Bridgepoint Education Inc (Form: 10-K, Received: 03/12/2019 16:18:34)

(Title of Each Class)

(Name of Each Exchange on Which Registered)

Common Stock $0.01 par value

New York Stock Exchange

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-34272

________________________________

BRIDGEPOINT EDUCATION, INC.

(Exact name of registrant as specified in its charter)

____________________________



Delaware (State or other jurisdiction of incorporation or organization)		59-3551629 (I.R.S. Employer Identification No.)

8620 Spectrum Center Blvd.

San Diego, CA 92123

(Address, including zip code, of principal executive offices)

(858) 668-2586

(Registrant's telephone number, including area code)

_____________________________

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting company ☒	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2018 , the last business day of the registrant’s second fiscal quarter, was approximately $170.3 million , based on the closing price of the registrant’s common stock as reported on such date by the New York Stock Exchange. Shares of common stock held by officers, directors and holders of 5% or more of the outstanding common stock have been excluded from the calculation of this amount because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 8, 2019 , the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was 27,174,667 , net of treasury shares.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement for its 2019 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.

BRIDGEPOINT EDUCATION, INC.

FORM 10-K

INDEX



Special Note Regarding Forward-Looking Statements		3
PART I		5
Item 1.	Business	5
Item 1A .	Risk Factors	23
Item 1B.	Unresolved Staff Comments	41
Item 2.	Properties	41
Item 3.	Legal Proceedings	42
Item 4.	Mine Safety Disclosures	42
PART II		43
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	43
Item 6.	Selected Consolidated Financial Data	45
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	46
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 8.	Financial Statements and Supplementary Data	59
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	100
Item 9A .	Controls and Procedures	100
Item 9B.	Other Information	104
PART III		105
Item 10.	Directors, Executive Officers and Corporate Governance	105
Item 11.	Executive Compensation	105
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	105
Item 13.	Certain Relationships and Related Transactions, and Director Independence	105
Item 14.	Principal Accounting Fees and Services	105
PART IV		106
Item 15.	Exhibits, Financial Statement Schedules	106

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are contained principally in Part I, Item 1, “Business,” Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” but appear throughout this annual report. Such forward-looking statements may include, among others, statements regarding future events, the future financial and operating results of Bridgepoint Education, Inc. (the “Company,” “Bridgepoint,” “we,” “us” or “our”), strategies, expectations, the competitive environment, regulation and the availability of financial resources, including, without limitation, statements regarding:


•	Ashford University's (“Ashford”) ability to continue to operate as an accredited institution subject to the requirements of the State of California, Department of Consumer Affairs, Bureau for Private Postsecondary Education (the “BPPE”);

•

our ability to comply with the extensive and continually evolving regulatory framework applicable to us and our institution, including Title IV of the Higher Education Act of 1965, as amended (the “Higher Education Act”), and its implementing regulations, the gainful employment rules and regulations, the “defense to repayment” regulations, state laws and regulatory requirements, and accrediting agency requirements;


•	projections, predictions and expectations regarding our business, financial position, results of operations and liquidity, and enrollment trends at our institution;


•	our ability to obtain continued approval of Ashford’s programs for GI Bill benefits through the Iowa State Approving Agency (“ISAA”), the Arizona State Approving Agency (“ASAA”), or the California State Approving Agency for Veteran's Education (“CSAAVE”), and to prevent any disruption of educational benefits to Ashford’s veteran students;


•	the ability of Ashford to continue participating in the U.S. Department of Defense Tuition Assistance Program for active duty military personnel and to prevent any disruption of educational benefits to Ashford’s active duty military students;


•	initiatives focused on student success, retention and academic quality;


•	expectations regarding the adequacy of our cash and cash equivalents and other sources of liquidity for ongoing operations;


•	expectations regarding capital expenditures;


•	our anticipated seasonal fluctuations in operational results;


•	management's goals and objectives; and


•	other similar matters that are not historical facts.

Forward-looking statements may generally be identified by the use of words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, as well as statements in the future tense.

Forward-looking statements should not be interpreted as a guarantee of future performance or results and will not necessarily be accurate indications of the times at or by which such performance or results will be achieved. Forward-looking statements are based on information available at the time such statements are made and the current good faith beliefs, expectations and assumptions of management regarding future events. Such statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause actual performance or results to differ materially from our expectations include, but are not limited to:


•	the inability of Ashford to comply with the additional reporting and disclosure obligations arising as a result of its operation as a BPPE-approved institution;


•	the imposition of fines or other corrective measures against our institution;


•	adverse regulatory changes affecting our industry;


•	our failure to comply with the extensive and continually evolving regulatory framework applicable to our industry, including Title IV of the Higher Education Act and its implementing regulations, the gainful employment rules and regulations, the “defense to repayment” regulations, state laws and regulatory requirements, and accrediting agency requirements;


•	our inability to continue to recruit and retain students;


•	our inability to continue to provide Tuition Assistance benefits to our active duty military students;


•	our inability to continue to provide GI Bill benefits to our veteran students;


•	competition in the postsecondary education market and its potential impact on our market share, recruiting costs and tuition rates;


•	reputational and other risks related to potential compliance audits, regulatory actions, negative publicity or service disruptions;


•	our inability to develop new programs or expand existing programs in a timely and cost-effective manner;


•	economic or other developments potentially impacting demand in our institution's core disciplines or the availability or cost of Title IV or other funding;


•	the preceding and other factors discussed in Item 1A, “Risk Factors,” and in other reports we may file with the Securities and Exchange Commission (the “SEC”) from time to time; and


•	the factors set forth in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations.”

All forward-looking statements in this annual report are qualified in their entirety by the cautionary statements included in this annual report, and you should not place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this annual report. We assume no obligation to update or revise any forward-looking statements contained herein to reflect actual results or any changes in our assumptions or expectations or any other factors affecting such forward-looking statements, except to the extent required by applicable securities laws. If we do update or revise one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

PART I

Item 1. Business.

BUSINESS

Overview

We are a provider of postsecondary education services through our regionally accredited academic institution, Ashford University ^® .

In March 2005, we acquired Ashford University, whose mission is to provide high-quality, accessible, affordable, and innovative educational programs that meet the diverse needs of individuals pursuing advancement in their lives, professions, and communities. We believe Ashford University is helping to define the modern college experience by providing the flexibility and effectiveness of online learning. The institution offers associate's, bachelor's, master's and doctoral degree programs primarily online. Ashford University is comprised of five colleges: the Forbes School of Business and Technology ^™ , the College of Education, the College of Health, Human Services and Science, the College of Liberal Arts and the College of Doctoral Studies. As of December 31, 2018 , Ashford University had a total of 38,153 students enrolled.

Ashford University is committed to providing a high-quality educational experience to its students. Our institution's online delivery models, weekly start dates, commitment to affordability and transferability of credits make its programs highly attractive and accessible. Our institution's online platform has been designed to deliver a quality educational experience while offering the flexibility and convenience that many students require, particularly working adults. Ashford University has a comprehensive curriculum development process and employs qualified faculty members with significant academic and practitioner credentials. Ashford University conducts ongoing faculty and student assessment processes and provides a broad array of student services. We are also focused on providing innovative technologies to enhance the student experience and support faculty and student engagement.

Ashford University is accredited by WASC Senior College and University Commission (“WSCUC”). For additional information regarding accreditation, see “Regulation — Accreditation” below. Ashford University maintains a website at www.ashford.edu, the contents of which are not incorporated by reference into, or in any way a part of, this report.

Enrollment

The following table summarizes period-end enrollment as of each of the periods presented:



	December 31, 2018			December 31, 2017			December 31, 2016
Doctoral	729	1.9	%	841	2.1	%	836	1.9	%
Master's	5,804	15.2	%	5,655	13.9	%	6,253	13.9	%
Bachelor's	29,604	77.6	%	32,153	78.9	%	35,748	79.2	%
Associate's	1,323	3.5	%	1,263	3.1	%	1,405	3.1	%
Other*	693	1.8	%	818	2.0	%	845	1.9	%
Total	38,153	100.0	%	40,730	100.0	%	45,087	100.0	%

* Includes students who are taking one or more courses at our institution but have not declared that they are pursuing a specific degree.

We define period-end enrollment as the number of active students on the last day of the financial reporting period. A student is considered active if the student has attended a class within the prior 15 days or is on an institutionally-approved break not to exceed 45 days, unless the student has graduated or provided notice of withdrawal, or for new students who have completed their third week of attendance, and posted attendance in the fourth week.

As of December 31, 2018 , approximately 71% of our institution's students were female, 55% identified themselves as minorities and the average age was 35 . Ashford University has online students throughout the United States and students in 20 different countries.

Graduation

As of December 31, 2018 , more than 120,000 students have graduated from our institution. The total number of credits required to obtain a degree for online programs varies based on the type of degree: an associate's degree requires a minimum of 64 credits; a bachelor's degree requires a minimum of 120 credits; a master's degree requires a minimum of 30 credits; and a doctoral degree requires a minimum of 59 credits.

Many students have previously completed some postsecondary education and have credits they would like to transfer to a new degree program. We believe students should receive credit for their prior work and Ashford University works closely with its accrediting agency to obtain the right to accept transfer credits.

Tuition and Fees

Ashford University generally structures the tuition and fees for programs to be below combined Title IV loan limits and average grant awards, affording students who do not otherwise have the financial means to pursue an education the opportunity to gain access to our institution's programs. We recognize that private loans are increasingly difficult to obtain, which can prevent academically qualified students from pursuing an education at institutions with higher tuition and fees. We believe that helping to remove the financial burden of obtaining incremental private loans while pursuing a postsecondary education not only permits more students to access our institution's programs, but also enables students to focus more on their coursework and program completion while in school.

The price of our institution's courses varies based upon the number of credits per course (with most courses representing three credits), the degree level of the program and the discipline. Refer to the academic catalog for the relative price per credit for undergraduate and graduate courses.

Revenue realized from tuition is reduced by the amount of scholarships awarded to students. For the years ended December 31, 2018 , 2017 and 2016 , we recorded $118.4 million , $103.6 million and $99.9 million , respectively, for institutional scholarships awarded to students.

Student Financing

Students finance their education at our institution through a combination of the various financing options described below.

Title IV programs

If a student attends any institution certified as Title IV eligible by the U.S. Department of Education (“Department”) and meets applicable student eligibility standards, that student may receive grants, loans, or both grants and loans to help fund their education under programs authorized by Title IV of the Higher Education Act (“Title IV”). An institution participating in federal student financial aid programs authorized by Title IV (“Title IV programs”) must ensure that all program funds are accounted for and disbursed properly. To continue receiving program funds, students must demonstrate satisfactory academic progress toward the completion of their program of study.

During the fiscal year ended December 31, 2018 , Ashford University derived 78.6% of its cash revenues from Title IV program funds.

Federal Direct Loans

The William D. Ford Federal Direct Loan Program (the “Direct Loan Program”) consists of two types of loans: Stafford loans, which are either subsidized or unsubsidized, and PLUS loans, which are made available to graduate and professional students, as well as parents of dependent undergraduate students. For a Direct Subsidized Loan, the federal government pays the interest on the loan while the student is in school and during grace periods and any approved periods of deferment, until the student's obligation to repay the loan begins. Direct Unsubsidized Loans are not based on financial need and are available to students who do not qualify for a Direct Subsidized Loan, or in some cases, in addition to a Direct Subsidized Loan. Loan funds are paid to our institution, which in turn credits the student's account for tuition and fees and disburse any requested amounts in excess of tuition and fees to the student.

Under the Bipartisan Student Loan Certainty Act of 2013, interest rates will be established each year for Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS loans for which the first disbursement is on or after July 1 of that year through the following June 30. The interest rate, once established, will be fixed and apply for the life of the loan. With respect to loans for which the first disbursement was on or after July 1, 2018 but before July 1, 2019, the interest rates are (i)

5.1% for Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate students, (ii) 6.6% for Direct Unsubsidized Loans for graduate/professional students and (iii) 7.6% for Direct PLUS loans.

Federal Pell Grant Program

Under the Federal Pell Grant Program, the Department makes grants to undergraduate students who demonstrate financial need. Under the August 2008 reauthorization of the Higher Education Act, students were able to receive Pell Grant funds for attendance on a year-round basis, and could potentially receive more in a given year than the traditionally defined maximum annual amount. However, the U.S. Department of Defense and Full-Year Continuing Appropriations Act of 2011 permanently repealed the Pell Grant provision that provided an otherwise eligible student with more than one Pell Grant in an award year, effective with the 2011-2012 award year. Beginning with the 2012-2013 award year, a student's eligibility to receive a Pell Grant was reduced from 18 semesters (or its equivalent) to 12 semesters (or its equivalent). The funding for Labor, Health and Human Services, and Education appropriations is part of the Consolidated Appropriations Act, 2014, which is subject to change annually. The maximum funding amount for Pell Grant award year 2018-2019 increased to $6,095 .

Non-Title IV funding sources

Other funding sources consist primarily of payments made in cash by individuals, private loans from third parties, reimbursement from corporate affiliates and government tuition assistance programs for military personnel, including veterans. During the fiscal year ended December 31, 2018 , Ashford University derived 21.4% of its cash revenues from these other funding sources.

Financial aid processing

Our institution has dedicated staff that provide call center and transactional processing services for the online financial aid student populations, including services related to disbursement eligibility review and Title IV fund returns. We believe this improves student financing outcomes and enhances efforts to comply with Title IV rules and regulations.

Curricula and Scheduling

Ashford University is committed to providing their students with a rigorous and rewarding academic experience that gives them the knowledge and experience necessary to be contributors, educators and leaders in their chosen professions. Ashford University seeks to maintain a high level of quality in curriculum, faculty and student support services, all of which contribute to the overall student experience. The curricula are reviewed periodically to ensure that content is refined and updated as necessary. Ashford University provides extensive student support services, including academic, administrative and technology support, to help maximize the success of its students. Additionally, Ashford University monitors the success of the educational delivery processes through periodic faculty and student assessments. Ashford University believes their commitment to quality is evident in the satisfaction and demonstrated proficiency of their students, which is measured at the completion of every course.

As of December 31, 2018 , Ashford University offered approximately 1,250 courses and approximately 80 degree programs. The degree programs are offered through Ashford University's five various colleges, the Forbes School of Business and Technology, the College of Education, the College of Health, Human Services and Science, the College of Liberal Arts, and the College of Doctoral Studies.

Ashford University's online courses are offered with weekly start dates throughout the year, except for two weeks total in late December and early January. Courses typically run five to six weeks and all courses are offered in an asynchronous format so students can complete their coursework as their schedule permits. Online students typically enroll in one course at a time. This focused approach to learning allows the student to engage fully in each course. Doctoral students are required to participate in periodic seminars and to compose and defend a dissertation on an approved topic.

Program Development

Ashford University designs its academic offerings to meet the needs of a broad cross-section of prospective students. In addition to adding programs in high-demand disciplines, Ashford University enhances its programs through the addition of specializations. Specialization areas are comprised of a select number of courses within an existing program that supplement that program's required courses. Specializations are used to create an offering that is tailored to the specific objectives of a student population and, therefore, is more attractive to potential students interested in a particular program. We believe the addition of specializations represents a cost-effective way to both expand our market and further enhance the differentiation of programs in that market. Ashford University is expanding its portfolio of master's and doctoral degree programs, consistent with our commitment to a quality academic offering, and to pursue increased graduate student enrollments because we believe graduate students represent an attractive segment of the market.

Ashford University seeks to offer programs in disciplines in which we believe there is strong demand for education and significant opportunity for employment. Ashford University's current program portfolio includes offerings at the associate's, bachelor's, master's and doctoral levels in the disciplines of business, education, psychology, social sciences and health sciences. Ashford University follows a defined process for identifying new degree program opportunities that incorporates student, faculty and market feedback, as well as macro trends in the relevant disciplines, in order to evaluate the expected level of demand for a new program prior to developing the content and marketing it to potential students.

Potential new programs and specializations are determined based on proposals submitted by faculty and staff and an assessment of overall market demand. Ashford University's faculty and academic leadership work in collaboration with our marketing team to research and select new programs that are expected to have strong demand and that can be developed at a reasonable cost. Programs are reviewed by the respective institution and must also receive approval through the normal governance process at the relevant institution. Once a program is selected for development, one or more subject matter experts are assigned to work with curriculum development staff to define measurable program-level student learning objectives. Each course in a program is designed to include learning activities that address the program objectives, foster student engagement and assess learning outcomes. All courses undergo extensive internal and external third-party quality assurance reviews before they are offered to students, and the new program is reviewed for approval through the appropriate governance processes. Following approval, an online program is conformed to the standards of our online learning management system and our marketing department creates a marketing plan for the program. In most cases, the time frame to identify, develop and internally approve a new program is approximately six months, not including the external regulatory approvals required before a program can be offered to students.

Comprehensive Assessment

Ashford University has developed and implemented a comprehensive assessment plan focused on student learning and effective instruction. The plan stipulates assessment of learning outcomes at the course, program and institutional levels. Learning outcomes are unique to each institution and demonstrate the skills that graduates should be able to demonstrate upon completion of their respective programs. With the assistance of our dedicated assessment team, our institution's faculty routinely evaluates and revises courses and learning resources based upon outcomes and institutional research data. Using direct and indirect measurements, student performance is assessed on an ongoing basis to help ensure student success.

We utilize Waypoint Outcomes, our proprietary assessment platform, which is an innovative, web-based assessment system of interactive rubrics, to gather data from specific learning activities. Data results from Waypoint Outcomes are shared with the student and are also accessible by the faculty and program administrators.

In addition to course and program assessments, faculty instructional performance is continuously assessed by institutional deans and instructional specialists and through the results of student surveys at the completion of each course. The results of all our assessment practices are reviewed by an assessment team, including faculty, and based on their conclusions, recommendations may be made to add to or modify programs.

Branding and Marketing

We have invested significant resources in developing processes and implementing technologies that allow us to effectively identify, recruit and retain qualified students. We develop and participate in various marketing activities to generate leads for prospective students and to build the Bridgepoint Education and Ashford University brands.

For Ashford University's online student population, we align ourselves with working adults, many of whom have already completed some postsecondary courses and are seeking an accessible, affordable education from a quality institution. The admissions policies that require a minimum age for online students at Ashford University are focused on attracting students with a greater commitment to completing their degrees.

The Ashford University branding campaigns utilize digital channels to communicate their message, and leads are generated from online sources. We also purchase keywords from search providers to generate online leads directly, rather than acquiring them solely through aggregators. Additionally, we have a team internally who focuses on generating online leads through search engine optimization techniques.

Recruiting and Admissions

Our institution employs teams who facilitate all aspects of enrollment and integration of a prospective student into a program of study. These teams consist of enrollment service advisors, financial services advisors and academic advisors. This structure promotes internal accountability among employees involved in identifying, recruiting, enrolling and retaining new students.

Prospective student leads are managed through a customer relations management (“CRM”) system, which directs a lead for a prospective student to a recruiting team and assigns an enrollment service advisor within that team to serve as the primary liaison for that prospective student. Once contact with a prospective student is established, the enrollment service advisor, along with the academic and financial services advisors, begins an assessment process to determine if our institution's program offerings match the student's needs and objectives. Additionally, enrollment service advisors communicate other criteria, including expected duration and cost of the program, to the prospective student.

The enrollment service advisors go through a comprehensive training program that addresses our institution's academic offerings, financial aid options and the regulatory environment in which we operate, including the restrictions imposed by regulations on the admissions process. We place significant emphasis on regulatory requirements and demand an environment of strict compliance.

Our institution has a presence in both military and corporate channels. Our military and academic outreach teams work with military education services officers, as well as with the military students we serve, to demonstrate the quality, impact and value that our institution's programs provide to individuals in the organizations. We believe our institution's educational offerings are attractive to potential students in the military. Military students may frequently change locations or seek to complete a program intermittently over the course of several years. In the corporate channel, we have the Education Partnerships program. These corporate partnership programs provide companies with the opportunity to allow their employees to pursue and complete a college degree without incurring any student debt. We believe employers value our institution's affordability, which allows employer tuition reimbursements to be used more efficiently.

The admissions process is designed to offer access to prospective students who seek the benefits of a postsecondary education. Ashford University undergraduate students may qualify in various ways, including by having a high school diploma or a General Educational Development equivalent. Graduate level students at Ashford University are required to have an undergraduate degree from an accredited college and may be required to have a minimum grade point average or meet other criteria to qualify for admission to certain programs. Doctoral students are required to have a Master’s degree from a regionally or approved nationally accredited institution with a graduate-level cumulative GPA of 3.0 or higher, or an earned Doctoral degree from a regionally or approved nationally accredited institution.

Retention

Once a student enrolls in an online program, the institution provides consistent, ongoing support to assist the student in acclimating to the online environment and to address challenges that arise in order to increase the likelihood that the student will persist through graduation.

Providing a superior learning experience to every student is a key component in retaining students at our institution. We believe that our team-based approach to recruitment and the robust student services we provide enhance retention because of each student's interaction with his or her team and the accountability inherent in the team structure. We also incorporate a systematic approach to contacting students at key milestones during their experience at our institution, providing encouragement and highlighting their progress. There are frequent personal interactions between academic advisors and students, which we view as a key component to our retention strategy. Ashford University has a retention committee that monitors performance metrics and other key data to analyze student retention rates, as well as the causes of and potential risks for student drops. In addition, our dispute resolution department serves as a neutral third-party for students to raise any concerns or complaints. Such concerns and complaints are then elevated to the appropriate department.

Ashford University has various programs focused on academic quality and student success that we believe help students succeed in their courses, help retain higher quality students and ultimately increase student retention. Ashford University has a free two-week orientation course that is mandatory for all incoming students who have not earned any previous college credits. The orientation is designed to provide students with a complete overview of the online classroom experience, prepare them for success in their courses and help them self-evaluate their readiness to succeed in an online college setting. The experience provides a realistic, up-front overview of expectations so that students are aware of what is expected of them as they prepare for their studies. Students also gain an understanding of how to access and navigate within the online classroom, so they can feel confident when they move to their first course in their respective programs. For students taking the orientation course, successful completion of the orientation is required before they can begin their first class.

Ashford University also offers the “Ashford Promise,” which allows a student to experience the first three weeks of his or her first class before incurring any financial obligation. After the first three weeks, students who do not demonstrate satisfactory academic progress, or those who simply opt out, will not be admitted as students. These individuals will not be responsible for any tuition or fees, and therefore will not incur any debt. We believe the Ashford Promise initiative helps increase student retention while reducing the financial risk to the student.

Technology

We have created a scalable technology system that we believe is secure, reliable and redundant, and permits our institution's courses and support services to be offered online.

Online course delivery and management

Ashford University utilizes the Canvas learning management system provided by Instructure, Inc. (“Instructure”), a third-party software and services provider. Canvas is a software-as-a-service (“SaaS”) platform that enables us to develop and deliver the latest in engaging online learning experiences. As a native cloud platform, Canvas software and data are hosted by Amazon Web Services, providing for a fast, secure and readily scalable experience for our institution's students and faculty. Additionally, students and faculty will have greater flexibility to learn and teach from anywhere, anytime and on any iOS or Android device.

Internal administration

Ashford University utilizes a CRM application from Campus Management Corp. for lead management, workflow, analytics, reporting and a complete view of our students. This tool enables Ashford University to view the entire student history from the lead to graduation, individually or in cohorts, and to respond appropriately. Additionally, Ashford University utilizes online application portals to accept, integrate and process student applications.

Ashford University utilizes CampusVue, a student information system provided by Campus Management Corp., to manage student data (including grades, attendance, status and financial aid) and to generate periodic management reports. This system interfaces with our online learning management system.

Innovation and new technologies

Central to our ideal of enabling learning anytime, anywhere, is the commitment to providing learning platforms and resources that make accessible learning a reality. These innovations include Constellation, our proprietary learning platform, Waypoint Outcomes, our proprietary assessment software, and our mobile application technology.

Constellation

Constellation is an innovative suite of interactive educational materials that increases the educational quality for online students at Ashford University. Constellation is our proprietary learning platform that takes the best features of traditional textbooks and combines them with the best features of the Internet to create a premium student experience. We developed Constellation as an alternative to third-party textbooks with digital course materials. Constellation gives students access to their digital course materials across platforms without sacrificing time-tested studying tools like highlighting and note taking. Constellation includes customized content geared to our institution's courses and students, combined with a robust set of features that make course materials engaging and accessible to students of various learning styles and abilities. Constellation is cloud-based and is compatible across operating systems, browsers and mobile technologies, including web-enabled smartphones and tablet devices. We have developed Constellation-enabled courses primarily in core classes to attempt to reach as many students as possible.

The Constellation team includes editors with extensive experience at leading textbook publishing firms. Highly qualified subject matter experts are recruited to author content that addresses course and institutional outcomes. Constellation digital texts are organized around our institution's accelerated courses.

Waypoint Outcomes

Waypoint Outcomes provides learning and assessment software to our institution. The software combines classic rubric grading scales with easy, efficient technology to help educators teach writing, critical thinking and cognitive skills. Its sophisticated grading palette frees teachers to focus on meaningful, personalized feedback for students by automating repetitive tasks.

Mobile application technology

Our institution offers mobile applications compatible with most web-enabled smartphones and tablet devices in order to increase the accessibility of the student learning experience. The applications enable students to use their mobile device to contact support staff, complete discussion posts and review important information regarding their academic status. We have received positive feedback from students indicating that these mobile applications further their learning experience, and we have incorporated feedback received into the periodic updates to these mobile applications.

Employees

As of December 31, 2018 , Ashford University had approximately 200 full-time faculty roles, including programs chairs, as well as approximately 2,620 active adjunct faculty. Adjunct faculty members are part-time employees engaged on a course-by-course basis and are compensated based upon a fixed amount per course, which varies among faculty members based on each individual's experience and background. In addition to teaching assignments, adjunct faculty members may also be asked to serve on student committees, such as comprehensive examination and dissertation committees, or assist with course development.

As of December 31, 2018 , the Company and its institution also employed approximately 1,970 combined non-faculty staff in the areas of university services, academic advising and academic support, enrollment services, university administration, financial aid, information technology, human resources, corporate accounting, finance and other administrative functions. None of our employees is a party to any collective bargaining or similar agreement with us.

Competition

The postsecondary education market is highly fragmented and competitive, with no private or public institution representing a significant market share. Our institution competes primarily with public and private degree-granting regionally accredited colleges and universities. Many colleges and universities enroll working adults, in addition to traditional 18 to 24-year-old students. Many of those colleges and universities offer a variety of distance education and online initiatives.

We believe that competitive factors in the postsecondary education market include the reputation of the college or university among students and employers, the number of qualified and experienced faculty, the program costs, the relevant and accredited program offerings, the regulatory approvals, the convenient, flexible and dependable access to programs and classes, the relative marketing and selling effectiveness, the time necessary to earn a degree and the level of student support services. We expect to encounter increased competition as a result of new entrants to the online education market, including traditional colleges and universities that had not previously offered online education programs.

Intellectual Property

We rely on a combination of copyrights, trademarks, service marks, patents, trade secrets, domain names and agreements with employees and third parties to protect our intellectual property rights. We have trademark and service mark registrations and pending applications for additional registrations in the United States and select foreign jurisdictions. We also own the domain name rights for our institution, as well as other words and phrases important to our business. In addition, we have applied for domestic and international patents for certain technology developed by us. We also have registered copyrights for exemplary business course materials. In many instances, our institution's course content is produced by faculty and other content experts under work-for-hire agreements pursuant to which we own the course content in return for a fixed development fee. In certain limited cases, course content is licensed from third parties on a royalty fee basis.

Environmental Matters

We believe our facilities are in material compliance with federal, state and local laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment. Compliance with these laws and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations or competitive position.

Financial Information about Segments and Geographic Areas

We operate our business in one reportable segment and we have no foreign operations or assets located outside of the United States. For information about our revenues from external customers, measures of profits and losses, and total assets, see our annual consolidated financial statements included elsewhere in this report.

Proposed Changes in the Structure of our Operations

We plan to undertake a conversion transaction pursuant to which Ashford University will separate from the Company through a series of conversion and merger transactions ultimately resulting in Ashford University being owned and operated by AU NFP, a California nonprofit public benefit corporation that was formed for the purpose of the conversion transaction and is independent of the Company. Following the proposed conversion and separation of Ashford University, we plan to operate as an education technology services provider that would provide certain services to AU NFP, and potentially, in the future, to other customers. The services to AU NFP would be provided pursuant to services agreements with the Company. The transactions described above are collectively hereinafter referred to as the “Proposed Transaction.”

We are continuing to finalize the terms of the Proposed Transaction with Ashford University and review various federal, state and other regulatory requirements and approvals that could impact the viability and timing of the Proposed Transaction. The Company and the boards of trustees of Ashford University and AU NFP are taking steps to protect Ashford University's and AU NFP’s independence in considering the conversion transaction in order to enable Ashford University and AU NFP to act in the best interests of Ashford University and its students. Neither the Company nor Ashford University are bound to move forward with the Proposed Transaction at this time.

Additional Information

We were incorporated in Delaware in May 1999 under the name TeleUniversity, Inc. and we changed our name to Bridgepoint Education, Inc. in February 2004. Our website is located at www.bridgepointeducation.com. We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form

8-K and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The website for the SEC is located at www.sec.gov. The reference to our website is intended to be an inactive textual reference and the contents of our website are not incorporated by reference into, or in any way a part of, this report.

REGULATION

Ashford University is an accredited institution of higher education that is subject to extensive regulation by a variety of agencies, including WSCUC, the agency that accredits Ashford University. Accrediting agencies provide an independent assessment of educational quality. Our institution is also subject to regulation by educational licensing authorities in states where our institution is physically located or conducts certain operations. We are also subject to regulation by the Department due to our participation in Title IV programs. To participate in Title IV programs, a school must maintain authorization by the state education agency or agencies where it is physically located, be accredited by an accrediting agency recognized by the Department and be certified by the Department as an eligible institution. Institutions that participate in Title IV programs are subject to an extensive set of laws and regulations. The laws, regulations and standards of WSCUC, the Department and state agencies affect the vast majority of our institution's operations.

Accreditation

Prior to being institutionally accredited by WSCUC in July 2013, Ashford University had been accredited by HLC since 1950. WSCUC is one of seven regional accrediting agencies that accredits colleges and universities in the United States. Most traditional, public and private non-profit, degree-granting colleges and universities are accredited by one of these seven agencies.

Accreditation by WSCUC is recognized by the Department and by prospective students as a reliable indicator of educational quality. Accreditation is a private, non-governmental process for evaluating the quality of an educational institution and its programs and an institution's effectiveness in carrying out its mission in areas including integrity, student performance, curriculum, educational effectiveness, faculty, physical resources, administrative capability and resources, financial stability and governance. To be recognized by the Department, an accrediting agency, among other things, must adopt specific standards to be maintained by educational institutions, conduct peer-review evaluations of institution's compliance with those standards, monitor compliance through periodic institutional reporting and the periodic renewal process and publicly designate those institutions that meet the agency's criteria. An accredited institution is subject to periodic review by its accrediting agency to determine whether it continues to meet the performance, integrity, quality and other standards required for accreditation. An institution that is determined not to meet the standards of accreditation may have its accreditation revoked or not renewed.

Accreditation is important to our institution as it establishes comprehensive criteria designed to promote educational quality and effectiveness. Accreditation also represents a public acknowledgment by a recognized independent agency of the quality and effectiveness of our institution and its programs. It also facilitates the transferability of educational credits when students transfer to or apply for graduate school at other regionally accredited colleges and universities. The Department relies on accreditation as an indicator of educational quality and effectiveness in determining an institution's eligibility to participate in Title IV programs, as do certain corporate and government sponsors in connection with tuition reimbursement and other student aid programs.

We believe that regional accreditation is viewed favorably by certain students when choosing a school, by other schools when evaluating transfer and graduate school applications, and by certain employers when evaluating the credentials of candidates for employment.

WSCUC Accreditation of Ashford University

In July 2013, WSCUC granted Initial Accreditation to Ashford University for five years, until July 15, 2018. In December 2013, Ashford University effected its transition to WSCUC accreditation and designated its San Diego, California facilities as its main campus and its Clinton, Iowa campus as an additional location. As part of a continuing monitoring process, Ashford University hosted a visiting team from WSCUC on a special visit in April 2015. In July 2015, Ashford University received an Action Letter from WSCUC outlining the findings arising out of its visiting team's special visit. The Action Letter stated that the WSCUC visiting team found evidence that Ashford University continues to make progress in all six areas recommended by WSCUC in 2013. As part of its institutional review process, WSCUC commenced its comprehensive review of Ashford University with an off-site review in March 2018. Ashford University was notified on June 8, 2018 that the Ashford University Accreditation Visit originally scheduled for fall 2018 had been rescheduled to April 3-5, 2019.

Licensure by California BPPE

To be eligible to participate in Title IV programs, an institution must be legally authorized to offer its educational programs by the states in which it is physically located. Ashford University is approved by the California BPPE to operate as an accredited institution. As a result, the university is subject to laws and regulations applicable to private, postsecondary educational institutions located in California, including reporting requirements related to graduation, employment and licensing

data, certain changes of ownership and control, faculty and programs, and student refund policies. Ashford University also remains subject to other state and federal student employment data reporting and disclosure requirements.

Negotiated Rulemaking and Other Executive Action

On July 31, 2018, the Department published a notice in the Federal Register announcing their intention to establish a negotiated rulemaking committee to prepare proposed regulations for the Federal Student Aid programs authorized under title IV of the Higher Education Act of 1965, as amended. In September 2018, interested parties commented at three public hearings on the topics suggested by the Department in the notice, and suggested additional topics for consideration for action by the negotiated rulemaking committee. The Negotiated Rulemaking Committee and Subcommittees will meet January through March of 2019 in an attempt to reach consensus on these topics.

The proposed topics for negotiation include those regarding accreditation agencies, such as requirements for accrediting agencies in their oversight of member institutions; requirements for accrediting agencies to honor institutional mission; criteria used by the Secretary to recognize accrediting agencies, emphasizing criteria that focus on educational quality; developing a single definition for purposes of measuring and reporting job placement rates; and simplifying the Department's process for recognition and review of accrediting agencies.

Additional proposed topics outside of those regarding accreditation agencies include: state authorization, to address the requirements related to programs offered through distance education or correspondence courses, including disclosures about such programs to enrolled and prospective students, and other state authorization issues; the definition of “regular and substantive interaction,” as that term is used in the definitions of “correspondence course” and “distance education”; the definition of the term “credit hour”; the requirement that an institution demonstrate a reasonable relationship between the length of a program and entry-level requirements for the recognized occupation for which the program prepares the student; the arrangements between an institution and another institution or organization to provide a portion of an educational program; the roles and responsibilities of institutions and accrediting agencies in the teach-out process; the barriers to innovation and competition in postsecondary education or to student completion, graduation, or employment, including, but not limited to, those contained in the Department's institutional eligibility regulations and student assistance general provisions; and direct assessment programs and competency-based education, including consideration of regulations that are barriers to the implementation of such programs, such as certain requirements for term-based academic calendars and satisfactory academic progress.

For additional information regarding negotiated rulemaking, see also “Gainful employment” and “Defense to Repayment” sections below.

Authorization by Congress of Title IV Programs

Congress must periodically reauthorize the Higher Education Act and annually determine the funding level for each Title IV program through the budget and appropriations process. In 2008, the Higher Education Act was reauthorized through September 2014 and on December 13, 2017, the House of Representatives’ Committee on Education and the Workforce passed H.R. 4508, the Promoting Real Opportunity, Success, and Prosperity through Education Reform Act (“PROSPER Act”). No date has been set for consideration by the full House on the legislation, nor has a companion Higher Education Act reauthorization bill been introduced in the U.S. Senate. The Higher Education Act's programs will continue year-to-year without explicit reauthorization as long as Congress appropriates funds for the programs. Congress may propose and pass revisions to the Higher Education Act between reauthorizations by using other legislative vehicles such as budget bills and appropriations bills, which could impact funding for student financial aid programs.

Department Regulation of Title IV Programs

To be eligible to participate in Title IV programs, an institution must comply with the Higher Education Act and the regulations thereunder that are administered by the Department. Among other things, the law and regulations require that an institution (i) be licensed or authorized to offer its educational programs by the states in which it is physically located, (ii) maintain institutional accreditation by an accrediting agency recognized for such purposes by the Department and (iii) be certified to participate in Title IV programs by the Department. Our institution's participation in Title IV programs allows for extensive oversight and review pursuant to regulations promulgated by the Department. Those regulations are subject to revision and amendment from time to time by the Department. The Department's interpretation of its regulations likewise is subject to change. As a result, it is difficult to predict how Title IV program requirements will be applied in all circumstances.

During the time when an institution is provisionally certified, it may be subject to adverse action with fewer due process rights than those afforded to other institutions, and it must apply for and receive approval from the Department for any substantial change including but not limited to the establishment of an additional location, an increase in the level of academic offerings, or the addition of certain programs.

The 90/10 rule

Under the Higher Education Act, a proprietary institution loses eligibility to participate in Title IV programs if the institution derives more than 90% of its revenues from Title IV program funds for two consecutive fiscal years, as calculated in accordance with Department regulations. This rule is commonly referred to as the “90/10 rule.” Any institution that violates the 90/10 rule for two consecutive fiscal years becomes ineligible to participate in Title IV programs for at least two fiscal years. In addition, an institution whose rate exceeds 90% for any single fiscal year is placed on provisional certification and may be subject to other enforcement measures. In September 2016, the Department issued new audit standards, for financial statement audits of proprietary institutions for fiscal years ending June 30, 2017 or later, which include a requirement that institutions must determine Title IV and non-Title IV revenue on a student by student basis. Based on this calculation, during the fiscal year ended December 31, 2018 and 2017 , Ashford University derived 78.6% and 80.8% , respectively, of its respective cash revenues from Title IV program funds.

Revenue derived from government tuition assistance for military personnel, including veterans, is not considered federal student aid for purposes of calculations under the 90/10 rule, and accordingly helps our institution satisfy the 90/10 rule. As of December 31, 2018 , approximately 26.7% of our institution's students were affiliated with the military, some of whom are eligible to receive government tuition assistance that may be used to pursue postsecondary degrees.

Cohort default rate

The most recent official three-year cohort default rates for Ashford University for the 2015, 2014 and 2013 federal fiscal years were 13.5% , 14.9% and 14.5% , respectively. The draft three-year cohort default rate for Ashford University for the 2016 federal fiscal year was 13.7%.

Financial responsibility

The Higher Education Act and Department regulations establish standards of financial responsibility that an institution must satisfy in order to participate in Title IV programs. The Department evaluates compliance with these standards annually upon receipt of an institution's annual audited financial statements and when an institution applies to the Department to reestablish its eligibility to participate in Title IV programs following a change in ownership. One financial responsibility standard is based on the institution's composite score, which is derived from a formula established by the Department. The composite score is a number between negative 1.0 and positive 3.0. It must be at least 1.5 for the institution to be deemed financially responsible without the need for further Department financial oversight. In addition to having an acceptable composite score, an institution must, among other things, meet all its financial obligations (including required refunds to students and any Title IV liabilities and debts), be current in its debt payments and not receive an adverse, qualified or disclaimed opinion by its accountants in its audited financial statements.

For the prior fiscal year ended December 31, 2017 , the consolidated composite score calculated was 2.3 , satisfying the composite score requirement of the Department's financial responsibility test. For the year ended December 31, 2018 , we expect the consolidated composite score to be 2.2 . However, the consolidated calculation is subject to determination by the Department once it receives and reviews our audited financial statements for the year ended December 31, 2018 . Additionally, for the year ended December 31, 2018 , the composite score at our institution is higher than the consolidated score.

Substantial misrepresentation

The Higher Education Act prohibits an institution participating in Title IV programs from engaging in substantial misrepresentation regarding the nature of its educational programs, its financial charges or the employability of its graduates. Under the Department's rules, a “misrepresentation” is any false, erroneous or misleading statement an institution, one of its representatives or any ineligible institution, organization or person with whom the institution has an agreement to provide educational programs or marketing, advertising, recruiting or admissions services makes directly or indirectly to a student, prospective student or any member of the public, or to an accrediting agency, a state agency or the Department. The Department's rules define a “substantial misrepresentation” as 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. For-profit educational institutions are also subject to the general deceptive practices jurisdiction of the Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”).

On December 10, 2015, Ashford University received a request for information from the Multi-Regional and Foreign School Participation Division of the Department’s Office of Federal Student Aid (“FSA”) for (i) advertising and marketing materials provided to prospective students regarding the transferability of certain credit, (ii) documents produced in response to the CFPB's August 10, 2015 Civil Investigative Demand related to the CFPB's investigation to determine whether for-profit postsecondary education companies or other unnamed persons have engaged in or are engaging in unlawful acts or practices related to the advertising, marketing or origination of private student loans, (iii) certain documents produced in response to subpoenas and interrogatories issued by the Attorney General of the State of California and (iv) records created between 2009 and 2012 related to the disbursement of certain Title IV funds. The FSA is reviewing representations made by Ashford University to potential and enrolled students, and has asked us and Ashford to assist in its assessment of Ashford's compliance with the prohibition on substantial misrepresentations. We, together with Ashford, intend to provide the FSA with our full cooperation with a view toward demonstrating the compliant nature of our practices.

The Department is currently conducting a program review to assess Ashford University's administration of the Title IV programs in which it participates. For additional information regarding the program review, see “Compliance reviews, audits and reports — Department of Education Open Program Review of Ashford University” below. For additional information regarding substantial misrepresentation, see “Defense to Repayment” below.

Return of Title IV funds for students who withdraw

If a student who has received Title IV funds withdraws, the institution must determine the amount of Title IV program funds the student has earned pursuant to applicable regulations. If the student withdraws during the first 60% of any payment period (which, for our undergraduate online students, is typically a 20-week term consisting of four five-week courses), the amount of Title IV funds that the student has earned is equal to a pro rata portion of the funds the student received or for which the student would otherwise be eligible for the payment period. If the student withdraws after the 60% threshold, then the student is deemed to have earned 100% of the Title IV funds received. If the student has not earned all the Title IV funds disbursed, the institution must return the unearned funds to the appropriate lender or the Department in a timely manner, which is generally no later than 45 days after the date the institution determined that the student withdrew. If an institution's annual financial aid compliance audit in either of its two most recently completed fiscal years determines that 5% or more of such returns were not timely made, the institution may be required to submit a letter of credit in favor of the Department equal to 25% of the amount of unearned Title IV funds the institution was required to return for its most recently completed fiscal year. For the fiscal year ended December 31, 2018 , our institution did not exceed the 5% threshold for late refunds sampled.

Gainful employment

In October 2014, the Department published gainful employment regulations impacting programs required to prepare graduates for gainful employment in a recognized occupation. Almost all academic programs offered by Title IV-participating private sector institutions of higher education must prepare students for gainful employment in a recognized occupation. The gainful employment regulations became effective July 1, 2015, with certain institutional disclosure requirements effective early 2017. The gainful employment regulations have a framework with three components:


•	Certification: Institutions must certify that each of their gainful employment programs meet state and federal licensure, certification and accreditation requirements.


•	Accountability Measures: To maintain Title IV eligibility, gainful employment programs will be required to meet minimum standards for the debt burden versus the earnings of their graduates.


◦	Pass: Programs whose graduates have annual loan payments less than 8% of total earnings or less than 20% of discretionary earnings.


◦	Zone: Programs whose graduates have annual loan payments between 8% and 12% of total earnings or between 20% and 30% of discretionary earnings.


◦	Fail: Programs whose graduates have annual loan payments greater than 12% of total earnings and greater than 30% of discretionary earnings.

Programs that fail in two out of any three consecutive years or are in the Zone for four consecutive years will be disqualified from participation in the Title IV programs.


•	Transparency: Institutions will be required to make public disclosures regarding the performance and outcomes of their gainful employment programs. The disclosures will include information such as costs, earnings, debt and completion rates.

The accountability measures will typically weigh a calculated debt burden from graduates who completed their studies three and four years prior to the measuring academic year and earnings from the most recent calendar year prior to the conclusion of the measuring academic year. Thus, for the 2014-2015 academic year, the two-year cohort will include graduates from the 2010-2011 and 2011-2012 academic years and earnings for those graduates from calendar year 2014.

In October 2016, Ashford received draft debt-to-earnings rates and certain underlying data from the Department for the first gainful employment measurement year. In January 2017, we received our institution's final debt-to-earnings rates for the first gainful employment measurement year. Based on the final rates, none of our programs were determined to fail. Two of our current programs, including the Associate of Arts in Early Childhood Education and the Bachelor of Arts in Early Childhood Education/Administration, were determined to be in the zone. At December 31, 2018 , approximately 3.3% of our institution's students were enrolled in the Associate of Arts in Early Childhood Education and approximately 8.9% of our institution's students were enrolled in the Bachelor of Arts in Early Childhood Education/Administration. During the year ended December 31, 2018 , we derived revenue of approximately $14.3 million from the Associate of Arts in Early Childhood Education and approximately $39.7 million from the Bachelor of Arts in Early Childhood Education/Administration.

The fact that none of our programs were determined to fail and only two of our current programs were determined to be in the zone is significant given the framework discussed above, as a program would be disqualified from participation in Title IV programs only if it were to fail for two out of three consecutive years, or either fail or be in the zone for three out of four consecutive years. The gainful employment regulations contemplate a transition period in the first several years to afford institutions the opportunity to make changes to their programs and retain Title IV eligibility.

On June 15, 2017, the Department announced its intention to conduct additional negotiated rulemaking on certain issues related to gainful employment. Because the negotiated rulemaking committee did not reach consensus, the Department planned to publish a proposed regulation through a NPRM, take public comment, and issue final regulations by November 1, 2018, with the final regulations effective July 1, 2019. This did not occur.

On June 30, 2017, the Department granted institutions until July 1, 2018 to comply with disclosure provisions related to promotional materials and prospective students, and extended the deadline for all programs to file alternate earnings appeals. The Department did not change a July 1, 2017 deadline requiring institutions to provide a completed disclosure template, or a link thereto, on gainful employment program web pages and our schools have complied with this requirement. In January 2018, the Department announced the release of the 2018 gainful employment template. While the aesthetic of the template remained the same, the Department removed certain data points. This included the amount for off-campus room and board, the percentage of students who borrow money to pay for the degree program, and the typical annual earnings after leaving the program.

On March 16, 2018, the Department announced it would release a new draft gainful employment completers list in late spring. On April 27, 2018, the Department announced that it would send institutions their completers list on April 30, 2018. Schools had until June 13, 2018 to review, correct, and submit the lists back to the Department and our institution timely submitted. The Department has not announced when schools can expect the next round of draft debt-to-earnings rates.

On June 18, 2018, the Department announced it will allow additional time, until July 1, 2019, for institutions to comply with the requirements of the gainful employment regulations in 34 CFR 668.412 (d) and (e) that include the disclosure template, or a link thereto, in their gainful employment program promotional materials; and directly distribute the disclosure template to prospective students. Because the Department intends to develop proposed regulations that would replace the gainful employment regulations, and as part of that rulemaking process, the Department continues to evaluate the efficacy of these disclosures to students and the implementation of these requirements. Institutions must continue to comply with the requirements in 34 CFR 668.412(a), (b), and (c) to post disclosures on their gainful employment program web pages using the

approved disclosure template provided by the Department. The deadline for these actions was April 6, 2018 and, as discussed above, our institution complied with this requirement.

On August 14, 2018, the Department proposed to rescind the gainful employment regulations and update the College Scorecard, a web-based tool, to provide program-level outcomes for all higher education programs at all institutions that participate in Title IV. On August 24, 2018, the Department announced that it would still require institutions to comply with the October 1, 2018 reporting requirement. Schools were to submit gainful employment program data for the 2017-18 Award Year to the National Student Loan Data System by October 1, 2018. Our institution submitted this reporting timely.

We continue to review the information provided by the Department to understand the potential impact of the gainful employment regulations on our programs. We also continue to evaluate options related to new programs or adjustments to current programs that could help mitigate the potential adverse consequences of the regulations. We will also continue to monitor changes to the existing regulations.

Defense to repayment

On June 18, 2015, the Department announced processes that would be established to assist students in gaining relief under the “defense to repayment” provisions of the Direct Loan Program regulations. The defense to repayment provisions then in effect allowed a student to assert as a defense against repayment of federal direct loans any commission of fraud or other violation of applicable state law by the school related to such loans or the educational services for which the loans were provided.

On June 16, 2016, the Department published proposed regulations regarding borrower defense to repayment and related matters, and on October 28, 2016, the Department published its final regulations with an effective date of July 1, 2017.

On June 14, 2017, the Department announced a postponement of the 2016 defense to repayment regulations and its intention to resubmit the regulations through the negotiated rulemaking process. The Department announced an additional postponement on October 24, 2017. On February 14, 2018, the Department announced that it was postponing the effective date of this rule until July 1, 2019 so that it could complete the negotiated rulemaking process and develop the new regulations. Because the negotiated rulemaking committee did not reach consensus, the Department published a proposed regulation through an NPRM, took public comment, and planned to issue final regulations by November 1, 2018, effective July 1, 2019. This did not occur.

In September and October of 2018, the U.S. District Court for the District of Columbia issued a series of orders and opinions holding these procedural delays by the Department to be improper. The Court reinstated the 2016 repayment regulations as of October 16, 2018.

