EDGAR 10-K Filing

Company CIK: 1046568
Filing Year: 2025
Filename: 1046568_10-K_2025_0000950170-25-022187.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
OVERVIEW
Perdoceo’s accredited academic institutions offer a quality postsecondary education to a diverse student population, with fully online, campus-based and hybrid learning programs. The Company’s academic institutions - Colorado Technical University (“CTU”), the American InterContinental University System (“AIUS” or “AIU System”) and University of St. Augustine for Health Sciences ("USAHS") - provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. USAHS is among the nation's reputable universities offering graduate health sciences degrees, primarily in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Perdoceo's academic institutions are committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.
When used in this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries.
Our reporting segments correspond to our accredited institutions.
CTU
CTU is committed to providing industry-relevant higher education to a diverse student population, including non-traditional adult learners seeking career advancement and the military community. CTU utilizes innovative technology and experienced faculty, enabling the pursuit of academic and professional goals for learners. CTU offers academic programs in the career-oriented disciplines of business and management, nursing, healthcare management, computer science, engineering, information systems and technology, project management, cybersecurity and criminal justice. Additionally, CTU also offers non-degree and professional development programs.
Discussion of business operations, trends and key drivers of operating results will primarily focus on CTU’s degree programs, which represent a majority of CTU’s operations and the CTU segment.
AIUS
AIUS is committed to providing industry-relevant higher education opportunities for a diverse student population, including non-traditional adult learners and the military community. AIUS places emphasis on the educational, professional and academic growth of each student. AIUS offers academic programs in the career-oriented disciplines of business studies, information technologies, education, behavioral sciences and criminal justice. AIUS also provides non-degree and professional development programs.
AIUS is comprised of three universities: the American InterContinental University ("AIU"), Trident University International (“Trident” or “TUI”) and California Southern University ("CalSouthern"). The AIUS structure provides a framework for all three universities to continue to serve their unique student populations while benefitting from one university system. Although all universities operate under a shared governance structure and have a common mission, the system structure allows each to retain its name and customize its programs and instructional and student service models to the needs of its unique student populations.
Discussion of business operations, trends and key drivers of operating results will primarily focus on AIU and Trident, which represents a majority of the AIU System and AIUS reporting segment. Specific references will be made to the other universities when material to the disclosure or necessary to understand the overall discussion.
USAHS
USAHS is among the nation's reputable universities offering graduate health sciences degrees, primarily in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Founded in 1979, USAHS educates students through its network of campuses in San Marcos, California; St. Augustine and Miami, Florida; and Austin and Dallas, Texas; and through its online programs. USAHS focuses on developing professional healthcare practitioners through innovative and personalized classroom learning and robust clinical opportunities.
Student Enrollments Statistics
Total student enrollments as of December 31, 2024 and 2023 were approximately 41,400 students and 34,500 students, respectively, with approximately 90% enrolled in our institutions’ fully-online academic programs for each of the years ended December 31, 2024 and 2023. Substantially all of the students attending our institutions reside within the United States of America. Total student enrollments and student enrollment statistics stated above and presented below do not include learners pursuing: a) non-degree and professional development programs, and b) degree seeking, non-Title IV participating, self-paced programs at our universities. Additional student enrollment demographic information for our institutions as of December 31, 2024 and 2023 was as follows:
Student Enrollments by Age Group
As a Percentage of Total
Student Enrollments as of
December 31,
Over 30
%
%
21 to 30
%
%
Under 21
%
%
Student Enrollments by Core Curricula
As a Percentage of Total
Student Enrollments as of
December 31,
Business Studies
%
%
Information Technology
%
%
Health Education
%
%
Student Enrollments by Degree Granting Program
As a Percentage of Total
Student Enrollments as of
December 31,
Doctoral and Master's Degree
%
%
Bachelor's Degree
%
%
Associate Degree
%
%
GUIDING PRINCIPLES AND STRATEGIC PRIORITIES
To compete successfully in today’s demanding economy, people benefit from higher education that provides a foundation of knowledge and skills they can use in the workplace and to build meaningful careers. We aim to become a leading provider of online
postsecondary education to non-traditional students, including adult learners. The core guiding principles we focus on in our pursuit of this goal are:
•enhancing academic outcomes;
•further elevating academic quality and integrity; and
•complying with regulations.
Our strategic priorities that we believe will support our goal to become a leading provider of online postsecondary education to non-traditional students and position the Company for long-term sustainable and responsible growth are:
•optimize student enrollment processes;
•enhance student retention and engagement;
•use technology as a differentiator;
•leverage efficient and effective scalable shared services to support organic growth at our universities and as a key enabler for inorganic growth strategies; and
•invest in student-serving processes that support our overall academic operations.
OUR BUSINESS
Through our three accredited academic institutions, we offer quality postsecondary education to a diverse student population, with fully online, campus-based and hybrid learning programs, with the health sciences degree programs at USAHS having a strong clinical component. We pursue a student-first mindset in our efforts to provide support throughout the academic life cycle, from enrollment and orientation through ongoing coaching and learning leading up to graduation, which we believe enhances overall student learning experiences and academic outcomes. We are committed to investing in our academic institutions, including through course curriculum development and student support technology, which we believe enables our support teams to provide customized service that contributes to positive student experiences. Technology is a key enabler for us, and we are continuing to expand the use of artificial intelligence ("AI") and machine learning to additional areas of the student academic life cycle. We believe that our technology innovations provide students with tools that enable them to focus on educational content in a manner that is best suited to their personal learning style.
Marketing, Student Recruitment and the Student Enrollment Process
Our academic institutions seek motivated students with both the desire and ability to complete their academic programs of choice. To promote interest among potential students, our institutions develop and engage in a variety of marketing activities which build awareness of our academic programs and universities among prospective students. Aided by data analytics, our marketing programs are designed to focus on enrolling students who we believe will be more likely to succeed at one of our academic institutions and eventually complete their degree of choice.
Perdoceo primarily serves a non-traditional and diverse student population, including adult learners. Our students have a broad range of educational and employment experiences which contributes to their college-level readiness. Each of our universities has an admissions function responsible for interacting with prospective students interested in applying to an institution after they have expressed interest in learning more about our academic institutions and programs. Generally, to be qualified for admission to an undergraduate program at one of our universities, an applicant must have received a high school diploma or a recognized equivalent, such as a General Education Development certificate. Our graduate programs require applicants to hold a bachelor's degree and some have additional program specific admissions requirements.
We leverage predictive analytics to help us identify and focus on prospective students who are more likely to succeed at one of our universities. Our prospective student outreach process uses technology to provide a more customized approach to enable us to more effectively provide prospective students with relevant information to help them make more informed academic decisions.
Perdoceo has continued to test and adopt machine learning and AI technology in an effort to streamline operations for both students (current and prospective) and staff. Perdoceo was an early adopter of virtual assistants ("chatbots") that lead to efficiencies in both the attraction and servicing of students. These virtual assistants were recently upgraded to the latest Large Language Models ("LLMs"), as well as generative AI technology. The upgraded chatbots are more responsive to student queries, as well as reduce the time and effort to train the chatbots on information students are requesting. In addition, the new virtual assistants give staff increased visibility into what information is important to students as they progress in their academic journeys.
Our technology enhancements enable our admissions staff to customize their prospective student outreach and engagement strategies based on students’ prior educational experience, degree and area of program interest, thus providing a more meaningful and relevant interaction with the prospective student. We believe prospective students have an improved overall experience in communications with our admissions personnel due to these enhancements.
Admissions advisors serve as one of the prospective students’ primary contacts, providing information to help them make informed enrollment decisions and assisting them with the completion of the enrollment process. The admissions advisors also have a responsibility to provide guidance and support through the enrollment application process and student orientation as well as assist each student as they transition into their first class.
Once a decision has been made to enroll at one of our academic institutions, the financial aid team works with the prospective student, providing them with necessary information, including about various loans and grants available to finance their education. The focus is on getting these students financially prepared for school in a timely manner so that they can focus on their academic activities.
At AIUS and CTU, every enrolled student is offered an orientation that is designed to prepare them to begin classes at our institutions. This orientation process also provides the opportunity for students to understand our academic and support services. We believe completion of these activities better prepares a student to make an informed decision about pursuing their education as well as allows them to be more successful as it simulates their classroom experience both online and in a campus-based environment. Completion of orientation does not financially obligate students, nor does it require students to continue their education with the university.
Additionally, first-time undergraduate students who attend online programs at AIUS and CTU and do not want to continue have 21 days after the start of their program to notify the university of their intention to withdraw. Students who notify and withdraw from the university within 21 days will not be responsible for any tuition-related expenses and are refunded any amounts they have paid in tuition and other institutional fees.
USAHS is a traditional university which offers three academic terms each calendar year, Spring, Summer and Fall, with breaks between academic terms. Prospective students are generally required to have an undergraduate degree and go through a comprehensive application and admissions process which has allowed USAHS to maintain strong academic outcomes and student experiences while also maintaining program level academic outcomes as required by various programmatic accrediting bodies.
Employer Supported Students
CTU and AIUS have focused on collaborating with certain employers that support their workforces through education benefits such as tuition assistance programs. During 2024, both academic institutions continued to focus on engaging with large companies, including some Fortune 500 companies. We expect this continued engagement and collaboration to result in new student interest through increased awareness of our institutions by the employees of these employers. Engaging with these employers provides us with an opportunity to connect with and educate a population of students, we believe, we would otherwise not likely have access to. Students from these employers who attend our institutions are awarded grants from the applicable university to partially offset their tuition costs, the amount of which can vary and depend on the employer’s approach to supporting the educational pursuits of its workforce. Although the amount paid by these students results in lower revenue per student due to the grants awarded from the applicable university, the recruiting, marketing and support costs associated with these students are relatively lower as well and most of these students are able to graduate from their chosen program of study with little or no debt. As of December 31, 2024, approximately 36.5% and 7.0% of total student enrollments at CTU and AIUS, respectively, attend pursuant to these employer sponsored engagements.
Student Retention and Academic Outcomes
Our institutions focus on improving student retention and enhancing academic outcomes. Investments in student serving processes, including the use of technology, remains a key focus to support these efforts. Our faculty and student advisors provide frequent assistance and feedback to students during their course of academic study. We support increased communication between our faculty and students by providing faculty with various technology enablers such as a two-way messaging platform and enhanced data reporting and analytics to help them provide meaningful academic support and information. As is the case at any postsecondary educational institution, a portion of our students withdraw from their academic programs for a variety of academic, financial or personal reasons, and these efforts are designed to help our students remain in school and succeed in their academic program.
Our student advising model at AIUS and CTU promotes collaboration between faculty and student advisors, which we believe enhances effectiveness and provides students with consistent support and communication. Student advisors continue to work with students throughout their academic program to provide relevant and specific feedback and guidance as they progress through their classes. Additionally, a team of staff members from advising, admissions and financial aid works directly with each new student creating a student-service atmosphere and encouraging quality interactions.
Coupled with the student advising model, our academic institutions continually review and update course content and sequencing to ensure workload levels build gradually as students develop skills and acclimate to course expectations, which we believe improves academic outcomes. In general, our courses are designed to accommodate skill development holistically, which we believe will further support learning.
AIUS' student-centric framework focuses on having students interact with their admissions advisor from enrollment through the end of their first academic session and be subsequently supported by student advisors. We believe this structure, along with faculty engagement, improves overall student experiences and retention. This cross-functional strategy is aimed at improving student engagement throughout the student’s academic life cycle, with particular emphasis on the important onboarding phase and first academic term as the students adjust to their academic program. In 2023, AIUS launched a "Ready" course, which allows students to experience and explore the classroom atmosphere weeks before classes begin.
CTU leverages data analytics to provide proactive outreach and personalized advising to improve student retention and academic outcomes. This approach is intended to help us reach the right student at the right time with the right support, which we expect will increase learning and course completion by our students. CTU continues to refine the data analytics process to enable its student advisors to be more effective in their student engagement efforts.
USAHS' student support processes for prospective students span prior to the start of their academic program all the way through graduation, yielding positive academic outcomes through a robust support system that integrates academic advising, tutoring, writing assistance and professional mentorship. A dedicated team of program directors, faculty advisors, student success advisors, and a dedicated student services department offer academic advising, professional development, tutoring, writing support, accessibility accommodations and financial aid assistance, that includes individualized support, student success strategies, and student outreach. These teams prioritize student retention and academic success with a core value of ‘students first’ and through a comprehensive approach to student support, data analysis, and program and institutional review. Each student is assigned a dedicated faculty advisor and a student success advisor. Faculty advisors provide academic guidance and professional development and mentorship in the profession.
Given the nature of USAHS' advanced degree levels, students enrolled in these academic programs are more likely to persist in their program through completion. USAHS’ strong retention rate, coupled with strong program tenure and job placement rates creates a network effect that continues to attract quality prospective students.
Curriculum and Program Development
Our universities develop and deliver a variety of academic programs resulting in the award of credentials ranging from certificates to doctoral degrees in career-oriented programs of study in core curricula areas of business studies, information technology and health sciences.
Our curricula, instructional delivery tools and experienced faculty comprise the learning experience that provides our student population with a unique opportunity to develop the knowledge, skills and competencies required for specific careers. The curriculum development process focuses on desired career needs, while considering relative competencies necessary to achieve these career needs, as well as any applicable recommendations set forth by advisory boards, programmatic accrediting agencies and industry standards. Subsequently, learning objectives are identified and courses are developed which foster student engagement in activities and optimally result in the attainment of program learning outcomes.
The acquisition of USAHS in December 2024 meaningfully expanded our academic offerings in the graduate health sciences field with programs such as physical therapy, occupational therapy, speech-language pathology and nursing degrees. These programs have a strong clinical component which provides students with real-world, hands-on experience in their relevant field of study, allowing them to apply theoretical knowledge to patient care and develop essential clinical skills.
Additionally, our institutions also offer non-degree professional development programs. These online courses offer upskilling and reskilling opportunities where one can develop skills and knowledge in a specific endeavor or area of interest.
Instructional Delivery
Our instructional delivery is based on the belief that learning depends on instructional methodologies that involve and efficiently effectuate student engagement with the instructor, with other students and with the course content. This engagement is fundamental to student learning outcomes, regardless of whether instruction occurs within a physical or virtual classroom. We continue to focus on innovation in our delivery of online education to enhance the learning experience for students.
In 2024, we expanded our student technology infrastructure at AIUS and CTU by implementing faculty and student-requested enhancements to our virtual campus and mobile platforms. This included the addition of dark mode for the mobile app, updates to the roster interface, and the introduction of an interactive rubric that our faculty and student support teams can potentially use to better serve and educate students throughout their academic journey. These upgrades are designed to enhance the student experiences, particularly for our non-traditional adult learners, while also improving operational efficiency.
USAHS primarily provides instructional delivery onsite at its various locations in California, Texas and Florida. These campus locations include learning centers designed to simulate clinical and home settings, with real medical equipment and high-fidelity, interprofessional environments. USAHS also offers anatomy education in both 2D and 3D for an interactive experience. Additionally, 3D printers and virtual headsets provide students with immersive learning experiences that enable students to see, interact with, experience diverse clinical and patient settings.
Learning Management System
Construction of, and ongoing enhancement to, a virtual campus that engages online students with their instructor, peers and content is critical to the achievement of student learning outcomes. CTU and AIUS’ online instructional delivery is accomplished using innovative, student-focused learning management systems. While online content delivery is very common today, our course content delivery systems have several features that make them distinctive. Designed around students, our course content delivery systems allow for a rich, engaging student experience that represents innovative online methods of delivering content.
CTU and AIUS have implemented the use of sophisticated personalized learning technologies through our virtual campus that provide intelligent, adaptive systems to power the delivery of personalized learning. We have a perpetual license to this technology and our personalized learning content was developed by teams of our own instructors and has been integrated across many of our curricula.
USAHS utilizes Blackboard, which is a web-based learning management system, that enables instructors and faculty to efficiently manage course content, deliver assignments, facilitate online discussions, grade student work, track course attendance, and provide students access to various learning resources - all in one centralized platform. It is designed to allow students and faculty to participate in classes delivered online or to use online materials to complement face-to-face learning.
Mobile Applications
Students at CTU and AIU have access to a mobile application and two-way messaging platform which were created to complement students’ mobile-centric lives. During 2024, we introduced new features, such as the highly requested dark mode and enhanced analytics. Approximately 95% of our students within these universities have opted in for the mobile application and to receive mobile notifications. Our students and staff are using the messenger application due to its ease and simplicity. The student benefits of these technological innovations include the ability to connect with their university in a different way, communicate efficiently with faculty, upload required documentation, track grades and degree progress in real-time and participate in courses from the palm of their hand, all of which contribute to increased student engagement. CTU and AIU also have a faculty mobile application which provides informative dashboards, the ability to complete tasks on the go and enhanced outreach and communication capabilities that we believe make teacher-student interactions easier and more effective.
Additionally, USAHS offers a mobile application to its students which provides information and resources, including campus virtual tours and maps, faculty information, access to Blackboard and library resources, and news and social media feeds.
Faculty
Our institutions employ credentialed, geographically dispersed, full-time, and part-time (i.e., adjunct) faculty who facilitate learning in our classrooms and virtual classrooms. Our faculty are hired, assigned, developed, and evaluated in accordance with current accepted higher education practices and in accordance with state, institutional accreditation, and programmatic accreditation standards.
Faculty Competencies
With the input of faculty and academic leadership at our universities, we have developed a set of instructor competencies that we believe are critical to student success and institutional effectiveness. These competencies provide the basis for faculty recruitment, hiring, orientation, evaluation, and development. Faculty hired by our academic institutions are evaluated for proficiency in the following competencies:
•communication;
•assessment of student learning;
•instructional methodology (pedagogy);
•subject matter expertise;
•utilization of technology to enhance teaching and learning;
•acknowledgement and accommodation of diversity in learners;
•student engagement;
•promotion of active student learning;
•compliance with academic institution policy; and
•demonstration of scholarship.
Seasonality and Fluctuations in Results
Our quarterly net revenues and income may fluctuate primarily due to total student enrollments during any given quarter. As a result, changes in the academic calendar may have an impact on quarterly comparability as each quarter may have non-comparable
revenue-earning days because the academic calendar may align differently with each calendar year and the quarters therein. While most of the operating costs for our institutions do not fluctuate significantly on a quarterly basis, we may see variability within our marketing spend based on the back to school season and prospective student interest levels at any given time.
Human Capital
As of December 31, 2024, we had approximately 5,690 employees, of which approximately 1,894 work for CTU, approximately 1,430 work for AIUS and approximately 1,579 work for USAHS, with the remainder being corporate-level employees in areas such as marketing, information technology, financial aid, accounting, human resources, legal and compliance.
The human capital objectives that we focus on reflect the nature of our business, our regulated industry and our guiding principles and strategic priorities discussed above under the heading “Guiding Principles and Strategic Priorities.”
We focus on achieving results in a compliant and ethical manner. New employees in student-serving functions such as admissions and financial aid participate in multi-week training programs, and our compliance monitoring programs and other ongoing compliance efforts in these and other areas are robust. The Compliance and Risk Committee of our Board of Directors regularly reviews the results of our compliance monitoring programs and matters reported through the Company’s internal system for reporting compliance concerns in order to monitor the effectiveness of these programs.
We use technology to support students and enhance learning. Therefore, it is imperative that our employees in student-serving functions are trained to use our technology and systems for the benefit of our students. This includes our faculty members who must be proficient in using our online learning management system, personalized learning technology and mobile applications. We also focus significant human capital resources on protecting our technology infrastructure and the personal information maintained therein regarding applicants, our students, their families and our alumni. The Compliance and Risk Committee and the full Board of Directors regularly review information security matters given their importance to the Company.
Our goal is to deploy resources in the most effective and efficient manner that we believe will lead to increased stockholder value while supporting and enhancing the academic quality of our institutions. This philosophy applies to our human capital resources as well. Significant management attention is focused on where to add human capital and other resources to grow responsibly, while at the same time monitoring human capital costs and promoting operating efficiencies. Employee turnover impacts human capital costs and operating efficiencies, and as a result, we have in the past seen improved operating results associated with improved tenure within student-serving functions. The Audit Committee of our Board of Directors regularly reviews information about employee turnover within the Company.
We are committed to a policy of equal employment opportunity. We value diversity and strive to create an atmosphere that supports the students and communities that we serve. Inclusivity is important in our approach to achieving a dynamic culture. We are committed to fostering an environment where differences are respected and valued and where employees feel empowered to share their experiences and ideas. The self-identified ethnicity or race of our full-time employees, including full-time faculty members, is approximately 53% White, 23% Black or African American, 12% Hispanic, Latinx or Spanish origin, 7% Asian, 1% American Indian or Alaskan Native and less than 1% Native Hawaiian or Other Pacific Islander, and our full-time employees are approximately 34% male and 66% female. The self-identified ethnicity or race of our part-time non-student employees, who are primarily part-time adjunct faculty members, is approximately 62% White, 17% Black or African American, 9% Hispanic, Latinx or Spanish origin, 6% Asian, 1% American Indian or Alaskan Native and less than 1% Native Hawaiian or Other Pacific Islander, and our part-time employees are approximately 40% male and 60% female.
INDUSTRY BACKGROUND AND COMPETITION
The domestic postsecondary education industry is highly fragmented and competitive, with no one provider having a significant market share. The Higher Education Act of 1965, as amended and reauthorized (“Higher Education Act”), and the related regulations govern all higher education institutions participating in federal student aid and loan programs under Title IV of the Higher Education Act (“Title IV Programs”). According to the National Center for Education Statistics (“NCES”), there were approximately 5,700 postsecondary education institutions eligible for federal student aid in the United States for the academic year 2023-24, including approximately 2,100 for-profit schools; approximately 1,900 public schools which include state universities and community colleges; and approximately 1,700 private non-profit schools. According to the U.S. Department of Education (“ED” or the “Department”), over the 12-month period for academic year 2022-23, approximately 24.9 million students were enrolled in postsecondary institutions.
The domestic postsecondary degree-granting education industry was an approximately $993 billion industry for academic year 2021-22, according to National Center for Education Statistics. We compete in this industry primarily with other degree-granting institutionally-accredited colleges and universities, both for-profit institutions like ours and public and private non-profit institutions. In particular, there is growing competition from online programs at these institutions as they increase their online offerings in response to growing prospective student interest.
Postsecondary institutions are subject to significant regulations which provide for an oversight triad by mandating specific regulatory responsibilities for the accrediting agencies recognized by the Department, the federal government through the Department, and state higher education regulatory bodies.
Extensive and increasingly complex Department regulations governing postsecondary institutions have been enacted, including regulations applicable only to for-profit institutions. These regulations, coupled with the increased focus by the U.S. Congress on the role that for-profit educational institutions play in higher education, as well as the evolving needs and objectives of students and employers, economic constraints affecting educational institutions and increased focus on affordability and value, may contribute to continued changes in business operating strategies. We have also recently been operating with dramatic shifts in regulatory approaches across different presidential administrations, resulting in a significant number of regulations being adopted, subsequently rescinded or revised, then re-adopted. We cannot predict the specific actions that the new Administration or Congress may take or their effect on the higher education sector, however the prior Trump administration focused significantly on a de-regulatory agenda and recent 2025 executive orders similarly call on all federal agencies to prioritize rescinding costly and burdensome regulations over the adoption of new regulation. We anticipate a number of regulatory changes may be forthcoming reflecting the priorities of the new administration.
Although competition exists, for-profit educators serve a segment of the market for postsecondary education that we believe has not been fully addressed by traditional public and private universities. Public and private non-profit institutions can face limited financial resources to expand their offerings in response to growth or changes in the demand for education, due to a combination of state funding challenges, decreased enrollment, increased expenses, significant expenditures required for research, and the professor tenure system. Institutions may also limit student enrollments to preserve the perceived prestige and exclusivity of their degree offerings. For-profit providers of postsecondary education offer prospective students the greater flexibility and convenience of their institutions' programmatic offerings and learning structure and an emphasis on applied content and the use of technology in the delivery of the education. At the same time, the share of the postsecondary education market that has been captured by for-profit providers remains relatively small. As a result, we believe that in spite of regulatory and other challenges facing the industry, for-profit postsecondary education providers continue to have significant opportunities to address the demand for postsecondary education.
The majority of our degree-seeking students today have one or more non-traditional characteristics (e.g., did not enroll immediately after high school graduation, work full-time, are financially independent for purposes of financial aid eligibility, have dependents other than a spouse or are single parents). These non-traditional students typically are looking to improve their skills and enhance their earning potential within the context of their careers or in pursuit of new careers. As the industry has shifted to more students with non-traditional characteristics, an increasing proportion of colleges and universities are addressing the needs of working students. This includes colleges and universities with well-established brand names that were historically focused on traditional students.
ACCREDITATION, STATE REGULATION AND OTHER COMPLIANCE MATTERS
Institutional Accreditation
In the United States, accreditation is a process through which an institution subjects itself to qualitative review by an organization of peer institutions. Accrediting agencies primarily examine the academic quality of the instructional programs of an institution, and a grant of accreditation is viewed as confirmation that an institution’s programs meet generally accepted academic standards. Accrediting agencies also review the administrative and financial operations of the institutions they accredit to ensure that each institution has the resources to meet its educational mission.
Pursuant to provisions of the Higher Education Act, the Department relies on institutional accrediting agencies recognized by the Department to determine whether institutions’ educational programs qualify the institutions to participate in Title IV Programs. The Higher Education Act and its implementing regulations specify certain standards that all recognized accrediting agencies must adopt in connection with their review of postsecondary institutions.
All of our institutions are accredited by accrediting agencies recognized by ED. AIUS had a comprehensive evaluation in 2024, during which the Higher Learning Commission ("HLC") found that AIUS continued to meet HLC’s criteria for accreditation, with its next reaffirmation of accreditation scheduled for 2033-2034. CTU is scheduled for reaccreditation by HLC in 2032-2033. In addition, on December 2, 2024, we acquired USAHS. USAHS is accredited by the Western Association of Colleges and Schools Senior College and University Commission (“WSCUC”). USAHS’ next reaffirmation of accreditation is scheduled for 2027.
