $20.7 million in payments from the Army. While we are taking efforts to mitigate any adverse impact of the transition to ArmyIgnitED. This improvement may not continue,ArmyIgnitED 2.0 on accounts receivable and therefore we cannot predict when this disruptioncash flow, there can be no assurance that these efforts will be resolved with the Army’s systems fully operational or the timing of expected cash receipts from the Army.
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. We believe that our cash flow from operations and our existing cash and cash equivalents will provide adequate funds for ongoing operations, debt and interest obligations, and planned capital expenditures for the foreseeable future. For more on our material cash requirements from known contractual and other obligations, please refer to our Annual Report and to the section entitled “Contractual Obligations”.successful.

Capital expenditures could be higher in the future as a result of, among other things, additional expenditures for technology or other business capabilities, including as a result of insourcing of information technology functions and marketing services from Collegis, the maintenance or relocation of existing campuses at RU and HCN and GSUSA’s classroom and administrative facility, the opening of new campuses at 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.

Professional fees may continue to be elevated or increase as we continue the integration of RU and GSUSA and continue to evaluate investments in strategic growth opportunities and enhancements to our business capabilities. 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. For the three months ended March 31, 2022 and 2021, we incurred $0.9 million and $0.6 million, respectively, of acquisition-related expenses which are included in general and administrative expenses on the Consolidated Statements of Income.
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RU currently relieshas historically relied on Collegis LLC, or Collegis for a variety of outsourced marketing services and information technology functions and marketing services under one contract for information technology functionsmarketing services and another for marketing services.information technology functions. In April 2022, we notified Collegis that we intendintended to permit both contracts to expire by their terms on September 30, 2024. In October 2022, RU and Collegis mutually agreed to the termination of the marketing services contract effective January 31, 2023, rather than having the contract expire by its terms in September 2024. Expenses for the fourth quarter of 2022 include $3.9 million in transition fees in connection with the termination of the Collegis marketing services contract as specific transition obligations were completed, and first quarter of 2023 expenses include the remaining $2.4 million in transition service fees, for total non-recurring transition service fees of $6.3 million.

Outsourced information technology services under the Collegis information technology contract will continue until September 30, 2024. The total minimum expenses for information technology services over the remaining period is approximately $13.6 million.

We plan to transition all of the information technology services currently outsourced to Collegis back to our operations or to one or more other third-party vendors, and we have already begun work on the transition of certain marketing services.vendors. As we are presently preparingcontinue to develop our transition plans, at this time we are unable to predict the full costs of the transition, in which periods we will incur those costs, or the impact on our financial results, but the transition may cause us to incur significant costs, which could adversely affect our financial condition, results of operations, and cash flows.

Acquisition of Rasmussen UniversityShare Repurchase Program

In connection withDuring the completionthree months ended March 31, 2023, we repurchased 75,000 shares of common stock for approximately $0.4 million. On March 16, 2023, our Board of Directors confirmed the Rasmussen Acquisition, on the Closing Date, we entered into the Credit Agreement and, pursuant thereto, the Lenders provided us with (i) the $175.0availability under our existing share repurchase program to repurchase up to approximately $8.0 million Term Loan, and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $20.0 million, or together with the Term Loan, the Facilities. We paid a portion of the consideration for the Rasmussen Acquisition with proceeds from the Term Loan. For more information on the Facilities and their terms, please refer to “Note 8. Long-Term Debt” included on the Consolidated Financial Statements in this Quarterly Report.

Our future capital requirements will depend on a number of factors. There can be no guarantee that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs. In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness. There can be no assurance that we will be able to refinance anyshares of our indebtedness on commercially reasonable terms or at all.common stock. We fully expended this $8.0 million as of April 30, 2023 and repurchased a total of 1,335,357 shares of our common stock with this amount.