The 2016 regulations allow a borrower to assert a defense to repayment on the basis of a substantial misrepresentation, any other misrepresentation in cases where certain other factors are present, a breach of contract or a favorable nondefault contested judgment against a school for its act or omission relating to the making of the borrower’s loan or the provision of educational services for which the loan was provided. In addition, the financial responsibility standards contained in the new regulations establish the conditions or events that trigger the requirement for an institution to provide the Department with financial protection in the form of a letter of credit or other security against potential institutional liabilities. Triggering conditions or events include, among others, certain state, federal or accrediting agency actions or investigations, and in the case of publicly traded companies, receipt of certain warnings from the SEC or the applicable stock exchange, or the failure to timely file a required annual or quarterly report with the SEC. The new regulations also prohibit schools from requiring that students agree to settle future disputes through arbitration.

We will continue to monitor guidance on or changes to the existing regulations.

Potential sanctions for noncompliance with Title IV regulations

The Department can impose sanctions for violating the statutory and regulatory requirements of Title IV programs, including:

•

transferring an institution from the advance method or the heightened cash monitoring level one method of Title IV payment, each of which permit the institution to receive Title IV funds before or concurrently with disbursing them to students, to the heightened cash monitoring level two method of payment or to the reimbursement method of payment, each of which delay an institution's receipt of Title IV funds until student eligibility has been verified by the Department;


•	imposing a monetary liability against an institution in an amount equal to any funds determined to have been improperly disbursed or not to have been properly returned upon student withdrawal;


•	requiring an institution to post a letter of credit in favor of the Department as a condition for continued Title IV eligibility;


•	initiating proceedings to impose a fine or to limit, suspend or terminate an institution's participation in Title IV programs;


•	referring a matter for possible civil or criminal investigation;


•	failing to grant an institution's application for renewal of its certification, or revocation of an institution's provisional certification, to participate in Title IV programs, or imposing conditions on its participation in Title IV programs; or


•	taking emergency action to suspend an institution's participation in Title IV programs without prior notice or a prior opportunity for a hearing.

Compliance reviews, audits and reports

Our institution is subject to reviews in connection with periodic renewals of certification to participate in Title IV programs, as well as announced and unannounced compliance reviews and audits by various external agencies, including the Department and the Office of Inspector General (“OIG”). The Department periodically reviews institutions participating in Title IV programs for compliance with applicable laws and regulations. The OIG is responsible for promoting the efficiency, effectiveness and integrity of the Department's programs and operations, including through the performance of general audits of institutions' administration of federal funds and investigations of fraud, abuse or other wrongdoing by institutions.

State licensing agencies, the U.S. Department of Veterans Affairs and accrediting bodies may also conduct audits and reviews of a similar fashion. In addition, as part of the Department's ongoing monitoring of institutions' administration of Title IV programs, the Higher Education Act requires institutions to submit to the Department an annual Title IV compliance audit conducted by an independent certified public accounting firm. Each institution must also annually submit audited financial statements prepared in accordance with GAAP and Department regulations to enable the Department to make a determination of an institution's financial responsibility.

Department of Education Open Program Review of Ashford University

On July 7, 2016, Ashford University was notified by the Department that an off-site program review had been scheduled to assess Ashford University’s administration of the Title IV programs in which it participates. The off-site program review commenced on July 25, 2016 and covered students identified in the 2009-2012 calendar year data previously provided by Ashford University to the Department in response to a request for information received from the Multi-Regional and Foreign School Participation Division of the Department’s Office of Federal Student Aid (the “FSA”) on December 10, 2015, but may be expanded if the Department deems such expansion appropriate.

On December 9, 2016, the Department informed Ashford University that it intended to continue the program review on-site at Ashford. The on-site program review commenced on January 23, 2017 and initially covered the 2015-2016 and 2016-2017 award years, but may be expanded if the Department deems such an expansion appropriate. To date, we have not received a draft report from the Department.

GI Bill Benefits

On May 20, 2016, the Company received a letter from the Iowa Department of Education (“Iowa DOE”) indicating that, as a result of the planned closure of the Clinton Campus, the Iowa State Approving Agency (“ISAA”) would no longer continue to approve Ashford University’s programs for GI Bill benefits after June 30, 2016, and recommending Ashford University seek approval through the State Approving Agency of jurisdiction for any location that meets the definition of a “main campus” or “branch campus.” Ashford University began the process of applying for approval through the State Approving Agency in California (“CSAAVE”), and the Company subsequently disclosed that on June 20, 2016 it received a second letter from the Iowa DOE indicating that the Iowa DOE had issued a stay of the ISAA’s withdrawal of approval of Ashford University’s programs for GI Bill benefits effective immediately until the earlier of (i) 90 days from June 20, 2016 or (ii) the date on which CSAAVE completed its review and issued a decision regarding the approval of Ashford University in California. Ashford University received communication from CSAAVE indicating that additional information and documentation would be required before Ashford University’s application could be considered for CSAAVE approval. Ashford University subsequently withdrew the CSAAVE application and continued working with the U.S. Department of Veterans Affairs (“VA”), the Iowa DOE and the ISAA to obtain continued approval of Ashford University’s programs for GI Bill benefits and to prevent any disruption of educational benefits to Ashford University's veteran students.

On September 15, 2016, in response to a Petition for Declaratory and Injunctive Relief (“Petition”) filed by Ashford University, the Iowa District Court for Polk County entered a written order (“Order”) staying the Iowa DOE’s announced intention to withdraw the approval of Ashford University as a GI Bill eligible institution until the entry of a final and appealable order and judgment in the action. On June 23, 2017, the Iowa District Court held a hearing on Ashford University’s Petition and on July 17, 2017, the Court ruled in favor of the Iowa DOE and denied the petition. Ashford University filed a motion for reconsideration of this ruling, which was denied on August 17, 2017. On August 23, 2017, Ashford University filed a Petition to Vacate or Modify the Iowa District Court’s July 17, 2017 ruling, based on material evidence, newly discovered, which could not with reasonable diligence have been previously discovered by Ashford University (“First Petition to Vacate”). On September 18, 2017, Ashford University appealed, inter alia , the July 17, 2017 ruling to the Iowa Supreme Court and posted an appeal bond, which stayed this matter pending resolution of Ashford University’s appeal. As a result, Ashford University’s approval was not withdrawn, and Ashford University’s programs remain approved for GI Bill purposes. The Assistant Attorney General handling this matter on behalf of the Iowa DOE also advised Ashford University that the Iowa DOE would take no action pending the post-ruling motions and appeal. On October 12, 2017, Judge Eliza Ovrom, the Iowa District Court Judge who issued the July 17, 2017 ruling, filed a Disclosure Statement revealing family ties to the Iowa Attorney General’s Office. Following motions by Ashford University for her recusal, Judge Ovrom recused herself from all further proceedings. On October 24, 2017, Ashford University filed with the Iowa Supreme Court a Petition to Vacate or, in the Alternative, for Limited Remand (“Second Petition to Vacate”), in which Ashford University argued that the July 17, 2017 ruling and all other material orders entered by Judge Ovrom should be vacated due to her previously undisclosed conflict of interest. On January 8, 2018, the Iowa Supreme Court remanded the Second Petition to Vacate to the District Court, where all proceedings in this matter were consolidated before Judge Michael Huppert. On April 26, 2018, Judge Huppert granted the Second Petition to Vacate and vacated all material rulings by Judge Ovrom, including the July 17, 2017 ruling, thus on June 21, 2018, the Iowa Supreme Court issued a Procedendo stating that the appeal was concluded. Judge Huppert’s decision mooted the First Petition to Vacate and Ashford University’s appeal of, inter alia , the July 17, 2017 ruling. The case is now proceeding on the merits de novo before a new judge.

On July 6, 2017, Ashford University received approval from the Arizona State Approving Agency (“ASAA”) to provide GI Bill benefits to its students. On September 13, 2017, the VA accepted the ASAA’s approval, subject to Ashford University's compliance with the approval requirements, and the University subsequently received a facility code from the VA. On November 9, 2017, the VA informed Ashford University that the ASAA had not provided sufficient evidence to establish that it has jurisdictional authority over Ashford University’s online programs. The VA stated that they intend to suspend payment of educational assistance and approval of new student enrollments and student re-enrollments for Ashford University’s online programs in 60 days unless corrective action was taken.

On November 17, 2017, Ashford University filed a petition for review in the United States Court of Appeals for the Federal Circuit challenging the VA’s actions. In response to that petition, the VA agreed to stay the actions with respect to the suspension and reenrollment it had announced on November 9, 2017 through the entry of judgment in the Federal Circuit case, on the condition that Ashford University request and submit an application for approval to CSAAVE on or before January 8, 2018. Ashford University submitted an application to CSAAVE for approval on January 5, 2018. On February 21, 2018, CSAAVE provided notice of its intention not to act on Ashford University’s initial application for approval for the training of veterans and other eligible persons. The notice directed Ashford University to request approval of its application by the VA. Ashford University continues to work in good faith with the VA while its petition for review remains pending with the Federal Circuit. In keeping with this commitment, Ashford University agreed, at the VA’s request, to submit another application to CSAAVE. Ashford University filed that additional application on November 19, 2018. On December 14, 2018, however, CSAAVE again informed Ashford University that it did not intend to act on Ashford University’s application, and again indicated that Ashford University could request approval of its application directly from the VA.

On January 29, 2019, Ashford University filed its opening brief with the Court of Appeals for the Federal Circuit. Under the briefing schedule established by the Court, VA’s opposition brief is currently due on April 1, 2019, and Ashford University’s reply is currently due on April 22, 2019.

Adding teaching locations and implementing new educational programs

The requirements and standards of accrediting agencies, state education agencies and the Department limit our institution's ability in certain instances to establish additional teaching locations or implement new educational programs. WSCUC and state education agencies that may authorize or accredit our institution or its programs, generally require institutions to notify them in advance of adding certain new locations or implementing certain new programs, and may undertake a review of the quality of the facility or the program and the financial, academic and other qualifications of the institution. In addition, if an institution participating in Title IV programs plans to add a new location or educational program, the institution must apply under certain circumstances to the Department to have the new location or educational program designated as within the scope of the institution's Title IV eligibility.

On April 23, 2018, Ashford University received an updated Program Participation Agreement from the Department. Based on the updated Program Participation Agreement, Ashford University is provisionally certified to participate in Federal Student Financial Aid Programs until March 31, 2021. Ashford University was previously eligible to participate on a month-to-month basis while its reapplication for certification was pending with the Department. As a result of the updated Program Participation Agreement, Ashford University’s previously pending educational programs have been approved and Ashford University is required to submit its reapplication for continued certification by December 31, 2020. During the time when an institution is provisionally certified, it must apply for and receive approval from the Department for any substantial change, including but not limited to the establishment of an additional location, an increase in the level of academic offerings or the addition of certain programs.

Change in ownership resulting in a change of control

The Department and most state and accrediting agencies require institutions of higher education to report or obtain approval of certain changes of control and changes in other aspects of institutional organization or operations. Transactions or events that constitute a change of control may include significant acquisitions or dispositions of an institution's common stock and significant changes in the composition of an institution's governing board. The types of thresholds for such reporting and approval vary among the states and among accrediting agencies. The Department regulations provide that a change of control occurs for a publicly traded corporation if either (i) a person acquires such ownership and control of the corporation so that the corporation is required to file a Current Report on Form 8-K with the SEC disclosing a change of control or (ii) the corporation's largest stockholder who owns at least 25% of the total outstanding voting stock of the corporation, ceases to own at least 25% of such stock or ceases to be the largest stockholder owning at least 25% of the total stock. A significant purchase or disposition of our voting stock could be determined by the Department to be a change of control under this standard. In such event, the regulatory procedures applicable to a change in ownership and control would have to be followed in connection with the transaction. Similarly, if such a disposition were deemed a change of control by the applicable accreditor or state educational licensing agency, any required regulatory notifications and approvals would have to be made or obtained.

Privacy of student records

The Family Educational Rights and Privacy Act of 1974 (“FERPA”) and the Department's FERPA regulations require educational institutions to, among other things, protect the privacy of students' educational records by limiting an institution's disclosure of a student's personally identifiable information without the student's prior written consent. If an institution fails to comply with FERPA, the Department may require the institution to take corrective action or may terminate the institution's receipt of federal funds. Educational institutions are also obligated to safeguard student information pursuant to the Gramm-Leach-Bliley Act (“GLBA”), which requires an institution to, among other things, develop and maintain a comprehensive written information security program designed to protect against the unauthorized disclosure of personally identifiable financial information of students, parents or other individuals with whom such institution has a customer relationship. If an institution fails to comply with the applicable GLBA requirements, it may be required to take corrective action, be subject to monitoring and oversight by the FTC, and be subject to fines or penalties imposed by the FTC.

State authorization

To be eligible to participate in Title IV programs, an institution must be legally authorized to offer its educational programs by the states in which it is physically located. An institution is legally authorized by a state if, among other things, it meets one of the following sets of requirements:

•

the state establishes the institution by name as an educational institution through a charter, statute, constitutional provision or other action issued by an appropriate state agency or state entity and is authorized to operate educational programs beyond secondary education, including programs leading to a degree or certificate; the institution complies with any applicable state approval or licensure requirements, except that the state may exempt the institution from any state approval or licensure requirement based on the institution's accreditation by one or more accrediting agencies recognized by the Department or based upon the institution being in operation for at least 20 years; and the state has a process to review and appropriately act on complaints concerning the institution including the enforcement of state laws;

•

the institution is established by the state on the basis of an authorization to conduct business in the state or to operate as a nonprofit charitable organization; the institution, by name, is approved or licensed by the state to offer programs beyond secondary education, including programs leading to a degree or certificate; and the institution is not exempt from the state's approval or licensure requirements based on accreditation, years in operation, or other comparable exemption; and the state has a process to review and appropriately act on complaints concerning the institution including the enforcement of state laws; or


•	the institution is exempt from state authorization as a religious institution under the state constitution or by state law, and the state has a process to review and appropriately act on complaints concerning the institution and to enforce applicable state laws.

The Department has stated that it will not publish a list of states that meet, or fail to meet, the above requirements, and it is unclear how the Department will interpret these requirements in each state.

The regulations also provide that if an institution is offering postsecondary education through distance or correspondence education to students in a state in which it is not physically located or in which it is otherwise subject to state jurisdiction as determined by the state, the institution must meet any state requirements to legally offer postsecondary distance or correspondence education to students in that state. Additionally, upon request by the Department, an institution must be able to document that it has the applicable state approval. For additional information, see “— State Education Licensure and Regulation” below.

State Education Licensure and Regulation

California, Arizona, Iowa and Colorado

The Higher Education Act requires Ashford University to be legally authorized in the states in which it is physically located to participate in Title IV programs, and Department regulations impose Title IV program requirements for an institution to be considered legally authorized by a state.

Ashford University has designated its San Diego, California facilities as its main campus for Title IV purposes. Ashford University timely submitted to California BPPE an application to renew its approval to operate as an accredited institution on May 7, 2018. Ashford University remains authorized in the state of California by California BPPE while the renewal application is pending review and approval. For additional information, see “Regulation - Licensure by California BPPE” above. Ashford University also has physical locations in Arizona, Colorado and Iowa. Ashford University is authorized to operate an administrative center in Arizona by the Arizona State Board for Private Postsecondary Education (“State Board”) until June 30, 2019. To maintain its Arizona authorization, the university must comply with applicable requirements under Arizona statutes and rules. Ashford University is authorized to operate as a place of business in Colorado by the Colorado Commission on Higher Education. To maintain its Colorado authorization, the university must comply with applicable requirements under Colorado statutes and rules. Ashford is registered as a postsecondary school in Iowa by the Iowa College Student Aid Commission (“ICSAC”) until November 20, 2019. To maintain its Iowa registration, Ashford must comply with applicable requirements under Iowa statutes and rules.

Additional state regulation

Most state education agencies impose regulatory requirements on educational institutions operating within their boundaries. Several states have sought to assert jurisdiction over out-of-state educational institutions offering online programs that have no physical location or other presence in the state but have some activity in the state, such as enrolling or offering educational services to students who reside in the state, employing faculty who reside in the state or advertising to or recruiting prospective students in the state. In addition to California, Arizona, Iowa and Colorado, we have determined that our activities in certain states constitute a presence requiring licensure or authorization under the requirements of the applicable state education agency, and we have obtained state education agency approvals in certain states as determined necessary in connection with our marketing and recruiting activities. We review state licensure requirements on a regular basis to determine whether our activities in those states constitute a presence or otherwise require licensure or authorization. Because we enroll students throughout the United States, we may have to seek licensure or authorization in additional states in the future.

Item 1A. Risk Factors.

Investing in our common stock involves risk. Before making an investment in our common stock, you should carefully consider the risk factors set forth below, as well as the other information contained in this Annual Report on Form 10-K, including our annual consolidated financial statements and the information set forth in Part I, Item 1, “Business” and Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations.” The risks described below are those which we believe are the material risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may impact our business operations. Any of the risks described below could materially adversely affect our business, prospects, financial condition, cash flows and results of operations. In these circumstances, the trading price of our common stock could decline and you could lose all or part of your investment.

Risks Related to Material Weaknesses in Internal Control Over Financial Reporting

We have identified material weaknesses in our internal control over financial reporting which resulted in the restatement of previously issued financial statements. If our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to further restate our financial results, which could adversely affect our stock price and result in an inability to maintain compliance with applicable stock exchange listing requirements.

We have concluded that there were matters that constituted material weaknesses in our internal control over financial reporting. Accordingly, management has determined that the Company's disclosure controls and procedures and internal controls over financial reporting were not effective as of December 31, 2018. See “Part II, Item 9A. Controls and Procedures” for further information. As a result of the material weaknesses, the Company restated its condensed consolidated financial statements as of and for the period ended September 30, 2018 by filing an Amendment No.1 on Form 10-Q/A.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. The existence of this issue could adversely affect us, our reputation or investors' perceptions of us. We plan to take additional measures to remediate the underlying causes of the material weaknesses. However, we have not completed all of the corrective processes, procedures and related evaluation or remediation that we believe are necessary. As we continue to evaluate and work to remediate the material weaknesses, we may determine to implement further measures to address the control deficiencies. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight.

Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take, and our measures may not prove to be successful in remediating the material weaknesses. If our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to further restate our financial results. In addition, if we are unable to successfully remediate the material weaknesses in our internal controls or if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected, and we may be unable to maintain compliance with applicable stock exchange listing requirements.

Risks Related to the Extensive Regulation of Our Business

If our institution fails to comply with applicable regulatory requirements, they could face monetary liabilities or penalties, operational restrictions, or loss of eligibility to participate in Title IV programs from which we derive most of our revenue.

To participate in Title IV programs, an institution must be (i) legally authorized to operate in the state in which it is physically located, (ii) accredited by an accrediting agency recognized by the Department as a reliable indicator of educational quality and (iii) certified as an eligible institution by the Department. As a result, we are subject to extensive regulation by the Department, WSCUC (our institution's accrediting agency), and state education agencies. These regulatory requirements cover many aspects of our operations. They also restrict our ability to acquire or open new schools, add new educational programs, expand existing educational programs, change our corporate structure or ownership, and make other substantive changes to our business. Given that the Department, WSCUC and state education agencies periodically revise their requirements and modify their interpretations of existing requirements, we cannot reliably predict how these regulatory requirements will be applied or whether we will be able to comply with all the requirements. If our institution fails to comply with these regulatory requirements, the Department could impose sanctions on that institution, including monetary liabilities or penalties, operational restrictions, or loss of eligibility to participate in Title IV programs from which we derive most of our revenue. For additional information, see “Regulation — Department Regulation of Title IV Programs — Potential sanctions for noncompliance with

Title IV regulations” in Part I, Item 1, “Business.” If our institution were to lose eligibility to participate in Title IV programs or were to have such participation substantially curtailed, enrollments and our revenues, financial condition, cash flows and results of operations would be materially and adversely affected.

Our institution must periodically seek recertification to participate in Title IV programs and may, in certain circumstances, be subject to review or other action by the Department in connection with such recertification.

An institution must periodically seek recertification from the Department to continue to participate in Title IV programs and may, in certain circumstances, be subject to review or other action by the Department in connection with such recertification. The Department may review an institution's continued certification to participate in Title IV programs in the event of a change of control, and may take emergency action to suspend an institution's certification without advance notice if it determines the institution is violating Title IV requirements and immediate action is necessary to prevent misuse of Title IV funds. If the Department revokes or does not renew our institution's certifications to participate in Title IV programs, our institution's students would no longer be able to receive Title IV funds, which would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Ashford University is provisionally certified by the Department, which may make it more vulnerable to unfavorable Department action and place additional regulatory burdens on its operations.

Ashford University is currently provisionally certified by the Department until March 31, 2021 and is required to submit its reapplication for continued certification by December 31, 2020. The Department typically places an institution on provisional certification following a change in ownership resulting in a change of control, and may provisionally certify an institution for other reasons including, but not limited to, failure to comply with certain standards of administrative capability or financial responsibility. During the time when an institution is provisionally certified, it may be subject to adverse action with fewer due process rights than those afforded to other institutions. For example, Ashford's provisional status could subject it to additional sanctions if the Department were to find that Ashford engaged in substantial misrepresentation, including the revocation of its program participation agreement or the imposition of limitations on its participation in Title IV programs. In addition, an institution that is provisionally certified must apply for and receive approval from the Department for any substantial change including, but not limited to, the establishment of an additional location, an increase in the level of academic offerings or the addition of certain programs. Any adverse action by the Department or increased regulatory burdens as a result of Ashford's provisional status could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our institution's failure to maintain accreditation would denigrate the value of their educational programs and result in a loss of eligibility to participate in Title IV programs.

An institution must be accredited by an accrediting agency recognized by the Department to participate in Title IV programs. Ashford University is accredited by WSCUC. For additional information, see “Regulation — Accreditation — Evaluations and renewals of accreditation” in Part I, Item 1, “Business.” WSCUC is recognized by the Department as a reliable authority regarding the quality of education and training provided by the institutions it accredits. To remain accredited, our institution must continuously meet accreditation standards relating to, among other things, performance, governance, institutional integrity, educational quality, faculty, administrative capability, resources and financial stability. If our institution fails to satisfy any of the standards of its accrediting agency, it could lose its accreditation. Loss of accreditation by our institution would denigrate the value of its educational programs and would result in its loss of eligibility to participate in Title IV programs, which would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

If WSCUC loses recognition by the Department, our institution could lose its ability to participate in Title IV programs.

To participate in Title IV programs, an institution must be accredited by an accrediting body recognized by the Department. WSCUC is recognized by the Department. If the Department ceased to recognize WSCUC for any reason, Ashford University would not be eligible to participate in Title IV programs unless the Department continued to certify the eligibility of the institution to participate in Title IV programs. The Department may continue to certify an institution for a period of no longer than 18 months after the date on which recognition of the accrediting body ceased. The inability of our institution to participate in Title IV programs would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our institution may lose eligibility to participate in Title IV programs or face other sanctions if it is not legally authorized to operate in the states in which it is physically located.

To be eligible to participate in Title IV programs, an institution must be legally authorized to offer its educational programs by the states in which it is physically located. For additional information, see “Regulation — Department Regulation of Title IV Programs — State authorization” in Item 1, “Business.” Ashford University's California facilities have been designated as its main campus for Title IV purposes. Ashford has been authorized by the BPPE to operate in California, is authorized by the State Board to operate an administrative center in Arizona, is authorized by the Commission to operate as a place of business in Colorado and is registered as a postsecondary school in Iowa by ICSAC. To maintain these authorizations and registrations, Ashford University must comply with applicable requirements under the statutes and rules of the applicable state. Any loss of authorization to operate by our institution and the resulting imposition of sanctions, including the loss of authorization to deliver educational programs and grant degrees and other credentials and the loss of eligibility to participate in Title IV programs, would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our failure to comply with the regulations of various states where we are not physically located could preclude us from recruiting or enrolling students in those states or result in such students being ineligible to receive Title IV funds.

Department regulations provide that if an institution is offering postsecondary education through distance or correspondence education to students in a state in which it is not physically located or in which it is otherwise subject to state jurisdiction as determined by the state, the institution must meet any state requirements to legally offer postsecondary distance or correspondence education to students in that state. Several states have sought to assert jurisdiction over online educational institutions that have no physical location or other presence in the state but that offer educational services to students who reside in the state or that advertise to or recruit prospective students in the state. We have determined that our activities in certain states constitute a presence requiring licensure or authorization under the requirements of the applicable state education agency, and we have obtained state education agency approvals in certain states as determined necessary in connection with our marketing and recruiting activities. For additional information, see “Regulation — State Education Licensure and Regulation — Additional state regulation” in Item 1, “Business.”

Our changing business and the constantly changing regulatory environment require us to regularly evaluate our state regulatory compliance activities. Although our institution has a process for evaluating the compliance of its online educational programs with state requirements regarding distance and correspondence learning, state regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states, and are subject to change. Consequently, a state education agency could disagree with our conclusion that we are not required to obtain a license or authorization in the state or could determine that we are not in compliance with state requirements, and may subject us to sanctions including the loss of state licensure or authorization, imposition of restrictions on our activities in the state, or imposition of fines and penalties. In addition, any failure to comply with state regulatory requirements, or any enactment of new or modified state regulations, may result in our inability to enroll students or receive Title IV funds for students in those states, which could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Ashford University is approved by the BPPE to operate in California, which presents a greater reporting burden and may subject the university to increased regulatory or political scrutiny.

In connection with its transition to WSCUC accreditation, Ashford University designated its San Diego, California facilities as its main campus for Title IV purposes and submitted an Application for Approval to Operate an Accredited Institution to the BPPE on September 10, 2013. To be eligible to participate in Title IV programs, an institution must be legally authorized to offer its educational programs by the states in which it is physically located. Ashford University is approved by the California BPPE to operate as an accredited institution. As a result, the university is subject to laws and regulations applicable to private, postsecondary educational institutions located in California, including reporting requirements related to graduation, employment and licensing data, certain changes of ownership and control, faculty and programs, and student refund policies. Ashford also remains subject to other state and federal student employment data reporting and disclosure requirements. Compliance with the additional reporting and disclosure obligations arising as a result of Ashford's operation as a BPPE-approved institution may result in material additional costs and increased regulatory or political scrutiny of the university.

Our institution could lose eligibility to participate in Title IV programs or face other sanctions if it derives more than 90% of its respective cash revenues from these programs.

accordance with Department regulations. This rule is commonly referred to as the “90/10 rule.” Any institution that violates the 90/10 rule for two consecutive fiscal years becomes ineligible to participate in Title IV programs for at least two fiscal years. In addition, an institution whose rate exceeds 90% for any single fiscal year will be placed on provisional certification and may be subject to other enforcement measures. During the fiscal year ended December 31, 2018 , Ashford University derived 78.6% of their respective cash revenues from Title IV program funds. Ashford University continues to monitor their respective 90/10 rule calculations and their compliance with the 90/10 rule.

Revenue derived from government tuition assistance for military personnel, including veterans, is not considered federal student aid for purposes of calculations under the 90/10 rule, and accordingly helps our institution satisfy the 90/10 rule. If there were a reduction in funding of government tuition assistance for military personnel, including veterans, or if our revenue derived from such funding were otherwise to decrease, it could be significantly more difficult for our institution to satisfy the 90/10 rule. For additional information, see Note 19 , “Regulatory” to our annual consolidated financial statements included elsewhere in this report.

Changes in federal law that increase Title IV grant and loan limits may result in an increase in the revenues we receive from Title IV programs and make it more difficult for our institution to satisfy the 90/10 rule. In addition, Congress could propose and adopt legislation that amends the 90/10 rule in ways that make it more difficult for our institution to satisfy the 90/10 rule. Failure to satisfy the 90/10 rule could result in our institution losing eligibility to participate in Title IV programs, which would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our institution may lose eligibility to participate in Title IV programs if too many students default on their loans.

For each federal fiscal year, the Department calculates a rate of student defaults over a three -year measuring period for each educational institution, which is known as a “cohort default rate.” An institution may lose its eligibility to participate in the Direct Loan Program and the Federal Pell Grant Program if for each of the three most recent federal fiscal years 30% or more of its students who became subject to a repayment obligation in that federal fiscal year defaulted on such obligation by the end of the following federal fiscal year. The most recent official three-year cohort default rates for Ashford University for the 2015 , 2014 and 2013 federal fiscal years were 13.5% , 14.9% and 14.5% , respectively. If too many of our institution's students were to default on their loans resulting in an increase in our institution's respective cohort default rates, our institution may lose eligibility to participate in Title IV programs, which would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

The failure of our institution to demonstrate financial responsibility may result in a loss of eligibility to participate in Title IV programs or require the posting of a letter of credit in order to maintain eligibility to participate in Title IV programs.

To participate in Title IV programs, an eligible institution must satisfy specific measures of financial responsibility prescribed by the Department. For additional information, see “Regulation — Department Regulation of Title IV Programs — Financial responsibility” in Item 1, “Business.” One measure of financial responsibility is an institution's composite score, a number between negative 1.0 and positive 3.0. An institution's composite score must be at least 1.5 for the institution to be deemed financially responsible without the need for further Department oversight. We expect the consolidated composite score to be 2.2 for the year ended December 31, 2018 ; however, the consolidated calculation is subject to determination by the Department once it receives and reviews our audited financial statements for the year ended December 31, 2018 . Additionally, for the year ended December 31, 2018 , the composite score at our institution is higher than the consolidated score. If our institution is found not to have satisfied the Department's financial responsibility requirements, they could be limited in their access to or lose Title IV program funding, or they may be required to post a letter of credit in favor of the Department and possibly accept other conditions to their participation in Title IV programs, which would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

If we fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our business could be adversely impacted.

We are susceptible to an increased risk of fraudulent activity by outside parties with respect to student enrollment and student financial aid programs. Our systems and processes may not always be adequate in the face of increasingly sophisticated and ever-changing fraud schemes. The potential for outside parties to perpetrate fraud in connection with the award and disbursement of Title IV program funds, including as a result of identity theft, may be heightened because we are an online education provider. We must maintain systems and processes to successfully identify and prevent fraudulent applications for enrollment and financial aid.

The Department's regulations require institutions that participate in Title IV programs to refer to the OIG credible information indicating that any applicant, employee, third-party servicer or agent of the institution that acts in a capacity that

involves administration of Title IV programs has been engaged in any fraud or other illegal conduct involving Title IV programs. If the systems and processes that we have established to detect and prevent fraud are inadequate, the Department may find that we do not satisfy its “administrative capability” requirements. In addition, our institution's ability to participate in Title IV programs is conditioned on their maintaining accreditation by an accrediting agency that is recognized by the Department. Under the Higher Education Act, accrediting agencies that evaluate institutions offering distance learning programs, as our institution does, must require such institutions to have processes by which they establish that a student who registers for a distance education program is the same student who participates in and receives credit for the program. Failure to adequately detect fraudulent activity related to student enrollment and financial aid could cause our institution to fail to meet their accrediting agencies' standards and result in the loss of accreditation at the discretion of such accrediting agencies. Any failure to satisfy the Department's administrative capability requirements or any loss of accreditation as a result of a failure to detect and prevent fraudulent activity could result in limits on or loss of our institution's eligibility to participate in Title IV programs and have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our institution could lose eligibility to participate in Title IV programs or face other sanctions if it pays incentive compensation to persons or entities involved in certain recruiting, admissions or financial aid awarding activities.

The Higher Education Act prohibits an institution from providing any commission, bonus or other incentive payment based directly or indirectly on securing enrollments or financial aid to any persons or entities involved in student recruiting or admissions activities or making decisions about the award of student financial assistance. The criteria for complying with the Department's rules prohibiting incentive compensation are not clear in all circumstances, and the Department will not review or approve compensation plans prior to their implementation.

If it were determined that our institution violated the incentive compensation rule, the institution could be subject to monetary liabilities or administrative action to impose a fine or to limit, suspend or terminate its eligibility to participate in Title IV programs, which could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our institution may lose eligibility to participate in Title IV programs or face other sanctions if the Department or other federal agencies determine they have misrepresented the nature of educational programs, financial charges or graduate employability.

The Higher Education Act prohibits an institution participating in Title IV programs from engaging in substantial misrepresentation regarding the nature of its educational programs, its financial charges or the employability of its graduates. Given the Department's broad definition of “substantial misrepresentation,” it is possible that despite our training efforts and compliance programs, our institution's employees or service providers may make statements that could be construed as substantial misrepresentations. In addition to the Department's prohibition on substantial misrepresentation, for-profit educational institutions are subject to the general deceptive practices jurisdiction of the FTC and the CFPB. The FSA is currently investigating representations made by Ashford University to potential and enrolled students, and has asked us and Ashford University to assist in its assessment of Ashford University's compliance with the prohibition on substantial misrepresentations. We, together with Ashford University, intend to provide the FSA with our full cooperation with a view toward demonstrating the compliant nature of our practices. In addition, the Department is currently conducting an off-site program review to assess Ashford University's administration of the Title IV programs in which it participates. For additional information, see “Regulation — Compliance reviews, audits and reports — Department of Education Open Program Review of Ashford University” in Item 1, “Business.”

If the Department determines that our institution has engaged in substantial misrepresentation, the Department may (i) attempt to revoke the institution's program participation agreement if the institution is provisionally certified, (ii) impose limitations on the institution's participation in Title IV programs if the institution is provisionally certified, (iii) deny applications from the institution for approval of new programs or locations or other matters or (iv) initiate proceedings to fine the institution or limit, suspend or terminate its eligibility to participate in Title IV programs. Because Ashford University is provisionally certified, it could be subject to the actions set forth in clauses (i) and (ii) above in addition to any other actions taken by the Department. The imposition of these sanctions, including the loss of eligibility to participate in Title IV programs, would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our institution may lose eligibility to participate in Title IV programs or face other sanctions if it fails to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program.

An institution participating in Title IV programs must correctly calculate the amount of unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion, and must return those unearned funds in a timely manner, generally within 45 days of the date the institution determines that the student has

withdrawn. For additional information, see “Regulation — Department Regulation of Title IV Programs — Return of Title IV funds for students who withdraw” in Item 1, “Business.” Failure to make timely returns of Title IV program funds for 5% or more of students sampled in the institution's annual financial aid compliance audit in either of its two most recently completed fiscal years can result in an institution having to post a letter of credit equal to 25% of the amount of unearned Title IV funds the institution was required to return for its most recently completed fiscal year. If unearned funds are not properly calculated and returned in a timely manner, an institution may also be subject to monetary liabilities or an action to impose a fine or to limit, suspend or terminate its participation in Title IV programs. For the fiscal year ended December 31, 2018 , our institution did not exceed the 5% threshold for late refunds sampled.

Our institution may be required to modify or eliminate certain programs, or certain programs may lose Title IV eligibility, if they do not lead to gainful employment in a recognized occupation, as determined by the Department.

In October 2014, the Department published gainful employment regulations impacting programs required to prepare graduates for gainful employment in a recognized occupation. Almost all academic programs offered by Title IV-participating private sector institutions of higher education must prepare students for gainful employment in a recognized occupation. The gainful employment regulations became effective July 1, 2015, with certain institutional disclosure requirements which became effective January 1, 2017. For additional information, see “Regulation — Department Regulation of Title IV Programs — Gainful employment” in Item 1, “Business.”

In October 2016, we received draft debt-to-earnings rates and certain underlying data from the Department for the first gainful employment measurement year, and in January 2017 we received our institution's final debt-to-earnings rates for the first gainful employment measurement year. Based on the final rates, none of our programs were determined to fail, two of our current programs were determined to be in the zone and one additional program that was discontinued prior to the issuance of the gainful employment regulations was determined to be in the zone. These results are significant given the framework of the gainful employment regulations, as a program would be disqualified from participation in Title IV programs only if it were to fail for two out of three consecutive years, or either fail or be in the zone for three out of four consecutive years. The regulations contemplate a transition period in the first several years to afford institutions the opportunity to make changes to their programs and retain Title IV eligibility. We continue to review the information provided by the Department to understand the potential impact of the gainful employment regulations on our programs, and we will continue to evaluate options related to new programs or adjustments to current programs that could help mitigate the potential adverse consequences of the regulations.

Under the final gainful employment regulations, the continuing eligibility of certain of our educational programs for Title IV program funding is at risk due to a number of factors, some of which are beyond our control including, without limitation, changes in the actual or deemed income level of our graduates, changes in student borrowing levels, increases in interest rates, changes in the federal poverty income level relevant for calculating discretionary income, and changes in the percentage of our former students who are current in repayment of their student loans. The factors noted above could reduce our ability to confidently offer or continue certain types of programs for which there is a market demand. Management is considering whether certain programs will be able to avoid falling into the fail or zone categories in the future through adjustments to program price or the duration of programs, if appropriate and consistent with programmatic standards and as permitted by applicable regulations. There can be no assurance that these adjustments will result in compliance with the gainful employment regulations. For programs where such adjustments are not feasible or do not result in compliance with the gainful employment regulations, we may discontinue such programs. The adjustment or discontinuation of any of our programs, or the loss of Title IV eligibility for certain of our programs if not adjusted or discontinued, could have a material adverse effect on enrollments and our business, financial condition, results of operations and cash flows.

The gainful employment regulations also provide that if a program fails to satisfy at least one of the two tests set forth in the regulations relating to minimum student debt service-to-earnings ratios, the institution will be required to provide a warning notice to prospective and enrolled students advising them that the program may lose Title IV eligibility based on final student debt service-to-earnings ratios for the next award year. If we are required to provide a warning notice with respect to any of our programs, it could have a material adverse effect on enrollment in those programs even before any determination has been made regarding eligibility of the program to participate in Title IV programs, which could adversely affect our business, financial condition, results of operations and cash flows.

The reinstatement of the 2016 regulations regarding borrower defense to repayment expand the circumstances in which students may assert a defense to repayment against an institution and provide that certain conditions or events could trigger, automatically or in some cases at the Department’s discretion, a requirement that an institution post a letter of credit or other security that could result in the imposition of significant restrictions on us and our ability to operate.

As of October 16, 2018, the U.S. District Court for the District of Columbia reinstated the 2016 regulations regarding borrower defense to repayment. The regulations allow a borrower to assert a defense to repayment on the basis of a substantial misrepresentation, any other misrepresentation in cases where certain other factors are present, a breach of contract or a favorable nondefault contested judgment against a school for its act or omission relating to the making of the borrower’s loan or the provision of educational services for which the loan was provided. In addition, the financial responsibility standards contained in the regulations establish the conditions or events that trigger the requirement for an institution to provide the Department with financial protection in the form of a letter of credit or other security against potential institutional liabilities. Triggering conditions or events include, among others, certain state, federal or accrediting agency actions or investigations, and in the case of publicly traded companies, receipt of certain warnings from the SEC or the applicable stock exchange, or the failure to timely file a required annual or quarterly report with the SEC. The regulations also prohibit schools from requiring that students agree to settle future disputes through arbitration.

Under the reinstated regulations regarding borrower defense to repayment, our institutions could face claims by students based on the expanded circumstances in which students may assert a defense to repayment of their student loans, and the Department may be entitled to seek recoupment of student loans discharged pursuant to the regulations. The FSA is currently investigating representations made by Ashford University to potential and enrolled students, and has asked the Company and Ashford to assist in its assessment of Ashford’s compliance with the prohibition on substantial misrepresentations. In addition, our institutions are from time to time subject to certain actions or investigations by various state, federal or accrediting agencies, and as a public company we would be subject to the additional triggering events outlined by the Department in the new regulations; therefore, we may be required to post a letter of credit or provide some other form of security to the Department, which could result in the imposition of significant restrictions on us and our ability to operate. Any assertion by our institutions’ students of defenses to repayment, including any resulting liability to, or remedial action against, our institutions, and any significant restrictions imposed on us or our ability to operate resulting from a requirement to post a letter of credit or other security, could damage our reputation in the industry and have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

The Department’s new regulations regarding borrower defense to repayment may expand the circumstances in which students may assert a defense to repayment against an institution and may also provide that certain conditions or events could trigger a requirement that an institution post a letter of credit or other security that could result in the imposition of significant restrictions on us and our ability to operate.

The current standard for determining whether a borrower has a defense to repayment of a student loan allows borrowers to assert a defense to repayment if a cause of action would have arisen under applicable state law. On June 14, 2017, the Department announced a postponement of proposed changes to defense to repayment regulations and its intention to resubmit the regulations through the negotiated rulemaking process. The Department announced an additional postponement on October 24, 2017. On February 14, 2018, the Department announced they are postponing the effective date of this rule until July 1, 2019 so they can complete the negotiated rulemaking process and develop the new regulations. Because the negotiated rulemaking committee did not reach consensus, the Department published a proposed regulation through an NPRM, took public comment, and planned to issue final regulations by November 1, 2018, effective July 1, 2019. While rulemaking occurs, the Department will continue to process claims under the current borrower defense rules.

Under any new regulations regarding borrower defense to repayment, our institution could face claims by students based on expanded circumstances in which students may assert a defense to repayment of their student loans, and the Department may be entitled to seek recoupment of student loans discharged pursuant to the regulations. The FSA is currently investigating representations made by Ashford University to potential and enrolled students, and has asked the Company and Ashford University to assist in its assessment of Ashford University’s compliance with the prohibition on substantial misrepresentations. In addition, our institution is from time to time subject to certain actions or investigations by various state, federal or accrediting agencies, and as a public company we could be subject to the additional triggering events outlined by the Department in new regulations; therefore, we may be required to post a letter of credit or provide some other form of security to the Department, which could result in the imposition of significant restrictions on us and our ability to operate. Any assertion by our institution's students of defenses to repayment, including any resulting liability to, or remedial action against, our institution, and any significant restrictions imposed on us or our ability to operate resulting from a requirement to post a letter of credit or other security, could damage our reputation in the industry and have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our institution cannot offer new programs, expand its physical operations into certain states or acquire additional schools if such actions are not approved in a timely fashion by the applicable regulatory agencies, and Title IV funds disbursed to students enrolled in any such programs, states or acquired schools may have to be repaid if prior approval is not obtained.

Our operating plans may include the offering of new educational programs by our institution, some of which may require regulatory approval. In addition, we or our institution may increase physical operations in additional states or seek to acquire additional schools. Because Ashford University is provisionally certified, it must apply for and receive approval from the Department for any substantial change, including but not limited to the establishment of an additional location, an increase in the level of academic offerings or the addition of certain programs. If we or our institution are unable to obtain the necessary approvals for such new programs, operations or acquisitions or, in the case of Ashford University, a substantial change, from the Department, WSCUC or any applicable state education agency or other accrediting agency, or if we or our institution is unable to obtain such approvals in a timely manner, the ability to consummate such actions and provide Title IV funds to any affected students would be impaired, which could have a material adverse effect on our business. If we, or our institution, was to determine erroneously that any such action did not require approval or that all required approvals have been obtained, our institution could be liable for repayment of the Title IV program funds provided to students in the affected program or at the affected location, which could have a material adverse effect on our revenues, financial condition, cash flows and results of operations.

If regulators do not approve, or if they delay their approval of, transactions involving a change of control of our company, our ability to participate in Title IV programs may be impaired.

We must seek approval of a change of ownership resulting in a change of control under the standards of the Department, WSCUC and/or applicable state education agencies. For additional information, see “Regulation — Department Regulation of Title IV Programs — Change in ownership resulting in a change of control” in Item 1, “Business.” A failure by us or our institution to reestablish its Department certification, accreditation or state authorization, as applicable, following a change of control could result in a suspension or loss of operating authority or the ability to participate in Title IV programs, which would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Governmental proceedings or other claims and lawsuits asserting regulatory noncompliance could result in monetary liabilities or penalties, injunctions or loss of Title IV funding for students at our institution.

Because we operate in a highly regulated industry, we and our institution are subject to compliance reviews, claims of noncompliance and lawsuits by government agencies, regulatory agencies and third parties, including claims brought by third parties on behalf of the federal government under the federal False Claims Act. If the results of these reviews or proceedings are unfavorable to us or if we are unable to defend successfully against such lawsuits or claims, we may be required to pay money damages or be subject to fines, limitations, loss of Title IV funding, injunctions or other penalties, which could have a material adverse effect on our business, financial condition, cash flows and results of operations. Even if we adequately address issues raised by an agency review or successfully defend a lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those reviews or to defend against those lawsuits or claims. In addition, claims and lawsuits brought against us may damage our reputation or adversely affect our stock price, even if such claims and lawsuits are eventually determined to be without merit. For additional information, see Note 21 , “Commitments and Contingencies” to our annual consolidated financial statements included elsewhere in this report.

Additional regulations or regulatory scrutiny resulting from action by the Department could result in increased compliance costs, fines, sanctions or lawsuits, which could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

On December 16, 2016, the Department released final regulations to clarify state authorization requirements for postsecondary institutions offering distance education that participate in federal student loan programs, as required by the Higher Education Act. Among other things, the final regulations (i) require institutions offering distance education to be authorized by each state in which they enroll students, if such authorization is required by the state, (ii) require institutions to document the state process for resolving student complaints regarding distance education programs, (iii) require public and individualized disclosures to enrolled and prospective students in distance education programs, including disclosures regarding adverse actions taken against the institution, the institution’s refund policies and whether each of the institution’s programs meet applicable state licensure or certification requirements, and (iv) require institutions to explain to students the consequences of moving to a state where the school is not authorized, which could include loss of eligibility for federal student aid. The final regulations recognize authorization through participation in a state authorization reciprocity agreement, as long as the agreement does not prevent a state from enforcing its own consumer laws. The final regulations were scheduled to take effect on July 1, 2018, however, on May 25, 2018, the Department published a Notice of Proposed Rulemaking (“NPRM”) in the Federal Register announcing the postponement, until July 1, 2020, of the effective date of the final regulations. The

Department delayed the regulations based on concerns raised by regulated parties and to ensure that there would be adequate time to conduct negotiated rulemaking to reconsider the final regulations, and as necessary, develop revised regulations.

We cannot predict the scope and content of the regulations that may emerge from these or other rulemaking activities that the Department initiates. The Company’s compliance with these regulations or any additional or modified regulations, could result in direct and indirect costs related to compliance, increased scrutiny, fines, liabilities, sanctions or lawsuits, which could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Any action by Congress to revise the laws governing Title IV programs or to reduce funding for these programs could negatively impact our business.

Congress must periodically reauthorize the Higher Education Act and annually determine the funding level for each Title IV program through the budget and appropriations process. In 2008, the Higher Education Act was reauthorized through September 2014, and on December 13, 2017, the House of Representatives’ Committee on Education and the Workforce passed H.R. 4508, the Promoting Real Opportunity, Success, and Prosperity through Education Reform Act (“PROSPER Act”). No date has been set for consideration by the full House on the legislation, nor has a companion Higher Education Act reauthorization bill been introduced in the U.S. Senate. The Higher Education Act's programs will continue year-to-year without explicit reauthorization as long as Congress appropriates funds for the programs. Congress may propose and pass revisions to the Higher Education Act between reauthorizations by using other legislative vehicles such as budget bills and appropriations bills, which could impact funding for student financial aid programs.

We cannot predict what legislation, if any, will arise out of the reauthorization of the Higher Education Act or other Congressional deliberations, or what impact any such legislation might have on the for-profit education sector and our business. However, any action by Congress that significantly reduces Title IV program funding or the eligibility of our institution or students to participate in Title IV programs, or that requires us to modify our practices in ways that could increase our administrative costs and reduce our profit margin, would have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Our regulatory environment and our reputation may be negatively influenced by the actions of other postsecondary institutions.

In recent years, Congressional, federal, state and accrediting agency investigations and civil litigation have been commenced against several postsecondary educational institutions. These investigations and lawsuits have alleged, among other things, deceptive trade practices and noncompliance with Department regulations. These allegations have attracted adverse media coverage and have been the subject of federal and state legislative hearings. Although the media, regulatory and legislative focus has been primarily on the allegations made against these specific companies, broader allegations against the postsecondary sector may negatively impact public perceptions of all postsecondary educational institutions. Such allegations could result in increased scrutiny and regulation of all postsecondary institutions, including Ashford University, by the Department, Congress, accrediting bodies, state legislatures or other governmental authorities.

As a result of changes that have been made, or that may be required by the accreditors of our institution, to our operational relationships with our institution and to its operations and business models, our historical financial and business results may not necessarily be representative of future results.

In connection with the WSCUC accreditation and our efforts to structure our operations to meet evolving regulatory expectations, Ashford University has made operational changes and launched various new business initiatives, and additional changes may be required. These changes and initiatives included hiring new leadership, implementing smaller class sizes, requiring minimum age-levels for students, implementing the Ashford Promise (an initiative that allows students a full refund for all tuition and fees through the third week of a student's first class), hiring additional full-time faculty and implementing new program review models. Many of these changes and initiatives result in higher expense to the organization, primarily in the areas of instructional costs and services. In addition, we have made changes in our organizational structure and operational relationships with our academic institution to ensure its academic independence and satisfaction of accreditation-related requirements. Some of these changes and initiatives have contributed to declines in new student enrollments. Accordingly, our historical results and trends, including enrollments, admissions advisory and marketing expenses, and instructional costs and services, may not be indicative of our future results, and there can be no assurance that changes to our operational relationship with our institution or other changes we have made, or may make in the future, will not have an adverse impact on regulatory compliance, satisfaction of accreditation-related standards, or our financial condition, cash flows and results of operations.

Risks Related to Our Business

Our financial performance depends on our ability to continue to develop awareness among, and to recruit and retain, students; adverse publicity may negatively impact demand for our institution's programs.