Institutional Accreditation Table
Institution, Main Campus Location (1)
Accreditor
Year of Accreditation Expiration (2)
American InterContinental University System
Chandler, AZ (Atlanta, GA and Houston, TX)
Higher Learning Commission
Colorado Technical University
Colorado Springs, CO (Denver, CO and Online)
Higher Learning Commission
University of St. Augustine for Health Sciences
San Marcos, CA (Miami, FL, St. Augustine, FL, Austin, TX, and Dallas, TX)
Western Association of Colleges and Schools Senior College and University Commission
___________________
(1)	Additional locations as defined by accreditors are in parenthesis.
(2)	Status as of February 18, 2025.
Programmatic Accreditation
In addition to the institutional accreditation described above, PEC institutions have specialized programmatic accreditations for particular educational programs. Many states and professional associations require professional programs to be accredited at a program level, and require individuals who must sit for professional license exams to have graduated from accredited programs. Programmatic accreditation does not satisfy the Department requirements to confer Title IV Program eligibility; however, it does provide additional academic quality review by peers in a given field and may enable or assist graduates to practice, sit for licensing or certification exams (in some cases) or otherwise secure appropriate employment in their chosen field. In addition to programmatic accreditation, some states have licensing boards which regulate who in a state is licensed to practice in a given profession.
Our universities pursue programmatic accreditation if that accreditation is required by employers or licensing bodies in order for a graduate to practice the profession or if it is required in order for a graduate to sit for a licensing or certification exam in order to practice or advance in the profession. In some cases, programmatic accreditation is sought because it is desired by employers and may enhance the ability of our graduates to compete for employment in their field.
Programmatic accreditation has been granted by the following accrediting agencies for the following degree program areas offered by our institutions.
Programmatic Accreditation Table (1)
Accreditor
Campus
Program Area Accredited (2)
ABET
Colorado Technical University, Colorado Springs
Electrical engineering and computer engineering
Accreditation Council for Business Schools and Programs
AIUS (all locations): American InterContinental University, California Southern University and Trident University International; Colorado Technical University (all locations)
Business
Accreditation Council for Occupational Therapy Education of the American Occupational Therapy Association
University of St. Augustine for Health Sciences (all locations)
Occupational Therapy
American Board of Physical Therapy Residency & Fellowship Education
University of St. Augustine for Health Sciences (all locations)
Clinical Orthopaedic Residency
Association for Advancing Quality in Education Preparation
AIUS/American InterContinental University, Chandler
Education
Commission on Accreditation in Physical Therapy Education
University of St. Augustine for Health Sciences (all locations)
Physical Therapy
Commission on Collegiate Nursing Education
AIUS/California Southern University, Chandler; Colorado Technical University, Colorado Springs; University of St. Augustine for Health Sciences, St. Augustine
Nursing
Council on Academic Accreditation in Audiology and Speech-Language Pathology
University of St. Augustine for Health Sciences (San Marcos, St. Augustine, Austin and Dallas)
Speech-Language Pathology
Project Management Institute Global Accreditation Center
Colorado Technical University (all locations)
Project management and business
____________________
(1)Status as of February 18, 2025.
(2)See the institutional website for a list of programs included in the approval.
State Regulation
State approval agencies are responsible for the oversight of educational institutions, and continued approval by such agencies is necessary for an institution to operate and grant degrees or certificates to its students. State laws establish standards for, among other things, student instruction, qualifications of faculty, location and nature of facilities, and financial policies. State laws and regulations may limit our campuses’ ability to operate or to award degrees or certificates or offer new programs. Moreover, under the Higher Education Act and federal regulations, approval by such agencies is necessary to maintain eligibility to participate in Title IV Programs. Currently, each of our campuses (ground-based and online) is authorized by the state in which it is located.
Additionally, CTU and AIUS meet state authorization requirements for their online activities via participation in a consortia program called the State Authorization Reciprocity Agreement (“SARA”).
SARA is an agreement among member states, districts and U.S. territories that establishes comparable national standards for interstate offering of postsecondary distance education courses and programs. States, districts and territories apply to become members of SARA (which, in many cases, requires action by the state legislature) and if accepted, institutions approved in their “home” state may apply to become participants in the SARA compact and the “home” state authorization is deemed acceptable to operate an online program in other states that also participate in SARA as long as they do not establish a “physical presence” in those other states (as defined by SARA). Forty-nine states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands are SARA participants (www.nc-sara.org). CTU and AIUS are approved to participate in SARA by their home states (Colorado and Arizona, respectively). California is the only state which is not a part of SARA; CTU and AIUS hold the appropriate approval in that state. AIUS also has licenses for its physical campus locations in Texas and Georgia. USAHS is licensed in its home state of California and the states of Florida and Texas where its physical campuses are located; in addition, USAHS maintains licenses or exemptions in each state which requires such licensure and where students are enrolled since it is not eligible to participate in SARA.
In addition to state education regulations, there are other state agencies that oversee regulations related to student financing, payment servicing and general consumer protection. In some cases, state laws and regulations require us to register the volume of payment plans our students enter into and/or require licenses for our institutions to collect student payments for the educational services they deliver.
Other Compliance Matters
On July 26, 2019, the Company executed a settlement agreement with the U.S. Federal Trade Commission ("FTC") to resolve an inquiry commenced by the FTC in 2015. While not admitting any wrongdoing, the Company chose to settle the FTC inquiry after almost four years of legal expenses and cooperating with the FTC’s investigation. Under the terms of the agreement with the FTC, the Company agreed to continue its compliance with the Federal Trade Commission Act and the Telemarketing and Consumer Fraud and Abuse Prevention Act, including compliance with the national do not call registry. The Company agreed to enhance its current operational and compliance processes with respect to prospective student expressions of interest, or “leads,” purchased from third party lead aggregators and generators and implement other agreed-upon compliance measures. Specifically, the agreement with the FTC requires the operation of a system to monitor third party lead aggregators and generators involving a compliance review by, or on behalf of, the Company of the various sources a prospective student interacts with prior to the Company’s purchase and use of the prospective student lead. In addition, the FTC Agreement contains requirements regarding employee and lead aggregator acknowledgements of the agreement, compliance certifications and record creation and maintenance. The principal provisions of the agreement with the FTC will remain in effect for twenty years.
See Item 1A, “Risk Factors - Risks Related to the Highly Regulated Field in Which We Operate - Our agreement with the FTC may lead to unexpected impacts on our student enrollments or higher than anticipated expenses, a failure to comply may lead to additional enforcement actions and continued scrutiny may result in additional costs or new enforcement actions,” for more information about these agreements.
STUDENT FINANCIAL AID AND RELATED FEDERAL REGULATION
A majority of our students require assistance in financing their education. Our institutions are approved to participate in the Department's Title IV federal aid programs. Our institutions also participate in a number of state financial aid programs, tuition assistance programs of the United States Armed Forces and other employers and education benefits administered by the Department of Veterans Affairs (“VA”). Our institutions that participate in federal and state financial aid programs are subject to extensive and frequently changing regulatory requirements imposed by federal and state government agencies, and other standards imposed by educational accrediting bodies.
Nature of Federal Support for Postsecondary Education in the United States
The U.S. government provides a substantial portion of its support for postsecondary education in the form of Title IV Program grants, loans and work-study programs to students who can use those funds to finance certain education related expenses at any institution that has been approved to participate by the Department. These federal programs are authorized by the Higher Education Act. While most students are eligible for a Title IV loan, typically, financial aid administered under Title IV is awarded on the basis of financial need, which is generally defined under the Higher Education Act as the difference between the costs associated with attending an institution and the amount a student’s family can reasonably be expected to contribute based on a federally determined formula. Among other things, recipients of Title IV Program funds must maintain a satisfactory grade point average and progress in a timely manner toward completion of their program of study.
Students at our institutions may receive grants, loans and work-study opportunities to fund their education under the Title IV Programs described in the sections below. In addition, some students at our institutions receive education related benefits pursuant to certain programs for veterans and military personnel or through participating in employer benefit programs, the most significant of which are described further below.
Federal Student and Parent Loans
The Department’s major form of aid includes loans to students and parents through the William D. Ford Federal Direct Loan (“Direct Loan”) Program. Direct Loans are loans made directly by the U.S. Government to students or their parents. The Direct Loan program offers Federal Direct Stafford, Federal Direct PLUS (which provides loans to parents of dependent students and to graduate or professional students, known as Parent PLUS and Grad PLUS) and Federal Direct Consolidation Loans.
Undergraduate students who have demonstrated financial need may be eligible to receive a Direct Subsidized Loan, with the Department paying the interest on this loan while the student is enrolled at least half-time in school. Graduate and undergraduate students who do not demonstrate financial need may be eligible to receive a Direct Unsubsidized Loan. Graduate/professional students may only receive Direct Unsubsidized Loans. With Direct Unsubsidized Loans the student is responsible for the interest while in school and after leaving school, although actual interest payments generally may be deferred by the student until after he or she has left school. Students who are eligible for a Direct Subsidized Loan may also be eligible to receive a Direct Unsubsidized Loan.
A student is not required to meet any specific credit scoring criteria to receive a Direct Loan, but historically, any student with a default on a prior loan made under any Title IV Program may not be eligible for new loans unless the default has been cured through repayment progress. Through a recent temporary student loan initiative announced on April 6, 2022, students that had previously defaulted on a student loan were temporarily eligible for new loans which increased the number of prospective students who were able to continue their education at one of our academic institutions. This initiative expired in October 2024. The Department has established maximum annual and aggregate borrowing limits for Direct Loans.
The Direct PLUS Loan Program provides loans to either the parents of dependent students or to graduate students. Parents and graduate students who have an acceptable credit history may borrow a Direct PLUS Loan to pay the education related expenses of a child who is a dependent or a graduate student enrolled at least half-time at our eligible institutions. The amount of a Direct PLUS Loan cannot exceed the student’s cost of attendance less all other financial aid received.
Federal Pell Grant and Federal Supplemental Educational Opportunity Grant
Title IV Program grants are generally made to our students under the Federal Pell Grant (“Pell Grant”) program and the Federal Supplemental Educational Opportunity Grant (“FSEOG”) program. The 2024-25 maximum annual Pell Grant is $7,395, excluding any additional amount awarded pursuant to a year-round Pell Grant. Beginning with the 2017-18 award year, eligible students may receive year-round Pell Grant funds. A year-round Pell Grant program allows students to receive up to 150% of the student’s regular award, allowing students to maintain their enrollment status and receive Pell Grant funds for up to two additional academic terms during an award year so that they can continue taking classes and work toward graduating more quickly. To be eligible for the additional Pell Grant funds, the student must be enrolled at least half-time in the payment period(s) for which the student receives the additional Pell Grant funds in excess of 100% of the student’s regular Pell Grant award.
The FSEOG program awards are designed to supplement Pell Grants up to a maximum amount of $4,000 per academic year for the neediest students. Our institutions are required to provide matching funding for FSEOG awards that represent not less than 25% of the total FSEOG award to be received by eligible students. The matching may be accomplished through institutional, private and/or state funds.
Federal Work-Study Program
Generally, under the federal work-study program, federal funds are used to pay 75% of the cost of part-time employment of eligible students to perform work for the institution or certain off-campus organizations. The remaining 25% is paid by the institution or the student’s employer. In select cases, these federal funds under the federal work-study program are used to pay up to 100% of the cost of part-time employment of eligible students.
Veterans Benefits Programs
Some of our students who are veterans use their benefits under the Montgomery GI Bill or the Post-9/11 Veterans Educational Assistance Act of 2008, as amended (“Post-9/11 GI Bill”), to cover their tuition. A certain number of our students are also eligible to receive funds from other education assistance programs administered by the VA.
The Yellow Ribbon program under the Post-9/11 GI Bill expanded education benefits for veterans who have served on active duty on or after September 11, 2001, including reservists and members of the National Guard. As originally passed, the Post-9/11 GI Bill provided that eligible veterans could receive benefits for tuition purposes up to the cost of in-state tuition at the most expensive public institution of higher education in the state where the veteran was enrolled. In addition, veterans who were enrolled in classroom-based programs or “blended programs” (programs that combine classroom learning and distance learning) could receive monthly housing stipends, while veterans enrolled in wholly distance-based programs were not entitled to a monthly housing stipend. The provisions regarding education benefits for post-9/11 veterans took effect August 1, 2009. The Post-9/11 GI Bill also increased the amount of education benefits available to eligible veterans under the pre-existing Montgomery GI Bill. The legislation also authorized expansion of service members’ ability to transfer veterans’ education benefits to family members.
On January 4, 2011, the Post-9/11 Veterans Educational Assistance Improvements Act of 2010 (“Improvements Act”) was adopted, which amends the Post-9/11 GI Bill in several respects. The Improvements Act alters the way benefits related to tuition and fees are calculated. For nonpublic U.S. institutions, the Improvements Act bases the benefits related to tuition and fees on the net cost to the student (after accounting for state and federal aid, scholarships, institutional aid, fee waivers, and similar assistance paid directly to the institution for the sole purpose of defraying tuition cost) rather than the charges established by the institution. The Improvements Act also replaced the state-dependent benefit cap with a single national cap which is adjusted annually and as of August 1, 2024, and effective through July 31, 2025, the national cap of academic year tuition and fee charges for private institution of higher learning is $28,937. In addition, veterans pursuing a program of education solely through distance learning on a more than half-time basis are eligible to receive up to 50% of the national average of the basic housing allowance available to service members who are at military pay grade E-5 and have dependents. Most “Improvements Act” changes took effect on August 1 or October 1, 2011, though changes to rules regarding eligibility for benefits were effective immediately or retroactively to the effective date of the Post-9/11 GI Bill. The Improvements Act did not change the Post-9/11 GI Bill’s provision that allows veterans to receive up to $1,000 per academic year for books, supplies, equipment and other education costs.
U.S. Military Tuition Assistance
Service members of the United States Armed Forces are eligible to receive tuition assistance from their branch of service through the Uniform Tuition Assistance Program of the Department of Defense (“DoD”). Service members may use this tuition assistance to pursue postsecondary degrees at postsecondary institutions that are accredited by accrediting agencies that are recognized by the Department. Each branch of the armed forces has established its own rules for the tuition assistance programs of DoD.
In 2010, both the U.S. Congress and DoD increased their focus on DoD tuition assistance that is used for distance education and programs at for-profit institutions. The DoD Voluntary Education Partnership Memorandum of Understanding (“MOU”) was established as part of the revised DoD Instruction 1322.25, Voluntary Education Programs dated March 15, 2011. The DoD updated the MOU in 2014 and 2019, in each case with enhanced requirements for institutions. The MOU requires that participating institutions provide meaningful information to students about the financial cost and attendance at an institution so military students can make informed decisions on where to attend school, not use unfair, deceptive, and abusive recruiting practices, and provide academic and student support services to service members and their families. It contains requirements regarding the disclosures of costs and amounts covered by federal educational benefits, marketing standards, state authorization, accreditation approvals, standard institutional refund policies, educational plans and academic and financial advising. The MOU also incorporates the development and implementation of the “VA Shopping Sheet,” a standardized cost form with federal aid information which has evolved into what is now referred to by the Department as the “College Financing Plan.” The MOU conveys the commitments and agreements between the educational institution and DoD prior to accepting funds under the tuition assistance program. For example, the MOU requires an institution to agree to support DoD regulatory guidance, adhere to a bill of rights that is specified in the regulations, and participate in the proposed Military Voluntary Education Review program. Under the MOU, institutions must also agree to adhere to the principles and criteria established by the Service Members Opportunity Colleges Degree Network System regarding the transferability of credit and the awarding of credit for military training and experience. CTU, AIUS and USAHS have signed each of the DoD’s standard MOUs. CTU and AIUS have signed most recently in July 2024, which is effective through 2029.
Institutional Payment Plans 	
Some of our students will enter into institutional payment plans with our institutions to pay a portion, or occasionally all, of their institutional charges directly to the school. This may occur for students who have a gap between Title IV financial aid funding and other third-party aid available to them and the institutional charges or for students who are enrolled in programs or courses for which Title IV or other financial aid is not offered. The payment period for these plans varies and includes payment periods during the in-school period as well as those extending up to 12 months beyond graduation. The payment plans do not charge interest.
Eligibility and Certification by the Department
Under the provisions of the Higher Education Act, an institution must apply to the Department for continued certification to participate in Title IV Programs at least every six years or when it undergoes a change of control. In addition, an institution must obtain the Department's approval for certain substantial changes in its operations, including changes in an institution’s accrediting agency or state authorizing agency or changes to an institution’s structure or certain basic educational features.
Institutions approved to participate in Title IV Programs sign a program participation agreement provided by the Department that describes the terms of participation and includes a number of certifications and assurances made by the head of the institutions. As long as an institution has submitted an application for re-certification at least ninety days prior to the expiration of its current program participation agreement, the institution’s eligibility to participate in Title IV Programs continues on a month-to-month basis until the Department completes its review. The Department may issue full certification to an institution, it may deny certification or it may elect to issue provisional certification, in which case the program participation agreement outlines additional requirements that the institution must meet.
The Department may place an institution on provisional certification status if it finds that the institution does not fully satisfy all required eligibility and certification standards. During the period of provisional certification, an institution must obtain prior Department approval to add an educational program, open a new location or make any other significant change. Provisional certification does not generally limit an institution’s access to Title IV Program funds. The Department may withdraw an institution’s provisional certification without advance notice if the Department determines that the institution is not fulfilling all material requirements.
In February 2025, both CTU and AIUS received renewals of their program participation agreements through June 30, 2027. Additionally, AIUS was removed from provisional certification, leaving both AIUS and CTU with full certification. Following the Trident acquisition and AIU’s implementation of a university system model, institutional accreditation and approval by the Department continues at the AIU System level. By March 31, 2027, CTU and AIUS will each be required to submit applications for recertification to continue participation in Title IV Programs.
As part of the standard change of ownership process, USAHS is operating under a temporary provisional program participation agreement as a result of PEC’s recent acquisition while the Department reviews all of the materials submitted as part of the change of
ownership application process. Pursuant to applicable regulations, if the change of ownership is approved, USAHS will then participate under provisional certification for up to three years.
In connection with its administration of Title IV Programs, the Department has broad powers to request information and review records of a participating institution. Since December 2021, the Company has responded to extensive requests for information from the Department's Investigation Group relating to CTU and AIUS. On January 17, 2025, the Department informed us that this inquiry that had spanned over three years was being closed. We were never provided with any explanation or basis for the information requests.
See Item 1A, “Risk Factors - Risks Related to the Highly Regulated Field in Which We Operate - “If the Department denies, or significantly conditions, recertification of any of our institutions to participate in Title IV Programs, that institution could not conduct its business as it is currently conducted,” and other risk factors in Item 1A for additional information about the risks surrounding continued participation in Title IV Programs.
Scrutiny of the For-Profit Postsecondary Education Sector
In recent years, Congress, the Department, states, accrediting agencies, the Consumer Financial Protection Bureau (“CFPB”), the FTC, state attorneys general, consumer advocacy groups and the media have all scrutinized the for-profit postsecondary education sector. Congressional hearings and roundtable discussions were held regarding various aspects of the education industry, including issues surrounding student debt as well as publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and reports were issued that are highly critical of for-profit colleges and universities. Many of the most highly criticized institutions have been closed now for several years. A group of influential U.S. senators, consumer advocacy groups and some media outlets have strongly and repeatedly encouraged the Department, DoD and the VA and its state approving agencies to take action to limit or terminate the participation of institutions such as ours in existing tuition assistance programs. In several cases, these groups have received significant financial support from third parties critical of our sector and have aligned on messaging that negatively impacts our sector during policy and rulemaking discussions. In addition, the Biden Administration made student loan forgiveness one of its top domestic policy objectives, and it was aggressively pursued by the Department in cooperation with special interest groups, other federal agencies, state attorney generals and others. These groups collectively focused efforts relating to student debt forgiveness on for-profit colleges and universities, encouraging loan discharge applications and complaints by former students. The loan discharge efforts culminated in an expansive loan forgiveness effort that resulted in the discharge of nearly $189 billion for 5.3 million borrowers. In our sector, these efforts specifically targeted any school that was no longer in operation, allowing the administration to make accusations supporting loan forgiveness to go unchallenged. Additionally, the Biden Administration agreed with activist groups to allow the approval of loan forgiveness without any supporting evidence as part of a legal settlement which vastly expanded the number of former students submitting applications without merit.
The November 2024 federal elections resulted in the election of a new President and Congress. We cannot predict the specific actions that the new Administration or Congress may take or their effect on the higher education sector, however the prior Trump administration focused significantly on a de-regulatory agenda and recent 2025 executive orders similarly call on all federal agencies to prioritize rescinding costly and burdensome regulations over the adoption of new regulation. The new Congress or Administration may delay, block, modify, or eliminate certain Title IV and other regulations applicable to higher education institutions. In addition, the new Administration may interpret, apply, and enforce Title IV and other regulations in a manner different from current Department guidance and practice. There have also been calls to dismantle or reorganize the Department. While we are not able to predict the likelihood of these changes, we expect that Title IV participation will continue to be heavily regulated. We expect to continue to need to operate nimbly, making necessary changes to the extent possible to comply with new rules or interpretations as well as new interpretations of existing rules.
Legislative Action and Recent Department Regulatory Initiatives
The U.S. Congress must periodically reauthorize the Higher Education Act and other laws governing Title IV Programs and annually determines the funding level for each Title IV Program.
The Higher Education Opportunity Act (“HEOA”) was the most recent reauthorization of the Higher Education Act and was signed into law on August 14, 2008. It revised many of the regulations governing an institution’s eligibility to participate in Title IV Programs.
Congress has subsequently taken several actions that effectively extend the Higher Education Act and various Title IV Programs on a temporary basis. Congress could work to reauthorize the Higher Education Act in its entirety, pass a series of smaller bills that focus on individual parts of the Higher Education Act, primarily Title IV Programs, or continue to extend existing Title IV Programs for more limited terms while continuing debate on broader policy objectives. Ongoing policy differences in Congress, a majority of which concern spending levels, could lead to significant regulatory changes in connection with any reauthorization of the Higher Education Act or the funding of Title IV Programs generally. A recent proposal from Congress included significantly different obligations for institutions, including a sharing of the financial risks for students that do not repay their student loans, the elimination of Parent and Graduate PLUS loans for new borrowers, and replacement of current annual loan limits with a new system based on the
median cost of attendance by program of study. Additionally, legislative changes impacting Title IV Programs is included in broader legislation from time to time and a number of proposals are currently part of ongoing discussions between the White House and Congress regarding the federal budget.
See Item 1A, “Risk Factors - Risks Related to the Highly Regulated Field in Which We Operate - The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult."
There continues to be significant uncertainty around the requirements and approach to handling applications for “borrower defense to repayment” due to a series of rulemakings and competing regulations published in 2016, 2019 and again in 2022 along with a number of legal challenges of those rulemakings and the Department's application of these rules to select institutions. See the “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” section below for a description of these regulations. The Department published its latest version of these rules in final regulations on November 1, 2022 in the Federal Register, with the updated regulations effective July 1, 2023; however a pending legal challenge by a group of schools in Texas has resulted in a stay of aspects of the rule’s effectiveness pending judicial review (see “Negotiated Rulemaking 2022: Affordability and Student Loans” below).
Negotiated Rulemaking 2022: Affordability and Student Loans
In December 2021, the Department concluded negotiated rulemaking on a number of topics related to affordability and student loans. The topics discussed during these negotiations generally related to different Title IV regulations that impact the Department’s ability to discharge student loans. During the process, the Department expressed a goal of making it easier for students to have their loans discharged or forgiven and providing more favorable loan repayment terms. The Department also intends to make it easier to seek recovery of discharged loan funds from institutions. After taking public comment on proposed rules, the Department published final regulations on November 1, 2022 in the Federal Register, which means these regulations were generally effective on July 1, 2023, subject to a court imposed stay discussed below.
These new regulations from the November 1, 2022 Final Rule include the following topics:
•discharges for borrowers with a total and permanent disability;
•eliminating certain interest capitalization events not required by statute;
•discharges for when a school falsely certifies a student was eligible for Title IV Program financial aid;
•closed school loan discharges;
•expanding and simplifying public service loan forgiveness;
•modifying the bases for borrower defense to repayment ("BDR") claims as well as the adjudication processes for student claims;
•modifying the procedures for recovering funds from schools for loans discharged pursuant to the borrower defense to repayment process; and
•prohibiting schools from adopting or enforcing pre-dispute arbitration agreements and waivers of class action lawsuits.
As published, these rules remove certain barriers and simplify the process for borrowers with a total and permanent disability and borrowers seeking public service loan forgiveness. The rules also expand closed school loan discharge provisions. The rules reduce the required supporting evidence and related obligations of students applying for BDR loan forgiveness, expand the categories students could raise in a BDR application, and provide the Department wide latitude to selectively adjudicate future BDR applications without affording institutions adequate opportunity to respond and potentially without regard to the individual merits of the BDR applications.
On August 22, 2023, the Department announced a new, more generous income driven repayment ("IDR") plan for student borrowers called the Saving on a Valuable Education (“SAVE”) plan. The SAVE plan was one of the 2022 negotiated rulemaking topics. The modified IDR plan calculates payments based on a borrower’s income and family size and not the loan balance and forgives outstanding balances after a certain number of years. The plan reduces many borrowers’ monthly payments to zero if their income level does not exceed certain levels. While the plan is intended to reduce the impact of prolonged student debt burdens, the plan is also likely to encourage some portion of students to take on more student loan debt than they might otherwise borrow assuming they will be able to have excess loan borrowing forgiven rather than having to repay what they have borrowed. On March 28, 2024, a coalition of eleven states filed a lawsuit, Kansas v. Biden, challenging the SAVE plan in the U.S. District Court for the District of Kansas. On April 8, 2024, a coalition of seven states filed a second lawsuit, Missouri v. Biden, to invalidate the plan. In August 2024, the Eighth Circuit in Missouri v, Biden upheld the district court order and affirmed a preliminary injunction against the Department preventing the Department from providing forgiveness of principal or interest, not charging borrowers accrued interest and implementing the payment-threshold provisions of the SAVE plan.
