APEI 10-K & 10-Q changes, risk factors and insider trading

Our marketing strategy for APUS has traditionally focused on building long-term, mutually beneficial relationships with businesses, other organizations, and individuals in military, military-affiliated,veterans, extended military families, and other public service communities.and service-minded communities, with a focus on educating those who serve. We must continue to develop and expand marketing channels that attract college-ready students unaffiliatedwho withuse thenon-federal militaryfunds whoas a payment source and may perform well at APUS and focus on efforts to attract students outside of the military,APUS, including in order to maintain compliance with the 90/10 Rule. However, we have experienced challenges attracting such students, and there is no assurance that we will be able to do so on a cost-effective basis or to prevent a further declinedeclines in non-militarythese types of enrollments at APUS.

Furthermore, because APUS’s tuition is generally lower than that of most of its competitors, it has fewer dollars to spend per student on marketing and advertising than its competitors. Our pricing structure and margin profile may limit the availability of financial resources to be used for marketing and enrollment in general. Nevertheless, we have tried to, and may in the future try to, implement new marketing tactics and channels, including those with which we have no experience, and there is no guarantee that our marketing and branding efforts will achieve the desired results. If we are unable to develop and optimize marketing and advertising programs that are effective in developing awareness of our institutions and the programs we offer and their value propositionspropositions, and we are unable to enroll and retain qualified students in militarythe andmarkets non-militarywe markets,serve, our enrollments would suffer, and there could be a material adverse effect on our financial condition and results of operations.

In April 2024, APU announced its intention to expand its reach to become a global digital university that integrates emerging technologies and enhanced teaching and learning opportunities for faculty and students, adopted a new visual identity, a new tagline: Digital Learning for Real LifeTM, an expanded global focus, and a suite of digital student services. In connection with this transition and rebranding initiative,transition, APU aims to provide students with highly collaborative learning experiences, AI-powered classroom support, and personalized digital services. This transition and rebranding initiative may be difficult to complete, divert management attention, and require us to expend resources and incur expenses. Additionally, despite APU’s efforts, this transition and rebranding initiative may not yield increased enrollments, and, even if it does, any increased enrollments may not offset expenses we incur and could potentially impact the mix of students attracted to APU, which could have a negative effect on our compliance with the 90/10 Rule. If APU fails to successfully rebrandtransition into a global digital university or incurs substantial expenses in an unsuccessful attempt to do so, we may fail to attract new enrollments to the extent necessary to realize a sufficient return on our efforts. Accordingly, our business, results of operations, and financial condition could be impacted.

As described more fully under “Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN”, and in the Risk Factor that begins with the caption “The planned combination of APUS, RU, and HCN,HCN” on January 28, 2025, we announced, the Combination,planned whichCombination may impact our ability to maintain and increase student enrollments.

The success of RU and HCN depends, in part, on our ability to maintain and increase student enrollments in those institutions’ programs. As part of our strategy to continue to build a national nursing platform, we intend to open new campuses and other operating locations; however, as a result of disciplinaryback-to-back actions,changes of control, composite score concerns and limitations imposed by the U.S. Department of Education, RU is currently and may continue to be limited in its ability to grow enrollment and expand intoin new geographical markets. Accordingly, there is no assurance that we will be able to effectuate this expansion strategy at RU and HCN or if such strategy will achieve desired results. For more on the limitations on our ability to expand our nursing programs into new geographical markets, see also the Risk Factors that begin with the captions “If our institutions are unable to successfully adjust…”, “If we or our institutions fail to comply with the extensive regulatory…,” “Failure to improve certain of our programs’ NCLEX pass rates...,” as well as “Business – Regulatory Environment – Regulatory Actions and Restrictions on Operations” and “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements” generally.

Opening new campuses and locations requires us to obtain appropriate federal, state, and accrediting agency approvals and to comply with any related requirements from those agencies. In addition, with the opening of new campuses, we have been and will be marketing in geographic areas in which our institutions did not previously have a campus, and these marketing efforts may not be successful. If in the future we are unable to effectively market RU’s and HCN’s programs,programs in these geographies, we may not be able to successfully maintain and increase those institutions’ enrollments, which would negatively affect our results of operations.

WeAt APUS, we are highly dependent on our relationship with the military and its members, and our ability to attract and retain military service members as students. Because APUS relies on referrals and personal relationships for recruiting, impediments to access can have an adverse effect on maintaining and generating registrations from military students.

DoD requires us to meet certain criteria in order to access installations solely to provide counseling and generally prohibits us from holding regular or recurring office hours on installations solely to provide counseling. Furthermore, the DoD MOUs,MOU, which specifyspecifies the terms and conditions of participation in TAtuition assistance, or TA, and areis discussed in more depth in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense”, and the related increased focus by DoD on relationships with and oversight of educational providers, or additional DoD restrictions, could lead to adverse changes in the nature of our relationships with military installations and their education centers and our access to military service members.

Enrollments and course registrations byhave active-dutybeen, service membersand may bein the future be, adversely affected by a variety of factors not directly related to education programs, including changes in military activity, budgets and government shutdowns.

EventsBudget notcuts directlyor relatedconstraints, including in connection with the failure to educationincrease programsor a delay in increasing the federal debt ceiling, could leadnegatively affect us by leading to a reduction in registrations from students on active duty. For example, large-scale personnelforce reductions or othercuts significantto drawdownsservices ofand U.S.tools active-dutythat we or APUS’s students rely upon for recruitment, enrollment, access, and TA. Even temporary changes to military forces would likely have a negative effect on enrollmentactivity and coursebudgets registrations.may adversely affect operations. Increased operations and overseas deployments, increased demands on active-duty service members, and limited internet access associated with some deployments could also negatively impact the ability of certain active-duty military students to pursue higher education.

Declines in enrollments at RU could materiallyhave adverselya affectmaterial adverse effect on RU’s and our profitability, financial condition, results of operations, and cash flows.

RU enrollments have been impacted by adverse findings by accrediting agencies and state regulatory bodies as a result of failures to meet applicable NCLEX benchmarks, operational challenges, self-imposed enrollment caps, the pause on new enrollments, and the consolidation and closure of campuses, as discussed in greater detail in “Risks Related to the Regulation of Our Industry”. In addition, RU enrollments may be affected by challenges related to implementation of our integrated curriculum and testing services, along with any resulting student complaints and our approach to resolving such complaints. IfDeclines RUin RU’s enrollments docould nothave continuea tomaterial stabilize,adverse effect on RU’s and our reputation, profitability, financial condition, results of operations, and cash flows could be materially adversely affected.flows. While we have identified, and continue to work to identify, new marketing strategies and other initiatives that we believe will attract and enroll quality students, there can be no assurance that these efforts will be successful.

•additionalfurther updates toupdating the admissions process and procedures; and

We believe that our institutions need to continuously update and expand the content of their existing programs and develop new programs, specializations, and modes of teaching in order to continue to attract and retain qualified students and remain competitive in the postsecondary education market. However, the updates and expansions of our institutions’ existing programs and the development of new programs and specializations may not be accepted by accreditors, state and federal regulators such as ED, existing or prospective students, or employers. If we cannot respond to changes in market requirements, our business may be adversely affected. Even if our institutions are able to develop acceptable new programs, they may not be able to introduce these new programs as quickly as students require or as quickly as competitors introduce competing programs. To offer a new academic program, our institutions may be required to obtain appropriate federal, state, and accrediting agency approvals, which may be conditioned or delayed in a manner that could significantly affect our growth plans. In addition, growth restrictions imposed on our institutions in connection with changes in ownership or otherwise may adversely impact our ability to adjust to future market demands. For example, including due to the change in ownership from APEI’s acquisition of RU, RU is currently subject to ED-imposed restrictions on new programs and locations and on the number of students receiving Title IV who can be enrolled at RU. Additionally, state-imposedBON imposed constraints exist on RU nursing enrollments in Minnesota and Kansas. These restrictions willmay limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current needs by providing new or modified programs. If we are unable to respond adequately to changes in market requirements due to financial constraints, regulatory limitations, or other factors, our institutions’ ability to attract and retain students could be impaired and our financial results could suffer.