Building awareness among potential students of Ashford University and the programs it offers is critical to their ability to attract prospective students. It is also critical to our success that these prospective students are converted to enrolled students in a cost-effective manner and that these enrolled students remain active in our institution's programs. Some of the factors that could prevent the successful recruiting and retention of students in our institution's programs include:


•	the emergence of more and better competitors;


•	factors related to our marketing efforts, including the costs of online advertising and broad-based branding campaigns;


•	performance problems with our online systems;


•	our institution's failure to maintain accreditation, state licensure and eligibility for Title IV programs;


•	student dissatisfaction with our institution's services and programs;


•	a decrease in the perceived or actual economic benefits that students derive from our institution's programs or programs provided by private sector postsecondary education companies generally;


•	adverse publicity regarding us, or online or private sector postsecondary education generally;


•	price reductions by competitors that we are unwilling or unable to match; and


•	a decline in the acceptance of online education or education provided by private sector postsecondary education companies.

We face litigation and legal proceedings that could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

We and our institution are subject to lawsuits, investigations and claims covering a wide range of matters. We are the subject of complaints alleging violations of various laws including, but not limited to, federal securities laws (including a securities class action), the federal False Claims Act and state employment laws, as well as investigations by the SEC, the U.S. Department of Justice (the “DOJ”), and state Attorneys General. Derivative shareholder complaints have also been asserted on our behalf against certain of our current and former officers and directors alleging breaches of fiduciary duties, waste of corporate assets and unjust enrichment. These and other legal proceedings could cause us to incur significant defense costs, are disruptive to our normal business operations and could damage our reputation and adversely affect our stock price. An adverse outcome of any legal proceeding could result in monetary losses or restrictions on our business, which could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

For additional information regarding current material legal proceedings involving us and our institution, including investigations by the SEC, the DOJ and state Attorneys General, see Note 21 , “Commitments and Contingencies” to our annual consolidated financial statements included elsewhere in this report.

As a percentage of revenues, our bad debt expense is high relative to our competitors. If we are unable to remedy the underlying causes, our bad debt expense could increase, which could have a material adverse effect on our financial condition, cash flows and results of operations.

As a percentage of revenues, our bad debt expense is high relative to our competitors, but has decreased from 6.4% of revenues for the year ended December 31, 2017 to 5.2% for the year ended December 31, 2018 . We believe our bad debt expense is primarily driven by operational policies, timing of financial aid processing and collection management. If we are unable to make appropriate changes, or if our changes are not as effective as anticipated, our bad debt expense could increase, which could have a material adverse effect on our financial condition, cash flows and results of operations.

A failure of our information systems to properly store, process and report relevant data may reduce our management’s effectiveness, interfere with our regulatory compliance and increase our operating expenses.

We are heavily dependent on the integrity of our data management systems. If these systems do not effectively collect, store, process and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies or human error, our ability to effectively plan, forecast and execute our business plan and comply with applicable laws and regulations will be impaired. Any such impairment could have a material adverse effect on our business, revenues, financial condition, cash flows and results of operations.

Our institution relies on a third-party vendor to provide the online learning platform for students and related support and hosting.

We have a license agreement with Instructure pursuant to which we license an online Canvas learning management system and platform for students at our institution. Our institution currently relies on Instructure for administrative support and hosting of the applicable systems. If Instructure ceases to operate or is unwilling or unable to work with our institution, or if our agreement with Instructure is otherwise terminated, the online learning platform for students at our institution and related administrative support and hosting could be interrupted or become unavailable, which could have a material adverse effect on our business.

We are subject to laws and regulations as a result of our collection and use of personal information, and any violations of such laws or regulations, or any security or cybersecurity breach, theft or loss of such information, could adversely affect our business.

Possession and use of personal information in our operations subjects us to risks and costs that could harm our business. We collect, use and retain large amounts of personal information regarding our applicants, students, faculty and staff. We also collect and maintain personal information about our employees in the ordinary course of our business. Our services can be accessed globally through the Internet. Therefore, we may be subject to the application of national privacy laws in countries outside the United States from which applicants and students access our services. Such privacy laws could impose conditions that limit the way we market and provide our services.

Our computer networks and the networks of certain of our vendors that hold and manage confidential information on our behalf may be vulnerable to unauthorized access, employee theft or misuse, computer hackers, computer viruses and other security and cybersecurity threats. Confidential information may also inadvertently become available to third parties when we integrate systems or migrate data to our servers following an acquisition of a school or in connection with periodic hardware or software upgrades. Due to the sensitive nature of the personal information stored on our servers, our networks may be targeted by hackers seeking to access this data. Users who circumvents security measures could misappropriate sensitive information or cause interruptions or malfunctions in our operations. Although we use security and business controls to limit access to and use of personal information, a third-party may be able to circumvent those security and business controls, which could result in a breach of student or employee privacy. In addition, errors in the storage, use or transmission of personal information could result in a breach of privacy for current or prospective students or employees.

Possession and use of personal information also subjects us to legislative and regulatory burdens that could require notification of data breaches and could restrict our use of personal information, and a violation of any laws or regulations relating to the collection or use of personal information could result in the imposition of fines against us or lawsuits brought against us. As a result, we may be required to expend significant resources to protect against the threat of these security and cybersecurity breaches or to alleviate problems caused by these breaches. A major breach, theft or loss of personal information held by us or our vendors regarding our institution's students and their families or our employees, or a violation of laws or regulations relating to the same, could have a material adverse effect on our reputation, result in lawsuits and result in further regulation and oversight by federal and state authorities and increased costs of compliance. The adoption of new or modified state or federal data or cybersecurity legislation could increase our costs and/or require changes in our operating procedures or systems.

Changes in accounting principles and guidance could result in unfavorable accounting charges or effects.

We prepare our consolidated financial statements in accordance with GAAP. These principles are subject to interpretation by the SEC and various bodies formed to create and interpret appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations, may have a material effect on our results and disclosures, as well as our processes and related controls. For example, during May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , for which certain elements may impact our current disclosures or our future accounting for revenue. For additional information, see Note 2, “Summary of Significant Accounting

Policies - Recent Accounting Pronouncements” to our annual consolidated financial statements included elsewhere in this report.

System disruptions and vulnerability from security risks to our technology infrastructure could damage the reputation of our institution and negatively impact our business.

The performance and reliability of our technology infrastructure (including the software and related hosting and maintenance services for our online learning platform, student information system, and lead management system) is critical to our reputation and our ability to attract and retain students. Any system error or failure, or a sudden and significant increase in bandwidth usage, could result in the unavailability of systems to us or our institution's students and negatively impact our business and reputation. Our computer networks may also be vulnerable to unauthorized access, computer hackers, computer viruses, denial of service attacks and other security problems. Although we continually monitor the security of our technology infrastructure and take proactive measures to prevent potential threats, these efforts may not protect our computer networks against all threats of security breaches, which could damage the reputation of our institution and negatively impact our business and prospects.

Our expenses may cause us to incur additional operating losses if we do not realize our expected revenues.

Our spending is based in significant part on our estimates of future revenue and is largely fixed in the short term. As a result, we may be unable to adjust our spending in a timely manner if our revenue falls short of our expectations. Accordingly, any significant shortfall in revenues in relation to our expectations would have an immediate and material adverse effect on our profitability. In addition, we anticipate increasing operating expenses to expand program offerings and marketing initiatives. Any such increase could cause material losses to the extent we do not generate additional revenues sufficient to cover those expenses.

Intense competition in the postsecondary education market, especially in the online education market, could decrease our market share, increase our cost of recruiting students and put downward pressure on our tuition rates.

Postsecondary education is highly competitive. We compete with traditional public and private two- and four-year colleges as well as with other postsecondary schools. Traditional colleges and universities may offer programs similar to those offered by our institution at lower tuition levels as a result of government subsidies, government and foundation grants, tax-deductible contributions and other financial sources not available to for-profit postsecondary institutions. In addition, our institution faces continued scrutiny from its accreditors, and some of our competitors, including traditional colleges and universities, have substantially greater brand recognition and financial and other resources than we have, which may enable them to compete more effectively for potential students. We also expect to face increased competition as a result of new entrants to the online education market, including traditional colleges and universities that had not previously offered online education programs.

We may not be able to compete successfully against current or future competitors and may face competitive pressures that could adversely affect our business. We may be required to reduce our tuition or increase marketing spending in order to attract or retain students or to pursue new market opportunities. We may also face increased competition in maintaining and developing new marketing relationships with corporations, particularly as corporations 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.

We may not be able to retain our key personnel or hire and retain the personnel we need to sustain and grow our business.

Our success depends largely on the skills, efforts and motivations of our executive officers, who generally have significant experience with our company and within the education industry. Due to the nature of our business, we face significant competition in attracting and retaining personnel who possess the skill sets we seek. In addition, key personnel may leave us and may subsequently compete against us. We do not carry life insurance on our key personnel as part of our benefits. The loss of the services of any of our key personnel or our failure to attract, replace and retain other qualified and experienced personnel on acceptable terms could impair our ability to sustain and grow our business. In addition, because we operate in a highly competitive industry, our hiring of qualified executives or other personnel may cause us or such persons to be subject to lawsuits alleging misappropriation of trade secrets, improper solicitation of employees or other claims.

If we are unable to hire new employees or to continue to develop existing employees responsible for student recruitment, the effectiveness of our new enrollment efforts would be adversely affected.

We intend to (i) hire, develop and train additional employees responsible for new enrollment and (ii) retain and continue to develop and train our existing new enrollment personnel. Our ability to develop and maintain a strong new enrollment function may be affected by a number of factors, including our ability to integrate and motivate our enrollment service advisors, our ability to effectively train our enrollment service advisors, the length of time it takes new enrollment service advisors to become productive, regulatory restrictions on the method of compensating enrollment service advisors and the competition involved in hiring and retaining enrollment service advisors. If we are unable to hire new employees or retain and develop current employees responsible for new enrollment, it could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Enrollment and revenues could decrease if government tuition assistance offered to military personnel is reduced, suspended or eliminated, if scholarships which we offer to military personnel are reduced or eliminated, or if our relationships with military bases deteriorate.

As of December 31, 2018 , approximately 26.7% of our institution's students were affiliated with the military, some of whom are eligible to receive government tuition assistance that may be used to pursue postsecondary degrees. In some cases, we also provide scholarships to students who are affiliated with the military. If government tuition assistance offered to military personnel is suspended or otherwise reduced or eliminated, enrollment by military personnel, including veterans, may decline, which could have a material adverse effect on our revenues, financial condition, cash flows and results of operations. Additionally, if in response to future reductions or suspensions in military tuition assistance we determine to reinstitute our Military Tuition Assistance Grant or a similar program, or if we increase our scholarships to students who are affiliated with the military, our per student revenue from military personnel would decline.

We maintain relationships with military bases and provide scholarships to students who are affiliated with the military. If our relationship with any military base deteriorates or we reduce or eliminate these scholarships, enrollment by military personnel, including veterans, may decline, which could have a material adverse effect on our revenues, financial condition, cash flows and results of operations.

A decline in the overall growth of enrollment in postsecondary institutions, or in the number of students seeking degrees online or in our core disciplines, could cause us to experience a further decline in enrollment at our institution.

Enrollment at our institution declined to 38,153 at December 31, 2018 as compared to 40,730 at December 31, 2017 , and our revenues have declined in recent periods and may continue to decline in the future. In addition, if job growth in the fields related to our institution's core disciplines is weaker than expected, fewer students may seek the types of degrees that our institution offers. To return to growth in our revenues and increase enrollment at our institution, our institution will need to attract and retain a larger percentage of students in existing markets and expand their markets by creating new academic programs. Any further decline in enrollment at our institution as a result of our inability to attract and retain students in existing markets or expand our markets by creating new academic programs in areas where there is market demand could have a material adverse effect on our revenues, financial condition, cash flows and results of operations.

Our success depends in part on our institution's ability to update and expand the content of existing programs and to develop new programs and specializations on a timely basis and in a cost-effective manner.

The updates and expansions of existing programs and the development of new programs and specializations may not be accepted by existing or prospective students or prospective employers of our institution's graduates. If we do not adequately respond to changes in market requirements by updating and expanding our existing programs or developing new programs, our business will be adversely affected. Even if our institution is able to develop acceptable new programs, they may not be able to introduce these new programs as quickly as students require or as quickly as our competitors introduce competing programs. To offer a new academic program, our institution may be required to obtain appropriate federal, state and accrediting agency approvals, which may be conditioned or delayed in a manner that could significantly affect our operations. In addition, to be eligible for federal student financial aid programs, a new academic program may need to be approved by the Department.

Establishing new academic programs or modifying existing programs requires investments in management, faculty and capital expenditures, additional marketing expenses and reallocation of other resources. We and our institution may have limited experience with programs in new disciplines and may need to modify existing systems and strategies or enter into arrangements with other educational institutions to provide new programs effectively and profitably. If our institution is unable to increase enrollment in new programs, offer new programs in a cost-effective manner or otherwise manage effectively the operations of newly established academic programs, it could have a material adverse effect on our revenues, financial condition, cash flows and results of operations.

Our failure to keep pace with changing market needs could harm our institution's ability to attract students.

Our success depends partially on the willingness of employers to hire, promote or increase the pay of our institution's graduates. Increasingly, employers demand that their new employees possess appropriate technical and analytical skills, and appropriate interpersonal skills, such as communication and teamwork. These skills can evolve rapidly in a changing economic and technological environment. Accordingly, it is important that our institution's educational programs continually evolve in response to those economic and technological changes.

The expansion of existing academic programs and the development of new programs may not be accepted by current or prospective students or by prospective employers of our institution's graduates. Even if our institution develops acceptable new programs, they may not be able to begin offering those new programs in a timely fashion 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, unusually rapid technological changes or other factors, the rates at which our institution's graduates obtain jobs in their fields of study could suffer, our ability to attract and retain students could be impaired and our business could be adversely affected.

We may be unable to sufficiently protect our proprietary rights and we may encounter disputes from time to time relating to our use of the intellectual property of third parties.

We rely on a combination of copyrights, trademarks, service marks, patents, trade secrets, domain names and agreements with employees and third parties to protect our proprietary rights. We have trademark and service mark registrations and pending applications for additional registrations in the United States and select foreign jurisdictions. We also own the domain name rights for our institution, as well as other words and phrases important to our business. In addition, we have applied for domestic and international patents for certain technology developed by us. We also have registered copyrights for exemplary business course materials. Nonetheless, as new challenges arise in protecting these proprietary rights online, we cannot assure you that these measures will be adequate to protect our proprietary rights, that we have secured, or will be able to secure, appropriate protections for all our proprietary rights in the United States or select foreign jurisdictions, or that third parties will not infringe upon or violate our proprietary rights. Despite our efforts to protect these rights, unauthorized third parties may attempt to duplicate or copy the proprietary aspects of our technology, curricula and online resource material, among others. Our management's attention may be diverted by these attempts, and we may need to expend funds in litigation to protect our proprietary rights against any infringement or violation.

We may also encounter disputes from time to time over rights and obligations concerning intellectual property, and we may not prevail in these disputes. In certain instances, we may not have obtained sufficient rights to the content of a course. Third parties may raise claims against us alleging an infringement or violation of their intellectual property. 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 all alleged violations of such intellectual property rights. Any such 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 insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant, or our institution may be required to alter the content of their classes to be non-infringing.

We may incur liability for the unauthorized duplication or distribution of class materials posted online for class discussions.

In some instances, our institution's faculty members or students may post various articles or other third-party content on class discussion boards. We may incur liability for the unauthorized duplication or distribution of this material posted online for class discussions. Third parties may raise claims against us for the unauthorized duplication of this material. Any such claims could subject us to costly litigation and could impose a significant strain on our financial resources and management personnel, regardless of whether the claims have merit. Our general liability insurance may not cover potential claims of this type adequately or at all, and we may be required to alter the content of our courses or pay monetary damages.

Government regulations relating to the Internet could increase our cost of doing business, affect our ability to grow or otherwise have a material adverse effect on our business.

The increasing popularity and use of the Internet and other online services has led and may lead to the adoption of new laws and regulatory practices in the United States or in foreign countries and to new interpretations of existing laws and regulations. These new laws and interpretations may relate to issues such as online privacy, copyrights, trademarks and service marks, sales taxes, fair business practices and the requirement that online education institutions qualify to do business as foreign corporations or be licensed in one or more jurisdictions where they have no physical location or other presence. New laws, regulations or interpretations related to doing business over the Internet could increase our costs and materially and adversely affect enrollments.

We may require additional financing in the future and if such financing is not available on terms acceptable to us, it could adversely affect our ability to grow.

We believe that cash flow from operations will be adequate to fund our current operating plans for the foreseeable future. However, we may need additional financing to finance our plans, particularly if we pursue any acquisitions. The amount, timing and terms of such additional financing will vary principally depending on the timing and size of new program offerings, the timing and size of acquisitions we may seek to consummate and the amount of cash flows from our operations. To the extent that we require additional financing in the future, such financing may not be available on terms acceptable to us or at all and, consequently, we may not be able to fully implement our plans.

A protracted economic slowdown and rising unemployment could lead to lower enrollment and impact our students' ability to repay their loans.

We believe that many students pursue postsecondary education to be more competitive in the job market. However, a protracted economic slowdown could increase unemployment and diminish job prospects generally. Diminished job prospects and heightened financial worries could affect the willingness of students to incur loans to pay for postsecondary education and to pursue postsecondary education in general. As a result, enrollments could suffer.

In addition, many of our institution's students borrow Title IV loans to pay for tuition, fees and other expenses. A protracted economic slowdown could negatively impact their ability to repay those loans which would negatively impact our institution's cohort default rates. Our institution's students also are frequently able to borrow Title IV loans in excess of their tuition. The excess is received by such students as a stipend. However, if a student withdraws, we must return any unearned Title IV funds, including stipends. A protracted economic slowdown could negatively impact such students' ability to repay those stipends. As a result, the amount of Title IV funds we would have to return without reimbursement from students could increase, and our results of operations could suffer.

If we fail to effectively identify, pursue and consummate acquisitions, either in the U.S. or outside of the U.S., our ability to grow could be impacted and our profitability may be adversely affected.

Acquisitions are one component of our overall long-term growth strategy. From time to time, we engage in evaluations of, and discussions with, possible domestic and international acquisition candidates. We may not be able to identify suitable acquisition opportunities, complete acquisitions on favorable terms, or successfully integrate or profitably operate acquired institution or businesses. There may be particular difficulties and complexities (regulatory or otherwise) associated with our expansion into international markets, and our strategies may not succeed beyond our current markets. If we are unable to effectively address these challenges, our ability to execute this component of our long-term strategy will be impaired, which could have an adverse effect on our ability to grow and our profitability.

The acquisition, integration and growth of acquired businesses may present challenges that could harm our business.

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. Some of these challenges include:


•	the inability to maintain uniform standards, controls, policies and procedures;


•	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 delay in obtaining, regulatory or other approvals necessary to operate the business;


•	the inability to correctly estimate the size of a target market or accurately assess market dynamics;


•	expenses associated with the integration efforts; and


•	unidentified issues not discovered in the due diligence process, including legal contingencies.

An acquisition related to an institution or other educational business often requires one or multiple regulatory approvals. If we are unable to obtain such approvals, or we obtain them on unfavorable terms, our ability to consummate a 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.

We may finance a future acquisition with existing funds or funds raised through debt or equity financing. If we use existing funds, we will lower the amount of funds we currently have. If we arrange for alternative financing, we may not be able to obtain such financing on favorable terms. In addition, equity financing could dilute the holdings of our stockholders, which may affect our stock price.

An increase in interest rates could adversely affect our institution's ability to attract and retain students.

Interest rates have reached relatively low levels in recent years, creating a favorable borrowing environment for students. However, if Congress increases interest rates on Title IV loans, or if private loan interest rates rise, our institution's students would have to pay higher interest rates on their loans. Any future increase in interest rates will result in a corresponding increase in educational costs to existing and prospective students. Higher interest rates could also contribute to higher default rates with respect to students' repayment of their education loans. Higher default rates may in turn adversely impact our institution's eligibility to participate in some or all Title IV programs, which could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

We are involved in pending securities litigation and an adverse resolution of such litigation may adversely affect our business, financial condition, results of operations and cash flows.

Following our announcement that we were restating our interim financial statements for the quarter ended September 30, 2018, controls, we became the subject of a lawsuit alleging securities law violations. This type of litigation can be expensive and disruptive to normal business operations, and the outcome can be difficult to predict regardless of the facts involved. An unfavorable outcome with respect to any of these lawsuits could have a material adverse effect on our business, financial condition, results of operations or cash flows. For additional information regarding this and other lawsuits in which we are involved, see Part I, Item 3, Legal Proceedings.

Risk Related to Our Common Stock

The price of our common stock has fluctuated significantly in the past and may continue to do so in the future. As a result, you could lose all or part of your investment.

Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares. The market price of our common stock has fluctuated significantly in the past, and may continue to fluctuate significantly for a variety of different reasons, including, without limitation:


•	developments regarding the accreditation or state licensing of our academic institution, particularly Ashford University;


•	our quarterly or annual earnings or those of other companies in our industry;


•	public reaction to our press releases, corporate communications and SEC filings;


•	changes in earnings estimates or recommendations by research analysts who track our common stock or the stocks of other companies in our industry;


•	seasonal variations in our student enrollment;


•	new laws or regulations or new interpretations of laws or regulations applicable to our industry or business;


•	negative publicity, including government hearings and other public lawmaker or regulator criticism, regarding our industry or business;


•	changes in enrollment;


•	changes in accounting standards, policies, guidance, interpretations or principles;


•	litigation involving our company or investigations or audits by regulators into the operations of our company or our competitors;


•	sales of common stock by our directors, executive officers and significant stockholders; and


•	changes in general conditions in the United States and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events.

In addition, in recent years, the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry.

Changes may occur without regard to the operating performance of these companies. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our company.

Sales of outstanding shares of our common stock into the market in the future could cause the market price of our stock to drop significantly, even if our business is doing well.

If our stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline. At December 31, 2018 , 27.2 million shares of our common stock were outstanding.

In addition, as of December 31, 2018 , there were 2.0 million shares of our common stock underlying outstanding stock options and 2.3 million shares of our common stock underlying outstanding stock awards, including restricted stock units and performance stock units. All shares subject to outstanding stock options are eligible for sale in the public market to the extent permitted by the provisions of the applicable stock option agreement and Rule 144 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold in the public market, the trading price of our common stock could decline. Under Rule 144, shares held by non-affiliates for more than six months may generally be sold without restriction, other than a current public information requirement, and may be sold freely without any restrictions after one year. Shares held by affiliates may also be sold under Rule 144 after one year, subject to applicable restrictions, including volume and manner of sale limitations.

If securities or industry analysts change their recommendations regarding our common stock adversely or cease to cover our company, or if our operating results do not meet their expectations, our stock price could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business or industry. If one or more of these analysts ceases coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrades our common stock, or if our operating results do not meet their expectations, our stock price could decline.

We currently do not intend to pay dividends on our common stock and, consequently, your only opportunity to achieve a return on your investment in our common stock is if the price of our common stock appreciates.

We do not expect to pay dividends on shares of our common stock in the foreseeable future and we intend to use our cash position to grow our business. Consequently, your only opportunity to achieve a positive return on your investment in our common stock will be if the market price of our common stock appreciates.

Your percentage ownership in the Company may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.

Subject to the rules of the New York Stock Exchange (the “NYSE”), our board of directors has the authority, without any action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of capital stock. At December 31, 2018 , there were 300.0 million shares of common stock authorized for issuance under our certificate of incorporation, 27.2 million shares of which were outstanding. At December 31, 2018 , there were 20.0 million shares of preferred stock authorized for issuance under our certificate of incorporation, no shares of which were outstanding. Issuances of common stock or voting preferred stock would reduce the influence of our current stockholders over matters on which our stockholders vote and, in the case of issuances of preferred stock, would likely result in the rights of our current stockholders being subject to the prior rights of holders of that preferred stock.

Our common stock has relatively low trading volume, compared to many other public companies

Our common stock trades on the NYSE. Our average daily trading volume over these various mediums is relatively low, particularly when compared to many larger public companies. This low trading volume can cause our common stock price to fluctuate significantly, and can make it difficult for investors to buy or sell our common stock quickly and efficiently, compared to companies with a larger publicly traded float and higher average daily trading volumes.

Provisions in our certificate of incorporation and bylaws and Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, may depress the trading price of our stock.

Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our stock by acting to discourage, delay or prevent a change of control of our company or changes in our board of directors that the stockholders of our company may deem advantageous. These provisions:


•	authorize the issuance of “blank check” preferred stock by our board of directors to increase the number of outstanding shares to discourage a takeover attempt;


•	provide for a classified board of directors (three classes);


•	provide that stockholders may only remove directors for cause;


•	provide that any vacancy on our board of directors, including a vacancy resulting from an increase in the size of the board, may only be filled by the affirmative vote of a majority of our directors then in office, even if less than a quorum;


•	provide that a special meeting of stockholders may only be called by our board of directors or by our chief executive officer;

•

provide that action by written consent of the stockholders may be taken only if the board of directors first approves such action, whenever the vote of stockholders is required at a meeting for any corporate action, the meeting and vote of stockholders may be dispensed with, and the action may be taken without such meeting and vote, if a written consent is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at the meeting of stockholders; provided that, notwithstanding the foregoing, we will hold an annual meeting of stockholders in accordance with NYSE rules for so long as our shares are listed on the NYSE, and as otherwise required by the bylaws;


•	provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and


•	establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

Risks Related to the Proposed Transaction and Proposed Change in the Structure of Our Operations

The Proposed Transaction is subject to the receipt of regulatory approvals that if not obtained, could delay or prevent its consummation, and an excessive delay in finalizing the Proposed Transaction could disrupt our business during its pendency.

The Proposed Transaction remains subject to various regulatory approvals from WSCUC, the Department and state regulatory bodies. There can be no assurances that these regulatory approvals will be obtained on the currently contemplated timeline or at all. WSCUC has indicated that, pending the receipt and review of additional documents, WSCUC is deferring any action on the change of control application filed by Ashford University to convert Ashford University to a nonprofit California public benefit corporation, AU NFP. In addition, as a condition to granting these regulatory approvals, a regulatory authority may require changes to the structure of the Proposed Transaction, and these changes may negatively impact our financial condition and results of operations. A material delay in obtaining such approvals may create uncertainty or otherwise have negative consequences, including adverse changes in our relationships with Ashford University’s students, vendors and faculty; adverse impacts on employee recruiting and retention efforts; and diversion of management’s attention and internal resources from ongoing business, any of which may materially and adversely affect our financial condition and results of operations. We cannot predict with certainty whether and when any of the required regulatory approvals will be granted. Whether or not the Proposed Transaction is consummated, while it is pending, we will continue to incur costs, fees, expenses and charges related to the Proposed Transaction.

If the Proposed Transaction is consummated, we will be subject to various risks and uncertainties arising out of the changes in the structure of our operations, any of which could materially and adversely affect our business and operations, and our stock price.

If the necessary approvals are obtained, definitive agreements are executed, and the Proposed Transaction is ultimately consummated, then various aspects of our operations would change in important ways. These changes include, but are not limited to, the following:


•	Following the Proposed Transaction, we would no longer own and operate a regulated institution of higher education, but we would instead be an education technology service provider to AU NFP and possibly other third-party education

providers. While the services we would provide are services that we provide as part of our business today, we have no experience operating solely as an education technology service provider to third parties.


•	Initially, all of our revenue would be derived pursuant to the services agreement with AU NFP. Accordingly, AU NFP’s ability to increase its enrollment and tuition and fee revenue, and our ability to continue to perform the services necessary to enable AU NFP to achieve such goals, would be critical to the success of our services business.

If the Proposed Transaction is consummated, but we are unable to successfully re-focus our business to providing education technology services to third-party education providers, or if the contemplated services agreement with AU NFP fails to achieve the anticipated levels of performance, then our business, financial condition and results of operations, as well as our stock price, could be materially and adversely affected.

If the Department does not approve the change of control related to the Proposed Transaction and recertify Ashford University to continue participating in the Title IV programs, its students would lose their access to Title IV program funds, or there are significant limitations as a condition of Ashford University’s continued participation in the Title IV programs, as a service provider to Ashford University, our business, financial condition and results of operations, as well as our stock price, could be materially and adversely affected.

Institutions are required to seek recertification from the Department on a regular basis in order to continue their participation in Title IV programs. An institution must also apply for recertification by the Department if it undergoes a change in control, as defined by the Department regulations, and may be subject to similar review if it expands its operations or educational programs in certain ways. Ashford University’s conversion to nonprofit status as a part of the Proposed Transaction, if consummated, would constitute a change in control of Ashford University. There can be no assurance that the Department will recertify Ashford University or that the Department will not impose conditions or other restrictions on Ashford University as a condition of granting Ashford University a provisional certification following the proposed change in control. If the Department does not renew, or withdraws, the certification of Ashford University to participate in the Title IV programs at any time, Ashford University’s students would no longer be able to receive Title IV program funds. Similarly, the Department could renew Ashford University’s certification, but restrict or delay Ashford University’s students’ receipt of Title IV funds, limit the students to whom Ashford University could disburse funds, or place other restrictions on Ashford University.

Any of these outcomes would have a material adverse effect on us. If the Proposed Transaction is consummated, we would no longer own or operate Ashford University, and we would no longer participate in the Title IV programs as an institution. However, we would face the risks discussed above in connection with providing services to Ashford University as a third-party education technology services provider, including adverse effects on our business and operations from a reduction or loss in our revenues under the contemplated services agreement if Ashford University loses or has limits placed on its Title IV eligibility.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As of December 31, 2018 , we do not own any property. We lease property in California, Colorado, Iowa, Arizona and Washington D.C. for academic operations, corporate functions, enrollment services and student support services. Below is a table summarizing our leased properties.



Number of Buildings	Location	Total Square Footage	Lease Expiration
2	San Diego, CA	300,000	2020
2	Denver, CO	182,000	2021-2023
2	Clinton, IA	22,400	2019
1	Phoenix, AZ	39,000	2019
1	Washington, D.C.	2,000	2019

Our facilities are utilized consistent with management's expectations, and we believe such facilities are suitable and adequate for current requirements and that additional space can be obtained on commercially reasonable terms to meet any future requirements.

Item 3. Legal Proceedings.

For information regarding any legal proceedings, see Note 21 , “Commitments and Contingencies” to our annual consolidated financial statements included elsewhere in this report, the text of which is incorporated by reference into this Item 3 of Part I.

Item 4. Mine Safety Disclosures.

None.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases

of Equity Securities.

Market Information

Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “BPI.”

Holders of Record

As of March 8, 2019 , there were 17 holders of record of our common stock. This figure does not include an indeterminate number of beneficial owners of our common stock whose shares are held of record by banks, brokers and other financial institutions.

Dividends

We have not paid any cash dividends on our common stock to date and do not anticipate paying cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results and capital requirements, any contractual restrictions related to our ability to pay dividends and such other factors as our board of directors may deem appropriate.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by Item 201(d) of Regulation S-K is incorporated by reference to our definitive proxy statement to be filed with the SEC in connection with our 2019 Annual Meeting of Stockholders or an amendment to this Annual Report on Form 10-K to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2018 .

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Performance Graph

The following information shall not be deemed to be “filed” with the SEC, nor shall such information be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such a filing.

The following graph compares the cumulative total return on our common stock over the period from December 31, 2013 through December 31, 2018 to the cumulative total return over the same period of the Russell 3000 Index and a customized peer group of four postsecondary education companies that includes American Public Education, Inc., Grand Canyon Education, Inc. and Strategic Education, Inc. The graph assumes an investment of $100 was made in each of our common stock, the index, and the peer group on December 31, 2013, and assumes reinvestment of all dividends. The stock price performance reflected in the graph is not necessarily indicative of future stock price performance.

Item 6. Selected Consolidated Financial Data.

The following selected consolidated financial and other data should be read in conjunction with Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and our annual consolidated financial statements included elsewhere in this report. The consolidated statement of income (loss) data, consolidated balance sheet data, and consolidated other data set forth below as of and for the years ended December 31, 2018 , 2017 , 2016 , 2015 and 2014 have been derived from our annual consolidated financial statements. Historical results are not necessarily indicative of the results to be expected for future periods. The risk factors set forth in Part I, Item 1A, “Risk Factors” also discuss material risks and uncertainties that could cause the data reflected below not to be indicative of our future financial condition or results of operations. We declared no cash dividends during the periods presented.



	Year Ended December 31,
	2018 ⁽¹⁾			2017 ⁽²⁾		2016 ⁽²⁾			2015			2014
Consolidated Statement of Income (Loss) Data:	(In thousands, except per share data)
Revenue	$	443,373		$	475,113	$	523,518		$	561,729		$	638,705
Operating income (loss)	$	(3,993	)	$	6,426	$	(43,232	)	$	(42,295	)	$	14,311
Net income (loss)	$	4,636		$	9,111	$	(33,051	)	$	(70,454	)	$	9,688
Income (loss) per share:
Basic	$	0.17		$	0.28	$	(0.71	)	$	(1.54	)	$	0.21
Diluted	$	0.17		$	0.28	$	(0.71	)	$	(1.54	)	$	0.21



	As of December 31,
	2018 ⁽¹⁾		2017 ⁽²⁾		2016 ⁽²⁾		2015 ⁽²⁾		2014
Consolidated Balance Sheet Data:	(In thousands)
Cash, cash equivalents, restricted cash and investments	$	192,652	$	207,591	$	381,769	$	373,987	$	356,545
Total assets	$	269,492	$	284,636	$	461,044	$	506,938	$	558,095
Total stockholders' equity	$	127,614	$	122,996	$	276,670	$	302,625	$	365,881



	Year Ended December 31,
	2018			2017			2016			2015		2014
Consolidated Other Data:	(In thousands, except enrollment data)
Cash flows (used in) provided by:
Operating activities	$	(7,591	)	$	(4,075	)	$	11,083		$	18,801	$	14,177
Investing activities	$	(3,546	)	$	43,684		$	14,741		$	51,287	$	(32,996	)
Financing activities	$	(3,805	)	$	(166,418	)	$	(319	)	$	3,805	$	2,284

Period-end enrollment ⁽³⁾ :	38,153			40,730			45,087			49,159		55,823


(1)	On January 1, 2018, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers and all related amendments using the modified retrospective method. See Note 2, “Summary of Significant Accounting Policies - Recent Accounting Pronouncements.”


(2)	Amounts reflect the effects of the restatement for those matters discussed in Note 2 to the consolidated financial statements.

(3)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our annual consolidated financial statements and related notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” and reflects the effects of the restatement discussed in Note 2 to the consolidated financial statements. In addition to historical information, this discussion includes forward-looking information that involves risks and uncertainties that could cause actual results to differ materially from management's expectations. See Part I, Item 1A, “Risk Factors” and “Special Note Regarding Forward-Looking Statements” at the beginning of this report.

Overview

We are a provider of postsecondary education services through our regionally accredited academic institution, Ashford University ^® . Ashford University offers associate’s, bachelor’s, master’s and doctoral programs. As of December 31, 2018 , our institution offered approximately 1,250 courses and approximately 80 degree programs. For additional information regarding our business, see Part I, Item 1, “Business.”

Key operating data

In evaluating our operating performance, our management focuses in large part on our revenue and operating income and period-end enrollment at our academic institution. The following table, which should be read in conjunction with our annual consolidated financial statements included elsewhere in this report, presents our key operating data for each of the periods presented (in thousands, except for enrollment data):



	Year Ended December 31,
	2018			2017		2016
Consolidated Statement of Income (Loss) Data: ⁽¹⁾
Revenue	$	443,373		$	475,113	$	523,518
Operating income (loss)	$	(3,993	)	$	6,426	$	(43,232	)

Consolidated Other Data:
Period-end enrollment ⁽²⁾	38,153			40,730		45,087


(1)	The Company has restated, for immaterial adjustments, its consolidated statements of income (loss) for the years ending December 31, 2017 and 2016.

(2)

Key enrollment trends

Enrollment at our academic institution decreased to 38,153 at December 31, 2018 as compared to 40,730 at December 31, 2017 , representing a decrease of 6.3% . We believe the decline in enrollment over the past few years is partially attributable to a general strengthening of the economy, thereby driving lower unemployment and increased competition, as well as a general weakening in the overall education industry due in large part to increased regulatory scrutiny. The decline is also partially caused by the initiatives our institution has put in place to help ensure student preparedness, raise academic quality and improve student outcomes, as well as our voluntary decision to stop enrolling new students eligible to use GI Bill benefits in the period from mid-November 2017 through early February 2018.

We also believe new enrollment has been impacted by the deliberate changes in our marketing strategy in which we significantly reduced our spending in the affiliate channel and reinvested some of those savings in other, more cost effective, channels. We have been implementing this updated marketing strategy that reflects a shift in our advertising mix, in an effort to attract prospective students who have a higher probability of being academically successful, while concurrently making meaningful improvements to the efficiency of our advertising, admissions and marketing spend.

We continue to focus our efforts on first stabilizing and then restarting enrollment growth. We have since launched 14 of the 16 new programs that Ashford University had received approval for back in the fourth quarter of 2017. Expanding our course offerings with these new programs will be one factor that will contribute to our goal of stabilizing enrollment and then achieving new enrollment growth, and over time total enrollment growth.

One area in which we are experiencing positive enrollment trends is within the Education Partnerships programs with various employers. These programs include the Corporate Full Tuition Grant (“FTG”) program, which provides companies

with the opportunity to offer their employees a way to pursue and complete a college degree without incurring any student debt. Enrollments in the Education Partnerships programs account for approximately 21% of our total enrollment as of December 31, 2018 . Revenue derived from Education Partnerships is cash pay, and is therefore not considered federal student aid for purposes of calculations under the 90/10 rule.

Trends and uncertainties regarding revenue and continuing operations

Merger Agreement with Fullstack Academy, Inc.

On March 12, 2019, we entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) to acquire Fullstack Academy, Inc., a Delaware corporation (“Fullstack”). Fullstack is an award-winning, immersive coding bootcamp, which offers a premier program centered on a series of leading and emerging technologies. The total consideration for the transaction is anticipated to be $17.5 million in cash and up to 4.75 million shares of Bridgepoint common stock, with 2.5 million shares issued at closing, and the remainder to be issued in the future upon the satisfaction of certain performance milestones. The Merger Agreement contains customary representations, warranties and covenants of Fullstack and the Company, and the acquisition is subject to customary closing conditions. If the acquisition is consummated, Fullstack will be a wholly-owned subsidiary of the Company.

Proposed conversion transaction

As discussed above under "Item 1. Business - Proposed Changes in the Structure of our Operations" we plan to undertake the Proposed Transaction pursuant to which Ashford University will separate from the Company through a series of conversion and merger transactions ultimately resulting in Ashford University being owned and operated by AU NFP, a California nonprofit public benefit corporation that was formed for the purpose of the conversion transaction and is independent of the Company. Following the Proposed Transaction, we plan to operate as an education technology services provider that would provide certain services to AU NFP, and potentially, in the future, to other customers. The services to AU NFP would be provided pursuant to services agreements with the Company.

We are continuing to finalize the terms of the Proposed Transaction with Ashford University and review various federal, state and other regulatory requirements and approvals that could impact the viability and timing of the Proposed Transaction. The Company and the boards of trustees of Ashford University and AU NFP are taking steps to protect Ashford University's and AU NFP’s independence in considering the conversion transaction in order to enable Ashford University and AU NFP to act in the best interests of Ashford University and its students. Neither we nor Ashford University are bound to move forward with the Proposed Transaction at this time.

Restructuring and impairment charges

We have implemented various restructuring plans to better align our resources with our business strategy and the related charges are recorded in the restructuring and impairment expense line item on our consolidated statements of income. Changes to these estimates could have a material impact on our consolidated financial statements. For information regarding the restructuring and impairment charges recorded, refer to Note 4 , “Restructuring and Impairment Charges” to our consolidated financial statements included elsewhere in this report.

Valuation allowance

We recognize deferred tax assets if realization of such assets is more-likely-than-not. In order to make this determination, we evaluate factors including the ability to generate future taxable income from reversing taxable temporary differences, forecasts of financial and taxable income or loss, and the ability to carryback certain operating losses to refund taxes paid in prior years. The cumulative loss incurred over the three-year period ended December 31, 2018 constituted significant negative objective evidence against our ability to realize a benefit from our federal deferred tax assets. Such objective evidence limited our ability to consider in our evaluation other subjective evidence such as our projections for future growth. On the basis of our evaluation, we determined that our deferred tax assets were not more-likely-than-not to be realized and that a valuation allowance against our deferred tax assets should continue to be maintained as of December 31, 2018 .

Key Financial Metrics

Revenue

Revenue consists principally of tuition, technology fees, course digital materials and other miscellaneous fees and is shown net of scholarships and refunds. Factors affecting our revenue include (i) the number of students who enroll and remain enrolled in our courses, (ii) our degree and program mix, (iii) changes in our tuition rates and (iv) the amount of scholarships we offer.

Enrollments

Enrollments are a function of the number of continuing students at the beginning of each period and new enrollments during the period, offset by students who either graduated or withdrew during the period. Our online courses are typically five or six weeks in length and have weekly start dates throughout the year, apart from a two-week break during the holiday period in late December and early January.

Costs and expenses

The following is a description of the costs included in each of our current expense categories:

Instructional costs and services consist primarily of costs related to the administration and delivery of our institution's educational programs. This expense category includes compensation for online faculty and administrative personnel, curriculum and new program development costs, financial aid processing costs, technology license costs, bad debt expense and costs associated with other support groups that provide services directly to the students. Instructional costs and services also include an allocation of information technology, facility, depreciation and amortization costs.

Admissions advisory and marketing costs include compensation of personnel engaged in marketing and recruitment, as well as costs associated with advertising media, purchasing leads and producing marketing materials. Our admissions advisory and marketing expenses are generally affected by the cost of advertising media and leads, the efficiency of our marketing and recruiting efforts, salaries and benefits for our enrollment personnel, and expenditures on advertising initiatives for new and existing academic programs. Advertising costs, which consist primarily of the cost of marketing leads, are expensed as incurred or the first time the advertising takes place, depending on the type of advertising activity. Admissions advisory and marketing costs also include an allocation of information technology, facility, depreciation and amortization costs.

General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, legal and compliance and other corporate functions. General and administrative expenses also include professional services fees, travel and entertainment expenses, and an allocation of information technology, facility, depreciation and amortization costs.

Legal settlement expense has primarily been comprised of (i) the cost to settle a wage and hour dispute, (ii) charges related to the cost of resolution of the previously disclosed civil investigative demands and (iii) the estimate of amounts to resolve the previously disclosed investigative subpoenas from the Attorney General of the State of California.

Restructuring and impairment charges are primarily comprised of (i) charges related to the write-off of certain fixed assets, (ii) student transfer costs relating to the closure of our Iowa residential campus, (iii) severance costs related to headcount reductions and (iv) estimated lease losses related to facilities vacated or consolidated.

Factors Affecting Comparability

We believe the following factors have had, or can be expected to have, a significant effect on the comparability of recent or future results of operations:

Seasonality

Our operations are generally subject to seasonal trends. We generally experience a seasonal increase in new enrollments during the first quarter of each year, subsequent to holiday break, as well as during the third quarter each year, when most other colleges and universities begin their fall semesters. While we enroll students throughout the year, our fourth quarter revenue generally is lower than other quarters due to the holiday break in December, with an increase in the first quarter of each year

Adoption of new accounting standards

As discussed in Part II, Item 8. Financial Statements, Note 2 “Recent Accounting Pronouncements,” we changed our method of accounting for revenue from contracts with customers in fiscal year 2018 due to the adoption of the new revenue standard. We adopted the new revenue standard using a modified retrospective approach.

Critical Accounting Policies and Use of Estimates

Critical accounting policies are those policies that, in management's view, are most important in the portrayal of our financial condition and results of operations. The footnotes to our annual consolidated financial statements included elsewhere in this report include disclosure of significant accounting policies. The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our financial statements. These critical accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.

The discussion of our financial condition and results of operations is based upon our annual consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses. We evaluate our estimates and assumptions on an ongoing basis. These estimates are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to our consolidated financial statements.

Revenue recognition

Revenues are recognized when control of the promised goods or services are transferred to the institutions’ students, in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services. Determining whether a valid customer contract exists includes an assessment of whether amounts due under the contract are collectible. We perform this assessment at the beginning of every contract and subsequently thereafter if new information indicates there has been a significant change in facts and circumstances.

Our contracts with customers generally include multiple performance obligations, which we identify by assessing whether each good and service promised in the contract is distinct. For each performance obligation, we allocate the transaction price, including fixed and variable consideration, on the basis of the relative standalone selling prices of each good and service in the contract, which is determined using observable prices.

We generate the majority of our revenue from tuition, technology fees, and digital materials related to students whose primary funding source is governmental funding. Tuition represents amounts charged for course instruction, and technology fees represent amounts charged for the students’ use of the technology platform on which course instruction is delivered. Digital materials fees represent amounts charged for the digital textbooks that accompany the majority of courses taught at our institution. With the exception of students attending courses within the three-week conditional admission period at Ashford University, the majority of tuition and technology fees are recognized as revenue as control of the services is transferred to the student, which occurs over the applicable period of instruction. Similarly, the majority of digital materials fees are recognized as revenue when control of the product has been transferred to the student, which occurs when the student is granted unrestricted access to the digital textbook, generally, on the first day of the course. Revenue generated from students within the conditional admission period is deferred and recognized when the student matriculates into the institution, which occurs in the fourth week of the course.

Our institutions' online students generally enroll in a program that encompasses a series of five to six-week courses that are taken consecutively over the length of the program. With the exception of those students under conditional admission and students enrolled under the FTG program, online students are billed on a payment period basis on the first day of a course. Students under conditional admission are billed for the payment period upon matriculation.

If a student's attendance in a class precedes the receipt of cash from the student's source of funding, we establish an account receivable and corresponding deferred revenue in the amount of the tuition due for that payment period. Cash received either directly from the student or from the student's source of funding reduces the balance of accounts receivable due from the student. Financial aid from sources such as the federal government's Title IV programs pertains to the online student's award year and is generally divided into two disbursement periods. As such, each disbursement period may contain funding for up to four courses. Financial aid disbursements are typically received during the online student's attendance in the first or second course. Since the majority of disbursements cover more courses than for which a student is currently enrolled, the amount received in excess effectively represents a prepayment from the online student for up to four courses. At the end of each accounting period, the deferred revenue and related account receivable balances are reduced to present amounts attributable to the current course.

In certain cases, our institution provides scholarships to students who qualify under various programs. These scholarships are recognized as direct reductions of revenue consistent with the timing of recognition associated with the related performance

obligations. Also, for some customers, we do not expect to collect 100% of the consideration to which we are contractually entitled and, as a result, those customers may receive discounts or price adjustments that, based on historical practice, represent implied price concessions and are accounted for as variable consideration. The majority of these price concessions relate to amounts charged to students for goods and services, which management has determined will not be covered by the student’s primary funding source (generally, government aid) and, as a result, the student will become directly financially responsible for them. The reduction in the transaction price that results from this estimate of variable consideration reflects the amount we do not expect to be entitled to in exchange for the goods and services it will transfer to the students, as determined using historical experience and current factors, and includes performing a constraint analysis. These estimates of variable consideration are recorded as direct reductions of revenue consistent with the timing of recognition associated with the related performance obligation.

A portion of tuition revenue, technology fee revenue, and digital materials revenue is generated from contracts with students enrolled under the corporate FTG program, which is a 12-month grant that, when combined with a corporate partner’s annual tuition assistance program, enables eligible students to earn their degree without incurring student loan debt. Students enrolled under this program are eligible to take up to ten undergraduate or eight graduate courses per 12-month grant period and must first utilize 100% of the funds awarded under their employer’s annual tuition assistance program before they can be awarded the FTG grant. The grants awarded by Ashford University under the FTG program are considered a material right, and, as such, we record a contract liability for a portion of the consideration received or due under these contracts. The contract liability is recorded in deferred revenue and student deposits on our consolidated balance sheets, and further discussed in the paragraph on deferred revenue below. The standalone selling price of the material right is determined based on the observable standalone selling price of the courses. The transaction price in each FTG contract is allocated to this material right on a relative standalone selling price basis. The contract liability is recognized as revenue at the earlier of satisfaction of the future obligation or contract termination. There are no material differences between the timing of the products and services transferred and the payment terms.

Deferred revenue consists of cash payments that are received or due in advance of performance as well as deferrals associated with certain contracts that include a material right. For the majority of our customers, payment for products and services is due at the beginning of each course. Billing of products and services transferred under an FTG student contract generally occurs after the conclusion of a course. Under special circumstances, some customers may be offered non-interest bearing payment plan arrangements that can extend for up to a maximum of three years. These payment plan arrangements give rise to significant financing components. However, since we historically collect substantially all the consideration to which it expects to be entitled under such payment plans within one year or less, the impact of these significant financing components is not material to any period presented.

Allowance for doubtful accounts

Accounts receivable consists of student accounts receivable, which represent amounts due for tuition, course digital materials, technology fees and other fees from currently enrolled and former students. Students generally fund their education through grants and/or loans under various Title IV programs, tuition assistance from military or corporate employers, or personal funds. Except for those students under conditional admission, payments are due on the respective course start date and will be considered past due depending on the student's payment terms. In general, an account is considered delinquent 120 days after the course start date.