We continue to closely monitor the Department’s public statements, legal filings, and other communications, but are unable to determine the ultimate impact of any final regulations on our business at this time. See Item 1A, “Risk Factors - Risks Related to the Highly Regulated Field in Which We Operate - The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult," for information about the potential impact of new regulations on our business.
Negotiated Rulemaking 2022: Institutional and Programmatic Eligibility
On October 4, 2021, the Department announced its intent to establish another negotiated rulemaking committee to develop proposed regulations related to institutional and programmatic eligibility. Negotiating sessions of the institutional and programmatic eligibility negotiated rulemaking committee were held in January, February and March 2022. The Department provided issue papers that revealed its intent to impose a number of additional obligations for schools and programs to remain eligible for Title IV funds.
On July 28, 2022, the Department published in the Federal Register another set of proposed regulations for public comment covering a topic that was part of the 2021 affordability and student loan negotiations along with two topics that were part of the 2022 institutional and programmatic eligibility negotiations. After public comment on proposed rules, the Department published final regulations on October 28, 2022 in the Federal Register, which means these regulations became effective July 1, 2023.
The new regulations from the October 28, 2022 Final Rule include the following topics:
•adopting new regulations to calculate the percentage of a for-profit school’s revenue that is derived from federal education assistance, referred to as the “90-10 Rule”;
•placing additional requirements and limits on changes of ownership or control; and
•Pell Grant eligibility for prison education programs.
The American Rescue Plan Act of 2021 (H.R.1319), passed on March 11, 2021, amended the Higher Education Act requirement of the 90-10 Rule that for-profit schools derive no more than 90% of their tuition and fee revenue from Title IV funds to require that for-profit schools derive no more than 90% of their tuition and fee revenue from generally any identifiable sources of federal funding. The regulation describing the new 90-10 Rule includes an expanded view of what federal aid is considered “federal educational assistance funds” under the rule, and is intended to include any identifiable revenue a school receives from tuition assistance programs offered by federal agencies, such as the Departments of Defense, Veterans Affairs, and Labor. The new rule also includes a number of technical changes, including a departure from the historical focus on cash basis revenue and existing Title IV Program cash management regulations. For example, in certain instances, institutions would be required to accelerate the receipt of, or would be deemed to have received, federal funds not received at the end of the annual measurement period. Although the Department published regulations in its Final Rule that are consistent with the consensus language reached during negotiated rulemaking, the Department included in the preamble to the regulation a number of interpretations that are likely not consistent with the consensus language and may potentially narrow and/or limit non-federal revenue that may be included by institutions in their annual calculations. These interpretations were offered with limited explanation and are expected to make future compliance with these regulations unclear and therefore more difficult for for-profit institutions.
We are continuing to monitor the Department’s interpretations, public statements, and other communications and have had to make adjustments in our operations in response to these new rules. See Item 1A, "Risk Factors - Risks Related to the Highly Regulated Field in Which We Operate - The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult," and "Our institutions could lose their eligibility to participate in federal student financial aid programs, face limitations on their ability to serve new or former students or have other limitations placed upon them if the percentage of their revenues derived from certain federal programs is too high," for information about the potential impact of new regulations on our business.
2023 Negotiated Rulemakings:
On May 19, 2023, the Department published a Notice of Proposed Rulemaking for the following rules:
•Gainful Employment ("GE");
•Financial Value Transparency ("FVT");
•Financial Responsibility;
•Administrative Capability;
•Certification Procedures; and
•Ability to Benefit ("ATB").
Additionally, the Department published a Notice of Proposed Rulemaking for regulations related to student loan debt relief on April 17, 2024. The Department published a second Notice of Proposed Rulemaking for regulations related to student loan debt relief (hardship) on October 31, 2024.
GE and FVT Negotiated Rulemaking
The 2021-2022 Negotiated Rulemaking Committee included rulemaking to re-adopt a new version of the gainful employment regulation (see “Negotiated Rulemaking 2022: Institutional and Programmatic Eligibility” above). A prior Department rulemaking effort in 2019 during the first Trump Administration resulted in the rescission of similar “gainful employment” regulations first adopted in 2015. Our institutions, and most other for-profit institutions, qualify for Title IV Program participation on the basis that they offer programs that, in addition to meeting other requirements, “prepare students for gainful employment in a recognized occupation.” On October 30, 2014, the Obama Administration published a new complex final regulation, effective July 1, 2015, to define “gainful employment” as meeting certain standards measuring the general amount students borrow for enrollment in a program against an amount of their reported earnings. In 2019, through new negotiated rulemaking sessions, the first Trump Administration considered different options for adopting a uniform set of requirements that could be applicable to all schools and not specifically targeted at for-profit institutions. After a public comment period on its proposal, the Department published a final regulation on July 1, 2019 to rescind the 2015 gainful employment regulation effective on July 1, 2020. In lieu of the complex gainful employment regulation designed to eliminate program eligibility, the Department continued to update the college scorecards it developed, which apply to all Title IV eligible institutions, with relevant information for prospective students. While the eligibility tests and disclosures associated with the 2015 gainful employment regulation were no longer required, the term “gainful employment” continues to exist in the Higher Education Act and CTU’s, AIUS’ and USAHS' Title IV eligible programs will continue to need to be career focused educational programs.
Following public comment on the 2023 proposed rules, on October 10, 2023, the Biden Administration published final regulations for a new GE rule. The new GE rule includes an eligibility framework that imposes additional requirements on for-profit sector programs, including our schools. The regulation uses two key metrics: Debt-to-Earnings (“D/E”) and Earnings Premium (“EP”) metrics to determine whether a program prepares students for gainful employment. The D/E metrics measure student debt at a program level against a measure of earnings. The EP metric measures student earnings at a program level against working individuals with a high school diploma or equivalent. GE programs that fail either the D/E or the EP metric in two of three consecutive years will lose Title IV eligibility. Programs offered by AIUS, CTU and USAHS are subject to the GE rule and could lose Title IV eligibility if their programs fail to pass the D/E rates and/or the EP measures. The rule also requires our institutions to warn current and prospective students if a program fails any metric in any year. The issuance of required GE warnings could deter prospective students from enrolling at our institutions and current students from continuing in their programs. Significantly, the 2023 GE rule is retroactive in its measurements, looking at data dating back many years to determine a program’s future eligibility and provides no opportunity for institutions to adopt changes that impact these eligibility metrics. It is also unclear whether and to what extent these metrics may be adversely impacted by the state and federally mandated business closures during the COVID pandemic and the general economic downturn and job loss that resulted from it.
The FVT regulation establishes a framework that is designed to increase the quality and availability of information provided directly to students about the costs, sources of financial aid, and outcomes of students enrolled in all Title IV eligible programs. FVT disclosures apply to only certain Title IV eligible programs offered by all institutions and use the same D/E and EP metrics as the GE framework. While the FVT regulations do not contemplate penalties or sanctions as under the GE rule, the regulations require that current and prospective students be provided relevant disclosures and acknowledge when an educational program is associated with a high debt burden.
On December 22, 2023, the American Association of Cosmetology Schools (“AACS”) filed a lawsuit in the U.S. District Court for the Northern District of Texas challenging the GE rule. AACS initiated the lawsuit in an effort to set aside the GE rule on the grounds that it violates the U.S. Constitution and the Administrative Procedure Act and exceeds the Department’s authority under the laws passed by Congress. On March 20, 2024, Ogle School Management, LLC and Triocci University of Beauty Culture, LLC filed a second lawsuit U.S. District Court for the Northern District of Texas seeking to invalidate the rule. On February 10, 2025, the Department of Justice filed a Consent Motion to Stay Proceedings for 90 days to allow incoming officials in the new Administration to familiarize themselves with the challenged regulations and potentially reevaluate them in order to ensure that any additional filings in the case are in accord with the Administration’s policy. The Department further indicated that due to “a number of technical and operational complexities,” the Department currently estimates that the first year’s metrics could not be issued before early fall 2025.
The GE and FVT rules became effective on July 1, 2024. A ‘Fact Sheet’ subsequently released by the Department announced that the first official metrics would be released by early 2025. Administrative and legal challenges to the rollout of the GE and FVT rules have led to delays to the required reporting timelines. A reporting deadline of January 15, 2025 was defined by repeated reports of system glitches and error reports from schools across the country, with many institutions unable to submit data at all. As a result, the Department reopened its debt reporting window to February 18, 2025. On February 14, 2025, the Department further extended the reporting deadline for evaluating completers’ lists and reporting data associated with Financial Value Transparency and Gainful Employment (FVT/GE) until September 30, 2025. The Department further noted that it does not plan to produce any FVT/GE metrics
prior to the new deadline and will take no enforcement or other punitive actions against institutions who have been unable to complete reporting to date.
If the Department publishes initial rates by late 2025, presumably the second round of rates would be at some time in the second half of 2026. Programs may be deemed ineligible to participate in Title IV programs as of the second round of rates would need to fail in 2 of 3 reporting years. We are unsure if or when the Administration or the pending legal challenges will provide further changes to the rule and or timelines. A loss or material reduction in eligible Title IV programs due to the GE rule would materially impact our student enrollments and profitability. We are continuing to evaluate the regulation, but given the complexity of the rules and the lack of our access to, and the lack of the Department providing transparency regarding, the earnings data used to calculate the metrics, we are unable to determine the ultimate impact of the regulation on our business at this time.
Financial Responsibility Negotiated Rulemaking
On October 31, 2023, the Department published new regulations on financial responsibility that became effective July 1, 2024. The Financial Responsibility regulations, among other things, significantly modify and expand the mandatory and discretionary triggering events that require an institution to post a letter of credit or other form of financial protection with the Department. The rule provides that a separate letter of credit of not less than 10% of the institution’s prior year Title IV receipts is required for each mandatory event or discretionary triggering event as determined by the Department in its discretion, such that multiple triggering events could subject our institutions to substantial cumulative financial protection obligations.
Examples of mandatory triggering events in the rule include: lawsuits by federal or state authorities to impose an injunction, to establish fines or penalties, or to obtain financial relief, or in a qui tam action in which the federal government has intervened, subject to certain timing requirements; an action by the Department to recover from the institution for adjudicated borrower defense to repayment claims where the potential amount of recovery would cause the institution’s recalculated composite score to drop below 1.0; the institution has received at least 50% of its Title IV funds in its most recently completed fiscal year programs that are failing the GE rule; the institution is required to submit a teach-out plan by a state or federal agency, an accrediting agency, or other oversight body for reasons related to financial concerns; for an institution owned at least 50% by a publicly traded entity, the entity is subject to certain actions or events specified in the rule initiated by the Securities and Exchange Commission; the institution fails the 90-10 rule for its most recently completed fiscal year; and, the institution is subject to a default or other adverse condition under a line of credit, loan agreement, security agreement or other financing arrangement due to an action by the Department.
Specified discretionary triggers would provide the Department flexibility on whether to require a letter of credit based on the adverse financial impact the triggering event would have on the institution. Examples of discretionary triggers include: an accrediting agency or a federal, state, or other authority places the institution on probation, show cause, or comparable status; the institution is subject to a default or other specified adverse condition under a credit or financing arrangement (unless due to an action by the Department, which is a mandatory trigger); a “significant fluctuation” in Direct Loan or Pell Grant funds received by the institution over different award years that cannot be accounted for by changes in those programs; the institution has high annual dropout rates as calculated by the Department; the institution is under prior financial reporting obligations to the Department and has any of the following occurrences: negative cash flows, failure of other financial ratios, cash flows that significantly miss projections submitted to the Department, significant increases in withdrawal rates or other indicators of a significant change in the institution’s financial condition; pending group-process BDR claims; a discontinuation of programs that enroll more than 25% of the institution’s students who receive Title IV funds; a closure of locations that enroll more than 25% of its students who receive Title IV funds; a citation by a state licensing agency for failing to meet its requirements; the institution or a program loses eligibility to participate in another federal educational assistance program due to an administrative action; for an institution owned at least 50% by a publicly traded entity, a disclosure by the entity in a public filing that its owner is under investigation for possible violations of state, federal or foreign law; a citation and potential loss of education assistance funds from another federal agency if it does not comply with agency requirements; the institution is required to submit a teach-out plan or agreement, including programmatic teach-outs, by a state, the Department or another federal agency, an accrediting agency, or other oversight body; or any other event or condition that the Department learns about from the institution or other parties where the Department determines that the event or condition is likely to have a significant adverse effect on the financial condition of the institution.
The new rule also adds additional circumstances that would deem an institution to lack financial responsibility, such as: failing to make debt payments for more than 90 days; failing to meet payroll obligations; borrowing from employee retirement plans or restricted funds without authorization; failing to make timely refunds or returns of Title IV funds or pay Title IV credit balances; or failing to make repayments of any Title IV liabilities. Finally, the regulations establish new rules for evaluating financial responsibility during a change in ownership.
Administrative Capability Negotiated Rulemaking
The Department regulations specify extensive criteria that an institution must satisfy to establish that it has the requisite administrative capability to participate in Title IV Programs. These criteria relate to, among other things, institutional staffing, operational standards such as procedures for disbursing and safeguarding Title IV Program funds, timely submission of accurate reports to the Department and various other procedural matters. If an institution fails to satisfy any of the Department’s criteria for
administrative capability, the Department may require the repayment of Title IV Program funds disbursed by the institution, place the institution on provisional certification status, require the institution to receive Title IV Program funds under another funding arrangement, impose fines or limit or terminate the participation of the institution in Title IV Programs.
On October 31, 2023, the Department published new regulations on administrative capability (the "Administrative Capability" regulations) that became effective July 1, 2024. The Administrative Capability regulations expand the requirements for institutions to demonstrate that they are administratively capable of providing the education they promise and of properly managing Title IV program funds, adding new standards related to financial counseling and career services, adequate clinical and externship opportunities, timely disbursement of Title IV funds, compliance with high school diploma verification requirements, aggressive and deceptive recruitment tactics or conduct, gainful employment requirements, and significant negative actions by a federal, state or accreditation agencies. The changes also provide the Department with increased and explicit authority to make an administrative capability finding based on a broader set of issues than it has used historically. Such findings could lead to fines, limitations, suspensions, terminations or other actions, including placing the institution on a provisional program participation agreement or heightened cash monitoring.
Certification Procedures Negotiated Rulemaking
On October 31, 2023, the Department published new regulations on certification procedures (the "Certification" rule) that became effective July 1, 2024. The revised Certification rule provides a more rigorous process for certifying institutions to participate in the Title IV programs, both initially and on an ongoing basis. The changes increase the Department’s oversight of institutions at critical points of institutional review including initial certification, during provisional certification, after a change of ownership, at recertification, and when there is a risk of closure.
This rule adds additional events that lead to provisional certification, such as if an institution is required to post a letter of credit because of a mandatory or discretionary triggers in the financial responsibility regulations, the Department determines the institution is at risk of closure, or the institution fails the 90-10 rule. It establishes new supplementary performance measures the Department may consider in determining whether to certify or condition the participation of the institution, such as withdrawal rates, the amount of educational and pre-enrollment expenditures, and licensure pass rates where the institution is required by an accrediting agency or state to report licensure exam passage rates.
The changes add a provision to include all federal agencies and add state attorneys general to the list of entities that have the authority to share with each other and the Department any information pertaining to an institution’s eligibility for or participation in Title IV programs or any information on fraud, abuse, or other violations of law.
The regulations establish a non-exhaustive list of conditions that the Department may apply to provisionally certified institutions, such as the submission of teach-out plans, the release of holds on student transcripts, restrictions or limitations on the addition of new programs or locations, requirements related to enrollment in programs that lead to state licensure, restrictions on growth in enrollments or Title IV volume, restrictions on the ability to provide a teach-out on behalf of another institution, restrictions on the acquisition of other institutions, additional financial reporting requirements, and limitations on entering into written arrangements with other institutions for the provision of educational instruction.
Finally, the new rule requires provisionally certified schools that have major consumer protection issues to recertify after no more than three years. For institutions alleged or found to have engaged in misrepresentation, aggressive recruiting, or incentive compensation violations, the Department may require that the institution engage a monitor and submit marketing materials to the Department for its review and approval.
Student Loan Debt Relief Negotiated Rulemaking
On August 31, 2023, the Department issued a notice of its intent to establish a Student Loan Debt Relief negotiated rulemaking committee to prepare proposed regulations for the federal student aid programs authorized under the Higher Education Act. As part of this rulemaking, the Department considered revisions to its federal student loan compromise regulations, as well as adding regulations on the circumstances under which the Department may waive or release all or part of federal student loan debts. On October 31, 2024, the Department published a Notice of Proposed Rulemaking on student debt relief based on hardship. On December 26, 2024, the Department withdrew its notice of proposed rulemaking for both rules.
2024 Negotiated Rulemaking
The Department convened a negotiating committee to develop proposed regulations pertaining to the following topics:
•The Federal TRIO programs;
•The Secretary's recognition of accrediting agencies;
•State authorization;
•Return to Title IV funds ("R2T4");
•Cash Management; and
•The definition of "distance education" as it pertains to clock hour programs and reporting for students who enroll primarily online.
This committee met in January, February and March 2024. On July 24, 2024, the Department published its Proposed Rule addressing distance education, R2T4 and Federal TRIO programs. The regulations were intended to help the Department improve its oversight of distance education and correspondence programs, and increase the accuracy of its R2T4 calculations. On December 30, 2024, the Department published final rules on distance education and R2T4, which rules would not become effective until July 1, 2026. On December 20, 2024, the Department terminated the negotiated rulemaking process for state authorization, cash management, and accreditation. We continue to closely monitor the Department’s rulemaking agenda, but we are unable to determine the potential impact of any future rule proposals or final regulations on our business at this time.
2024 Final Regulations - Summary
Return to Title IV Funds
In the final rule, the Department abandoned its proposal to require institutions to take attendance for every course offered by distance education. The Department also dropped its proposal to permit students who received a student loan credit balance refund, but who never began attendance, to repay the loan according to the terms of the promissory note.
The new rule retains other proposed provisions, including an optional exemption from performing an R2T4 calculation for institutions with generous tuition refund policies, defined as treating withdrawn students as though they had never begun attendance; returning all Title IV aid and refunding all institution charges for the payment period or period of enrollment; and writing off any balance due for the payment period or period of enrollment (changed from the proposed rule where the Department required writing off balances for the “current year”) in which the withdrawal occurred.
The Department chose to retain its proposal to codify longstanding guidance that, for institutions required to take attendance, the date of determination of withdrawal must be documented within 14 days after the student’s last date of attendance.
The new rule includes a change to how the R2T4 calculation is performed for programs offered in modules, specifically with respect to establishing a “freeze date” to determine the number of days in a payment period for these programs. In place of the freeze date, the rules will now consider a module part of the payment period for R2T4 calculation purposes only if the student began attendance in that module.
Distance Education
The final rules do not include a proposal to report distance education programs as “additional virtual locations” but, retained a new definition for “distance education course,” with slight changes from the proposal.
TRIO Programs
The Department chose not to finalize any of the TRIO rule changes proposed in July, which would have expanded eligibility for the Talent Search, Upward Bound, and Educational Opportunity Center to noncitizen students enrolled or seeking to enroll in a high school in the U.S., its territories, or the Freely Associated States.
See Item 1A, “Risk Factors - Risks Related to the Highly Regulated Field in Which We Operate - The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult," for information about the potential impact of new regulations on our business.
The Department’s proposed and final rules discussed above impose additional burdens on academic institutions, and often apply unevenly. For example, the 90-10 Rule is an additional annual eligibility test requirement that applies exclusively to for-profit sector institutions. The GE rule is designed to primarily impose additional requirements on for-profit sector programs and many of the proposed modifications to other long standing existing rules contain new requirements that apply exclusively to for-profit sector institutions and their ownership structures. The previously adopted and rescinded GE regulation is discussed above in this “Legislative Action and Recent Department Regulatory Initiatives” section, and see the “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” section below for an overview of the current rules relating to the 90-10 Rule, change of ownership or control, financial responsibility and administrative capability.
Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations
To be eligible to participate in Title IV Programs, an institution must comply with the Higher Education Act and regulations thereunder that are administered by the Department. We and our institutions are regularly subject to audits and compliance reviews and periodically subject to inquiries, lawsuits, investigations, and/or claims of non-compliance from federal and state regulatory agencies, accrediting agencies, the Department, based on claims by present and former students and employees, and others that may
allege violations of statutes, regulations, accreditation standards or other regulatory requirements applicable to us or our institutions. If the results of any such audits, reviews, investigations, claims or actions are unfavorable to us, we may be required to pay monetary damages or be subject to fines, operational limitations, loss of federal funding, injunctions, additional oversight and reporting, provisional certification or other civil or criminal penalties. In addition, if the Department or another regulatory agency determined that one of our institutions improperly disbursed Title IV Program funds or violated a provision of the Higher Education Act or the Department’s regulations, that institution could be required to repay such funds, and could be assessed an administrative fine.
The Higher Education Act also requires that an institution’s administration of Title IV Program funds be audited annually by an independent accounting firm and that the resulting audit report be submitted to the Department for review. In May 2023, the Department’s Office of Inspector General (“OIG”) released a revised audit guide applicable specifically to proprietary schools and third-party servicers administering Title IV programs. The updated guide is effective for fiscal years beginning after January 1, 2023. The revised audit guide was effective for us for the year ending December 31, 2023 and applies to annual compliance audits due June 30, 2024 and thereafter. The new guide increases the requirements and testing procedures necessary when filing our annual Title IV compliance audits.
“90-10 Rule”
Under a provision of the Higher Education Act commonly referred to as the “90-10 Rule,” any of our institutions that, on modified cash basis accounting, derives more than 90% of its cash receipts from federal sources for a fiscal year will be placed on provisional participation status for its next two fiscal years, is required to provide warning notices to students regarding the potential loss of Title IV and would be required to post a letter of credit with the Department. If an institution does not satisfy the 90-10 Rule for two consecutive fiscal years, it will lose its eligibility to participate in Title IV Programs for at least two fiscal years. We have essentially no control over the amount of federal funding sought by or awarded to our students. If an institution violates the 90-10 Rule and becomes ineligible to participate in Title IV Programs but continues to disburse Title IV Program funds, the Department could require repayment of all Title IV Program funds received by it after the effective date of the loss of eligibility
We have implemented various measures intended to reduce the percentage of our institution’s 90-10 revenue attributable to federal Program funds, including emphasizing employer-paid and other direct-pay education programs such as our corporate engagements, diversifying our educational offerings to increase the portion of our students who do not rely on Title IV Programs, recruitment of international students, the use of externally funded scholarships and grants and counseling students to carefully evaluate the amount of necessary Title IV Program borrowing consistent with Department regulations and guidance.
As discussed above in “Legislative Action and Recent Department Regulatory Initiatives," the calculation beginning with the 2023 fiscal year was calculated using the new calculation. We have preliminarily calculated the 90-10 rates for the year ended December 31, 2024 and AIUS, CTU and USAHS are all in compliance with the 90-10 Rule. The preliminary calculations for AIUS and CTU show improvement from the prior year. The new 90-10 Rule requires a much greater level of granularity and research of different fund sources to determine whether there may be an indirect and otherwise unobvious federal connection. While our preliminary calculations of the 90-10 rates for 2024 show our institutions continue to be in compliance, we are continuing our review of the applicable requirements and audit of our 2024 rates.
On December 21, 2022, the Department published in the Federal Register the list of sources of Federal Education Assistance to be included as “federal educational assistance” under the revised rule. This publication confirmed that government education assistance for military or veteran personnel is considered “federal educational assistance.” Furthermore, the Department indicates that the list is not all encompassing as certain non-federal entities may sub-grant award funds under various names, and that it is up to each institution to determine if there are federal funds included in amounts received from students or other funding sources, and the precise federal and non-federal breakdown in instances where funds may be co-mingled. The result makes compliance with the revised rule more difficult if not impossible in some cases, as well as adding additional layers of complexity for institutions to calculate a rate under the new rules.
The ability of our institutions to maintain 90-10 rates below 90% will depend on the impact of future changes in our student enrollment mix, and Department regulations and guidance and other factors outside of our control. In addition, disagreements with, changes in, or new interpretations of, the technical aspects of the calculation methodology or other industry practices under the 90-10 Rule could further significantly impact our compliance with the 90-10 Rule.
See Item 1A, “Risk Factors - Risks Related to the Highly Regulated Field in Which We Operate - Our institutions could lose their eligibility to participate in federal student financial aid programs, face limitations on their ability to serve new or former students or have other limitations placed upon them if the percentage of their revenues derived from certain federal programs is too high," for additional information regarding risks relating to the 90-10 Rule.
Student Loan Default Rates
An institution may lose eligibility to participate in some or all Title IV Programs if the rates at which its former students default on the repayment of their federally-guaranteed or federally-funded student loans exceed specified percentages. This is determined by an institution’s cohort default rate which is calculated on an annual basis as a measure of administrative capability. Each cohort is the
group of students who first enter into student loan repayment during a federal fiscal year (ending September 30 of each year). An institution’s cohort default rate is calculated as the percentage of borrowers who entered repayment in the relevant federal fiscal year who default before the end of the second fiscal year following the fiscal year in which the borrowers entered repayment. This represents a three-year measurement period.
If an institution’s three-year cohort default rate exceeds 10% for any one of the three preceding years, it must delay for 30 days the release of the first disbursement of U.S. federal student loan proceeds to first time borrowers enrolled in the first year of an undergraduate program. As a matter of regular practice, our institutions have implemented a 30-day delay for such disbursements.