Within the postsecondary education market generally, we have experienced increased competition from new market entrants providing both online and non-traditional programs, including providers partnering with Online Program Management, and a shift of for-profit institutions to not-for-profit status. In the fall of 2024,2025, there was an industry-wide increase of approximately 3%2% in undergraduate enrollment as compared to an approximate 2%3% increase in the fall 2023.of 2024. However, despite overall increases in online postsecondary enrollments at the undergraduate and graduate levels, data suggest that previous growth in enrollment in postsecondary degree-granting institutions is slowing. The combination of reduced growth or declines in the postsecondary student population and the entrance of additional providers in the online postsecondary education market will further intensify competition, and any resulting decline in the number of enrollments could have an adverse effect on our results of operations. In addition, although our overall advertising costs decreased year-over-year in 2024, increased competition for college-ready students has led to an increase in the cost of advertising in certain marketing channels.channels in 2025. Increases in our advertising costs, and continued increases in the cost of advertising in certain marketing channels, may adversely impact our ability to attract college-ready students and/or increase our student acquisition costs.

As more fully described in “Our Institutions and Operations – Our Institutions – Accreditation – Affordability and Cost of Attendance”, certainall of our institutions implemented tuition and fee increases for certain or all students across select or all programs, as the case may be. Even with these increases, tuition and fees for our institutions are designed to be affordable and competitive when compared to the tuition and fees at similar institutions offering the same level of flexibility, accessibility, and student experience. However, higher tuition and fees may cause potential students to be unwilling, or unable, to enroll at our institutions and/or in affected programs, and existing students may be unwilling, or unable, to remainedremain enrolled, resulting in lower enrollments at our institutions and adverse impacts on our financial condition and results of operations.

In August 2023, RU decided to voluntarily pause new enrollments in the Bloomington, Minnesota ADN program beginning in November 2023, and, after informing in December 2023 MBN that it intended to voluntarily close the program, RU closed the programprogram, effective June 15, 2024. This program had been subject to adverse action and heightened scrutiny from regulators as a result of a continued failure to meet applicable regulatory and accreditor requirements.

In July 2024, RU closed its Lake Elmo, Minnesota campus and moved all enrolled students at the campus to RU’s Eagan, Minnesota campus, which is located less than 10 miles from the Lake Elmo campus. In addition, in May 2024, RU notified the EAPWisconsin Educational Approval Program, or WEAP, that it intendsplanned to voluntarily close its Green Bay, and Wausau, Wisconsin campuses, effective December 31, 2025, and 2026, respectively. TakenRU together,closed the actionsGreen regardingBay, Wisconsin campus, effective December 31, 2025, as planned, and six students who had not yet graduated, were transferred to the LakeWausau Elmocampus. campusAs andof December 31, 2025, less than ten students were enrolled at the Wausau, Wisconsin campuses are expected to directly impact approximately 190 students, or 1% of RU’s current total enrollment.campus.

IfWe we orand our institutions failare subject to comply with the extensive regulatory requirements for the operation of postsecondary education institutions, we and our institutions could face penalties and significant restrictions on operations,operations if we or our institutions fail to comply with these requirements, including loss of federal student loans and grants and access to DoD TA programs.programs and education programs administered by the VA.

Findings of noncompliance with these laws, regulations, standards, and policies could result in any of the respective regulatory agencies taking certain actions, including: (i) imposing monetary fines, penalties, or injunctions; (ii) limiting operations, including restricting our institutions’ ability to offer new programs of study or to open new locations, or imposing limits on our growth; (iii) limiting or terminating our ability to grant degrees; (iv) restricting or revoking our institutions’ accreditation, licensure, or other approval required to operate; (v) limiting, suspending, or terminating our institutions’ eligibility to participate in Title IV programs, TA, or VA education benefit programs; (vvi) requiring us to repay funds, post a letter of credit, or become subject to payment methods for Title IV programs that are not the advance payment system; (vivii) subjecting us to civil or criminal penalties; or (viiviii) or other actions that could have a material adverse effect on our business. See also the Risk Factor that begins “Government and regulatory agencies and third parties…” below.

The regulations, standards, and policies of ED, state regulatory bodies, and our institutions’ accrediting agencies change frequently and are subject to interpretive ambiguities. Recent and pending changes in, or new interpretations of, applicable laws, regulations, standards, or policies, or our noncompliance with any applicable laws, regulations, standards, or policies, could have a material adverse effect on our accreditation, authorization to operate in various states, permissible activities, receipt of funds under TA, ability to participate in Title IV programs, ability to participate in VA education benefit programs, or costs of doing business. We cannot predict with certainty how these regulatory requirements will be applied or whether we will be able to comply, or will be deemed by others to have complied, with all of the requirements, but these requirements or our noncompliance with them could adversely impact our business, operations, financial results, and reputation. For example, pending nursing education legislation in Florida could, if passed and not vetoed, lead to increased challenges in hiring and retaining qualified nursing program directors, and increased expenses related to compliance with new requirements. The legislation would also allow FBN to impose disciplinary remedies on an approved program against which an adverse action has been taken by another regulatory jurisdiction in the United States.

If our institutions fail to maintain their institutional accreditation, they will lose the ability to participate in Title IV andIV, DoD TA programs, and VA programs and our student enrollments would decline.

Accreditation at the institutional level by an accrediting agency recognized by ED is necessary to participate in Title IV and TA programs. Our institutions’ accrediting agencies may impose restrictions on their accreditation or may terminate their accreditation. To remain accredited, our institutions must continuously meet certain criteria and standards relating to, among other things, performance, governance, institutional integrity, educational quality, faculty, administrative capability, resources, and financial stability. Our institutions also must comply with accrediting agency policies and requirements, such as the requirements to apply and wait for approval before making certain changes. For example, as it did with the acquisition of RU, or the Rasmussen Acquisition, HLC requires approval before the closing of a transaction in order for an institution to maintain accredited status after closing. The standards of accrediting agencies that accredit our institutions and programs can and do vary, and accrediting agencies may prescribe more rigorous standards than are currently in place. Complying with more rigorous accreditation standards could require significant changes to the way we operate our business and increase our administrative and other costs. No assurances can be given that our institutions or programs would be able to comply with more rigorous accreditation standards in a timely manner or at all. Failure to meet accreditation criteria or standards or to comply with accreditation policies and requirements could result in the loss, limitation, modification, or suspension of accreditation at the discretion of the accrediting agency. The complete loss of institutional accreditation at one of our institutions would, among other things, render the institution and its students ineligible to participate in Title IV, TA, and VA programs, and have a material adverse effect on our enrollments, revenue, and results of operations. In addition, accrediting bodies may adopt new or revised criteria, standards, and policies that are intended to monitor, regulate, or limit the growth of our programs or for-profit institutions like ours.

The HEA requires all for-profit education institutions to comply with what is commonly referred to as the 90/10 Rule, which imposes sanctions on institutions that derive more than 90% of their total revenue on a cash accounting basis from Title IV programsprograms, TA, and VA programs, and other federal educational assistance funds, as calculated under ED’s regulations. As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – The ‘90/10 Rule’” for fiscal years beginning on or after January 1, 2023, federal educational assistance funds used to calculate the “90%” side of the ratio include Title IV fundsfunds, TA, and VA programs, and all other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal educational assistance funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges. The 90/10 Rule no longer permits institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio. As a result, effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio. WhileOn eachJuly of7, our2025, institutionsED wasissued an interpretative rule that specifies that for-profit schools will be allowed to count non-federal funds generated from programs offered entirely through distance education, if such programs satisfy certain criteria, as non-federal revenue in compliancetheir with90/10 thecalculations, and may revise 90/10 Rule for 2024, with APUS’s relevant percentagecalculations for 2024prior beingfiscal 89%, there is no assurance that we will continueyears to beinclude ablerevenue tofrom complydistance education programs in futurethe years,“10%” particularlyside at APUS. The Combination (as defined below) is expected to benefit 90/10 Rule compliance and other regulatory considerations; however, there can be no assurance thatof the Combination will have the expected benefits or when those benefits will be realized.ratio.

As a result of the problemscircumstances with TA discussed in further detail in the Risk Factor that begins “Our student registrations, revenue, and cash flow have been adversely impacted...” below, approximately $18.4 million in cash payments from the Army to APUS that were expected to be received in 2021 and 2022 were received in 2023. This together with the January 1, 2023, change to the 90/10 Rule and enrollment growth among service members as compared to declines in students who use non-federal educational assistance funds, caused APUS’s 90/10 Rule percentage to increase.