Accounts receivable are stated at the amount management expects to collect from outstanding balances. For accounts receivable, an allowance for doubtful accounts is estimated by management and is principally based on historical collection experience as well as (i) an assessment of individual accounts receivable over a specific aging and amount, (ii) consideration of the nature of the receivable accounts and (iii) potential changes in the business or economic environment. The provision for bad debt is recorded within instructional costs and services in our consolidated statements of income (loss). We charge off uncollectable accounts receivable when the student account is deemed uncollectable by internal collection efforts or by a third-party collection agency.

Impairment of intangible assets

We test indefinite-lived intangible assets for impairment annually in the fourth quarter of each fiscal year, or more frequently if events and circumstances warrant. To evaluate the impairment of the indefinite-lived intangible assets, we assess the fair value of the assets to determine whether they are in excess of the carrying values. Determining the fair value of indefinite-lived intangible assets is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions are inherently uncertain, and can include such items as growth rates used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and a determination of appropriate market comparables. Our assessment of indefinite-lived intangible assets during the fourth quarter of fiscal 2018 resulted in certain impairment of goodwill and intangibles.

We also have definite-lived intangible assets, which primarily consist of purchased intangibles and capitalized curriculum development costs. The definite-lived intangible assets are recognized at cost less accumulated amortization. Amortization is computed using the straight-line method based on estimated useful lives of the related assets unless there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We estimate that the useful life of the capitalized curriculum development costs is three years and the useful life of the purchased intangibles is the life of the related contract.

Impairment of long-lived assets

We assess potential impairment to our long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors we consider important that could cause us to assess potential impairment include significant changes in the manner of our use of the acquired assets or the strategy for our overall business and significant negative industry or economic trends. An impairment loss is recorded when the carrying amount of the long-lived asset is not recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value, and is recorded as a reduction in the carrying value of the related asset and an expense to operating results.

We use various assumptions in determining undiscounted cash flows expected to result from the use and eventual disposition of an asset, which could include assumptions regarding revenue growth rates, operating costs, certain capital additions, assumed discount rates, disposition or terminal value and other economic factors. These variables require management to make judgments and include inherent uncertainties such as continuing acceptance of our institution's education offerings by prospective students, our ability to manage operating costs and the impact of changes in the economy on our business. Variations in the assumptions used could lead to a different conclusion regarding the realizability of an asset and, thus, could have a significant effect on our conclusions regarding whether an asset is impaired and the amount of impairment loss recorded in the consolidated financial statements.

Income taxes

We utilize the asset-liability method of accounting for income taxes. Significant judgments are required in determining the consolidated provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax settlement is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognized when, despite our belief that our tax return positions are supportable, we believe that it is more-likely-than-not that those positions may not be fully sustained upon review by tax authorities. We believe that our accruals for tax liabilities are adequate for all open audit years based on our assessment of many factors, including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters differs from our expectations, such differences will impact income tax expense in the period in which such determination is made.

We evaluate and account for uncertain tax positions using a two-step approach. Recognition (step one) occurs when we conclude that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when we subsequently determine that a tax position no longer meets the more-likely-than- not threshold of being sustained.

We are required to file income tax returns in the United States that includes various state and local tax jurisdictions. The preparation of these income tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by us. The income tax returns are subject to audits by the applicable

federal and state taxing authorities. As part of these audits, the taxing authorities may disagree with our tax positions. The ultimate resolution of these tax positions is often uncertain until the audit is complete and any disagreements are resolved. We therefore record an amount for our estimate of the additional tax liability, including interest and penalties, for any uncertain tax positions taken or expected to be taken in an income tax return. We review and update the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, and upon completion of tax audits and expiration of statutes of limitations. We record interest and penalties related to income tax matters in income tax expense.

In addition to estimates inherent in the recognition of current taxes payable, we estimate the likelihood that we will be able to recover our deferred tax assets each reporting period. Realization of our deferred tax assets is dependent upon future taxable income. To the extent we believe it is more-likely-than-not that all or some portion of our net deferred tax assets will not be realized, we establish a valuation allowance against deferred tax assets. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies.

Stock-based compensation

We have granted options to purchase our common stock, restricted stock units (“RSUs”) and performance stock units (“PSUs”) to eligible persons under our 2009 Stock Incentive Plan. The benefits provided by these grants are share-based payments and are recorded in our consolidated statement of income (loss) based upon their fair values.

Stock-based compensation cost is measured using the grant date fair value of the award and is expensed over the vesting period. The fair value of RSUs is the stock price on the date of grant multiplied by the number of units awarded. The fair value of PSUs was estimated based on our stock price as of the date of grant using a Monte Carlo simulation model. We estimate the fair value of stock options on the grant date using the Black-Scholes option pricing model. Determining the fair value of stock options and PSUs at the grant date under these models requires judgment, including estimating our volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock options and PSUs represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

Stock options awarded under our 2009 Stock Incentive Plan have an exercise price that equals or exceeds the closing price of our common stock on the date of grant. The risk-free interest rate is based on the U.S. Treasury yield of those maturities that are consistent with the expected term of the stock option or PSUs in effect on the date of grant. Dividend rates are based upon historical dividend trends and expected future dividends. As we have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future, a zero-dividend rate is assumed in our calculation. We have sufficient historical stock option exercise information to compute an expected term for use as an assumption in the Black-Scholes option pricing and Monte Carlo simulation models, and as such, our computation of expected term was calculated using our own historical data. We also have sufficient historical data on the volatility of our stock to use as a direct assumption in the option pricing models.

The amount of stock-based compensation expense we recognize during a period is based on the portion of the awards that are ultimately expected to vest. We estimate stock option forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The effect of a 10% change in estimates to any of the individual inputs to the Black-Scholes option pricing model or the Monte Carlo simulation model would not have a material impact on our consolidated financial statements.

Results of Operations

The following table sets forth our consolidated statements of income (loss) data as a percentage of revenue for each of the periods indicated:



	Year Ended December 31,
	2018		2017		2016
Revenue	100.0	%	100.0	%	100.0	%
Costs and expenses:
Instructional costs and services	49.1	%	49.5	%	50.3	%
Admissions advisory and marketing	38.1	%	36.9	%	38.6	%
General and administrative	11.9	%	10.0	%	9.3	%
Legal settlement expense	0.0	%	0.4	%	6.3	%
Restructuring and impairment charges	1.8	%	1.8	%	3.7	%
Total costs and expenses	100.9	%	98.6	%	108.2	%
Operating income (loss)	(0.9	)%	1.4	%	(8.2	)%
Other income, net	0.2	%	0.3	%	0.4	%
Income (loss) before income taxes	(0.7	)%	1.7	%	(7.8	)%
Income tax expense (benefit)	(1.7	)%	(0.2	)%	(1.5	)%
Net income (loss)	1.0	%	1.9	%	(6.3	)%

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Revenue. Our revenue for the year ended December 31, 2018 and 2017 , was $443.4 million and $475.1 million , respectively, representing a decrease of $31.7 million , or 6.7% . The decrease between periods was primarily due to a decrease of 8.5% in average weekly enrollment from 43,872 students for the year ended December 31, 2017 to 40,133 students for the year ended December 31, 2018 . As a result of the decrease in enrollments, tuition revenue for the year ended December 31, 2018 decreased by approximately $25.1 million or 4.6% , as compared to the year ended December 31, 2017 . The decrease in revenue between periods was also due to higher scholarships for the period, an increase of $14.8 million , year over year. In addition, the implementation of the new revenue recognition standards in 2018, accounted for approximately $6.6 million of the decrease in revenue for the year. The overall decrease was partially offset by the approximate 5.0% tuition increase on February 6, 2018, as well as an increase in net revenue generated from course digital materials of approximately $6.9 million .

Instructional costs and services. Our instructional costs and services for the year ended December 31, 2018 and 2017 , were $217.7 million and $235.4 million , respectively, representing a decrease of $17.7 million , or 7.5% . In addition to the decline in enrollment, headcount within instructional costs and services decreased year over year, and the overall decrease in expense is consistent with the continued efforts to improve operating expense management. Specific decrease s between periods primarily include bad debt expense of $7.5 million , direct compensation of $3.6 million , license fees of $2.3 million , instructor fees of $1.9 million , corporate support services of $1.3 million and amortization of intangible assets of $0.8 million . The change in bad debt which included the impact from implementing the new revenue recognition standards in 2018, was approximately $6.5 million for the year ended December 31, 2018 .

Our instructional costs and services, as a percentage of revenue, for the year ended December 31, 2018 and 2017 , were 49.1% and 49.5% , respectively, representing a decrease of 0.4% . This decrease primarily included decrease s in bad debt expense of 1.2% and license fees of 0.4% , partially offset by increase s in corporate support services of 0.2% , direct compensation of 0.4% and instructional supplies of 0.2% . As a percentage of revenue, bad debt expense decreased to 5.2% for the year ended December 31, 2018 , compared to 6.4% for the year ended December 31, 2017 . We continue to implement changes in our processes which we believe will help us to continue reducing this expense as a percentage of revenue.

Admissions advisory and marketing. Our admissions advisory and marketing expenses for the year ended December 31, 2018 and 2017 , were $168.8 million and $175.4 million , respectively, representing a decrease of $6.6 million , or 3.8% . Specific factors contributing to the overall decrease between periods were primarily due to decrease s in compensation of $7.5 million due to a reduction in headcount, facilities costs of $1.2 million , advertising costs of $0.9 million , and information technology costs of $0.4 million . The overall decrease was partially offset by increase s in professional fees of $1.7 million , transaction costs of $1.0 million (relating to the conversion and separation of Ashford University), and license fees of $0.7 million .

Our admissions advisory and marketing expenses, as a percentage of revenue, for the year ended December 31, 2018 and 2017 , were 38.1% and 36.9% , respectively, representing an increase of 1.2% . This increase primarily included increase s in advertising costs of 0.9% , professional fees of 0.4% , and license fees of 0.2% , partially offset by a decrease in compensation of 0.5% .

General and administrative. Our general and administrative expenses for the year ended December 31, 2018 and 2017 , were $53.0 million and $47.4 million , respectively, representing an increase of $5.6 million , or 11.8% . The increase between periods was primarily due to transaction costs of $6.9 million (relating to the conversion and separation of Ashford University), corporate support services of $2.1 million , and other administrative costs of $0.5 million . These increase s were partially offset by decrease s in administrative compensation of $2.1 million and professional fees of $1.9 million .

Our general and administrative expenses, as a percentage of revenue, for the year ended December 31, 2018 and 2017 , were 11.9% and 10.0% , respectively, representing an increase of 1.9% . This increase is mainly due to transaction costs of 1.6% (relating to the conversion and separation of Ashford University) and other administrative costs of 0.3% , partially offset by a decrease in professional fees of 0.2% .

Legal settlement expense. For the year ended December 31, 2018 , we recorded a legal settlement expense of $0.1 million as compared to $1.8 million for the year ended December 31, 2017 , that was related to costs to settle a wage and hour dispute.

Restructuring and impairment charges. Our restructuring and impairment charges for the year ended December 31, 2018 were $7.8 million , as compared to $8.7 million for the year ended December 31, 2017 , representing a decrease of $0.9 million . The charges for the year ended December 31, 2018 were comprised of $2.9 million of lease exit costs for properties in San Diego, $1.9 million relating to severance costs for wages and benefits resulting from a reduction in force and $1.7 million for asset impairments, and net student agreement costs of $1.2 million .

Other income, net. Our other income, net, for the year ended December 31, 2018 was $1.0 million , a decrease of $0.5 million as compared to other income, net, of $1.5 million for the year ended December 31, 2017 . The decrease between periods was primarily a result of decrease d interest income due to changes in the levels of average cash and cash equivalents and investment balances.

Income tax benefit. Income tax benefit for the year ended December 31, 2018 was $7.6 million as compared to income tax benefit of $1.2 million for the year ended December 31, 2017 , or an increase of $6.4 million in income tax benefit. Income tax benefit was recognized at effective tax rates of 257.4% and (14.8)% for the years ended December 31, 2018 and 2017 , respectively. The change in the income tax benefit is mainly attributable to a tax benefit of $5.7 million associated with a reduction in uncertain tax position mainly associated with the California audit examination settlement for the tax years ended December 31, 2008 through 2012, and $1.8 million income tax benefit including interest associated with refund claims for qualified production activities tax deductions for the tax years ended December 31, 2013 and 2014.

Net income. Our net income for the year ended December 31, 2018 was $4.6 million compared to net income of $9.1 million for the year ended December 31, 2017 , a $4.5 million decrease in net income as a result of the factors discussed above.

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

Revenue. Our revenue for the year ended December 31, 2017 was $475.1 million , a decrease of $48.4 million , or 9.2% , as compared to $523.5 million for the year ended December 31, 2016 . The decrease between periods was primarily due to the 9.8% decrease in average weekly student enrollment at our academic institution from 48,647 students during the year ended December 31, 2016 to 43,872 students for the year ended December 31, 2017 . Tuition revenue for the year ended December 31, 2017 was $544.1 million, a decrease of $46.4 million, or 7.9%, as compared to $590.5 million for the year ended December 31, 2016 . The decrease between periods was primarily due to the decrease in average weekly enrollment, partially offset by the approximate 2.0% tuition increase on April 1, 2017. Additionally, revenue generated from course digital materials and related fees for the year ended December 31, 2017 was $17.7 million, a decrease of $1.8 million, or 9.2%, as compared to $19.5 million for the year ended December 31, 2016 . The decrease in revenue between periods was also partially due to an increase in institutional scholarships. Institutional scholarships for the year ended December 31, 2017 was $103.6 million, an increase of $3.6 million, or 3.6%, as compared to $99.9 million for the year ended December 31, 2016 .

Instructional costs and services. Our instructional costs and services for the year ended December 31, 2017 were $235.4 million , a decrease of $27.9 million , or 10.6% , as compared to instructional costs and services of $263.3 million for the year ended December 31, 2016 . The decrease between periods was reflective of the decrease in student enrollment at our academic institutions as discussed above. Specific decreases between periods include decreases in direct compensation (a reduction in cost driven by financial aid processing activities being brought in-house) of $9.3 million, corporate support services of $5.6 million, instructor fees of $4.5 million, facilities costs of $4.2 million, license fees of $2.5 million, bad debt expense of $1.7

million, and amortization of intangible assets of $1.3 million. These decreases were partially offset by an increase in information technology costs of $1.2 million.

Our instructional costs and services decreased as a percentage of revenue to 49.5% for the year ended December 31, 2017 , as compared to 50.3% for the year ended December 31, 2016 . The decrease of 0.8% as a percentage of revenue primarily resulted from decreases in facilities costs of 0.6%, corporate support services of 0.4%, license fees of 0.3%, instructor fees of 0.3% and amortization of intangible assets of 0.2%, partially offset by increases in information technology costs of 0.6% and bad debt expense of 0.3%. As a percentage of revenue, bad debt expense increased to 6.4% for the year ended December 31, 2017 , compared to 6.1% for the year ended December 31, 2016 . We continue to implement changes in our processes which we believe will help us reach our goal of reducing this expense as a percentage of revenue over time.

Admissions advisory and marketing. Our admissions advisory and marketing expenses for the year ended December 31, 2017 were $175.4 million , a decrease of $26.8 million , or 13.3% , as compared to admissions advisory and marketing expenses of $ 202.2 million for the year ended December 31, 2016 . As a result of our change in marketing strategy and the shift in advertising mix, specific factors contributing to the overall decrease between periods were primarily due to a decrease in compensation expense of $18.4 million, net facilities costs of $7.0 million, advertising costs of $6.0 million, and information technology costs of $2.9 million, partially offset by increases in corporate support services of $5.9 million, and consulting and professional fees of $0.8 million.

Our admissions advisory and marketing expenses decreased as a percentage of revenue to 36.9% for the year ended December 31, 2017 from 38.6% for the year ended December 31, 2016 . The decrease of 1.7% as a percentage of revenue was primarily due to decreases in compensation expense of 2.0%, facilities costs of 1.1% and information technology costs of 0.4%, partially offset by increases as a percentage of revenue in corporate support services of 1.0%, and advertising costs of 0.3%.

General and administrative. Our general and administrative expenses for the year ended December 31, 2017 were $47.4 million , a decrease of $1.5 million , or 3.0% , as compared to general and administrative expenses of $48.8 million for the year ended December 31, 2016 . The decrease between periods was primarily due to decreases in other administrative costs of $2.2 million, administrative compensation of $2.0 million, and facilities costs of $1.6 million, partially offset by increases in professional fees of $4.3 million.

Our general and administrative expenses increased as a percentage of revenue to 10.0% for the year ended December 31, 2017 from 9.3% for the year ended December 31, 2016 . The increase of 0.7% as a percentage of revenue included increases in professional fees of 1.1%, and administrative compensation of 0.3%, partially offset by a decrease in corporate support services of 0.6% and net facilities costs of 0.3%.

Legal settlement expense. For the year ended December 31, 2017 , we recorded a legal settlement expense of $1.8 million related to the costs to settle a wage and hour dispute. For the year ended December 31, 2016 . we recorded a legal settlement expense of $33.1 million, which includes the cost of resolution of the previously disclosed civil investigative demands from the CFPB, as well as an estimate of amounts to resolve the previously disclosed investigative subpoenas from the Attorney General of the State of California.

Restructuring and impairment charges. Our restructuring and impairment charges for the year ended December 31, 2017 were $8.7 million , comprised of $5.8 million of lease exit costs for properties in San Diego, $2.2 million relating to severance costs for wages and benefits resulting from a reduction in force and $0.8 million for asset impairments. The costs were partially offset by a decrease in student transfer costs $0.1 million . Our restructuring and impairment charges for the year ended December 31, 2016 were $19.3 million , comprised of $14.5 million of lease exit costs for properties in San Diego, $2.7 million relating to severance costs for wages and benefits resulting from a reduction in force to help better align personnel resources with the decline in student enrollment and $2.2 million for asset impairments, partially offset by a decrease in student transfer costs of $0.1 million .

Other income, net. Our other income, net, for the year ended December 31, 2017 was $1.5 million , a decrease of $0.8 million as compared to other income, net, of $2.3 million for the year ended December 31, 2016 . The decrease between periods was primarily a result of decrease d interest income due to changes in the levels of average cash and cash equivalents and investment balances.

Income tax benefit. Income tax benefit for the year ended December 31, 2017 was $1.2 million as compared to income tax benefit of $7.9 million for the year ended December 31, 2016 , or a decrease of $6.7 million in income tax benefit. Income tax benefit was recognized at effective tax rates of (14.8)% and 19.2% for the years ended December 31, 2017 and 2016 , respectively. The change in the income tax benefit is mainly attributable to the tax refund claims associated with the 2016 net operating loss carryback to the tax year 2014.

Net income (loss). Our net income for the year ended December 31, 2017 was $9.1 million compared to net loss of $33.1 million for the year ended December 31, 2016 , a $42.2 million increase in net loss as a result of the factors discussed above.

Liquidity and Capital Resources

Liquidity

We financed our operating activities and capital expenditures during the years ended December 31, 2018 and 2017 either through cash provided by operating activities or through cash on hand. Our cash and cash equivalents at December 31, 2018 and 2017 , were $166.3 million and $185.1 million , respectively, which can be used for operating activities or capital expenditures. Additionally, at December 31, 2018 and 2017 , we had restricted cash of $24.3 million and $20.4 million , respectively, as well as investments of $2.1 million and $2.1 million , respectively.

We manage our excess cash pursuant to the quantitative and qualitative operational guidelines of our cash investment policy. Our cash investment policy, which is managed by our Chief Financial Officer, has the following primary objectives: (i) preserving principal, (ii) meeting our liquidity needs, (iii) minimizing market and credit risk, and (iv) providing after-tax returns. Under the policy's guidelines, we invest our excess cash exclusively in high-quality, U.S. dollar-denominated financial instruments. For a discussion of the measures we use to mitigate the exposure of our cash investments to market risk, credit risk and interest rate risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”

Stock repurchase programs

The Company's board of directors (the “board”) may authorize us to repurchase outstanding shares of its common stock from time to time in the open market through block trades or otherwise depending on market conditions and other considerations, pursuant to the applicable rules of the SEC. The Company's policy is to retain these repurchased shares as treasury shares and not to retire them. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant. The timing and extent of any repurchases will depend upon market conditions, the trading price of our shares and other factors, and subject to the restrictions relating to volume, price and timing under applicable law. We may commence or suspend share repurchases at any time or from time to time. For information regarding share repurchases, refer to Note 17 , “Stock Repurchase Programs” to our consolidated financial statements included elsewhere in this report.

Available borrowing facilities

We had no borrowings outstanding as of December 31, 2018 . The Company had issued letters of credit that are collateralized with cash in the aggregate amount of $14.9 million , which is included as restricted cash as of December 31, 2018 .

As part of its normal business operations, the Company is required to provide surety bonds in certain states in which the Company does business. As of December 31, 2018 , the Company's total available surety bond facility was $6.5 million and the surety had issued bonds under the facility totaling $4.2 million on the Company's behalf.

Title IV and other governmental funding

Our institution derives the substantial majority of its respective cash revenues from students who enroll and are eligible for various federal student financial assistance programs authorized under Title IV of the Higher Education Act. In the year ended December 31, 2018 , Ashford University derived 78.6% of their respective cash revenues from Title IV program funds, calculated in accordance with applicable Department regulations. Our institution is subject to significant regulatory scrutiny as a result of numerous standards that must be satisfied in order to participate in Title IV programs. For additional information regarding Title IV programs and the regulation thereof, see “Regulation” in Item 1, “Business”. The balance of revenues derived by our institution is from government tuition assistance programs for military personnel, including veterans, payments made in cash by individuals, reimbursement from corporate partnerships and private loans from third parties. For additional information, see the section entitled “Student Financing” in Item 1, “Business”.

If we were to become ineligible to receive Title IV and other governmental funding, our liquidity would be significantly impacted. The timing of disbursements under Title IV programs is based on federal regulations and our ability to successfully and timely arrange financial aid for our institution's students. Title IV funds are generally provided in multiple disbursements before we earn a significant portion of tuition and fees and incur related expenses over the period of instruction. Students must apply for new loans and grants each academic year. These factors, together with the timing at which our institution's students begin their programs, affect our revenues and operating cash flow.

Financial responsibility

For the fiscal year ended December 31, 2017 , the consolidated composite score calculated was 2.3 , satisfying the composite score requirement of the Department's financial responsibility test, which institutions must satisfy in order to participate in Title IV programs. We expect the consolidated composite score to be 2.2 for the year ended December 31, 2018 . However, the consolidated calculation is subject to determination by the Department once it receives and reviews our audited financial statements for the year ended December 31, 2018 . Additionally, for the year ended December 31, 2018 , the composite score at our institution is higher than the consolidated score. For additional information, see “Regulation — Department Regulation of Title IV Programs — Financial responsibility” in Part I, “Business.”

Operating activities

Net cash used in operating activities was $7.6 million for 2018 , compared to net cash used in operating activities of $4.1 million for 2017 , and net cash provided by operating activities of $11.1 million for 2016 . The increase in the net cash used in operating activities of $3.5 million from 2017 to 2018 was primarily due to a decrease in net income of $4.5 million , decrease in provisions for bad debt (partially due to the impact of ASC 606) of $4.2 million (net of the change in accounts receivable), and the release of uncertain tax positions during the current year, captured in the change in other liabilities year over year. These changes were offset by a greater decrease in prepaids and other current assets during current year versus prior year, resulting in an increase in cash provided by operating activities of $3.9 million , and a decrease in other assets (net of long-term restricted cash included in other assets) as a result of a decrease in long term prepaids, resulting in an increase in cash provided by operating activities of $2.8 million. In addition, there was a lower decrease in accounts payable and accrued liabilities than in prior year of $0.7 million , due to overall operating expense decreasing year over year. The decrease of $15.2 million from 2016 to 2017 was primarily due to a relative decrease in the changes in accounts payable and accrued liabilities of $17.7 million due to the timing of lease termination costs, decrease in prepaids and other current assets of $12.9 million due to the timing of income tax receivables, and decrease in other long-term assets of $6.3 million. In addition, there was a loss on student loans receivable of $7.5 million in 2016, whereas there was none in 2017. There was also a decrease in the loss on termination of leased space of $7.4 million, and lower depreciation and amortization by $4.2 million. These decreases were mainly offset by an increase in net income of $42.2 million. We expect to generate cash from our operating activities in the foreseeable future.

Investing activities

Net cash used in investing activities was $3.5 million for 2018 , compared to net cash provided by investing activities of $43.7 million and $14.7 million for 2017 and 2016 , respectively. During 2018 , there were no maturities of investments and we purchased $1.1 million of investments. This is compared to maturities of investments of $47.7 million and purchases of investments of $0.3 million in 2017 , as well as maturities of investments of $37.8 million and purchases of investments of $20.3 million in 2016 . Capital expenditures were $2.6 million , $3.4 million and $1.9 million for 2018 , 2017 and 2016 , respectively. For the year ending December 31, 2019 , we expect our capital expenditures to be approximately $26.0 million .

Financing activities

Net cash used in financing activities was $3.8 million , $166.4 million and $0.3 million for 2018 , 2017 and 2016 , respectively. During 2018 , net cash used in financing activities was primarily due to the repurchases of common stock of $2.4 million , tax withholdings related to the net exercise of stock options of $1.1 million , as well as cash used for the tax withholdings related to vesting of restricted stock awards of $0.9 million . During 2017 , net cash used in financing activities was primarily due to the repurchases of common stock of $168.7 million , as well as cash used for the tax withholdings related to vesting of restricted stock awards of $1.9 million , partially offset by the cash provided by option exercises of $3.8 million . During 2016 , cash used in financing activities primarily reflects the cash used for the tax withholdings related to vesting of restricted stock awards of $1.9 million , partially offset by the cash provided by option exercises of $1.3 million .

Based on our current level of operations, we believe that our future cash flows from operating activities and our existing cash and cash equivalents will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next 12 months. However, changes could occur that would consume our available capital resources before that time. Our capital requirements depend on numerous factors, including our ability to continue to generate revenue. There can be no assurance that additional funding, if necessary, will be available to us on favorable terms, if at all. For additional information, see Part I, Item 1A, “Risk Factors” which also discuss material risks and uncertainties.

Off-Balance Sheet Arrangements and Significant Contractual Obligations

As part of our normal business operations, we are required to provide surety bonds in certain states where we do business. We entered into a surety bond facility with an insurance company to provide such bonds when required. As of December 31, 2018 , our total available surety bond facility was $6.5 million and the surety had issued bonds totaling $4.2 million on our behalf under such facility.

The following table sets forth, as of December 31, 2018 , certain significant cash and contractual obligations that will affect our future liquidity:



	Payments Due by Period
	Total		2019		2020		2021		2022		2023		Thereafter
	(In thousands)
Operating lease obligations	$	61,040	$	20,382	$	9,936	$	6,460	$	3,826	$	2,726	$	17,710
Other contractual obligations	43,146		18,531		10,410		4,050		2,620		2,535		5,000
Uncertain tax positions	865		—		865		—		—		—		—
Total	$	105,051	$	38,913	$	21,211	$	10,510	$	6,446	$	5,261	$	22,710

Segment Information

We operate in one reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of our institution's students regardless of geography. Our chief operating decision maker, our CEO and President, manages our operations as a whole, and our chief operating decision maker does not evaluate expenses or operating income information on a component level.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, refer to Note 2, “Summary of Significant Accounting Policies” to our annual consolidated financial statements included elsewhere in this report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Market and Credit Risk

Pursuant to our cash investment policy, we attempt to mitigate the exposure of our cash and investments to market and credit risk by (i) diversifying concentration to ensure we are not overly concentrated in a limited number of financial institutions, (ii) monitoring and managing the risks associated with the national banking and credit markets, (iii) investing in U.S. dollar-denominated assets and instruments only, (iv) diversifying account structures so that we maintain a decentralized account portfolio with numerous stable, highly rated and liquid financial institutions and (v) ensuring that our investment procedures maintain a defined and specific scope such that we will not invest in higher-risk investment accounts, including financial swaps or derivative and corporate equities. Accordingly, pursuant to the guidelines established by our cash investment policy, we invest our excess cash exclusively in high-quality, U.S. dollar-denominated financial instruments.

Despite the investment risk mitigation strategies we employ, we may incur investment losses as a result of unusual and unpredictable market developments, and we may experience reduced investment earnings if the yields on investments that are deemed to be low risk remain low or decline further in this time of economic uncertainty. Unusual and unpredictable market developments may also create liquidity challenges for certain of the assets in our investment portfolio.

We have no derivative financial instruments or derivative commodity instruments.

Interest Rate Risk

To the extent we borrow funds, we would be subject to fluctuations in interest rates. As of December 31, 2018 , we had no outstanding borrowings.

Our future investment income may fall short of expectations due to changes in interest rates. At December 31, 2018 , a hypothetical 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair value or cash flows related to interest earned on our cash, cash equivalents or investments.

Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

BRIDGEPOINT EDUCATION, INC. AND SUBSIDIARIES



Report of Independent Registered Public Accounting Firm	60
Consolidated Balance Sheets	61
Consolidated Statements of Income (Loss)	62
Consolidated Statements of Comprehensive Income (Loss)	63
Consolidated Statements of Stockholders' Equity	64
Consolidated Statements of Cash Flows	65
Notes to Annual Consolidated Financial Statements	66

Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Bridgepoint Education, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Bridgepoint Education, Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of income (loss), comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2019, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company changed its method of accounting for revenue from contracts with customers in fiscal year 2018 due to the adoption of the new revenue standard. The Company adopted the new revenue standard using a modified retrospective approach.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

March 12, 2019

We have served as the Company's auditor since 2016.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

BRIDGEPOINT EDUCATION, INC.

Consolidated Balance Sheets

(In thousands, except par value)



	As of December 31,
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	166,307		$	185,098
Restricted cash	18,619			20,428
Investments	2,068			2,065
Accounts receivable, net	27,015			24,174
Prepaid expenses and other current assets	18,255			22,388
Total current assets	232,264			254,153
Property and equipment, net	16,860			10,434
Goodwill and intangibles, net	12,441			14,593
Other long-term assets	7,927			5,456
Total assets	$	269,492		$	284,636
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	62,792			71,165
Deferred revenue and student deposits	63,834			70,766
Total current liabilities	126,626			141,931
Rent liability	3,183			7,001
Lease financing obligation	8,634			—
Other long-term liabilities	3,435			12,708
Total liabilities	141,878			161,640
Commitments and contingencies (see Note 21)
Stockholders' equity:
Preferred stock, $0.01 par value:
20,000 shares authorized; zero shares issued and outstanding at December 31, 2018 and 2017	—			—
Common stock, $0.01 par value:
300,000 shares authorized; 65,289 and 64,887 issued, and 27,168 and 27,158 outstanding, at December 31, 2018 and 2017, respectively	653			649
Additional paid-in capital	205,157			201,755
Retained earnings	429,992			426,356
Treasury stock, 38,121 and 37,729 shares at cost at December 31, 2018 and 2017, respectively	(508,188		)	(505,764		)
Total stockholders' equity	127,614			122,996
Total liabilities and stockholders' equity	$	269,492		$	284,636

The accompanying notes are an integral part of these consolidated financial statements.

BRIDGEPOINT EDUCATION, INC.

Consolidated Statements of Income (Loss)

(In thousands, except per share amounts)



	Year Ended December 31,
	2018			2017			2016
Revenue	$	443,373		$	475,113		$	523,518
Costs and expenses:
Instructional costs and services	217,700			235,390			263,337
Admissions advisory and marketing	168,751			175,389			202,206
General and administrative	52,980			47,381			48,843
Legal settlement expense	141			1,845			33,088
Restructuring and impairment charges	7,794			8,682			19,276
Total costs and expenses	447,366			468,687			566,750
Operating income (loss)	(3,993		)	6,426			(43,232		)
Other income, net	1,047			1,511			2,306
Income (loss) before income taxes	(2,946		)	7,937			(40,926		)
Income tax benefit	(7,582		)	(1,174		)	(7,875		)
Net income (loss)	$	4,636		$	9,111		$	(33,051	)

Income (loss) per share:
Basic	$	0.17		$	0.28		$	(0.71	)
Diluted	$	0.17		$	0.28		$	(0.71	)
Weighted average number of common shares outstanding used in computing income (loss) per share:
Basic	27,135			32,058			46,228
Diluted	27,563			32,794			46,228

The accompanying notes are an integral part of these consolidated financial statements.

BRIDGEPOINT EDUCATION, INC.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)



	Year Ended December 31,
	2018		2017		2016
Net income (loss)	$	4,636	$	9,111	$	(33,051	)
Other comprehensive gain, net of tax:
Unrealized gains on investments	—		1		98
Comprehensive income (loss)	$	4,636	$	9,112	$	(32,953	)

The accompanying notes are an integral part of these consolidated financial statements.

BRIDGEPOINT EDUCATION, INC.

Consolidated Statements of Stockholders' Equity

(In thousands)



	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Gain/(Loss)			Treasury Stock
	Shares	Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Gain/(Loss)			Treasury Stock			Total
Balance at January 1, 2016 (as restated, see Note 2)	63,407	$	634	$	188,863		$	450,296		$	(99	)	$	(337,069	)	$	302,625
Stock-based compensation	—	—		7,317			—			—			—			7,317
Exercise of stock options	306	3		1,328			—			—			—			1,331
Stock issued under employee stock purchase plan	35	1		245			—			—			—			246
Stock issued under restricted stock plan, net of shares held for taxes	287	3		(1,899		)	—			—			—			(1,896		)
Net loss	—	—		—			(33,051		)	—			—			(33,051		)
Unrealized gains on investments, net of tax	—	—		—			—			98			—			98
Balance at December 31, 2016	64,035	641		195,854			417,245			(1		)	(337,069		)	276,670
Stock-based compensation	—	—		3,632			—			—			—			3,632
Exercise of stock options	537	5		3,843			—			—			—			3,848
Stock issued under employee stock purchase plan	34	1		288			—			—			—			289
Stock issued under restricted stock plan, net of shares held for taxes	281	2		(1,862		)	—			—			—			(1,860		)
Repurchase of common stock	—	—		—			—			—			(168,695		)	(168,695		)
Net income	—	—		—			9,111			—			—			9,111
Unrealized gains on investments, net of tax	—	—		—			—			1			—			1
Balance at December 31, 2017	64,887	649		201,755			426,356			—			(505,764		)	122,996
Adoption of accounting standards (Note 2)	—	—		—			(1,000		)	—			—			(1,000		)
Stock-based compensation	—	—		4,787			—			—			—			4,787
Exercise of stock options	122	2		453			—			—			—			455
Net share settlement of stock options	—	—		(1,097		)	—			—			—			(1,097		)
Stock issued under employee stock purchase plan	34	—		210			—			—			—			210
Stock issued under restricted stock plan, net of shares held for taxes	246	2		(951		)	—			—			—			(949		)
Repurchase of common stock	—	—		—			—			—			(2,424		)	(2,424		)
Net income	—	—		—			4,636			—			—			4,636
Balance at December 31, 2018	65,289	$	653	$	205,157		$	429,992		$	—		$	(508,188	)	$	127,614

The accompanying notes are an integral part of these consolidated financial statements.

BRIDGEPOINT EDUCATION, INC.

Consolidated Statements of Cash Flows

(In thousands)



	Year Ended December 31,
	2018			2017			2016
Cash flows from operating activities
Net income (loss)	$	4,636		$	9,111		$	(33,051	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Provision for bad debts	22,834			30,294			32,022
Depreciation and amortization	6,786			8,863			13,082
Amortization of premium/discount	—			20			68
Deferred income taxes	(19		)	(600		)	28
Stock-based compensation	4,787			3,632			7,317
Loss on impairment of student loans receivable	—			—			7,542
Net loss (gain) on marketable securities	89			(274		)	(164		)
Loss on termination of leased space	2,943			5,829			13,244
Loss on disposal or impairment of fixed assets	1,406			864			3,024
Loss on impairment of goodwill and intangibles	495			—			—
Changes in operating assets and liabilities:
Accounts receivable	(27,007		)	(30,343		)	(31,724		)
Prepaid expenses and other current assets	4,133			280			13,225
Student loans receivable	—			—			876
Other long-term assets	2,843			(3,066		)	3,274
Accounts payable and accrued liabilities	(12,190		)	(12,908		)	4,778
Deferred revenue and student deposits	(6,598		)	(5,605		)	(13,572		)
Other liabilities	(12,729		)	(10,172		)	(8,886		)
Net cash (used in) provided by operating activities	(7,591		)	(4,075		)	11,083
Cash flows from investing activities
Capital expenditures	(2,581		)	(3,387		)	(1,925		)
Purchases of investments	(1,067		)	(315		)	(20,260		)
Capitalized costs for intangible assets	(873		)	(553		)	(830		)
Sales of investments	975			214			—
Maturities of investments	—			47,725			37,756
Net cash (used in) provided by investing activities	(3,546		)	43,684			14,741
Cash flows from financing activities
Proceeds from exercise of stock options	455			3,848			1,331
Tax withholdings related to net exercise of stock options	(1,097		)	—			—
Proceeds from the issuance of stock under employee stock purchase plan	210			289			246
Tax withholding on issuance of stock awards	(949		)	(1,860		)	(1,896		)
Repurchase of common stock	(2,424		)	(168,695		)	—
Net cash used in financing activities	(3,805		)	(166,418		)	(319		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(14,942		)	(126,809		)	25,505
Cash, cash equivalents and restricted cash at beginning of period	205,526			332,335			306,830
Cash, cash equivalents and restricted cash at end of period	$	190,584		$	205,526		$	332,335

Supplemental disclosure of cash flow information:
Cash paid for interest	$	73		$	65		$	62
Cash (received) paid for income taxes, net	$	(3,380	)	$	387		$	(20,788	)

Supplemental disclosure of non-cash transactions:
Purchase of equipment included in accounts payable and accrued liabilities	$	25		$	379		$	—
Issuance of common stock for vested restricted stock units	$	2,760		$	4,779		$	4,847
Property and equipment under build-to-suit leases	$	9,861		$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements

1. Nature of Business

Bridgepoint Education, Inc. (together with its subsidiaries, the “Company”), incorporated in 1999, is a provider of postsecondary education services. Its wholly-owned subsidiary, Ashford University ^® , is a regionally accredited academic institution, which delivers programs primarily online. Ashford University offers associate’s, bachelor’s, master’s and doctoral programs.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Bridgepoint Education, Inc. and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates.

Restatement of Previously Issued Consolidated Financial Statements

Subsequent to the issuance of the Company’s consolidated financial statements for the year ended December 31, 2017, the Company determined that prior financial statements had errors related to revenue for the Full Tuition Grant program portion of our student contracts which was misstated due to allowances that had not been properly determined and computational errors, which also resulted in misstatements in accounts receivable and its provision for bad debts and deferred revenue and student deposits. As a result, the Company has restated the accompanying 2017 and 2016 consolidated financial statements from amounts previously reported to correct these matters. The Company recorded a cumulative adjustment to retained earnings of $1.0 million to its opening balance sheet as of January 1, 2016 for the immaterial adjustments impacting 2015 and prior. The restatement does not impact net cash flows used in operations in any period. Management considers the restatement to be immaterial.

The following tables present the impact of the restatement corrections on the previously issued consolidated financial statements. The following tables are presented in thousands, except per share data:



	As Reported		As Restated
Consolidated balance sheet data:	December 31, 2017
Accounts receivable, net	$	27,077	$	24,174
Total current assets	$	257,056	$	254,153
Total assets	$	287,539	$	284,636
Deferred revenue and student deposits	$	68,207	$	70,766
Total current liabilities	$	139,372	$	141,931
Total liabilities	$	159,081	$	161,640
Retained earnings	$	431,818	$	426,356
Total stockholders’ equity	$	128,458	$	122,996
Total liabilities and stockholders’ equity	$	287,539	$	284,636

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)



	As Reported		As Restated		As Reported			As Restated
	Year Ended
Consolidated statements of income (loss) and comprehensive income (loss) data:	December 31, 2017				December 31, 2016
Revenue	$	478,397	$	475,113	$	527,090		$	523,518
Instructional costs and services	$	237,248	$	235,390	$	263,898		$	263,337
Total costs and expenses	$	470,545	$	468,687	$	567,311		$	566,750
Operating income (loss)	$	7,852	$	6,426	$	(40,221	)	$	(43,232	)
Income (loss) before income taxes	$	9,363	$	7,937	$	(37,915	)	$	(40,926	)
Net income (loss)	$	10,537	$	9,111	$	(30,040	)	$	(33,051	)
Basic income (loss) per share	$	0.33	$	0.28	$	(0.65	)	$	(0.71	)
Diluted income (loss) per share	$	0.32	$	0.28	$	(0.65	)	$	(0.71	)
Comprehensive income (loss)	$	10,538	$	9,112	$	(30,138	)	$	(32,953	)



	As Reported			As Restated			As Reported			As Restated
	Year Ended
Consolidated statement of cash flow data:	December 31, 2017						December 31, 2016
Net income (loss)	$	10,537		$	9,111		$	(30,040	)	$	(33,051	)
Provision for bad debts	$	32,151		$	30,294		$	32,583		$	32,022
Accounts receivable	$	(32,771	)	$	(30,343	)	$	(34,790	)	$	(31,724	)
Deferred revenue and student deposits	$	(6,460	)	$	(5,605	)	$	(14,078	)	$	(13,572	)
Cash flows provided by (used in) operating activities	$	(4,075	)	$	(4,075	)	$	11,083		$	11,083



	As Reported		As Restated		As Reported		As Restated		As Reported		As Restated
Consolidated statement of stockholders equity data:	December 31, 2017				December 31, 2016				January 1, 2016
Retained earnings	$	431,818	$	426,356	$	421,281	$	417,245	$	451,321	$	450,296
Total stockholders’ equity	$	128,458	$	122,996	$	280,706	$	276,670	$	303,650	$	302,625

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents is comprised of cash and other short-term highly liquid investments that are readily convertible into known amounts of cash. The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

The Company's restricted cash is primarily held in money market accounts, and is excluded from cash and cash equivalents on the Company's consolidated balance sheets. The majority of restricted cash represents funds held for students from Title IV financial aid programs that result in credit balances on a student’s account or funds held for students to be refunded in connection with a legal settlement. To a lesser extent, restricted cash also represents amounts held as collateral for letters of credit, a portion of which is considered long-term. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)



	As of December 31,
	2018		2017		2016
Cash and cash equivalents	$	166,307	$	185,098	$	307,802
Restricted cash, current	18,619		20,428		24,533
Restricted cash, long-term	5,658		—		—
Total cash, cash equivalents and restricted cash	$	190,584	$	205,526	$	332,335

Investments

The Company has historically held investments that consisted of mutual funds, corporate notes and bonds, and certificates of deposit. As of December 31, 2018 , the Company held investments solely in mutual funds. The Company's investments are denominated in U.S. dollars, are investment grade and are readily marketable. The Company considers as current assets those investments which will mature or are likely to be sold in less than one year.

The Company classifies its investments as either trading, available-for-sale or held-to-maturity. Trading securities are those bought and held principally to sell in the short-term, with gains or losses from changes in fair value flowing through current earnings. Available-for-sale securities are carried at fair value as determined by quoted market prices, with unrealized gains and losses, net of tax, reported as a separate component of comprehensive income (loss) and stockholders’ equity. Held-to-maturity securities would be carried at amortized cost. Amortization of premiums, accretion of discounts, interest, and realized gains and losses are included in other income, net in the consolidated statement of income (loss).

The Company regularly monitors and evaluates the realizable value of its investments. If events and circumstances indicate that a decline in the value of these assets has occurred and is other-than-temporary, the Company would record a charge to other income, net in the consolidated statements of income (loss).

Deferred Compensation

The Company has a deferred compensation plan, into which eligible participants can defer a maximum of 80% of their regular compensation and a maximum of 100% of their incentive compensation. The amounts deferred by the participant under this plan are credited with earnings or losses based upon changes in values of participant elected notional investments. Each participant is fully vested in the participant amounts deferred. The Company may make contributions that will generally vest according to a four-year vesting schedule. After four years of service, participants become fully vested in the employer contributions upon reaching normal retirement age, death, disability or a change in control. The Company's obligations under the deferred compensation plan totaled $1.5 million and $1.4 million as of December 31, 2018 and 2017 , respectively, and are included in other long-term liabilities in the consolidated balance sheets. The Company's assets relating to the deferred compensation plan totaled $2.1 million and $2.1 million as of December 31, 2018 and 2017 , respectively, and are included in investments in the consolidated balance sheets.

Fair Value Measurements

The Company uses the three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: (i) Level 1, defined as observable inputs such as quoted prices in active markets; (ii) Level 2, defined as inputs other than quoted prices in active markets that are either observable directly or indirectly, through market corroboration, for substantially the full term of the financial instrument; and (iii) Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consists of student accounts receivable, which represent amounts due for tuition, course digital materials, technology fees and other fees from currently enrolled and former students. Students generally fund their education through grants and/or loans under various Title IV programs, tuition assistance from military and corporate employers or personal funds. Generally, payments are due on the respective course start date and are considered past due dependent upon the student's payment terms. In general, an account is considered delinquent 120 days after the course start date.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

Accounts receivable are stated at the amount management expects to collect from outstanding balances. For accounts receivable, an allowance for doubtful accounts is estimated by management and is principally based on historical collection experience as well as (i) an assessment of individual accounts receivable over a specific aging and amount, (ii) consideration of the nature of the receivable accounts and (iii) potential changes in the business or economic environment. The provision for bad debt is recorded within instructional costs and services in the consolidated statements of income (loss). The Company writes off uncollectable accounts receivable when the student account is deemed uncollectable.

Student Loans Receivable and Loan Loss Reserves

During 2016, the Company reached a settlement with the Consumer Financial Protection Bureau, and in accordance with the terms of the settlement, all existing student loans receivable were written off. The Company’s institution has already ceased offering institutional loans, and no such loans were made after the year ended December 31, 2014. Before being written off, student loans receivable was stated at the amount management expected to collect from outstanding balances. For tuition related student loan receivables, the Company had estimated an allowance for doubtful accounts, similar to that of accounts receivable, based on (i) an assessment of individual loans receivable over a specific aging and amount, (ii) consideration of the nature of the receivable accounts, (iii) potential changes in the business or economic environment and (iv) related FICO scores and other industry metrics. The related provision for bad debts for the year ended December 31, 2016 were $0.2 million , and is recorded within instructional costs and services in the consolidated statements of income (loss).

The Company had also recorded a loss reserve for the full book value of any impaired loans. For the year ended December 31, 2016, there was $0.2 million recorded for loan loss reserves. The loan loss reserve was maintained at a level deemed adequate by management based on a periodic analysis of the individual loans and is recorded within instructional costs and services in the consolidated statements of income (loss).

Property and Equipment

Property and equipment are recognized at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives of the related assets as follows:



Furniture and office equipment	3 - 7 years
Software	3 - 5 years
Vehicles	5 years

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets. Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation is removed and a gain or loss is recorded in the consolidated statements of income (loss). Repairs and maintenance costs are expensed in the period incurred.

Leases

Leases are evaluated and classified as either operating or capital leases. Leased property and equipment meeting certain criteria would be capitalized, and the present value of the related lease payments is recognized as a liability on the consolidated balance sheets. Amortization of capitalized leased assets is computed on the straight-line method over the term of the lease or the life of the related asset, whichever is shorter.

If the Company receives tenant allowances from the lessor for certain improvements made to the leased property, these allowances are capitalized as leasehold improvements and a long-term liability is established. The long-term liability is amortized on a straight-line basis over the corresponding lease term. The Company records rent expense on a straight-line basis over the initial term of a lease. The difference between the rent payment and the straight-line rent expense is recorded as either a short-term or long-term liability.

The Company recognizes liabilities for exit and disposal activities on non-cancelable lease obligations at fair value in the period the liability is incurred. For the non-cancelable lease obligations, the Company records the obligation when the contract is terminated.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

Impairment of Long-Lived Assets

The Company assesses potential impairment to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recorded if the carrying amount of the long-lived asset is not recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results. For additional information, see Note 4 , “Restructuring and Impairment Charges.”

Goodwill and Other Intangible Assets

The Company tests goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of each fiscal year, or more frequently if events and circumstances warrant.

To evaluate the impairment of goodwill, the Company first assesses qualitative factors, such as deterioration in general economic conditions or negative company financial performance, to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. The Company's assessment of goodwill during the fourth quarter of fiscal 2018 indicated that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount. If negative qualitative indicators had been noted above, the Company would then need to assess the fair value of its reporting unit to determine whether it was greater or less than its carrying values. The Company's assessment of goodwill during the fourth quarter of fiscal 2018 resulted in impairment of goodwill of $0.1 million , due to the closure of a component of the Company's business.

To evaluate the impairment of the indefinite-lived intangible assets, the Company assessed the fair value of the assets to determine whether they were greater or less than the carrying values. Determining the fair value of indefinite-lived intangible asset is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions are inherently uncertain, and may include such items as growth rates used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and a determination of appropriate market comparables. The Company's assessment of indefinite-lived intangible assets during the fourth quarter of fiscal 2018 resulted in impairment of intangibles of $0.4 million , due to the closure of a component of the Company's business.

