American Public Education, Inc.

Good evening. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the APEI fourth quarter and full year 2021 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. Ryan Crenn, AVP of Investor Relations, you may begin.

Thank you and good afternoon, everyone. Welcome to American Public Education's conference call to discuss fourth quarter and full year 2021 financial and operating results. Joining me on the call today are Angela Seldin, President and Chief Executive Officer, Rick Sunderland, Executive Vice President and Chief Financial Officer, and Steve Summers, Senior Vice President and Chief Strategy and Corporate Development Officer. Materials for the conference call today are available under the Events and Presentations section of the APEI website. Please note that statements made during this conference call and any accompanying presentation materials regarding APEI and its subsidiaries that are not historical facts may be forward-looking statements based on current expectations, assumptions, estimates, and projections about APEI and the industry. In some cases, forward-looking statements may be identified by words such as anticipate, believe, seek, could, estimate, expect, can, may, plan, should, will, would, and similar words or their opposites. Forward-looking statements include, without limitation, statements regarding expected growth, registrations and enrollments, revenue, net income, earnings per share and EBITDA, earnings guidance, expected benefits of the acquisition of Rasmussen University, future impacts of the COVID-19 pandemic on enrollments as the pandemic abates, organizational changes, plans with respect to recent, current, and future initiatives, and future demand or expectations for online enrollment in nursing education. Forward-looking statements are subject to risks and uncertainty that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, among others, risks related to actions taken by the Department of Defense or branches of the U.S. Armed Forces, including actions related to the disruption and suspension of the Tuition Assistance Program, challenges with integrating acquisitions, regulatory matters, competitive pressures, and those described in today's press release and in the company's Form 10-K filed with the SEC today and in other SEC filings. The company undertakes no obligation to update publicly any forward-looking statement for any reason unless required by law, even if new information becomes available or other events occur in the future. This presentation contains references to non-GAAP financial information that we use to measure our business. A reconciliation between the non-GAAP financial measures we use and the most directly comparable GAAP measures are located in the appendix to our presentation and in our financial statements. Management believes that our presentation of non-GAAP financial information provides useful supplemental information to investors regarding our results of operations and should only be considered in addition to and not as a substitute for or superior to any measure of financial performance prepared in accordance with GAAP. I will now turn the call over to our CEO, Angela Seldin. Angie, please go ahead.

