American Public Education (APEI) risk factors, FY2024 10-K

Risks Related to Attracting and Retaining Students

1. 01Our success and financial performance depend on the effectiveness of our ability to attract students who persist in our institutions’ programs
2. 02If we are unable to effectively market our programs or expand into new markets, our results of operations would be negatively affected
3. 03to realize a sufficient return on our efforts. Accordingly, our business, results of operations, and financial condition could be impacted
4. 04If APUS does not have strong relationships with, and access to, various military installations and installation education centers, our ability to maintain enrollments from military students and our future growth may be impaired
5. 05Enrollments and course registrations by active-duty service members may be adversely affected by a variety of factors not directly related to education programs, including changes in military activity, budgets and government shutdowns
6. 06Declines in enrollments at RU could materially adversely affect RU’s and our profitability, financial condition, results of operations, and cash flows
7. 07Changes our institutions may make to their operations to improve the student experience and enhance our institutions’ ability to identify and enroll students who are likely to succeed may adversely affect our institutions’ enrollment, profitability, financial condition, results of operations, and cash flows
8. 08If our institutions are unable to successfully adjust to future market demands by updating and expanding the content of existing programs and developing new programs, specializations, and modes of teaching on a timely basis and in a cost-effective manner, our performance may be impaired
9. 09Continued strong competition in the postsecondary education market could decrease our institutions’ market share and increase our cost of acquiring students
10. 10We expect to continue to face greater competition from non-traditional offerings, provided by both educational institutions and non-traditional providers
11. 11Tuition and fee increases at RU, APUS, and HCN could have an adverse impact on enrollment, our financial condition and our results of operations
12. 12RU’s actual and planned closure of campuses or termination of programs on certain campuses may adversely impact RU and us

Risks Related to the Regulation of Our Industry

1. 13If we or our institutions fail 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, including loss of federal student loans and grants and access to DoD TA programs
2. 14If our institutions fail to maintain their institutional accreditation, they will lose the ability to participate in Title IV and DoD TA programs and our student enrollments would decline
3. 15If one or more of our institutions does not comply with the 90/10 Rule for two consecutive years, it or they will lose eligibility to participate in federal student financial aid programs
4. 16DoD’s MOUs impose 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
5. 17HLC could identify deficiencies during its mid-cycle comprehensive evaluation of APUS and take adverse action against APUS based on such deficiencies
6. 18ED’s new gainful employment requirements could materially and adversely affect our business
7. 19Failure to improve certain of our programs’ NCLEX pass rates and to more generally satisfy NCLEX requirements could reduce our enrollments, revenue, and cash flow, lead to adverse actions taken by state boards of nursing, and limit our ability to offer educational programs
8. 20RU’s Illinois ADN program was previously adversely impacted by regulatory action, including as a result of the failure to meet applicable NCLEX pass rates, and further action by regulators and accreditors could result in additional adverse impacts
9. 21The inability of our institutions’ graduates to obtain professional licensure, employment, or other outcomes in their chosen fields of study, particularly in nursing, could reduce our enrollments and revenue, limit our ability to offer educational programs, and potentially lead to litigation that could be costly to us
10. 22A failure of HCN to satisfy ABHES accreditation standards, including specific student achievement indicators, could have a material adverse impact on HCN’s student enrollment, revenue, results of operations, and cash flows
11. 23credentialing or licensure. Alternatively, ABHES may in its discretion provide an opportunity for a program to come into compliance within a period of time specified by ABHES, and ABHES may extend the period for achieving compliance if a program demonstrates improvement over time or for other good cause
12. 24If 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
13. 25Our institutions’ failure to comply with the requirements of SARA or regulations of ED or various states related to state authorization could result in actions that would have a material adverse effect on our enrollments, revenue, and results of operations
14. 26Our subsidiary institutions’ failure to meet financial responsibility standards may result in additional regulatory requirements that may negatively impact cash flow or the loss of eligibility by one of our institutions to participate in Title IV programs
15. 27An obligation to post a letter of credit, or to accept other conditions, such as a change in our system of Title IV payment from ED for purposes of disbursement, as a result of not meeting financial responsibility standards, could increase our costs of regulatory compliance, or affect our cash flow
16. 28A failure to demonstrate “administrative capability” may result in the loss of eligibility to participate in Title IV programs
17. 29ED rules related to BDTR claims may create significant liability that could have an adverse effect on our business and results of operations
18. 30The postsecondary education regulatory environment has changed and may change in the future as a result of U.S. federal elections
19. 31A failure by our institutions to comply with ED’s incentive payment rule could result in sanctions and liability under the False Claims Act
20. 32Our institutions may lose eligibility to participate in Title IV programs if their student loan default rates are too high, and our future growth could be impaired as a result
21. 33We rely on third parties to administer elements of APUS’s, RU’s, and HCN’s participation in Title IV programs and their failure to perform services as agreed or to comply with applicable regulations could cause us to lose our eligibility to participate in Title IV programs
22. 34Our institutions will be subject to sanctions that could be material to our results and damage our reputation if ED determines that our institutions failed to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program
23. 35Our institutions’ failure to comply with ED’s substantial misrepresentation rules could result in material sanctions
24. 36Enforcement of laws related to the accessibility of technology continues to evolve, which could result in increased information technology development costs and compliance risks
25. 37Government and regulatory agencies and third parties may conduct compliance reviews, bring claims, or initiate enforcement actions or litigation against us, any of which could disrupt our institutions’ operations and adversely affect their performance
26. 38Investigations by state Attorneys General, Congress, and governmental agencies into the Company and other for-profit institutions may result in increased regulatory burdens and costs and may impact our reputation
27. 39If regulators do not approve or delay their approval of transactions involving a change of control of our Company or of institutions that we own or acquire, our and our institutions’ ability to operate could be impaired
28. 40Failure to comply with the various federal and state laws and regulations governing HCN’s extended payment plan options could subject us to fines, penalties, obligations to discharge loans and other injunctive requirements