The Company also has definite-lived intangible assets, which primarily consist of purchased intangibles and capitalized curriculum development costs. The definite-lived intangible assets are recognized at cost less accumulated amortization. Amortization is computed using the straight-line method based on estimated useful lives of the related assets.

Revenue and Deferred Revenue

Revenues are recognized when control of the promised goods or services are transferred to the institutions’ students, in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods or services. Determining whether a valid customer contract exists includes an assessment of whether amounts due under the contract are collectible. The Company performs this assessment at the beginning of every contract and subsequently thereafter if new information indicates there has been a significant change in facts and circumstances.

The Company’s contracts with customers generally include multiple performance obligations, which it identifies by assessing whether each good and service promised in the contract is distinct. For each performance obligation, the Company allocates the transaction price, including fixed and variable consideration, on the basis of the relative standalone selling prices of each good and service in the contract, which is determined using observable prices.

The Company generates the majority of its revenue from tuition, technology fees, and digital materials related to students whose primary funding source is governmental funding. Tuition represents amounts charged for course instruction, and technology fees represent amounts charged for the students’ use of the technology platform on which course instruction is delivered. Digital materials fees represent amounts charged for the digital textbooks that accompany the majority of courses taught at the Company’s institution. With the exception of students attending courses within the three-week conditional admission period at Ashford University, the majority of tuition and technology fees are recognized as revenue as control of the

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

services is transferred to the student, which occurs over the applicable period of instruction. Similarly, the majority of digital materials fees are recognized as revenue when control of the product has been transferred to the student, which occurs when the student is granted unrestricted access to the digital textbook, generally, on the first day of the course. Revenue generated from students within the conditional admission period is deferred and recognized when the student matriculates into the institution, which occurs in the fourth week of the course.

The Company's institutions' online students generally enroll in a program that encompasses a series of five to six-week courses that are taken consecutively over the length of the program. With the exception of those students under conditional admission and students enrolled under the Corporate Full Tuition Grant (“FTG”) program, online students are billed on a payment period basis on the first day of a course. Students under conditional admission are billed for the payment period upon matriculation.

If a student's attendance in a class precedes the receipt of cash from the student's source of funding, the Company establishes an account receivable and corresponding deferred revenue in the amount of the tuition due for that payment period. Cash received either directly from the student or from the student's source of funding reduces the balance of accounts receivable due from the student. Financial aid from sources such as the federal government's Title IV programs pertains to the online student's award year and is generally divided into two disbursement periods. As such, each disbursement period may contain funding for up to four courses. Financial aid disbursements are typically received during the online student's attendance in the first or second course. Since the majority of disbursements cover more courses than for which a student is currently enrolled, the amount received in excess effectively represents a prepayment from the online student for up to four courses. At the end of each accounting period, the deferred revenue and related account receivable balances are reduced to present amounts attributable to the current course.

In certain cases, the Company's institution provides scholarships to students who qualify under various programs. These scholarships are recognized as direct reductions of revenue consistent with the timing of recognition associated with the related performance obligations. Also, for some customers, the Company does not expect to collect 100% of the consideration to which it is contractually entitled and, as a result, those customers may receive discounts or price adjustments that, based on historical Company practice, represent implied price concessions and are accounted for as variable consideration. The majority of these price concessions relate to amounts charged to students for goods and services, which management has determined will not be covered by the student’s primary funding source (generally, government aid) and, as a result, the student will become directly financially responsible for them. The reduction in the transaction price that results from this estimate of variable consideration reflects the amount the Company does not expect to be entitled to in exchange for the goods and services it will transfer to the students, as determined using historical experience and current factors, and includes performing a constraint analysis. These estimates of variable consideration are recorded as direct reductions of revenue consistent with the timing of recognition associated with the related performance obligation.

A portion of tuition revenue, technology fee revenue, and digital materials revenue is generated from contracts with students enrolled under the corporate FTG program, which is a 12-month grant that, when combined with a corporate partner’s annual tuition assistance program, enables eligible students to earn their degree without incurring student loan debt. Students enrolled under this program are eligible to take up to ten undergraduate or eight graduate courses per 12-month grant period and must first utilize 100% of the funds awarded under their employer’s annual tuition assistance program before they can be awarded the FTG grant. The grants awarded by Ashford University under the FTG program are considered a material right, and, as such, the Company records a contract liability for a portion of the consideration received or due under these contracts. The contract liability is recorded in deferred revenue and student deposits on the Company’s consolidated balance sheets, and further discussed in the paragraph on deferred revenue below. The standalone selling price of the material right is determined based on the observable standalone selling price of the courses. The transaction price in each FTG contract is allocated to this material right on a relative standalone selling price basis. The contract liability is recognized as revenue at the earlier of satisfaction of the future obligation or contract termination. There are no material differences between the timing of the products and services transferred and the payment terms.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

contract generally occurs after the conclusion of a course. Under special circumstances, some customers may be offered non-interest bearing payment plan arrangements that can extend for up to a maximum of three years. These payment plan arrangements give rise to significant financing components. However, since the Company historically collects substantially all the consideration to which it expects to be entitled under such payment plans within one year or less, the impact of these significant financing components is not material to any period presented.

Workers' Compensation

The Company records a gross liability for estimated workers' compensation claims, incurred but not yet reported, as of each balance sheet date. The Company also records the gross insurance recoverable due for individual claim amounts. This is recorded as an other asset and as an equal accrued liability. The stop-loss premium is determined annually, but invoiced and paid on a quarterly basis. The related insurance premiums are expensed ratably over the coverage period.

Income Taxes

The Company accounts for its income taxes using the asset-liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the bases used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates expected to be in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more-likely-than-not that the Company will not realize those tax assets through future operations.

The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.

Stock-Based Compensation

Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the vesting period. The Company estimates the fair value of stock options on the grant date using the Black-Scholes option pricing model. The Company estimates the fair value of its performance stock units (“PSUs”) on the grant date using a Monte Carlo simulation model. Determining the fair value of stock-based awards at the grant date under these models requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. The fair value of the Company's restricted stock units (“RSUs”) is based on the market price of the Company's common stock on the date of grant.

The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates award forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company's equity incentive plans require that stock option awards have an exercise price that equals or exceeds the closing price of the Company's common stock on the date of grant.

Stock-based compensation expense for stock-based awards is recorded in the consolidated statement of income (loss), net of estimated forfeitures, using the graded-vesting method over the requisite service periods of the respective stock awards. The requisite service period is generally the period over which an employee is required to provide service to the Company in exchange for the award.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

Instructional Costs and Services

Instructional costs and services consist primarily of costs related to the administration and delivery of the Company's educational programs. These expenses include compensation for faculty and administrative personnel, curriculum and new program development costs, financial aid processing costs, technology license costs, bad debt expense and costs associated with other support groups that provide services directly to the students. Instructional costs and services also include an allocation of information technology, facility, depreciation and amortization costs.

Admissions Advisory and Marketing

Admissions advisory and marketing costs include compensation of personnel engaged in marketing and recruitment, as well as costs associated with advertising media, purchasing leads and producing marketing materials. Such costs are generally affected by the cost of advertising media and leads, the efficiency of the Company's marketing and recruiting efforts, compensation for the Company's enrollment personnel and expenditures on advertising initiatives for new and existing academic programs. Admissions advisory and marketing costs also include an allocation of information technology, facility, depreciation and amortization costs.

Advertising costs, a subset of admissions advisory and marketing costs, consists primarily of marketing leads and other branding and promotional activities. These advertising activities are expensed as incurred, or the first time the advertising takes place, depending on the type of advertising activity. Advertising costs were $74.8 million , $75.7 million and $83.0 million for the years ended December 31, 2018 , 2017 and 2016 , respectively.

General and Administrative

General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, legal and compliance and other corporate functions. General and administrative expenses also include professional services fees, travel and entertainment expenses and an allocation of information technology, facility, depreciation and amortization costs.

Legal Settlement Expense

Legal settlement expense is primarily comprised of (i) the cost to settle a wage and hour dispute, (ii) charges related to the cost of resolution of the previously disclosed civil investigative demands and (iii) the estimate of amounts to resolve the previously disclosed investigative subpoenas.

Restructuring and Impairment Charges

Restructuring and impairment charges are primarily comprised of i) charges related to the write off of certain fixed assets and assets abandoned, ii) student transfer costs relating to the closure of certain components of the Company's business, iii) severance costs related to headcount reductions made in connection with restructuring plans and iv) estimated lease losses related to facilities vacated or consolidated under restructuring plans.

Income (Loss) Per Share

Basic income per common share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share is calculated by dividing net income available to common stockholders by the sum of (i) the weighted average number of common shares outstanding during the period and (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of the stock options and upon the settlement of RSUs and PSUs.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

Segment Information

The Company operates in one reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of its students regardless of geography. The Company's chief operating decision maker, its CEO and President, manages the Company's operations as a whole, and no revenue, expense or operating income information is evaluated by the chief operating decision maker on any component level.

Comprehensive Income

Comprehensive income consists of net income and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income. The following table summarizes the components of other comprehensive gain (loss) and the related tax effects for the years ended December 31, 2018 , 2017 and 2016 (in thousands):



	Unrealized gains (losses) on investments
Year ended:	Before-Tax Amount		Tax Effect			Net-of-Tax Amount
December 31, 2018	$	—	$	—		$	—
December 31, 2017	$	1	$	—		$	1
December 31, 2016	$	157	$	(59	)	$	98

There were no reclassifications out of other comprehensive income, relating to the net realized gain on the sale of securities, during the years ended December 31, 2018 , 2017 and 2016 .

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, or Accounting Standards Codification Topic 606 (“ASC 606”), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (“ASC 605”). This literature is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting guidance also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, as well as assets recognized from costs incurred to obtain or fulfill a contract. On January 1, 2018, the Company adopted ASC 606 using the modified retrospective adoption method. In accordance with the modified retrospective adoption method, the Company elected to retroactively adjust only those contracts that did not meet the definition of a completed contract at the date of initial application. The new guidance impacted the amount and timing of the Company’s revenue recognition as follows:


•	Prior to the adoption of ASC 606, we recognized revenue to the extent of cash receipts when collectibility was not reasonably assured. Under ASC 606, collectibility issues may indicate an implied price concession, which is accounted for as variable consideration. Consequently, revenues for these types of contracts are accelerated, net of any amounts which we do not expect to collect.

•

Under ASC 606, once a student is deemed to have a history of collection issues, future revenues earned are subject to a price concession as the student has demonstrated that they may not pay the full tuition price based on past behavior. This results in a reduction in the transaction price such that revenue is recorded based on the amount to which the Company expects to be entitled if, in the future, a student is deemed to have resolved their collection issues, a price concession will no longer be recorded.

At the date of adoption of ASC 606, the Company recorded a cumulative adjustment to its consolidated balance sheet, including an adjustment to retained earnings, to adjust for the aggregate impact of these revenue items, as calculated under the new guidance. The cumulative effect adjustment decreased the opening balance of retained earnings on January 1, 2018, as follows (in thousands):

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)



	Closing balance at December 31, 2017		Adjustments due to ASC 606			Opening balance at January 1, 2018
Accounts receivable, net	$	24,174	$	(1,333	)	$	22,841
Deferred revenue and student deposits	$	70,766	$	(333	)	$	70,433
Retained earnings	$	426,356	$	(1,000	)	$	425,356

The following tables present the impact of changes to the consolidated financial statement line items as a result of applying ASC 606 to the twelve months ended December 31, 2018 (in thousands):



	As Reported under ASC 606		Adjustments due to ASC 606		Amounts under ASC 605
Revenue	$	443,373	$	6,638	$	450,011
Instructional costs and services ⁽¹⁾	$	217,700	$	6,469	$	224,169
Net income	$	4,636	$	169	$	4,805

(1) Adjustment for instructional costs and services is due to change in provision for bad debts.



	As of December 31, 2018
	As Reported under ASC 606		Adjustments due to ASC 606			Amounts under ASC 605
Accounts receivable, net	$	27,015	$	1,748		$	28,763
Deferred revenue and student deposits	$	63,834	$	579		$	64,413
Retained earnings	$	429,992	$	(1,169	)	$	428,823

Comparative historical information on the consolidated statement of income has not been restated and continues to be reported under ASC 605 . For further information regarding the disaggregation of revenue recorded in the current period, refer to Note 3, “Revenue Recognition” to the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases at the lease commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. Lessees will no longer be provided with a source of off-balance sheet financing. Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842 ; ASU 2018-10, Codification Improvements to Topic 842, Leases ; and ASU 2018-11, Targeted Improvements. Public companies should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company expects to adopt the new standard on January 1, 2019 and use the effective date as its date of initial application.

A modified retrospective transition approach would require applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. An entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides several optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits us not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of hindsight or the practical expedient pertaining to land easements; the latter not being applicable. The standard also provides practical expedients for an entity’s ongoing accounting. The Company

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

currently expects to elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize right-of-use assets or lease liabilities, and this includes not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition. The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for all its leases.

The Company expects that ASU 2016-02 will have a material effect on its financial statements. While the Company continues to assess all of the effects of adoption, it currently believes the most significant effects relate to (1) the recognition of new right-of-use assets and lease liabilities on its balance sheet for real estate operating leases; (2) the derecognition of existing assets and liabilities for certain assets under construction in build-to-suit lease arrangements that the Company will lease when construction is complete; and (3) providing significant new disclosures about its leasing activities. The Company does not expect a significant change in its leasing activities between now and adoption.

Upon adoption, the Company expects to recognize right-of-use assets of approximately $24.9 million , with corresponding operating lease liabilities of approximately $33.3 million . The operating lease liabilities are based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The Company plans to use its estimated incremental borrowing rate based on information available at the date of adoption in calculating the present value of its existing lease payments. The incremental borrowing rate will be determined using the U.S. Treasury rate adjusted to account for the Company’s credit rating and the collateralized nature of operating leases.

Upon adoption, the Company also expects to derecognize an existing debt obligation of $8.6 million with corresponding construction-in-process of the same amount for an asset under construction in build-to-suit lease arrangements. Upon completion of the related build-to-suit construction, the Company expects to recognize a new right-of-use asset and lease liability on its balance sheet for the associated lease. The Company does not expect any material adjustments to the opening balance of retained earnings upon adoption of the new standard given the nature of the impacts and the other transition practical expedients elected by the Company. The Company does not expect the adoption of this standard to have a material impact on the recognition, measurement or presentation of lease expenses within its consolidated statements of operations or cash flows.

In June 2018, the FASB issued ASU 2018-07, Improvements to Non-Employee Share-Based Payment Accounting , which simplifies the accounting for share-based payments granted to non-employees for goods and services. Under the literature, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees currently under ASC 718, Compensation - Stock Compensation . Board members are the only non-employees that the Company grants to, who are treated as “employees” under ASC 718. The guidance is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. The Company believes that the adoption of ASU 2018-07 will not have a significant impact on the Company’s consolidated financial statements.

3. Revenue Recognition

The following table presents the Company’s net revenue disaggregated based on the revenue source (in thousands):



	Twelve Months Ended December 31, 2018
Tuition revenue, net	$	402,711
Digital materials revenue, net	24,730
Technology fee revenue, net	14,047
Other revenue, net ⁽¹⁾	1,885
Total revenue, net	$	443,373

(1) Primarily consists of revenues generated from services such as graduation fees, transcript fees, and other miscellaneous services.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

The following table presents the Company’s net revenue disaggregated based on the timing of revenue recognition (in thousands):



	Twelve Months Ended December 31, 2018
Over time, over period of instruction	$	382,554
Over time, full tuition grant ⁽¹⁾	36,230
Point in time ⁽²⁾	24,589
Total revenue, net	$	443,373


(1)	Represents revenue generated from the corporate full tuition grant (“FTG”) program.


(2)	Represents revenue generated from digital textbooks and other miscellaneous fees.

The Company operates under one reportable segment and has no foreign operations or assets located outside of the United States.

Deferred Revenue

Deferred revenue consists of cash payments that are received or due in advance of the Company’s performance as well as deferrals associated with certain contracts that include a material right. Below are the opening and closing balances of deferred revenue from the Company’s contracts with customers (in thousands):



	Deferred Revenue
Opening balance, January 1, 2018	$	22,001
Closing balance, December 31, 2018	21,768
Increase (Decrease)	$	(233	)

For further information on deferred revenue and student deposits, refer to Note 11 , “Deferred Revenue and Student Deposits” and for further information on receivables, refer to Note 6, “Accounts Receivable, Net” within the consolidated financial statements.

For the majority of the Company’s customers, payment for products and services is due at the beginning of each course. Billing of products and services transferred under a FTG student contract generally occurs after the conclusion of a course. Under special circumstances, some customers may be offered non-interest bearing payment plan arrangements that can extend for up to a maximum of three years. These payment plan arrangements give rise to a significant financing component. However, since the Company historically collects substantially all of the consideration to which it expects to be entitled under such payment plans within one year or less, the impact of the significant financing component in these transactions is not material to any period presented.

The difference between the opening and closing balances of deferred revenue primarily results from the timing difference between the Company’s performance and the customer’s payment. For the year ended December 31, 2018 , the Company recognized $21.9 million of revenue that was included in the deferred revenue balance as of January 1, 2018. Amounts reported in the closing balance of deferred revenue are expected to be recognized as revenue within the next 12 months.

4 . Restructuring and Impairment Charges

The Company has written off certain assets and has implemented various restructuring plans to better align its resources with its business strategy. These related charges are recorded in the restructuring and impairment charges line item on the Company’s consolidated statements of income (loss).

During the years ended December 31, 2018 , 2017 and 2016 , the Company recognized asset impairment charges of $1.7 million , $0.8 million and $2.2 million , respectively. The charges for this year ending December 31, 2018 , related to the

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

impairment of certain fixed assets, goodwill and intangible assets as a result of the closure of a component of the Company's business. The charges in the year ended December 31, 2017 also related to the discontinuation of certain software, and the charges in the year ended December 31, 2016 also related to vacating leased property in 2016 as a result of the decision to close Ashford University’s residential campus in 2015.

With the closure of the residential campus, ground-based Ashford University students were provided opportunities to continue their degrees through individual student transfer agreements. The Company initially recorded restructuring charges relating to future cash expenditures for student transfer agreements based upon several assumptions that were subject to change, including assumptions related to the number of students who elected to continue to pursue their degrees through Ashford University’s online programs. For the years ended December 31, 2018 , 2017 and 2016 , the Company reassessed this estimate and decreased the related restructuring charges by approximately $0.3 million , $0.1 million and $0.1 million respectively. Offsetting these amounts for the year ended December 31, 2018 , were charges relating to the closure of a component of the Company's business, where students had the opportunity to have certain portions of their tuition and fees refunded under the Department regulations regarding “borrower defense to repayment.” The Company currently estimates that a reasonable range for this matter is between $1.5 million and $8.3 million . The Company has recorded an expense of $1.5 million for the year ended December 31, 2018 related to this matter which represents its current best estimate of the cost of resolution of this matter.

The Company has also implemented various reductions in force to help better align personnel resources with the decline in enrollment. During the years ended December 31, 2018 , 2017 and 2016 , the Company recognized $1.9 million , $2.2 million and $2.7 million , respectively, as restructuring charges related to severance costs for wages and benefits resulting from the reductions in force. The Company anticipates the remainder of these costs will be paid out by the end of the first quarter of 2019 from existing cash on hand.

As part of its continued efforts to streamline operations, the Company vacated or consolidated properties in Denver and San Diego and reassessed its obligations on non-cancelable leases. The fair value estimate of these non-cancelable leases is based on the contractual lease costs over the remaining term, partially offset by estimated future sublease rental income. The estimated rental income considers subleases the Company has executed or expects to execute, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the related facilities. During the years ended December 31, 2018 , 2017 and 2016 , the Company recorded $2.9 million , $5.8 million and $14.5 million , respectively, as restructuring charges relating to lease exit and other costs, due to reassessment of estimates.

The following table summarizes the amounts recorded in the restructuring and impairment charges line item on the Company's consolidated statements of income (loss) for each of the periods presented (in thousands):



	Year Ended December 31,
	2018		2017			2016
Asset impairment	$	1,718	$	798		$	2,215
Student transfer costs	1,186		(120		)	(142		)
Severance costs	1,947		2,175			2,668
Lease exit and other costs	2,943		5,829			14,535
Total restructuring and impairment charges	$	7,794	$	8,682		$	19,276

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

The following table summarizes the changes in the Company's restructuring liability by type during the three-year period ended December 31, 2018 (in thousands):



	Asset Impairment			Student Transfer Costs			Severance Costs			Lease Exit and Other Costs			Total
Balance at December 31, 2015	$	—		$	3,224		$	1,744		$	13,921		$	18,889
Restructuring and impairment charges	2,215			(142		)	2,668			14,535			19,276
Payments	—			(1,490		)	(3,845		)	(9,999		)	(15,334		)
Non-cash transaction	(2,215		)	—			—			—			(2,215		)
Balance at December 31, 2016	—			1,592			567			18,457			20,616
Restructuring and impairment charges	798			(120		)	2,175			5,829			8,682
Payments	—			(878		)	(2,547		)	(13,643		)	(17,068		)
Non-cash transaction	(798		)	—			—			—			(798		)
Balance at December 31, 2017	—			594			195			10,643			11,432
Restructuring and impairment charges	1,718			1,186			1,947			2,943			7,794
Payments	—			(277		)	(1,875		)	(10,722		)	(12,874		)
Non-cash transaction	(1,718		)	—			—			—			(1,718		)
Balance at December 31, 2018	$	—		$	1,503		$	267		$	2,864		$	4,634

The restructuring liability amounts are recorded within either the accounts payable and accrued liabilities account or the rent liability account on the consolidated balance sheets. The Company is not complete with its restructuring activities and anticipates additional charges in the foreseeable future.

5. Investments

The following tables summarize the fair value information of total investments as of December 31, 2018 and 2017 , respectively (in thousands):



	December 31, 2018
	Level 1		Level 2		Level 3		Total
Mutual funds	$	2,068	$	—	$	—	$	2,068



	December 31, 2017
	Level 1		Level 2		Level 3		Total
Mutual funds	$	2,065	$	—	$	—	$	2,065

The mutual funds in the tables above, represent the deferred compensation asset balances, which are considered to be trading securities. There were no transfers between level categories for investments during the periods presented. The Company’s money market securities are recorded in the cash and cash equivalents line item on the Company’s consolidated balance sheets, and are classified as Level 1 securities.

There were no differences between amortized cost and fair value of investments as of December 31, 2018 and 2017 . There were no reclassifications out of accumulated other comprehensive income during either the twelve months ended December 31, 2018 and 2017 . As of December 31, 2018 , the $2.1 million of mutual funds, representing the deferred compensation asset balances are considered to be trading securities.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

6. Accounts Receivable, Net

Accounts receivable, net, consists of the following (in thousands):



	As of December 31,
	2018		2017
Accounts receivable	$	39,195	$	39,363
Less allowance for doubtful accounts	12,180		15,189
Accounts receivable, net	$	27,015	$	24,174

There is an immaterial amount of accounts receivable, net, at each balance sheet date with a payment due date of greater than one year.

The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):



Allowance for doubtful accounts receivable:	Beginning Balance		Charged to Expense		Deductions (1)			Ending Balance
For the year ended December 31, 2018	$	15,189	$	22,834	$	(25,843	)	$	12,180
For the year ended December 31, 2017	$	15,621	$	30,294	$	(30,726	)	$	15,189
For the year ended December 31, 2016	$	10,114	$	31,862	$	(26,355	)	$	15,621


(1)	Deductions represent accounts written off, net of recoveries.

7. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consists of the following (in thousands):



	As of December 31,
	2018		2017
Prepaid expenses	$	5,445	$	6,195
Prepaid licenses	5,840		4,882
Income tax receivable	5,044		8,889
Prepaid insurance	1,077		1,215
Insurance recoverable	723		1,192
Other current assets	126		15
Total prepaid expenses and other current assets	$	18,255	$	22,388

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

8. Property and Equipment, Net

Property and equipment, net, consists of the following (in thousands):



	As of December 31,
	2018			2017
Buildings, build-to-suit	$	10,434		$	—
Furniture and office equipment	31,227			43,330
Software	7,517			12,313
Leasehold improvements	3,430			5,445
Vehicles	22			22
Total property and equipment	52,630			61,110
Less accumulated depreciation and amortization	(35,770		)	(50,676		)
Total property and equipment, net	$	16,860		$	10,434

Depreciation and amortization expense associated with property and equipment totaled $ 4.3 million , $ 5.5 million and $ 8.4 million for the years ended December 31, 2018 , 2017 and 2016 , respectively.

9. Goodwill and Intangibles, Net

Goodwill and intangibles, net, consists of the following (in thousands):



	December 31, 2018
Definite-lived intangible assets:	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Capitalized curriculum costs	$	21,076	$	(19,338	)	$	1,738
Purchased intangible assets	15,850		(7,219		)	8,631
Total definite-lived intangible assets	$	36,926	$	(26,557	)	$	10,369
Goodwill and indefinite-lived intangibles						2,072
Total goodwill and intangibles, net						$	12,441

	December 31, 2017
Definite-lived intangible assets:	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Capitalized curriculum costs	$	21,463	$	(19,300	)	$	2,163
Purchased intangible assets	15,850		(5,987		)	9,863
Total definite-lived intangible assets	$	37,313	$	(25,287	)	$	12,026
Goodwill and indefinite-lived intangibles						2,567
Total goodwill and intangibles, net						$	14,593

Goodwill and indefinite-lived intangibles includes the goodwill resulting from prior period acquisitions and the indefinite-lived intangibles attributable to the accreditation of the Company's institution. Definite-lived intangibles include trademark agreements and digital course materials.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

For the years ended December 31, 2018 , 2017 and 2016 , amortization expense was $2.5 million , $3.4 million and $4.7 million , respectively. The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):



Year Ended December 31,
2019	$	2,041
2020	1,791
2021	1,549
2022	1,280
2023	1,236
Thereafter	2,472
Total future amortization expense	$	10,369

10. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consists of the following (in thousands):



	As of December 31,
	2018		2017
Accounts payable	$	5,313	$	5,619
Accrued salaries and wages	7,807		8,573
Accrued bonus	8,147		6,924
Accrued vacation	7,929		8,237
Accrued litigation and fees	8,041		9,886
Accrued expenses	17,692		16,024
Current leases payable	5,768		12,971
Accrued insurance liability	2,095		2,931
Total accrued liabilities	$	62,792	$	71,165

11 . Deferred Revenue and Student Deposits

Deferred revenue and student deposits consists of the following (in thousands):



	As of December 31,
	2018		2017
Deferred revenue	$	21,768	$	22,001
Student deposits	42,066		48,765
Total deferred revenue and student deposits	$	63,834	$	70,766

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

12. Other Long-Term Liabilities

Other long-term liabilities consists of the following (in thousands):



	As of December 31,
	2018		2017
Uncertain tax positions	$	865	$	8,893
Other long-term liabilities	2,570		3,815
Total other long-term liabilities	$	3,435	$	12,708

13 . Credit Facilities

The Company has issued letters of credit that are collateralized with cash in the aggregate amount of $14.9 million , which is included as either restricted cash or other long-term assets in the consolidated balance sheets as of December 31, 2018 .

As part of its normal business operations, the Company is required to provide surety bonds in certain states in which the Company does business. The Company has entered a surety bond facility with an insurance company to provide such bonds when required. As of December 31, 2018 , the Company's total available surety bond facility was $6.5 million and the surety had issued bonds totaling $4.2 million on the Company's behalf under such facility.

14. Lease Obligations

Operating leases

The Company leases certain office facilities and office equipment under non-cancelable lease arrangements that expire at various dates through 2023. The office leases contain certain renewal options. Rent expense under non-cancelable operating lease arrangements is accounted for on a straight-line basis and totaled $14.9 million , $15.0 million and $23.3 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. Rent expense in certain periods also includes the restructuring and impairment charges recorded and therefore, may differ significantly from cash payments. For additional information, see Note 4 , “Restructuring and Impairment Charges.”

The following table summarizes the future minimum rental payments under non-cancelable operating lease arrangements in effect at December 31, 2018 (in thousands):



Year Ended December 31,
2019	$	20,382
2020	9,936
2021	6,460
2022	3,826
2023	2,726
Thereafter	17,710
Total minimum payments	$	61,040

The Company has agreements to sublease certain portions of its office facilities, with three active subleases as of December 31, 2018 . The Company is subleasing approximately 28,300 square feet of office space in San Diego, California with a commitment to lease for 16 months and a net sublease value of $1.0 million . In addition, the Company is subleasing approximately 72,000 square feet of office space in Denver, Colorado with a commitment to lease for 32 months and a net sublease value of $3.2 million .

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

During 2018, the Company entered into a lease agreement consisting of approximately 131,000 square feet of office space located in Chandler, Arizona. Although the Company is not the legal owner of the leased space, the Company is involved in the construction and the build-out of the space, and as such, serves as the construction agent on behalf of the landlord. Under such arrangement, the Company has obligations to fund cost over-runs in its capacity as the construction agent, and accordingly has determined that under lease accounting standard ASC 840, Leases, it bears substantially all of the risks and rewards of ownership as measured under GAAP. The Company is therefore required to report the landlord's costs of construction on its balance sheet as a fixed asset during the construction period as if the Company owned such asset. In connection with this arrangement, the Company has recorded $10.4 million in buildings, build-to-suit, in property and equipment, net, with a corresponding lease financing obligation of $8.6 million on the consolidated balance sheets as of December 31, 2018 .

15. Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing net income (loss) available to common stockholders for the period by the weighted average number of common shares outstanding for the period.

Diluted income (loss) per share is calculated by dividing net income (loss) available to common stockholders for the period by the sum of (i) the weighted average number of common shares outstanding during the period, plus (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive securities for the periods presented include incremental stock options, unvested restricted stock units (“RSUs”) and unvested performance stock units (“PSUs”).

The following table sets forth the computation of basic and diluted income (loss) per share for the periods indicated (in thousands, except per share data):



	Year Ended December 31,
	2018		2017		2016
Numerator:
Net income (loss)	$	4,636	$	9,111	$	(33,051	)
Denominator:
Weighted average number of common shares outstanding	27,135		32,058		46,228
Effect of dilutive options and stock units	428		736		—
Diluted weighted average number of common shares outstanding	27,563		32,794		46,228
Income (loss) per share:
Basic	$	0.17	$	0.28	$	(0.71	)
Diluted	$	0.17	$	0.28	$	(0.71	)

The following table sets forth the number of stock options, RSUs and PSUs excluded from the computation of diluted loss per share for the periods indicated because their effect was anti-dilutive (in thousands):



	Year Ended December 31,
	2018	2017	2016
Stock options	2,524	1,850	4,359
Stock units	64	6	730

16 . Stock-Based Compensation

The Company recorded $4.8 million , $3.6 million and $7.3 million of compensation expense related to equity awards for the years ended December 31, 2018 , 2017 and 2016 , respectively. The related income tax benefit was $1.2 million , $1.4 million and $2.7 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. However, there was no net tax benefit recorded for the equity awards, as the Company was in a full valuation allowance position for the years ended December 31, 2018 , 2017 and 2016 . The Company records stock-based compensation expense over the vesting term using the graded-vesting method.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

Stock Options

The Company grants stock options from its 2009 Stock Incentive Plan (the “2009 Plan”). The compensation committee of the Company's board of directors, or the full board of directors, determines eligibility, vesting schedules and exercise prices for stock options granted under the 2009 Plan. Stock options granted under the 2009 Plan typically have a maximum contractual term of 10 years , subject to the option holder's continuing service with the Company. Stock options are generally granted with a four -year vesting requirement, pursuant to which the option holder must continue providing service to the Company at the applicable vesting date. All stock options granted during the years ended December 31, 2018 , 2017 and 2016 were awarded pursuant to the 2009 Plan. Under the 2009 Plan, the number of authorized shares is subject to automatic increase each January 1 through and including January 1, 2019, pursuant to a formula contained in the 2009 Plan, without the need for further approval by the Company's board of directors or stockholders.

Before the adoption of the 2009 Plan, the Company awarded stock options pursuant to the Company's Amended and Restated 2005 Stock Incentive Plan (the “2005 Plan”). Effective upon the closing of the Company's initial public offering, the 2005 Plan was terminated and no further stock options may be issued under the 2005 Plan, provided that all stock options then outstanding under the 2005 Plan will continue to remain outstanding pursuant to the terms of the 2005 Plan and the applicable award agreements.

The following table presents a summary of stock option activity during the years ended December 31, 2018 , 2017 and 2016 (in thousands, except for exercise prices and contractual terms):



	Options Outstanding		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
December 31, 2015	4,653		$	13.72	4.84	$	2,556
Granted	375		$	10.44
Exercised	(306	)	$	4.35
Forfeitures and expired	(1,115	)	$	15.41
December 31, 2016	3,607		$	13.64	4.80	$	2,025
Granted	332		$	10.44
Exercised	(537	)	$	7.17
Forfeitures and expired	(502	)	$	15.51
December 31, 2017	2,900		$	14.15	4.23	$	—
Granted	35		$	6.89
Exercised	(798	)	$	10.50
Forfeitures and expired	(165	)	$	17.82
December 31, 2018	1,972		$	15.19	4.49	$	4
Vested and expected to vest at December 31, 2018	1,965		$	15.21	4.48	$	4
Exercisable at December 31, 2018	1,740		$	15.90	4.02	$	—

As of December 31, 2018 , the Company had 4.2 million shares of common stock reserved for issuance upon the exercise of outstanding stock options and settlement of outstanding stock awards under the Company's equity incentive plans. Shares issued upon stock option exercises and settlements of stock awards are drawn from the authorized but unissued shares of common stock.

During the year ended December 31, 2018 , there were 0.8 million stock options exercised with an intrinsic value of $2.3 million . No windfall tax benefit was realized from these exercises. The Company also realized a total tax benefit shortfall of

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

$0.8 million . During the year ended December 31, 2017 , there were 0.5 million stock options exercised with an intrinsic value of $2.7 million . The windfall tax benefit realized from these exercises was $0.3 million . The Company also realized a total tax benefit shortfall of $1.6 million . During the year ended December 31, 2016 , there were 0.3 million stock options exercised with an intrinsic value of $1.2 million . The windfall tax benefit realized from these exercises was $0.3 million . The Company also realized a total tax benefit shortfall of $3.4 million .

Approximately 0.2 million and 0.3 million stock options expired during the years ended December 31, 2018 and 2017 , respectively.

The fair value of each stock option award granted during the years ended December 31, 2018 , 2017 and 2016 was estimated on the date of grant using the Black-Scholes option pricing model. The Company's determination of the fair value of share-based awards is affected by the Company's common stock price as well as assumptions regarding several complex and subjective variables.

Below is a summary of the assumptions used for the stock options granted in the years indicated.



	2018			2017			2016
Weighted average exercise price per share	$	6.89		$	10.44		$	10.44
Risk-free interest rate	2.7		%	2.1		%	1.4		%
Expected dividend yield	—			—			—
Expected volatility	41.8		%	47.2		%	49.8		%
Expected life (in years)	5.75			5.75			5.75
Forfeiture rate	13.0		%	11.0		%	9.0		%
Weighted average grant date fair value per share	$	2.97		$	4.76		$	4.91

The risk-free interest rate is based on the currently available rate on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the stock option converted into a continuously compounded rate. The Company has never declared or paid any cash dividends on its common stock and does not currently anticipate paying cash dividends in the future. The Company has enough historical option exercise information to compute an expected term for use as an assumption in the Black-Scholes option pricing model, and as such, its computation of expected term was calculated using its own historical data. The volatility of the Company's common stock is also based upon its own historical volatility.

As of December 31, 2018 , 2017 and 2016 , there was $0.4 million , $0.9 million and $1.4 million , respectively, of unrecognized compensation costs related to unvested stock options. At December 31, 2018 , the unrecognized compensation costs of stock options were expected to be recognized over a weighted average period of 1.1 years.

Stock Awards

The Company also grants RSUs to its employees under the 2009 Plan. Each RSU represents the future issuance of one share of the Company's common stock contingent upon the recipient's continued service with the Company through the applicable vesting date. Upon the vesting date, RSUs are automatically settled for shares of the Company's common stock unless the applicable award agreement provides for delayed settlement. If prior to the vesting date the employee's status as a full-time employee is terminated, the unvested RSUs are automatically canceled on the employment termination date, unless otherwise specified in an employee's individual employment agreement. The fair value of an RSU is calculated based on the market value of the common stock on the grant date and is amortized over the applicable vesting period using the graded-vesting method.

The Company also grants certain PSUs under the 2009 Plan to various individuals. During the year ended December 31, 2018 , 0.2 million PSUs were granted. There were no PSUs granted during either of the years ended December 31, 2017 or 2016. Each PSU represents the future issuance of one share of the Company's common stock contingent upon achievement of the applicable performance target and the recipient's continued service with the Company through the applicable vesting date.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

Certain of the PSUs may be earned based on the achievement of a market-based measure, and certain of the PSUs may be earned based on performance-based measures.

With respect to each award of PSUs, vesting is based upon the achievement of the applicable performance target, and subject to the employee's continued service with the Company through the applicable vesting date. If prior to the vesting date the employee's status as a full-time employee is terminated, the unvested PSUs are automatically canceled on the employment termination date, unless otherwise specified in an employee's individual employment agreement. PSUs are amortized over the applicable vesting period using the graded-vesting method. The fair value of the portion of the PSU awards subject to earning based on the achievement of a performance-based measure was based on the Company's stock price as of the date the applicable performance target was approved by the Company's board of directors. Compensation cost for the portion of the PSU awards subject to earning based on the achievement of a performance-based measure is recorded based on the probable outcome of the performance conditions associated with the shares, as determined by management. The fair value of the portion of the PSU awards subject to earning based on the achievement of a market-based measure was estimated based on the Company's stock price as of the date of grant using a Monte Carlo simulation model.

The assumptions for the portion of the PSU awards subject to earning based on the achievement of a market-based measure are noted in the following table:



	2018
Grant price per share	$	9.57
Risk-free interest rate	2.9		%
Expected dividend yield	—
Historical volatility	52.5		%
Expected life (in years)	1.5
Forfeiture rate	13.0		%
Weighted average grant date fair value per share	$	11.34

A summary of the RSU and PSU activity and related information is as follows (in thousands, except for exercise prices and contractual terms):



	Restricted Stock Units and Performance Stock Units
	Time-Based RSU				Performance-Based PSU				Market-Based PSU
	Number of Shares		Weighted Average Purchase Price		Number of Shares		Weighted Average Purchase Price		Number of Shares		Weighted Average Purchase Price
Balance at December 31, 2015	1,390		$	10.78	359		$	9.86	966		$	5.11
Awarded	505		$	10.18	—		—		—		—
Vested	(472	)	$	10.84	—		—		—		—
Canceled	(289	)	$	10.69	(92	)	$	9.86	(231	)	$	5.19
Balance at December 31, 2016	1,134		$	10.52	267		$	9.86	735		$	5.09
Awarded	473		$	10.45	—		—		—		—
Vested	(461	)	$	10.58	—		—		—		—
Canceled	(302	)	$	10.51	(103	)	$	9.86	(300	)	$	5.04
Balance at December 31, 2017	844		$	10.45	164		$	9.86	435		$	5.13
Awarded	1,121		$	7.55	—		—		237		9.57
Vested	(377	)	$	10.68	—		—		—		—
Canceled	(148	)	$	9.61	—		$	—	(2	)	$	9.57
Balance at December 31, 2018	1,440		$	8.22	164		$	9.86	670		$	6.69

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

As of December 31, 2018 and 2017 , there was $6.4 million and $3.6 million , respectively, of unrecognized compensation costs related to unvested RSUs. At December 31, 2018 , the unrecognized compensation costs of RSUs were expected to be recognized over a weighted average period of 1.4 years.

During the year ended December 31, 2018 , 0.4 million RSUs vested and were released with a market value of $2.8 million . The related windfall tax benefit realized was approximately $39,000 , and the related tax benefit shortfall realized was $0.3 million . During the year ended December 31, 2017 , 0.5 million RSUs vested and were released with a market value of $4.8 million . The related windfall tax benefit realized was $0.1 million , and the related tax benefit shortfall realized from the RSUs released was $0.1 million . During the year ended December 31, 2016 , 0.5 million RSUs vested and were released with a market value of $4.8 million . There was $0.1 million related windfall tax benefit realized, and the related tax benefit shortfall realized from the RSUs released was $0.2 million .

As of December 31, 2018 , there was $2.7 million of unrecognized compensation costs related to unvested PSUs. At December 31, 2018 , the unrecognized compensation costs of PSUs were expected to be recognized over a weighted average period of 0.8 years, to the extent the applicable performance criteria are met. No PSUs vested during the years ended December 31, 2018 , 2017 and 2016 .

17 . Stock Repurchase Programs

The Company's board of directors (“board”) may authorize the Company to repurchase outstanding shares of its common stock from time to time in the open market through block trades or otherwise depending on market conditions and other considerations, pursuant to the applicable rules of the Securities and Exchange Commission (“SEC”). The Company's policy is to retain these repurchased shares as treasury shares and not to retire them. The amount and timing of future share repurchases, if any, will be determined as market and business conditions warrant.

On March 10, 2017, the Company repurchased approximately 18.1 million shares of the Company's common stock for an aggregate purchase price of approximately $152.0 million , including fees. On November 21, 2017, the Company repurchased 2.1 million shares of the Company's common stock for an aggregate purchase price of approximately $16.7 million , including fees.

On November 17, 2017, the Company's board authorized a share repurchase program of up to $20.0 million in aggregate value of shares of its common stock over the next 12 months. The timing and extent of any repurchases will depend upon market conditions, the trading price of the Company's shares and other factors, and subject to the restrictions relating to volume, price and timing under applicable law. In addition, the Company may commence or suspend share repurchases at any time or from time to time. Under this program, during the year ended December 31, 2018 , the Company repurchased approximately 0.4 million shares of the Company’s common stock for an aggregate purchase price of approximately $2.4 million , including fees.

18. Income Taxes

The Company uses the asset-liability method to account for taxes. Under this method, deferred income tax assets and liabilities result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in income and deductions in future years. The components of income tax expense (benefit) are as follows (in thousands):

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)



	Year Ended December 31,
	2018			2017			2016
Current:
Federal	$	(1,836	)	$	(1,091	)	$	(8,433	)
State	(5,727		)	517			530
	(7,563		)	(574		)	(7,903		)
Deferred:
Federal	(12		)	(605		)	25
State	(7		)	5			3
	(19		)	(600		)	28
Total	$	(7,582	)	$	(1,174	)	$	(7,875	)

On December 22, 2017, H.R.1, formerly known as the Tax Cuts and Jobs Act (the “Tax Legislation”) significantly revised the U.S. tax code that could affect the Company's year ended December 31, 2018, including, but not limited to, lowering the U.S. federal corporate income tax rate from 35% to 21% ; bonus depreciation that will allow for full expensing of qualified property; limitations on the deductibility of certain executive compensation and other deductions; and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. The enactment of the Tax Legislation resulted in a one-time remeasurement of the Company's U.S. federal deferred tax assets and liabilities from 35% to the lower enacted corporate tax rate or 21% . The provisional remeasurement of the Company's deferred tax balance was primarily offset by a corresponding change in the valuation allowance in the year ended December 31, 2017. The Company completed its accounting for the income tax effects of the Tax Legislation in 2018, and no material adjustments were required to the provisional amounts initially recorded.

Each reporting period, the Company assesses the likelihood that it will be able to recover its deferred tax assets, which represent timing differences in the recognition of certain tax deductions for accounting and tax purposes. The realization of deferred tax assets is dependent, in part, upon future taxable income. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income given current business conditions affecting the Company, and the feasibility of ongoing tax planning strategies.

As of December 31, 2018, the Company continued to record a full valuation allowance against all net deferred tax assets mainly because the Company was in a three-year cumulative pretax book loss position at December 31, 2018. The Company intends to maintain a valuation allowance against its deferred tax assets until sufficient positive evidence exists to support its reversal.

Deferred income tax balances reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are paid or recovered.

Significant components of the Company’s deferred tax assets and liabilities and balance sheet classifications are as follows (in thousands):

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)



	As of December 31,
	2018			2017
Deferred tax assets:
Net operating loss	$	5,925		$	2,183
Fixed assets	1,543			(291		)
Bad debt	1,537			1,194
Vacation accrual	1,954			1,880
Stock-based compensation	5,313			6,435
Deferred rent	2,168			4,818
State tax	—			1,520
Bonus accrual	1,456			1,372
Accrued expenses	3,303			3,711
Revenue reserves	—			2,007
Other	987			766
Total deferred tax assets	24,186			25,595
Valuation allowance	(23,603		)	(25,251		)
Net deferred tax assets	583			344
Deferred tax liabilities:
Indefinite-lived intangibles	(450		)	(517		)
Other	(288		)	—
Total deferred tax liabilities	(738		)	(517		)
Total net deferred tax assets (liabilities)	$	(155	)	$	(173	)

At December 31, 2018 , the Company had federal and state net operating loss carryforwards of $19.9 million and $35.0 million , respectively, which are available to offset future taxable income. The federal and state net operating loss carryforwards will begin to expire in 2021 and 2020, respectively. The Company’s utilization of net operating loss carryforwards may be subject to annual limitations due to ownership change provisions of Section 382 of Internal Revenue Code of 1986, as amended.

The following table presents a reconciliation of the income tax benefit computed using the federal statutory tax rate of 21% and the Company's provision for income taxes (in thousands):



	Year Ended December 31,
	2018					2017					2016
Computed expected federal tax expense	$	(619	)	21.0	%	$	2,778		35.0	%	$	(14,324	)	35.0	%
State taxes, net of federal benefit	142			(4.8	)	277			3.5		(628		)	1.5
Permanent differences	640			(21.7	)	(363		)	(4.5	)	341			(0.8	)
Penalty	—			—		—			—		2,800			(6.8	)
Uncertain tax positions	(4,422		)	150.1		677			8.5		346			(0.9	)
Credits	—			—		(466		)	(5.9	)	(402		)	1.0
Stock compensation	879			(29.8	)	1,277			16.1		116			(0.3	)
Federal tax rate change	—			—		12,726			160.3		—			—
Domestic production activities	(2,245		)	76.2		—			—		—			—
Valuation allowance	(1,939		)	65.8		(18,169		)	(228.9	)	3,839			(9.4	)
Other	(18		)	0.6		89			1.1		37			(0.1	)
Income tax benefit	$	(7,582	)	257.4	%	$	(1,174	)	(14.8	)%	$	(7,875	)	19.2	%

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

The Company has recognized a tax benefit of $5.7 million associated with a reduction in uncertain tax position mainly associated with the California audit examination settlement for the tax years ended December 31, 2008 through 2012, and $1.8 million income tax benefit including interest associated with refund claims for qualified production activities tax deductions for the tax years ended December 31, 2013 and 2014.

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits (in thousands):



	Year Ended December 31,
	2018			2017			2016
Unrecognized tax benefits at beginning of period	$	18,869		$	20,248		$	20,589
Gross increases - tax positions in prior period	487			427			176
Gross decreases - tax positions in prior period	(16,369		)	(1,354		)	(517		)
Gross increases - current period tax positions	—			—			—
Settlements	(1,936		)	—			—
Lapse of statute of limitations	(166		)	(452		)	—
Unrecognized tax benefits at end of period	$	885		$	18,869		$	20,248

In 2018, the Company executed a Closing Agreement with the California Franchise Tax Board to settle an audit principally associated with the method of sourcing services income for sales factor apportionment purposes. The settlement resolved the sales factor sourcing issue for the audit period covering the California income tax returns for years ended December 31, 2008 through 2012. As part of the settlement, the Company has agreed to withdraw a refund claim of $12.6 million and paid $1.9 million in additional taxes and interest which were previously included in the prior period unrecognized tax benefits.

Included in the amount of unrecognized tax benefits at December 31, 2018 and 2017 is $0.7 million and $14.8 million , respectively, of tax benefits that, if recognized, would affect the Company's effective tax rate. Also included in the balance of unrecognized tax benefits at December 31, 2018 and 2017 is $0.1 million and $3.9 million , respectively, of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred tax assets which was offset by a full valuation allowance. It is reasonably possible that the total amount of the unrecognized tax benefit will change during the next 12 months; however, the Company does not expect the potential change to have a material effect on the results of operations or financial position in the next year.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. At December 31, 2018 and 2017 , the Company had approximately $0.1 million and $2.7 million , respectively, of accrued interest and penalties, before any tax benefit, related to uncertain tax positions.

The Company has analyzed filing positions in all the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The tax years 2001 through 2017 are open to examination by major taxing jurisdictions to which the Company is subject.

The Company is currently under Internal Revenue Service audit examinations of the Company’s income and payroll tax returns for the years 2013 through 2016.

The Company’s income tax returns for the tax years ended December 31, 2013 through 2015 are under examination by the California Franchise Tax Board. The audit examination is currently on hold until the IRS audit examination has been completed.

There are no other income tax audit examinations pending at December 31, 2018 other than the aforementioned IRS and FTB audit examinations.

19 . Regulatory

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act of 1965, as amended (the “Higher Education Act”), and the regulations promulgated thereunder by the U.S. Department of Education (the “Department”) subject the Company to significant regulatory scrutiny on the basis of numerous standards that institutions of higher education must satisfy in order to participate in the various federal student financial aid programs under Title IV of the Higher Education Act (“Title IV programs”). Ashford University is regionally accredited by WASC Senior College and University Commission (“WSCUC”).