If an institution’s three-year cohort default rate exceeds 30% for any given year, it must establish a default prevention task force and develop a default prevention plan with measurable objectives for improving the cohort default rate.
Excessive three-year cohort default rates will result in the loss of an institution’s Title IV eligibility, as follows:
•	Annual test. If the three-year cohort default rate for any given year exceeds 40%, the institution will cease to be eligible to participate in Title IV Programs; and
•	Three consecutive years test. If the institution’s three-year cohort default rate exceeds 30% for three consecutive years, the institution will cease to be eligible to participate in Title IV Programs.
We have initiatives aimed at reducing the likelihood of our students’ failure to repay their loans in a timely manner. These initiatives emphasize the importance of students’ compliance with loan repayment requirements and provide for loan counseling and communication with students after they cease enrollment. Our efforts supplement the counseling, processing and other student loan servicing work performed by the Department through contracts it has with select third parties. The quality and nature of the student loan servicing work performed by the Department has a direct impact on our cohort default rates and we have experienced past performance failures by the Department and its student loan servicers in outreach to students.
As part of the CARES Act, which was signed into law on March 27, 2020, federal student loan payments and interest were suspended for a period of time. Ultimately, student loan repayment started up again in October 2023, while interest began accruing on those loans as of September 1, 2023. During the suspended period, student loan borrowers had their loans placed in forbearance, and as such, were no longer required to make payments on their federal student loans. Consequently, no further defaults could occur during this period. Based on this forbearance, and more specifically the timing of it, we have seen a favorable impact on the CDR rates starting with the 2018 rates. We believe this favorability will at least continue through the 2023 cohort default rates, and expect the rates through the 2022 cohort to be at or near zero percent and 2023 to be under 10%.
In September 2024, the Department released the official three-year cohort default rates for the 2021 cohort which was 0% for all our academic institutions. A listing of the official 2021, 2020 and 2019 three-year cohort default rates for our institutions is provided in the table below.
Cohort Default Rates
3-year rate
Institution, Main Campus Location
(Additional locations as defined by accreditors are in parentheses)
American InterContinental University (1)
Chandler, AZ (Online) (Atlanta, GA and Houston, TX)
0.0%
0.0%
4.4%
Colorado Technical University
Colorado Springs, CO (Denver, CO and Online)
0.0%
0.0%
4.3%
University of St. Augustine for Health Sciences
San Marcos, CA (St. Augustine and Miami, FL and Austin and Dallas, TX)
0.0%
0.1%
0.1%
______________________
(1)Trident University students who entered repayment on or after March 2, 2020, will begin to be included in the American InterContinental University cohort default rates starting with the 2020 cohort.
With the forbearance period having ended in October 2023, and interest once again accruing on these loans, all students were encouraged to resume their next normally scheduled payment in October 2023. To assist with the resumption of loan repayment after a long hiatus, the Department issued an “on-ramp” program, which would not penalize students even if they failed to make the required payments for one year. As students become delinquent, they will automatically be redesignated by the Department’s loan servicers as in good standing up through September 2024. Separately, with the resumption of repayment in October 2023, borrowers have experienced numerous issues, such as having a new servicer to make payments to, not receiving or receiving incorrect information on their payment, and significantly long wait times to get through to the servicers.
Furthermore, with the resumption of repayment, the Department also implemented a new repayment option called the “SAVE” plan. This plan was designed to generally be more favorable than all the other existing repayment plans, eliminating several options
and therefore simplifying the repayment choices for borrowers. On July 28, 2024, this new income-based repayment plan had been paused by a federal appeals court. There are two legal challenges currently on-going against the “SAVE” plan. It is unclear what the outcome of the legal challenges will be, and what repayment options will be available to students should the legal challenge be successful. Under this new plan, starting with the October repayment resumption, among other benefits, many more borrowers would have been eligible for a zero-dollar repayment amount. Starting in July 2024, many borrowers with a repayment amount greater than zero would have been eligible for a new, significantly reduced payment amount. Most borrowers, not already in an income-based repayment plan, would need to actively sign up for this new repayment plan with their federal loan servicer. Currently, students who have signed up for this new repayment plan have been place in an interest free forbearance, where they are not required to make any payments. It is unclear how the repayment plan “on-ramp” process, coupled with the various servicer issues will ultimately impact cohort default rates in the future. Many of these servicers have been advertising long wait times for supporting student borrowers for an extended period of time which is likely to adversely impact the cohort default rates at our institutions. Furthermore, servicers have indicated they are performing limited to no outreach to delinquent borrowers, as they concentrate their resources on attempting to answer the inbound call volume. The Department has warned that defaults across all institutions may rise considerably when the blanket forbearance expires. Additionally, a number of recently adopted policies by the Biden Administration have created disincentives for students to repay their loans, including forgoing a number of common consequences of nonpayment during this “on-ramp” period and frequently promoting a desire to provide broad based loan forgiveness. These policies are expected to negatively impact future default rates and recent reports show repayment trends on student loans that have re-entered repayment in October 2023, are significantly behind historical levels. As a result of all these changes, as well as the servicer issues, we anticipate seeing higher cohort default rates as compared to historical rates starting with the 2024 cohort, until the loan repayment landscape improves.
Borrower Defense to Repayment
On November 1, 2016, the Department adopted new regulations that cover multiple issues including the processes and standards for the discharge of federal student loans, which are commonly referred to as “borrower defense to repayment” ("BDR") regulations. On September 23, 2019, the Department published new final BDR regulations that became effective on July 1, 2020. The new 2019 final BDR regulations are summarized below and created a distinct loan discharge process and standards applicable to federal student loans first disbursed after July 1, 2020. On November 1, 2022, the Department published further revised and final BDR regulations that were to become effective on July 1, 2023. See “Legislative Action and Recent Department Regulatory Initiatives - Negotiated Rulemaking 2022: Affordability and Student Loans,” for more information. These regulations have been negotiated and revised multiple times by the Department, who has created competing standards and outcomes for institutions and student borrowers. Since their initial adoption in 2016 and with their subsequent modifications in 2019 and 2022, the Department’s BDR regulations have also been the subject of numerous legal challenges in different jurisdictions around the country. The Department subsequently used the settlement of a lawsuit (discussed below) that was primarily seeking improvements in the Department's processing of claims as a means of providing loan forgiveness, including previously denied and/or meritless claims and further adopting yet a new BDR process and set of standards applicable to claims pending as of that date. Numerous legal challenges remain pending regarding these regulations, making it difficult to predict what standards and processes will ultimately apply to historical or future student loans incurred by our current or former students.
2019 Final Regulations - Summary
Loan Discharge. The 2019 BDR regulations significantly altered how loan discharge applications are to be treated by the Department. In addition to adopting the more balanced burden of proof standard of “preponderance of the evidence,” the 2019 regulations provided for a single new federal standard for a misrepresentation claim a student may assert against its school. Under the new standard, an individual borrower may assert a defense to repayment based on the institution’s statement, act, or omission that is false, misleading, or deceptive. To be eligible for relief, the borrower would be required to demonstrate that the misrepresentation (1) was made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth, (2) was relied upon by the borrower in making an enrollment decision, and (3) caused the student financial harm.
In addition, the 2019 final regulations eliminated the concept of automatic group loan discharges contained in the 2016 and subsequent 2022 regulations and require individual claims to be made by students and include a process for the institution to provide a defense to any claims asserted. Although these 2019 regulations were finalized and adopted, it does not appear that the Department implemented or applied them to any pending BDR applications and instead agreed to a settlement of existing claims (discussed below) that called for relying on a modified set of standards while they developed new standards and processes adopted in November 2022.
Department Settlement of Pending BDR Applications, Inducement of New Claims
On November 16, 2022, a California federal court in Sweet v. Cardona, No. 3:19-cv-3674 (N.D. Cal.) approved a settlement agreement entered into by the Department in a class action lawsuit that challenges the way the Department has been dealing with BDR applications over the past few years (“Sweet Settlement”). The Sweet Settlement provides a streamlined path to debt forgiveness for former students of over 150 schools, including AIUS, CTU, and institutions of ours that have previously closed. Neither the Company nor our current or former institutions are a party to this lawsuit. BDR applications for over 150 schools pending at the time of the settlement agreement were approximately 286,000, but expanded by an addition 180,000 applications prior to the court’s final
approval following publicity about the opportunity afforded by the settlement. The Department has neither identified the number of claims nor the specific claims covered by the Sweet Settlement that are related to our institutions. Because the process agreed to by the Department in the Sweet Settlement does not follow the claim adjudication procedures set out in applicable regulations, while uncertain, we believe the claims covered by the Sweet Settlement cannot form the basis of a claim for recoupment against the Company or our institutions.
Pending Borrower Defense to Repayment Applications
In May 2021, the Department notified the Company that the Department has several thousand borrower defense applications that make claims regarding the Company’s institutions, including institutions that have ceased operations. As part of the initial fact-finding process, the Department sent individual student claims to the Company and allowed the institutions the opportunity to submit responses to the borrower defense applications. A majority of the claims received involve institutions or campuses that have ceased operations and, in some cases, involve students who attended over 25 years ago. We have submitted responses to the claims received which indicate that we believe the applications fail to establish a valid borrower defense and the Department should therefore deny them. We have responded to substantial requests for information going back as far as 25 years with respect to these claims. The initial volume of several thousand expanded significantly as the Department and outside interest groups have continued to promote different pathways for students to receive loan forgiveness or loan discharge. Despite our belief expressed in responses submitted to the Department that the applications fail to establish a valid borrower defense and the Department should therefore deny them, the Department has already agreed in the Sweet Settlement to discharge most of the applications we are aware of. Our belief is that those applications discharged pursuant to the Sweet Settlement would not be eligible for recoupment against the Company. Almost all of the applications we have been provided to date would be covered by procedures set forth in the Sweet Settlement. It remains unclear what loan discharge applications the Department may grant in the future and whether they will assert repayment claims against us regardless of the date the student loan was disbursed and the corresponding discharge standards and processes.
2022 Final Regulations - Summary
As part of the Institutional and Programmatic Eligibility rulemaking, on November 1, 2022, the Department of Education released final rules on borrower defense to repayment (“BDR”). The borrower defense to repayment rules have an effective date of July 1, 2023. The rules establish a single federal standard for BDR, include a new definition of aggressive and deceptive recruitment - one of five grounds under which a claim could be filed under the new rules - and reinstate a ban on pre-dispute arbitration and class action waivers. The grounds on which a student may make a claim for BDR under these new rules include:
•substantial misrepresentation,
•substantial omission of fact,
•breach of contract,
•aggressive and deceptive recruitment, or
•a federal, state judgment, departmental adverse action against an institution that could give rise to a borrower defense claim.
As published, the new rules remove certain barriers and simplify the process for borrowers with a total and permanent disability and borrowers seeking public service loan forgiveness. The rules also expand closed school loan discharge provisions. The rules reduce the required supporting evidence and related obligations of students applying for BDR loan forgiveness, expand the categories students could raise in a BDR application, and provide the Department wide latitude to selectively adjudicate future BDR applications without affording institutions adequate opportunity to respond and potentially without regard to the individual merits of the BDR applications. The new BDR rules remove any statute of limitations on student claims and create a rebuttable presumption in favor of full loan forgiveness as opposed to partial relief for most approved applications, eliminating the Department’s approach under the previous rules of assessing whether and to what extent a student had been financially harmed. The rules also increase the burden on institutions to maintain and provide documentation to refute student claims. As a result, an institution’s failure to maintain and provide timely and responsive information that goes beyond the contents of a typical student’s academic file in response to future BDR applications could form the basis for loan forgiveness. The combination of the reduced requirements, increased categories, and presumptions will increase the likelihood of loan forgiveness and potentially create a significant financial incentive for existing and former students to apply for loan forgiveness regardless of a claim’s merit. In fact, the Department’s current efforts to settle litigation in the Sweet Matter (see "Borrower Defense to Repayment: Department Settlement of Pending BDR Applications, Inducement of New Claims" for more information regarding the Sweet Matter) reflects an attempt to discharge the loans for hundreds of thousands of students without regards to the merits of their claims and induced the filing of tens of thousands of new BDR applications in a matter of only a few months from students hoping to benefit from the opportunity afforded by the settlement.
On February 28, 2023, the Career Colleges & Schools of Texas (“CCST”) filed a lawsuit in the U.S. District Court for the Northern District of Texas challenging the Department’s recently promulgated borrower defense to repayment and closed school loan discharge regulations. CCST initiated the lawsuit in an effort to set aside the BDR rule on the grounds that it violates the U.S. Constitution and the Administrative Procedure Act. On August 7, 2023, a three-judge Fifth Circuit Court of Appeals panel granted a
motion for an injunction pending appeal in the lawsuit. The motion stayed the effective date of the borrower defense to repayment and closed school loan discharge provisions that went into effect on July 1, 2023. On November 6, 2023, oral argument was heard by a three judge panel of the Fifth Circuit. On April 4, 2024, the Fifth Circuit Court of Appeals reversed the order of the U.S. District Court for the Western District of Texas, and granted a preliminary injunction against the 2022 BDR Rule. On October 11, 2024, the Department of Education petitioned the Supreme Court to review the U.S. Court of Appeals for the Fifth Circuit’s grant of the preliminary injunction. On January 10, 2025, the Supreme Court granted the petition for certiorari review. According to the Supreme Court’s docket, it is only taking up one of the two questions in the petition: “Whether the court of appeals erred in holding that the Education Act does not permit the assessment of borrower defenses to repayment before default, in administrative proceedings, or on a group basis.” On February 6, 2025, the Supreme Court paused at the Department’s request its review of the lawsuit, as the Acting Secretary of Education announced that the Department would reevaluate the Department’s BDR regulations.
Financial Responsibility Standards
To participate in Title IV Programs, our institutions must either satisfy standards of financial responsibility prescribed by the Department, or post a letter of credit in favor of the Department and possibly accept other conditions on their participation in Title IV Programs. Pursuant to the Title IV Program regulations, each eligible higher education institution must, among other things, satisfy on an annual basis a quantitative standard of financial responsibility that is based on a weighted average of three tests that assess the financial condition of the institution, known as a “composite score.” The three tests measure primary reserve, equity and net income ratios. The Primary Reserve Ratio is a measure of an institution’s financial viability and liquidity. The Equity Ratio is a measure of an institution’s capital resources and its ability to borrow. The Net Income Ratio is a measure of an institution’s profitability. These tests provide three individual scores that are converted into a single composite score. The maximum composite score is 3.0. If the institution achieves a composite score of at least 1.5, it is considered financially responsible without conditions or additional oversight. A composite score from 1.0 to 1.4 is considered to be in “the zone” of financial responsibility, and a composite score of less than 1.0 is not considered to be financially responsible. If an institution is in “the zone” of financial responsibility, the institution may establish eligibility to continue to participate in Title IV Programs under the Zone Alternative.
Zone Alternative. Under what is referred to as the “zone alternative,” an institution may continue to participate in Title IV Programs for up to three years under additional monitoring and reporting procedures but without having to post a letter of credit in favor of the Department. These additional monitoring and reporting procedures include being transferred from the “advance” method of payment of Title IV Program funds to cash monitoring status (referred to as Heightened Cash Monitoring 1, or “HCM1,” status) or to the “reimbursement” or Heightened Cash Monitoring 2 (“HCM2”) methods of payment. If an institution does not achieve a composite score of at least 1.0 in one of the three subsequent years or does not improve its financial condition to attain a composite score of at least 1.5 by the end of the three-year period, the institution must satisfy another alternative standard to continue participating in Title IV Programs.
If an institution has a composite score of less than 1.0 it may continue to participate in Title IV programs under either of the following alternative bases:
• Letter of Credit Alternative. An institution that fails to meet one of the standards of financial responsibility, including by having a composite score less than 1.5, may demonstrate financial responsibility by submitting an irrevocable letter of credit to the Department in an amount equal to at least 50% of the Title IV Program funds that the institution received during its most recently completed fiscal year. By choosing this option, the institution qualifies as a financially responsible institution.
• Provisional Certification. If an institution fails to meet one of the standards of financial responsibility, including by having a composite score less than 1.5, the Department may permit the institution to participate under provisional certification for up to three years. If the Department permits an institution to participate under provisional certification, an institution must comply with the requirements of the Zone Alternative, including being transferred to the HCM1, HCM2 or “reimbursement” method of payment of Title IV Program funds, and must submit a letter of credit to the Department in an amount determined by the Department which can range from 10%-100% of the Title IV Program funds that the institution received during its most recently completed fiscal year. If an institution is still not financially responsible at the end of the period of provisional certification, including because it has a composite score of less than 1.0, the Department may again permit provisional certification subject to the terms the Department determines appropriate.
The Department applies its quantitative financial responsibility tests annually based on an institution’s audited financial statements and may apply the tests if an institution undergoes a change in control or under other circumstances. The Department also may apply the tests to the parent company of our institutions, and to other related entities. The Department currently applies the composite score to the parent company on a consolidated basis. Our composite score for the consolidated entity for the year ended December 31, 2023 was 3.0, and our preliminary calculation for the year ended December 31, 2024 is also 3.0, which is the highest possible score and considered financially responsible without conditions or additional oversight. If in the future we are required to satisfy the Department’s standards of financial responsibility on an alternative basis, including potentially by posting irrevocable letters of credit, we may not have the capacity to post these letters of credit.
Currently, USAHS is on HCM1 and has posted an LOC in favor of the Department in the amount of $21.5 million as of December 31, 2024, due to its FRR score attributable to its prior ownership which for 2023 was 0.5. We will engage with the Department to seek removal of these limitations in connection with their review the change of ownership application materials we have submitted and the resulting passing financial responsibility metrics and subsequent FRR score for USAHS.
Accreditor and state regulatory requirements also address financial responsibility, and these requirements vary among agencies and also are different from the Department requirements. Any developments relating to our satisfaction of the Department’s financial responsibility requirements may lead to additional focus or review by our accreditors or applicable state agencies regarding their respective financial responsibility requirements.
In addition to the annual tests referenced above, both the 2016 and 2019 borrower defense to repayment regulations include discussion of financial triggering events that may provide the Department discretion regarding periodic determinations of our financial responsibility and associated enhanced financial protection in the form of a letter of credit or other security it determines it needs. Recently promulgated changes to the financial responsibility regulations that became effective July 1, 2024 included updates to the list of triggering events that, if they occur, may require the posting of one or more letters of credit with the Department.
See “Negotiated Rulemaking 2023: Financial Responsibility” above for more information about changes to the previous rule. See Item 1A, “Risk Factors - Risks Related to the Highly Regulated Field in Which We Operate - A failure to demonstrate ‘financial responsibility’ or ‘administrative capability’ or meet new 'certification' requirements would have negative impacts on our operations,” for additional information regarding risks relating to the financial responsibility standards.
Return and Refunds of Title IV Program Funds
An institution participating in Title IV Programs must correctly calculate the amount of unearned Title IV Program funds that were disbursed to students who withdraw from their educational programs, and must return those funds to the government in a timely manner.
The portion of tuition and fee payments billed to students but not yet earned is recorded as deferred tuition revenue and reflected as a current liability on our consolidated balance sheets, as such amounts represent revenue that we expect to earn within the next year. If a student withdraws from one of our institutions prior to the completion of the academic term, we refund the portion of tuition and fees already paid that we are not entitled to retain, pursuant to applicable federal and state law and accrediting agency standards and our refund policy. The amount of funds to be refunded on behalf of a student is calculated based upon the period of time in which the student has attended classes and the amount of tuition and fees paid by the student as of the student’s withdrawal date.
Institutions are required to return any unearned Title IV funds within 45 days of the date the institution determines that the student has withdrawn. An institution that is found to be in non-compliance with the Department refund requirements for either of the last two completed fiscal years must post a letter of credit in favor of the Department in an amount equal to 25% of the total Title IV Program returns that were paid or should have been paid by the institution during its most recently completed fiscal year. As of December 31, 2024, CTU and AIUS have posted no letters of credit in favor of the Department due to non-compliance with the Department refund requirements. USAHS has issued a letter of credit for $0.1 million due to non-compliance with the Department's refund requirements that took place before our acquisition.
Change of Ownership or Control
When an institution undergoes a change of ownership or a change of ownership resulting in a change of control, as those terms are defined and applied by the applicable state approving agency, its accrediting agency and the Department, it must secure the approval of those agencies to continue to operate and to continue to participate in Title IV Programs. If the institution is unable to re-establish state authorization and accreditation requirements and satisfy other requirements for certification by the Department, the institution may lose its authority to operate and its ability to participate in Title IV Programs. An institution whose change of ownership or control is approved by the appropriate authorities is nonetheless provisionally re-certified by the Department for a period of up to three years. Transactions or events that constitute a change of ownership or a change of control by one or more of the applicable regulatory agencies, including the Department, applicable state agencies, and accrediting bodies, include the acquisition of an institution from another entity or significant acquisition or disposition of an institution’s equity or assets. It is possible that some of these events may occur without our control. Our failure to obtain, or a delay in obtaining, a required approval of any change in control from the Department, applicable state agencies, or accrediting agencies could impair our ability or the ability of the affected institutions to participate in Title IV Programs. If we were to undergo a change of control and our institutions failed to obtain the required approvals from applicable regulatory agencies in a timely manner, our student population, financial condition, results of operations and cash flows could be materially adversely affected.
When we acquire an institution that is eligible to participate in Title IV Programs, that institution typically undergoes a change of ownership resulting in a change of control as defined by the Department. Our acquired institutions in the past have undergone a certification review under our ownership and have been certified to participate in Title IV Programs on a provisional basis, per Department requirements, until such time that the Department signs a new program participation agreement with the institution.
Currently, only USAHS is subject to provisional certification status due to the Department’s change of ownership criteria. The potential adverse effects of a change of control under Department regulations may influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance or redemption of our common stock.
On October 28, 2022, the Department, as part of 2021-2022 negotiated rulemaking agenda, published Final Regulations on Change of Ownership. The Department added a definition of main campus as “the primary physical location where the institution offers programs, within the same ownership structure of the institution, and certified as the main campus by the Department and the institution’s accrediting agency.” Also included is a required notification to the Department and students of planned change in ownership at least 90 days in advance. The new regulations also lower reporting of ownership interest changes to 5%, instead of the current 25% threshold and raised the threshold of full review of change in control from 25% ownership interest changes to 50%.
Opening New Institutions, Start-up Campuses and Adding Educational Programs
The Higher Education Act generally requires that for-profit institutions be fully operational for two years before applying to participate in Title IV Programs. However, an institution that is certified to participate in Title IV Programs may establish a start-up branch campus or location and participate in Title IV Programs at the start-up campus without satisfying the two-year requirement if the start-up campus has received all of the necessary state and accrediting agency approvals, has been reported to the Department, and meets certain other criteria as defined by the Department. Nevertheless, under certain circumstances, a start-up branch campus may also be required to obtain approval from the Department to be able to participate in Title IV Programs.
In addition to the Department regulations, certain of the state and accrediting agencies with jurisdiction over our institutions have requirements that may affect our ability to open a new institution, open a start-up branch campus or location of one of our existing institutions, or begin offering a new educational program at one of our institutions. If we establish a new institution, add a new branch start-up campus, or expand program offerings at any of our institutions without obtaining the required approvals, we would likely be liable for repayment of Title IV Program funds provided to students at that institution or branch campus or enrolled in that educational program, and we could also be subject to sanctions. Also, if we are unable to obtain the approvals from the Department, applicable state regulatory agencies, and accrediting agencies for any new institutions, branch campuses, or program offerings where such approvals are required, or to obtain such approvals in a timely manner, our ability to grow our business would be impaired and our financial condition, results of operations and cash flows could be materially adversely affected.
Administrative Capability
See “Negotiated Rulemaking 2023: Administrative Capability” above.
Restrictions on Payment of Commissions, Bonuses and Other Incentive Payments
An institution participating in Title IV Programs cannot provide any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or awarding Title IV financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance. Regulations issued in October 2010 which became effective July 1, 2011 rescinded previously issued Department guidance and “safe harbors” relied upon by higher education institutions in making decisions about how they managed, compensated and promoted individuals and their supervisors engaged in student recruiting and awarding of financial aid. The elimination of these “safe harbor” protections and guidance required us to terminate certain compensation payments to our affected employees and to implement changes in contractual and other arrangements with third parties to change structures formerly allowed under Department rules, and has had an impact on our ability to compensate, recruit, retain and motivate affected admissions and other affected employees as well as on our business arrangements with third-party lead generators and other marketing vendors. In September 2016, the Department’s Office of Inspector General released a revised audit guide, subsequently amended, applicable specifically to for-profit schools that requires an annual audit to review compliance with the incentive compensation restrictions.
Further, the Department provides very limited published guidance regarding this rule and does not establish clear criteria for compliance for many circumstances. If the Department determined that an institution’s compensation practices violated these standards, the Department could subject the institution to substantial monetary fines, penalties or other sanctions, and exposure to increased risk of action under the False Claims Act.
Substantial Misrepresentation
The Higher Education Act prohibits an institution participating in Title IV Programs from engaging in substantial misrepresentation of the nature of its educational programs, financial charges, graduate employability or its relationship with the Department. Under the Department’s rules, a "misrepresentation" is any statement (made in writing, visually, orally or otherwise) made by the institution, any of its representatives or a third party that provides educational programs, marketing, advertising, recruiting, or admissions services to the institution, that is false, erroneous or has the likelihood or tendency to deceive, and a "substantial misrepresentation" is any misrepresentation on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment. Considering the broad definition of “substantial misrepresentation,” it is possible that, despite our training efforts and compliance programs, our institutions' employees or service providers may make
statements that could be construed as substantial misrepresentations. If the Department determines that one of our institutions has engaged in substantial misrepresentation, the Department may revoke the institution’s program participation agreement, deny applications from the institution for approval of new programs or locations or other matters, initiate proceedings under its borrower defense to repayment regulations, or fine, limit, suspend, or terminate its eligibility to participate in Title IV Programs; the institution could also be exposed to increased risk of action under the Federal False Claims Act.
