American Public Education, Inc.

Company Overview

Business Model: American Public Education, Inc. (APEI) provides online and campus-based postsecondary education through its subsidiary institutions: American Public University System (APUS), Rasmussen University (RU), and Hondros College of Nursing (HCN). The institutions offer purpose-built education programs designed to prepare individuals for professional contributions and career advancement. APEI operates a shared services model for certain business functions across its institutions.

Market Position: APEI serves approximately 108,600 students. APUS is a leading educator of active-duty military and veterans, with approximately 62% of its students self-reporting active military duty at initial enrollment and 15% as military veterans as of December 31, 2025. RU and HCN are national leaders in pre-licensure nursing education, collectively training over 10,200 nursing students across 26 campuses and online, with over 90% pursuing pre-licensure Diploma in Practical Nursing, Associate Degree in Nursing, or post-licensure Bachelor of Science in Nursing degrees. The company emphasizes affordability, relevant offerings aligned with demand, and flexible program offerings.

Recent Strategic Developments:

• Planned Combination of APUS, RU, and HCN: In January 2025, APEI announced the planned combination of APUS, RU, and HCN into a single institution named American Public University System, comprising two divisions: APU Global (APUS brands) and RU Health+ (RU and HCN nursing/healthcare programs, and RU's non-healthcare programs). The legal entity merger was completed on March 2, 2026, with the APUS entity surviving. The full institutional combination is expected to be completed in the third quarter of 2026, subject to regulatory approvals.
• U.S. Federal Government Shutdown Impact: A U.S. federal government shutdown from October 1 to November 12, 2025, temporarily suspended Department of Defense (DoD) Tuition Assistance (TA) programs, leading to a decrease of approximately 20,600 APUS TA course registrations in the fourth quarter of 2025 compared to the prior year.
• 90/10 Rule Compliance Focus: APEI maintained a sustained focus on the "90/10 Rule" in 2025, with all institutions in compliance. APUS's relevant percentage for 2025 was 89%. Changes in TA billing practices were implemented to manage compliance, potentially delaying $34.1 million in receivables from 2025 to 2026.
• Tuition Increases: In August and October 2025, RU implemented modest tuition increases for new, reentering, and current non-prelicensure nursing students. HCN implemented a 5% tuition and fee increase in October 2025 for its Associate Degree in Nursing and Diploma in Practical Nursing programs. APUS implemented a modest tuition increase for non-military undergraduate and graduate students in February 2026.
• Campus Consolidations and Closures: RU closed its Green Bay, Wisconsin campus on December 31, 2025, and intends to close its Wausau, Wisconsin campus on December 31, 2026.
• Preferred Stock Redemption: On June 23, 2025, APEI redeemed all 400 outstanding shares of Series A Senior Preferred Stock for $43.1 million, excluding $1.4 million in unpaid and accrued dividends.
• Sale of Graduate School USA: On July 25, 2025, APEI completed the sale of its membership interest in Graduate School USA for $0.5 million.
• Reductions in Force: In November 2025, APEI completed a reduction in force, terminating approximately 40 non-faculty employees at APUS (representing approximately 6.5% of the APUS non-faculty workforce) due to the government shutdown. Separately, 19 information technology employees were terminated in the fourth quarter of 2025 as part of optimization efforts.

Geographic Footprint: APEI operates online and through 26 campuses across eight states. APUS is exclusively online, headquartered in Charles Town, West Virginia, and authorized in all 50 U.S. states and the District of Columbia. RU operates 18 campuses across five states (Florida, Illinois, Kansas, Minnesota, North Dakota) and online, headquartered in suburban Minneapolis, Minnesota. HCN operates eight campuses across three states (Ohio, Indiana, Michigan), headquartered in Westerville, Ohio.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 54.2%
• Operating Margin: 7.4%
• Net Margin: 4.9%

Investment in Growth:

• R&D Expenditure: Not explicitly stated as an expense. Software development and program development costs are capitalized.
• Capital Expenditures: $15.9 million
• Strategic Investments: APEI incurred $3.5 million in professional fees in 2025 related to the Combination of APUS, RU, and HCN.