Operating Activities

Net cash provided by operating activities was $25.3$12.8 million and $11.2$25.3 million for the three months ended March 31, 20222023 and 2021,2022, respectively. The increasedecrease in cash from operating activities iswas primarily due to payments received from the Armynet loss during the three months ended March 31, 2023, compared to net income in the prior year period, and other changes in working capital due to the timing of receipts and payments. Accounts receivable at March 31, 2022,2023, decreased approximately $2.4$5.3 million compared to December 31, 2021.2022, primarily as a result of improvement in Army’s processing of invoices and payments to APUS. Accounts
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payable, accrued liabilities, and accrued compensation and benefits and accrued liabilities at March 31, 20222023 were approximately $2.4$4.3 million higher than December 31, 2021,2022, primarily due to the inclusiontiming of the RU Segment in 2022.payment processing.

Investing Activities
 
Net cash used in investing activities was $0.3$3.2 million and $1.5$0.3 million for the three months ended March 31, 2023 and 2022, and 2021, respectively. Capital expenditures of $3.0 millionInvesting activities for the three months ended March 31, 2023 include capital expenditures of $3.2 million. For the three months ended March 31, 2022, capital expenditures were $3.0 million, partially offset by net proceeds from the GSUSA Acquisition and the proceeds from the sale of real property of $1.9 million and $0.8 million, respectively. For the three months ended March 31, 2021, capital expenditures were $1.5 million.

Financing Activities
 
Net cash used in financing activities was $2.8 million and $3.7 million for the three months ended March 31, 2023 and 2022, compared to $83.4 million of net cash provided by financing activities forrespectively. For the three months ended March 31, 2021, respectively. This decrease2023, the cash used in financing activities of $1.5 million was related to the payment of a dividend on our preferred stock, $1.4 million used for the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants, and purchases of our common stock under our share repurchase program. For the three months ended March 31, 2022, the cash used in financing activities was largelyprimarily due to $1.4 million used for the deemed repurchase of our common stock to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants, and $2.2 million in principal payments made on our long term debt. Due to debt borrowings for the three months ended March 31, 2022. During the three months ended March 31, 2021, we received net proceeds of approximately $86.2 as a result ofprepayments made in December 2022, no further principal payments are required on our underwritten public offering of common stock.outstanding debt until 2027.

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 theour Annual Report.

RU is a party to service agreements with a third party,Outsourced information technology services under the Collegis to provide marketing and IT services. The agreements expireinformation technology contract will continue until September 30, 2024. The total minimum value of the service contractsexpenses for information technology services over the remaining period is approximately $47.9$13.6 million. NoticesWe plan to transition all of the non-renewalinformation technology services currently outsourced to Collegis back to our operations or to one or more other third-party vendors in the future. In October 2022, RU and Collegis mutually agreed to the termination of the marketing and IT services agreements were issued to Collegiscontract effective January 31, 2023, rather than having the contract expire by its terms in April 2022.

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InSeptember 2024. Expenses for the fourth quarter of 2022 include $3.9 million in transition fees in connection with the GSUSA Acquisition, we have also assumed an operating lease obligationtermination of the Collegis marketing services contract as specific transition obligations were completed, and first quarter of 2023 expenses include the remaining $2.4 million in transition service fees, for total non-recurring transition service fees of $6.3 million. We completed the aggregatetransition of $50.0 million over 15 years for GSUSA’s Washington, D.C., headquarters facility. For more information onRU marketing in-house to our centralized marketing team during the timing and amountfirst quarter of our future lease obligations, please refer to “Note 5. Leases” included on the Consolidated Financial Statements.2023.


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, 2022.2023. 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 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 market 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 LIBOR on our variable rate indebtedness, we would incur an incremental $1.0 million in interest expense per year, excluding any offset from the interest rate cap agreement. To reduce our exposure to
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market risks from increases in interest rates on our variable rate indebtedness we entered into a hedging arrangement in the form of an interest rate cap agreement. The interest rate cap agreement provides us with interest rate protection in the event the three month LIBOR rate increases above 2% and has a January 2025 termination date. As of March 31, 2022,2023, the interest rate cap agreement hedged $87.5 million of principal under our term loan. For every 100 basis points increase in LIBOR, we would incur an incremental $1.7 million in interest expense per year, excluding any impact offset from the interest rate cap agreement.

