American Public Education, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the APEI Reports Third 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 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Simonowski, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, operator. Good evening and welcome to American Public Education's third quarter conference call. Materials that accompany today's conference call are available in the events and presentation section of our website. Please note that statements made in this conference call and in the accompanying presentation materials regarding American Public Education, its subsidiaries or Rasmussen University 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, plan, should, will, and would. These forward-looking statements include, without limitation, statements regarding the benefits of the acquisition of Rasmussen University, the closing of the transaction and its timing, expected growth, expected registration and enrollments, expected revenues, earnings and expenses, expected financial results for Rasmussen University the ability to deliver a return on learners' educational investment, and plans with respect to recent, current, and future initiatives. 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 the acquisition of Rasmussen University and the risk factors described in the risk factor section and elsewhere in a 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 Chief Executive Officer, and Rick Sunderland, Executive Vice President and Chief Financial Officer. Also available for questions is Steve Summers, Senior Vice President of Strategy and Corporate Development. Now I'll turn the call over to Angela Selden. Angie.

Thank you, Chris. Good evening, everyone, and thank you for joining our call today. Before I share details surrounding APEI's third quarter results, I'd like to reflect on the themes and progress APEI has made over the past year. Just over a year ago when I joined APEI, we began by evaluating every aspect of each business unit. At APUS, enrollment had been flat or declining for several years, with only modest investments as the company sought to maintain margins. Honduras had a leading position in Ohio and was in the attractive pre-licensure nursing education segment, but it was underperforming and had made some unfortunate decisions in late 2018, which resulted in sharp declines in enrollment in 2019. With the support of the Board of Directors, we set out to turn around the business and to reposition the company for growth. all while continuing to ensure that we put our students' ambitions and success at the center of all we do. We evaluated the solid set of assets the company had built, including the leadership position in both military and veteran markets, the company's strong regulatory reputation, an established pre-licensure nursing B-10 in Ohio, and a solid balance sheet from which to work. What a year it has been. The improvements have been wide ranging and dramatic. We added key leaders and brought some additional experience to our board. Overall, it was a year of transformation and acceleration. At APUS, we're especially pleased to have welcomed Wade Dyke as president to help guide the institution into its next phase of growth and improve our educational experience for our students and faculty. We prioritize modernizing our virtual campus, which is anchored by our Learning Management System, or LMS, by implementing V2L and migrating, as of this month, over 1,300 courses in nine months. All APUS courses beginning in January 2021 will occur in our new LMS. We also began a modernization effort of our Student Relationship Management System, or CRM, to ensure that we can create appropriate transparency at each student touchpoint. We prioritized marketing investments in 2020. As the leading player in the military and veteran segments, our student-centric mindset has resulted in exceptional satisfaction scores and a 54% referral rate to prospective students. Yet, we had more to do. and implemented micro-segmenting to attract those students with attributes that have proven in the APUS model to persist and complete. The net result of our efforts this year has been a pronounced improvement in new and returning students at APUS. While we have clearly benefited from the market shift to online learning, particularly among active duty military students, We believe that the efforts we've undertaken will provide long-term benefits and lead to sustained future growth. While other leading online institutions, both tax-paying and not-for-profit, significantly outspend APUS on brand awareness, we intend to continue our discipline around more efficient and effective uses of our marketing dollars through continuously improving segmentation and analytics. At Hondros, under Harry Wilkins' leadership, who is, by the way, APEI's former CFO, he has led a turnaround that can only be described as stunning. Enrollments, which had declined by a third in the span of three quarters from fourth quarter of 18 to third quarter of 19, have fully recovered and exceed the high watermark that had been achieved two years prior. This is made all the more remarkable by the fact that Hondros, which was a 100% on-ground operation, accomplished this turnaround during the COVID-19 lockdowns and restrictions, Harry and his team with assistance from APUS pivoted to a hybrid model in a period of five weeks, allowing Hondros to continue academic progression uninterrupted in the second quarter of 2020 and beyond by offering academic coursework online and labs and clinicals on campus when others did not. Hondros has continued to enroll new students and train new nurses during our national health crisis. With this turnaround, Hondros is now positioned very well for future growth. Our CFO Rick Sunderland will share the details regarding the financial turnaround that we believe resulted from the operational improvements during his remarks. Our most recent achievement is our announced