Business Segment Analysis

American Public University System Segment

Financial Performance:

• Revenue: $319.8 million (+0.9% YoY)
• Operating Margin: 28.4%
• Key Growth Drivers: The increase in revenue was primarily attributable to a 0.7% increase in net course registrations to approximately 381,000 in 2025 compared to 378,400 in 2024, and the impact of 2024 tuition increases. Growth in registrations from military-affiliated students utilizing VA benefits and students using financial aid partially offset a decrease in registrations from military students utilizing TA due to the fourth quarter 2025 government shutdown.

Product Portfolio:

• APUS offers 133 degree programs and 98 certificate programs across five schools of study, with over 1,700 distinct courses available in either eight- or sixteen-week formats.
• Major product lines include military studies, national security, intelligence, homeland security, business, health science, information technology, justice studies, education, and liberal arts.
• New product launches or major updates: APUS offers 13 undergraduate and 11 graduate NanoCerts™ programs, which are micro-credentials comprising three academic courses. In April 2024, American Public University announced plans to expand into a global digital university integrating emerging technology and enhanced teaching/learning opportunities.

Market Dynamics:

• APUS primarily serves adult learners, with a significant focus on the military community (62% active duty, 15% veterans as of December 31, 2025).
• The average age of APUS students is 34, with approximately 88% enrolling with prior educational credits and 90% being working adults.
• APUS faces competition from other online institutions, colleges near military installations, and the U.S. Naval Community College, which APUS is not eligible to partner with due to its for-profit status.

Rasmussen University Segment

Financial Performance:

• Revenue: $246.2 million (+13.9% YoY)
• Operating Margin: 1.6% (improved from -10.1% in 2024)
• Key Growth Drivers: Revenue growth was driven by an 8.7% increase in total student enrollment in 2025 compared to 2024, including a 9.6% increase in online enrollment and a 7.7% increase in on-ground enrollment. This was supported by improvements in marketing and admissions efficiencies and increased student retention rates, partly due to course redesigns, and the impact of 2024 and 2025 tuition increases.

Product Portfolio:

• RU offers a comprehensive "ladder" of nursing degrees, including Diploma in Practical Nursing, Associate Degree in Nursing, Bachelor of Science in Nursing, post-licensure RN to BSN, Master of Science in Nursing, and Doctorate of Nursing Practice, plus a post-graduate nursing certificate.
• RU also offers over 60 programs across seven schools of study, including business, technology, and education.
• New product launches or major updates: In January 2025, RU implemented a contract with a third-party to provide nursing program curriculum upgrades, course materials, and testing services, including integrated NCLEX testing simulation and preparation tools.

Market Dynamics:

• RU serves approximately 15,900 students, with 80% over age 25 and 83% female.
• Approximately 6,200 students (over 90% of whom are in pre-licensure programs) were pursuing nursing degrees at RU as of December 31, 2025.
• RU's pre-licensure nursing programs compete locally with community colleges, public/private postsecondary institutions, and other career-focused nursing colleges. Post-licensure programs face broader online competition.
• RU closed its Green Bay, Wisconsin campus on December 31, 2025, and plans to close its Wausau, Wisconsin campus on December 31, 2026.

Hondros College of Nursing Segment

Financial Performance:

• Revenue: $75.0 million (+11.4% YoY)
• Operating Margin: -1.2% (improved from -1.6% in 2024)
• Key Growth Drivers: Revenue growth was primarily due to a 12.3% increase in student enrollment in 2025 compared to 2024, driven by continued enrollment growth across all campuses. The revenue increase for the year was less than the enrollment increase due to more students taking repeat courses, which have lower revenue per student.

Product Portfolio:

• HCN offers pre-licensure nursing programs: Diploma in Practical Nursing and Associate Degree in Nursing, including a Direct Entry ADN option for accelerated graduation.
• As of December 31, 2025, approximately 67% of HCN students were enrolled in a PN program and 32% in an ADN program.
• New product launches or major updates: HCN offers NCLEX fee vouchers and quarterly student workshops to prepare for the NCLEX exam.