In September 2023, APUS changed its approach to invoicing for TATA, to offset the effect of the receipt of the delayed payments from the Army. APUS tooktaking longer to bill TA, which had the effect of delaying into 2024 payments forfrom TA2023 thatto ordinarily2024. wouldDue haveto been received in 2023. APUS’sthis change in billingthe approach resultedto invoicing TA in the fourth quarter of 2023, in 2024, APUS collected approximately $22.1 million offrom receivablesTA that we would have expectedrelated to receiveperiods inprior 2023 being received into 2024. The change in billing approach positively impacted the “90%” side of the ratio in 2023. In January 2024, APUS separately revised its billing policy for students utilizing TA from two weeks to five weeks after course start date to nine weeks after the course start date. The change in billing approach positively impacted the “90%” side of the ratio in 2024.

In December 2024, APUS implementedagain another change tochanged its approach to invoicing for TA, delayingtaking intolonger 2025to paymentsbill forTA, and, as a result of this change, in 2025, APUS collected approximately $32.5 million from TA that ordinarily would have been received in 2024. We estimate that APUS’s change in billing approach resulted in approximately $26.4 million of receivables that we would have expectedrelated to receiveperiods inprior 2024 being received into 2025. While theThe change in billing approach positively impacted the “90%” side of the ratio in 2024, itand reduced operating cash flow in 2024,2024. mayIn result2025, the change in billing approach increased operating cash flow and bad debt expenseexpense. in 2025, and may causeWhile the “90%” side of the ratio toremained increaseconsistent in 20252025, orthe futurechange years,in whichbilling approach could have an adverse impact on our cash flow and results of operations, as well as APUS’s ability to comply with the 90/10 Rule in 2025 or future years.2026. The change in billing practice added to our accounts receivable as of December 31, 2024,2025, and resulted in an increase to our leverage ratiosratio as of December 31, 2024,2025, under our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock, each as defined and discussed in “Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 9. Long-term Debt” and “ – Note 13. Preferred Stock”. WhileIn weJuly do2025, notAPUS anticipateagain delayed billing to certain branches, further delaying payments until 2026. We estimate that athis higherdelay leveragein ratioAPUS’s billing approach implemented beginning in July 2025 will have material limitations on our expected operations for 2025, it could result in reducedapproximately operational$34.1 flexibilitymillion of receivables that we would have expected to receive in 2025 andto futurebe years.received in 2026.

We cannot predict whether Congress or ED will continue to modify the 90/10 Rule with respect to relevant sources of funds or other aspects of the calculation. For example, in recent years Congress has considered various other proposals that would modify the 90/10 Rule, including proposals to decrease the limit on Title IV funds from 90% to 85%.85% or prohibit the use of federal funds to implement, administer, or enforce the 90/10 Rule. Such proposals, or other similar legislation, should they become law, could have a material adverse impact on the operations of our institutions. In addition, states have passed or may in the future pass, their own versions of the 90/10 Rule that like the new federal 90/10 Rule include TA and VA education benefits or other sources of funds in the “90%” side of the ratio. To the extent that any additional laws or regulations are adopted that further limit or condition the participation of for-profit schools or distance education programs in TATA, VA education benefits programs, or in Title IV programs, or that further limit or condition the amount of TATA, or VA education benefits for which for-profit schools or distance education programs are eligible to receive, our financial condition and results of operations could be materially and adversely affected.

While each of our institutions was in compliance with the 90/10 Rule for 2024,2025, there is no assurance that we expectwill continuedcontinue challengesto withbe complianceable withto thecomply 90/10in Rule,future years, particularly at APUS. Enrollments at APUS from students who use TA and VA funds have been trending upward, while enrollments from students who use non-federal educational assistance funds continued to decline. This is makingmakes it more difficult to satisfy the 90/10 Rule at APUS. In order to try and address the challenges with respect to 90/10 at APUS, we may pursue strategic transactions, including business combinations and acquisitions. Those transactions may not be successful or could cause disruption to our operations. For examples of some of the challenges that some types of strategic transactions could have, see the Risk Factors with the captions beginning with “The planned combination of APUS, RU, and HCN” and “Business combinations and acquisitions may be difficult to integrate …” below.

The DoD’s MOUsMOU imposeimposes extensive regulatory requirements on our institutions with respect to participation in DoD TA programs, and our revenue and number of students would decrease if our institutions were no longer able to receive funds under DoD TA programs or if TA is reduced, eliminated, or suspended.

As described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Defense” and “Business – Regulatory Environment – Compliance with Regulatory Standards and the Effect of Regulatory Violations – Compliance Reviews”, each institution participating in TA is party to an MOU in a similar form outlining certain commitments and agreements in connection with accepting funds from TA. For example, the MOUsDOD includeMOU includes an agreement to participate in the DoD’s Voluntary Education Institutional Compliance Program, or ICP, in order to participate in TA. An institution that is found noncompliant with DoD requirements through the ICP and demonstrates an unwillingness to resolve a finding may be subject to a range of penalties from a written warning to termination of the institution’s participation in TA.

The DoD MOUsMOU also provideprovides that an institution may only participate in TA if it is accredited by an accrediting agency recognized by ED, approved for VA funding, and a participant in Title IV programs. Failure to comply with anthe DoD MOU could result in an institution losing its ability to participate in TA. We also believe that in certain circumstances DoD may impose sanctions for a failure to comply instead of denying an institution the ability to participate in TA, including restricting student enrollment in TA programs, suspending an institution from enrolling new students, limiting access to military installations, subjecting the institution to heightened compliance oversight, or otherwise limiting an institution’s ability to participate in TA. In February 2025, ICP notified APUS that it willwould conduct a review of APUSAPUS’s compliance with the DoD MOU. On May 14, 2025, DoD issued a report that informed APUS that the review had been completed with no findings. If an institution fails to comply with the requirements of an MOU, it could result in sanctions, up to losing the ability to participate in TA, that could have a significant adverse effect on our results of operations and financial condition.

HLC conducted a focused visit at APUS in March 2024 after HLC raised potential concerns regarding APUS’s compliance with standards related to program development oversight and program assessment processes as a result of certain courses not being available for students in one program. In June 2024, HLC affirmed that APUS addressed all concerns regarding compliance with HLC standards. However, pursuant to HLC policy,2023, APUS transitioned from the Open Pathway designation to the Standard Pathway designation because of the decision to conduct a focused visit.visit Asin aMarch result2024 ofdue thisto transition,concerns regarding course availability in one program. Under the Standard Pathway, APUS is subject to a mid-cycle comprehensive evaluation. For more details on this evaluation and related details involving the Combination, see “Business – Regulatory Environment – Accreditation – Institutional Accreditation.” We cannot be sure that HLC will not identify deficiencies at APUS during the mid-cycle comprehensive evaluation site visit or call for negative accreditation-related action against APUS as a result.

ED’s new gainful employment requirements could materially and adversely affect our business.

PursuantAs todiscussed newin greater detail in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Regulation of Title IV Financial Aid Programs – Gainful Employment Regulations”, GE regulations, that took effecteffective July 1, 2024, EDestablish willan accountability framework to determine the Title IV eligibility of GE programs based in part on satisfaction of specified performance levels of two measures defined by the GE regulations: the debt-to-earnings rates (which include two rates, the discretionary debt-to-earnings rate and the annual debt-to-earnings rate) and the earnings premium measure. The OBBBA also establishes an accountability framework, effective July 1, 2026, that will require institutions to satisfy the OBBBA earnings test.

The majority of RU’s graduates, HCN graduates, and certain APUS graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing. Their success in obtaining these outcomes depends on numerous factors, including (i) individual merits of the graduate,graduate; (ii) whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association,association; (iii) whether the program meets all state requirements for professional licensure,licensure; and (iv) the accreditation of the institution and the specific program. Failure to satisfy NCLEX pass rate requirements imposed by state boards of nursing can result in the state boards of nursing and other regulators taking certain adverse actions, including placement of a program on provisional approval status or withdrawal of approval pursuant to an adjudication proceeding, and NCLEX exam pass rate requirements could limit our institutions’ ability to expand into new geographies.