Department of Education Open Program Review of Ashford University

On July 7, 2016, Ashford University was notified by the Department that an off-site program review had been scheduled to assess Ashford University’s administration of the Title IV programs in which it participates. The off-site program review commenced on July 25, 2016 and covered students identified in the 2009-2012 calendar year data previously provided by Ashford University to the Department in response to a request for information received from the Multi-Regional and Foreign School Participation Division of the Department’s Office of Federal Student Aid (“FSA”) on December 10, 2015, but may be expanded if the Department deems such expansion appropriate.

On December 9, 2016, the Department informed Ashford University that it intended to continue the program review on-site at Ashford University. The on-site program review commenced on January 23, 2017 and initially covered the 2015-2016 and 2016-2017 award years, but may be expanded if the Department deems such expansion appropriate. To date, the Company has not received a draft report from the Department.

Program Participation Agreement for Ashford University

WSCUC Accreditation of Ashford University

The “90/10” Rule

Under the Higher Education Act, a proprietary institution loses eligibility to participate in Title IV programs if the institution derives more than 90% of its revenues from Title IV program funds for two consecutive fiscal years, as calculated in accordance with Department regulations. This rule is commonly referred to as the “90/10 rule.” Any institution that violates the 90/10 rule for two consecutive fiscal years becomes ineligible to participate in Title IV programs for at least two fiscal years. In addition, an institution whose rate exceeds 90% for any single fiscal year is placed on provisional certification and may be subject to other enforcement measures. In September 2016, the Department issued new audit standards, for financial statement audits of proprietary institutions for fiscal years ending June 30, 2017 or later, which include a requirement that institutions must determine Title IV and non-Title IV revenue on a student by student basis. On the basis of this calculation, during the fiscal year ended December 31, 2018 , Ashford University derived 78.6% , of their respective cash revenues from Title IV program funds. As previously reported, for fiscal years ended December 31, 2017 and 2016 , Ashford University derived 80.8% and 81.2% , respectively, of its respective cash revenues from Title IV program funds.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

Cohort Default Rate

The most recent official three-year cohort default rates for Ashford University for the 2015, 2014 and 2013 federal fiscal years, were 13.5% , 14.9% and 14.5% , respectively.

Financial Responsibility

The Department calculates an institution's composite score for financial responsibility based on its (i) equity ratio, which measures the institution's capital resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and (iii) net income ratio, which measures the institution's ability to operate at a profit. An institution that does not meet the Department's minimum composite score of 1.5 may demonstrate its financial responsibility by posting a letter of credit in favor of the Department and possibly accepting other conditions on its participation in the Title IV programs.

For the fiscal year ended December 31, 2017 , the consolidated composite score calculated was 2.3 , satisfying the composite score requirement of the Department's financial responsibility test, which institutions must satisfy to participate in Title IV programs. For the fiscal year ended December 31, 2018 , the Company expects the consolidated composite score to be 2.2 . However, the consolidated calculation is subject to determination by the Department once it receives and reviews the Company's audited financial statements for the year ended December 31, 2018 . Additionally, for the year ended December 31, 2018 , the composite score at the Company's institution is higher than the consolidated score.

Return of Title IV funds for students who withdraw

If a student who has received Title IV funds withdraws, the institution must determine the amount of Title IV program funds the student has earned pursuant to applicable regulations. If the student withdraws during the first 60% of any payment period (which, for undergraduate online students, is typically a 20-week term consisting of four five-week courses), the amount of Title IV funds that the student has earned is equal to a pro rata portion of the funds the student received or for which the student would otherwise be eligible for the payment period. If the student withdraws after the 60% threshold, then the student is deemed to have earned 100% of the Title IV funds received. If the student has not earned all the Title IV funds disbursed, the institution must return the unearned funds to the appropriate lender or the Department in a timely manner, which is generally no later than 45 days after the date the institution determined that the student withdrew. If an institution's annual financial aid compliance audit in either of its two most recently completed fiscal years determines that 5% or more of such returns were not timely made, the institution may be required to submit a letter of credit in favor of the Department equal to 25% of the amount of unearned Title IV funds the institution was required to return for its most recently completed fiscal year. For the fiscal year ended December 31, 2018 , the Company's institution did not exceed the 5% threshold for late refunds sampled.

Substantial Misrepresentation

The Higher Education Act prohibits an institution participating in Title IV programs from engaging in substantial misrepresentation regarding the nature of its educational programs, its financial charges or the employability of its graduates. Under the Department’s rules, a “misrepresentation” is any false, erroneous or misleading statement an institution, one of its representatives or any ineligible institution, organization or person with whom the institution has an agreement to provide educational programs or marketing, advertising, recruiting, or admissions services makes directly or indirectly to a student, prospective student or any member of the public, or to an accrediting agency, a state agency or the Department. The Department’s rules define a “substantial misrepresentation” as 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. For-profit educational institutions are also subject to the general deceptive practices jurisdiction of the Federal Trade Commission and the Consumer Financial Protection Bureau (the “CFPB”).

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

On December 10, 2015, Ashford University received a request for information from the Multi-Regional and Foreign School Participation Division of the FSA for (i) advertising and marketing materials provided to prospective students regarding the transferability of certain credits, (ii) documents produced in response to the August 10, 2015 Civil Investigative Demand from the CFPB related to the CFPB’s investigation to determine whether for-profit postsecondary education companies or other unnamed persons have engaged in or are engaging in unlawful acts or practices related to the advertising, marketing or origination of private student loans, (iii) certain documents produced in response to subpoenas and interrogatories issued by the Attorney General of the State of California (the “CA Attorney General”) and (iv) records created between 2009 and 2012 related to the disbursement of certain Title IV funds. The FSA is investigating representations made by Ashford University to potential and enrolled students, and has asked the Company and Ashford to assist in its assessment of Ashford’s compliance with the prohibition on substantial misrepresentations. The Company and Ashford University are cooperating fully with the FSA with a view toward demonstrating the compliant nature of their practices.

The Department is currently conducting a program review to assess Ashford University’s administration of the Title IV programs in which it participates. For additional information, see “ Department of Education Open Program Review of Ashford University ” above.

If the Department determines that one of the Company’s institution has engaged in substantial misrepresentation, the Department may (i) revoke the institution’s program participation agreement, if the institution is provisionally certified, (ii) impose limitations on the institution’s participation in Title IV programs, if the institution is provisionally certified, (iii) deny participation applications made on behalf of the institution or (iv) initiate proceedings to fine the institution or to limit, suspend or terminate the participation of the institution in Title IV programs. Because Ashford University is provisionally certified, if the Department determined that Ashford has engaged in substantial misrepresentation, the Department may take the actions set forth in clauses (i) and (ii) above in addition to any other actions taken by the Department.

GI Bill Benefits

On May 20, 2016, the Company received a letter from the Iowa Department of Education (“Iowa DOE”) indicating that, as a result of the planned closure of the Clinton Campus, the Iowa State Approving Agency (“ISAA”) would no longer continue to approve Ashford University’s programs for benefits under the GI Bill after June 30, 2016, and recommending Ashford University seek approval through the State Approving Agency of jurisdiction for any location that meets the definition of a “main campus” or “branch campus.” Ashford University began the process of applying for approval through the State Approving Agency in California (“CSAAVE”), and the Company subsequently disclosed that on June 20, 2016 it received a second letter from the Iowa DOE indicating that the Iowa DOE had issued a stay of the ISAA’s withdrawal of approval of Ashford University’s programs for GI Bill benefits effective immediately until the earlier of (i) 90 days from June 20, 2016 or (ii) the date on which CSAAVE completed its review and issued a decision regarding the approval of Ashford University in California. Ashford University received communication from CSAAVE indicating that additional information and documentation would be required before Ashford University’s application could be considered for CSAAVE approval. Ashford University subsequently withdrew the CSAAVE application and continued working with the U.S. Department of Veterans Affairs (“VA”), the Iowa DOE and the ISAA to obtain continued approval of Ashford University’s programs for GI Bill benefits and to prevent any disruption of educational benefits to Ashford University’s veteran students.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

action pending the post-ruling motions and appeal. On October 12, 2017, Judge Eliza Ovrom, the Iowa District Court Judge who issued the July 17, 2017 ruling, filed a Disclosure Statement revealing family ties to the Iowa Attorney General’s Office. Following motions by Ashford University for her recusal, Judge Ovrom recused herself from all further proceedings. On October 24, 2017, Ashford University filed with the Iowa Supreme Court a Petition to Vacate or, in the Alternative, for Limited Remand (“Second Petition to Vacate”), in which Ashford University argued that the July 17, 2017 ruling and all other material orders entered by Judge Ovrom should be vacated due to her previously undisclosed conflict of interest. On January 8, 2018, the Iowa Supreme Court remanded the Second Petition to Vacate to the District Court, where all proceedings in this matter were consolidated before Judge Michael Huppert. On April 26, 2018, Judge Huppert granted the Second Petition to Vacate and vacated all material rulings by Judge Ovrom, including the July 17, 2017 ruling, thus on June 21, 2018, the Iowa Supreme Court issued a Procedendo stating that the appeal was concluded. Judge Huppert’s decision mooted the First Petition to Vacate and Ashford’s appeal of, inter alia , the July 17, 2017 ruling. The case is now proceeding on the merits de novo before a new judge.

20. Retirement Plans

The Company maintains an employee savings plan (the “401(k) Plan”) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended. Under the 401(k) Plan, participating employees may contribute a portion of their pre-tax earnings up to the Internal Revenue Service annual contribution limit. Additionally, the Company may elect to make matching contributions into the 401(k) Plan in its sole discretion. The Company's total expense related to the 401(k) Plan was $2.8 million , $2.9 million and $3.1 million for the years ended December 31, 2018 , 2017 and 2016 , respectively.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

21 . Commitments and Contingencies

Litigation

From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with GAAP, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated, the best estimate within that range should be accrued. If no estimate is better than another, the Company records the minimum estimated liability in the range. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. Below is a list of material legal proceedings to which the Company or its subsidiaries is a party.

California Attorney General Investigation of For-Profit Educational Institutions

In January 2013, the Company received from the Attorney General of the State of California (the “CA Attorney General”) an Investigative Subpoena relating to the CA Attorney General’s investigation of for-profit educational institutions. Pursuant to the Investigative Subpoena, the CA Attorney General requested documents and detailed information for the time period March 1, 2009 to present. On July 24, 2013, the CA Attorney General filed a petition to enforce certain categories of the Investigative Subpoena related to recorded calls and electronic marketing data. On September 25, 2013, the Company reached an agreement with the CA Attorney General to produce certain categories of the documents requested in the petition and stipulated to continue the hearing on the petition to enforce from October 3, 2013 to January 9, 2014. On January 13, 2014 and June 19, 2014, the Company received additional Investigative Subpoenas from the CA Attorney General each requesting additional documents and information for the time period March 1, 2009 through the current date.

Representatives from the Company met with representatives from the CA Attorney General’s office on several occasions to discuss the status of the investigation, additional information requests, and specific concerns related to possible unfair business practices in connection with the Company’s recruitment of students and debt collection practices.

The parties also discussed a potential resolution involving injunctive relief, other non-monetary remedies and a payment to the CA Attorney General and in the third quarter of 2016, the Company recorded an expense of $8.0 million related to the cost of resolving this matter.

The parties did not reach a resolution and on November 29, 2017, the CA Attorney General filed suit against Ashford University and Bridgepoint Education.

The Company intends to vigorously defend this case and emphatically denies the allegations made by the CA Attorney General that it ever deliberately misled its students, falsely advertised its programs, or in any way were not fully accurate in its statements to investors. However, the outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. At present, the Company cannot reasonably estimate any updated range of loss for this action based on currently available information and as such, the prior accrual of $8.0 million remains.

Massachusetts Attorney General Investigation of Bridgepoint Education, Inc. and Ashford University

On July 21, 2014, the Company and Ashford University received from the Attorney General of the State of Massachusetts (“MA Attorney General”) a Civil Investigative Demand (“MA CID”) relating to the MA Attorney General's investigation of for-profit educational institutions and whether the university's business practices complied with Massachusetts consumer protection laws. Pursuant to the MA CID, the MA Attorney General has requested from the Company and Ashford University documents and information for the time period January 1, 2006 to present. The Company is cooperating with the investigation and cannot predict the eventual scope, duration or outcome of the investigation at this time. The Company has not accrued any liability associated with this action.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

Department of Justice Civil Investigative Demand

On July 7, 2016, the Company received from the U.S. Department of Justice (“DOJ”) a Civil Investigative Demand (“DOJ CID”) related to the DOJ's investigation concerning allegations that the Company may have misstated Title IV refund revenue or overstated revenue associated with private secondary loan programs and thereby misrepresented its compliance with the 90/10 rule of the Higher Education Act. Pursuant to the DOJ CID, the DOJ has requested from the Company documents and information for fiscal years 2011-2015. The Company is cooperating with the DOJ and cannot predict the eventual scope, duration or outcome of the investigation at this time. The Company has not accrued any liability associated with this action.

Shareholder Derivative Actions

In re Bridgepoint, Inc. Shareholder Derivative Action

On July 24, 2012, a shareholder derivative complaint was filed in California Superior Court by Alonzo Martinez. In the complaint, the plaintiff asserts a derivative claim on the Company's behalf against certain of its current and former officers and directors. The complaint is captioned Martinez v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement on behalf of the Company, as well as other equitable relief and attorneys' fees. On September 28, 2012, a substantially similar shareholder derivative complaint was filed in California Superior Court by David Adolph-Laroche. In the complaint, the plaintiff asserts a derivative claim on the Company's behalf against certain of its current and former officers and directors. The complaint is captioned Adolph-Laroche v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched.

On October 11, 2012, the Adolph-Laroche action was consolidated with the Martinez action and the case is now captioned In re Bridgepoint, Inc. Shareholder Derivative Action . A consolidated complaint was filed on December 18, 2012 and the defendants filed a motion to stay the case while the underlying securities class action is pending. The motion was granted by the Court on April 11, 2013. A status conference was held on October 10, 2013, during which the Court ordered the stay continued for the duration of discovery in the underlying securities class action, but permitted the plaintiff to receive copies of any discovery responses served in the underlying securities class action. The stay was lifted following the settlement of the underlying securities class action and all defendants filed demurrers on October 3, 2016, which were granted with leave to amend on October 6, 2017. On October 17, 2017, the plaintiff submitted a litigation demand to the Company's Board of Directors, which appointed a working group to evaluate the demand. The Board refused the demand and the Plaintiff filed a Second Amended Complaint on October 3, 2018. The Defendants filed demurrers on December 21, 2018, which are currently pending with the Court.

Reardon v. Clark, et al.

On March 18, 2015, a shareholder derivative complaint was filed in the Superior Court of the State of California in San Diego. The complaint asserts derivative claims on the Company’s behalf against certain of its current and former officers and directors. The complaint is captioned Reardon v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. Following the dismissal of the underlying Zamir securities class action and pursuant to a stipulation among the parties, on May 10, 2018, the Court ordered the case stayed while the Company’s Board of Directors evaluates a litigation demand submitted by the plaintiff.

Larson v. Hackett, et al.

On January 19, 2017, a shareholder derivative complaint was filed in the Superior Court of the State of California in San Diego. The complaint asserts derivative claims on the Company's behalf against certain of its current and former officers and directors. The complaint is captioned Larson v. Hackett, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. Following the dismissal of

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

the underlying Zamir securities class action and pursuant to a stipulation among the parties, on May 10, 2018, the Court ordered the case stayed while the Company’s Board of Directors evaluates a litigation demand submitted by the plaintiff.

Stein Securities Class Action

On March 8, 2019, a securities class action complaint was filed in the U.S. District Court for the Southern District of California by Shiva Stein naming the Company, Andrew Clark, Kevin Royal, and Joseph D’Amico as defendants. The Complaint alleges that Defendants made false and materially misleading statements and failed to disclose material adverse facts regarding the Company's business, operations and prospects, specifically that the Company had applied an improper revenue recognition methodology to students enrolled in the Corporate Full Tuition Grant program. The complaint asserts a putative class period stemming from March 8, 2016 to March 7, 2019. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Complaint has not yet been served.

The Company is evaluating the complaint and intends to vigorously defend against it. However, because of the many questions of fact and law that may arise, the outcome of the legal proceeding is uncertain at this point. Based on information available to the Company at present, it cannot reasonably estimate a range of loss and accordingly has not accrued any liability associated with this action.

22. Concentration of Risk

Concentration of Revenue

In 2018 , Ashford University derived 78.6% of its respective cash revenues from students whose source of funding is through Title IV programs, as calculated in accordance with Department regulations. See Note 19 , “Regulatory - The “90/10” Rule.” Revenue derived from government tuition assistance for military personnel, including veterans, is not considered federal student aid for purposes of calculations under the 90/10 rule.

Title IV programs are subject to political and budgetary considerations and are subject to extensive and complex regulations. The Company's administration of these programs is periodically reviewed by various regulatory agencies. Any regulatory violation could be the basis for the initiation of potentially adverse actions including a suspension, limitation or termination proceeding, which could have a material adverse effect on the Company's enrollments, revenues and results of operations. Students obtain access to federal student financial aid through a Department-prescribed application and eligibility certification process. Student financial aid funds are generally made available to students at prescribed intervals throughout their expected length of study. Students typically apply the funds received from the federal financial aid programs first to pay their tuition and fees. Any remaining funds are distributed directly to the student, if requested.

Concentration of Credit Risk

The Company maintains its cash and cash equivalents accounts in financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 . The Company performs ongoing evaluations of these institutions to limit its concentration risk exposure.

Concentration of Sources of Supply

The Company is dependent on a third-party provider for its online platform, which includes a learning management system that stores, manages and delivers course content, enables assignment uploading, provides interactive communication between students and faculty, and supplies online assessment tools. The partial or complete loss of this source may have an adverse effect on enrollments, revenues and results of operations.

BRIDGEPOINT EDUCATION, INC.

Notes to Annual Consolidated Financial Statements (Continued)

23. Quarterly Results of Operations (Unaudited)

The following tables set forth unaudited results of operations and certain operating results for each quarter during the years ended December 31, 2018 and 2017 , and present the impact of the restatement on the previously issued condensed consolidated financial statements. See Note 2, "Summary of Significant Accounting Policies - Restatement of Previously Issued Consolidated Financial Statements" for further information. The Company believes the information reflects all adjustments necessary to present fairly the information below. Basic and diluted income (loss) per share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted income (loss) per share information may not equal annual basic and diluted income (loss) per share. The following tables for the quarterly periods in fiscal year 2018 and 2017 are presented in thousands, except per share data:



	As Reported			As Restated			As Reported			As Restated			As Reported			As Restated
	Three Months Ended
Consolidated statement of income (loss) data:	March 31, 2018						June 30, 2018						September 30, 2018						December 31, 2018
Revenue	$	118,031		$	116,777		$	120,834		$	119,037		$	114,858		$	112,846		$	94,713
Instructional costs and services	$	56,862		$	56,614		$	53,986		$	54,397		$	54,470		$	55,109		$	51,580
Total costs and expenses	$	117,645		$	117,397		$	109,280		$	109,691		$	111,328		$	111,967		$	108,311
Operating income (loss)	$	386		$	(620	)	$	11,554		$	9,346		$	3,530		$	879		$	(13,598	)
Income (loss) before income taxes	$	636		$	(370	)	$	11,836		$	9,628		$	3,897		$	1,246		$	(13,450	)
Income tax benefit	$	(1,661	)	$	(1,680	)	$	(5,395	)	$	(5,452	)	$	(408	)	$	(415	)	$	(35	)
Net income (loss)	$	2,297		$	1,310		$	17,231		$	15,080		$	4,305		$	1,661		$	(13,415	)
Basic income (loss) per share	$	0.08		$	0.05		$	0.63		$	0.56		$	0.16		$	0.06		$	(0.49	)
Diluted income (loss) per share	$	0.08		$	0.05		$	0.63		$	0.55		$	0.16		$	0.06		$	(0.49	)



	As Reported		As Restated		As Reported		As Restated		As Reported			As Restated			As Reported			As Restated
	Three Months Ended
Consolidated statement of income (loss) data:	March 31, 2017				June 30, 2017				September 30, 2017						December 31, 2017
Revenue	$	129,490	$	128,279	$	124,581	$	123,363	$	119,367		$	118,419		$	104,959		$	105,052
Instructional costs and services	$	63,039	$	62,714	$	61,148	$	61,077	$	57,756		$	56,741		$	55,305		$	54,858
Total costs and expenses	$	119,828	$	119,503	$	118,401	$	118,330	$	120,870		$	119,855		$	111,446		$	110,999
Operating income (loss)	$	9,662	$	8,776	$	6,180	$	5,033	$	(1,503	)	$	(1,436	)	$	(6,487	)	$	(5,947	)
Income (loss) before income taxes	$	10,105	$	9,219	$	6,521	$	5,374	$	(1,122	)	$	(1,055	)	$	(6,141	)	$	(5,601	)
Net income (loss)	$	9,869	$	8,983	$	6,314	$	5,167	$	39		$	106		$	(5,685	)	$	(5,145	)
Basic income (loss) per share	$	0.23	$	0.21	$	0.22	$	0.18	$	0.00		$	0.00		$	(0.20	)	$	(0.18	)
Diluted income (loss) per share	$	0.23	$	0.21	$	0.21	$	0.17	$	0.00		$	0.00		$	(0.20	)	$	(0.18	)

24. Subsequent Event

On March 12, 2019, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) to acquire Fullstack Academy, Inc., a Delaware corporation (“Fullstack”). Fullstack is an award-winning, immersive coding bootcamp, which offers a premier program centered on a series of leading and emerging technologies. The total consideration for the transaction is anticipated to be $17.5 million in cash and up to 4.75 million shares of Bridgepoint common stock, with 2.5 million shares issued at closing, and the remainder to be issued in the future upon the satisfaction of certain performance milestones. The Merger Agreement contains customary representations, warranties and covenants of Fullstack and the Company, and the acquisition is subject to customary closing conditions. If the acquisition is consummated, Fullstack will be a wholly-owned subsidiary of the Company.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Principal Financial Officer, we carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) and Rule 15d-15(b) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and our Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2018, because of the material weaknesses in our internal control over financial reporting described below. Notwithstanding the material weaknesses described below, management has concluded that the Company's consolidated financial statements for the periods covered by and included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with accounting principles generally accepted in the United States (“GAAP”) for each of the periods presented herein.

Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2018, based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a Company's annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management's assessment of our internal control over financial reporting, our management has identified control deficiencies that constituted material weaknesses in our internal control over financial reporting as of December 31, 2018, as described below.

Management has concluded that there were matters that constituted material weaknesses in our internal control over financial reporting. These material weaknesses relate to 1) control design in the accounting of the student contracts for the Full Tuition Grant program whereby revenue was misstated due to allowances that had not been properly determined and contained computational errors, which also resulted in misstatements in accounts receivable and its provision for bad debts and deferred revenue and student deposits; and 2) operating effectiveness of review controls in the determination of the accounting for nonrecurring transactions and new accounting standards. Specifically, our controls were not effective as management

100

misapplied accounting guidance and did not arrive at the proper accounting conclusions, resulting in misstatement of restricted cash and other long-term assets as of September 30, 2018 related to a long-term letter of credit issued as collateral for the build-to-suit lease; and management incorrectly applied ASC 606 upon adoption on January 1, 2018 as it relates to the Full Tuition Grant Program, specifically the period of time for which to recognize revenue in 2018 related to Full Tuition Grant students that become inactive. These material weaknesses resulted in the restatement of the Company’s financial statements. Accordingly, management has determined that the Company's internal control over financial reporting was not effective as of December 31, 2018 due to material weaknesses.

The effectiveness of our internal control over financial reporting as of December 31, 2018, has been audited by Deloitte and Touche LLP, an independent registered public accounting firm, as stated in their report which appears below Item 9A.

Management's Remediation Plan

We are committed to remediating the material weaknesses by implementing changes to our internal control over financial reporting. Our Principal Financial Officer is responsible for implementing changes and improvements in internal control over financial reporting and for remediating the control deficiencies that gave rise to the material weaknesses.

We plan to implement measures to remediate the underlying causes of the control deficiencies. We plan to achieve this primarily through the following:


•	improving the internal communication procedures between operations and accounting personnel;


•	enhancing our controls over the Full Tuition Grant accounting models, including more detailed steps to evaluate and revise critical assumptions and estimates to be more precise;


•	implementing enhanced analytical controls to compensate for the manual processes;


•	technical accounting training for key financial management; and


•	engaging external consultants, as needed, to provide support related to more complex applications of GAAP related to nonrecurring transactions and new accounting standards.

We believe these measures will remediate the underlying control deficiencies that gave rise to the material weaknesses. However, we have not completed all of the corrective processes, procedures and related evaluation or remediation that we believe are necessary. As we work to remediate the control deficiencies that gave rise to the material weaknesses, we may determine to take additional measures to address the control deficiencies.

Changes in Internal Control Over Financial Reporting

We continually assess the adequacy of our internal control over financial reporting and make improvements as deemed appropriate. With the exception of the material weaknesses discussed above, there were no changes in internal control over financial reporting, during the three months ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

101

Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Bridgepoint Education, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Bridgepoint Education, Inc. and subsidiaries (the "Company") as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018, of the Company and our report dated March 12, 2019, expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph relating to the manner in which it accounts for revenues from contracts with customers.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment: 1) control design in the accounting of student contracts in the Full Tuition Grant program whereby allowances had not been properly determined and had computational errors, and 2) the Company's review controls over nonrecurring transactions and new accounting standards were not operating effectively in the determination of accounting conclusions.

102

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2018, of the Company, and this report does not affect our report on such consolidated financial statements.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

March 12, 2019

103

Item 9B. Other Information.

None.

104

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference to our definitive proxy statement to be filed with the SEC in connection with our 2019 Annual Meeting of Stockholders or an amendment to this Annual Report on Form 10-K to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2018 .

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

105

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are included as part of this Annual Report on Form 10-K:

(1) Financial Statements.



Report of Independent Registered Public Accounting Firm	60
Consolidated Balance Sheets	61
Consolidated Statements of Income (Loss)	62
Consolidated Statements of Comprehensive Income (Loss)	63
Consolidated Statements of Stockholders' Equity	64
Consolidated Statements of Cash Flows	65
Notes to Annual Consolidated Financial Statements	66
Report on the Internal Controls of Independent Registered Public Accounting Firm	102

(2) Financial Statement Schedules.

All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included.

(3) Exhibits.

Exhibit

Description of Document

Filed Herewith

Incorporated by Reference

Form

Exhibit No.

Date Filed

Acquisition Agreements

2.1

Purchase and Sale Agreement dated December 3, 2004, as amended, among The Franciscan University of the Prairies, the Sisters of St. Francis and the registrant.

S-1

2.1

February 17, 2009

2.2

Asset Purchase and Sale Agreement dated September 12, 2007 between the Colorado School of Professional Psychology and the registrant.

S-1

2.2

February 17, 2009

Charter Documents and Instruments Defining Rights of Security Holders

3.1

Fifth Amended and Restated Certificate of Incorporation.

10-Q

3.1

May 21, 2009

3.2

Second Amended and Restated Bylaws.

S-1

3.4

March 20, 2009

4.1

Specimen of Stock Certificate.

S-1

4.1

March 30, 2009

4.2

Second Amended and Restated Registration Rights Agreement dated August 26, 2009 among the registrant and the other persons named therein.

S-1

4.4

September 4, 2009

Employee Benefit Plans

10.1

Amended and Restated 2009 Stock Incentive Plan, dated May 2017.

10.2

First Amendment to Amended and Restated 2009 Stock Incentive Plan.

S-8

99.2

January 17, 2017

10.3

Amended and Restated 2009 Stock Incentive Plan - Form of Nonstatutory Stock Option Agreement for Executives and Senior Management.

S-8

99.4

May 13, 2009

10.4

Amended and Restated 2009 Stock Option Plan - Form of Nonstatutory Stock Option Agreement (effective March 2011).

10-Q

10.3

May 3, 2011

10.5

Amended and Restated 2009 Stock Incentive Plan - Form of Incentive Stock Option Agreement for Executives and Senior Management.

S-8

99.5

May 13, 2009

10.6

2009 Stock Incentive Plan - Form of Restricted Stock Unit Award Agreement (Deferred Settlement).

8-K

99.1

June 27, 2011

10.7

2009 Stock Incentive Plan - Form of Restricted Stock Unit Award Agreement (General).

8-K

99.2

June 27, 2011

106

Exhibit

Description of Document

Filed Herewith

Incorporated by Reference

Form

Exhibit No.

Date Filed

10.8

Amended and Restated 2009 Stock Incentive Plan - Form of Performance Stock Unit Award Agreement.

8-K

10.1

December 23, 2014

10.9

Amended and Restated 2009 Stock Incentive Plan - Amendment to Performance Stock Unit Award Agreement.

10-K

10.16

March 10, 2015

10.10

Amended and Restated 2009 Stock Incentive Plan - Form of Performance Cash Award Agreement (with Performance Component)

10-Q

10.1

August 2, 2016

10.11

Amended and Restated 2009 Stock Incentive Plan - Form of Performance Cash Award Agreement (General)

10-Q

10.2

August 2, 2016

10.12

Form of Non-Plan Stock Option Agreement.

S-8

99.6

May 13, 2009

10.13

Form of Compensatory Warrant Agreement.

S-1

4.10

March 20, 2009

10.14

Amended and Restated Employee Stock Purchase Plan.

8-K

99.1

March 22, 2010

10.15

Bridgepoint Education Nonqualified Deferred Compensation Plan

10-Q

10.7

May 3, 2010

10.16

2009 Stock Incentive Plan - Form of 2018 MSU Agreement.

Agreements with Executive Officers and Directors

10.17

Amended and Restated Employment Agreement between Andrew S. Clark and the registrant.

10-K

10.20

March 10, 2015

10.18

Offer Letter to Diane Thompson.

S-1

10.28

March 20, 2009

10.19

Offer Letter to Anurag Malik, dated June 29, 2016.

10-K

10.33

March 7, 2017

10.20

Offer Letter to Thomas McCarty, dated December 2, 2016.

10-K

10.34

March 7, 2017

10.21

Amended and Restated Executive Severance Plan.

10-Q

10.1

August 4, 2015

10.22

Amended and Restated Form of Severance Agreement under the Executive Severance Plan.

10-K

10.36

March 7, 2017

10.23

Offer Letter to Dale Crandall.

S-1

10.30

March 20, 2009

10.24

Form of Indemnification Agreement.

10-K

10.33

March 8, 2016

10.25

Stock Ownership Guidelines (effective May 14, 2013).

10-K

10.33

March 17, 2014

10.26

Offer Letter to Kevin Royal, dated April 13, 2018

10-Q

10.1

May 1, 2018

10.27

Employment Agreement between Gregory Finkelstein and the registrant

10.28

Offer Letter to John Semel, dated January 25, 2019

Material Real Estate Agreements

10.29

†

Standard Form Modified Gross Office Lease dated October 22, 2008, and addendum, with Sunroad Centrum Office I, L.P. related to the premises located at 8620 Spectrum Center Lane, San Diego, California.

S-1

10.17

March 2, 2009

10.30

†

First Amendment to Standard Form Modified Gross Office Lease dated September 16, 2011, with Sunroad Centrum Office I, L.P., related to the premises located at 8620 Spectrum Center Lane, San Diego, California.

10-Q

10.4

December 16, 2011

10.31

†

Office Lease dated February 28, 2011 with WSC 1515 Arapahoe Investors V, L.L.C., related to the premises located at located at 1515 Arapahoe Street, Denver, Colorado.

10-Q

10.1

May 3, 2011

10.32

†

Commencement Date Memorandum and First Amendment to Office Lease dated November 18, 2011 with WSC 1515 Arapahoe Investors V, L.L.C., related to the premises located at located at 1515 Arapahoe Street, Denver, Colorado.

10-K

10.55

March 7, 2012

10.33

†

Lease dated August 8, 2011, with CCP/MS SSIII Denver Tabor Center I Property Owner LLC, related to the premises located at 1200 17th Street and 1201 16th Street, Denver, Colorado.

10-Q

10.3

November 1, 2011

10.34

†

First Amendment dated June 28, 2012, with CCP/MS SSIII Denver Tabor Center I Property Owner LLC, related to the premises located at 1200 17th Street and 1201 16th Street, Denver, Colorado.

10-Q

10.2

August 7, 2012

10.35

Purchase Agreement and Escrow Instructions, dated December 21, 2015, with Clinton Catalyst, LLC.

10-K

10.58

March 8, 2016

10.36

Lease Agreement, dated December 29, 2015, with Clinton Catalyst, LLC

10-K

10.59

March 8, 2016

10.37

Office Lease dated August 15, 2018 with Ascend Northrup, LLC, related to the premises at 1811 E. Northrup Boulevard, Chandler, Arizona

10-Q

10.1

November 8, 2018

107

Exhibit

Description of Document

Filed Herewith

Incorporated by Reference

Form

Exhibit No.

Date Filed

Material Strategic Agreements

10.38

†

Software License Agreement and Campuscare Support Agreement between Campus Management Corp. and the registrant.

S-1

10.21

March 30, 2009

10.39

†

Addenda to Software License Agreement with Campus Management Corp. dated June 29, 2009.

10-Q

10.5

August 11, 2009

10.40

†

Addendum to CampusCare Maintenance and Support Agreement dated February 11, 2011 with Campus Management Corporation.

10-Q

10.2

May 3, 2011

10.41

†

CampusCare Maintenance and Support Renewal dated December 28, 2011, with Campus Management Corp.

10-K

10.67

March 7, 2012

10.42

†

Addendum to Software License Agreement with Campus Management Corp. dated June 29, 2012.

10-K

10.72

March 12, 2013

10.43

†

Addendum to CampusCare Support Agreement dated June 29, 2012 with Campus Management Corporation.

10-K

10.73

March 12, 2013

10.44

†

CampusCare Maintenance and Support Renewal dated December 10, 2012, with Campus Management Corp.

10-K

10.68

March 17, 2014

10.45

†

CampusCare Maintenance and Support Renewal dated October 24, 2013, with Campus Management Corp.

10-K

10.69

March 17, 2014

10.46

†

Addendum to Software License Agreement with Campus Management Corp. dated April 1, 2014.

10-Q

10.1

August 7, 2014

10.47

†

Addendum to CampusCare Support Agreement dated April 1, 2014 with Campus Management Corp.

10-Q

10.2

August 7, 2014

10.48

†

CampusCare Maintenance and Support Renewal dated January 20, 2016, with Campus Management Corp.

10-K

10.76

March 8, 2016

10.49

†

Campusnet Infrastructure as a Service (IaaS) Agreement, dated June 30, 2016, with Campus Management Corp.

10-Q

10.4

August 2, 2016

10.50

†

CampusCare Maintenance and Support Renewal, dated June 30, 2016, with Campus Management Corp.

10-Q

10.5

August 2, 2016

10.51

†

Addendum to CampusCare Support Agreement, dated June 30, 2016, with Campus Management Corp.

10-Q

10.6

August 2, 2016

10.52

†

License Agreement dated October 31, 2013 between Forbes Education Holdings, Bridgepoint Education, Inc. and Ashford University, LLC.

10-K

10.76

March 17, 2014

10.53

First Amendment to License Agreement, dated July 12, 2016, between Forbes Education Holdings, LLC, Bridgepoint Education, Inc. and Ashford University, LLC

10-Q

10.2

November 8, 2016

10.54

Private Cloud Services Agreement, dated December 15, 2015, with North American Communications Resource, Inc .

10-K

10.84

March 8, 2016

10.55

†

Services Order Form, dated September 20, 2016, with Instructure, Inc.

10-Q

10.1

November 8, 2016

Code of Ethics

14.1

Amended and Restated Code of Ethics

8-K

14.1

December 1, 2009

Subsidiaries

21.1

List of subsidiaries of the registrant.

Consent and Power of Attorney

23.1

Consent of independent registered public accounting firm, Deloitte and Touche LLP

24.1

Power of Attorney (included on signature page).

Certifications Required by Sarbanes-Oxley Act of 2002

31.1

Certification of Andrew S. Clark, CEO and President, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Kevin Royal, Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Andrew S. Clark, CEO and President, and Kevin Royal, Chief Financial Officer

108

Exhibit

Description of Document

Filed Herewith

Incorporated by Reference

Form

Exhibit No.

Date Filed

Interactive Data

101

‡

The following financial information from our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 12, 2019, formatted in Extensible Business Reporting Language ( “ XBRL ” ): (i) the Consolidated Balance Sheets as of December 31, 2018 and 2017; (ii) the Consolidated Statements of Income (Loss) for the years ended December 31, 2018, 2017 and 2016; (iii) the Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, 2017 and 2016; (iv) the Consolidated Statements of Stockholder's Equity for the three years ended December 31, 2018; (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016; and (vi) the Notes to Annual Consolidated Financial Statements.


*	Indicates management contract or compensatory plan or arrangement.


†	Portions of this exhibit have been omitted pursuant to a request for confidential treatment and the non-public information has been filed separately with the SEC.

109

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	BRIDGEPOINT EDUCATION, INC.

	/s/ ANDREW S. CLARK
	Andrew S. Clark (CEO and President)

Dated: March 12, 2019

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Andrew S. Clark and Kevin Royal, jointly and severally, as his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Name	Title	Date
/s/ ANDREW S. CLARK	CEO and President (Principal Executive Officer) and a Director	March 12, 2019
Andrew S. Clark

/s/ KEVIN ROYAL	Chief Financial Officer (Principal Financial Officer)	March 12, 2019
Kevin Royal

/s/ STEVEN BURKHOLDER	Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)	March 12, 2019
Steven Burkholder

/s/ TERESA S. CARROLL	Director	March 12, 2019
Teresa S. Carroll

/s/ RYAN CRAIG	Director	March 12, 2019
Ryan Craig

/s/ DALE CRANDALL	Director	March 12, 2019
Dale Crandall

/s/ ROBERT HARTMAN	Director	March 12, 2019
Robert Hartman

/s/ MICHAEL B. HORN	Director	March 12, 2019
Michael B. Horn

/s/ KIRSTEN M. MARRINER	Director	March 12, 2019
Kirsten M. Marriner

/s/ VICTOR K. NICHOLS	Director	March 12, 2019
Victor K. Nichols

/s/ GEORGE PERNSTEINER	Director	March 12, 2019
George Pernsteiner

110

Exhibit 10.1

BRIDGEPOINT EDUCATION, INC.

2009 STOCK INCENTIVE PLAN

(as amended and restated May 10, 2017)


SECTION 1.	INTRODUCTION.

The Company's Board of Directors originally adopted the Bridgepoint Education, Inc. 2009 Stock Incentive Plan effective upon approval by the Company’s stockholders, which was obtained on March 16, 2009. The Plan was first amended and restated in its entirety effective March 31, 2009. The Plan was again amended and restated in its entirety effective May 13, 2013, which amendment and restatement was subsequently amended on one occasion. The Company now wishes to amend and restate the Plan in its entirety a third time by the adoption of this document.

The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by offering Selected Employees an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, and to encourage such Selected Employees to continue to provide services to the Company and to attract new individuals with outstanding qualifications.

The Plan seeks to achieve this purpose by providing for Awards in the form of Options (which may constitute Incentive Stock Options or Nonstatutory Stock Options), Stock Appreciation Rights, Stock Grants, Stock Units and Performance Cash.

This Plan and all Awards shall be construed in accordance with and governed by the laws of the State of Delaware, but without regard to its conflict of law provisions. Capitalized terms shall have the meaning provided in Section 2 unless otherwise provided in this Plan or any related Stock Option Agreement, SAR Agreement, Stock Grant Agreement, Stock Unit Agreement or Performance Cash Agreement.


SECTION 2.	DEFINITIONS .

(a) “Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity. For purposes of determining an individual's “Service,” this definition shall include any entity other than a Subsidiary, if the Company, a Parent and/or one or more Subsidiaries own not less than 50% of such entity.

(b) “Award” means any award of an Option, SAR, Stock Grant, Stock Unit or Performance Cash under the Plan.

(d) “Cashless Exercise” means, to the extent that a Stock Option Agreement so provides and as permitted by applicable law, a program approved by the Committee in which payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price and any applicable tax

Exhibit 10.1

withholding obligations (up to the maximum amount permitted by applicable law) relating to the Option.

(e) “Cause” means, except as may otherwise be provided in a Participant’s employment agreement or applicable Award agreement, any one of the following: (i) a conviction of a Participant for a felony crime or the failure of a Participant to contest prosecution for a felony crime, or (ii) a Participant's misconduct, fraud, disloyalty or dishonesty (as such terms may be defined by the Committee in its sole discretion), or (iii) any unauthorized use or disclosure of confidential information or trade secrets by a Participant, or (iv) a Participant's negligence, malfeasance, breach of fiduciary duties, neglect of duties, or (v) any material violation by a Participant of a written Company or Subsidiary or Affiliate policy or any material breach by a Participant of a written agreement with the Company or Subsidiary or Affiliate, or (vi) any other act or omission by a Participant that, in the opinion of the Committee, could reasonably be expected to adversely affect the Company's or a Subsidiary's or an Affiliate's business, financial condition, prospects and/or reputation. In each of the foregoing subclauses (i) through (vi), whether or not a “Cause” event has occurred will be determined by the Committee in its sole discretion and the Committee's determination shall be conclusive, final and binding. For the avoidance of doubt, nothing in this Plan shall prohibit any Participant from reporting possible violations of federal law or regulation to any governmental agency or entity, including, but not limited to, the Department of Justice, the SEC, Congress, and any agency Inspector General, or from participating in a resulting investigation or making other disclosures that are protected under the whistleblower provisions of federal law or regulation.

(f) “Change In Control” means, except as may otherwise be provided in a Participant's employment agreement or applicable Award agreement, any one of the following:

(i) The acquisition by any individual, entity or group (other than the Company or any employee benefit plan of the Company or Warburg Pincus & Co. (and its affiliated entities and investment funds) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of securities representing more than 50% of the voting securities of the Company entitled to vote generally in the election of directors, determined on a fully-diluted basis (“Company Voting Securities”); provided, however, that such acquisition shall not constitute a Change In Control hereunder if a majority of the holders of the Company Voting Securities immediately prior to such acquisition retain directly or through ownership of one or more holding companies, immediately following such acquisition, a majority of the voting securities entitled to vote generally in the election of directors of the successor entity;

(ii) The sale, transfer or other disposition of all or substantially all of the Company's assets; or

(iii) When a majority of the members of the Board shall not be Company Directors.

A transaction shall not constitute a Change In Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transactions. In the case of clauses (i) and (ii), a Change In Control shall not be

Exhibit 10.1

deemed to have occurred for purposes of the Plan until the transaction that would otherwise be considered a Change In Control closes. Notwithstanding the foregoing, a Change In Control shall not occur for purposes of this Plan in the case of Awards that are subject to the requirements of Code Section 409A unless such Change In Control constitutes a “change in control event” as defined in Code Section 409A.

(g) “Code” means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder.

(h) “Committee” means a committee described in Section 3.

(i) “Common Stock” means the Company's common stock, $0.01 par value per share.

(j) “Company” means Bridgepoint Education, Inc., a Delaware corporation.

(k) “Company Directors” means (i) individuals who as of the Effective Date are members of the Board; (ii) individuals elected as directors of the Company subsequent to the Effective Date for whose election proxies shall have been solicited by the Board; or (iii) any individual elected or appointed to the Board to fill vacancies of the Board caused by death or resignation (but not by removal) or to fill newly created directorships.

(l) “Consultant” means an individual who performs bona fide services to the Company, a Parent, a Subsidiary or an Affiliate, other than as an Employee or Director or Non-Employee Director.

(m) “Covered Employees” means those persons whose compensation is subject to the deduction limitations of Code Section 162(m).

(n) “Determination Date” means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as “performance-based compensation” under Code Section 162(m).

(o) “Director” means a member of the Board who is also an Employee.

(p) “Disability” means that the Selected Employee is classified as disabled under a long-term disability policy of the Company or, if no such policy applies, the Selected Employee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

(q) “Effective Date” means May 10, 2017.

(r) “Employee” means any individual who is a common-law employee of the Company, a Parent, a Subsidiary or an Affiliate.

(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

Exhibit 10.1

(t) “Exercise Price” means, in the case of an Option, the amount for which a Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price” means, in the case of a SAR, an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value in determining the amount payable to a Participant upon exercise of such SAR.

(u) “Fair Market Value” means the market price of a Share as determined by the regular session closing price for such stock as reported on the New York Stock Exchange on the date of determination, or if there were no sales on such date, on the last date preceding such date on which a closing price was reported. If the foregoing provision is inapplicable, then the Fair Market Value shall be determined by the Committee in good faith using a reasonable application of a reasonable valuation method as the Committee deems appropriate.

(v) “Fiscal Year” means the Company's fiscal year.

(w) “Grant” means any grant of an Award under the Plan.

(x) “Incentive Stock Option” or “ISO” means an incentive stock option described in Code Section 422.

(y) “Non-Employee Director” means a member of the Board who is not an Employee.

(z) “Nonstatutory Stock Option” or “NSO” means a stock option that is not an ISO.

(aa) “Option” means an ISO or NSO granted under the Plan entitling the Optionee to purchase a specified number of Shares, at such times and applying a specified Exercise Price, as provided in the applicable Stock Option Agreement.

(bb) “Optionee” means an individual, estate or other entity that holds an Option.

(cc) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the Effective Date shall be considered a Parent commencing as of such date.

(dd) “Participant” means an individual or estate or other entity that holds an Award.

(ee) “ Performance Cash ” means a right to receive a specified amount of cash payable upon the satisfaction of any one or more Performance Goals and/or other conditions (including, without limitation, continued Service through a specified date) as determined by the Committee and set forth in the applicable Performance Cash Agreement.

(ff) “ Performance Cash Agreement ” means the agreement described in Section 11 evidencing each Award of Performance Cash.

(gg) “Performance Goals” means one or more objective measurable performance factors as determined by the Committee with respect to each Performance Period based upon one or more of the

Exhibit 10.1

following: (i) operating income; (ii) earnings before interest or taxes and earnings before interest, taxes, depreciation and amortization; (iii) earnings or net earnings; (iv) cash flow; (v) market share; (vi) net or gross sales or revenue; (vii) expenses or expense reduction; (viii) cost of goods sold; (ix) profit/loss or profit margin, net or gross; (x) working capital; (xi) return on equity or assets; (xii) earnings per share (diluted or basic); (xiii) economic value added, or EVA; (xiv) stock price; (xv) price/earnings ratio; (xvi) debt, or debt-to-equity or debt reduction; (xvii) accounts receivable; (xviii) writeoffs; (xix) cash; (xx) assets; (xxi) liquidity; (xxii) operations; (xxiii) research or related milestones; (xxiv) business development; (xxv) intellectual property ( e.g. , patents); (xxvi) product development; (xxvii) regulatory activity; (xxviii) information technology; (xxix) financings; (xxx) product quality control; (xxxi) management; (xxxii) human resources; (xxxiii) corporate governance; (xxxiv) compliance program; (xxxv) legal matters; (xxxvi) internal controls; (xxxvii) policies and procedures; (xxxviii) accounting and reporting; (xxxix) strategic alliances, licensing and partnering; (xl) site, plant or building development; (xli) customer retention; (xlii) customer satisfaction and/or (xlii) mergers and acquisitions or divestitures; each with respect to the Company and/or one or more Affiliates or operating units as determined by the Committee in its sole discretion. Any such criteria used may be (A) measured in absolute terms, (B) measured in terms of growth, (C) compared to another company or companies, (D) measured against the market as a whole and/or according to applicable market indices, (E) measured against the performance of the Company as a whole or a segment of the Company and/or (F) measured on a pre-tax or post-tax basis (if applicable). Further, any Performance Goals may be used to measure the performance of one or more product lines or specific markets and may be measured relative to a peer group or index. Awards issued to persons who are not Covered Employees may take into account other (or no) factors.

(hh) “Performance Period” means any one or more periods of time, as determined by the Committee in its sole discretion, within which the Performance Goals applicable to an Award are to be achieved. The Committee may establish different Performance Periods for different Participants, and the Committee may establish concurrent or overlapping Performance Periods.

(ii) “Plan” means this Bridgepoint Education, Inc. 2009 Stock Incentive Plan as it may be amended from time to time.

(jj) “Prior Equity Plan” means the Bridgepoint Education, Inc. Amended and Restated 2005 Stock Incentive Plan.

(kk) “Re-Price” means that the Company has lowered or reduced the Exercise Price of outstanding Options and/or outstanding SARs for any Participant(s) in a manner described by SEC Regulation S-K Item 402(d)(2)(viii) (or as described in any successor provision(s) or definition(s)) or has taken other action that would constitute a repricing for purposes of the exchange upon which the Shares are then listed).

(ll) “SAR Agreement” means the agreement described in Section 8 evidencing each Award of a Stock Appreciation Right.

(mm) “SEC” means the Securities and Exchange Commission.

Exhibit 10.1

(nn) “Section 16 Persons” means those officers, directors or other persons who are subject to Section 16 of the Exchange Act.

(oo) “Securities Act” means the Securities Act of 1933, as amended.

(pp) “Selected Employee” means an Employee, Consultant, Director, or Non-Employee Director who has been selected by the Committee to receive an Award under the Plan.