Risks Related to Our Business

1. 41Our student registrations, revenue, and cash flow have been adversely impacted, and we could experience additional adverse impacts as a result of the Armed Forces’ transition to new systems for soldiers to request TA
2. 42Economic and market conditions in the U.S. and abroad and changes in interest rates could affect our enrollments, success with placement and persistence and cohort default rates
3. 43Our business could be harmed if our institutions experience a disruption in their ability to process Title IV financial aid
4. 44The planned combination of APUS, RU, and HCN may not be completed, or may not be completed on the terms currently contemplated, and if it is, the expected benefits may not be realized, any of which could have a material adverse impact on our business, financial condition, and results of operations
5. 45Business combinations and acquisitions may be difficult to integrate, disrupt our business, dilute stockholder value, or divert management attention, and we may not realize the expected benefits of any consummated business combinations or acquisitions
6. 46We have implemented a shared services model for services to our institutions, and challenges encountered due to the ongoing operation and expansion of this model could cause strategic or operational challenges and adversely impact us
7. 47We rely on third-party vendors whose service may be of lower quality than ours, whose responsiveness may be less timely than ours, and whose compliance practices may increase our operational and compliance risk
8. 48There can be no guarantee that our business will generate sufficient cash flow from operations or that future capital or borrowings will be available to us in an amount sufficient to enable us to fund our other liquidity needs
9. 49We have incurred substantial indebtedness under our credit agreement, the cost of servicing that debt could adversely affect our business and financial results, and we may not be able in the future to service that debt
10. 50Our Series A Senior Preferred Stock provides rights, preferences, and privileges that are not held by our common stockholders, and is senior to our common stock, which could adversely affect our cash flows, liquidity, and financial condition
11. 51We may need additional capital in the future, but there is no assurance that funds will be available on acceptable terms
12. 52If our institutions fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our institutions may lose the ability to participate in Title IV programs or DoD TA programs or have participation in these programs conditioned or limited
13. 53If we are unable to attract, retain, and develop skilled personnel and management, our business and growth prospects could be severely harmed, and changes in management could cause disruption and uncertainty
14. 54We may not achieve the anticipated benefits of our cost savings efforts, including reductions in force, and any savings may be offset by increased costs in other areas
15. 55Our limited ability to obtain exclusive proprietary rights and protect our intellectual property, as well as disputes we may encounter from time to time with third parties regarding our use of their intellectual property, could harm our operations and prospects
16. 56intellectual property rights can be difficult, particularly as it relates to the development by our institutions’ competitors of competing courses and programs
17. 57We may incur liability for the unauthorized duplication or distribution of course materials posted online for course discussions
18. 58We rely on dividends, distributions and other payments, advances, and transfers of funds from our operating subsidiaries to meet our obligations and to fund acquisitions and certain investments
19. 59Legal proceedings, particularly class action lawsuits, may require human and financial resources, distract our management, and negatively affect our reputation and results of operations

Risks Related to Our Technology Infrastructure

1. 60Transitioning outsourced RU marketing and information technology functions to internal functions and for certain information technology functions, a managed service provider may not be efficient or cost-effective, or may pose other operational challenges
2. 61We have expended and need to continue to expend time, money, and resources into our and our institutions’ information technology, which may place a strain on our capacity that could adversely affect our systems, controls, and operating efficiency, and those of our institutions
3. 62Increased use of AI may present operational, reputational, legal, regulatory, and competitive risks and could result in additional costs, each of which could materially and adversely affect our business, financial condition, and results of operations
4. 63Some or all of the foregoing risks could result in additional costs or materially and adversely affect our business, financial condition, reputation, and results of operations
5. 64other interruption or disruption of these services, whether due to cyber-attacks, other cybersecurity incidents, or other causes, could adversely impact our operations and our business
6. 65Cybersecurity incidents could compromise sensitive information, including personal information, and cause system disruptions and significant damage to our business and reputation
7. 66Failure to comply with privacy laws or regulations could have an adverse effect on our business

Risks Related to Owning our Common Stock

1. 67The price of our common stock may be volatile, and as a result returns on an investment in our common stock may be volatile
2. 68We may face risks associated with stockholder activism
3. 69Our future results of operations and financial condition may not meet our guidance or expectations
4. 70Environmental, social, and governance, or ESG, matters and the perception of our activities in these areas by stakeholders may impact our business and reputation