As discussed more fully in “Business – Regulatory Environment – State Authorization/Licensure – State Authorization/Licensure of Our Institutions”, RU’s Illinois ADN program had not met state-established first-time NCLEX benchmarks for three consecutive years. In February 2022, RU’s Illinois ADN program was placed on probationary status by IDFPRIllinois Department of Financial and Professional Regulation, or IDFPR, as a result of which RU was required to temporarily reduce admitted students in the program by 25% and was given two years to demonstrate evidence of implementing strategies to correct deficiencies and satisfy the required NCLEX pass rate. The State of Illinois enacted legislation that, effective January 1,2024 2024,that changed the Illinois NCLEX pass rate requirements from a one-year measurement based on first attempts only to include a three-year average that includes all test attemptsattempts, and temporarily removed all nursing programs, including RU’s Illinois ADN program, from probationary status until September 2026. IDFPRRU’s publishedIllinois aADN listprogram is currently approved; however, Illinois Department of approvedFinancial nursingand programs,Professional whichRegulation, includedor IDFPR, has publicly reported that RU’s Illinois ADN program withouthas referencenot to probation, but it did acknowledgemet the program’srequired lowNCLEX pass rate for twothe consecutiveprior six years. There can be no assurance that IDFPR will not seek to impose different or additional requirements inprior connectionto withSeptember this2026 changeas ina legislation.result of failures to satisfy the required NCLEX pass rate, and it is unknown what actions IDFPR may take regarding RU’s Illinois ADN program after September 2026, which could include reinstatement of probationary status or withdrawal of approval.

Certain APUS graduates seek professional licensure, employment or other outcomes in their chosen fields following graduation, particularly in nursing. State requirements for licensure are subject to change, as are professional certification standards, and we may not become aware of changes that may impact our students in certain instances. In addition, as further discussed in “Business – Regulatory Environment – State Licensure/Authorization – Federal Requirements for State Authorization/Licensure - State Authorization and Professional Licensure”, ED regulations require institutions that offer postsecondary education programs leading to employment in an occupation that requires licensure or certification to meet certain additional requirements in order for those programs to maintain eligibility to participate in Title IV programs. In each state in which the institution is located, in which students enrolled in distance education are located, orand where a student enrolled after July 1, 2024, attests that they intend to seek employment, the program must satisfy the applicable state education requirements for professional licensure or certification so that a student seeking employment may qualify to take any licensure or certification exam needed to practice or find employment in the state. In the event that one or more states refuse to recognize our institutions’ students for professional licensure based on factors relating to our institutions or programs, the potential and actual growth of our institutions’ programs would be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

As more fully described in “Business – Regulatory Environment – Accreditation – Institutional Accreditation”, in prior years, several HCN programs at certain HCN campuses have failed to satisfy ABHES’ student achievement measures, andand, as a result, ABHES has placed certain locations and programs on program-specific warning or outcomes reporting status and required action plans. If ABHES determines that HCN’s response to the program-specific warning status is insufficient, it could take action that could have an adverse impact on our results of operations, cash flow, and financial condition, including limiting program enrollment, suspending program enrollment and new starts until HCN meets terms and conditions established by ABHES, or withdraw approval for one or more programs. HCN is also required to disclose the program-specific warnings to current and prospective students, which could adversely affect HCN’s reputation and enrollments.

If our institutions fail to maintain state authorization in the states where they are physically located, the institutions would lose their ability to grant degrees and other credentials in that state and to participate in Title IV programs and DoD TA programs.

As discussed in “Business – Regulatory Environment – State Licensure/Authorization”, to participate in Title IV programs and TA, an institution must be legally authorized by the relevant education agency of the state in which its main campus is physically located.located, and, in the case of APUS, West Virginia. Loss of “home state” authorization by one of our institutions in the state in which its main campus is physically located would render that institution unable to participate in Title IV programs, and therefore also TA and VA, to operate in the state and grant credentials, and to maintain institutional accreditation. If one of our institutions were to lose state authorization as to a non-main campus location, it would be unable to award Title IV aid to students at that location, and it would be unable to operate at that location.

Various states impose regulatory requirements on educational institutions operating within their boundaries, including registration requirements applicable to online education institutions that have no physical location or other presence in the state but offer educational services to students who reside in the state or advertise to or recruit prospective students in the state. As described more fully in “Business – Regulatory Environment – State Authorization/Licensure”, APUS and RU must comply with the requirements of California, which is the only state that does not participate in State Agency Reciprocity Agreement, or SARA, and APUS, RU, and HCN must comply with SARA,SARA with regard to the interstate offering of postsecondary distance education and online education. Those requirements may change from time to time and, in some instances, are ambiguous or are left to the interpretative discretion of state regulators. Changes in requirements to participate in SARA, including those approved by SARA’s coordinating entity, the board of directors of NC-SARA in October 2024, or changes to state laws and regulations and the interpretation of those laws and regulations may limit our ability to participate in the reciprocity agreements, offer education programs and award degrees. If one of our institutions were to fail to comply with such requirements, the institution could lose its ability to participate in SARA or may be subject to the loss of state licensure or authorization to provide distance education. If one of our institutions were to fail to comply with state requirements to obtain licensure or authorization, it could also be subject to injunctive actions or penalties. We cannot predict the extent to which states will retain membership in SARA, the manner in which SARA’s rules may be modified, interpreted, and enforced, our institutions’ ability to comply with SARA’s requirements and retain eligibility, or the impact that failure to meet the SARA requirements may have on our business.

As more fully described in “Business – Regulatory Environment – Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Eligibility and Certification Procedures”, APUS, RURU, and HCN must periodically seek recertification from ED,ED to continue participation in Title IV programs, and ED may review our institutions’ eligibility and certification to participate in Title IV programs, or the scope thereof. However, also as described in the foregoing section, ED must in some cases provisionally certify an institution, which imposes additional conditions on the institution’s receipt of Title IV funds. For example, APUS and RU are currently provisionally certified with ED.

You should read the following discussion together with the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K, or this Annual Report. This discussion contains forward-looking statements that are based on management’s current expectations, estimates, and projections about our business and operations, and involves risks and uncertainties. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those we discuss under “Risk Factors”, “Special Note Regarding Forward-Looking Statements”, and elsewhere in this Annual Report. For a discussion of our financial condition and results of operations for 20232024 compared to 2022,2023, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 5,6, 2024,2025, which discussion is incorporated in this Annual Report by reference and which is available free of charge on the SECs website at www.sec.gov.

We are a provider of online and campus-based postsecondary education to approximately 106,700108,600 students, and career learning to approximately 24,600 individuals,students through fourthree subsidiary institutions, American Public University System, or APUS, Rasmussen University, or RU, and Hondros College of Nursing, or HCN, and Graduate School USA, or GSUSA.HCN. Our subsidiary institutions offer purpose-built education programs and career learning designed to prepare individuals for productive contributions to their professions and society, and to offer opportunities designed to advance students in their current professions or to help them prepare for their next career. Our subsidiary institutions are licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent the institutions believe such licenses or authorizations are required,required and APUS, RU, and HCN are certified by the Department of Education, or ED to participate in Title IV programs. Additional information regarding our subsidiary institutions and their regulation is included in the “Business” section of this Annual Report.

Our revenue is largely driven by the number of students enrolled at our institutions, the number of and types of courses that students take, student payor source, and the mix of programs students attend. Our consolidated revenue in 20242025 was $624.6$648.9 million, representing a $24.0$24.3 million, or 4.0%,3.9%, increase from $600.5$624.6 million in 2023.2024. This includes revenue from GSUSA through July 25, 2025, or the GSUSA Sale Date. A significant portion of our revenue comes from our institutions’ participation in Title IV programs, and APUS’s participation in the DepartmentDoD of Defense, or DoD, tuition assistance, or TA,TA programs, and otherVA governmenteducation programs, and this creates significant risks to our operations.