Market Dynamics:

• HCN serves approximately 4,000 students, with an average age of 35 and 93% female.
• HCN's nursing programs compete locally with a mix of community colleges, public/private postsecondary institutions, and other career-focused nursing colleges.
• HCN's ADN program has been on provisional approval status in Ohio since March 2017 due to not meeting first-time NCLEX pass rate standards.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: No shares were repurchased during the three months ended December 31, 2025. For the full year 2025, APEI did not repurchase shares of common stock. In 2024, APEI repurchased 251,146 shares of common stock for $2.8 million. As of December 31, 2025, approximately $6.0 million remained available under the November 2023 purchase authorization. On March 10, 2026, the Board of Directors authorized a new common stock repurchase program of up to $50 million, replacing prior authorizations.
• Dividend Payments: $2.8 million in preferred stock dividends were paid in 2025, compared to $6.1 million in 2024. All Series A Senior Preferred Stock was redeemed in June 2025.
• Dividend Yield: Not applicable as common stock dividends have not historically been paid.
• Future Capital Return Commitments: A new common stock repurchase program of up to $50 million was authorized on March 10, 2026.

Balance Sheet Position:

• Cash and Equivalents: $174.1 million (unrestricted cash and cash equivalents as of December 31, 2025)
• Total Debt: $96.4 million (Term Loan outstanding as of December 31, 2025)
• Net Cash Position: $77.7 million (unrestricted cash and cash equivalents minus total debt as of December 31, 2025)
• Credit Rating: Not disclosed.
• Debt Maturity Profile: The $96.4 million Term Loan outstanding as of December 31, 2025, was scheduled to mature on September 1, 2027. (Subsequent Event: On March 9, 2026, APEI entered into a new Credit Agreement, refinancing the existing term loan with a $90.0 million term loan maturing March 9, 2031, and a $40.0 million revolving credit facility).

Cash Flow Generation:

• Operating Cash Flow: $62.0 million (2025)
• Free Cash Flow: $46.1 million (2025) (Operating Cash Flow of $62.0 million minus Capital Expenditures of $15.9 million)
• Cash Conversion Metrics: Accounts receivable increased by $5.3 million in 2025, primarily related to delayed billings in the APUS Segment.

Operational Excellence

Production & Service Model: APEI provides postsecondary education through three institutions: APUS (online), RU (campus-based and online), and HCN (campus-based with online courses). APEI operates a shared services model for certain business functions, aiming for efficient resource use. APUS offers online delivery with monthly starts and individualized academic support. RU offers a blend of in-person and online courses with flexible start dates. HCN offers on-campus and online instruction with daytime and evening/weekend options.

Supply Chain Architecture: Key Suppliers & Partners:

• Learning Management Systems: APUS and HCN use Brightspace by D2L. RU currently uses Blackboard Ultra, hosted by Anthology, but plans to transition to D2L in 2026.
• Integrated Curriculum & Testing Services: In January 2025, RU entered into a contract with a third-party to provide nursing program curriculum upgrades, course materials, and testing services.
• Information Technology Services: APEI utilizes third-party vendors for certain IT capabilities, including cloud computing and software-as-a-service. A managed service provider handles service desk, student support, end-user support, and network management/operations.

Facility Network:

• Manufacturing: Not applicable (education services).
• Research & Development: Not explicitly detailed as separate facilities, but APUS utilizes Industry Advisory Councils to evaluate its curriculum.
• Distribution:
  • APUS: Exclusively online, headquartered in Charles Town, West Virginia, with administrative facilities in Charles Town and Ranson, West Virginia (four owned facilities totaling approximately 60,000 square feet).
  • RU: 18 leased campuses across five states (totaling approximately 500,000 square feet combined). Closed Green Bay, Wisconsin campus (December 31, 2025), plans to close Wausau, Wisconsin campus (December 31, 2026).
  • HCN: 8 leased campuses across three states and a leased administrative office in suburban Columbus, Ohio (totaling approximately 228,000 square feet combined).

Operational Metrics:

• APUS Net Course Registrations: 381,000 in 2025 (+0.7% YoY).
• RU Student Enrollment: Increased 8.7% in 2025 YoY (9.6% online, 7.7% on-ground).
• HCN Student Enrollment: Increased 12.3% in 2025 YoY.
• NCLEX Pass Rates: RU's PN and BSN programs met their respective state-established first-time NCLEX benchmarks based on 2025 results. Three RU ADN programs did not meet the benchmarks, resulting in one program continuing its mandated corrective action. HCN's ADN program has been on provisional approval status in Ohio since March 2017 due to not meeting the first-time pass rate standard.

