American Public Education, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the American Public Education, Inc. Reports first quarter 2020 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Chris Semenovsky, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you, Operator. Good evening and welcome to American Public Education's discussion of financial and operating results for the first quarter of 2020. Materials that accompany today's conference call are available in the events and presentation section of our website, and are included as an exhibit to our current report on Form 8K furnished with the SEC earlier today. Please note that statements made in this conference call and in the accompanying presentation materials regarding American public education or its subsidiaries that are not historical facts may be forward-looking statements based on current expectations, assumptions, estimates and projections about American public education and the industry. These forward-looking statements are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Forward-looking statements can be identified by words such as anticipate, believe, seek, could, estimate, expect, intend, may, should, will and would. These forward-looking statements include, without limitation, statements regarding expected growth, registrations, enrollments, revenues, Thank you. Thank you very much. and the company's response to the COVID-19 pandemic. Actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including risks related to COVID-19 pandemic and the risk factors described in the risk factor section and elsewhere in the company's most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC as well as the company's other SEC filings. The company undertakes no obligation to update publicly any forward-looking statements for any reason unless required by law, even if new information becomes available or other events occur in the future. This evening, it's my pleasure to introduce Angela Selden, our CEO, and Rick Sunderland, our Executive Vice President and CFO. At this time, I'll turn the call over to Angela Selden. Angie?

Thank you, Chris. Good evening, everyone. I'll begin today's call by reviewing our first quarter results at both APUS and Hondros, which are in line with our expectations and largely unaffected by the COVID-19 pandemic. I will share highlights regarding positive momentum across both APUS and Hondros in the second quarter of 2020. We will discuss the activation of our business continuity plan in response to COVID-19 and the minimal impact COVID-19 has had on our Q2 2020 results. Finally, since the way we all work, learn, and interact with one another is being shaped, perhaps permanently, by the effects of the coronavirus outbreak, I will discuss how APEI is responding to increase demand for both online education and pre-licensure nursing education, opportunities that we could not have foreseen just a few months ago. We're moving to page three, first quarter results and priorities. In the first quarter of 2020, total net course registrations at APUS increased 1% Thank you. Thank you. In fact, we experienced a year-over-year increase in net course registrations by new students from each branch of the military, except for the Navy, which continues to impose limitations on TA course approvals. Net course registrations by new students utilizing veterans benefits, or VA, increased 1.5%, and net course registrations by new students using cash and other sources increased 1.3% compared to the prior year period. New students using Federal Student Aid or FSA had net course registrations decline 5.6% year over year. We believe the increase in registrations among active duty military is driven in part by the launch of the AMU Freedom Grant, which was effective January 1, 2020. which extended our textbook and tuition grant to military students at the master's level. We plan to continue building on our strengths in the military, military affiliated, and veteran communities and working toward our goal of further increasing the number of military and military affiliated learners with minimal or no out-of-pocket costs at AMU. The Technology Modernization Project at APUS remains on track with our stated goal of completing our migration to a New Learning Management System, or LMS, by early 2021. Thus far, we have successfully transitioned nearly 60 courses and over 100 sections out of 1,750 unique courses. representing more than 1,700 registrations to the new LMS with no unscheduled downtime. Student feedback regarding the new cloud-based Next Generation Online Campus has been overwhelmingly positive. We plan to gradually accelerate the rollout each month using our newly adopted agile methodology. This summer, we also plan to further expand the functionality and integration of our CRM system, Salesforce, with other systems which we believe will further improve our end-to-end student experience. Improved student persistence rates at APUS, combined with our new marketing messaging and our new technology capabilities, have given us the confidence to increase our investment in marketing to drive greater awareness and grow our student population including among a military affiliated and non-military communities. We have also continued to develop new programs that we believe are attractive to working professionals seeking advancement in today's digital economy. APUS plans to launch a new BS in data science, a BS in computer science, and an MED in higher education administration as well as 10 new associate's degrees for enrollment starting in July. Now we move to Hondros. I'm very pleased to report on the enrollment turnaround at Hondros College of Nursing. As a result, we credit in large part to the efforts of its hardworking faculty and associates. For the three months ending June 30th, 2020, New student enrollment increased 56% year-over-year, a spring term record for new student enrollment. Total student enrollment increased 14% year-over-year, driven by new student enrollment and improvements in retention. In its most recent interim report to ABHES, Hondros Accrediting Agency, Hondros reported that every program at every campus met or exceeded the accreditation requirement for a 70% retention rate. TimeGrowth's management team remains optimistic about reaching profitability by the fourth quarter of 2020. This