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, 2022.2023. 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, 2022.2023.
 
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.

On September 1, 2021, we completed the Rasmussen Acquisition. Please refer to “Note 3. Acquisition Activity” above for more information on this acquisition. In accordance with SEC guidance, management may omit an assessment of an acquired business’ internal control over financial reporting from management’s assessment of internal control over financial reporting for a period not to exceed one year. As noted under Item 9A, Controls and Procedures, contained in our Annual Report, management’s assessment of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls of RU. Management is continuing to integrate the acquired operations of RU into our overall financial reporting process, and as a result of these integration activities, certain controls will be evaluated and may be changed. Based on SEC guidance, management also did not assess the effectiveness of internal control over financial reporting of GSUSA and plans to exclude RU operations from its annual assessment of internal controls over financial reporting for the year ending December 31, 2022.


PART II – OTHER INFORMATION

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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.

Recent ED negotiated rulemakingsRU’s Bloomington, Minnesota ADN program has been adversely impacted by regulatory action and heightened scrutiny as a result of the failure to meet applicable regulatory and accreditor requirements, and further action by regulators and accreditors could result in regulations that materially and adversely affect our business.additional adverse impacts or cause us to have to close the program.

RU’s Bloomington, Minnesota ADN program has been subject to adverse action and heightened scrutiny from regulators as a result of continued failure to meet applicable regulatory and accreditor requirements, and further action by such regulators, which we believe to be reasonably possible, could adversely impact our ability to continue the Bloomington, Minnesota ADN program or potentially the ADN programs at all of RU’s Minnesota campuses, which would have an adverse effect on our results of operations, cash flows, and financial condition. In March 2022, ED completed negotiated rulemaking processes intendedSeptember 2021, ACEN placed conditions on the Bloomington, Minnesota ADN program’s continued accreditation, requiring it to develop regulationsdemonstrate compliance with all applicable accreditation criteria within two years. ACEN conducted a site visit at the Bloomington, Minnesota ADN program for April 2023. We believe that ACEN’s site visit team is planning to recommend withdrawal of accreditation following its April 2023 site visit based on the team’s findings that the program did not demonstrate compliance with certain accreditation criteria related to Title IV participation. Topics addressed include 90/10 Rule modifications, gainful employment requirements, public service student loan forgiveness programs, mandatory pre-dispute arbitration, prohibition of class-action lawsuits,outcomes. RU will have an opportunity to respond to that recommendation before the ACEN board makes a decision, and we believe that we have a strong rationale for why accreditation should not be withdrawn for this program. If ACEN denies continuing accreditation, RU has the ability to benefit provisions, certification proceduresimmediately reapply for participationaccreditation with ACEN or with another national nursing accreditor, the first step of which would be candidacy. If RU is unable to obtain accreditation or candidacy status with ACEN or another national nursing accrediting body, RU would likely have to close the Bloomington, Minnesota ADN program. In addition, a stipulation and consent order with the MBN requires the Bloomington, Minnesota ADN program to among other things reach applicable NCLEX pass rate standards by the end of 2023 and maintain a specified student to faculty ratio in Title IV programs, change2023, with a potential penalty up to and including withdrawal of ownership and change in control rules and procedures, financial responsibility standards, and standards of administrative capability, among others.program approval. The negotiated rulemaking committees did not reach consensus on most of the draft regulations that they addressed, which means ED is not boundstudent to use language developed during the negotiated rulemaking process for those regulations, and we cannot predict the nature or final form of any regulations ultimately adopted by ED. Any final regulations adopted by ED are not expected to go into effect until July 1, 2023 at the earliest, and we cannot ascertain whether those regulations could harm our business or materially and adversely affect our financial conditions and results of operations.faculty ratio