OTHER INFORMATION
Our website address is www.perdoceoed.com. We make available within the “Investor Relations” portion of our website under the caption “Annual Reports & SEC Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, including any amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials to the U.S. Securities and Exchange Commission (“SEC”). Also, the SEC maintains an Internet site at www.sec.govthat contains reports, proxy and information statements, and other information that we file electronically with the SEC. Information contained on our website is expressly not incorporated by reference into this Form 10-K.

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ITEM 1A. RISK FACTORS
Item 1A. RISK FACTORS
Risks Related to the Highly Regulated Field in Which We Operate
Compliance with the extensive regulatory requirements applicable to our business can be costly and time consuming, and failure to comply could result in substantial financial penalties, severe restrictions on or closure of our operations, loss of federal and state financial aid funding for our students, or loss of our authorization to operate our institutions.
As a provider of postsecondary education and a participant in federal and state programs providing financial assistance to students, we are subject to extensive laws and regulation at both the federal and state levels as well as by accrediting agencies. These requirements cover virtually all aspects of our business.
In particular, the Higher Education Act authorizes Title IV Programs and subjects participants to extensive regulations by the Department, state education authorizing agencies, and accrediting agencies. Our institutions’ participation in education assistance programs administered by the Departments of Defense and Veterans Affairs also subjects us to oversight by those agencies. In addition, other federal agencies such as the Consumer Financial Protection Bureau (“CFPB”) and the Federal Trade Commission (“FTC”) and various state agencies and state attorneys general enforce a broad range of consumer protection and other laws applicable to activities of postsecondary educational institutions, such as recruiting, marketing, the protection of personal information, student financing and payment servicing.
Because of these regulatory requirements, we are subject to compliance reviews and audits, as well as claims of noncompliance and lawsuits by government agencies based on claims by students, current and former employees and other third parties. These matters often require the expenditure of substantial time and resources to address and, additionally, they may damage our reputation, even if such actions are eventually determined to be without merit. For example, the Department has broad powers to request information and review records of an institution participating in Title IV Programs. These requests can be open-ended and do not necessarily relate to any specific allegations of wrongdoing or assert any compliance failures of any kind. We received such a request from the Department in December 2021. The inquiry was subsequently closed in January 2025 without any findings. Due process safeguards and protections for institutions subjected to this type of information request are limited to the Department’s interpretation of the boundaries of its authority over institutions participating in Title IV programs.
The Department, under the Biden Administration, took an ever-expanding view on its authority over the administration of Title IV programs, institutions and loans, including overruling or ignoring a number of historical precedents and due process safeguards. The Department partnered with advocacy groups critical of the for-profit education sector in numerous aspects of its agenda, which have lobbied for targeting the sector and our schools. The postsecondary education regulatory environment may change in the future as a result of the U.S. federal election in November 2024. The new Presidential Administration and new Congress may act to change or eliminate currently effective ED regulations and final ED regulations that have been promulgated but are not yet effective.
In addition to responding to compliance reviews and audits and other informational requests, we have had significant matters pending against us in the past which have resulted in the payment of significant amounts to settle the matters and our agreement to ongoing compliance and operational oversight. In this regard, see Item I, “Business - Accreditation, State Regulation and Other Compliance Matters - Other Compliance Matters,” for discussion of agreements undertaken in connection with several matters resolved in recent years.
Compliance with reviews and audits and applicable laws, regulations, standards or policies may impose significant burdens and a failure to comply could result in substantial financial penalties, severe restrictions on or closure of our operations, loss of federal and state financial aid funding for our students, or loss of authorization to operate our institutions.
“Gainful Employment” regulations may subject us to significant disclosures and limitations, including program closures, which could materially reduce the enrollments and revenue at our institutions and negatively impact our future growth.
On October 10, 2023, the Biden Administration published final regulations for the GE rule. The GE rule includes a Title IV eligibility framework that imposes additional requirements on for-profit sector programs, including our schools. The regulation uses two key metrics: Debt-to-Earnings (“D/E”) and Earnings Premium (“EP”) metrics to determine whether a program prepares students for gainful employment. The D/E metrics measure student debt at a program level against a measure of earnings. The EP metric measures student earnings at a program level against working individuals with a high school diploma or equivalent. GE programs that fail either the D/E or the EP metric in two of three consecutive years will lose Title IV eligibility. Programs offered by AIUS, CTU and USAHS are subject to the GE Rule and could lose Title IV eligibility if their programs fail to pass the D/E rates and/or the EP measures. The rule also requires our institutions to warn current and prospective students if a program fails any metric in any year. The issuance of required GE warnings could deter prospective students from enrolling at our institutions and current students from continuing in their programs. Significantly, the 2023 GE rule is retroactive in its measurements as it evaluates data from previous student cohorts for the purpose of determining a program’s future Title IV eligibility. It is unclear the impact that state and federal mandated business closures experienced during the COVID pandemic and its resulting economic effects may have on our metrics, as data from this time period is applicable to the metrics.
See “GE and FVT Negotiated Rulemaking” above for information about the timeline of the GE and FVT rules. Given the recent challenges associated with implementation of the rules, we have concerns with the accuracy and effectiveness of the GE and FVT metrics.
Failure to comply with the GE Rule may result in a loss of Title IV eligibility which would materially impact student enrollments and profitability. It additionally may impact the continued viability of our business. Given the complexity of the rules and the lack of clarity, transparency and other challenges with the reporting and collection of the data, we are unable to determine the impact of the regulations on our business at this time.
Our institutions could lose their eligibility to participate in federal student financial aid programs, face limitations on their ability to serve new or former students or have other limitations placed upon them if the percentage of their revenues derived from certain federal programs is too high.
Under revised regulations effective for calendar year 2023, any of our institutions may lose eligibility to participate in Title IV Programs if, on modified cash basis accounting, the percentage of the cash receipts derived from federal funding programs for two consecutive fiscal years is greater than 90%. The Department specified the sources of federal funding to be included in the 90-10 Rule in mid-December 2022, well after a substantial majority of students for the upcoming 2023 calendar year, a majority of those students which were in the process of continuing through their program, had already enrolled and elected financing for upcoming classes. Federal funding now includes tuition assistance under the Title IV program as well as tuition assistance benefits provided to members of the military and veterans as well as a significant number of other federal programs supporting higher education and training. Under this modified 90-10 Rule, an institution that derives more than 90% of its cash receipts from federal funding sources for any fiscal year will be placed on provisional participation status for its next two fiscal years and is required to issue notices to existing students about the potential loss of Title IV funding. The issuance of any required notice could deter prospective students from enrolling at our institutions and current students from continuing in their programs. We have substantially no control over the amount of Title IV student loans and grants, military or veteran education benefits, or other federal education assistance funds sought by or awarded to our students and given the significant existing student populations at our institutions when these rules were adopted, the 90-10 Rule operates retroactively to capture the significant federal funding those students were already utilizing and entitled to.
Additionally, we may not know at the time of receipt that funding used by a student was derived from a federal program. In addition, if the institution violates the 90-10 Rule for two consecutive fiscal years and becomes ineligible to participate in Title IV Programs, but continues to disburse Title IV Program funds, the Department would require the repayment of all Title IV Program funds received by it after the effective date of the loss of eligibility. The Department also noted in its publication of the new rule that its expectation was to encourage a shift in enrollment away from for-profit schools and toward taxpayer subsidized community colleges. As such, we expect unfavorable treatment from the Department in its interpretations, guidance, and enforcement with regard to institutional compliance.
Several factors have adversely impacted our 90-10 percentages in recent years, including increases in Title IV Program aid availability including year-round Pell Grant funds and budget reductions for state grant programs, workforce training programs, and other funding programs. We expect this negative trend to continue. Additionally, the lack of visibility into federal fund sources that students utilize, the timing of the identification of the federal fund sources applicable to the 90-10 Rule, the lack of clarity regarding the definition of federal funds which funds count in the “10”, as well as other technical aspects of the calculation methodology, and interest levels and variability in the timing of receipts of future cash payments made for allowable non-Title IV programs offered by our institutions, all make it difficult to predict future compliance with the 90-10 Rule. We have implemented various measures intended to reduce the percentage of our institutions’ cash basis revenue attributable to designated federal funding sources, including efforts to diversify the sources of our revenue. However, these measures may not be adequate to prevent our compliance with the 90-10 Rule and may not be sufficient to allow our institutions to serve degree-seeking prospective students at the same rates as we have historically, or may require limiting the type or volume of new students we enroll or programs we offer. We may be required to modify our business operations, including reducing our investments in prospective student outreach and recruitment, in order to preserve our existing students’ ability to continue benefitting from financial assistance for their education pursuant to Title IV Programs. For example, in 2023, we materially reduced prospective student enrollment, marketing and outreach processes at AIUS during the year to limit the volume of new federal funding that the institution would receive to preserve available funding for existing students. Any necessary business changes could materially impact our revenue, operating costs and opportunities for growth. Furthermore, these business changes could make more difficult our ability to comply with other important regulatory requirements.
The ability of our institutions to comply with the 90-10 Rule will depend upon the composition of our future student population and their personal circumstances, as well as on regulatory changes and other factors outside of our control, including those cited above.
While the Department may attempt to impose additional sanctions on institutions that fail the 90-10 Rule, but there is only limited precedent available to determine their legality or predict what those additional sanctions might be. For example, the new financial responsibility rule, discussed further below, imposes a mandatory trigger for failure to comply with one year of the 90-10 Rule. It would require a minimum financial protection of 10 percent of the previous year’s Title IV funds. This protection would
remain in place until the institution passes the 90-10 Rule for two consecutive years. The Department has discretion to impose a wide range of additional conditions as part of its provisional certification and the institutions' continued participation in Title IV Programs. These conditions may include, but are not limited to: restrictions on the total amount of Title IV Program funds that may be distributed to students attending the institutions; restrictions on programmatic, enrollment, and geographic expansion; requirements to obtain and post letters of credit; and additional reporting requirements to include additional interim financial or enrollment reporting.
See Item 1, “Business - Student Financial Aid and Related Federal Regulation - Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations - ‘90-10 Rule,'” for more information about the 90-10 Rule and the measures we have implemented to improve our compliance.
If any of our institutions lose eligibility to participate in Title IV Programs due to violation of the prior or modified 90-10 Rule, the institution would experience a dramatic decline in revenue and would be unable to continue its business as it currently is conducted. Efforts to reduce the 90-10 Rule percentage for our institutions have and may in the future involve taking measures that reduce our revenue, increase our operating expenses or involve interpretations of the 90-10 Rule or other Title IV regulations that are without clear precedent (or all of the foregoing, in each case perhaps significantly).
The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult.
The regulations, standards and policies of our regulators change frequently and are subject to interpretation, and interpretations may change over time or due to changes in presidential administrations. In particular, the Department under the Biden Administration promulgated a number of new regulations that depending on the date of publication became effective or will be effective on July 1, 2023, 2024 and 2026, including the Financial Value Transparency and Gainful Employment Rule, and revised financial responsibility, administrative capability, 90-10, distance education and certification rules. We have been operating with dramatic shifts in regulatory approaches across different presidential administrations, resulting in a significant number of regulations being adopted, subsequently rescinded or revised, then re-adopted. While President Trump’s previous priorities are apparent by actions taken in his first term, we have limited information on the priorities for private postsecondary education for his second term. We anticipate a number of regulatory changes may be forthcoming.
The Higher Education Act guides the federal government’s support of postsecondary education. The U.S. Congress is required to periodically reauthorize the Higher Education Act and other laws governing Title IV Programs and annually determines the funding level for each Title IV Program. Congress last reauthorized the Higher Education Act in 2008. The reauthorization of the Higher Education Act results in a change in the requirements for existing programs and its participation in Title IV programs. Additionally, funding for student financial assistance programs may be impacted during appropriations and budget actions. See Item 1, “Business-Student Financial Aid and Related Federal Regulation-Legislative Action and Recent Department Regulatory Initiatives,” for more information about the reauthorization of the Higher Education Act. In recent years, Congress, the Department, states, accrediting agencies, the CFPB, the FTC, state attorneys general, consumer advocacy groups, and the media have scrutinized the for-profit postsecondary education sector. See Item 1, “Business - Student Financial Aid and Related Federal Regulation - Scrutiny of the For-Profit Postsecondary Education Sector,” for more information about the focus on our industry. This scrutiny and efforts of the Biden Administration led to significant regulatory changes designed to target and limit for-profit postsecondary education. See Item 1, “Business - Student Financial Aid and Related Federal Regulation - Legislative Action and Recent Department Regulatory Initiatives,” for an overview of regulatory initiatives by the Department. Ongoing efforts by activists to change state authorization regulations, State Authorization Reciprocity Agreement ("SARA") reciprocity rules, and state-by-state standards could increase regulatory burdens on our business. See Item 1, “Business - Accreditation, State Regulation and Other Compliance Matters - State Regulation,” for more information about state regulation and SARA.
As in the past, recent and future regulatory changes may have significant impacts on our business, potentially requiring a large number of operational changes, changes to and elimination of certain educational programs, or other fundamental changes to our business. These actions may reduce our student enrollments and profitability or limit our ability to maintain or grow our business. These recent and future regulatory changes may also make compliance with regulatory requirements even more complex and difficult.
A failure to demonstrate "financial responsibility" or "administrative capability" or meet new "certification" requirements would have negative impacts on our operations.
See “Negotiated Rulemaking: Financial Responsibility,” “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations,” “Negotiated Rulemaking: Administrative Capability” and “Negotiated Rulemaking: Certification Procedures” above for an overview of the current rules relating to the financial responsibility, administrative capability and certification procedures.
If our institutions fail to maintain financial responsibility or administrative capability, they could lose their eligibility to participate in Title IV Programs, have that eligibility adversely conditioned or be subject to similar negative consequences under accreditor and state regulatory requirements, which would have a material adverse effect on our operations. In particular, limitations
on participation in Title IV Programs resulting from the failure to demonstrate financial responsibility or administrative capability could materially reduce the enrollments and revenue at the impacted institution, and a termination of participation would cause a dramatic decline in revenue and we would be unable to continue our business as it currently is conducted.
“Borrower defense to repayment” regulations, including closed school loan discharges, may subject us to significant repayment liability to the Department for discharged federal student loans and posting of substantial letters of credit that may limit our ability to make investments in our business which could negatively impact our future growth.
See the “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” above for an overview of the current rules relating to Borrower Defense to Repayment.
We cannot predict the impact various defense to repayment regulations will have on student enrollments, the volume of claims for loan discharge (including closed school discharge), the amount of claims for loan discharge the Department approves, the amount of discharged loans the Department asserts we have repayment liability for, our future financial responsibility as determined by the Department, or any sanctions or other actions the Department might take against our institutions based on loans discharged, all of which could be materially adverse to our business.
Our institutions would lose their ability to participate in Title IV Programs if they fail to maintain their institutional accreditation, and our student enrollments could decline if certain of our programs fail to obtain or maintain programmatic accreditation.
An institution must be accredited by an accrediting agency recognized by the Department in order to participate in Title IV Programs. See Item 1, “Business - Accreditation, Jurisdictional Authorizations and Other Compliance Matters - Institutional Accreditation.” The failure to comply with accreditation standards subjects an institution to additional oversight and reporting requirements, accreditation proceedings such as a show-cause directive, an action to defer or deny action related to an institution's application for a new grant of accreditation, an action to suspend an institution's accreditation or a program's approval, or other negative actions. Future inquiries or actions by state or federal agencies could negatively impact our accreditation status. If our institutions or programs are subject to accreditation actions or are placed on probationary or other negative accreditation status, we may experience adverse publicity, impaired ability to attract and retain students and substantial expense to obtain unqualified accreditation status. The inability to obtain reaccreditation following periodic reviews or any final loss of institutional accreditation after exhaustion of the administrative agency processes would result in a loss of Title IV Program funds for the affected institution and its students. In addition, if an accrediting body of our institutions loses recognition by the Department, that institution could lose its ability to participate in Title IV Programs. See Item 1, "Business - Student Financial Aid and Related Federal Regulation - Eligibility and Certification by the Department," for more information.
Many states and professional associations require professional programs to be accredited. While programmatic accreditation is not a sufficient basis to qualify for institutional Title IV Program certification, programmatic accreditation may be a prerequisite for or improve employment opportunities of program graduates in their chosen field. Those of our programs that do not have such programmatic accreditation, where available, or fail to maintain such accreditation, particularly in programs in the health sciences field, may experience adverse publicity, declining enrollments, litigation or other claims from students or suffer other adverse impacts, which could result in it being impractical for us to continue offering such programs.
If 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 have participation in these programs conditioned or limited.
Our institutions must maintain systems and processes to identify and prevent fraudulent applications for enrollment and financial aid. We cannot be certain that our institutions’ systems and processes will continue to be adequate in the face of increasingly sophisticated fraud schemes, or that we will be able to expand such systems and processes at a pace consistent with the changing nature of these fraud schemes. We believe the risk of outside parties attempting to perpetrate fraud in connection with the award and disbursement of Title IV program funds, including as a result of identity theft, is heightened due to being an exclusively online education provider.
The Department requires institutions that participate in Title IV Programs to refer to the Department’s Office of the Inspector General ("OIG") credible information about fraud or other illegal conduct involving Title IV programs. If the systems and processes that our institutions have established to detect and prevent fraud are inadequate, the Department may find that our institutions do not satisfy the Department’s administrative capability requirements, which could have the adverse effects described in the risk factor captioned “A failure to demonstrate "financial responsibility" or "administrative capability" or meet new "certification" requirements would have negative impacts on our operations.” In addition, our ability to participate in Title IV Programs is conditioned on maintaining accreditation by an accrediting agency that is recognized by the Department. Any significant failure to adequately detect fraudulent activity related to student enrollment and financial aid could cause us to fail to meet accreditors’ standards. Furthermore, accrediting agencies that evaluate institutions offering online programs, must require such institutions to have processes through which the institution establishes that a student who registers for such a program is the same student who participates in and receives
credit for the program. Failure to meet the requirements of our institutions’ accrediting agencies could result in the loss of accreditation of one or more of our institutions, which could result in their loss of eligibility to participate in Title IV Programs.
Our agreement with the FTC may lead to unexpected impacts on our student enrollments or higher than anticipated expenses, a failure to comply may lead to additional enforcement actions and continued scrutiny may result in additional costs or new enforcement actions.
As discussed above, states and other regulatory bodies have increased their focus on the for-profit postsecondary education sector. In 2019, we entered into an agreement with the FTC to bring closure to inquiries by them. See Item 1, “Business - Accreditation, State Regulation and Other Compliance Matters - Other Compliance Matters” for information about this agreement. This agreement may ultimately result in negative impacts on our business, any one of which may be material.
Pursuant to the agreement with the FTC, we agreed to various operating provisions including the operation of a system to monitor lead aggregators and generators involving a compliance review by, or on behalf of, the Company of the various sources a prospective student interacts with prior to the Company’s purchase and use of the prospective student lead. The compliance costs related to these agreements may be greater than anticipated and may have a negative impact on our ability to compete effectively and maintain and grow student enrollments at our institutions, and a failure to comply may lead to additional enforcement action by the FTC. In addition, we may receive requests from states and other regulatory bodies to provide ongoing proof that we are complying with applicable laws and regulations and meeting our obligations pursuant to this agreement. Compliance with these requests results in significant additional costs and a failure to respond, whether required or not, could result in additional enforcement actions.
If we are unable to successfully resolve pending or future litigation and regulatory and governmental inquiries involving us, or face increased regulatory actions or litigation, our financial condition and results of operations could be adversely affected.
We have been named as defendants currently and/or in the past in various lawsuits, investigations and claims covering a range of matters, including, but not limited to, violations of federal securities laws, breaches of fiduciary duty and claims made by current and former students and employees of our institutions. Current claims include a qui tam action filed in federal court by an individual plaintiff on behalf of themselves and the federal government alleging that we submitted false claims or statements to the Department in violation of the False Claims Act. See Note 12 "Contingencies" to our consolidated financial statements for discussion of these and certain other current matters. Additional actions may arise in the future.
Given the highly regulated nature of our industry, we and our institutions are subject to and have regular audits, compliance reviews, inquiries, investigations, and claims of non-compliance by the Department, federal and state regulatory agencies, accrediting agencies, state attorney general offices, present and former students and employees, and others that may allege violations of statutes, regulations, accreditation standards, consumer protection and other legal and regulatory requirements applicable to us or our institutions. See Note 12 "Contingencies" to our consolidated financial statements and Item 1, "Business - Student Financial Aid and Related Federal Regulation - Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations" for additional discussion of these and certain other current matters. If the results of any such audits, reviews, inquiries, investigations, claims, or actions are unfavorable to us, we may be required to pay monetary damages or be subject to fines, operational limitations, loss of federal funding, injunctions, undertakings, additional oversight and reporting, or other civil or criminal penalties.
Even if we maintain compliance with applicable governmental and accrediting body regulations, increased regulatory scrutiny or adverse publicity arising from allegations of non-compliance may increase our costs of regulatory compliance and adversely affect our financial results, growth rates and prospects.
We are subject to a variety of other claims and litigation that arise from time to time alleging non-compliance with or violations of state or federal regulatory matters including, but not limited to, claims involving students, graduates and employees. In the event that extensive changes in the overall federal and state regulatory construct results in additional statutory or regulatory bases for these types of matters, or other events result in more of such claims or unfavorable outcomes to such claims, there exists the possibility of a material adverse impact on our business, reputation, financial position, cash flows and results of operations for the periods in which the effects of any such matter or matters becomes probable and reasonably estimable.
We cannot predict the ultimate outcome of these and future matters and expect to continue to incur significant defense costs and other expenses in connection with them. We may be required to pay substantial damages or settlement costs in excess of our insurance coverage related to these matters. Government investigations and any related legal and administrative proceedings may result in the institution of administrative, civil injunctive or criminal proceedings against us and/or our current or former directors, officers or employees, or the imposition of significant fines, penalties or suspensions, or other remedies and sanctions. Any such costs and expenses could have a material adverse effect on our financial condition and results of operations and the market price of our common stock.
If the Department denies, or significantly conditions, recertification of any of our institutions to participate in Title IV Programs, that institution could not conduct its business as it is currently conducted.
Under the provisions of the Higher Education Act, an institution must apply to the Department for continued certification to participate in Title IV Programs at least every six years or whenever it undergoes a change of control. Generally, the recertification process includes a review by the Department of an institution’s educational programs and locations, administrative capability, financial responsibility, and other regulatory oversight categories. USAHS is operating under a temporary provisional program participation agreement as a result of its recent change of ownership. Pursuant to applicable regulations, if the change of ownership is approved, USAHS will then participate under provisional certification for up to three years. During the period of provisional certification, an institution must obtain prior Department approval to add an educational program, open a new location, increase the credential level of its offerings, or shorten or lengthen its programs, which could negatively impact USAHS ability to take these actions. Institutions may be given provisional program participation agreements for nominal or arbitrary reasons and we have seen in some instances without justification, including the existence of an open and pending audit or review within the Department’s discretion or unspecified issues arising out of past administrative capability issues. Recently, the Department has imposed a number of additional reporting, limiting and monitoring conditions on continued participation against institutions it has recertified.
Additionally, as stated above, in February 2025, both CTU and AIUS received renewals of their program participation agreements through June 30, 2027. Additionally, AIUS was removed from provisional certification, leaving both AIUS and CTU with full certification. By March 31, 2027, CTU and AIUS will each be required to submit applications for recertification to continue participation in Title IV Programs.
If the Department finds that any of our institutions do not fully satisfy all required eligibility and certification standards, the Department could deny recertification or limit, suspend, or terminate the institution’s participation in Title IV Programs. Continued Title IV Program eligibility is critical to the operation of our business. If any of our institutions becomes ineligible to participate in Title IV Programs, or have that participation significantly conditioned, it could not conduct its business as currently conducted and we would experience a dramatic decline in revenue.
We are dependent on the recertification and maintenance of Title IV Programs.
A substantial majority of our students rely upon Title IV Programs to assist in financing their education, and we derive a substantial majority of our revenue and cash flows from Title IV Programs. For example, for the year ended December 31, 2024, a majority of our students who were in a program of study at any date during that year participated in Title IV Programs, which resulted in Title IV Program cash receipts of approximately $484 million. As a result, any legislative or regulatory action that significantly reduces Title IV Program funding or the ability of our students to participate, or that places significant additional burdens on or eliminates our ability to participate, would materially reduce the number of students who enroll at our institutions, our revenue and our profitability, and we would be unable to continue our business as it currently is conducted.
We need timely approval by applicable regulatory agencies to offer new programs or make substantive changes to existing programs.
Our institutions frequently need to obtain approvals from regulatory agencies in the conduct of their business. For example, to establish a new educational program or substantive changes to existing programs, we are required to obtain the appropriate approvals from the Department and applicable state and accrediting regulatory agencies. Staffing levels at the Department and other regulatory agencies and the volume of applications and other requests may delay our receipt of necessary approvals. Further, approvals may be conditioned or denied in a manner that could significantly affect our strategic plans and future growth. Approval by these regulatory agencies may also be negatively impacted due to regulatory inquiries or reviews and any adverse publicity relating to such matters or the industry generally.
If our institutions become ineligible to participate in various educational assistance programs, it could have a material negative impact on student enrollments and could have other adverse consequences.
Some students at our institutions receive education-related benefits pursuant to their employment or participation in programs for military or veteran personnel. If any decision is made that reduces our institutions’ eligibility to participate in these employer sponsored educational assistance programs or the programs benefitting military or veteran personnel, we could experience a material decline in student enrollments and revenue.
Risks Related to Our Business
Our financial performance depends on the level of student enrollments in our institutions.