Market Access & Customer Relationships

Go-to-Market Strategy: APEI employs a tailored marketing approach encompassing direct-to-student and business-to-business channels, across online, on-campus, and hybrid learning modalities. Marketing efforts focus on student awareness, onboarding, persistence, performance, and career outcomes.

Distribution Channels:

• Direct Sales: In-house centralized marketing team, APUS Military Outreach team (conducts on-base office hours and participates in education fairs).
• Channel Partners:
  • RU and HCN: Over 400 corporate alliance partners whose employees can pursue education.
  • APUS: Over 120 direct employer and organization partners.
  • Collaboration with leading tuition assistance administrators and vertical channel partners, extending indirect reach to over 1,000 organizations.
• Digital Platforms: Online sales channels, e-commerce initiatives, digital (search, company-owned/external content, social media, streaming services), and more traditional media (television, radio, and print). American Public University plans to expand as a global digital university with AI-powered classroom support and personalized digital services.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Not explicitly named, but APUS has over 120 direct employer and organization partners. RU and HCN have over 400 corporate alliance partners.
• Strategic Partnerships: APUS partners with community colleges for transfer opportunities. RU and HCN seek new and expanded nursing provider partnerships.
• Customer Concentration:
  • APUS: 41% of 2025 revenue from DoD TA programs, 26% from VA education benefits, 19% from Title IV programs, 14% from cash and other sources.
  • RU: 78% of 2025 revenue from Title IV programs, 20% from cash and other sources, 2% from VA education benefits.
  • HCN: 85% of 2025 revenue from Title IV programs, 14% from cash and other sources, 1% from VA education benefits.

Geographic Revenue Distribution:

• U.S. Military Community: APUS is the number one educator of active-duty military and veterans.
• Nursing Education: RU and HCN train nurses at 26 campuses across eight states and online.
• Growth Markets: Focus on expanding nursing opportunities through geographic campus expansion and program/course offerings, including post-licensure nursing programs at RU.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The U.S. postsecondary education market is large (over 4,500 institutions), diverse, and fragmented. Key challenges include demand for relevance and return on investment, focus on quality and affordability, changing consumer demands (pursuing credentials outside degrees), an evolving regulatory environment, enrollment fluctuations, and rapid technological transformation (increasing demand for online offerings and AI utilization).

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Not-for-profit Public and Private Colleges: Offer online and on-campus instruction, often with substantial government subsidies, grants, tax-exemptions, and long-standing name recognition.
• Other For-Profit Schools: Particularly those that offer online learning programs.
• Armed Forces' Own Programs: U.S. Naval Community College and other distance learning programs.
• Nursing Education Competitors: Community colleges, public and private postsecondary institutions, and other career-focused nursing colleges in local campus markets.

Emerging Competitive Threats:

• Non-Traditional Education Programs: Competency-based education programs, coding bootcamps, micro-credentials, massive open online courses, and other flexible and individualized programs, often without charge or at low costs.
• Increased Online Offerings: Traditional campus-based institutions continuing to increase online degree programs and develop more non-traditional programs.
• Shift to Not-for-Profit Status: For-profit institutions converting to not-for-profit status.

Competitive Response Strategy: APEI's strategy includes continuously updating and expanding existing programs, developing new programs and specializations, and enhancing modes of teaching to meet market demands. This includes leveraging its military heritage, affordability, and online offerings for veterans, and expanding its national nursing platform through geographic campus expansion and program offerings. APEI is also building a career learning platform and investing in technology, including AI, to enhance student experience and operational effectiveness.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Student Attraction & Retention: Dependence on attracting and retaining students who persist in programs. Inability to effectively market or expand into new markets could negatively affect results of operations.
• Military Dependence: High reliance on military students (APUS), making enrollments vulnerable to changes in military activity, budgets, and government shutdowns (e.g., the Q4 2025 shutdown impact on TA registrations).
• Competition: Intense competition from public, private, and other for-profit institutions, as well as non-traditional offerings (competency-based education, bootcamps, massive open online courses), could decrease market share and increase student acquisition costs.
• Tuition Increases: Modest tuition increases at RU, HCN, and APUS may cause potential students to be unwilling or unable to enroll, or existing students to withdraw, negatively impacting enrollments and financial results.
• Economic Conditions: General economic slowdowns, recessions, rising interest rates, and inflation could affect enrollments, student persistence, cohort default rates, and increase operating costs.
• Technology Disruption: Rapid technological transformation, including artificial intelligence, presents risks if APEI cannot successfully integrate or compete with others' advancements.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Third-Party Vendor Reliance: Dependence on third-party vendors for IT services, learning management systems, and integrated curriculum/testing services introduces risks of lower quality service, untimely responsiveness, and increased operational/compliance risk.
• Capacity Constraints: Inability to expand or update technology resources appropriately could limit future growth and student support.
• Campus Closures: Actual and planned campus closures (e.g., RU's Wisconsin campuses) may adversely impact enrollments and reputation.