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The HEA requireslimit constrains our ability to enroll students based on our ability to attract and retain qualified faculty. RU has voluntarily further reduced enrollments in the Bloomington, Minnesota ADN program new cohorts starting in January 2023, but there can be no assurance that these or other efforts will improve NCLEX scores above the applicable threshold or by the required deadline, if at all, for-profit education institutionsor that the program will be found to complybe in compliance with the 90/10 Rule. In March 2021, the American Rescue Plan Act of 2021, or ARPA, which modified the 90/10 Rule to require that a for-profit institution derive not less than 10% of its revenue from sources other than “federal education assistance funds,” was signed into law. One of the recent negotiated rulemaking committees reached consensus on draft regulations to implement ARPA’s modifications to the 90/10 Rule, which means ED is required to use the consensus-based language in the proposed regulations that it publishes for public notice and comment. This language provides that for fiscal years beginning on or after January 1, 2023, federal funds used to calculate the revenue percentage will include Title IV funds and any other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges. The consensus-based language also provides that ED will identify the federal agency and the other educational assistance funds provided by that agency in a notice published in the Federal Register, with updates published as needed.order. As a result of this language, we expectthe order, the Minnesota Office of Higher Education, or MOHE, informed RU that TAit expects RU to identify a clinical site for each student within 50 miles from the student’s home, disclose to potential students that RU may not be able to satisfy the MBN’s order, provide options for students unable to complete the program if the MBN were to withdraw program approval, including a refund option, and VA benefits will be included in the “90%” sideto provide MOHE with copies of the ratio,any reports submitted to MBN or ACEN as they become available. The MBN order and our institutions’ 90/10 Rule percentages will increase, particularly at APUS. Inclusion of TA in the 90/10 calculationMOHE’s related scrutiny could also cause other educational institutions to decrease their focus on serving military-affiliated students using TA benefits, and while that could have a positive impact on our enrollments from those students, it could also have an adverse impact on our reputation and ability to meet the requirements of the 90/10 Rule. This change, and any resulting actions we take to adjust the operations of our institutions to comply with the 90/10 Rule, could have a material adverse impact on the financial condition and operations of our institutions.

The negotiated rulemaking committee focused on draft gainful employment regulations did not reach consensus. However, in connection with that process, ED released informational rates that it calculated for the two metrics that ED is contemplating using for purposes of determining Title IV eligibility of gainful employment programs. Those two metrics are referred to as the debt-to-earnings rates (which involve two rates, namely the discretionary earnings rate and the annual earnings rate) and the earnings threshold measure. In a memorandum accompanying the informational rates and ED’s assessments of whether programs would fail on either of the proposed measures based on those rates, ED explained that the methodology it used to produce this data differed from ED’s proposed methodology from the negotiated rulemaking sessions, that any final regulation’s methodology may change, and that the outcomes depicted in the informational rates for particular programs may differ from those generated by a future gainful employment rule. ED also made certain assumptions that may not prove to be accurate. Out of the 30 RU programs, 47 APUS programs, and five HCN programs that ED assessed in the informational rates and subject to the qualifications set forth in ED’s related memorandum, eight RU programs and three APUS programs failed one or both measures. At this time, the outcome of any future gainful employment rulemaking is uncertain and it is difficult to predict whether our institutions’ programs will satisfy any future gainful employment metrics, including whether any programsenroll students.
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identified as failing in the informational rates will in fact fail or whether other programs will fail or pass. The failure of any of our institutions’ programs to meet the required metrics could adversely impact those institutions and programs.

Our planned transition away from Collegis for currently outsourced RU information technology and marketing functions may not be timely, efficient, or cost-effective, or may pose other operational challenges.