profitability target includes the startup costs for the new Indianapolis campus, which opened for classes in April 2020. These numbers are substantial considering the incredible changes Thank you for joining us. Leveraging the online expertise of APUS, migrated curriculum online and trained faculty on the new online learning modality, significantly accelerating this transition. Most of Hondros course content has shifted to online learning and campuses are generally closed. Additionally, because Hondros qualifies as an essential service under this pandemic, Students have access to in-person advising and to certain labs and other hands-on portions of the curriculum that are required to be held in person. Open portions of the campuses are regularly sanitized using rigorous hygiene protocols. All staff and students are required to undergo a health screening and follow CDC guidelines prior to entering the campus. While our nation's path to post-COVID-19 conditions is uncertain, I believe that APUS and Hondros are providing a much-needed sense of normalcy in the lives of most learners. Page 4, our COVID-19 response. Our team executed our business continuity plan with excellence in an uncertain environment, rapidly transitioning the APUS API and Hondros Enterprises to work from home while simultaneously addressing increased demand for online learning and pre-licensure nursing programs. Our primary concern has been and remains the health and safety of our students and our employees. To support our employees, we have implemented several hardship leave and flexible scheduling policies. We send our thoughts to those affected by the virus. and recognize the selfless dedication of our nation's doctors, nurses, first responders and frontline workers, many of whom are alumni of our institutions. APUS recently announced Momentum 2020, earmarking up to $20 million in scholarship funds to help bridge the gap for up to 20,000 visiting undergraduate students whose studies have been This scholarship offers a 50% discount for those eligible visiting students who start courses with APUS in May through August 2020. Given our regional accreditation by the Higher Learning Commission, students can evaluate the likelihood of credit transfer in collaboration with their home institutions. Our APUS IT department was well prepared for this crisis, with its critical services functions largely operating successfully under conditions of full remote working and high student demand. And our APUS learning platform is robust, with the capacity to support the addition of thousands more new and returning students. Looking ahead, our leadership team is evaluating the eventual phased-in remote opening of our administrative offices, prioritizing the health and safety of workers as our primary consideration. We are actively working to establish a timeline. APEI has substantial liquidity with $197 million in cash and equivalents at March 31, 2020, and no long-term debt. Thanks to years of strong free cash flow and conservative financial and risk management, we have made it a priority to increase our communication with employees, some of whom are working remotely for the first time, and with students, many of whom may be experiencing new personal challenges. Despite these new challenges, APUS experienced the lowest course drop rate Since 2002 for new and returning students. We believe that COVID-19 crisis has increased demand for online higher education and nursing programs. Most learners, including active duty military, are experiencing stay-at-home orders, travel restrictions, or other disruptions making online education an attractive option. While the era of home confinement and social distancing is temporary, traditional campus operations may not fully resume in the fall, and the difficult job market is likely to persist for some time. With a heritage of more than 25 years as a leader in online education, APUS is uniquely positioned to help a wide variety of learners affordably and without interruption. Similarly, Hondros College of Nursing, with its newly online programs and limited in-person coursework, is well positioned to help in the healthcare crisis by continuing to advance new nurses to the front lines. Our second quarter guidance reflects the increased demand for our online courses and nursing programs. The increase of APUS appears to be strongest among veterans and active duty military. Our belief is that net course registrations in the second quarter at APUS are being positively impacted by, one, our decision to provide the AMU Freedom Grant to military service members at the master's level, two, increased marketing to elevate our affordability message, and three, increased demand for online programs brought on by COVID-19. We believe that enrollment demand at Hondros is driven by successful execution of its enrollment recovery plan and the nursing shortage, as well by increased interest in students looking at a service profession in part inspired by the pandemic. We believe that the long-term strategic initiatives at APUS and Hondros are beginning to have a positive impact on stabilizing and growing enrollment. As we have mentioned before, it is our top priority to grow APEI's core businesses with an emphasis on addressing the national need for an adult learning platform where learners of all backgrounds can obtain the skills they need to maximize the return on each learner's educational investment. We intend to achieve this goal by building on our core competencies in online and nursing education, focusing on military and veteran communities, developing new flexible courses, modernizing our technology, and elevating our brand message of maximizing learner return on educational investment with uplifting purpose-driven stories. As I stated at the beginning of our call, the pandemic has created an unexpected opportunity to amplify both the APUS and Hondros value propositions to students, namely affordability, Thank you for joining us today. Now more than ever, learners are counting on us so their studies can proceed without interruption. Our employees have truly risen to the occasion, having recognized early on that this crisis may also be a defining moment for our organization. I thank each and every one of them for their creativity and dedication. Now I will turn the call over to our CFO, Rick Sunderland.