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

On January 28, 2025, we announced ourthe planplanned tocombination combineof APUS, RU, and HCN into one consolidated HLC-accredited institution that will be a university system encompassing all APUS, RU, and HCN programs, campuses, and operations,HCN, or the Combination.Combination, Thewhich will result in a combined institution will be named American Public University System,System or the Combined Institution. As a resultcomprised of the Combination, the Combined Institution will have two divisions, tentativelydivisions named (i) APUSAPU Global, comprised of American Military UniversityAMU and American Public University, or APU, and (ii) Rasmussen,RU Health+, comprised of RU’s campus-based and online nursing programs, RU’s healthcare programs, HCN’s campus-based nursing and healthcare programs, and RU’s non-healthcare programs,programs. withThe finalCombination divisionconstitutes namesa Change of Control, Structure or Organization pursuant to beHLC determinedpolicy closerand, accordingly, we were required to closingobtain HLC approval prior to effectuating the Combination. In December 2024, APUS and RU jointly submitted an application for Change of Control, Structure or Organization to HLC. Subsequently, ED informed us that we would need to follow a different process to implement the Combination that entails two steps instead of one: (i) merger of the Combination.legal Theentities structurethat willown allowand eachoperate institutionAPUS, toRU, continueand toHCN, servewith itsthe particularAPUS studententity populationssurviving whilefollowing benefitingthe frommerger, beingand part(ii) combination of a single university system. The structure is designed to leverage each institution’s strengths to focus our efforts on supporting the military and veterans and expanding our nursing and healthcare platforms to better serve our students. We believe combining our subsidiary institutions into one HLC-accredited institution. As a singleresult universityof systemthis process change, HLC required APUS and RU to submit a new joint application for Change of Control, Structure or Organization to HLC in September 2025 containing substantially the same information that had been submitted previously and reflecting the two-step process. In February 2026, HLC approved the continuation of accreditation of APUS and RU after the legal entity merger with an acknowledgment that the intent is to eventually consolidate the three institutions into one HLC accreditation. ABHES has also informed HCN that it will strengthencontinue HCN’s ABHES accreditation after the financiallegal positionentity merger. On March 2, 2026, we completed the merger of ourthe Companylegal asentities athat whole,own enableand usoperate APUS, RU, and HCN with the APUS entity surviving the merger, and subsequently notified ED that the merger occurred and resulted in RU and HCN being directly owned by the same legal entity that directly owns APUS. We currently expect to operate with greater efficiency, and facilitate innovation acrosscomplete the Companyimplementation throughof morestep directtwo collaboration among the educational divisions. We anticipate completingof the Combination in the third quarter of 20252026, subject to obtaining required approvals and ED taking related actions.approvals. We anticipatewill evaluate changes to our segment reporting,reporting combiningas oura HCNresult Segmentof withthe our RU Segment.Combination. For the yearyears ended December 31, 2024, and 2025, we incurred approximately$2.2 $2.2million and $3.5 million in professional feesfees, respectively, and we expect to incur between approximately $3.0$2.0 million and $5.0$4.0 million in professional fees in 20252026 to complete the Combination. See the Risk Factor with the caption beginning “The planned combination of APUS, RU, and HCN …” and “Business – Regulatory Environment – Accreditation – Institutional Accreditation – The Planned Combination of APUS, RU, and HCN” for more information.

Student Body. At APUS,APUS and for RU programs excluding pre-licensure nursing and allied health programs, all coursework is delivered online. As of December 31, 2024,2025, approximately 65%62% of APUS’s students self-reported that they served in the military on active duty at the time of initial enrollment, and as a result APUS is particularly reliant on TA programs, and the DoD budget. At APUS, active-duty military students generally take fewer courses per year on average than non-military students and have a lower revenue per net course registration than students utilizing other funding sources. A significant portion of APUS’s registrations is also attributable to students using Department of Veterans Affairs, or VA education benefits, and funds from Title IV programs. RU nursing students and HCN students generally attend classes at physical campuses and use Title IV program funds. At APUS and for RU programs outside pre-licensure nursing and allied health, all coursework is delivered online. For the fiscal year ended December 31, 2024,2025, 37%39% of RU students were enrolled in nursing programs, 26% in health sciences programs, 17%15% in business programs, with the remainder of students in education, technology, design and justice studies programs. For the fiscal year ended December 31, 2024,2025, approximately 65%67% of HCN students were enrolled in the Practical Nursing, or PN program, while 35%32% were enrolled in the Associate Degree in Nursing, or ADN program.

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

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

Tuition Increases. Providing affordable degree and certificate programs is an important element of our competitive strategy. As more fully described in “Business – Our Institutions and Operations – Our Institutions – Accreditation – Affordability and Cost of Attendance”, certain of our institutions implemented tuition and fee increases in 20232023, 2024, and 2024.2025. Even with these increases, tuition and fees at our institutions are designed to be affordable and competitive when compared to the tuition and fees at similar institutions offering the same level of flexibility, accessibility, and student experience.

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

•improvingcontinuing to improve our RU Segment enrollment, financial results, and NCLEX pass rates, and stabilizing enrollmentrates;

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

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

Changes and upgrades to our information technology systems have resulted and may continue to result in our incurring significant costs, including in the short term, and carry risk to our operations and financial results. InFor 2022, we incurred approximately $3.2 millionexample, in information technology costs in our APUS Segment related to our multi-year technology transformation program. In early 2023, we launched a new native mobile application to improve the student experience at APUS. In 2024, we completed the consolidation of APUS’s customer relationship management systems onto a single platform.platform Weand alsoannounced havethe severalplan otherto systemsexpand APU to become a global digital university that supportintegrates theemerging student experience, financial aid processing, financial management, human resources processes, marketing,technology and decisionenhanced support.teaching and learning opportunities for faculty and students.

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

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

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

“90/10 Rule” Compliance and Delayed Billing. For fiscal years beginning on or after January 1, 2023, which for our institutions means the year ended December 31, 2023, federal educational assistance funds used to calculate the “90%” side of the ratio include Title IV fundsfunds, and all other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal educational assistance funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges. The 90/10 Rule no longer permits institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio. Effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio, and our institutions’ 90/10 Rule percentages increased, particularly at APUS. In addition, on July 7, 2025, ED issued an interpretative rule that specifies that for-profit schools will be allowed to count non-federal funds generated from programs offered entirely through distance education, if such programs satisfy certain criteria, as non-federal revenue in their 90/10 calculations, and may revise 90/10 Rule calculations for prior fiscal years to include revenue from distance education programs in the “10%” side of the ratio. While each of our institutions was in compliance with the 90/10 Rule for 2024,2025, with APUS’s relevant percentage for 20242025 being 89%, there is no assurance that we will continue to be able to comply in future years, particularly at APUS.APUS, including following the Combination.

As a result of the problems with TA discussed in further detail in the Risk Factor that begins “Our student registrations, revenue, and cash flow have been adversely impacted...”, approximately $18.4 million in cash payments from the Army to APUS that were expected to be received in 2021 and 2022 were received in 2023. ThisThis, together with the January 1, 2023, change to the 90/10 Rule and enrollment growth among service members as compared to declines in students who use non-federal educational assistance fundsfunds, caused APUS’s 90/10 Rule percentage to increase.

In September 2023, APUS changed its approach to invoicing for TATA, to offset the effect of the receipt of the delayed payments from the Army. APUS tooktaking longer to bill TA, which had the effect of delaying into 2024 payments forfrom TA2023 thatto ordinarily2024. wouldDue haveto been received in 2023. APUS’sthis change in billingthe approach resultedto invoicing TA in the fourth quarter of 2023, in 2024 APUS collected approximately $22.1 million offrom receivablesTA that we would have expectedrelated to receiveperiods inprior 2023 being received into 2024. The change in billing approach positively impacted the “90%” side of the ratio in 2023. In January 2024, APUS separately revised its billing policy for students utilizing TA from two weeks to five weeks after course start date to nine weeks after the course start date. The change in billing approach positively impacted the “90%” side of the ratio in 2024.

In December 2024, APUS implemented another change to its approach to invoicing for TA, delaying into 2025 payments for TA that ordinarily would have been received in 2024. We estimate that APUS’sThe change in billing approach resulted in approximately $26.4 million of receivables that we would have expected to receive in 2024 being received in 2025. While the change in billing approach positively impacted the “90%” side of the ratio in 2024, it reduced operating cash flow in 2024, may result in increased bad debt expense in 2025, and may cause the “90%” side of the ratio to increase in 2025 or future years, which could have an adverse impact on our cash flow and results of operations, as well as APUS’s ability to comply with the 90/10 Rule in 20252026, orincluding futureand years.following the Combination. The change in billing practice added to our accounts receivable as of December 31, 2024,2025, and resulted in an increase to our leverage ratiosratio as of December 31, 2024,2025, under our Credit Agreement and the purchase agreement for the shares of Series A Senior Preferred Stock as furtherdefined and discussed in “NoteFinancial 9. Long-Term Debt”Statements and “NoteSupplementary 13.Data Preferred– Stock”Notes included in theto Consolidated Financial Statements in– thisNote Annual9. Report.Long-term Debt”.