RU currently relies on Collegis for a variety of outsourced information technology functions, including data center, learning management system, user support, and network and voice services, as well as marketing services. RU’s contracts with Collegis expire in September 2024, and in April 2022 we notified Collegis that we intend to permit the contracts to expire by their terms, which could have adverse impacts on our ongoing relationship with Collegis or the level of service that they provide. We plan to transition all of the services currently outsourced to Collegis back to our operations or to one or more other third-party vendors, and we have already begun work on the transition of certain marketing services. As we are presently preparing transition plans, at this time, we are unable to predict the full costs of the transition, in which periods we will incur those costs, or the impact on our financial results. However, the transition will cause us to incur significant time and expense, may not be timely, efficient, or cost-effective, or may otherwise be difficult to implement or pose operational challenges, any of which could adversely affect our business, financial condition, results of operations, and cash flows. This transition will require the efforts of multiple parties, including third-party vendors, and we cannot be assured that the level of cooperation among the parties will not create added challenges. In addition, there is no assurance that any contracts with third parties that replace Collegis for any of these services will be on terms that are favorable to us.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases

During the three months ended March 31, 2022,2023, we did not repurchase anyrepurchased 75,000 shares of our common stock. The table and footnotes below provide details regarding our repurchase programs (unaudited):

Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum 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)(3)
January 1, 2022— $— — — $8,396,734 
January 1, 2022 - January 31, 2022— — — 382,955 8,396,734 
February 1, 2022 - February 28, 2022— — — 390,264 8,396,734 
March 1, 2022 - March 31, 2022— — — 512,421 8,396,734 
Total— $— — 512,421 $8,396,734 
Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum 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)(3)
January 1, 2023— — — — 8,396,734 
January 1, 2023 - January 31, 2023— — — 7,618 8,396,734 
February 1, 2023 - February 28, 2023— — — 350,614 8,396,734 
March 1, 2023 - March 31, 202375,000 4.96 75,000 614,120 8,024,734 
Total75,000 $4.96 75,000 614,120 $8,024,734 
 
(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. 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 also, from time to time enter into Rule 10b5-1 plans to facilitate repurchases of shares under this authorization. On March 16, 2023, our Board of Directors confirmed the availability under our existing share repurchase program to repurchase up to approximately $8.0 million of shares of the Company’s common stock. The amount and timing of share repurchases are subject to a variety of factors, including liquidity, cash flow, stock price, and general business and market conditions. We have no obligationconditions, and applicable legal requirements. The authorization does not obligate the Company to repurchaseacquire any shares, and repurchases may modify, suspendbe commenced or discontinuesuspended and the repurchase program may be discontinued at any time.time based on market conditions and other factors that the Company deems appropriate. 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 plans.plan.

(3)During the three month period ended March 31, 2022,2023, we were deemed to have repurchased 71,33185,023 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 of Directors 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
 
    None.
 
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Item 6. Exhibits 
Exhibit No.Exhibit Description
10.1
Cooperation Agreement, dated March 20, 2023, by and among 325 Capital LLC, 325 Capital Master Fund LP, 325 Capital GP LLC, Daniel M. Friedberg, Anil K. Shrivastava, and Michael D. Braner. (1)
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema Document
EX-101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
EX-101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
EX-101.LABInline XBRL Taxonomy Extension Label Linkbase Document
EX-101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)Incorporated by reference to exhibit filed with the Company’s Current Report on Form 8-K (File No. 001-33810) filed with the SEC on March 20, 2023.
    

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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 SeldenMay 10, 20229, 2023
 Angela Selden 
 President and Chief Executive Officer 
 (Principal Executive Officer) 
   
   
 /s/ Richard W. Sunderland, Jr.May 10, 20229, 2023
 Richard W. Sunderland, Jr. 
 Executive Vice President and Chief Financial Officer 
 (Principal Financial Officer and Principal Accounting Officer) 
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