Financial & Regulatory Risks

Market & Financial Risks:

• 90/10 Rule Compliance: Risk of losing Title IV eligibility if any institution fails the 90/10 Rule for two consecutive years, which would also result in loss of TA program eligibility. APUS's 2025 percentage was 89%, requiring continued focus. Delayed TA billing practices could impact 2026 compliance.
• OBBBA Impact: The One Big Beautiful Bill Act introduces new caps on federal loans for graduate/professional students and an accountability framework (earnings test) that could limit program eligibility for Direct Loans, significantly impacting enrollments and financial results.
• Title IV Program Eligibility: Extensive regulatory requirements for Title IV participation; non-compliance could lead to sanctions, repayment obligations, provisional certification, or loss of eligibility. APUS and RU are currently provisionally certified.
• Financial Responsibility Standards: Failure to meet ED's financial responsibility composite score (e.g., falling into the "zone") could result in heightened cash monitoring, additional reporting, or requirement to post financial protection (letter of credit). APEI was in the "zone" for fiscal year 2023 but improved to 2.6 for fiscal year 2024.
• NCLEX Pass Rates: Failure to improve NCLEX pass rates for nursing programs could lead to adverse actions by state boards of nursing (e.g., provisional approval, withdrawal of approval), reduced enrollments, and reputational damage.
• Borrower Defense to Repayment Claims: ED rules related to borrower defense to repayment claims may create significant liability for APEI if claims are granted and recoupment is sought. APUS, RU, and HCN have received numerous borrower defense to repayment claims from ED, which they dispute.
• Student Loan Default Rates: High student loan cohort default rates could lead to loss of Title IV eligibility. While 2022 rates were 0% due to pandemic relief, the end of forbearance and "on-ramp" period may lead to higher future rates.
• Indebtedness: Cost of servicing existing debt ($96.4 million Term Loan as of December 31, 2025) could adversely affect business and financial results. Inability to generate sufficient cash flow or access additional capital could impair debt service.
• Capital Availability: Need for additional capital for acquisitions or growth initiatives, with no assurance of availability on acceptable terms.

Regulatory & Compliance Risks:

• Regulatory Scrutiny: Subject to compliance reviews, investigations, and enforcement actions by ED, DoD, VA, state agencies, and accreditors. Unfavorable outcomes could lead to fines, operational limitations, or loss of program eligibility.
• Change of Control: Transactions involving a change of control (e.g., the Combination) require regulatory approvals, which if delayed or denied, could impair operations or impose growth restrictions.
• State Authorization/Licensure: Failure to maintain state authorization in operating states could lead to inability to grant degrees or participate in federal aid programs.
• Privacy Laws: Failure to comply with evolving federal, state, and international privacy laws (Family Educational Rights and Privacy Act of 1974, Gramm-Leach-Bliley Act, California Consumer Privacy Act, General Data Protection Regulation) could result in fines, penalties, and reputational damage.
• Accessibility Laws: Enforcement of laws related to technology accessibility for students with disabilities (Section 504 of the Rehabilitation Act of 1973, Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act) could increase IT development costs and compliance risks. APUS is cooperating with ED's Office for Civil Rights on accessibility compliance.
• Incentive Payment Rule: Non-compliance with ED's incentive payment rule could result in sanctions, liability under the Federal False Claims Act, and reputational harm.