Enrollment of students at our institutions is impacted by many of the regulatory risks discussed above and business risks discussed below, many of which are beyond our control. We also believe that the level of our student enrollments is affected by changes in economic conditions, although both the nature and magnitude of this effect are uncertain and may change over time. For example, during periods when the unemployment rate declines or remains stable, prospective students may have more employment options, leading them to choose to work rather than to pursue postsecondary education. On the other hand, high unemployment rates may affect the willingness of students to incur loans to pay for postsecondary education or to pursue postsecondary education in general.
Affordability concerns and negative perception of the value of a college degree increase reluctance to take on debt and make it more challenging for us to attract and retain students. We may experience decreasing enrollments in our institutions due to changing demographic trends in family size, overall declines in enrollment in postsecondary institutions, job growth in fields unrelated to our core disciplines or other societal factors. Further, we continue to make investments in and changes to our business which are designed to improve student experiences, retention and academic outcomes and support the long-term sustainable and responsible growth of our institutions. These initiatives may not be successful or the success of these initiatives may reduce over time.
Our student enrollments could suffer from any of these circumstances. We believe it is likely that legislative, regulatory and economic uncertainties will continue, and thus it is currently difficult to assess our long-term growth prospects. Reduced enrollments at our institutions, for any of the reasons mentioned herein or otherwise, generally reduce our profitability, which, depending on the level of the decline, could be material.
We compete with a variety of educational institutions, especially in the online education market, and if we are unable to compete effectively, our student enrollments and revenue could be adversely impacted.
The postsecondary education industry is highly fragmented and increasingly competitive. Our institutions compete with traditional public and private two-year and four-year colleges and universities, other for-profit institutions, other online education providers and alternatives to higher education, such as immediate employment and military service. Some public and private institutions charge lower tuition for courses of study similar to those offered by our institutions due, in part, to government subsidies, government and foundation grants, tax-deductible contributions and other financial resources not available to for-profit institutions, and this competition may increase if additional subsidies or resources become available to those institutions. For example, a typical community college is subsidized by local or state government and, as a result, tuition rates for associate’s degree programs may be much lower at community colleges than at our institutions. Many states have adopted or proposed programs to enable residents to attend community colleges for free.
Some of our competitors are more widely known and have more established reputations than our institutions. In addition, some of our competitors are subject to fewer regulatory burdens on enrollment and financial aid processes, which may enable them to compete more effectively for potential students. In particular, several of our publicly traded for-profit competitors have converted or are attempting to convert to a structure where a for-profit service company provides services to a non-profit educational institution, which reduces the impact of certain regulations on their operations, such as the 90-10 Rule and GE.
We also expect to experience increased competition as more postsecondary education providers increase their online program offerings (in particular programs that are geared towards the needs of working adults), including traditional and community colleges that had not previously offered online education programs, and increase their use of personalized learning technologies. This trend has been accelerated by the COVID-19 pandemic and companies that provide and/or manage online learning platforms for traditional colleges and community colleges. Increased competition may create greater pricing or operating pressure on us, which could have a material adverse effect on our institutions’ enrollments, revenues and profit margins. We may also face increased competition in maintaining and developing new corporate and other engagements with employers, particularly as employers become more selective as to which online universities they will encourage or offer scholarships to their employees to attend and from which online universities they will hire prospective employees.
Congress, the Department and other agencies have required increasing disclosure of information to prospective students (with some disclosures only required by for-profit institutions). Some of these disclosures may negatively impact a prospective student’s decision to enroll in one of our institutions.
An increase in competition, particularly from traditional colleges with well-established reputations that rely on a history of selective admissions, may affect the success of our recruiting efforts to enroll and retain students who are likely to succeed in our educational programs, or cause us to reduce our tuition rates and increase our marketing and other recruiting expenses, which could adversely impact our profitability and cash flows.
The U.S. political and economic environment could materially impact our business operations and financial performance, and uncertainty surrounding the potential legal, regulatory and policy changes by the new U.S. presidential administration may directly affect us and the global economy.
The political and economic environment in the U.S. and elsewhere has resulted in and may continue to result in uncertainty. Changing regulatory policies because of the changing political environment could impact our regulatory and compliance costs and future revenues, all of which could materially and adversely affect our business, financial condition and operating results. Failure to adapt to or comply with evolving regulatory requirements or investor or stakeholder expectations and standards could also negatively impact our reputation, access to capital and our stock price.
The presidential election and congressional seat turnover may result in increased regulatory and economic uncertainty. Changes in federal policy by the executive branch and regulatory agencies may occur over time through the new presidential administration’s and/or Congress’s policy and personnel changes, which could lead to changes involving the level of oversight and focus on for-profit postsecondary education providers; however, the nature, timing and economic and political effects of such potential changes remain
uncertain. Any future changes in federal and state laws and regulations, as well as the interpretation and implementation of such laws and regulations, could affect us in substantial and unpredictable ways.
Additionally, levels of U.S. federal government spending are difficult to predict and subject to significant risk. Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the spending priorities of the new U.S. presidential administration and Congress and what challenges budget reductions will present for us and our industry generally. For example, the Department of Government Efficiency (“DOGE”) was announced to reform federal government processes and reduce expenditures. The Office of Management and Budget (“OMB”) published Memorandum M-25-13 on January 29, 2025 which temporarily paused all activities related to obligation or disbursement of all federal financial assistance. The Executive Order did not impact funds provided to individual students, such as Federal Pell Grants and Direct Loans. While Memorandum M-25-13 was rescinded on February 3, 2025 following litigation challenging it, the administration has stated that it still pursuing a spending freeze. We are unable to predict if there will be budget reduction initiatives that would impact student federal financial assistance available to our students and, if so, the extent of those reductions.
Pressures on and uncertainty surrounding the U.S. federal government’s budget, and potential changes in budgetary priorities, could adversely affect the funding of federal programs providing financial assistance to our students, which could in turn adversely affect our business, financial condition and operating results.
Our financial performance depends on our ability to develop awareness among, and enroll and retain, students in our institutions and programs in a cost-effective manner.
If our institutions are unable to successfully conduct outreach for and recruit prospective students for their educational programs, our institutions’ ability to attract and enroll prospective students in those programs could be adversely affected. We have been investing in our student admissions and advising functions and other initiatives to improve student experiences, retention and academic outcomes. If these initiatives do not continue to succeed, our ability to attract, enroll and retain students in our programs could be adversely affected. Further, internet and other technology, including data gathering and marketing and advertising, is changing fast and we may be unable to adapt our initiatives to attract, enroll and retain students in a timely manner. Consequently, our ability to increase revenue or maintain profitability could be impaired. Some of the factors that could prevent us from successfully conducting outreach and recruitment for our institutions and the programs that they offer include, but are not limited to: student or employer dissatisfaction with our educational programs and services; diminished access to prospective students; our failure to maintain or expand our brand names or other factors related to our marketing or advertising practices; FTC or Federal Communications Commission restrictions on contacting prospective students and the use of internet, mobile phone and other advertising and marketing media; costs and effectiveness of internet, mobile phone and other advertising programs; and changing media preferences of our target audiences.
We use third-party lead aggregators and generators to help us identify prospective students. The practices of some lead aggregators and generators have been questioned by various regulatory bodies, which could lead to changes in the quality and number of prospective student leads provided by these lead aggregators and generators as well as the cost thereof, which could in turn result in a reduction in the number of students we enroll. Further, the highly regulated nature of the postsecondary education industry and the resulting compliance measures undertaken by the industry are burdensome and some lead aggregators may choose not to work with us in favor of providing their services to different industries. In addition, the number of lead aggregators and generators has reduced over time due to consolidation in that industry, and this could exaggerate the indirect impact on us of any negative developments within that industry or with respect to any lead aggregator or generator with which we do business.
We may not be able to retain our key personnel or hire, train and retain the personnel we need to sustain and grow our business.
Our future success depends largely on the skills, efforts and motivation of our executive officers and other key personnel, as well as on our ability to attract and retain qualified managers and our institutions’ ability to attract and retain qualified faculty members and administrators. If any of our executive officers leave the Company, it may be difficult to hire a replacement with similar experience and skills due to the highly regulated nature of our business. The political and regulatory uncertainty facing the for-profit postsecondary education industry may make it difficult to retain key personnel, in particular long-tenured senior officers. Loss of key personnel in the future could impact our growth, lead to changes in or create uncertainty about our business strategies or otherwise impact management’s attention to operations.
Our success and ability to grow depends on the ability to hire, train and retain significant numbers of talented people. We face competition from companies in postsecondary education and other industries in attracting, hiring and retaining personnel who possess the combination of skills and experiences that we seek to implement our business strategy. In particular, our performance is dependent upon the availability and retention of qualified personnel for our student support operations. The negative publicity surrounding our industry sometimes makes it difficult and more expensive to attract, hire and retain qualified and experienced personnel, and the Department’s regulations related to incentive compensation affect our ability to compensate admissions and financial aid personnel. Our ability to effectively train our student support personnel and the length of time it takes them to become productive also impacts our results of operations. This may result in additional costs in the future as we are required to provide increased compensation in order to attract and retain qualified employees.
Regulatory changes impacting the for-profit postsecondary education sector may require us to make substantial changes to our business and explore alternative business strategies to maintain or grow our business. If our executive officers and other key personnel lack experience necessary to support these changes, we may be unable to timely attract the talent that we need.
Our financial performance depends, in part, on our ability to keep pace with changing market needs and technology.
Increasingly, prospective employers of students who graduate from our institutions demand that their new employees possess appropriate technological skills and also appropriate “soft” skills, such as communication, critical thinking and teamwork skills. These desired skills can evolve rapidly in a changing economic and technological environment, so it is important for our institutions’ educational programs to evolve in response to those economic and technological changes. Current or prospective students or the employers of our graduates may not accept expansion of our existing programs, improved program content and the development of new programs. Students and faculty increasingly rely on personal communication devices and expect that we will be able to adapt our information technology platforms and our educational delivery methods to support these devices and any new technologies that may develop. Even if our institutions are able to develop acceptable new and improved programs in a cost-effective manner, our institutions may not be able to begin offering them as quickly as prospective students and employers would like or as quickly as our competitors offer similar programs. If we are unable to adequately respond to changes in market requirements due to regulatory or financial constraints, rapid technological changes or other factors, our ability to attract and retain students could be impaired and our revenue and profitability could be adversely affected.
Our future results of operations could be materially adversely affected if we are required to write down the carrying value of non-financial assets and non-financial liabilities, such as goodwill.
In accordance with U.S. GAAP, we review our non-financial assets and non-financial liabilities, including goodwill, for impairment on at least an annual basis through the application of fair value-based measurements. On an interim basis, we review our assets and liabilities to determine if a triggering event had occurred that would result in it being more likely than not that the fair value would be less than the carrying amount for any of our reporting units or indefinite-lived intangible assets. Some factors that management considers when determining if a triggering event has occurred include reviewing the significant inputs to the fair value calculation and any events or circumstances that could affect the significant inputs, including, but not limited to, financial performance, legal, regulatory, contractual, competitive, economic, political, business or other factors, industry and market conditions as well as the most recent quantitative fair value analysis for each reporting unit and the amount of the difference between the estimated fair value and the carrying value. We determine the fair value of our reporting units using a combination of an income approach, based on discounted cash flow, and a market-based approach. To the extent the fair value of a reporting unit is less than its carrying amount, we will be required to record an impairment charge in the consolidated statements of income. Our estimates of fair value are based primarily on projected future results and expected cash flows consistent with our plans to manage the underlying businesses, including projections of newly acquired businesses. However, should we encounter unexpected economic conditions or operational results, have unforeseen complications with integration of newly acquired businesses or need to take additional actions not currently foreseen to comply with current and future regulations, the assumptions used to calculate the fair value of our assets, estimates of future cash flows, revenue growth, and discount rates could be negatively impacted and could result in an impairment of goodwill which could materially adversely affect our results of operations.
We rely on proprietary rights and intellectual property in conducting our business, which may not be adequately protected under current laws, and we may encounter disputes from time to time relating to our use of the intellectual property of third parties.
Our success depends in part on our ability to protect our proprietary rights. We rely on a combination of copyrights, trademarks, service marks, trade secrets, domain names and agreements to protect our proprietary rights. We rely on service mark and trademark protection in the United States and select foreign jurisdictions to protect our rights to our marks as well as distinctive logos and other marks associated with our services. These measures may not be adequate, and we cannot be certain that we have secured, or will be able to secure, appropriate protections for all of our proprietary rights. Unauthorized third parties may attempt to duplicate the proprietary aspects of our curricula, online resource material and other content despite our efforts to protect these rights. Our management’s attention may be diverted by these attempts, and we may need to use funds for lawsuits to protect our proprietary rights against any infringement or violation.
We may encounter disputes from time to time over rights and obligations concerning intellectual property, and we may not prevail in these disputes. Third parties may raise a claim against us alleging an infringement or violation of the intellectual property of that third party. Some third-party intellectual property rights may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid those intellectual property rights. In addition, in some instances, our faculty members or our students may post various articles or other third-party content on class discussion boards or download third-party content to personal computers, which may result in claims or liability for the unauthorized duplication or distribution of this material. Any intellectual property claim could subject us to costly litigation and impose a significant strain on our financial resources and management personnel regardless of whether such claim has merit.
Our corporate engagement programs have contributed to student enrollment growth through 2024. If we fail to enter new corporate engagements or if existing corporate partners pause or reduce participation in their tuition assistance programs, total student enrollments may suffer.
We remain focused on investing in and improving processes that support our corporate engagement programs. These programs have been a meaningful driver of total enrollment growth through 2024. Our continued success with these programs depends, in part, on our ability to maintain existing corporate engagements and enter into additional corporate engagements. There is no guarantee that our existing corporate partners will have an interest in continuing to fund or expand these tuition assistance programs, and there is no guarantee that their employees will continue to have the same level of interest in participating, which could adversely impact total student enrollments.
The acquisition, integration and growth of acquired businesses may present challenges that could harm our business.
On December 2, 2024, we completed our acquisition of the University of St. Augustine for Health Sciences (“USAHS”). Our future success will depend, in part, on our ability to integrate USAHS, and any other institutions or businesses we may acquire in the future, into our operations. The successful integration and profitable operation of an acquired institution or business, including the realization of anticipated cost savings and additional revenue opportunities, can present challenges, and the failure to overcome these challenges can have an adverse effect on our business, financial condition, cash flows and results of operations. Such challenges, while ultimately dependent on the particular acquisition at hand, may include, among other things, the inability to maintain uniform standards, controls, policies and procedures; the acquired business not performing as expected; distraction of management’s attention from normal business operations during the integration process; the inability to attract and/or retain key management personnel to operate the acquired entity; the inability to obtain, or delays in obtaining, regulatory or other approvals necessary to operate the business; the risk that disruptions from the integration will harm our or the acquired entity’s businesses; potential adverse reactions or changes to business relationships resulting from the acquisition; the inability to correctly estimate the size of a target market or accurately assess market dynamics; expenses associated with the integration efforts; and our assumption of unexpected risks, liabilities and obligations of the acquired business, including issues not discovered in the due diligence process.
An acquisition related to an institution or other educational business often requires various regulatory approvals and in the case of a Title IV eligible institution, like USAHS, has recently required growth restrictions, reporting obligations and temporary conditions on operations that limit changes to the institution after acquisition. If we are unable to obtain such approvals, or we obtain them on unfavorable terms, our ability to consummate a future transaction may be impaired or we may be unable to operate the acquired entity in a manner that is favorable to us. If we fail to properly evaluate an acquisition, we may be required to incur costs in excess of what we anticipated, and we may not achieve the anticipated benefits of such acquisition, including the acquisition of USAHS.
Natural disasters or other extraordinary events may cause us to close some of our schools or suffer casualty losses.
We may experience business interruptions or casualty losses resulting from natural disasters, inclement weather, transit disruptions or other events in one or more of the geographic areas in which we operate, particularly in California, Colorado, Florida, Georgia and Texas, where our physical campuses are located. These events could impair the value of our assets and/or cause us to close physical campuses, temporarily or permanently, and could affect student recruiting opportunities in those locations, causing enrollment and revenue to decline, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Risks Related to Our Business Technology Infrastructure
If we, our third-party vendors, our regulators or any other quasi-governmental organization we are required to report information to are subject to cyberattacks, data breaches or other security incidents, or if there is a disruption or failure of our information technology systems or software, such events could expose us to liability and could adversely affect our financial condition and operating results.
As part of our business, we collect, process, use and store sensitive data and certain personal information from our students and employees. We also utilize third-party vendors and provide information about our students and employees to governmental and quasi-governmental external agencies to satisfy different legal and regulatory requirements and use electronic payment methods to process and store some of this information, including credit card information. Our business relies on information technology networks and systems to store this data, process financial and personal information, manage a variety of business processes, and comply with regulatory, legal and tax requirements. Additionally, we maintain other confidential, proprietary or otherwise sensitive information relating to our business and from third parties.
The information technology networks and systems owned, operated, controlled or used by us, our third-party vendors or other external agencies may be vulnerable to damage, disruptions or shutdowns, software or hardware vulnerabilities, data breaches, security incidents, failures during the process of upgrading or replacing software or databases or components thereof, power outages, natural disasters, hardware failures, attacks by computer hackers, telecommunication failures, user errors, user malfeasance, computer viruses, unauthorized access, phishing or social engineering attacks, ransomware attacks, distributed denial-of-service attacks, brute
force attacks, robocalls and other real or perceived cyberattacks or catastrophic events, all of which may not be prevented by our efforts to secure our networks and systems. Security incidents can also occur as a result of non-technical issues, including intentional or inadvertent actions by our employees, our third-party vendors, external agencies or their personnel, or other parties. Security incidents are becoming increasingly prevalent and severe, as well as increasingly difficult to detect. Any of these incidents could lead to interruptions or shutdowns of our platforms, disruptions in our ability to process service requests and record or analyze the use of our services, the loss or corruption of data or unauthorized access to, or acquisition of, personal information or other sensitive information, such as our intellectual property. We maintain policies and practices and operational safeguards, measures and controls aimed at reducing our cyber risk, protecting and recovering our data and ensuring business continuity, which include reasonable efforts that aim to ensure that our third-party vendors maintain reasonable security, including encryption and authentication technology, and will notify us promptly if a security incident occurs. However, none of our or our vendors’ or external agencies’ security measures can provide absolute security. Advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography or other developments may result in our failure or inability, or the failure or inability of our vendors or external agencies, to adequately protect personal or other sensitive information, and there can be no assurance that we, our vendors or external agencies will not suffer a cyberattack, that hackers or other unauthorized parties will not gain access to or exfiltrate personal information or other sensitive data or that any such data compromise or unauthorized access will be discovered in a timely fashion.
Like many businesses, we, our third-party vendors and external agencies have in the past and will in the future continue to be subject to cyberattacks, cybersecurity threats and attempts to compromise and penetrate our data security and systems and disrupt our services. Regular patching of each of our respective computer systems and frequent updates to our virus detection and prevention software with the latest virus and malware signatures may not catch newly introduced malware, ransomware, viruses or “zero-day” viruses prior to their infecting our, our third-party vendors and/or external agencies’ computer systems or networks. Future cyberattacks against us, our third-party vendors or external agencies could lead to operational disruptions that could have an adverse effect on our ability to provide services to students and on our results of operations and financial results. Any general decline in internet use for any reason, including security or privacy concerns, cost of internet service or changes in government regulation, could result in less demand for online educational services and inhibit growth in our online programs.
Failure of our systems to operate effectively or a compromise in the security of our systems, or the systems of our third-party vendors, external agencies or other third parties, that results in unauthorized persons or entities obtaining personal information or other sensitive information could materially and adversely affect our reputation, operations, operating results and financial condition. Actual or anticipated cyberattacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, pay higher insurance premiums and engage third-party specialists for additional services. Breaches in our data security or that of our third-party vendors, external agencies or other third parties could expose us to risks of data loss, inappropriate disclosure of confidential or proprietary information, potential claims, investigations, regulatory proceedings, litigation penalties and liability, could impede our processing of transactions and our financial reporting and could result in a disruption of our operations. In addition, we may incur other substantial costs in connection with remediating and otherwise responding to any data security incident, including potential liability for stolen client, student or employee data, repairing system damage, or providing credit monitoring or other benefits to clients, students or employees affected by the incident. Additionally, if we, our third-party service providers or external agencies experience security incidents that result in a decline in performance of necessary services, availability problems or the loss, corruption of, unauthorized access to or disclosure of personal data or confidential information, people may become unwilling to provide us the information necessary to receive our services, and our reputation and market position could be harmed. Existing students may also decrease their use of our services or cease using our services altogether. The impact of security threats, incidents and other disruptions are difficult to predict. Our insurance coverage for such security threats, incidents and other disruptions may not be adequate to cover all related costs, and we may not otherwise be fully indemnified for them. This may result in an increase in our costs for insurance or insurance not being available to us on economically feasible terms or at all. Insurers may also deny us coverage as to any future claim. Any of these results could materially harm our growth prospects, financial condition, business and reputation.
The personal information that we collect may be vulnerable to breach, theft or loss, any of which could adversely affect our reputation, operations and ability to attract and retain students.
In the ordinary course of our business, we maintain on our network systems and the networks of our third-party providers, and report to external agencies, certain information that is confidential, proprietary, personal (such as student information) or otherwise sensitive in nature, including financial information and confidential business information. Our computer networks, those of our vendors that manage confidential information for us or provide services to our students or us and those of external agencies can be accessed globally through the internet and are vulnerable to unauthorized access, inadvertent access or display, theft or misuse, hackers, installation of ransomware and malware and computer viruses, during regular use and in connection with hardware and software upgrades and changes. These attacks have become more prevalent and sophisticated. Unauthorized access, misuse, theft or hacks can evade our intrusion detection and prevention precautions, and the intrusion detection and prevention precautions of our third-party providers and external agencies to which we report certain information, without alerting us to the breach or loss for some period of time or ever. An individual or group that circumvents security measures could misappropriate confidential or proprietary
information or personal information about our students or employees, cause interruptions or malfunctions in our operations or commit fraud. We have experienced malware and virus attacks on our systems which went undetected by our virus detection and prevention software.
The FTC passed an amendment to the Safeguards Rule under the Gramm-Leach-Bliley Act (the “GLBA”), effective on June 9, 2023, that updated data security requirements for financial institutions, including all Title IV institutions of higher education. The Department has increased enforcement authority by requiring auditors to verify an institution’s compliance with components of the Safeguards Rule. Failure to comply with the applicable GLBA requirements may result in FTC enforcement, which could include the imposition of conditions, penalties, monitoring and oversight.
In addition to being subject to privacy and information security laws and regulations in the U.S., because our services can be accessed globally via the internet, we may also be subject to privacy and information security laws in countries outside the U.S. from which students access our services, which laws may constrain the way we market and provide our services. Any breach of student or employee privacy or errors in storing, using or transmitting personal information could violate privacy laws and regulations resulting in fines or other penalties. The adoption of new or modified state or federal data or cybersecurity legislation could increase our costs and require changes in our operating procedures or systems. An example of this is the California Consumer Privacy Act which became effective January 1, 2020.
The reliability of our program infrastructure and mechanisms to protect the personal information of our students is critical to our operations, reputation and ability to attract and retain students. A breach, theft or loss of personal information held by us, our vendors or an external agency, or a violation of the laws and regulations governing privacy, could have a material adverse effect on our reputation and ability to attract and retain students, or result in lawsuits, additional regulation, remediation and compliance costs or investments in additional security systems to protect our computer networks, the costs of which may be substantial.
Our primarily remote work environment may exacerbate the risks related to our business technology infrastructure.
A significant portion of our employees work remotely, as do a number of our third-party service vendors. This remote work environment may exacerbate certain risks to our business, including increasing the stress on, and our vulnerability to disruptions of, our technological infrastructure and systems and the risks of phishing and other cybersecurity attacks, unauthorized dissemination of confidential information and social engineering attempts. If a natural disaster, power outage, connectivity issue or other event occurs that impacts the ability of employees to work remotely, it may be difficult or, in certain cases, impossible for us to continue our business for a period of time, which could materially harm our growth prospects, financial condition, business and reputation.
Risk Related to Our Common Stock
The trading price of our common stock may continue to fluctuate substantially in the future, and as a result returns on an investment in our common stock may be volatile.
The trading price of our common stock has previously and may continue to fluctuate significantly as a result of a number of factors, some of which are not in our control. These factors may include:
•the actual, anticipated or perceived impact of changes in the political environment or government policies;
•the outcomes and impacts on our business of the Department’s rulemakings, and other changes in the legal or regulatory environment in which we operate;
•negative media coverage of the for-profit education industry;
•general economic conditions or conditions in the postsecondary education field, including declining enrollments;
•the initiation, pendency or outcome of litigation, accreditation reviews, regulatory reviews, inquiries and investigations and any related adverse publicity;
•the failure of certain of our institutions or programs to maintain compliance under the 90-10 Rule or other regulatory standards;
•our ability to meet or exceed, or changes in, expectations of analysts or investors, or the extent of analyst coverage of our company;
•any reduction or elimination of our payment of dividends on our common stock;
•decisions by any significant investors to reduce their investment in us;
•quarterly variations in our operating results, which sometimes occur due to the academic calendar and significant expense items that do not regularly occur;
•loss of key personnel; and
•price and volume fluctuations in the overall stock market, which may cause the market price for our common stock to fluctuate significantly more than the market as a whole.
Changes in the trading price of our common stock may occur without regard to our operating performance, and the price of our common stock could fluctuate based upon factors that have little or nothing to do with our company. Further, the trading volume of our common stock has historically been, and may continue to be, relatively low, which may cause our stock price to react more to the above and other factors. The fluctuations in the trading price of our common stock may impact an investor’s ability to sell their shares at a desired time or at a price considered satisfactory, including at or above the price at which the investor acquired them.
Shareholders may not receive the level of dividends previously provided under the dividend policy our Board of Directors has adopted, or any dividends at all.