(qq) “Service” means service as an Employee, Director, Non-Employee Director or Consultant. Service will be deemed terminated as soon as the entity to which Service is being provided is no longer either (i) the Company, (ii) a Parent, (iii) a Subsidiary or (iv) an Affiliate. A Participant's Service does not terminate if he or she is a common-law employee and goes on a bona fide leave of absence that was approved by the Company in writing and the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. However, for purposes of determining whether an Option is entitled to continuing ISO status, a common-law employee's Service will be treated as terminating ninety (90) days after such Employee went on leave, unless such Employee's right to return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Committee determines which leaves count toward Service, and when Service terminates for all purposes under the Plan.

(rr) “Share” means one share of Common Stock.

(ss) “Stock Appreciation Right” or “SAR” means a stock appreciation right awarded under the Plan which provides the holder with a right to potentially receive, in cash and/or Shares, value with respect to a specific number of Shares, as provided in Section 8.

(tt) “Stock Grant” means Shares awarded under the Plan.

(uu) “Stock Grant Agreement” means the agreement described in Section 9 evidencing each Award of a Stock Grant.

(vv) “Stock Option Agreement” means the agreement described in Section 6 evidencing each Award of an Option.

(ww) “Stock Unit” means a bookkeeping entry representing the equivalent of one Share, as awarded under the Plan.

(xx) “Stock Unit Agreement” means the agreement described in Section 10 evidencing each Award of a Stock Unit.

(yy) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the Effective Date shall be considered a Subsidiary commencing as of such date.

Exhibit 10.1

(zz) “10-Percent Shareholder” means an individual who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries. In determining stock ownership, the attribution rules of Code Section 424(d) shall be applied.

SECTION 3. ADMINISTRATION .

(a) Committee Composition . A Committee appointed by the Board shall administer the Plan. Unless the Board provides otherwise, the Board's Compensation Committee (or a comparable committee of the Board) shall be the Committee. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.

The Committee shall have membership composition which enables (i) Awards to Section 16 Persons to qualify as exempt from liability under Section 16(b) of the Exchange Act and (ii) Awards to Covered Employees to qualify as performance-based compensation as provided under Code Section 162(m) (to the extent such Awards are intended to qualify as performance-based compensation). For the avoidance of doubt, to the extent that the Board determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Code Section 162(m), the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Code Section 162(m).

The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not qualify under Rule 16b-3 or Code Section 162(m), that may administer the Plan with respect to Selected Employees who are not Section 16 Persons or Covered Employees, respectively, may grant Awards under the Plan to such Selected Employees and may determine all terms of such Awards. To the extent permitted by applicable law, the Board may also appoint a committee, composed of one or more officers of the Company, that may authorize Awards to Employees (who are not Section 16 Persons or Covered Employees) within parameters specified by the Board and consistent with any limitations imposed by applicable law.

Notwithstanding the foregoing, the Board shall constitute the Committee and shall administer the Plan with respect to all Awards granted to Non-Employee Directors.

(b) Authority of the Committee . Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Such actions shall include without limitation:

(i) determining Selected Employees who are to receive Awards under the Plan;

(ii) determining the type, number, vesting requirements, performance conditions (if any) and their degree of satisfaction, and other features and conditions of such Awards and amending such Awards;

(iii) correcting any defect, supplying any omission, or reconciling or clarifying any inconsistency in the Plan or any Award agreement;

Exhibit 10.1

(iv) accelerating the vesting, or extending the post-termination exercise term, or waiving restrictions, of Awards at any time and under such terms and conditions as it deems appropriate;

(v) interpreting the Plan and any Award agreements;

(vi) making all other decisions relating to the operation of the Plan; and

(vii) adopting such plans or subplans as may be deemed necessary or appropriate to provide for the participation by non-U.S. employees of the Company and its Subsidiaries and Affiliates, which plans and/or subplans shall be attached hereto as Appendices.

The Committee may adopt such rules or guidelines, as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final and binding on all persons. The Committee's decisions and determinations need not be uniform and may be made selectively among Participants in the Committee's sole discretion. The Committee's decisions and determinations will be afforded the maximum deference provided by law.

(c) Indemnification . To the maximum extent permitted by applicable law, each member of the Committee, or of the Board, or any persons (including without limitation Employees and officers) who are delegated by the Board or Committee to perform administrative functions in connection with the Plan, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any Stock Option Agreement, SAR Agreement, Stock Grant Agreement, Stock Unit Agreement or Performance Cash Agreement, and (ii) from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.

SECTION 4. GENERAL .

(a) General Eligibility . Only Employees, Consultants, Directors and Non-Employee Directors shall be eligible for designation as Selected Employees by the Committee.

(b) Incentive Stock Options . Only Selected Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, a Selected Employee who is a 10-Percent Shareholder shall not be eligible for the grant of an ISO unless the requirements set forth in Code Section 422(c)(5) are satisfied. If and to the extent that any Shares are issued under a portion of any Option that exceeds the $100,000 limitation of Code Section 422, such Shares shall not be treated as issued under an ISO notwithstanding any designation otherwise. Certain decisions, amendments, interpretations and actions by the

Exhibit 10.1

Committee and certain actions by a Participant may cause an Option to cease to qualify as an ISO pursuant to the Code and by accepting an Option the Participant agrees in advance to such disqualifying action.

(c) Restrictions on Shares . Any Shares issued pursuant to an Award shall be subject to such rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall apply in addition to any restrictions that may apply to holders of Shares generally and shall also comply to the extent necessary with applicable law. In no event shall the Company be required to issue fractional Shares under this Plan.

(d) Beneficiaries . A Participant may designate one or more beneficiaries with respect to an Award by timely filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant's death. If no beneficiary was designated or if no designated beneficiary survives the Participant, then after a Participant's death any vested Award(s) shall be transferred or distributed to the Participant's estate.

(e) Performance Conditions . The Committee may, in its discretion, include performance conditions in an Award. If performance conditions are included in Awards to Covered Employees that are intended to qualify as performance-based compensation under Code Section 162(m), then such Awards will be subject to the achievement of Performance Goals that shall be established and administered pursuant to the requirements of Code Section 162(m) and as described in this Section 4(e), and the provisions of this Section 4(e) shall control over any contrary provisions in the Plan. Any Performance Goals applicable to Stock Grants, Stock Units and/or Performance Cash that are intended to qualify as performance-based compensation under Code Section 162(m) will be set by the Committee on or before the Determination Date. Before any Shares underlying an Award or any Award payments are released to a Covered Employee with respect to a Performance Period, the Committee shall certify in writing that the Performance Goals for such Performance Period have been satisfied. Without limitation, the approved minutes of a Committee meeting shall constitute such written certification. A Participant will be eligible to receive payment pursuant to an Award intended to qualify as performance-based compensation under Code Section 162(m) for a Performance Period only if the Performance Goals for such period are achieved. To the extent specified at the time of Grant of an Award intended to qualify as performance-based compensation under Code Section 162(m), the Committee may appropriately adjust any evaluation of performance under a Performance Goal to exclude any of the following events that occurs during a Performance Period:

(i) asset write-downs,

(ii) litigation or claim judgments or settlements,

(iii) the effect of changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results,

(iv) accruals for reorganization and restructuring programs and

(v) any items that are unusual in nature or infrequently occurring as described in applicable accounting principles and/or in management's discussion and analysis of financial

Exhibit 10.1

condition and results of operations appearing in the Company's annual report for the applicable year.

Notwithstanding satisfaction of any completion of any Performance Goal, the Committee may: (A) reduce (but not increase) the number or amount of Shares, Options, SARs, Stock Units, Performance Cash or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Performance Goals on the basis of such further considerations as the Committee in its sole discretion shall determine, (B) determine what actual Award, if any, will be paid in the event of a termination of employment as the result of a Participant's death or disability or upon a Change in Control or in the event of a termination of employment following a Change in Control prior to the end of the Performance Period, and (C) determine what actual Award, if any, will be paid in the event of a termination of employment other than as the result of a Participant's death or disability prior to a Change in Control and prior to the end of the Performance Period to the extent an actual Award would have otherwise been achieved had the Participant remained employed through the end of the Performance Period. With respect to any Awards that are intended to qualify as performance-based compensation under Code Section 162(m), prior to the Determination Date, the Committee will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant. In all other respects, Performance Goals will be calculated in accordance with the Company's financial statements, generally accepted accounting principles, or under a methodology established by the Committee prior to or at the time of the issuance of an Award and which is consistently applied with respect to a Performance Goal in the relevant Performance Period. In addition, the Committee will adjust any performance criteria, Performance Goal or other feature of an Award that relates to or is wholly or partially based on the number of, or the value of, any stock of the Company, to reflect any stock dividend or split, repurchase, recapitalization, combination, or exchange of shares or other similar changes in such stock. Awards with performance conditions that are granted to Selected Employees who are not Covered Employees or any Awards to Covered Employees which are not intended to qualify as performance-based compensation under Code Section 162(m) need not comply with the requirements of Code Section 162(m).

To the extent necessary to comply with the performance-based compensation provisions of Code Section 162(m), with respect to any Award granted subject to Performance Goals and intended to qualify as “performance-based compensation” under Code Section 162(m), within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period (or such other time as may be required or permitted by Code Section 162(m)), the Committee will, in writing, (i) designate one or more Selected Employees to whom an Award will be made, (ii) select the Performance Goals applicable to the Performance Period, (iii) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (iv) specify the relationship between Performance Goals and the amounts of such Awards, as applicable, to be earned by each such Selected Employee for such Performance Period.

Notwithstanding any other provision of the Plan, any Award which is granted to a Selected Employee and is intended to constitute qualified performance-based compensation under Code Section 162(m) will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are

Exhibit 10.1

requirements for qualification as qualified performance-based compensation as described in Code Section 162(m), and the Plan will be deemed amended to the extent necessary to conform to such requirements.

(f) No Rights as a Stockholder . A Participant, or a transferee of a Participant, shall have no rights as a stockholder (including without limitation voting rights or dividend or distribution rights) with respect to any Common Stock covered by an Option, SAR or Stock Unit until such person becomes entitled to receive such Common Stock, has satisfied any applicable withholding or tax obligations relating to the Award and has been issued the applicable stock certificate by the Company (or if stock certificates are not issued, the applicable book entry credit or other indicia of ownership has been made by the Company). No adjustment shall be made for cash or stock dividends or other rights for which the record date is prior to the date when such certificate, book entry credit, or other indicia of ownership is issued, except as expressly provided in Section 12.

(g) Termination of Service . Unless the applicable Award agreement or employment agreement provides otherwise (and in such case, the Award or employment agreement shall govern as to the consequences of a termination of Service for such Awards), the following rules shall govern the vesting, exercisability and term of outstanding Awards held by a Participant in the event of termination of such Participant's Service (in all cases subject to the term of the Option or SAR as applicable): (i) if the Service of a Participant is terminated for Cause, then all Options, SARs, unvested portions of Stock Units and unvested portions of Stock Grants shall terminate and be forfeited immediately without consideration; (ii) if the Service of Participant is terminated for any reason other than for Cause, death or Disability, then the vested portion of his/her then-outstanding Options/SARs may be exercised by such Participant or his or her personal representative within three months after the date of such termination and all unvested portions of any outstanding Awards shall be forfeited without consideration as of the date of such termination; or (iii) if the Service of a Participant is terminated due to death or Disability, the vested portion of his/her then-outstanding Options/SARs may be exercised within twelve months after the date of termination of Service and all unvested portions of any outstanding Awards shall be forfeited without consideration as of the date of such termination. In the event of a termination of an Employee's Service due to Disability, an unexercised ISO will be treated as an NSO commencing as of one year and one day after such termination. The consequences of a termination of Service on an Award of Performance Cash shall be governed by the applicable Performance Cash Agreement.

(h) Code Section 409A . Notwithstanding anything in the Plan to the contrary, the Plan and Awards granted hereunder are intended to comply with the requirements of Code Section 409A and shall be interpreted in a manner consistent with such intention. If upon a Participant's “separation from service” within the meaning of Code Section 409A, he/she is then a “specified employee” (as defined in Code Section 409A), then to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall defer payment of “nonqualified deferred compensation” subject to Code Section 409A payable as a result of and within six (6) months following such separation from service under this Plan until the earlier of (i) the first business day of the seventh month following the Participant's separation from service, or (ii) ten (10) days after the Company receives notification of the Participant's death. Any such delayed payments shall be made without interest.

Exhibit 10.1

(i) Suspension or Termination of Awards . If at any time (including after a notice of exercise has been delivered) the Committee (or the Board), reasonably believes that a Participant has committed an act of Cause (which includes a failure to act), the Committee (or Board) may suspend the Participant's right to exercise any Option or SAR (or vesting of Stock Grants or Stock Units) pending a determination of whether there was in fact an act of Cause. If the Committee (or the Board) determines a Participant has committed an act of Cause, neither the Participant nor his or her estate shall be entitled to exercise any outstanding Option or SAR whatsoever and all of Participant's outstanding Awards shall then terminate without consideration. Any determination by the Committee (or the Board) with respect to the foregoing shall be final, conclusive and binding on all interested parties.

(j) Electronic Communications . Subject to compliance with applicable law and/or regulations, an Award agreement or other documentation or notices relating to the Plan and/or Awards may be communicated to Participants by electronic media.

(k) Unfunded Plan . Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are granted Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Company or the Committee be deemed to be a trustee of stock or cash to be awarded under the Plan.

(l) Liability of Company Plan . The Company (or members of the Board or Committee) shall not be liable to a Participant or other persons as to: (i) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder; and (ii) any unexpected or adverse tax consequence or any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, exercise or settlement of any Award granted hereunder.

SECTION 5. SHARES SUBJECT TO PLAN AND SHARE LIMITS .

(a) Basic Limitation . The stock issuable under the Plan shall be authorized but unissued Shares or treasury Shares. Subject to adjustment as provided in Sections 5(b), 5(c) and 12, the aggregate number of Shares reserved for Awards under the Plan is 5,366,466, which is the same number of Shares that were reserved but not issued under the Plan as of January 1, 2017. The aggregate number of Shares that may be issued in connection with any single type of Award (NSOs, ISOs, SARs, Stock Grants or Stock Units) under the Plan shall be the same numeric limit set forth in the preceding sentence.

(b) Subject to adjustment as provided in Section 12, the maximum aggregate number of Shares that may be issued under the Plan as set forth in Section 5(a) shall be increased on January 1, 2018 and on each subsequent January 1 through and including January 1, 2027, by a number of Shares (the “Annual Increase”) equal to the lesser of (i) two percent (2%) of the number of Shares issued and outstanding on the immediately preceding December 31, (ii) 1,300,000 Shares, or (iii) an amount determined by the Board.

Exhibit 10.1

(c) Additional Shares . If Awards (including for purposes of this sentence awards outstanding under the Prior Equity Plan after January 1, 2017) are forfeited or are terminated for any reason other than being exercised, then the Shares underlying such Awards shall again become available for Awards under the Plan (with the maximum number of Shares added to the Plan pursuant to awards granted under the Prior Equity Plan not to exceed 2,038,683). If SARs are exercised or Stock Units are settled in Shares, then only the number of Shares (if any) actually issued in settlement of such SARs or Stock Units shall reduce the number of Shares available under Section 5(a), as adjusted by Section 5(b), and the balance shall again become available for Awards under the Plan. If a Participant pays the Exercise Price by net exercise or by surrendering previously owned Shares (or by stock attestation) and/or, as permitted by the Committee, pays any withholding tax obligation with respect to an Award by electing to have Shares withheld or surrendering previously owned Shares (or by stock attestation), the surrendered Shares and the Shares withheld to pay taxes shall be available for issuance under the Plan and shall not count toward the maximum number of shares that may be issued under the Plan as set forth in Section 5(a), as adjusted by Section 5(b).

(d) Dividend Equivalents . Any dividend equivalents distributed under the Plan shall not be applied against the number of Shares available for Awards.

(e) Share Limits . For so long as: (x) the Company is a “publicly held corporation” within the meaning of Code Section 162(m) and (y) the deduction limitations of Code Section 162(m) are applicable to the Company's Covered Employees, then the limits specified below in this Section 5(e) shall be applicable to Awards issued under the Plan that are intended to qualify as performance-based compensation under Code Section 162(m).

(i) Limits on Options . No Selected Employee shall receive Options to purchase Shares during any Fiscal Year covering in excess of 750,000 Shares.

(ii) Limits on SARs . No Selected Employee shall receive Awards of SARs during any Fiscal Year covering in excess of 750,000 Shares.

(iii) Limits on Stock Grants . No Selected Employee shall receive Stock Grants during any Fiscal Year covering in excess of 750,000 Shares.

(iv) Limits on Stock Units . No Selected Employee shall receive Stock Units during any Fiscal Year covering in excess of 750,000 Shares.

(v) Limit on Total Amount of All Awards . No Selected Employee shall receive Awards during any Fiscal Year in excess of the aggregate amount of 750,000 Shares, whether such Awards are in the form of Options, SARs, Stock Grants and/or Stock Units.

(vi) Increased Limits for First Year of Employment . The limits expressed in the foregoing subparts (i) through (v) shall in each case be increased to 1,500,000 Shares with respect to Awards granted to a Selected Employee during the Fiscal Year of the Selected Employee's commencement of employment with the Company.

Exhibit 10.1

(vii) Limit on Awards Settleable in Cash. During any Fiscal Year, no Selected Employee shall receive Stock Units that are intended to qualify as performance-based compensation under Code Section 162(m) having an initial value greater than $3,000,000.

(viii) Limit on Awards of Performance Cash . During any 12 month Performance Period, no Selected Employee shall receive Performance Cash intended to qualify as performance-based compensation under Code Section 162(m) having a value greater than $3,000,000. If the Performance Period is less than or exceeds 12 months, the dollar limit expressed in the preceding sentence shall be reduced or increased proportionately, as the case may be, calculated as the product of: (A) $3,000,000, multiplied by (B) a fraction, the numerator of which is the number of days in the Performance Period and the denominator of which is 365. For example, if the Performance Period is three (3) years, the limit shall be calculated by multiplying: (A) $3,000,000, by (B) a fraction, the numerator of which is 1095 and the denominator of which is 365.

(f) Non-Employee Director Share Limits . Notwithstanding any other provision of the Plan to the contrary, no Non-Employee Director shall receive Awards during any Fiscal Year in excess of the aggregate amount of 50,000 Shares, whether such Awards are in the form of Options, SARs, Stock Grants and/or Stock Units.

SECTION 6. TERMS AND CONDITIONS OF OPTIONS .

(a) Stock Option Agreement . Each Grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Committee deems appropriate for inclusion in a Stock Option Agreement (including without limitation any performance conditions). The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. The Stock Option Agreement shall also specify whether the Option is an ISO; if not specified then the Option shall be an NSO.

(b) Number of Shares . Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall be subject to adjustment of such number in accordance with Section 12.

(c) Exercise Price . An Option's Exercise Price shall be established by the Committee and set forth in a Stock Option Agreement. The Exercise Price of an Option shall not be less than 100% of the Fair Market Value (110% for ISO Grants to 10-Percent Shareholders) on the date of Grant.

(d) Exercisability and Term . Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable. The Stock Option Agreement shall also specify the term of the Option; provided that the term of an Option shall in no event exceed ten years from the date of Grant (and may be for a shorter period of time than ten years). A Stock Option Agreement may provide for accelerated vesting in the event of the Participant's death, or Disability or other events. Notwithstanding the forgoing, an ISO that is granted to a 10-Percent Shareholder shall have a maximum term of five years. Notwithstanding any other provision of the Plan, no Option can be exercised after the expiration date provided in the

Exhibit 10.1

applicable Stock Option Agreement. A Stock Option Agreement may permit an Optionee to exercise an Option before it is vested (an “early exercise”), subject to the Company's right of repurchase at the original Exercise Price of any Shares acquired under the unvested portion of the Option which right of repurchase shall lapse at the same rate the Option would have vested had there been no early exercise. In no event shall the Company be required to issue fractional Shares upon the exercise of an Option and the Committee may specify a minimum number of Shares that must be purchased in any one Option exercise.

(e) Modifications or Assumption of Options . Within the limitations of the Plan and subject to Section 6(g) below, the Committee may modify, extend or assume outstanding options or may accept the cancellation of outstanding options (whether granted by the Company or by another issuer) in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price. No modification of an Option shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such Option.

(f) Assignment or Transfer of Options . Except as otherwise provided in the applicable Stock Option Agreement and then only to the extent permitted by applicable law, no Option shall be transferable by the Optionee other than by will or by the laws of descent and distribution. Except as otherwise provided in the applicable Stock Option Agreement, an Option may be exercised during the lifetime of the Optionee only by Optionee or by the guardian or legal representative of the Optionee. No Option or interest therein may be assigned, pledged or hypothecated by the Optionee during his or her lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.

(g) No Re-Pricing . Without the approval of the Company’s stockholders, the Committee shall not Re-Price any Options previously granted under the Plan.

SECTION 7. PAYMENT FOR OPTION SHARES .

(a) General Rule . The entire Exercise Price of Shares issued upon exercise of Options shall be payable in cash at the time when such Shares are purchased, except as follows and if so provided for in an applicable Stock Option Agreement:

(i) In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Stock Option Agreement. The Stock Option Agreement may specify that payment may be made in any form(s) described in this Section 7.

(ii) In the case of an NSO granted under the Plan, the Committee may, in its discretion at any time, accept payment in any form(s) described in this Section 7.

(b) Surrender of Stock . To the extent that this Section 7(b) is made applicable to an Option in a Stock Option Agreement, payment for all or any part of the Exercise Price may be made with Shares which have already been owned by the Optionee for such duration as shall be specified by the Committee. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan.

Exhibit 10.1

(c) Cashless Exercise . To the extent that this Section 7(c) is made applicable to an Option in a Stock Option Agreement, payment for all or a part of the Exercise Price may be made through Cashless Exercise.

(d) Net Exercise . To the extent that this Section 7(d) is made applicable to an Option in a Stock Option Agreement, payment for all or a part of the Exercise Price may be made through a “net exercise” arrangement pursuant to which the number of Shares issued to the Optionee in connection with the Optionee's exercise of the Option will be reduced by the Company's retention of a portion of such Shares. Upon such a net exercise of an Option, the Optionee will receive a net number of Shares that is equal to (i) the number of Shares as to which the Option is being exercised minus (ii) the quotient (rounded down to the nearest whole number) of the aggregate Exercise Price of the Shares being exercised divided by the Fair Market Value of a Share on the Option exercise date. The number of Shares covered by clause (ii) will be retained by the Company and not delivered to the Optionee. No fractional Shares will be created as a result of a net exercise and the Optionee must contemporaneously pay for any portion of the aggregate Exercise Price that is not covered by the Shares retained by the Company under clause (ii).

(e) Other Forms of Payment . To the extent that this Section 7(e) is made applicable to an Option in a Stock Option Agreement, payment may be made in any other form that is consistent with applicable laws, regulations and rules and approved by the Committee.

SECTION 8. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS .

(a) SAR Agreement . Each Grant of a SAR under the Plan shall be evidenced by a SAR Agreement between the Participant and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan (including without limitation any performance conditions). A SAR Agreement may provide for a maximum limit on the amount of any payout notwithstanding the Fair Market Value on the date of exercise of the SAR. The provisions of the various SAR Agreements entered into under the Plan need not be identical. SARs may be granted in consideration of a reduction in the Participant's other compensation.

(b) Number of Shares . Each SAR Agreement shall specify the number of Shares to which the SAR pertains and is subject to adjustment of such number in accordance with Section 12.

(c) Exercise Price . Each SAR Agreement shall specify the Exercise Price. The Exercise Price of a SAR shall not be less than 100% of the Fair Market Value on the date of Grant.

(d) Exercisability and Term . Each SAR Agreement shall specify the date when all or any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term of the SAR which shall not exceed ten years from the date of Grant. A SAR Agreement may provide for accelerated exercisability in the event of the Participant's death, or Disability or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant's Service. A SAR may be included in an ISO only at the time of Grant but may be included in an NSO at the time of Grant or at any subsequent time, but not later than six months before the expiration of such NSO. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change In Control.

Exhibit 10.1

(e) Exercise of SARs . If, on the date when a SAR expires, the Exercise Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR may automatically be deemed to be exercised as of such date with respect to such portion to the extent so provided in the applicable SAR agreement. Upon exercise of a SAR, the Participant (or any person having the right to exercise the SAR after Participant's death) shall receive from the Company (i) Shares, (ii) cash or (iii) any combination of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise Price of the Shares.

(f) Modification or Assumption of SARs . Within the limitations of the Plan and subject to Section 8(h) below, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (including stock appreciation rights granted by another issuer) in return for the grant of new SARs for the same or a different number of Shares and at the same or a different Exercise Price. No modification of a SAR shall, without the consent of the Participant, alter or impair his or her rights or obligations under such SAR.

(g) Assignment or Transfer of SARs . Except as otherwise provided in the applicable SAR Agreement and then only to the extent permitted by applicable law, no SAR shall be transferable by the Participant other than by will or by the laws of descent and distribution. Except as otherwise provided in the applicable SAR Agreement, a SAR may be exercised during the lifetime of the Participant only by the Participant or by the guardian or legal representative of the Participant. No SAR or interest therein may be assigned, pledged or hypothecated by the Participant during his or her lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.

(h) No Re-Pricing . Without the approval of the Company’s stockholders, the Committee shall not Re-Price any SARs previously granted under the Plan.

SECTION 9. TERMS AND CONDITIONS FOR STOCK GRANTS .

(a) Time, Amount and Form of Awards . Awards under this Section 9 may be granted in the form of a Stock Grant.

(b) Stock Grant Agreement . Each Stock Grant awarded under the Plan shall be evidenced by a Stock Grant Agreement between the Participant and the Company. Each Stock Grant shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan that the Committee deems appropriate for inclusion in the applicable Stock Grant Agreement (including without limitation any performance conditions). The provisions of the Stock Grant Agreements entered into under the Plan need not be identical.

(d) Vesting Conditions . Each Stock Grant may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the

Exhibit 10.1

Stock Grant Agreement. A Stock Grant Agreement may provide for accelerated vesting in the event of the Participant's death, or Disability or other events.

(e) Assignment or Transfer of Stock Grants . Except as provided in Section 15, or in a Stock Grant Agreement, or as required by applicable law, a Stock Grant awarded under the Plan shall not be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor's process, whether voluntarily, involuntarily or by operation of law. Any act in violation of this Section 9(e) shall be void. However, this Section 9(e) shall not preclude a Participant from designating a beneficiary who will receive any vested outstanding Stock Grant Awards in the event of the Participant's death, nor shall it preclude a transfer of vested Stock Grant Awards by will or by the laws of descent and distribution.

(f) Voting and Dividend Rights . The holder of a Stock Grant (irrespective of whether the Shares subject to the Stock Grant are vested or unvested) awarded under the Plan shall have the same voting, dividend and other rights as the Company's other stockholders. A Stock Grant Agreement, however, may require that the holder of such Stock Grant invest any cash dividends received in additional Shares subject to the Stock Grant. Such additional Shares subject to the Stock Grant shall be subject to the same conditions and restrictions as the Stock Grant with respect to which the dividends were paid. Such additional Shares subject to the Stock Grant shall not reduce the number of Shares available for issuance under Section 5.

(g) Modification or Assumption of Stock Grants . Within the limitations of the Plan, the Committee may modify or assume outstanding Stock Grants or may accept the cancellation of outstanding Stock Grants (including stock granted by another issuer) in return for the grant of new Stock Grants for the same or a different number of Shares. No modification of a Stock Grant shall, without the consent of the Participant, alter or impair his or her rights or obligations under such Stock Grant.

SECTION 10. TERMS AND CONDITIONS OF STOCK UNITS .

(a) Stock Unit Agreement . Each Grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the Participant and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan (including without limitation any performance conditions). The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the Participant's other compensation.

(b) Number of Shares . Each Stock Unit Agreement shall specify the number of Shares to which the Stock Unit Grant pertains and is subject to adjustment of such number in accordance with Section 12.

(c) Payment for Awards . To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.

(d) Vesting Conditions . Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant's death, or Disability or other events.

Exhibit 10.1

(e) Voting and Dividend Rights . The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee's discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents which are not paid shall be subject to the same conditions and restrictions as the Stock Units to which they attach, which means, among other things, that if the Committee grants dividend equivalents with respect to any Award that vests or is earned based upon the satisfaction of any one or more performance conditions, no dividend equivalents will be paid unless and until such Award vests or is earned by satisfaction of the applicable performance conditions.

(f) Form and Time of Settlement of Stock Units . Settlement of vested Stock Units may be made in the form of (i) cash, (ii) Shares or (iii) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Shares over a series of trading days. Except as otherwise provided in a Stock Unit Agreement or a timely completed deferral election, vested Stock Units shall be settled within thirty days after vesting. The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred, in accordance with applicable law, to any later date. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 12.

(g) Creditors' Rights . A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement.

(h) Modification or Assumption of Stock Units . Within the limitations of the Plan, the Committee may modify or assume outstanding Stock Units or may accept the cancellation of outstanding Stock Units (including stock units granted by another issuer) in return for the grant of new Stock Units for the same or a different number of Shares. No modification of a Stock Unit shall, without the consent of the Participant, alter or impair his or her rights or obligations under such Stock Unit.

(i) Assignment or Transfer of Stock Units . Except as provided in Section 15, or in a Stock Unit Agreement, or as required by applicable law, Stock Units shall not be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor's process, whether voluntarily, involuntarily or by operation of law. Any act in violation of this Section 10(i) shall be void. However, this Section 10(i) shall not preclude a Participant from designating a beneficiary who will receive any outstanding vested Stock Units in the event of the Participant's death, nor shall it preclude a transfer of vested Stock Units by will or by the laws of descent and distribution.

Exhibit 10.1

SECTION 11. TERMS AND CONDITIONS OF PERFORMANCE CASH.

(a) Performance Cash Agreement . Each Grant of Performance Cash under the Plan shall be evidenced by a Performance Cash Agreement between the Participant and the Company. Performance Cash shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The Performance Cash Agreement shall set forth the Performance Goals and/or other conditions applicable to the Award (including, without limitation, continued Service through a specified date), the amount of cash payable pursuant to the Award and the time of payment for each Award. The provisions of the various Performance Cash Agreements entered into under the Plan need not be identical.

(b) Performance Conditions . An Award of Performance Cash grants the Participant the right to receive an amount of cash payable upon the satisfaction of any one or more Performance Goals and/or other conditions (including, without limitation, continued Service through a specified date) as determined by the Committee and set forth in the Performance Cash Agreement. For the avoidance of doubt, the performance conditions applicable to an Award of Performance Cash intended to qualify as performance-based compensation under Code Section 162(m) are limited to the Performance Goals listed in Section 2(ii).

SECTION 12. ADJUSTMENTS .

(a) Adjustments . In the event of a subdivision of the outstanding Shares, a declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Shares (by reclassification or otherwise) into a lesser number of Shares, a stock split, a reverse stock split, a reclassification or other distribution of the Shares without the receipt of consideration by the Company, of or on the Common Stock, a recapitalization, a combination, a spin-off or a similar occurrence, the Committee shall make equitable and proportionate adjustments to:

(i) the maximum aggregate number of Shares specified in Section 5(a);

(ii) clause (ii) of the Annual Increase specified in Section 5(b);

(iii) the number and kind of securities available for Awards (and which can be issued as ISOs) under Section 5;

(iv) the limits on Awards issued under the Plan that are intended to qualify as performance-based compensation under Code Section 162(m) under Section 5(e);

(v) the limits on Awards issued under the Plan to Non-Employee Directors under Section 5(f);

(vi) the number and kind of securities covered by each outstanding Award;

(vii) the Exercise Price under each outstanding SAR and Option; and

(viii) the number and kind of outstanding securities issued under the Plan.

Exhibit 10.1

(b) Participant Rights . Except as provided in this Section 12, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. If by reason of an adjustment pursuant to this Section 12, a Participant's Award covers additional or different shares of stock or securities, then such additional or different shares and the Award in respect thereof shall be subject to all of the terms, conditions and restrictions which were applicable to the Award and the Shares subject to the Award prior to such adjustment.

(c) Fractional Shares . Any adjustment of Shares pursuant to this Section 12 shall be rounded down to the nearest whole number of Shares. Under no circumstances shall the Company be required to authorize or issue fractional shares and no consideration shall be provided as a result of any fractional shares not being issued or authorized.

SECTION 13. EFFECT OF A CHANGE IN CONTROL .

(a) Merger or Reorganization . In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement may provide, without limitation, for the assumption of outstanding Awards by the surviving corporation or its parent, for their continuation by the Company (if the Company is a surviving corporation), for accelerated vesting or for their cancellation with or without consideration, in all cases without the consent of the Participant.

(b) Acceleration . Except as otherwise provided in the applicable Stock Option Agreement, SAR Agreement, Stock Unit Agreement or Stock Award Agreement, in the event that a Change In Control occurs with respect to the Company and the applicable agreement of merger or reorganization provides for assumption or continuation of Awards pursuant to Section 13(a), no acceleration of vesting shall occur. In the event that a Change In Control occurs with respect to the Company and there is no assumption or continuation of Awards pursuant to Section 13(a), all Awards shall vest and become exercisable as of immediately before such Change In Control. The consequences of a merger or other reorganization, or a Change In Control, on an Award of Performance Cash shall be governed by the applicable Performance Cash Agreement.

SECTION 14. LIMITATIONS ON RIGHTS .

(a) Retention Rights . Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain an employee, consultant or director of the Company, a Parent, a Subsidiary or an Affiliate. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate the Service of any person at any time, and for any reason, subject to applicable laws, the Company's Certificate of Incorporation and Bylaws and a written employment agreement (if any).

(b) Stockholders' Rights . A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Shares covered by his or her Award prior to the issuance of such Shares. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date when such Shares are issued, except as expressly provided in Section 12.

Exhibit 10.1

(c) Regulatory Requirements . Any other provision of the Plan notwithstanding, the obligation of the Company to issue Shares or other securities under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of Shares or other securities pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Shares or other securities, to their registration, qualification or listing or to an exemption from registration, qualification or listing.

(d) Dissolution . To the extent not previously exercised or settled, Options, SARs, Stock Units and unvested Stock Grants shall terminate immediately prior to the dissolution or liquidation of the Company and be forfeited to the Company.

(e) Clawback Policy . The Company may (i) cause the cancellation of any Award, (ii) require reimbursement of any Award by a Participant and (iii) effect any other right of recoupment of equity or other compensation provided under this Plan or otherwise in accordance with Company policies and/or applicable law (each, a “Clawback Policy”). In addition, a Participant may be required to repay to the Company certain previously paid compensation, whether provided under this Plan or an Award Agreement or otherwise, in accordance with the Clawback Policy.

SECTION 15. TAXES .

(a) General . A Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with his or her Award. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.

(b) Share Withholding . The Committee in its discretion may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired (or by stock attestation). Such Shares shall be valued based on the value of the actual trade or, if there is none, the Fair Market Value as of the previous day. Any payment of taxes by assigning Shares to the Company may be subject to restrictions, including, but not limited to, any restrictions required by rules of the SEC. The Committee may also, in its discretion, permit a Participant to satisfy withholding or income tax obligations (up to the maximum amount permitted by applicable law) related to an Award through a sale of Shares underlying the Award or, in the case of Options, through a net exercise or Cashless Exercise.

SECTION 16. DURATION AND AMENDMENTS .

(a) Term of the Plan . The Plan was originally effective on March 16, 2009, was first amended and restated effective March 31, 2009, and was again amended and restated effective May 13, 2013. The Plan as set forth in this amendment and restatement is effective on the Effective Date and shall terminate on the tenth anniversary of the Effective Date unless terminated on an earlier date pursuant to this Section 16. The amendment and restatement of the Plan as set forth

Exhibit 10.1

herein will not in any way affect outstanding awards that were issued under the Prior Equity Plan or outstanding Awards that were issued under this Plan prior to the Effective Date.

(b) Right to Amend or Terminate the Plan . The Board may amend or terminate the Plan at any time and for any reason. No Awards shall be granted under the Plan after the Plan's termination. An amendment of the Plan shall be subject to the approval of the Company's stockholders only to the extent required by applicable laws, regulations or rules. In addition, no such amendment or termination shall be made which would impair the rights of any Participant, without such Participant's written consent, under any then-outstanding Award, provided that no such Participant consent shall be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either (i) is required or advisable in order for the Company, the Plan or the Award to satisfy or conform to any law or regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment has been adequately compensated. In the event any provision of this Plan shall be held illegal or invalid for any reason, such provisions will be reformed by the Board if possible and to the extent needed in order to be held legal and valid. If it is not possible to reform the illegal or invalid provisions then the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. In the event of any conflict in terms between the Plan and any Award agreement, the terms of the Plan shall prevail and govern.

SECTION 17. EXECUTION .

To record the adoption of this amendment and restatement of the Plan by the Board, the Company has caused its duly authorized officer to execute this Plan on behalf of the Company.

BRIDGEPOINT EDUCATION, INC.

By:_______________________________

Its:_______________________________

Exhibit 10.16

BRIDGEPOINT EDUCATION, INC.

2009 STOCK INCENTIVE PLAN

(AS AMENDED AND RESTATED EFFECTIVE MAY 10, 2017)

MARKET STOCK UNIT AWARD AGREEMENT

Unless otherwise defined herein, the terms defined in the Bridgepoint Education, Inc. 2009 Stock Incentive Plan (as amended and restated effective May 10, 2017) (the “Plan”) will have the same defined meanings in this Market Stock Unit Award Agreement. This Market Stock Unit Award Agreement, along with the Terms and Conditions of Market Stock Unit Grant, attached hereto as Exhibit A (the “Terms and Conditions”), shall be referred to herein as the “Award Agreement.” In light of the repeal of the performance-based compensation exception to Section 162(m) of the Code, this Award is not intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code and, as a result, is not subject to the restrictions set forth in Section 4(e) of the Plan.


I.	NOTICE OF MARKET STOCK UNIT GRANT

Participant Name: [Name]

Address: [Address]

You have been granted the right to receive an Award of Market Stock Units (“MSUs”), subject to the terms and conditions of the Plan and this Award Agreement as follows:

Grant Number: [Number]

Date of Grant: [October 11, 2018]

Target Number of MSUs: [Number]

Maximum Number of MSUs: [Target Number of MSUs × 2]

Performance Period: [October 11, 2018 - April 11, 2020]


II.	EARNING OF MARKET STOCK UNITS

Subject to the Participant’s continued Service and the possible vesting of any unvested MSUs upon a corporate transaction in accordance with Section 13 of the Plan, the number of MSUs that will be earned during the Performance Period and eligible for vesting pursuant to Section III, below, will be determined as follows:


•	For MSUs to be earned pursuant to this Section II, the Closing ¹ is defined in the Terms and Conditions must occur during the Performance Period.


•	No MSUs will be earned if the End Stock Price ² is defined in the Terms and Conditions is less than 60% of the Base Stock Price.


•	If the End Stock Price equals 60% of the Base Stock Price, ³ is defined in the Terms and Conditions the number of MSUs that will be earned during the Performance Period and eligible for vesting is:

________________________

¹ “Closing” is defined in the Terms and Conditions.

² “End Stock Price” is defined in the Terms and Conditions.

³ “Base Stock Price” is defined in the Terms and Conditions.

Exhibit 10.16

Target Number of MSUs × 50%


•	Subject to the bullet below, if the End Stock Price exceeds 60% of the Base Stock Price, the number of MSUs that will be earned during the Performance Period and eligible for vesting is:

Target Number of MSUs × ((End Stock Price ÷ Base Stock Price) - .1))


•	For the avoidance of doubt, the maximum number of MSUs that will be earned and eligible for vesting pursuant to this Award Agreement is 200% of the Target Number of MSUs.


III.	VESTING OF MARKET STOCK UNITS; PAYMENT

Subject to the Participant’s continued Service and the possible vesting of any unvested MSUs upon a corporate transaction in accordance with Section 13 of the Plan, the earned MSUs will vest on the day immediately following the twelve (12) month anniversary of the Closing (the “Vesting Date”). For example, if the Closing occurs on November 15, 2018, the earned MSUs will vest on November 16, 2019. If the Participant ceases to provide Service for any or no reason before the Vesting Date, the unvested MSUs shall lapse and be immediately cancelled as of the date the Participant ceases to provide Service. In other words, the Participant must be providing Service on the Vesting Date to receive payment for the earned MSUs.

In settlement of the Award, the Company will deliver to the Participant the same number of whole Shares with such Shares being delivered no later than ten (10) business days of the Vesting Date.


IV.	GENERAL

By the Participant’s signature and the signature of the representative of the Company below, the Participant and the Company agree that this Award of MSUs is granted under and governed by the terms and conditions of the Plan and this Award Agreement, including the Terms and Conditions, all of which are made a part of this document. The Participant has reviewed the Plan and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and fully understands all provisions of the Plan and this Award Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Company upon any questions relating to the Plan and this Award Agreement. The Participant further agrees to notify the Company upon any change in the residence address indicated below. Finally, pursuant to Section 14(e) of the Plan, the Participant acknowledges and agrees that this Award is subject to potential cancellation or recoupment to the fullest extent called for by applicable federal or state law or any policy of the Company. By accepting this Award, the Participant agrees to be bound by, and comply with, the terms of any Clawback Policy adopted by the Company.

[Signature page follows]

Exhibit 10.16

The Company and the Participant have duly executed this Market Stock Unit Award Agreement as of the Date of Grant set forth above.

PARTICIPANT: BRIDGEPOINT EDUCATION, INC.




Signature:			By:


Print Name:			Title:


Residence Address:

Exhibit 10.16

EXHIBIT A

TERMS AND CONDITIONS OF MARKET STOCK UNIT GRANT

1. Grant . The Company hereby grants to the individual named in Section I of the Market Stock Unit Award Agreement attached hereto (the “Participant”), as compensation for his or her services, an Award of Market Stock Units, subject to all of the terms and conditions of these Terms and Conditions, the Market Stock Unit Award Agreement, and the Plan, which is incorporated herein by reference. These Terms and Conditions, along with the Market Stock Unit Award Agreement attached hereto, shall be referred to herein as the “Award Agreement.”

2. Company’s Obligation to Pay; Time of Payment . Each Market Stock Unit (“MSU”) represents the right to receive a Share on the date it vests. Unless and until the MSU is earned and vests in accordance with Section 3, the Participant will have no right to payment with respect to any MSUs. Prior to actual payment of any earned and vested MSUs, such MSU will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company. Any MSUs that are earned and vest in accordance with Section 3 will be paid to the Participant (or in the event of the Participant’s death, to his or her estate) in whole Shares, subject to the Participant satisfying any applicable tax withholding obligations set forth in Section 7. As provided in Section III of the Market Stock Unit Award Agreement, earned and vested MSUs will be paid in Shares as soon as practicable after vesting, but in each such case no later than ten (10) business days following the applicable Vesting Date (as defined in the Market Stock Unit Award Agreement).

3. Earning and Vesting of Market Stock Units .

a. Earning of Market Stock Units . In calculating the number of MSUs that will be earned pursuant to Section II of the Market Stock Unit Award Agreement, the following terms will have the following meanings:


i.	The term “Base Stock Price” means $9.57, which reflects the closing Share price as of the Date of Grant.

ii.

The term “Closing” means the occurrence of each of the following: (1) the receipt of identified regulatory approvals; (2) the execution of a plan of conversion and services agreements between the Company and Ashford University after all required approvals from the Board of Directors of the Company and the Board of Trustees of Ashford University have been received; and (3) the filing of the conversion documents.


iii.	The term “End Stock Price” means the average of the Fair Market Value of the Share price for the twenty (20) trading days preceding the Vesting Date.

b. Vesting of Market Stock Units . The MSUs that are earned pursuant to Section 3.a. shall vest in accordance with Section III of the Market Stock Unit Award Agreement.

c. Effect of a Change in Control . In accordance with Section 13 of the Plan,

A-4

Exhibit 10.16

in the event of a corporate transaction, the Compensation Committee of the Board (the “Committee”) may call for the accelerated vesting of some or all of the Award. Notwithstanding any contrary provision of this Award Agreement or the Plan, if the price of one Share as reflected in a corporate transaction equals or exceeds 200% of the Base Stock Price, the Committee shall take all action necessary to provide for the immediate vesting of all of the MSUs subject to this Agreement. If permitted by Section 409A of the Code, the vested MSUs will be paid in Shares, cash, or a combination of Shares and cash in connection with the closing of such corporate transaction and, to the extent paid in Shares, such Shares shall be allowed to participate in the corporate transaction.

4. Compensation Committee Certification . The Committee shall be responsible for determining that the Closing and other conditions set forth in Section II of the Market Stock Unit Award Agreement have occurred. The Committee may reasonably rely on information from, and representations by, individuals within the Company in making such determination and when made such determination shall be final and binding on the Participant.

5. Lapse upon Termination of Service . In accordance with Section III of the Market Stock Unit Award Agreement, any MSUs that are unearned or unvested as of any Vesting Date (as defined in the Market Stock Unit Award Agreement) shall lapse and be immediately cancelled as of the date of the Participant’s termination of Service for any or no reason.

6. Death of Participant . Any distribution or delivery to be made to the Participant under this Award Agreement will, if the Participant is then deceased, be made to Participant’s designated beneficiary, or if no beneficiary survives the Participant, the administrator or executor of the Participant’s estate. Any such transferee must furnish the Company with: (a) written notice of his or her status as transferee; and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.

7. Withholding of Taxes . Notwithstanding any contrary provision of this Award Agreement, no certificate representing the Shares will be issued to the Participant unless and until satisfactory arrangements (as determined by the Company) will have been made by the Participant with respect to the payment of income, employment and other taxes which the Company determines must be withheld with respect to the delivery of Shares pursuant to this Award Agreement. The Company, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit the Participant to satisfy such tax withholding obligation, in whole or in part (without limitation) by: (a) paying cash; (b) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the minimum amount required to be withheld; (c) delivering to the Company already vested and owned Shares having a Fair Market Value equal to the minimum amount required to be withheld; or (d) selling a sufficient number of such Shares otherwise deliverable to the Participant through such means as the Company may determine in its sole discretion (whether through a broker or otherwise) equal to the minimum amount required to be withheld. To the extent determined appropriate by the Company in its discretion, it will have the right (but not the obligation) to satisfy any tax withholding obligations by reducing the number of Shares otherwise deliverable to the Participant by the minimum amount required to be withheld. If the Participant fails to make satisfactory arrangements for the payment of any required tax withholding obligations hereunder at the time any Shares are scheduled to be delivered pursuant to Section 3, the MSUs shall lapse and be

A-5

Exhibit 10.16

immediately cancelled with no payment due to the Participant.

8. Rights as Stockholder . Neither the Participant nor any person claiming under or through the Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Participant. After such issuance, recordation and delivery, the Participant will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

9. No Guarantee of Continued Service . THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THIS AWARD AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE EARNING AND VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT IN SERVICE TO THE COMPANY FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH THE PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING THE PARTICIPANT) TO TERMINATE THE PARTICIPANT’S SERVICE AT ANY TIME, WITH OR WITHOUT CAUSE.

10. Address for Notices . Any notice to be given to the Company under the terms of this Award Agreement will be addressed to the Company, in care of Stock Administration at Bridgepoint Education, Inc., at 8620 Spectrum Center Blvd., San Diego, CA 92123, or at such other address as the Company may hereafter designate in writing.

11. Grant is Not Transferable . Except to the limited extent provided in Section 6, this Award and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Award, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this Award and the rights and privileges conferred hereby immediately will become null and void.

12. Binding Agreement . Subject to the limitation on the transferability of this Award contained herein, this Award Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

13. Additional Conditions to Issuance of Stock . If at any time the Company determines, in its discretion, that the listing, registration or qualification of the Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the issuance of Shares to the Participant (or his or her estate), such issuance will not occur unless and until such listing, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. Where the Company determines that the delivery of the payment of any Shares will violate federal securities laws or other applicable laws, the Company will defer delivery until the earliest date at which the Company reasonably anticipates that the delivery of Shares will no longer cause such violation. The Company will make all

A-6

Exhibit 10.16

reasonable efforts to meet the requirements of any such state or federal law or securities exchange and to obtain any such consent or approval of any such governmental authority.

14. Plan Governs . This Award Agreement is subject to all the terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Award Agreement and one or more provisions of the Plan, the provisions of the Plan will govern. Capitalized terms used and not defined in this Award Agreement will have the meanings set forth in the Plan.

15. Authority . The Committee will have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any MSUs have vested). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon the Participant, the Company and all other interested persons. No member of the Committee, nor any employee of the Company, will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award Agreement.

16. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to the MSUs awarded under the Plan or future MSUs that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.

17. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Award Agreement.

18. Agreement Severable . In the event that any provision in this Award Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Award Agreement.

19. Modifications to the Agreement . This Award Agreement constitutes the entire understanding of the parties on the subjects covered. The Participant expressly warrants that he or she is not accepting this Award Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Award Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company.

20. Amendment, Suspension or Termination of the Plan . By accepting this Award, the Participant expressly warrants that he or she has received an Award of MSUs, and has received, read and understood a description of the Plan. The Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time.

21. Governing Law . This Award Agreement will be governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For purposes

A-7

Exhibit 10.16

of litigating any dispute related to this Award of MSUs or arising under this Award Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation will be conducted in the courts of San Diego County, California, or the federal courts for the United States for the Southern District of California, and no other courts, where this Award of MSUs is made and/or this Award Agreement is to be performed.