Geopolitical & External Risks

Geopolitical Exposure:

• Government Shutdowns: Future government shutdowns could disrupt TA and other financial aid programs, adversely affecting enrollments and cash flows.
• Political Environment: Changes in U.S. federal elections and administrations could lead to new legislation, regulations, or enforcement actions impacting postsecondary education. The Trump administration's stated intent to dismantle ED and related reductions in force create uncertainty.
• Trade Relations: Not explicitly detailed.
• Sanctions & Export Controls: Not explicitly detailed.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Student Information Systems: APUS uses a legacy customized system (Partnership at a Distance™). RU uses Anthology Campus Nexus. HCN uses a separate legacy system. Plans in 2026 to move non-core SIS data and workflow functions for RU and HCN into Salesforce and migrate HCN to a new SIS platform.
• Learning Management Systems: APUS and HCN use Brightspace by D2L. RU currently uses Blackboard Ultra, hosted by Anthology, with a planned transition to D2L in 2026 to consolidate the LMS environment.
• Innovation Pipeline: A multi-year enterprise technology transformation is underway to modernize core platforms, improve student experience, reduce long-term technology risk, and improve operational effectiveness. American Public University plans to expand as a global digital university integrating emerging technology and enhanced teaching and learning opportunities, including AI-powered classroom support and personalized digital services.

Intellectual Property Portfolio:

• Patent Strategy: APEI and its institutions own and exercise rights associated with patents, copyrights, trademarks (registered and common law), and domain names.
• Licensing Programs: Institutions own or license course syllabi and instructional materials developed by faculty and third-party content experts.
• IP Litigation: APEI and its institutions vigorously defend against infringement of intellectual property rights.

Technology Partnerships:

• Utilization of third-party vendors for certain IT capabilities, including cloud computing and software-as-a-service.
• A managed service provider for certain services, including service desk, student support, end-user support, and network management and operations.
• Contract with a third-party for RU's nursing program curriculum upgrades and testing services.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: APEI focuses on talent development, succession planning, and fostering a high-performance culture. Annual enterprise-wide talent reviews are conducted, extended in 2025 to include all employees at director level and above.

Board Composition: The Board of Directors includes Angela K. Selden (President and CEO), Daniel S. Pianko (Board Chair), Granetta B. Blevins, Michael D. Braner, Anna M. Fabrega, and Richard Statuto.

Human Capital Strategy

Workforce Composition:

• Total Employees: 5,841 (as of December 31, 2025)
• Geographic Distribution: Not explicitly detailed beyond headquarters and campus locations.
• Skill Mix:
  • Full-Time Employees: 2,360 (705 Faculty Members, 1,655 Other Professional Staff)
  • Part-Time Employees: 3,481 (3,130 Faculty Members, 351 Other Professional Staff)
  • APUS: Approximately 77% of full-time faculty hold a terminal degree in their field of study.
  • RU and HCN: All full-time nursing faculty have earned a Bachelor of Science in Nursing or higher.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Centralized talent acquisition function and team to improve talent search efficiency, increase consistency of sourcing practices, and strengthen hiring processes.
• Retention Metrics: Full-time faculty and non-faculty staff turnover was approximately 16% in 2025 (67% voluntary, 33% involuntary).
• Employee Value Proposition: Comprehensive education benefit program for employees, paid parental leave, additional paid time off for volunteerism, fitness benefit, no-cost mental health resources, employee discount program.

Diversity & Development:

• Diversity Metrics: Not explicitly detailed.
• Development Programs: New faculty members complete onboarding, orientation, and training. All faculty have annual development opportunities. A centralized talent and transformation team focuses on improving internal learning and development practices and succession planning. An annual enterprise-wide talent review process was extended in 2025 to include all employees at director level and above. Consistent compliance training is provided.
• Culture & Engagement: Employee engagement is measured through an annual company-wide survey, with action plans implemented to enhance engagement. Engagement and community impact councils are in place.

Environmental & Social Impact

Environmental Commitments: Not explicitly detailed in the provided text.

Supply Chain Sustainability: Not explicitly detailed in the provided text.

Social Impact Initiatives:

• Community Investment: Engagement and community impact councils lead efforts to positively impact communities, including organizing volunteer opportunities. All full-time employees receive eight hours of additional paid time off for volunteering.
• Product Impact: APEI's mission is to "Power Purpose, Potential and Prosperity for Those in Service to Others," focusing on preparing service-minded students for employment and career advancement. Many students are from underserved populations. APUS provides 24/7 mental health support in multiple languages and AI-based career services.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Historically, enrollments are higher in the fall when students traditionally start their education. Quarterly fluctuations are expected to continue.
• Economic Sensitivity: APEI's business can be adversely affected by general economic slowdowns, recessions, or adverse economic developments in the United States or abroad, including rising interest rates and inflation. These factors can impact enrollments, student persistence, and student loan default rates.
• Industry Cycles: The U.S. postsecondary education market faces challenges from demand for relevance and return on investment, focus on quality and affordability, changing consumer demands (pursuing credentials outside degrees), an evolving regulatory environment, enrollment fluctuations, and rapid technological transformation.