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

Tuition rate. Providing affordable degree and certificate programs is an important element of our competitive strategy. APUS implemented modest tuition and fee increases for non-military and veteran students in the second and third quarters of 2023. In April 2024, APUS implemented an additional tuition increase to master’s level students across all categories, including military, non-military and veteran students, and in September 2024, APUS returned the military rate for master’s level students to the $250 per credit hour rate in effect prior to the April 2024 tuition increase. In February 2026 APUS implemented modest tuition increases for all nonmilitary undergraduate and graduate students. We believe that APUS’s tuition and fees remain lower than the average in-state cost at public universities. RU implemented modest tuition increases for all students in select programs in the first quarters of 2023 and 20242024, for new students forin select programs in August 2024, and for returning students forin select programs in October 2024. RU implemented modest tuition increases for new and re-entering students in August 2025. RU implemented modest increases for current students in non-prelicensure nursing programs in October 2025 and implemented a modest tuition increase for prelicensure nursing program students in January 2026. In October 2026, RU plans to implement a modest tuition increase for all students. HCN implemented a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs.programs, In the third quarter of 2025, RU plans to implement a tuition increase, similar to the increase implementedand in theOctober third2025 for its ADN and fourthPN quarters of 2024.programs. The tuition and fee increases at RU and HCN are intended to reflect adjustments to be consistent with the local campus markets. Even with these increases, RU and HCN’s tuition and fees are designed to be affordable and competitive when compared to the tuition and fees at similar institutions offering the same level of flexibility, accessibility, and student experience.

Other fees. In addition to tuition, prior to the second quarter of 2023, APUS charged a technology fee of $65 per course to all non-military students. In the second quarter of 2023, the technology fee increased to $85 per course, and in the third quarter of 2023 the technology fee per course was eliminated for all undergraduate students. APUS students are also charged certain additional fees, such as graduation, late registration, transcript request, and comprehensive examination fees, when applicable. APUS provides an APUS-funded grant to cover the technology fee for certain students. Technology fee revenue net of technology fee grants was approximately $7.3 million in 2022, $8.1 million in 2023, and $4.7 million in 2024, and $5.0 million in 2025, or 2.6%, 2.7%, 1.5%, and 1.5%1.6% of APUS revenue, respectively.

RU and HCN students are charged fees for various items such as applications, testing, books and supplies, laboratory work, technology, and graduation. For example, RU charges a course technology and resource fee of $195$200 per course and a one-time administrative fee for certain programs, up to $495, for all new, reentering, and program transfer students. In addition, RU students may purchase required textbooks or e-books through RU for a flat fee of $15 for each textbook (traditional or e-book) for each course. HCN charges an application fee of $25, an enrollment fee of $50, as well as other fees for books and technology that vary by program. Textbook and other course materials revenue for RU and HCN was approximately $49.6 million in 2022, $43.3 million in 2023, and $45.7 million in 2024, and $52.0 million in 2025, or 16.5%, 16.0%, 16.1%, and 16.1%16.2% of RU and HCN revenue, respectively.

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

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

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

For the year ended December 31, 2024,2025, our consolidated revenue was $624.6$648.9 million, an increase of $24.1$24.3 million, or 4.0%,3.9%, compared to $600.5$624.6 million in 2023.2024. The increase in revenue was primarily due to a $13.7$30.0 million, or 4.5%,13.9%, increase in revenue in our APUSRU Segment, a $10.4$7.7 million, or 18.2%,11.4%, increase in revenue in our HCN Segment, and a $2.2$2.8 million, or 1.0%,0.9%, increase in revenue in our RUAPUS Segment, partially offset by a $2.0$16.3 million, or 7.5%,67.1%, decrease in GSUSA revenue included in Corporate and Other.Other for the period prior to the GSUSA Sale Date.

The increase in APUS revenue was driven by an increase in net course registrations when compared to the prior year, and the impact of the 2024 tuition increases. APUS net course registrations increased approximately 2.9%0.7% to 378,400381,000 for the year ended December 31, 2024,2025, from approximately 367,600378,400 in the 20232024 period. The increase in net course registrations was primarily due to an increase in registrations by military-affiliated students utilizing VA.VA benefits, and an increase in students using financial aid, which was partially offset by a decrease in registrations from military students utilizing TA due to the government shutdown in the fourth quarter 2025. Net course registrations represent the total number of courses for which students remain enrolled after the date by which they may drop a course without financial penalty.

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,operations, financial condition, and liquidity could be harmed, the value of our securities could decline, and you could lose all or part of your investment. There have been no material changes in the risk factors set forth in the “Risk Factors” section of our Annual Report.

We are a provider of online and campus-based postsecondary education to approximately 108,900109,000 students through our subsidiary, American Public University System, Inc.Inc., which currently operates threeAmerican separatelyPublic accreditedUniversity institutions,System, APUS,or RU,the andSystem. HCN.The OurSystem institutions offeroffers purpose-built education programs designed to prepare individuals for productive contributions to their professions and society,society and opportunities designed to advance students in their current professions or to help them prepare for their next career. OurThe institutionsSystem areis accredited and licensed or otherwise authorized by state authorities to offer postsecondary education programs to the extent theit institution believebelieves such licenses or authorizations are required and are certified by ED to participate in Title IV programs.

In January 2025, we announced the plannedCombination, combinationa ofprocess ourthat threeafter institutions,two orsteps resulted in the Combination, which will result inSystem, a combined Higher Learning Commission-accredited institution named American Public University System.institution. Effective March 2, 2026, or the Merger Date, we completed the first step of the Combination, the merger of the legal entities that owned and operated our three institutions, with American Public University System, Inc. surviving the merger, or the Legal Merger, and we subsequently notified ED that the Legal Merger occurred. WeOn currentlyAugust expect4, 2026, ED approved, and we completed, the Combinationsecond tostep occur duringof the thirdCombination, quarterthe combination of 2026,APUS, subjectRU, toand obtainingHCN requiredinto approvals.one HLC-accredited institution, or the Institutional Combination.

•Military+, Segment, which was formerly the APUS Segment, provides online postsecondary education to approximately 89,50089,400 adult learners, directed primarily at the needs of the military, veterans, extended military and veteran families, and other public service and service-minded communities through APUS, which operates through two brands: American Military University, and American Public University. As of MarchJune 31,30, 2026, approximately 62% of Military+ Segment students self-reported that they served in the military on active duty at the time of initial enrollment.

•Health+, Segment, consisting of the businesses that formerly comprised the RU Segment and the HCN Segment, provides nursing- and health sciences-focused and other postsecondary education, including business, technology, and education. Health+ Segment provides these education services to approximately 19,40019,600 students at 27 campuses in eight states and online (excluding one campus plannedbeing toclosed closeas duringof July 31, 2026) through RU and HCN. As of MarchJune 31,30, 2026, on-ground enrollment was approximately 11,000,11,100, and online enrollment was approximately 8,4008,500 students.

The Planned Combination of APUS, RU, and HCN

We were required to obtain HLC approval prior to effectuating the Combination, and pursuant to ED’s requirements, are pursuingundertook the Combination in two steps: (i) the Legal Merger and (ii) combination of APUS, RU, and HCN into one HLC-accredited institution, or the Institutional Combination. In February 2026, HLC approved the continuation of accreditation of APUS and RU after the Legal Merger with an acknowledgment that the intent is to consolidate the three institutions into one HLC accreditation. On April 28, 2026, HLC approved the continuation of accreditation after the Institutional Combination.Combination, and on June 12, 2026, HLC reaffirmed that approval. HLC has scheduled a site visit in August 2026 in connection with the Legal Merger. WeOn currentlyAugust expect4, to2026, completeED implementationapproved, ofand we completed, the Institutional Combination in the third quarter of 2026, subject to obtaining required approvals from ED and state agencies.Combination. For additional details regarding regulatory treatment of the Combination, see the Regulatory Environment in our Annual Report captioned “Regulatory Environment – Accreditation – Institutional Accreditation” and “Regulatory Environment – Accreditation – The Planned Combination of APUS, RU, and HCN”, and for additional information regarding risks related to the Combination, see the Risk Factor in our Annual Report with the caption beginning “The planned combination of APUS, RU, and HCN...”.