22. Section 409A Compliance . The Company believes, but does not and cannot warrant or guaranty, that the payments due pursuant to this Award Agreement qualify for the short-term deferral exception to Section 409A of the Code as set forth in Treasury Regulation Section 1.409A-1(b)(4). Notwithstanding anything to the contrary in this Award Agreement, if the Company determines that neither the short-term deferral exception nor any other exception to Section 409A applies to the payments due pursuant to this Award Agreement, the provisions of Section 4(h) of the Plan shall apply. This Award Agreement shall be operated in compliance with Section 409A or an exception thereto and each provision of this Award Agreement shall be interpreted, to the extent possible, to comply with Section 409A or to qualify for an applicable exception. The Participant remains solely responsible for any adverse tax consequences imposed upon the Participant by Section 409A.

A-8

Exhibit 10.27

EMPLOYMENT AGREEMENT

This employment agreement (the “Agreement”) is entered into by and between Greg Finkelstein (“you” or “your”) and Bridgepoint Education, Inc., a Delaware corporation, (the “Company”). This Agreement has an effective date of December 31, 2018 (the “Effective Date”).

In consideration of the mutual covenants and promises made in this Agreement, you and the Company agree as follows:

1. Position and Responsibilities . As of the Effective Date, you will commence service as a full-time employee of the Company as the Company’s Executive Vice President and Chief Operating Officer (“COO”). As COO, you will report directly to the Company’s Chief Executive Officer (“CEO”). You will have the duties, responsibilities and authority that are customarily associated with such position and such other senior management duties as may reasonably be assigned by the CEO, in each case, in accordance with Company policy as set forth from time to time by the Company’s Board of Directors (the “Board”) and subject to the terms hereof. At the request of the Company, your will also serve as an officer and/or member of the board of directors of any Company affiliate and or institution, without additional compensation. You will devote substantially all of your business time and commit your best efforts to the Company’s business. You will initially be based out of your home office in Florida, but will be required to travel to such locations as necessary to fulfill your responsibilities as COO. Nothing herein will preclude you from (a) serving, with the prior written consent of the Company, as a member of the board of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of non-competing businesses and charitable organizations, (b) engaging in charitable activities and community affairs, and (c) managing your personal investments and affairs; provided, however, that the activities set out in clauses (a), (b) and (c) will be limited by you so as not to materially interfere, individually or in the aggregate, with the performance of your duties and responsibilities hereunder. The Company hereby acknowledges your activities with and ownership in the entities identified in Exhibit A and consents to such activity and ownership for so long as such entities continue to be a non-competing business with the Company.

2. Term . Your employment with the Company is at-will and either you or the Company may terminate your employment at any time and for any reason, with or without Cause (as defined below), in each case subject to the terms and provisions of this Agreement. Unless terminated earlier, this Agreement will extend through the three year anniversary of the Effective Date (“Expiration Date”); provided, however, on the three year anniversary of the Effective Date (and on each subsequent anniversary thereafter) the Expiration Date will automatically be extended by an additional year unless either party has provided written notice to the other party at least three months before the applicable Expiration Date that such party will not agree to so extend the Agreement. The terms of Sections 8 through 17 will survive any termination or expiration of this Agreement or of your employment.

3. Salary, Bonus, Equity Incentives . For avoidance of doubt, the Board may delegate its authority and responsibilities under this Section 3 to a committee or sub-committee of members of the Board and all references in this Agreement to the “Board” shall be, as applicable, to the Board or committee or sub-committee thereof of the Board (e.g., the Compensation Committee of the Board).

Exhibit 10.27

(a) Base Salary . During your employment as COO and while this Agreement is in effect, you will be paid an annual base salary of $430,000.00 (the “Base Salary”) for your services as COO, payable in the time and manner that the Company customarily pays its employees provided that you will receive pro-rata payments of Base Salary on at least a monthly basis. Your Base Salary will also be reviewed periodically by the Compensation Committee of the Board and may be increased by the Compensation Committee in its discretion or decreased with your written consent.

(b) Bonuses . During your employment as COO and while this Agreement is in effect, you will be eligible to participate in any bonus programs as set forth by the Compensation Committee of the Board. In addition, during each Company fiscal year you will be eligible to earn an annual cash bonus based on performance objectives reasonably established by the Compensation Committee. Your annual target cash bonus amount will be equal to 70% of your Base Salary that is paid to you during the applicable fiscal year. The actual amount of the annual bonus paid to you, if any, will be determined by the Compensation Committee in its sole discretion and may be more or less than the target amount. Any such bonus will be paid to you during the first two and a half months of the fiscal year that follows the applicable performance fiscal year. Subject to Section 7(b)(v), you must be employed by the Company through the date the annual bonus is paid in order to receive payment.

(c) Sign-On Equity Grant . If you commence employment with the Company on the Effective Date, you will receive sign-on restricted stock units with a grant date value of $200,000, with 25% of the restricted stock units vesting on the first anniversary of the grant date, 25% vesting on the second anniversary of the grant date, 25% vesting on the third anniversary of the grant date, and the remaining 25% of the restricted stock units vesting on the fourth anniversary of the grant date. The restricted stock units will be subject to the terms and conditions specified by the Compensation Committee of the Board, the Company’s stock plan, the award agreement that you must execute as a condition of the grant and the Company’s insider trading policy.

(d) Stock Options and Compensatory Equity .

(i) In addition to the sign-on restricted stock units described in Section 3(c), while you are an employee of the Company, you will be eligible to receive grants of stock options, restricted stock units, market stock units, and other forms of equity compensation awards (time and/or performance based, collectively the “Equity Awards”). Such Equity Awards, if any, will be made in the sole discretion of the Compensation Committee of the Board or sub-committee thereof and will be subject to the terms and conditions specified by the Compensation Committee or sub-committee thereof, the Company’s stock plan, the award agreement that you must execute as a condition of any grant and the Company’s insider trading policy. If required by applicable law with respect to transactions involving Company equity securities, you agree that you will use your best efforts to comply with any duty that you may have to (i) timely report any such transactions and (ii) to refrain from engaging in certain transactions from time to time.

(ii) Your Equity Awards for the 2019 calendar year will have a grant date value of $420,000 and will be subject to the terms and conditions specified by the Compensation Committee or sub-committee thereof, the Company’s stock plan, the award

Exhibit 10.27

agreement(s) that you must execute as a condition of any grant and the Company’s insider trading policy.

(iii) If you are still in our service upon the consummation of a Change of Control (as defined below), 50% of each of your then unvested time-based stock options and performance-based stock options, if any, shall become vested on a pro rata basis (rounded down to the nearest whole number for each discrete option) over the vesting schedule. The remaining unvested portion of your options, if any, shall continue to vest pursuant to their original vesting schedule but at 50% of the original rate of vesting over such vesting period. As purely a hypothetical example to illustrate the foregoing, assume that at the time of a Change of Control, you were in service and held one time-based stock option which then had sixty unvested shares that were scheduled to vest at 10 shares, 20 shares, and 30 shares in each of the three following months, respectively. Thirty of such sixty unvested shares would become vested upon the Change of Control and the remaining thirty unvested shares would vest at 5 shares, 10 shares, and 15 shares in each of the three following months subject to your continued service.

4. Expense Reimbursement . Subject to Section 11 below, during your employment as COO and while this Agreement is in effect, you will be reimbursed for all reasonable business expenses (including, but without limitation, travel expenses) upon the properly completed submission of requisite forms and receipts to the Company in accordance with the Company’s Expense Reimbursement Policy.

5. Change of Control .

(a) Definition . For purposes of this Agreement, a “Change of Control” will have the meaning set forth in the then applicable Company stock plan.

(b) Limitation on Payments . In the event that it is determined that any payment or distribution of any type to or for your benefit made by the Company, by any of its affiliates, by any person who acquires ownership or effective control or ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of the Code or by any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payments”), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are collectively referred to as the “Excise Tax”), then such payments or distributions or benefits will be payable either:

(i) in full; or

(ii) as to such lesser amount which would result in no portion of such payments or distributions or benefits being subject to the Excise Tax.

You will receive the greater, on an after-tax basis, of (i) or (ii) above. In the event that clause (ii) above applies, and a reduction is required to be applied to the Total Payments, the Total Payments will be reduced by the Company in the following order: (1) payments and benefits due under Sections 7(b)(i) and (ii) will be reduced (if necessary, to zero) in such order with amounts that are payable first reduced first; provided, however that in all events such payments which are not subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) will be

Exhibit 10.27

reduced first; (2) payments and benefits due in respect of any options to purchase shares of common stock of the Company will be reduced second; (3) payments and benefits due in respect of any fully valued Equity Awards (i.e., restricted stock or restricted stock units) for which an election under Section 83(b) of the Code has not been made will be reduced third and (4) payments and benefits due in respect of any fully valued Equity Awards (i.e., restricted stock or restricted stock units) for which an election under Section 83(b) of the Code has been made will be reduced fourth. Notwithstanding anything to the contrary herein, in all events, you will have no right, power or discretion to determine the reduction of payments and/or benefits hereunder and any such reduction will be structured in a manner intended to comply with Section 409A of the Code.

Unless you and the Company agree otherwise in writing, any determination required under this Section 5(b) will be made in writing by a qualified independent accountant selected by the Company (the “Accountant”) whose determination will be conclusive and binding. You and the Company will furnish the Accountant such documentation and documents as the Accountant may reasonably request in order to make a determination. The Company will bear all costs that the Accountant may reasonably incur in connection with performing any calculations contemplated by this Section 5(b).

6. Employee Benefit Programs . During your employment with the Company, and except as may be provided under an employee stock purchase plan, you will be entitled to participate, on the same terms as generally provided to senior executives, in all Company employee benefit plans and programs at the time or thereafter made available to Company senior executive officers including, without limitation, any savings or profit sharing plans, deferred compensation plans, stock option incentive plans, group life insurance, accidental death and dismemberment insurance, hospitalization, surgical, major medical and dental coverage, vacation, sick leave (including salary continuation arrangements), long-term disability, holidays, ArmadaCare, and other employee benefit programs sponsored by the Company. The Company may amend, modify or terminate these benefits at any time and for any reason. You will also be indemnified to the fullest extent permitted by law, from and against any and all liability, loss, damages or expenses incurred as a result of, arising out of, or in any way related to, your service as an employee, officer, director or agent of the Company or a Company affiliate, in accordance with the Company’s Certificate of Incorporation and bylaws. The Company will maintain a directors and officers liability insurance policy (including tail coverage) covering you in your capacity as an officer and director of the Company and any Company affiliate. The Company’s obligation to indemnify you will survive termination of this Agreement.

7. Consequences of Termination of Employment . Unless the Company requests otherwise in writing, upon termination of your employment for any reason, you will be deemed to have immediately resigned from all positions as an officer (and/or director, if applicable) with the Company (and its affiliates and or institutions) as of your last day of employment (the “Termination Date”). Upon termination of your employment for any reason, you will receive payment or benefits from the Company covering the following: (i) all unpaid salary and unpaid vacation accrued through the Termination Date, (ii) any bonus amount that has been determined to have been earned with respect to a performance period that has ended on or prior to your termination of employment, but which remains unpaid; (iii) any payments/benefits to which you are entitled under the express terms of any applicable Company employee benefit plan, (iv) any unreimbursed valid business expenses for which you have submitted properly documented

Exhibit 10.27

reimbursement requests, and (v) your then outstanding prior equity awards as governed by their applicable terms (collectively, (i) through (v) are the “Accrued Pay”). You may also be eligible for other post-employment payments and benefits as provided in this Agreement.

(a) For Cause . For purposes of this Agreement, your employment may be terminated by the Company for “Cause” as a result of the occurrence of one or more of the following:

(i) your conviction of, or a plea of guilty or nolo contendere to, a felony or other crime (except for misdemeanors which are not materially injurious to the business or reputation of the Company or a Company affiliate);

(ii) your willful refusal to perform in any material respect your duties and responsibilities for the Company or a Company affiliate or your failure to comply in any material respect with the terms of this Agreement and the Confidentiality Agreement (as defined in Section 8) and the policies and procedures of the Company or a Company affiliate at which you serve as an officer and/or director if such refusal or failure causes or reasonably expects to cause injury to the Company or a Company affiliate;

(iii) fraud or other illegal conduct in your performance of duties for the Company or a Company affiliate; or

(iv) any conduct by you that is materially injurious to the Company or a Company affiliate or materially injurious to the business reputation of the Company or a Company affiliate.

Prior to your termination for Cause, you will be provided with written notice from the Company describing in detail the conduct forming the basis for the alleged Cause and to the extent curable, a reasonable opportunity (of not less than 30 days or more than 90 days) to cure such conduct before the Company may terminate you for Cause. You have the right to present your case to the CEO, with assistance of your legal counsel before any termination for Cause is finalized by the Company. Any termination for “Cause” will not limit any other right or remedy the Company may have under this Agreement or otherwise. You will continue to receive the compensation and benefits provided by this Agreement during the period after you receive the written notice of the Company’s intention to terminate your employment for Cause until such termination becomes effective.

In the event your employment is terminated by the Company for Cause you will be entitled only to your Accrued Pay and you will be entitled to no other compensation from the Company. In addition, you may be required to repay to the Company certain previously paid compensation in accordance with any Clawback Policy (as defined below) then in effect.

For avoidance of doubt, terminations of employment due to death or Disability, which are addressed in Section 7(d) below, are not terminations for Cause.

(b) Without Cause or for Good Reason . The Company may terminate your employment without Cause at any time and for any reason with notice or you may resign your employment for Good Reason (as defined below in Section 7(b)(vii)) upon 30 days advance

Exhibit 10.27

written notice (each a “Qualifying Termination”). If your employment is terminated due to a Qualifying Termination, then, subject to Sections 11 and 13 hereof, you will be eligible to receive the following subject to your timely compliance with Section 7(e) and further provided that no payments for such Qualifying Termination will be made until on or after the date of a “separation from service” within the meaning of Code Section 409A:

(i) The Company will provide you with cash payments equal in the aggregate to one and one-half times the sum of your Base Salary and your annual target bonus. The cash payments provided by this subpart (i) will be paid to you in substantially equal installments payable bi-weekly over the 18 month period following your Termination Date, however, the first payment will be made within 15 days following the effective date of the Release (as defined below). This first payment will cover the period of time from the Termination Date through the end of the bi-weekly period immediately preceding such first payment;

(ii) The Company will reimburse you for a portion of the premiums you pay for group medical insurance while you are covered under a Company-sponsored group medical insurance plan pursuant to Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or any similar state law (“COBRA”). Such reimbursement will be equal to the subsidy provided by the Company to active Company employees who participate in the same group medical insurance plan (“Reimbursed Subsidy”). You shall pay your share of any COBRA premiums with after-tax income and the Reimbursed Subsidy will be taxable to you for federal and state tax purposes. The Reimbursed Subsidy will be provided concurrently with COBRA continuation coverage, on a monthly basis for a period of 18 months so long as you elect continuation coverage within the time period prescribed by COBRA, provided, however, if the Company determines that it cannot provide the foregoing reimbursement without violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act or the Employee Retirement Income Security Act of 1974, each as amended), the Company will in lieu thereof provide you with a lump sum taxable payment that is equal to 18 months’ of the Reimbursed Subsidy amount, which payment will be paid to you regardless of whether you elect COBRA continuation coverage In all cases, the coverage (and/or reimbursements) provided in this subpart (ii) will immediately terminate if you are offered group medical insurance coverage in connection with your employment by another employer;

(iii) Any then unvested restricted stock units granted to you pursuant to Section 3(c) will become immediately fully vested as of your Termination Date;

(iv) Your then outstanding and unvested Equity Awards that are to vest solely on continued service to the Company (“Time-Based Equity Awards”) will become incrementally vested on an accelerated basis as if your Termination Date occurred one year later and with respect to Equity Awards that are stock options granted to you on or after the Effective Date, will remain exercisable by you until the earlier of one year following your Termination Date or the expiration of their originally scheduled term;

(v) You will continue to be eligible to receive the bonus described in Section 3(b) for the completed fiscal year immediately preceding your termination of employment to the extent the bonus has not yet been paid, in such amount, if any, that the Board determines under Section 3(b);

Exhibit 10.27

(vi) If the Qualifying Termination occurs during the 24 month period after a Change of Control, then in lieu of subpart (iv), all of your unvested Time-Based Equity Awards will become immediately fully vested as of your Termination Date; and

(vii) For purposes of this Agreement, you may resign your employment from the Company for “Good Reason” within 90 days after the date that any one of the following events described in subparts (1) through (4) (any one of which will constitute “Good Reason”) has first occurred without your written consent. Your resignation for Good Reason will only be effective if the Company has not cured or remedied the Good Reason event within 30 days after its receipt of your written notice (such notice will describe in detail the basis and underlying facts supporting your belief that a Good Reason event has occurred). Such notice of your intention to resign for Good Reason must be provided to the Company within 60 days of the initial existence of a Good Reason event. Failure to timely provide such written notice to the Company or failure to timely resign your employment for Good Reason means that you will be deemed to have consented to and waived the Good Reason event. If the Company does timely cure or remedy the Good Reason event, then you may either resign your employment without Good Reason or you may continue to remain employed subject to the terms of this Agreement.


(1)	You have incurred a material diminution in your responsibilities, duties or authority, including without limitation a requirement that you report to any person or group of persons other than the CEO or Board;


(2)	You have incurred a material diminution in your Base Salary or annual target bonus amount; or


(3)	The Company has materially breached a material provision of this Agreement.

Subject to the express language in this Section 7(b) and Section 14, you will not be required to mitigate the amount of any payment or benefit contemplated by this Section 7(b), nor will any such payment or benefit be reduced by any earnings or benefits that you may receive from any other source. If any cash payments that are owed to you under this Agreement are not paid to you within 15 days of their due date, then the Company will additionally owe you interest on such late payments, payable on a monthly basis while any overdue amount is still outstanding, with interest accruing at the then prevailing prime rate, compounded monthly. For avoidance of doubt, this Section 7(b) does not apply to terminations of employment due to death or Disability which are addressed in Section 7(d).

(c) Voluntary Termination . In the event you voluntarily terminate your employment with the Company without Good Reason, you will be entitled to receive only your Accrued Pay. You will be entitled to no other compensation from the Company. You agree to provide the Company with at least 30 days advance written notice of your intention to resign without Good Reason. For avoidance of doubt, this Section 7(c) does not apply to terminations of employment due to death or Disability which are addressed in Section 7(d).

Exhibit 10.27

(d) Death or Disability . In the event your employment with the Company is terminated as a result of your death or Disability, then: (i) your estate will be entitled to receive your Accrued Pay, (ii) your then outstanding unvested Time-Based Equity Awards will be treated as set forth in Section 7(b)(iv), (iii) your estate will be entitled to receive six monthly installment payments of your Base Salary commencing with the month after your death or Disability, as applicable, and (iv) your dependents will receive medical benefits (at the same level that they were receiving such coverage as of the Termination Date) paid by the Company for the six months following your Termination Date; provided, however, if the Company determines that it cannot provide the foregoing medical benefits without violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act or the Employee Retirement Income Security Act of 1974, each as amended), the Company will in lieu thereof provide your dependents with a lump sum taxable payment that is equal to six months Reimbursed Subsidy amount.

For purposes of this Agreement, “Disability” is defined to occur when you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

(e) Release of Claims . As a condition to receiving (and continuing to receive) the payments and benefits provided in Section 7(b), you must (i) within not later than 60 days after your Termination Date (the “Release Deadline”), execute (and not revoke) and deliver to the Company a Release Of All Claims And Covenant Not To Sue agreement (the “Release”) substantially in the form attached as Exhibit B hereto and (ii) remain in full compliance with such Release. The Company will have the obligation to prepare and execute said Release and tender the Release to you within 7 days of your Termination Date. None of the payments and benefits provided in Section 7(b) will be paid or provided until the Release is effective and irrevocable and if the Release does not become effective and irrevocable by the Release Deadline, you will forfeit all rights to the severance payments and benefits described in Section 7(b) of this Agreement. If the Release is effective and irrevocable on the Release Deadline, then, except as required by the following sentence and/or Section 11 below, any payments that would have been made to you during the 60 day period immediately following your separation from service will be paid to you on the first Company payroll period following the Release Deadline and any remaining payments will be made as provided in this Agreement. Additionally, and notwithstanding anything herein to the contrary, in the event that the time period within which you must return and not revoke the Release straddles 2 calendar years, in all events any payments under Section 7(b) will be made (or commence, as applicable) in the second such calendar year.

8. Proprietary Information and Inventions Agreement; Confidentiality . Your employment is contingent upon you signing the Company’s standard form of proprietary information and inventions agreement (“Confidentiality Agreement”).

9. Assignability; Binding Nature . Commencing on the Effective Date, this Agreement will be binding upon you and the Company and your respective successors, heirs, and assigns. This Agreement may not be assigned by you except that your rights to compensation and benefits hereunder, subject to the limitations of this Agreement, may be transferred by will or operation of law. No rights or obligations of the Company under this Agreement may be assigned

Exhibit 10.27

or transferred except in the event of a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and assumes the Company’s obligations under this Agreement contractually or as a matter of law. The Company will require any such purchaser, successor or assignee to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such purchase, succession or assignment had taken place. Your rights and obligations under this Agreement will not be transferable by you by assignment or otherwise provided, however, that if you die, all amounts then payable to you hereunder will be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate.

10. Governing Law; Arbitration . This Agreement will be deemed a contract made under, and for all purposes will be construed in accordance with, the laws of California. You and the Company agree that any controversy or claim relating to this Agreement or any breach thereof, and any claims you may have arising from or relating to your employment (or separation from employment) with the Company or that the Company may have against you arising from or relating to your employment with the Company, of any nature whatsoever, other than those prohibited by law or for workers’ compensation, unemployment or disability benefits, will be settled solely and finally by binding arbitration in San Diego, California before a single neutral arbitrator in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (“AAA”) then in effect in the State of California, which can be found at www.adr.org, and for which you can request a copy from the Company. You agree that any claim brought pursuant to this Agreement shall be brought in your individual capacity only, and not as a class, collective, or representative action and that the arbitrator has no power or authority to preside over a class, collective or representative action. Judgment upon the award, if any, rendered by the arbitrator may be entered in any court having jurisdiction thereof, provided that this Section 10 will not be construed to eliminate or reduce any right the Company or you may otherwise have to obtain a temporary restraining order or a preliminary or permanent injunction to enforce any of the covenants contained in this Agreement before the matter can be heard in arbitration. The arbitrator shall issue written findings of fact and conclusions of law. You and the Company understand that by agreeing to binding arbitration you and the Company are giving up your rights to trial by jury of any claim either may have against each other. If you prevail on at least one material claim with respect to such dispute, then within 75 days of the dispute’s final resolution the Company will reimburse you for your reasonable and substantiated legal fees and costs incurred with respect to any such prevailing claims. You agree that nothing in this Agreement prevents you from making a report to or filing a charge with a federal, state, or local government agency and that nothing in this Agreement precludes your participation in an investigation by a government agency. However, after exhaustion of any such administrative procedures, any remaining issue or dispute between you and the Company shall be resolved exclusively pursuant to the terms of this Section 10.

11. Taxes . Notwithstanding anything herein to the contrary, all payments made by the Company hereunder to you or your estate or beneficiaries will be subject to tax withholding pursuant to any applicable laws or regulations. This Agreement is intended to be exempt from or comply with the requirements of section 409A of the Code and each provisions of this Agreement

Exhibit 10.27

shall be interpreted, to the extent possible, to comply with Section 409A or an exception thereto. Nevertheless, the Company does not and cannot guarantee any particular tax effect or treatment of the amounts due under this Agreement. Accordingly, you remain solely liable for any adverse tax consequences imposed on you by Section 409A of the Code. In the event this Agreement or any benefit paid to you hereunder is deemed to be subject to Section 409A of the Code, you consent to the Company adopting such conforming amendments or taking such actions as the Company deems necessary, in its reasonable discretion, to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A. Notwithstanding any provision in the Agreement to the contrary, if upon your “separation from service” within the meaning of Code Section 409A, you are then a “specified employee” within the meaning of Code Section 409A, then to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company will defer payment of “nonqualified deferred compensation” subject to Code Section 409A payable as a result of and within six months following such “separation from service” under this Agreement until the earlier of (a) the first business day of the seventh month following your “separation from service,” or (b) 10 days after the Company receives valid confirmation of your death. Any such delayed payments will be made without interest. Additionally, the reimbursement of expenses or in-kind benefits provided pursuant to this Agreement will be subject to the following conditions: (i) the expenses eligible for reimbursement or in-kind benefits in one taxable year will not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year (ii) the reimbursement of eligible expenses or in-kind benefits will be made promptly, subject to the Company’s applicable policies, but in no event later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit. Under no circumstances may the time or schedule of any payment made or benefit provided pursuant to the Plan or any Agreement be accelerated or subject to further deferral except as otherwise permitted or required pursuant to Section 409A of the Code and you do not have the right to make any election regarding the time or form of any payment due under this Agreement.

12. Entire Agreement . Except as otherwise specifically provided in this Agreement, this Agreement contains all the legally binding understandings and agreements between you and the Company pertaining to the subject matter of this Agreement and supersedes all such agreements, whether oral or in writing, previously entered into between the parties.

13. Covenants .

(a) As a condition of this Agreement and to your receipt of any post-employment benefits, you agree that you will fully and timely comply with all of the covenants set forth in this Section 13(a) (which will survive your termination of employment and termination or expiration of this Agreement):

(i) You will fully comply with all obligations under the Confidentiality Agreement and further agree that the provisions of the Confidentiality Agreement will survive any termination or expiration of this Agreement or termination of your employment or any subsequent service relationship with the Company;

(ii) Within five days of the Termination Date, you will return to the Company all Company confidential information including, but not limited to, intellectual property,

Exhibit 10.27

etc. and you will not retain any copies, facsimiles or summaries of any Company proprietary information;

(iii) You will not at any time during the period of your employment with the Company and during any period following your termination of employment, make (or direct anyone to make) any disparaging statements (oral or written) about the Company, or any of its affiliated entities, officers, directors, employees, stockholders, representatives or agents, or any of the Company’s products or services or work-in-progress, that are harmful to their businesses, business reputations or personal reputations;

(iv) You agree that during the period of your employment with the Company and for one year after the Termination Date, you will not induce, solicit, recruit or encourage any employee of the Company to leave the employ of the Company which means that you will not (x) disclose to any person, entity or employer the backgrounds or qualifications of any Company employees or otherwise identify them as potential candidates for employment or (y) personally or through any other person recruit or otherwise solicit Company employees to work for you or any other person, entity, or employer. For the avoidance of doubt, your direct or indirect placement of a general advertisement for employment not targeted at any specific individual will not constitute a violation of this Section 13(a)(iv);

(v) You agree that during the period of your employment with the Company and thereafter, you will not utilize any trade secrets or proprietary information of the Company in order to solicit, either on behalf of yourself or any other person or entity, the business of any client or customer of the Company, whether past, present or prospective. The Company considers the following, without limitation, to be its trade secrets and proprietary information: Financial information, administrative and business records, analysis, studies, governmental licenses, employee records (including but not limited to counts and goals), prices, discounts, financials, electronic and written files of Company policies, procedures, training, and forms, listing of students and students who applied or made an inquiry about any program and any student data, student records, written or electronic work product that was authored, developed, edited, reviewed or received from or on behalf of the Company during period of employment, Company developed technology, software, or computer programs, process manuals, products, business and marketing plans and or projections, Company sales and marketing data, Company technical information, Company strategic plans, Company financials, enrollment lists, total student enrollment, enrollment goals, vendor affiliations, proprietary information, technical data, trade secrets, know-how, copyrights, patents, trademarks, intellectual property, and all documentation related to or including any of the foregoing; and

(vi) You agree that, upon the Company’s request and without any payment therefore, you will reasonably cooperate with the Company (and be available as necessary but such cooperation will not interfere with new employment) after the Termination Date in connection with any matters involving events that occurred during your period of employment with the Company.

(b) You also agree that you will fully and timely comply with all of the covenants set forth in this Section 13(b) (which will survive your termination of employment and termination or expiration of this Agreement):

Exhibit 10.27

(i) You will fully pay off any outstanding amounts owed to the Company no later than their applicable due date or within 30 days of your Termination Date (if no other due date has been previously established);

(ii) Within five days of the Termination Date, you will return to the Company all Company property including, but not limited to, computers, cell phones, pagers, keys, business cards, etc.;

(iii) Within 30 days of the Termination Date, you will submit any outstanding expense reports to the Company;

(iv) As of the Termination Date, you will no longer represent that you are an officer, director or employee of the Company and you will immediately discontinue using your Company mailing address, telephone, facsimile machines, voice mail and e-mail; and

(v) You will provide written notice to the Company within three business days after the date that you have agreed to accept new full or part time employment or agreed to provide consulting or other services to another entity or venture during the period during which you are receiving severance benefits under Section 7(b).

(c) You acknowledge that (i) upon a violation of any of the covenants contained in Section 13 of this Agreement or (ii) if the Company is terminating your employment for Cause as provided in Section 7(a), the Company would as a result sustain irreparable harm, and, therefore, you agree that in addition to any other remedies which the Company may have, the Company will be entitled to seek equitable relief including specific performance and injunctions restraining you from committing or continuing any such violation; and

(d) The compensation and benefits provided pursuant to this Agreement may be subject to the Company’s compensation recoupment policy or policies (and related Company practices) that may be adopted by the Company and in effect from time-to-time, including, but not limited to, any policy or policies that may be adopted in response to applicable law (each, a “Clawback Policy”). By signing this Agreement you agree to fully cooperate with the Company in assuring compliance with such policies and the provisions of applicable law, including, but not limited to, promptly returning any compensation subject to recovery by the Company pursuant to such Clawback Policies and applicable law.

14. Offset . Any severance or other payments or benefits made to you under this Agreement may be reduced, in the Company’s discretion, by any amounts you owe to the Company or as will be needed to satisfy any future co-payments you would need to make for continuing post-termination benefits, provided however that any such offsets do not violate Code Section 409A.

15. Notice . Any notice that the Company is required to or may desire to give you will be given by personal delivery, recognized overnight courier service, email, telecopy or registered or certified mail, return receipt requested, addressed to you at your address of record with the Company, or at such other place as you may from time to time designate in writing. Any notice that you are required or may desire to give to the Company hereunder will be given by personal delivery, recognized overnight courier service, email, telecopy or by registered or certified mail,

Exhibit 10.27

return receipt requested, addressed to the Company’s General Counsel at its principal office, or at such other office as the Company may from time to time designate in writing. The date of actual delivery of any notice under this Section 15 will be deemed to be the date of delivery thereof.

16. Waiver; Severability . No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to by you and the Company in writing. No waiver by you or the Company of the breach of any condition or provision of this Agreement will be deemed a waiver of a similar or dissimilar provision or condition at the same or any prior or subsequent time. Except as expressly provided herein to the contrary, failure or delay on the part of either party hereto to enforce any right, power, or privilege hereunder will not be deemed to constitute a waiver thereof. In the event any portion of this Agreement is determined to be invalid or unenforceable for any reason, the remaining portions will be unaffected thereby and will remain in full force and effect to the fullest extent permitted by law.

17. Voluntary Agreement . You acknowledge that you have been advised to review this Agreement with your own legal counsel and other advisors of your choosing and that prior to entering into this Agreement, you have had the opportunity to review this Agreement with your attorney and other advisors and have not asked (or relied upon) the Company or its counsel to represent you or your counsel in this matter. You further represent that you have carefully read and understand the scope and effect of the provisions of this Agreement and that you are fully aware of the legal and binding effect of this Agreement. This Agreement is executed voluntarily by you and without any duress or undue influence on the part or behalf of the Company.

Exhibit 10.27

Please acknowledge your acceptance and understanding of this Agreement by signing and returning it to the undersigned. A copy of this signed Agreement will be sent to you for your records.

ACKNOWLEDGED AND AGREED :



BRIDGEPOINT EDUCATION, INC. /s/ Andrew Clark BY: Andrew Clark TITLE: President & CEO	GREG FINKELSTEIN /s/ Gregory Finkelstein

Exhibit 10.27

EXHIBIT A


•	Academic Programs International (API) - Chairman of the Board and investor and equity owner.


•	Collegis Education - Investor and equity owner. Will resign Advisory Board member position prior to or as soon as possible following the Effective Date.


•	Rasmussen College - Investor and equity owner.


•	Bennett Day School - Investor and equity owner.


•	Venops - Investor and equity owner. Also sits on the Board of Directors.

Exhibit 10.27

EXHIBIT B

RELEASE OF ALL CLAIMS AND COVENANT NOT TO SUE PURSUANT TO AGREEMENT


1.	PARTIES . The parties to this Agreement and Release are Greg Finkelstein (“Executive”) and Bridgepoint Education, Inc., a Delaware corporation, (the “Company”).

2. RECITALS . This Release is made with reference to the following facts:

Executive and Company are parties to an Employment Agreement dated __________, 2019 (the “Employment Agreement”). That Employment Agreement provides that Executive must execute a general release and covenant not to sue within not later than 60 days after Executive’s Termination Date (as defined in the Employment Agreement) in order for Executive to receive any severance payment and benefits under the Employment Agreement. This Release is the general release and covenant not to sue required by the Employment Agreement.


3.	EXECUTIVE’S PROMISES . In consideration for the promises and payments contained in the Employment Agreement, Executive agrees as follows:

3.1 Executive hereby covenants not to sue and also waives, releases and forever discharges Company, its parent company, divisions, subsidiaries, officers, directors, agents, employees, stockholders, affiliates and successors from any and all claims, causes of action, damages or costs of any type Executive may have against Company or its current and former parent company, divisions, subsidiaries, officers, directors, employees, agents, stockholders, successors or affiliates (the “Released Parties”) including without limitation those arising out of or relating to Executive’s employment with Company, or Executive’s separation from employment (if separated by such date). This waiver and release includes, but is not limited to, claims, causes of action, damages or costs arising under or in relation to Company’s employee handbook and personnel policies, or any oral or written representations or statements made by officers, directors, employees or agents of Company, or under any local, state or federal law regulating wages, hours, compensation or employment, or any claim for breach of contract or breach of the implied covenant of good faith and fair dealing, or any claim for stock, stock options, warrants, or phantom stock or equity of any kind or any claim for wrongful termination, or any discrimination claim on the basis of race, sex, sexual orientation, gender, age, religion, marital status, national origin, physical or mental disability, medical condition, or any claim arising under the federal Age Discrimination in Employment Act (“ADEA”), the Equal Pay Act, the California Family Rights Act, the Pregnancy Discrimination Act, the Family Medical Leave Act, the California Labor Code, the California Wage Orders, Title VII of the Civil Rights Act, the Fair Employment and Housing Act, the California Labor Code Private Attorneys General Act of 2004, the California Wage Orders, and Business and Professions Code Section 17200, et seq, the Americans with Disabilities Act, the Fair Labor Standards Act, the California Constitution, the Genetic Information Non-Discrimination Act, the National Labor Relations Act, the Lilly Ledbetter Fair Pay Act, the Fair Credit Reporting Act, the False Claims Act, the Sarbanes-Oxley Act, the California Business and Professions Code, California statutory or common law, and the Older Workers Benefit Protection Act (“OWBPA”). Notwithstanding the foregoing, this Release does not release (a) claims that

Exhibit 10.27

cannot be released as a matter of law, (b) claims arising after the effective date of this release including those under the Employment Agreement, (c) claims to enforce any of Executive’s rights to post-termination benefits under Section 7 of the Employment Agreement, (d) claims for indemnification pursuant to Section 6 of the Employment Agreement or under any directors and officers liability insurance policy, or (e) claims to enforce any of Executive’s vested benefits under any employee benefit or equity plan of the Company. Nothing in this Release shall be construed as prohibiting Executive from making a claim with, cooperating with, or participating in any manner in any investigation of a charge or complaint by any local, state, or federal agency, or from making any disclosures that are protected under the whistleblower provisions of local, state or federal law or regulation. However, Executive acknowledges that by signing this Release he waives any claim or right to receive damages or compensation on the basis of any such charge, complaint or investigation.

3.2 The waiver and release set forth in Section 3.1 applies to claims of which Executive does not currently have knowledge and Executive specifically waives the benefit of the provisions of Section 1542 of the Civil Code of the State of California which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” Executive hereby expressly waives and relinquishes all rights and benefits under any law or legal principle of similar effect to Section 1542 in any jurisdiction with respect to the release granted in this Release. Executive acknowledges that he may later discover facts in addition to or different from those which Executive now knows, or believes to be true, with respect to any of the subject matters of this Release, but that it is nevertheless Executive’s intention to settle and release any and all claims released herein.

3.3 Executive has not suffered nor aggravated any known on-the-job injuries for which Executive has not already filed a Workers’ Compensation claim.

3.4 Executive agrees that nothing in this Release will be construed as an admission of liability of any kind by Company to Executive.

4. CONSULTATION, REVIEW, AND REVOCATION . In accordance with the ADEA as amended by the OWBPA, Executive is advised to consult with an attorney before signing this Release. Executive acknowledges that this Section and this Release is written in a manner calculated to be understood by Executive. The release of claims under the ADEA contained in this Release does not cover rights or claims that may arise after the date Executive signs this Release. Executive is given a period of 21 days in which to consider whether to enter into this Release. Executive does not have to utilize the entire 21 day period before signing this Release, and may waive this right. Executive understands and agrees that this Release will be automatically withdrawn by the Company if Executive does not accept and deliver this Release to the Company within the 21 day period. If Executive does enter into this Release, he may revoke the Release within seven days after the execution of the Release. In the event this Release is revoked, Executive understands that this Release will be null and void, and he will not be entitled to receive the severance payments and benefits specified in Section 7(b) of the Employment Agreement. Any revocation must be in writing and must be received by the Company no later than midnight of the seventh day after execution by Executive. The Release is not effective or enforceable until after this seven day period has passed without revocation. Executive hereby acknowledges and agrees

Exhibit 10.27

that he is knowingly and voluntarily waiving and releasing Executive’s rights and claims in exchange for consideration (something of value) in addition to anything of value to which he is already entitled.

5. LABOR CODE SECTION 206.5 . Executive agrees that the Company has paid to Executive his salary and vacation accrued as of the Termination Date and that these payments represent all such monies due to Executive through the Termination Date. In light of the payment by the Company of all wages due, or to become due to Executive, California Labor Code Section 206.5 is not applicable to the parties hereto. That section provides in pertinent part as follows: “No employer will require the execution of any release of any claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of such wages has been made.”

6. MISCELLANEOUS .

6.1. This Release will be deemed to have been executed and delivered within the State of California, and the rights and obligations of the parties hereunder will be construed and enforced in accordance with, and governed by, the laws of the State of California. Executive and the Company agree that any controversy or claim relating to this Release or any breach thereof, and any claims Executive may have arising from or relating to Executive’s employment with the Company (or separation from employment) or that the Company may have against Executive arising from or relating to his employment with the Company, of any nature whatsoever, other than those prohibited by law or for workers’ compensation, unemployment or disability benefits, will be settled solely and finally by binding arbitration in San Diego, California before a single neutral arbitrator in accordance with the provisions of Section 10 of the Employment Agreement.

6.2. This Release and the Employment Agreement (and any agreements referenced therein) represent the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions. This Release may be amended only by an agreement in a writing signed by the parties.

6.3. This Release is binding upon and will inure to the benefit of the parties hereof, their respective agents, employees, representatives, officers, directors, divisions, subsidiaries, affiliates, parent company, assigns, heirs, partners, successors in interest and stockholders, including any successor company of the Company.

6.4. Executive agrees that he has read this Release and has had the opportunity to ask questions, seek counsel and time to consider the terms of the Release. Executive has entered into this Release freely and voluntarily.

6.5. The parties agree that any dispute or controversy arising from or related to this Release will be decided by final and binding arbitration as provided in the Employment Agreement.

6.6. The execution date of this Release is the date that Executive signs this Release.

6.7. Executive acknowledges that Executive has had the opportunity to fully review this Release and, if Executive so chooses, to consult with counsel, and is fully aware of Executive’s rights and obligations under this Release and the Employment Agreement.

6.8. Executive acknowledges and hereby affirms his obligations under Section 13 the Employment Agreement and hereby acknowledges that nothing in this Release shall release Executive from his obligations pursuant to Section 13 of the Employment Agreement including, without limitation, obligations regarding confidential and proprietary information, the Company’s intellectual property rights, non-disparagement, and non-solicitation.

Exhibit 10.27

6.9. Executive acknowledges and hereby affirms his consent to, and understanding of, the tax and Code Section 409A related provisions set forth in Section 11 of the Employment Agreement and the application of such provisions to the payments described above.

6.10. In the event any portion of this Release is determined to be invalid or unenforceable for any reason, the remaining portions will be unaffected thereby and will remain in full force and effect to the fullest extent permitted by law.

By signing this Release before the 21 day period described in Section 4 expires, Executive waives Executive’s right under the ADEA and the OWBPA to 21 days to consider the terms of this Release. In any case, however, Executive retains the right to revoke this Release within seven days, as described above in Section 4.



GREG FINKELSTEIN (“Executive”) Date: _____________________________	BRIDGEPOINT EDUCATION, INC. (“Company”) By: _________________________________ Its:__________________________________ Date:________________________________

Exhibit 10.28

January 25, 2019

John Semel

Re: Offer of Employment

Dear John:

Bridgepoint Education is pleased to offer you the position of Chief Strategy Officer . The pertinent details are set forth below; additionally, be sure to review the information contained in the Addendum of this Offer Letter.

Start Date:

Office Location: Remote

Company address: 8620 Spectrum Center Blvd., San Diego, CA 92123

Telephone: 866-475-0317

Base Salary: You will be paid in bi-weekly installments equivalent to $450,000.00 on an annual basis, and subject to deductions for taxes and other withholdings as required by law.

Sign-On Bonus: We are providing you with a sign-on bonus in the amount of $85,000 less applicable payroll deductions. Please see the addendum at the end of this offer letter for additional details regarding the sign-on bonus.

Performance Bonus: You are eligible to participate in the Bridgepoint Education Short Term Bonus Program (STI). This is an annual plan and your bonus target will be 75% of your annual salary. The bonus for 2019 will be prorated based upon your start date. The STI has a threshold and overachievement opportunity on the financial portion of the metrics up to 200%. You must be employed by the Company through the date the annual bonus is paid to receive payment. Please see the addendum at the end of this offer letter for additional details regarding the performance bonus.

Equity Grants : In this role, you are eligible to receive equity grants under the 2009 Stock Incentive Plan. You will receive an initial grant during the 2019 annual grant process with a value of $450,000.00 (subject to approval by the Compensation Committee of the Board of Directors). The form and mix of the award will also be decided by the Compensation Committee. For each subsequent year in the role, you may receive an equity grant commensurate with your position (subject to approval by the Compensation Committee of the Board of Directors).

Exhibit 10.28

Executive Management Severance Plan : You are eligible to participate in the standard Bridgepoint Education Amended and Restated Executive Management Severance Plan, which provides for twelve (12) months of severance in the case of a without cause termination. The plan also provides benefits that are reasonably equivalent to the employee benefits provided to Employee immediately prior to termination. In addition, the plan provides for a single lump sum cash payment equal to a pro rata portion of the annual cash bonus based upon the number of days the employee is employed during the fiscal year. You will receive a copy of the plan during your initial onboarding.

Benefits : You are eligible to participate in the benefits plan available to THE COMPANY’s full-time executive employees. Currently, the standard benefits include the following:


•	401(k) Retirement Account


•	Health, dental, life and disability insurance - coverage begins on the first day of the month following the date of hire


•	ArmadaCare


•	Flexible Spending Account


•	Health and Wellness Program


•	Sick Leave


•	Self-Managed vacation


•	Eleven (11) paid Company Holidays


•	Corporate Discount Partnerships

We at Bridgepoint Education hope that you will accept this job offer and look forward to welcoming you aboard. You will be reporting to me directly. Feel free to call me if you have questions or concerns regarding this offer.

Sincerely,

Andrew Clark

Chief Executive Officer

/s/ John Semel______

John Semel

January 26, 2019_____

Date

Exhibit 10.28

ADDENDUM

You will receive a copy of the Bridgepoint Education (THE COMPANY) employee handbook and will be subject to all of the provisions of this handbook. You will also be required to sign an acknowledgment of receipt of the handbook.

Performance Bonus : Your actual bonus payout may vary based on the achievement of THE COMPANY financial and quality goals. You must be employed on the day that Performance Bonuses are paid out. The Performance Bonus is not part of the employee’s base pay and is considered taxable income. The Performance Bonus is subject to change or termination at management’s discretion.

Sign-On Bonus: The employee understands that the sign-on bonus is forfeited if the employee fails to report to work and is subject to be reimbursed to THE COMPANY in the event employment is self-terminated prior to one (1) year of service. The total financial obligation is calculated on a monthly pro-rata basis. Therefore, every month of employment reduces financial obligation by 1/12th. For example, if the employee self-terminates after 6 months, the employee would owe THE COMPANY 50% of Sign-On Bonus. If you voluntarily terminate your employment with THE COMPANY prior to completing 12 months of employment, you understand and agree that you must repay all unearned amounts advanced to you on or before your separation date. Nothing in this paragraph affects the at-will nature of your employment as described below. The requirement to reimburse THE COMPANY ends after you have completed twelve (12) months of full-time employment.

Work Schedule: Your regular work schedule is typically 8 hours per day Monday - Friday, unless otherwise indicated by your manager. As an exempt employee, you may work different or additional hours as necessary.

Please be advised the worker’s compensation information is as follows:

California:

Athens Administrators

P.O. Box 696

Concord, CA 94522

Phone: 619/400-1472

Fax: 619/599-8165

Toll Free: 866/482-3535

Arbitration: Binding arbitration of disputes, rather than litigation in courts, provides an effective means for resolving issues arising in or from an employment situation. The Company and employee agree to utilize binding arbitration to resolve all disputes that may arise out of the employment context.

Exhibit 10.28

Terms of Employment: Your employment with THE COMPANY is "at will" meaning that you are not employed for any specific period of time. Your employment can be terminated with or without cause and with or without notice, at any time, at the option either of THE COMPANY or you. The at-will nature of your employment relationship may not be modified except in a writing signed by both the President of THE COMPANY and you. This constitutes the entire understanding regarding the at-will nature of your employment.

No Use of Confidential Information: THE COMPANY is extending this offer due to your skills and abilities and not due to any information you might possess regarding current or former employers. If you accept this offer, keep in mind that you may not bring to THE COMPANY, disclose to THE COMPANY or use in the performance of your duties for THE COMPANY any confidential information, trade secrets, documents or materials from any other employer.

Non-Compete Agreement : You confirm by accepting this offer and working for THE COMPANY in the position described above, you will not be breaching any previous agreements with prior employers.

You may be requested to review and complete additional documentation upon hire. This letter represents an offer of employment contingent upon the successful completion of pre-employment screening. Pre-employment screening includes but is not limited to: criminal background investigation, verification of education credentials, verification of prior employment and professional reference checks.

Employment with Bridgepoint Education or its subsidiaries is only available to an individual who physically resides in the United States. If at any time, you were to reside outside the United

States, your employment will be subject to termination.

In addition, your employment is also contingent upon the production of documentation of identification and eligibility for employment as required by the Immigration Reform and Control Act of 1986. In compliance with federal law, all persons hired will be required to verify identity and eligibility to work in the United States and to complete the required employment eligibility verification document Form I-9 upon hire. Bridgepoint Education and its subsidiaries participate in E-Verify. For more information please visit www.dhs.gov/E-verify.

Exhibit 21.1

SUBSIDIARIES OF

BRIDGEPOINT EDUCATION, INC.

AS OF DECEMBER 31, 2018




		JURISDICTION OF INCORPORATION OR ORGANIZATION
SUBSIDIARIES OF BRIDGEPOINT EDUCATION, INC.:
Ashford University, LLC		California
Bridgepoint Education Real Estate Holdings, LLC		Iowa
Insource Shared Services, LLC		Delaware
Ed Tech Platform, LLC		Delaware
SUBSIDIARIES OF ASHFORD UNIVERSITY, LLC:
Center Leaf Partners, LLC		Iowa

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. Nos. 333-159220, 333-164405, 333-171571, 333-179046, 333-185944, 333-188738, 333-201454, 333-208997, 333-215580 and 333-222498 on Form S-8 of our report dated March, 12, 2019 relating to the consolidated financial statements of Bridgepoint Education, Inc. and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the manner in which it accounts for revenues from contracts with customers), and of our report dated March 12, 2019 relating to internal control over financial reporting (which report expresses an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of material weaknesses) appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2018.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

March 12, 2019

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew S. Clark, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Bridgepoint Education, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 12, 2019



		/s/ ANDREW S. CLARK
		Andrew S. Clark President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin Royal, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Bridgepoint Education, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 12, 2019



		/s/ KEVIN ROYAL
		Kevin Royal Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bridgepoint Education, Inc. (the "Company") on Form 10-K for the period ended December 31, 2018 , as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 12, 2019



/s/ ANDREW S. CLARK
Andrew S. Clark, President and Chief Executive Officer (Principal Executive Officer)

Dated: March 12, 2019



/s/ KEVIN ROYAL
Kevin Royal, Chief Financial Officer (Principal Financial Officer)

This certification shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by the Company into such filing.

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.