Planning & Forecasting: The student population varies as a result of new enrollments, graduations, student attrition, military deployments, and the success of marketing programs, making forecasting very difficult.

Regulatory Environment & Compliance

Regulatory Framework: APEI and its institutions (APUS, RU, HCN) are extensively regulated by:

• Accrediting Agencies: The Higher Learning Commission for APUS and RU; the Accrediting Bureau of Health Education Schools for HCN. Programmatic accreditors include the Accreditation Council for Business Schools and Programs, the Commission on Collegiate Nursing Education, the Accrediting Commission for Education in Nursing, and the National League for Nursing Commission for Nursing Education Accreditation.
• State Regulatory Bodies: State education agencies and state boards of nursing in the states where the institutions operate.
• Federal Government: The U.S. Department of Education for Title IV programs, the Department of Defense for Tuition Assistance, and the U.S. Department of Veterans Affairs for education benefits.
• Other Federal Agencies: The Consumer Financial Protection Bureau and the Federal Trade Commission.

Industry-Specific Regulations:

• Title IV Programs: Compliance with the Higher Education Act of 1965, as amended, and related ED regulations for financial aid eligibility, administrative capability, and financial responsibility. APUS and RU are currently provisionally certified.
• 90/10 Rule: For-profit institutions are prohibited from deriving more than 90% of their revenue (as computed by ED) from federal education assistance funds. Effective January 1, 2023, TA and VA benefits are included in the "90%" side of the ratio. APUS's relevant percentage for 2025 was 89%.
• Gainful Employment Regulations: New GE regulations, effective July 1, 2024, establish an accountability framework. The One Big Beautiful Bill Act, signed July 4, 2025, establishes a new accountability framework effective July 1, 2026, and delays the Biden Administration's borrower defense to repayment regulations until July 1, 2035.
• NCLEX Pass Rates: Nursing programs must maintain state-mandated pass rates on relevant licensure exams. Failure can lead to provisional approval or withdrawal of program approval.
• State Authorization Reciprocity Agreement: APUS, RU, and HCN participate in SARA, which sets national standards for interstate distance education. NC-SARA approved policy changes in October 2025, including public disclosure of provisional status and financial responsibility evaluation.
• DoD MOUs: Institutions participating in TA must sign Memoranda of Understanding outlining commitments and compliance with DoD requirements. APUS was subject to an Institutional Compliance Program review in February 2025, which concluded with no findings in May 2025.
• VA Education Benefits: Compliance with the Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020 and the Training in High-Demand Roles to Improve Veteran Employment Act.

Trade & Export Controls: Not explicitly detailed.

Legal Proceedings: APEI currently has no material legal proceedings pending. However, it is subject to ongoing compliance reviews and potential litigation related to regulatory compliance, including borrower defense to repayment claims. APUS, RU, and HCN have received numerous borrower defense to repayment claims from ED, which they dispute.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 27.8% in 2025, compared to 39.3% in 2024. The 2025 rate was impacted by excess tax benefits related to stock compensation offset by non-deductible employee compensation.
• Geographic Tax Planning: Not explicitly detailed.
• Tax Reform Impact: The One Big Beautiful Bill Act, signed July 4, 2025, changes U.S. tax laws, but did not have a material impact on APEI's annual effective tax rate in 2025.

Insurance & Risk Transfer

Risk Management Framework: APEI has developed a robust cybersecurity program that incorporates a process of identifying and managing cybersecurity risks across the enterprise. This includes reviewing technology stack and processes, conducting threat assessments (internal and external), engaging third-party consultants for assessments (e.g., annual penetration testing), maintaining a risk register, and testing incident response processes. The Information Security Steering Committee provides oversight.

• Insurance Coverage: APEI maintains specific insurance coverage to mitigate losses associated with certain cybersecurity incidents that impact its or its third parties’ information technology and information systems.
• Risk Transfer Mechanisms: Not explicitly detailed beyond insurance.