plan to acquire Rasmussen University. I have prepared more detailed comments later in our call regarding the importance of this transaction. But first, I would like to take this opportunity to give you some perspective on the election and its implications for APEI. While final congressional election results are still unknown, no matter the outcome, we remain confident that APEI and its subsidiary institutions are well positioned, regardless of the political landscape, to continue to deliver on our mission of helping students of all backgrounds maximize their HEROI, higher education return on investment. We deliver high quality education at an affordable cost and do it by focusing on student outcomes and maintaining a strong reputation with students and regulators. We believe that our focus on educating enlisted military and veterans, as well as creating new nurses, are noble endeavors that change lives and improve society. That won't change. And we have continued to measure our performance as if Obama-era regulations had remained in place, with measures such as gainful employment and 90-10 all achieving passing rates. Even if 90-10 or other ratios or definitions change, we feel comfortable that we will be successful in adapting to proposed changes. Moving to page three of the PowerPoint, for our third quarter 2020 highlights, enrollment momentum continued for the fourth consecutive quarter. Strong enrollment growth at APUS and record enrollment at Hondros drove a 17% increase in consolidated revenues in the third quarter of 2020, as well as 11% growth in revenue for the first three quarters of the year. Hondros has returns to profitability, and APUS generated a year-over-year increase in operating margin. All while increasing investment in our technology transformation to improve the student and faculty experience and additional marketing to support the APUS micro segmentation and messaging about affordability. Our results this year clearly demonstrate that APEI's value proposition of helping learners of all backgrounds maximize their higher education return on investment, or HGROI, resonates with today's value-oriented students, including military professionals, veterans, and nurses. Our HGROI philosophy is shared by Rasmussen University. which we recently announced we plan to acquire. As the nation's largest educator of pre-licensure nurses in ADN and PN programs, Rasmussen adds another number one position to APEI's current number one position in active duty military and veteran student education. With this dynamic and transformative acquisition, APEI will be better positioned as a strategic platform for adult learners, particularly those service-minded individuals pursuing professions with significant career opportunities such as nursing. We will be paying close attention to the integration planning of Rasmussen with a focus on unlocking new enrollments and cost synergies while continuing to accelerate growth initiatives across our entire enterprise. We remain focused on maintaining our organic enrollment momentum and delivering on our strategic priorities to enhance our offerings to all students and to increase revenue, operating margin, and adjusted EBITDA. On page four, for the three months ended September 30th, 2020, total course registrations at APUS increased 18% year over year, driven by a 25% increase in new registrations. In January of 2020, APUS created and launched the Freedom Grant for AMU students, offering a tuition reduction and free course materials for active duty military pursuing graduate degrees to ensure these students incur no out-of-pocket costs to obtain a graduate degree. This now aligns with the same no out-of-pocket pricing for undergraduate and listed military students at APUS. We believe the increase in registrations among active duty military APUS driven in part by the launch of the AMU Freedom Grant. Student persistence rates at both FSA and non-FSA students at APUS improved to the highest level in years as measured by the first course pass and completion rate of undergraduate students for the three months ended August 2020, the most recently available data. In addition, I should note that 3Q20 had one additional week of recruiting available to it as compared to last year, which we estimate added about 1,000 registrations Even excluding those registrations for comparison purposes, the momentum was strong and we see growth continuing in the fourth quarter as well. On page five, we couldn't be more pleased with the record enrollment and return to profitability at Hondros. This tremendous success highlights the importance of our strategic emphasis on pre-licensure nursing programs, an emphasis that will be amplified by our acquisition of Rasmussen University. In the third quarter of 2020, enrollment at Hondros increased 38%, driven by an incredible 88% increase in new student enrollment. Hondros enrollment momentum continued into the fourth quarter of 2020, as Hondros recently reported an impressive 34% increase in new and total student enrollment, the highest in the school's history. Not only have total enrollments reached record levels, we're seeing even faster growth in HONDROS' ADN or RN program, further corroborating our interest in Ransacin and its concentration in the ADN RN program. HONDROS has continued to improve conversion rates and student onboarding processes with the deployment and integration of Salesforce software. In addition, they have remained nimble in serving the nursing community after the pandemic and the resulting recession. Their mission to provide a better way to become a nurse is both a mission and a strategy. And their direct entry ADN program, new tuition financing options, and flexible scheduling seems to be attractive options for many prospective nursing students. The recent success at APUS and HONDRA translates into strong financial results for APEI. I will now turn the call over to our CFO, Rick Sunderland, to provide additional details on our third quarter results.