Between May 1, 2026 and July 31, 2026, our institutions received 69 BDTR claims from ED, seeking in the aggregate a discharge of approximately $1.5 million in loans. Each of our institutions disputes the validity of these claims and has filed responses to them with ED. We are unable to predict whether ED will grant BDTR relief for the claims, or if so, whether it will seek recoupment from our institutions. For additional information regarding risks related to BDTR claims, see the Risk Factor in our Annual Report captioned “ED rules related to BDTR claims may create significant liability that could have an adverse effect on our business and results of operations”.

Consolidated revenue for the three months ended June 30, 2026, increased to $171.7 million from $162.8 million, or by 5.5%, as compared to the prior year period. The growth was primarily driven by increased enrollment in our Health+ Segment and higher net course registrations in our Military+ Segment, partially offset by the absence of revenue from GSUSA due to its sale in July 2025. Our net income for the three months ended MarchJune 31,30, 2026, was $17.7$9.8 million, compared to $8.9$4.5 million in the prior year period, an increase of $8.8$5.3 million. The increase in net income for the three months ended MarchJune 31,30, 2026, was primarily related to the increase in revenue of $10.2$8.9 million, partially offset by an increase in operating expenses of $2.5 million, as compared to the prior year period, partially offset by the extinguishment of debt recognized in the three months ended March 31, 2026 of $1.7 million.period. Our operating margin improved to 12.4%7.9% for the three months ended MarchJune 31,30, 2026, as compared to 7.4%4.3% in the prior year period.

Military+ segmentSegment net course registrations for the three months ended MarchJune 31,30, 2026, increased to approximately 106,60098,300 from approximately 102,500,96,400, an increase of 4,100,1,900, or 4.0%,2.0%, as compared to the prior year period. Military+ segmentSegment revenue for the three months ended MarchJune 31,30, 2026, increased to $89.4$85.5 million from $83.9$81.7 million, or by 6.5%,4.7%, as compared to the prior year period. Military+ segmentSegment net course registrations for the six months ended June 30, 2026, increased to approximately 204,900 from approximately 198,900, an increase of 6,000, or 3.0%, as compared to the prior year period. Military+ Segment revenue for the six months ended June 30, 2026, increased to $175.0 million from $165.7 million, or by 5.6%, as compared to the prior year period. Military+ Segment operating margin increased to 34.3%27.7% for the three months ended MarchJune 31,30, 2026, from 28.7%26.2% in the prior year period, and increased to 31.1% for the six months ended June 30, 2026, from 27.5% in the prior year period.

Health+ segmentSegment total enrollment for the three months ended MarchJune 31,30, 2026, increased to approximately 19,40019,600 from approximately 18,000,18,300, an increase of 1,400,1,300, or 7.8%,6.6%, as compared to the prior year period. Health+ segmentSegment revenue for the three months ended MarchJune 31,30, 2026, increased to $85.4$86.2 million from $76.9$77.7 million, or by 11.0%, as compared to the prior year period. Health+ segmentSegment total enrollment for the six months ended June 30, 2026, increased approximately 7.0%, as compared to the prior year period. Health+ Segment revenue for the six months ended June 30, 2026, increased to $171.6 million from $154.6 million, or by 11.0%, as compared to the prior year period. Health+ Segment operating margin improved to 0.6%0.4% for the three months ended MarchJune 31,30, 2026, from negative 1.1%3.1% in the prior year period, and increased to 0.5% for the six months ended June 30, 2026, from negative 2.1% in the prior year period.

Our financial results for the three and six months ended MarchJune 31,30, 2025, reflect the financial results of GSUSA in Corporate and Other.

We estimate fair value in our quantitative analysis by weighting the results from two different valuation approaches. They are: (i) discounted cash flow and (ii) guideline public company. Under the discounted cash flow method, we determined fair value by discounting the estimated future cash flows of RUour andHealth+ HCNSegment, at their estimated weighted-average cost of capital. We incorporate the use of projected financial information and a discount rate that are developed using market participant-based assumptions. The cash-flow projections are based on three-year financial forecasts developed by management that include revenue projections, capital spending trends, and investment in working capital to support anticipated revenue growth, which are updated at least annually and approved by management. Under the guideline public company method, we used pricing multiples from other public companies in the public higher education market to determine the fair value of RUthe andreporting HCN.unit. Values derived under the two valuation methods are then weighted to estimate RUthe andreporting HCN’sunit enterprise values.value. If we determine that the carrying amount of a reporting unit exceeds its fair value, we then calculate the implied fair value of the reporting unit goodwill as compared to its carrying amount to determine the appropriate impairment charge. Although we believe our assumptions are reasonable, actual results may vary significantly and may expose us to material impairment charges in the future. Our methodology for determining fair values remained consistent for the periods presented.

Below we have included a discussion of our operating results and material changes in our operating results during the three and six months ended MarchJune 31,30, 2026, compared to the three and six months ended MarchJune 31,30, 2025. 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.

Military+ Segment net course registrations for the three months ended MarchJune 31,30, 2026, increased to approximately 106,60098,300 from approximately 102,500,96,400, an increase of 4,100,1,900, or 4.0%,2.0%, as compared to the prior year period primarily due to increases in military registrations from students utilizing TA and financial aid. Military+ Segment net course registrations for the six months ended June 30, 2026, increased to approximately 204,900 from approximately 198,900, an increase of 6,000, or 3.0%, as compared to the prior year period primarily due to increases in military registrations from students utilizing TA, financial aid, and military-affiliated students utilizing education benefit programs administered by the U.S. Department of Veterans Affairs, or VA. Military+ operatingOperating margin increased to 34.3%27.7% for the three months ended MarchJune 31,30, 2026, from 28.7%26.2% in the prior year period and increased to 31.1% for the six months ended June 30, 2026, from 27.5% in the prior year period. Operating margin for the three months ended MarchJune 31,30, 2026, increased primarily due to the $5.5$3.8 million increase in revenue and a $1.5$0.8 million decrease in lossemployee oncompensation assets held for sale,costs, partially offset by a $1.3$2.0 million increase in advertising costs, as compared to the prior year period. Operating margin for the six months ended June 30, 2026, increased primarily due to the $9.3 million increase in revenue, a $1.5 million decrease in loss on assets held for sale, and a $0.8 million decrease in employee compensation costs, partially offset by increases of $3.3 million in advertising costs and $1.2 million in bad debt expense, as compared to the prior year period.

Health+ Segment total enrollment for the three months ended MarchJune 31,30, 2026, increased to approximately 19,40019,600 from approximately 18,000,18,300, an increase of 1,400,1,300, or 7.8%,6.6%, as compared to the prior year period, driven by an 9.2% increase in on-ground enrollment and a 3.4% increase in online enrollment. Health+ Segment total enrollment for the six months ended June 30, 2026, increased approximately 7.0%, as compared to the prior year period, driven by a 10.0%9.0% increase in on-ground enrollment,enrollment and a 5.0%4.6% increase in online enrollment. Health+ Segment operating margin improved to 0.6%0.4% for the three months ended MarchJune 31,30, 2026, from negative 1.1%,3.1%, in the prior year period. The improvement in the operating margin for the three months ended MarchJune 31,30, 2026, was primarily due to the $8.4$8.6 million revenue increase, partially offset by increases of $2.8$3.1 million in advertising costs, $1.4 million in employee compensation costs, and $1.0 million in information technology costs, as compared to the prior year period. Health+ Segment operating margin improved to 0.5% for the six months ended June 30, 2026, from negative 2.1%, in the prior year period. The improvement in the operating margin for the six months ended June 30, 2026, was primarily due to the $17.0 million revenue increase, partially offset by increases of $4.9 million in advertising costs, $3.2 million in classroom and course materials costs, $1.9 million in advertising costs, $1.3$2.7 million in employee compensation costs, and $0.8$1.4 million in bad debt expense, and $1.3 million in technology costs, as compared to the prior year period.