We declared our first quarterly cash dividend in the third quarter of 2023 and have paid a quarterly dividend since then. However, we are not obligated to pay dividends on our common stock. Despite our history of paying dividends, the declaration and payment of all future dividends to holders of our common stock are subject to the discretion of our Board of Directors, which may amend, revoke or suspend our dividend policy at any time and for any reason, including earnings and cash flows, capital spending plans, financial conditions and other factors our Board of Directors may deem relevant. The terms of our indebtedness and any limitations imposed by regulatory authorities, among other factors, may also restrict us from paying cash dividends on our common stock under certain circumstances.
Over time, our capital and other cash needs may change significantly from our current needs, which could affect whether we pay dividends and the level of any dividends we may pay in the future. Accordingly, shareholders may not receive dividends consistent with the previously issued amounts, or at all. Any reduction or elimination of dividends may cause the market price of our common stock to decline.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

---

ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
We have ground-based campuses located in Georgia (AIUS), Texas (AIUS and USAHS), California (USAHS), Florida (USAHS) and Colorado (CTU), which generally consist of teaching facilities, including classrooms and laboratories, and administrative offices. Additionally, we have administrative facilities located in the areas of Chicago, Illinois and Phoenix, Arizona, which are used for our universities and corporate functions.
We have transitioned our workforce to a primarily remote work environment, supported by our scalable and innovative technology infrastructure and we continue to look for ways to optimize our lease portfolio.
All of our campus and administrative facilities are leased except one in Houston, Texas. As of December 31, 2024, we leased approximately 0.8 million square feet under lease agreements that have remaining terms ranging from less than one year through 2049. The facility in Houston, Texas, is used by AIUS and is less than 0.1 million square feet of real property.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
See Note 12 “Contingencies” to our consolidated financial statements in Item 15 of this Annual Report on Form 10-K.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed for trading on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “PRDO”.
The closing price of our common stock as reported on the Nasdaq on February 11, 2025 was $28.39 per share. As of February 11, 2025, there were approximately 94 holders of record of our common stock, including The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.
Our common stock transfer agent and registrar is Computershare Trust Company, N.A. They can be contacted at P.O. Box# 43078, Providence, RI 02940-3078 or at their website www.computershare.com/investor.
In 2024, the Company's Board of Directors continued to implement its dividend policy. Under this policy, the Board plans to distribute dividends on a quarterly basis. The declaration and payment of dividends on our common stock are subject to the discretion of our Board of Directors. Any decision to pay future cash dividends will be made by the Board of Directors and depend on the Company’s available retained earnings, financial condition, the impact of changing laws and regulations, economic conditions, general business conditions, capital spending plans, the anticipated effect of a dividend payment on our financial condition, and other factors the Board of Directors may consider relevant. In addition to quarterly dividends, the Company reinvests earnings in our operations to promote future growth and, from time to time, executes repurchases of shares of our common stock under the stock repurchase program discussed below. The repurchase of shares of our common stock reduces the amount of cash available to pay cash dividends to our common stockholders.
On February 20, 2024, the Board of Directors of the Company approved a new stock repurchase program for up to $50.0 million which commenced March 1, 2024 and expires September 30, 2025. The new stock repurchase program replaced the previous stock repurchase program. The other terms of the new stock repurchase program are consistent with the Company’s previous stock repurchase program.
During 2024, we repurchased 0.4 million shares of our common stock for approximately $6.8 million at an average price of $17.60 per share under the Company’s current stock repurchase program. The timing of purchases and the number of shares repurchased under the program are determined by the Company’s management and depend on a variety of factors, including stock price, trading volume and other general market and economic conditions, its assessment of alternative uses of capital, regulatory requirements and other factors. Repurchases will be made in open market transactions, including block purchases, conducted in accordance with Rule 10b-18 under the Exchange Act as well as may be made pursuant to trading plans established under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The stock repurchase program does not obligate the Company to purchase shares and the Company may, in its discretion, begin, suspend or terminate repurchases at any time, without any prior notice. As of December 31, 2024, approximately $47.1 million was available under the stock repurchase program.
The Board of Directors approved the aforementioned stock repurchase programs believing it advantageous to the Company and its stockholders to repurchase shares of the Company’s common stock from time to time at prices below what the Board of Directors believed to be the intrinsic value of the Company’s common stock.
Issuer Purchases of Equity Securities
Period
Total Number of
Shares
Purchased (1)
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs (2)
December 31, 2023
$
18,528,794
January 1, 2024 - January 31, 2024
-
$
-
-
18,528,794
February 1, 2024 - February 29, 2024
220,000
17.63
220,000
14,646,422
March 1, 2024 - March 31, 2024
358,669
17.64
164,571
47,106,022
April 1, 2024 - April 30, 2024
-
-
-
47,106,022
May 1, 2024 - May 31, 2024
-
-
-
47,106,022
June 1, 2024 - June 30, 2024
-
-
-
47,106,022
July 1, 2024 - July 31, 2024
-
-
-
47,106,022
August 1, 2024 - August 31, 2024
-
-
-
47,106,022
September 1, 2024 - September 30, 2024
-
-
-
47,106,022
October 1, 2024 - October 31, 2024
-
-
-
47,106,022
November 1, 2024 - November 30, 2024
-
-
-
47,106,022
December 1, 2024 - December 31, 2024
-
-
-
47,106,022
Total
578,669
384,571
(1)Includes 194,098 shares delivered back to the Company for payment of withholding taxes from employees for vesting restricted stock units pursuant to the terms of the Perdoceo Education Corporation Amended and Restated 2016 Incentive Compensation Plan.
(2)On February 20, 2024, the Board of Directors of the Company approved a new stock repurchase program of up to $50.0 million which commenced on March 1, 2024 and expires on September 30, 2025.
See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for information as of December 31, 2024, with respect to shares of our common stock that may be issued under our existing share-based compensation plans.
The graph below shows a comparison of cumulative total returns for Perdoceo, the Standard & Poor’s 500 Index and an index of peer companies selected by Perdoceo. The companies in the peer index are weighted according to their market capitalization as of the end of each period for which a return is indicated. Included in the peer index are the following companies whose primary business is postsecondary education: Adtalem Global Education Inc., American Public Education, Inc., Grand Canyon Education, Inc., Laureate
Education, Inc., and Strategic Education, Inc. The performance graph begins with Perdoceo’s $18.39 per share closing price on December 31, 2019.
COMPARISON OF CUMULATIVE FIVE-YEAR TOTAL RETURN
(Based on $100 invested on December 31, 2019 and assumes the reinvestment of all dividends.)
The information contained in the performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission nor shall such information be deemed incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, as both are amended from time to time, except to the extent specifically incorporated by reference into such filing.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion below contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. We have tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “expect,” “plan,” “may,” “should,” ”will,” “continue to,” “focused on” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those matters discussed in Item 1A, “Risk Factors,” in Part I of this Annual Report on Form 10-K that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason.
As used in this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries. The terms “institution” and “university” refer to an individual, branded, for-profit educational institution, owned by us and including its campus locations. The term “campus” refers to an individual main or branch campus operated by one of our institutions.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K. The MD&A is intended to help investors understand the results of operations, financial condition and present business environment. The MD&A is organized as follows:
•Overview
•Consolidated Results of Operations
•Segment Results of Operations
•Summary of Critical Accounting Policies and Estimates
•Liquidity, Financial Position and Capital Resources
OVERVIEW
Perdoceo’s accredited academic institutions offer a quality postsecondary education to a diverse student population, with fully online, campus-based and hybrid learning programs. The Company’s academic institutions - Colorado Technical University (“CTU”), the American InterContinental University System (“AIUS” or “AIU System”) and University of St. Augustine for Health Sciences ("USAHS") - provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. USAHS is among the nation's reputable universities offering graduate health sciences degrees, primarily in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Perdoceo's academic institutions are committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.
Our reporting segments are determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 - Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across three reporting segments: CTU, AIUS and USAHS.
See Note 18 “Segment Reporting” for a description of each of our current reporting segments along with revenues, operating income and total assets by reporting segment.
Regulatory Environment and Political Uncertainty
As indicated in “Scrutiny of the For-Profit Postsecondary Education Sector” section, the for-profit industry is scrutinized by various policymakers, agencies and interest groups. Congressional hearings and roundtable discussions were previously held regarding certain aspects of the education industry, including issues surrounding student debt as well as publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and reports were issued that are highly critical of for-profit
colleges and universities. Many of the most highly criticized institutions have been closed now for several years. See “Scrutiny of the For-Profit Postsecondary Education Sector” for additional information on this matter.
The November 2024 federal elections resulted in a new President and Congress. We cannot predict the actions that the new Administration or Congress may take or their effect on the higher education sector. The new Congress or Administration may delay, block, modify, or eliminate certain Title IV and other regulations applicable to higher education institutions. In addition, the new Administration may interpret, apply, and enforce Title IV and other regulations in a manner different from current Department guidance and practice. We expect to continue to need to operate nimbly, making necessary changes to the extent possible to comply with new rules or interpretations as well as new interpretations of existing rules.
We encourage you to review Item 1, “Business,” and Item 1A, “Risk Factors,” to learn more about our highly regulated industry and related risks and uncertainties.
Note Regarding Non-GAAP measures
We believe it is useful to present non-GAAP financial measures which exclude certain significant and non-cash items as a means to understand the performance of our core business. As a general matter, we use non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of our core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, we believe that non-GAAP financial information is used by analysts and others in the investment community to analyze our historical results and to provide estimates of future performance.
We believe certain non-GAAP measures allow us to compare our current operating results with respective historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by items we do not consider reflective of underlying operating performance. We believe the items we are adjusting for are operating expenses which are not reflective of our underlying business. In evaluating the use of non-GAAP measures, investors should be aware that in the future we may incur expenses similar to the adjustments presented below. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. A non-GAAP measure has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income, operating income, earnings per diluted share, or any other performance measure derived in accordance with and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity.
Non-GAAP financial measures, when viewed in a reconciliation to respective GAAP financial measures, provide an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.
2024 Review
During the year ended December 31, 2024 ("current year"), our academic institutions continued to execute on our goal of changing lives through education and preparing learners for job skills necessary in today’s world. The positive student enrollment results we experienced as of the end of the current year demonstrated the execution on our strategy of prioritizing student experiences and academic outcomes, that we believe, will support sustainable and responsible growth.
On December 2, 2024, the Company completed the acquisition of the University of St. Augustine for Health Sciences ("USAHS"). USAHS is among the nation's reputable universities offering graduate health sciences degrees, primarily in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Founded in 1979, USAHS educates students through its network of campuses in San Marcos, California; St. Augustine and Miami, Florida; and Austin and Dallas, Texas and through its online programs. This strategic acquisition allows us to diversify and significantly expand our academic offerings into the health sciences field, broadening our reach and community impact.
Total student enrollments increased 20.0% at December 31, 2024 as compared to December 31, 2023, with both CTU and AIUS contributing to this increase, along with the USAHS acquisition. CTU's total student enrollments increased 8.1% as compared to the prior year end, driven by student enrollment growth within our corporate engagement programs as well as continued improvement in prospective student interest levels, student retention and student engagement. Total student enrollments increased 11.8% at AIUS for the current year end as compared to the prior year end as AIUS' total student enrollment comparability had continued to improve through the current year since reverting to normalized levels of operations at the end of 2023.
We remain focused on further enhancing and supporting student retention and engagement, while making selective investments in student technology, including exploring AI based solutions, and leveraging data analytics to identify and engage with prospective students who are most likely to succeed at one of our academic institutions. We also continued to experience increased efficiencies within our student enrollment and onboarding processes that have been supported by the use of data analytics and technology and we have increased training and development within our admissions and enrollment teams. Lastly, we remained focused on investing in and improving processes that support our corporate engagement programs.
We expect the high levels of student retention and student engagement we experienced in 2024, as well as the prospective student interest experienced in the latter half of 2024, to continue into 2025. While we may see quarterly variability in revenue and student enrollment trends, our assumption is that the impact from the Department student loan initiatives that have ended or are expected to change or end in 2025 will mostly be offset with organic improvements in student retention, student engagement and higher levels of prospective student interest for our academic programs, including growth in corporate engagements. Full year revenue is expected to be higher for 2025 primarily due to the USAHS acquisition as well as growth in revenue and student enrollments within CTU and AIUS.
Financial Highlights
Revenue for the current year decreased by 4.0% or $28.7 million as compared to the prior year, resulting from a decrease in revenue for CTU of 2.6% or $12.0 million and a decrease for AIUS of 11.1% or $26.8 million, which more than offset the revenue of $10.0 million from the USAHS acquisition in December of 2024. The decrease in revenue at CTU was mainly due to simplification of professional development program offerings. Excluding the impact from the simplification of professional development program offerings, 2024 revenue at CTU experienced organic growth. Strong underlying student retention and engagement and an increase in student enrollment from corporate engagements fully offset the negative impact of fewer revenue-earning days during the full year and resulted in this organic revenue growth. The decrease within AIUS was driven by a lag impact on revenue through the first three quarters of 2024 of the operational changes undertaken during 2023, which more than offset the revenue growth in the fourth quarter of 2024 for AIUS.
Operating income for the current year increased to $174.3 million as compared to operating income of $150.4 million in the prior year. The increase in operating income for the current year was a result of decreased operating expenses, primarily in the areas of administrative, asset impairment, admissions and academics expenses, which more than offset the decrease in revenue during the current year as compared to the prior year.
The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant and non-cash items, as a means to understand the performance of its operations. Adjusted operating income was $192.2 million for the current year as compared to $174.9 million for the prior year. Adjusted operating income for the years ended December 31, 2024 and 2023 is presented below (dollars in thousands, unless otherwise noted):
For the Year Ended December 31,
Adjusted Operating Income
Operating income
$
174,253
$
150,446
Depreciation and amortization
14,645
16,887
Legal fee expense related to certain matters (1)
3,309
7,579
Adjusted Operating Income
$
192,207
$
174,912
For the Year Ended December 31,
Adjusted Earnings Per Diluted Share
Reported Earnings Per Diluted Share
$
2.19
$
2.18
Pre-tax adjustments included in operating expenses:
Amortization for acquired intangible assets
0.09
0.11
Legal fee expense related to certain matters (1)
0.05
0.11
Gain on sale of intangible assets (2)
-
(0.32
)
Total pre-tax adjustments
0.14
(0.10
)
Tax effect of adjustments (3)
(0.04
)
0.02
Total adjustments after tax
0.10
(0.08
)
Adjusted Earnings Per Diluted Share
$
2.29
$
2.10
___________________________
(1)Legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts.
(2)Non-cash gain associated with the sale of the LCB tradename in exchange for outstanding shares of Perdoceo's stock.
(3)The tax effect of adjustments was calculated by multiplying the pre-tax adjustments with a tax rate of 25%. This tax rate is intended to reflect federal and state taxable jurisdictions as well as the nature of the adjustments.
CONSOLIDATED RESULTS OF OPERATIONS
The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the years ended December 31, 2024 and 2023 (dollars in thousands), including comparisons of our year-over-year performance between these years. Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our results for the year ended December 31, 2022, as well as the year-over-year comparison of our 2023 financial performance to 2022.
For the Year Ended December 31,
% of
Total
Revenue
% of
Total
Revenue
% of
Total
Revenue
TOTAL REVENUE
$
681,263
$
710,004
$
695,208
OPERATING EXPENSES
Educational services and facilities (1)
120,860
17.7
%
130,324
18.4
%
116,723
16.8
%
General and administrative (2):
Advertising and marketing
100,963
14.8
%
102,588
14.4
%
126,843
18.2
%
Admissions
81,783
12.0
%
91,359
12.9
%
93,810
13.5
%
Administrative
150,587
22.1
%
170,922
24.1
%
163,893
23.6
%
Bad debt
33,719
4.9
%
33,215
4.7
%
41,574
6.0
%
Total general and administrative expense
367,052
53.9
%
398,084
56.1
%
426,120
61.3
%
Depreciation and amortization
14,645
2.1
%
16,887
2.4
%
19,734
2.8
%
Asset impairment
4,453
0.7
%
14,263
2.0
%
2,994
0.4
%
OPERATING INCOME
174,253
25.6
%
150,446
21.2
%
129,637
18.6
%
PRETAX INCOME
201,440
29.6
%
192,121
27.1
%
134,269
19.3
%
PROVISION FOR INCOME TAXES
53,850
7.9
%
44,469
6.3
%
38,402
5.5
%
Effective tax rate
26.7
%
23.1
%
28.6
%
NET INCOME
$
147,590
21.7
%
$
147,652
20.8
%
$
95,867
13.8
%
_______________
(1)Educational services and facilities expense includes costs attributable to the educational activities of our campuses, including: salaries and benefits of faculty, academic administrators and student support personnel, and costs of educational supplies and facilities, such as rents on leased facilities. Also included in educational services and facilities expense are rents on leased administrative facilities, such as our corporate headquarters, and costs of other goods and services provided by our campuses, including costs of textbooks and laptop computers.
(2)General and administrative expense includes operating expenses associated with, including salaries and benefits of personnel in, corporate and campus administration, marketing, admissions, information technology, financial aid, accounting, human resources, legal and compliance. Other expenses within this expense category include costs of advertising and production of marketing materials and bad debt expense.
Year Ended December 31, 2024 as Compared to the Year Ended December 31, 2023
Revenue
Revenue for the year ended December 31, 2024 ("current year") decreased 4.0%, or $28.7 million, primarily due to decreases in revenue from both CTU and AIUS. The decline at AIUS was attributed to the delayed impact on revenue through the first three quarters of 2024 from operational changes made in the previous year. Typically, total student enrollment balances at the end of any given quarter have a delayed effect on revenue in the following quarter. CTU’s decline was driven by adjustments to our professional development program offerings. The current year's revenue benefited from the acquisition completed on December 2, 2024, which was not included in the full comparative period of the prior year.
Educational Services and Facilities Expense (dollars in thousands)
For the Year Ended December 31,
2024 vs 2023 % Change
2023 vs 2022 % Change
Educational services and facilities:
Academics & student related
$
112,216
$
120,023
$
99,410
-6.5
%
20.7
%
Occupancy
8,644
10,301
17,313
-16.1
%
-40.5
%
Total educational services and facilities
$
120,860
$
130,324
$
116,723
-7.3
%
11.7
%
Educational services and facilities expense for the current year decreased by 7.3% or $9.5 million as compared to the prior year, supported by improvements in both academics and student related costs and occupancy expenses, compared to the prior year.
Academics and student related costs decreased by 6.5% or $7.8 million as compared to the prior year, primarily due to operational changes made related to simplification of professional development offerings. Occupancy expenses for the current year improved by 16.1% or $1.7 million as compared to the prior year, driven by ongoing optimization of leased space.
General and Administrative Expense (dollars in thousands)
For the Year Ended December 31,
2024 vs 2023 % Change
2023 vs 2022 % Change
General and administrative:
Advertising and marketing
$
100,963
$
102,588
$
126,843
-1.6
%
-19.1
%
Admissions
81,783
91,359
93,810
-10.5
%
-2.6
%
Administrative
150,587
170,922
163,893
-11.9
%
4.3
%
Bad Debt
33,719
33,215
41,574
1.5
%
-20.1
%
Total general and administrative expense
$
367,052
$
398,084
$
426,120
-7.8
%
-6.6
%
The general and administrative expense for the current year decreased by 7.8% or $31.0 million, compared to the prior year. The decrease was primarily driven by lower administrative, admissions and advertising and marketing expenses.
Administrative expense for the current year decreased by 11.9% or $20.3 million as compared to the prior year, primarily driven by operational efficiencies within our academic institutions and decreased legal fees within Corporate and Other for the current year.
Admissions expense decreased by 10.5% or $9.6 million as compared to the prior year. The current year improvement was primarily driven by decreased expenses within both CTU and AIUS as a result of operational changes made during the prior year.
The advertising and marketing expense for the current year decreased by 1.6% or $1.6 million as compared to the prior year, which was driven by adjustments made to our marketing processes to identify prospective student interest.
Bad debt expense incurred by each of our segments during the years ended December 31, 2024, 2023 and 2022 was as follows (dollars in thousands):
For the Year Ended December 31,
% of Segment Revenue
% of Segment Revenue
% of Segment Revenue
2024 vs 2023 % Change
2023 vs 2022 % Change
Bad debt expense by segment:
CTU
$
20,386
4.5
%
$
20,223
4.3
%
$
21,640
5.2
%
0.8
%
-6.5
%
AIUS
13,133
6.1
%
13,008
5.4
%
19,971
7.3
%
1.0
%
-34.9
%
USAHS (1)
NM
-
NA
-
NA
NM
NA
Corporate and Other
(1
)
NM
(16
)
NM
(37
)
NM
NM
NM
Total bad debt expense
$
33,719
4.9
%
$
33,215
4.7
%
$
41,574
6.0
%
1.5
%
-20.1
%
_______________
(1)	USAHS includes results of operations starting from the acquisition date on December 2, 2024.
Bad debt expense remained relatively consistent with a slight increase of 1.5% or $0.5 million for the current year as compared to the prior year. We regularly evaluate our reserve rates, which includes a quarterly update of our analysis of historical student receivable collectability based on the most recent data available and a review of current known factors which we believe could affect future collectability of our student receivables, such as the number of students that do not complete the financial aid process. We continue to expect quarterly fluctuations in bad debt expense.
Operating Income
Operating income for the current year increased by 15.8% or $23.8 million as compared to the prior year. The current year improvement was supported by lower operating expenses across most categories which more than offset the decrease in revenue as compared to the prior year. Additionally, asset impairment expense decreased by $9.8 million as compared to the prior year which benefited the current year comparison.
Provision for Income Taxes
For the year ended December 31, 2024, we recorded a tax provision of $53.9 million, resulting in an effective tax rate of 26.7% as compared to a tax provision of $44.5 million, with an effective rate of 23.1% for the prior year. The prior year provision includes a $4.5 million favorable adjustment related to the tax benefits associated with a previously disclosed prior year ordinary loss attributable to the stock of a worthless subsidiary, which decreased the 2023 effective tax rate by 2.4%.
For the full year 2025, we expect our effective tax rate to be between 25.5% and 26.5%.
SEGMENT RESULTS OF OPERATIONS
The summary of segment financial information below should be referenced in connection with a review of the following discussion of our segment results from operations for the years ended December 31, 2024 and 2023 (dollars in thousands), including comparisons of our year-over-year performance between these years. Please refer to Part II Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our results for the year ended December 31, 2022, as well as the year-over-year comparison of our 2023 financial performance to 2022.
For the Year Ended December 31,
2024 vs 2023 % Change
2023 vs 2022 % Change
REVENUE:
CTU (1)
$
456,899
$
468,926
$
419,617
-2.6
%
11.8
%
AIUS (2)
213,547
240,300
274,479
-11.1
%
-12.5
%
USAHS (3)
10,041
-
-
NM
NA
Corporate and Other
1,112
NM
NM
Total
$
681,263
$
710,004
$
695,208
-4.0
%
2.1
%
OPERATING INCOME (LOSS):
CTU (1)
$
171,260
$
144,008
$
141,622
18.9
%
1.7
%
AIUS (2)
36,182
45,283
33,315
-20.1
%
35.9
%
USAHS (3)
(2,640
)
-
-
NM
NA
Corporate and Other
(30,549
)
(38,845
)
(45,300
)
-21.4
%
-14.2
%
Total
$
174,253
$
150,446
$
129,637
15.8
%
16.1
%
OPERATING INCOME (LOSS) MARGIN:
CTU (1)
37.5
%
30.7
%
33.8
%
AIUS (2)
16.9
%
18.8
%
12.1
%
USAHS (3)
NM
NA
NA
Corporate and Other
NM
NM
NM
Total
25.6
%
21.2
%
18.6
%
______________________
(1)CTU includes results of operations from Coding Dojo beginning on the acquisition date of December 1, 2022.
(2)AIUS includes results of operations from CalSouthern beginning on the acquisition date of July 1, 2022.
(3)USAHS includes results of operations beginning on the acquisition date of December 2, 2024.
As of December 31,
2024 vs 2023 % Change
2023 vs 2022 % Change
TOTAL STUDENT ENROLLMENTS:
CTU
28,100
26,000
25,200
8.1
%
3.2
%
AIUS
9,500
8,500
14,000
11.8
%
-39.3
%
USAHS (1)
3,800
-
-
NM
NA
Total
41,400
34,500
39,200
20.0
%
-12.0
%
______________________
(1)Perdoceo completed the acquisition of USAHS on December 2, 2024.
Total student enrollments represent all students who are active as of the last day of the reporting period. Active students are defined as those students who are considered in attendance by participating in class related activities during the previous two weeks of the most recent academic term. Total student enrollments do not include learners participating in: a) non-degree seeking and professional development programs, and b) degree seeking, non-Title IV, self-paced programs at our universities.
Year Ended December 31, 2024 as Compared to the Year Ended December 31, 2023
CTU. Revenue for the current year decreased by 2.6% or $12.0 million as compared to the prior year. This decline was mainly due to simplification of professional development program offerings at CTU. Excluding the impact from the simplification of professional development program offerings, 2024 revenue at CTU experienced organic growth. Strong underlying student retention and engagement and an increase in student enrollment from corporate engagements fully offset the negative impact of fewer revenue-earning days during the full year and resulted in this organic revenue growth. CTU's total student enrollments increased by 8.1% as of December 31, 2024 as compared to December 31, 2023. This increase was driven by student enrollment growth within our corporate engagement programs as well as continued improvement in prospective student interest levels, student retention and student engagement. CTU's academic calendar may impact the comparability of revenue-earning days and enrollment results in any given quarter, with the impact on revenue and total student enrollments not necessarily having the same magnitude or directional impact.
Current year operating income for CTU increased by 18.9% or $27.3 million as compared to the prior year. The improvement in operating income was driven by lower operating expenses across most categories, partially due to right-sizing of the cost structure to align with more simplified professional development offerings, which more than offset the declines in revenue.