Three Months Ended MarchJune 31,30, 2026, Compared to Three Months Ended MarchJune 31,30, 2025

Revenue. Our consolidated revenue for the three months ended MarchJune 31,30, 2026, was $174.7$171.7 million, an increase of $10.2$8.9 million, or 6.2%,5.5%, compared to $164.6$162.8 million for the three months ended MarchJune 31,30, 2025. Revenue increased primarily due to an $8.4$8.6 million, or 11.0%, increase in revenue in our Health+ segment,Segment, and a $5.5$3.8 million, or 6.5%,4.7%, increase in revenue in our Military+ segment,Segment, partially offset by a $3.7$3.4 million decrease in GSUSA revenue included in Corporate and Other for the period prior to the GSUSA Sale Date. Our Health+ segmentSegment revenue increase was primarily due to a 7.8%6.6% increase in total student enrollment and the impact of tuition increases in the second half of 2025. Our Military+ segmentSegment revenue increase was primarily due to a 4.0%2.0% increase in net course registrations, as compared to the prior year period.

Costs and expenses. Costs and expenses for the three months ended MarchJune 31,30, 2026, were $153.1$158.2 million, an increase of $0.8$2.5 million, or 0.5%,1.6%, compared to $152.3$155.7 million for the three months ended MarchJune 31,30, 2025. Costs and expenses for the three months ended MarchJune 31,30, 2026, include $0.9 million in professional fees related to the Combination in Corporate and Other. The results in the prior year period included a $1.5 million loss on assets held for sale in our Military+ segment and $1.0$1.7 million in professional fees in Corporate and Other relating to the Combination.Combination and the sale of GSUSA. Costs and expenses for the three months ended MarchJune 31,30, 2026, as compared to the prior year period, excluding the items noted above, increased $2.4$3.3 million, or 1.6%,2.1%, primarily due to increases of $2.9$5.1 million in advertising costs,costs $2.7to drive increases in registrations and enrollment, $1.3 million in classroomtechnology costs, and course materials costs due to increased vendor costs and enrollment, and $1.3$1.2 million in bad debt expense, partially offset by decreasesa decrease of $1.6$6.0 million in employee compensation costs, $1.6 million in occupancy costs,Corporate and $0.7Other million in information technology costs relateddue to ourthe ongoingsale effortsof to reduce operating costs.GSUSA. Costs and expenses as a percentage of revenue decreased to 87.6%92.1% for the three months ended MarchJune 31,30, 2026, from 92.6%95.7% for the three months ended MarchJune 31,30, 2025.

Instructional costs and services expenses. Our instructional costs and services expenses for the three months ended MarchJune 31,30, 2026, were $74.6$76.6 million, a decrease of $0.3$1.8 million, or 0.4%,2.3%, compared to $74.9$78.4 million for the three months ended MarchJune 31,30, 2025. Instructional costs and services expenses decreased primarily due to the $3.2$3.0 million decrease in Corporate and Other due to the sale of GSUSA, and a $0.9$1.4 million decrease in employee compensation costs in our Military+ segment,Segment andprimarily due to a $0.5 million decreasechange in occupancyits costspart-time infaculty ourcompensation Health+ segment related to campus and office space closures in 2025,plan, partially offset by increases of $2.8$1.5 million in employee compensation costs and $0.4 million in classroom and course material costs duein our Health+ Segment related to increased vendor costs and enrollment, and $1.4$0.5 million in employeeinformation compensationtechnology costs in our Health+ segment related to increased enrollment.Segment. Instructional costs and services expenses as a percentage of revenue decreased to 42.7%44.6% for the three months ended MarchJune 31,30, 2026, from 45.5%48.2% for the three months ended MarchJune 31,30, 2025.

Selling and promotional expenses. Our selling and promotional expenses for the three months ended MarchJune 31,30, 2026, were $37.9$40.1 million, an increase of $2.7$5.1 million, or 7.6%,14.5%, compared to $35.2$35.0 million for the three months ended MarchJune 31,30, 2025. Selling and promotional expenses increased primarily due to an aggregate increase of $3.1$5.1 million in advertising costs across both segments to further drive enrollment, partially offset by a decrease of $1.1 million in Corporate and Other due to the sale of GSUSA.enrollment. Selling and promotional expenses as a percentage of revenue increased to 21.7%23.4% for the three months ended MarchJune 31,30, 2026, from 21.4%21.5% for the three months ended MarchJune 31,30, 2025.

General and administrative expenses. Our general and administrative expenses for the three months ended MarchJune 31,30, 2026, were $36.3$37.5 million, a decrease of $0.1$0.7 million, or 0.3%,1.7%, compared to $36.4$38.1 million for the three months ended MarchJune 31,30, 2025. For the three months ended MarchJune 31,30, 2026 and 2025, general and administrative expenses included $0.9 million and $1.0$1.4 million, respectively, in professional fees relating to the Combination in Corporate and Other. General and administrative expenses decreased primarily due to a $1.6$1.9 million decrease in Corporate and Other due to the sale of GSUSA, partially offset by a $1.4$1.2 million increase in bad debt expense in both segments. Consolidated bad debt expense for the three months ended MarchJune 31,30, 2026, was $6.3$5.9 million, or 3.6%3.4% of revenue, compared to $5.0$4.8 million, or 3.0% of revenue in the prior year period. General and administrative expenses as a percentage of revenue decreased to 20.8%21.8% for the three months ended MarchJune 31,30, 2026, from 22.1%23.4% for the three months ended MarchJune 31,30, 2025. As we continue to evaluate enhancements to our business capabilities, we may incur additional costs, and our general and administrative expenses will vary from time to time.

Depreciation and amortization expenses. Depreciation and amortization expenses were $4.2$4.0 million for the three months ended MarchJune 31,30, 2026, compared to $4.0$4.1 million in the prior year period, a decrease of $0.2$0.1 million. Depreciation and amortization expenses as a percentage of revenue were 2.4%2.3% and 2.5% for the three months ended MarchJune 31,30, 2026, and 2025, respectively.

Stock-based compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $2.3$2.2 million for each of the three months ended MarchJune 31,30, 2026, and 2025.2025, respectively. Stock-based compensation costs included accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Interest expense,income (expense), net. Interest expense,income, net of interest expense and other income, was $0.7 million and $0.9$0.6 million for the three months ended MarchJune 31,30, 2026, andcompared 2025, respectively. Netto interest expenseexpense, net of interest income and other income of $1.1 million, in the prior year period. The increase in net interest income in the three months ended MarchJune 31,30, 2026, as compared to the prior year period, decreasedwas primarily due to a decrease in interest expense due to the refinance of corporate debt and thean decreaseincrease in marketinterest ratesincome paidearned inon investment securities, for the comparable periods.

Income tax expense. We recognized income tax expense of $1.5$4.4 million and $2.5$1.4 million for the three months ended MarchJune 31,30, 2026, and 2025, respectively, or an effective tax rate of 7.9%31.0% in 2026 and 21.7%24.0% in 2025. The effective tax rate in both periods2026 was positively impacted by excesshigher taxnon-deductible benefitsexpenses, relatedwhen to stock compensation as the first quarter typically includes the majority of annual vested stock awards. The impact on the first quarter of 2026 was more significant due to the increase in share price, in comparisoncompared to the prior period.

Net income. Our net income was $17.7$9.8 million and $8.9$4.5 million for the three months ended MarchJune 31,30, 2026, and 2025, respectively, an increase of $8.8$5.3 million. This increase was due to the factors discussed above.

Preferred stock dividends. There were no preferred stock dividends for the three months ended MarchJune 31,30, 2026 due to the redemption of all outstanding shares of our Series A Senior Preferred Stock in June 2025. Preferred stock dividends for the three months ended MarchJune 31,30, 2025 were $1.4$1.3 million.

Net income (loss) available to common stockholders. The net income available to common stockholders was $17.7$9.8 million for the three months ended MarchJune 31,30, 2026, compared to a net incomeloss available to common stockholders of $7.5$0.3 million for the three months ended MarchJune 31,30, 2025, an improvement of $10.3$10.1 million. This improvement was due to the factors discussed above.