AIUS. Revenue for the current year decreased by 11.1% or $26.8 million as compared to the prior year. This decline was driven by a lag impact through the first three quarters of 2024 from the operational changes made during the latter half of 2023. AIUS' total student enrollments increased by 11.8% as of December 31, 2024 as compared to December 31, 2023. This increase was primarily driven by the return to normalized operating levels starting in late 2023, which contributed to increasing student enrollments throughout 2024.
Current year operating income for AIUS decreased by 20.1% or $9.1 million as compared to the prior year, driven by the revenue decline mentioned above which was only partially offset with decreased operating expenses.
USAHS. Revenue for the current year was approximately $10.0 million starting from the acquisition date of December 2, 2024. USAHS reported an operating loss of approximately $2.6 million for the fourth quarter partially driven by amortization expense associated with acquired intangible assets.
Corporate and Other. This category includes unallocated costs that are incurred on behalf of the entire company. Total Corporate and Other operating loss for the current year improved by 21.4% or $8.3 million as compared to the prior year, primarily as a result of lower legal expenses.
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have identified the accounting policies and estimates listed below as those that we believe require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements which includes a discussion of these and other significant accounting policies.
Revenue Recognition
Description: Our revenue, which is derived primarily from academic programs taught to students who attend our universities, is generally segregated into two categories: (1) tuition and fees, and (2) other. Tuition and fees represent costs to our students for educational services provided by our universities and are reflected net of scholarships and tuition discounts. Our universities charge tuition and fees at varying amounts and bill students a single charge that covers tuition, certain fees and required program materials,
such as textbooks and supplies, which we treat as a single performance obligation. Generally, we bill student tuition at the beginning of each academic term for our degree programs and recognize the tuition as revenue on a straight-line basis over the academic term. As part of a student’s course of instruction, certain fees, such as technology fees and graduation fees, are billed separately to students. These fees are generally earned over the applicable term and are not considered separate performance obligations. We generally bill student tuition upon enrollment for our non-degree professional development programs and recognize the tuition as revenue on a straight-line basis over the length of the offering.
Assumptions and judgment: Revenue recognition includes assumptions and significant judgments including determination of the appropriate portfolios to assess for meeting the criteria to recognize revenue under ASC Topic 606 as well as the assessment of collectability. We analyze revenue recognition on a portfolio approach under ASC Topic 606. Significant judgment is used in determining the appropriate portfolios to assess for meeting the criteria to recognize revenue under ASC Topic 606. We have determined that all of our students can be grouped into one portfolio. Based on our past experience, students at different universities, in different programs or with different funding all behave similarly. Enrollment agreements all contain similar terms, refund policies are similar across all institutions and students work with the university to obtain some type of funding, for example, Title IV Program funds, Veterans Administration funds, military funding, employer tuition assistance or self-pay. We have significant historical data for our students which allows us to analyze collectability. We do not expect that revenue earned for the portfolio is significantly different as compared to revenue that would be earned if we were to assess each student contract separately.
Significant judgment is also required to assess collectability, particularly as it relates to students seeking funding under Title IV Programs. Because students are required to provide documentation, and in some cases extensive documentation, to the Department to be eligible and approved for funding, the timeframe for this process can sometimes span between 90 to 120 days. We monitor the progress of students through the eligibility and approval process and assess collectability for the portfolio each reporting period to monitor that the collectability threshold is met.
These assumptions and significant judgments are based upon our interpretation of accounting guidance and historical experience. Although management believes these assumptions and significant judgments to be reasonable, actual amounts may differ if historical experience is not reflective of future results.
Impact if actual results differ from assumptions and judgment: If actual performance is not consistent with historical experience in regards to our assessment of collectability, our revenue recognition may be materially different than what was originally recorded.
Allowance for Credit Losses
Description: We extend unsecured credit to a portion of the students who are enrolled at our academic institutions for tuition and certain other educational costs. Based upon past experience and judgment, we establish an allowance for credit losses with respect to student receivables which we estimate will ultimately not be collectible. As such, our results from operations only reflect the amount of revenue that is estimated to be reasonably collectible. Our standard student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables. Our estimation methodology considers a number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trending analysis and comparing estimated and actual performance.
Assumptions and judgment: Management makes a range of assumptions to determine what is believed to be the appropriate level of allowance for credit losses. Management determines a reasonable and supportable forecast based on the expectation of future conditions over a supportable forecast period as described above, as well as qualitative adjustments based on current and future conditions that may not be fully captured in the historical modeling factors described above. All of these estimates are susceptible to significant change.
Impact if actual results differ from assumptions and judgment: We monitor our collections and write-off experience to assess whether or not adjustments to our allowance percentage estimates are necessary. Changes in trends in any of the factors that we believe impact the collection of our student receivables, as noted above, or modifications to our collection practices, and other related policies may impact our estimate of our allowance for credit losses and our results from operations.
A one percentage point change in our allowance for credit losses as a percentage of gross earned student receivables as of December 31, 2024 would have resulted in a change in pretax income of $0.7 million during the year then ended.
Because a substantial portion of our revenue is derived from Title IV Programs, any legislative or regulatory action that significantly reduces the funding available under Title IV Programs, or the ability of our students or institutions to participate in Title IV Programs, would likely have a material impact on the realizability of our receivables.
Goodwill Impairment
Description: Goodwill represents the excess of cost over fair market value of identifiable net assets acquired through business purchases. Goodwill often involves estimates based on third-party valuations, or internal valuations based on discounted cash flow analyses or other valuation techniques. Under ASC Topic 350, we review goodwill for impairment on an annual basis or when an event or other circumstances change that would more likely than not reduce the fair value of the asset below its carrying value, by applying a fair-value-based test. In making this assessment we assess qualitative factors to determine whether it is more-likely-than-not the fair value of the goodwill is less than its carrying amount. If we conclude based on the qualitative assessment that goodwill may be impaired, we then perform a quantitative one-step impairment test, and an impairment loss would be recognized for the excess of the carrying value over the fair value of the goodwill. Any subsequent increases in goodwill would not be recognized on the consolidated financial statements.
Assumptions and judgment: During the current year, we performed a qualitative assessment for the annual review of goodwill balances for impairment. Management first considered events and circumstances, including business trends and current operating performance, that may affect the fair value of the reporting unit to determine whether it was necessary to perform the quantitative impairment test. Management focused on the significant inputs utilized in the most recent quantitative assessment and any events or circumstances that could affect the significant inputs, including, but not limited to, financial performance compared with actual and projected results of relevant prior periods, legal, regulatory, contractual, competitive, economic, political, business or other factors, and industry and market considerations, such as a deteriorating operating environment or increased competition.
When performing a quantitative assessment for the annual review of goodwill balances for impairment, we estimate the fair value of each of our reporting units based on projected future operating results and cash flows, market assumptions and/or comparative market multiple methods. Determining fair value requires significant estimates and assumptions based on an evaluation of a number of factors, such as marketplace participants, relative market share, new student interest, student retention, future expansion or contraction expectations, amount and timing of future cash flows and the discount rate applied to the cash flows. Projected future operating results and cash flows used for valuation purposes do reflect improvements relative to recent historical periods with respect to, among other things, modest revenue growth and operating margins. Although we believe our projected future operating results and cash flows and related estimates regarding fair values are based on reasonable assumptions, historically projected operating results and cash flows have not always been achieved. The failure of one of our reporting units to achieve projected operating results and cash flows in the near term or long term may reduce the estimated fair value of the reporting unit below its carrying value and result in the recognition of a goodwill impairment charge. Significant management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate future cash flows. Assumptions used in our impairment evaluations, such as forecasted growth rates and our cost of capital, are based on the best available market information and are consistent with our internal forecasts and operating plans. In addition to cash flow estimates, our valuations are sensitive to the rate used to discount cash flows and future growth assumptions. These assumptions could be adversely impacted by certain of the risks discussed in Item 1A, “Risk Factors,” in this Annual Report on Form 10-K.
Impact if actual results differ from assumptions and judgment: Changes in these qualitative and quantitative factors, as well as downturns in economic or business conditions, could have a significant adverse impact on the fair value of our reporting units in relation to their respective carrying values of goodwill and could result in an impairment loss affecting our consolidated financial statements as a whole. Generally, an impairment loss would reduce our net income for the reporting period being presented, and proportionally reduce the value of the assets and equity reflected on our balance sheet.
We did not record any goodwill impairment charges during the years ended December 31, 2024 and 2023, and have $258.0 million and $241.2 million of goodwill as of December 31, 2024 and 2023, respectively.
Income Taxes
Description: We are subject to the income tax laws of the U.S. and various state, local and foreign jurisdictions. These tax laws are complex and subject to interpretation. As a result, significant judgments and interpretations are required in determining our income tax provisions (benefits) and evaluating our uncertain tax positions.
We account for income taxes in accordance with FASB ASC Topic 740 - Income Taxes. Topic 740 requires the recognition of deferred income tax assets and liabilities based upon the income tax consequences of temporary differences between financial reporting and income tax reporting by applying enacted statutory income tax rates applicable to future years to differences between the financial statement carrying amounts and the income tax basis of existing assets and liabilities. Topic 740 also requires that deferred income tax assets be reduced by a valuation allowance if it is more likely than not that some portion of the deferred income tax asset will not be realized.
Assumptions and judgment: In establishing a provision for income tax expense or a liability for an uncertain tax position, we must make judgments and interpretations about the application of inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws
may be subject to review/adjudication by the court systems in the various tax jurisdictions or may be settled with the taxing authority upon examination or audit.
Impact if actual results differ from assumptions and judgment: Although we believe the judgments and estimates used are reasonable, actual results could differ and we may be exposed to changes in tax liability that could be material. To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would result in an increase in our effective income tax rate.
Business Combinations
Description: We account for business combinations in accordance with FASB ASC Topic 805 - Business Combinations. Paragraph 805-20-30-1 states that the acquirer shall measure the identifiable assets acquired and the liabilities assumed in the acquiree at their acquisition date fair values.
Assumptions and judgment: Allocating the purchase price for a business combination requires the Company to identify and estimate the fair values of various assets acquired and liabilities assumed. Management is responsible for determining the appropriate valuation model and estimated fair values, and in doing so, considers a number of factors, including information provided by an outside valuation advisor. Management bases the fair value of assets, including identifiable intangible assets acquired and liabilities assumed, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. The inputs and assumptions used in the valuations are considered level 3 inputs.
Impact if actual results differ from assumptions and judgment: Changes in any qualitative and quantitative factors, could have a significant impact on the fair value of acquired assets and liabilities assumed and could result in a change to the purchase accounting and any future expense associated with acquired assets.
LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES
As of December 31, 2024, cash, cash equivalents, restricted cash and available-for-sale short-term investments (“cash balances”) totaled $591.5 million. Restricted cash as of December 31, 2024 was $22.6 million and primarily relates to a letter of credit USAHS is required to maintain with the Department of Education. Our cash flows from operating activities have historically been adequate to fulfill our liquidity requirements. We have historically financed our operating activities, organic growth and acquisitions primarily through cash generated from operations and existing cash balances. We generated cash in 2024 as a result of improved operating performance and expect to continue to do so in 2025. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures, lease commitments and quarterly dividends payments through at least the next 12 months primarily with cash generated by operations and existing cash balances.
We maintain a balanced capital allocation strategy that focuses on maintaining a strong balance sheet and adequate liquidity, while (i) investing in organic projects at our universities, in particular technology-related initiatives which are designed to benefit our students, as well as real estate updates, and (ii) evaluating diverse strategies to enhance stockholder value, including acquisitions, quarterly dividend payments and share repurchases. Ultimately, our goal is to deploy resources in a way that drives long term stockholder value while supporting and enhancing the academic value of our institutions.
On February 20, 2024, the Board of Directors of the Company approved a new stock repurchase program for up to $50.0 million which commenced March 1, 2024 and expires September 30, 2025. The new stock repurchase program replaced the previous stock repurchase program. The timing of purchases and the number of shares repurchased under the program will be determined by the Company’s management and will depend on a variety of factors including stock price, trading volume and other general market and economic conditions, its assessment of alternative uses of capital, regulatory requirements and other factors.
The Board of Directors approved the aforementioned stock repurchase programs believing it advantageous to the Company and its stockholders to repurchase shares of the Company’s common stock from time to time at prices below what the Board of Directors believed to be the intrinsic value of the Company’s common stock.
The discussion above reflects management’s expectations regarding liquidity; however, as a result of the significance of the Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV funds that our students are eligible to receive or any impact on timing or our ability to receive Title IV Program funds, or any requirement to post a significant letter of credit to the Department, may have a significant impact on our operations and our financial condition. In addition, our financial performance is dependent on the level of student enrollments which could be impacted by external factors. See Item 1A, “Risk Factors.”
Sources and Uses of Cash
Operating Cash Flows
During the years ended December 31, 2024 and 2023, net cash flows provided by operating activities totaled $161.6 million and $112.0 million, respectively. The increase in cash flow from operations as compared to the prior year is primarily driven by the increase in operating income as compared to the prior year as well as a negative working capital timing impact on the prior year operating cash flows.
Our primary source of cash flows from operating activities is tuition collected from our students. Our students derive the ability to pay tuition costs through the use of a variety of funding sources, including, among others, federal loan and grant programs, state grant programs, private loans and grants, institutional payment plans, private and institutional scholarships and cash payments. For the years ended December 31, 2024 and 2023, approximately 77% and 76% of our institutions’ aggregate cash receipts from tuition payments came from Title IV Program funding. This percentage differs from the Title IV Program percentage calculated under the 90-10 Rule due to the treatment of certain funding types and certain student level limitations on what and how much to count as prescribed under the rule.
For further discussion of Title IV Program funding and other funding sources for our students, see Item 1, “Business - Student Financial Aid and Related Federal Regulation.”
Our primary uses of cash to support our operating activities include, among other things, cash paid and benefits provided to our employees for services, to vendors for products and services, to lessors for rents and operating costs related to leased facilities, to suppliers for textbooks and other institution supplies, and to federal, state and local governments for income and other taxes.
Investing Cash Flows	
During the years ended December 31, 2024 and 2023, net cash flows used in investing activities totaled $107.8 million and $88.5 million, respectively.
Purchases and Sales of Available-for-Sale Investments. Purchases and sales of available-for-sale investments resulted in a net cash inflow of $34.6 million for the year ended December 31, 2024 as compared to a net cash outflow of $76.1 million for the year ended December 31, 2023.
Business acquisition. For the year ended December 31, 2024, the Company completed the USAHS acquisition and made total initial cash payments of $137.8 million.
Capital Expenditures. Capital expenditures decreased to $4.6 million for the year ended December 31, 2024 as compared to $6.4 million for the year ended December 31, 2023. Capital expenditures represented approximately 0.7% and 0.9% of revenue for the years ended December 31, 2024 and 2023, respectively. For the year ending December 31, 2025, we expect capital expenditures to be approximately 2.0% of revenue.
Financing Cash Flows
During the years ended December 31, 2024 and 2023, net cash flows used in financing activities totaled $41.1 million and $23.4 million, respectively.
Payments of employee tax associated with stock compensation. Payments of employee tax associated with stock compensation were $3.4 million for the year ended December 31, 2024 and $2.2 million for the year ended December 31, 2023.
Repurchase of stock. During the year ended December 31, 2024, we repurchased 0.4 million shares of our common stock for approximately $6.8 million at an average price of $17.60 per share as compared to 0.5 million shares of common stock repurchased for $8.3 million at an average price of $15.38 per share for the year ended December 31, 2023. Repurchases of stock during 2024 and 2023 were funded by cash generated from operating activities and existing cash balances. See Part II, Item 5 for more information.
Release of cash held in escrow. During the years ended December 31, 2024 and 2023, we released $0.3 million and $1.0 million of escrow associated with acquisitions.
Payments of cash dividends and dividend equivalents. During the years ended December 31, 2024 and 2023, the Company made dividend payments of $31.7 million and $14.4 million, respectively.
Principal payments for finance leases and failed sale leaseback. During the year ended December 31, 2024, the Company made payments of $0.4 million for finance leases and $0.7 million for a failed sale leaseback, both related to the acquisition of USAHS.
Contractual Obligations
As of December 31, 2024, future minimum cash payments due under contractual obligations for our non-cancelable operating and finance lease arrangements were $74.4 million and $18.5 million, respectively. Of these amounts, approximately $11.1 million for
operating leases and $6.3 million for finance leases are due within the next 12 months. Lastly, undiscounted future rental payments associated with a build to suit arrangement that is reflected as construction financing as of December 31, 2024 amount to $158.4 million over the 25 year lease term. Payments will begin upon lease commencement in January 2025. These future minimum cash payments reflect base rent and other fixed lease-related costs identified in the lease agreements but excludes variable costs such as common area maintenance payments and taxes, as these amounts are undeterminable at this time and may vary based on future circumstances. We lease most of our administrative and educational facilities under non-cancelable operating leases expiring at various dates through 2049.
As of December 31, 2024, we were not a party to any off-balance sheet financing or contingent payment arrangements, nor do we have any unconsolidated subsidiaries.
Changes in Financial Position - December 31, 2024 Compared to December 31, 2023
Selected consolidated balance sheet account changes from December 31, 2023 to December 31, 2024 were as follows (dollars in thousands):
As of December 31,
% Change
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, restricted cash and short-term investments
$
591,548
$
604,156
%
Prepaid expenses (1)
16,910
11,712
%
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation (1)
95,508
21,371
%
Right of use assets, net - operating (1)
50,099
19,096
%
Right of use assets, net - finance (1)
15,375
-
NA
Goodwill (1)
258,012
241,162
%
Intangible assets, net of amortization (1)
95,006
36,219
%
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lease liabilities - operating (1)
7,792
5,701
%
Lease liabilities - finance (1)
5,466
-
NA
NON-CURRENT LIABILITIES:
Lease liabilities - operating (1)
50,224
21,346
%
Lease liabilities - finance (1)
11,555
-
NA
Construction financing (1)
56,500
-
NA
________________________________
(1) The increases in these assets and liability categories are driven by the USAHS acquisition.
Cash, cash equivalents, restricted cash and short-term investments. The decrease in total cash, cash equivalents, restricted cash and short-term investments is primarily due to payments associated with a business acquisition and dividend payments, which were mostly offset with cash from operations.
Recent Accounting Pronouncements
See Note 4 “Recent Accounting Pronouncements” to our consolidated financial statements for a discussion of recent accounting pronouncements that may affect us.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, primarily changes in interest rates. We use various techniques to manage our interest rate risk. We have no derivative financial instruments or derivative commodity instruments, and believe the risk related to cash equivalents and available for sale investments is limited due to the adherence to our investment policy, which focuses on capital preservation and liquidity. In addition, we use asset managers who conduct initial and ongoing credit analyses on our investment portfolio and monitor that investments are in compliance with our investment policy. Despite the investment risk mitigation strategies
we employ, we may incur investment losses as a result of unusual and unpredictable market developments and may experience reduced investment earnings if the yields on investments deemed to be low risk remain low or decline.
Interest Rate Exposure
Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell investments that have declined in market value due to changes in interest rates. At December 31, 2024, a 100 basis point increase or decrease in average interest rates applicable to our investments or borrowings would not have a material impact on our future earnings, fair values or cash flows.
Our financial instruments are recorded at their fair values as of December 31, 2024 and December 31, 2023. We believe that the exposure of our consolidated financial position and results of operations and cash flows to adverse changes in interest rates applicable to our investments or borrowings is not significant.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information required by Item 8 is contained in Part IV, Item 15 of this Annual Report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We completed an evaluation as of the end of the period covered by this Annual Report on Form 10-K (“Report”) under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in this Report was recorded, processed, summarized and reported within the time periods specified in the rules and forms provided by the U.S. Securities and Exchange Commission (“SEC”), and (ii) the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Scope of Management’s Report on Internal Controls over Financial Reporting
Management has excluded the acquisition of University of St. Augustine ("USAHS") in its evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024, pursuant to Rule 13a-15(b) of the Exchange Act. USAHS was not material to consolidated results of operations for the year ended December 31, 2024 and was approximately 1.5% of total revenues for the year ended December 31, 2024 and 18% of total assets as of December 31, 2024, when excluding acquired goodwill and intangible assets.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Our management does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles.
Based upon the evaluation under the framework contained in the 2013 Committee of Sponsoring Organizations of the Treadway Commission Report, management concluded that, as of December 31, 2024, our internal control over financial reporting was effective.
Grant Thornton LLP, our independent registered public accounting firm, who audited and reported on the consolidated financial statements for the year ended December 31, 2024 included in this Annual Report on Form 10-K, has issued a report on the effectiveness of our internal control over financial reporting. This attestation report is included on page 69 of this Annual Report on Form 10-K.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
Rule 10b5-1 Plan Elections
During the quarter ended December 31, 2024, the following executive officers of the Company adopted a "Rule 10b5-1 trading arrangement," as defined in Item 408 of Regulation S-K.
Ashish Ghia, Senior Vice President, Chief Financial Officer and Treasurer, entered into a pre-arranged stock trading plan on November 15, 2024. Mr. Ghia’s plan provides for the sale between March 18, 2025 and November 14, 2025, of up to 6,236 shares of the Company's common stock which Mr. Ghia has the right to acquire under outstanding vested stock options and all net vested restricted stock held by Mr. Ghia upon the vesting of performance shares and restricted stock units that will vest prior to November 14, 2025.
Greg Jansen, Senior Vice President, General Counsel and Corporate Secretary, entered into a pre-arranged stock trading plan on November 15, 2024. Mr. Jansen’s plan provides for the sale between April 10, 2025 and November 14, 2025, of 60% of net vested restricted stock held by Mr. Jansen upon the vesting of performance shares and restricted stock units that will vest prior to November 14, 2025.
Michele Peppers, Vice President - Accounting & Reporting and Chief Accounting Officer, entered into a pre-arranged stock trading plan on December 11, 2024. Ms. Peppers' plan provides for the sale between March 14, 2025 and December 10, 2025, of up to 4,038 shares of the Company's common stock owned by Ms. Peppers, and all net vested restricted stock held by Ms. Peppers upon the vesting of performance shares and restricted stock units that will vest prior to December 10, 2025.
Each of the trading plans was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended, and the Company's policies regarding transactions in Company securities.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Below is a list of our Executive Officers and Board of Directors as of February 18, 2025:
Executive Officers:
Board of Directors:
Todd S. Nelson
Gregory L. Jackson - Chairman of the Board
President and Chief Executive Officer
Private Investor
Ashish R. Ghia
Dennis H. Chookaszian
Senior Vice President, Chief Financial Officer and Treasurer
Former Chairman and Chief Executive Officer of CNA Financial Corporation
Sunitha Araamudhu
Kenda B. Gonzales
Senior Vice President - American InterContinental University System
Former Chief Financial Officer of Harrison Properties, LLC
Elise L. Baskel
Patrick W. Gross
Senior Vice President - Colorado Technical University
Chairman of the Lovell Group
David C. Czeszewski
William D. Hansen
Senior Vice President and Chief Information Officer
President and Chief Executive Officer of Building Hope Holdings, Inc.
Greg E. Jansen
Todd S. Nelson
Senior Vice President, General Counsel and Corporate Secretary
President and Chief Executive Officer of Perdoceo Education Corporation
Julia Leeman
Hanna Skandera
Senior Vice President - Campus Operations
President and Chief Executive Officer of Daniels Fund
John R. Kline
Leslie T. Thornton
Senior Vice President - American InterContinental University System
Former Senior Vice President, General Counsel and Corporate Secretary of WGL Holdings, Inc. and Washington Gas
Michele A. Peppers
Alan D. Wheat
Vice President - Accounting & Reporting and Chief Accounting Officer
Chair of Wheat Shroyer Government Relations
The other information required by this item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table provides information as of December 31, 2024 with respect to shares of our common stock that may be issued under our existing equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION
(a)
(b)
(c)
Plan Category
Number of shares to be
issued upon exercise of
outstanding options
Weighted-average exercise
price of outstanding options
Number of shares
remaining available for
future issuances under
equity compensation
plans (excluding
securities reflected in
column (a))
Equity compensation plans approved by stockholders
383,216
(1)
$
9.90
3,971,659
(2)
Total
383,216
$
9.90
3,971,659
(1)Includes outstanding options to purchase shares of our common stock under the Company’s 2008 Incentive Compensation Plan (the “2008 Plan”) and Amended and Restated 2016 Incentive Compensation Plan (the “2016 Plan”).
(2)Includes shares available for future issuance under the 2016 Plan in addition to the number of shares issuable upon exercise of outstanding options referenced in column (a). In addition to stock options, the 2016 Plan provides for the issuance of stock appreciation rights, restricted stock and units, deferred stock, dividend equivalents, other stock-based awards, performance awards and units, or cash incentive awards. The amount in column (c) is net of 2.8 million shares underlying restricted stock units outstanding as of December 31, 2024, which will be settled in shares of our common stock if the vesting conditions are met and thus reduce the common stock available for future share-based awards under the 2016 Plan by the amount vested. These shares take into account the anticipated vesting levels based on projected attainment of performance conditions for performance-based restricted stock units and have been multiplied by the applicable factor under the 2016 Plan to determine the remaining shares available as of December 31, 2024. Additionally, there were less than 0.1 million shares underlying deferred stock units outstanding under the previous 2008 Plan which will be settled in shares of our common stock if the vesting conditions are met and do not affect the number of shares reflected in column (c) above.
See Note 14 “Share-Based Compensation” to our consolidated financial statements for more information regarding the Company’s share-based compensation.
The other information required by this item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1.	Financial Statements
The financial statements listed in the Index to Financial Statements on page 66 are filed as part of this Annual Report.
2.	Financial Statement Schedules
The financial statement schedule listed in the Index to Financial Statements on page 66 is filed as part of this Annual Report. All other schedules have been omitted because the required information is included in the consolidated financial statements or notes thereto or because they are not applicable or not required.
3.	Exhibits
The exhibits listed in the Index to Exhibits on pages 62- 64 are filed as part of this Annual Report.