Thank you, Ryan, and thank you all for joining us today and for your interest in American public education. 2021 was a highly transformative year for APEI as we accelerated and expanded our efforts in educating the service-minded. First, by successfully acquiring Rasmussen University, which roughly doubled the size of APEI in terms of revenue, APEI became the number one educator of prelicensure, ADN, and PN nurses in the United States, and diversified its revenue to one-third nursing, one-third military and veterans, and one-third online education. Next, we acquired Graduate School USA on January 1, 2022, and created APEI's platform for career and workforce training. further diversifying our revenue streams by educating the service-minded federal workforce. In addition to our inorganic growth activities, we have many accomplishments for which to be proud, including record enrollment growth at Honduras College of Nursing, a rebound in registration momentum at APUS with record military enrollment, and year-over-year enrollment growth and record nursing enrollment at Rasmussen. all while maintaining a strong commitment to regulatory and public company compliance across the enterprise. This includes a reaffirmation of accreditation by the Higher Learning Commission, or HLC, at Rasmussen in December 2020 and at APUS in August 2021. both which have been awarded an open pathway designation which affords institutions greater opportunity to pursue institutional improvement projects than the alternative standard pathway designation. Before we move to detailed financial results and enrollment momentum, I would like to take a moment to discuss APEI's distinctive position in America's economy and society. one that we believe is unique and puts APEI squarely at the center of America's greatest strengths. America has the best post-secondary education system on the planet, where students from all over the world flock to attend university here. APEI's institutions have achieved top-quality accreditation, attracting students attending our institutions from over 90 countries during 2021 alone. America has the world's strongest military, and APEI has the honor of being the number one educator of active duty military and veterans. America has the world's best healthcare systems and providers, and APEI now has the honor of educating the largest number of ADN and PN pre-licensure nurses in the United States. And finally, America has the most accessible and efficient capital markets in the world. APEI as a public company has successfully leveraged those capital markets, and in particular in 2021, to strategically grow. We believe APEI is the only company at the intersection of America's greatest strengths, post-secondary education, military, healthcare, and capital markets. Our education of service-minded military and veteran students provides steady enrollment and increasing market share. Our national nursing platform is a growth engine, squarely positioned to help mitigate the chronic nursing shortage. And our over 350 programs and certificates at APUS, Rathison, Hondros, and GSUSA provide accessible, affordable, high-quality education and ongoing professional development to students at any stage of their career journey. It's no better time to invest in the future of America by investing in APEI. During today's call, I will be providing more detail on the enrollment momentum at APUS, Rasmussen, and Hondros, before turning the call over to Rick to review key financial metrics and the results for the fourth quarter and full year of 2021. Slide four is a brief reminder of the educational offerings at APEI. APEI's origins began at APUS. purpose-built to enable active duty military to uniquely access their earned education benefit through inclusive, adaptable education. This inspired our vision of educating service-minded students, and we did so with the goal of keeping college education affordable. APEI's acquisition of Honduras College of Nursing in 2013 was a springboard into nursing education, another service-minded career in a high-demand field. With the acquisition of Rasmussen University, APEI created the largest ADN and PN pre-licensure nursing platform in the United States, creating new nurses to help meet society's chronic nursing shortage. And with the addition of Graduate School USA and its focus on training the federal workforce, its purpose is tightly aligned with educating the service-minded student and represents a strong adjacency to APUS's core military and veteran student offerings. On slide five, you'll see an overview of APEI's national nursing platform and our market opportunities in the face of this chronic nursing shortage. Through Rasmussen and Hondro, APEI serves as the largest ADN and PN pre-licensure nursing educator in the United States, creating new nurses at its 30 campuses. The Bureau of Labor and Statistics recently published its updated annual job projections, and registered nurses, licensed practical nurses, and vocational nurses are expected to increase 9% to over 4.1 million by 2030. larger than the national average across all jobs. Over the next 10 years, each year, there are expected to be approximately 195,000 registered nurse openings and another 61,000 licensed practical and vocational nurse openings. 2021 NCLEX numbers suggest that only 72% of the annual licensed practical nurse job demand can be met through present practical nurse graduates. A 2021 American Association of Critical Care Nurse Survey of more than 6,500 nurses showed that 92% believe the pandemic has depleted nurses at their hospitals over the past 18 months. And as a result, their careers will be shorter than they intended. and 66% felt their experiences during the pandemic have caused them to consider leaving nursing. The BLS has indicated that overall resignations in healthcare are up 50% since the start of the pandemic. And currently, 43% of the nursing population is over the age of 55, and it is expected that of those eligible to retire within the next three years, more than 50% will do so. These staffing shortages are not sustainable as costs continue to soar for the healthcare providers due to their need to use temporary labor and overtime to fill these shortages, causing healthcare system margins to decline substantially. And ultimately, it is the patient who suffers. At Rasmussen and Hondros, we are partnering with over 300 clinical partners to help these healthcare systems alleviate this chronic nursing shortage. Across our three education units of Rasmussen, APUS, and Hondros, we expanded our nursing curriculum ladder with Rasmussen's launch of a nurse practitioner program at the end of 2021. Notably, what remains attractive about our pre-licensure education is that we enable LPN to begin working in approximately 12 months. Direct entry RN students complete within 15 months, and our RN students begin working in just over two years. The vast majority of our nursing students are currently pre-licensure, yet we continue to believe the nursing sector needs post-licensure education, and in particular to educate new nursing faculty. Overall, we believe strongly that the accreditation standards, requirements of state boards of nursing approvals, the significant amount of clinical and other partner relationships needed, and the general process of standing up a nursing school provides a substantial barrier to entry for new competition and is a significant reason we remain enthusiastic about nursing education. Turning to slide six, nursing enrollment reached record levels at both Rasmussen and Hondros in 4Q21. In total, APEI has total nursing enrollment of over 11,200 students that are predominantly prelicensure. Rasmussen's nursing enrollments continue to grow up 8% in 4Q21 as compared to the prior year period. Nursing enrollment now represents over 50% of the total enrollment at Ratheson, compared with less than 30% just a few years ago. And we expect this trend to continue. At Hondros, we now have over 2,500 nursing students, which represents 17% growth in 4Q21 versus the prior year period. We have positive news from Hondros Indianapolis campus, which originally opened in 2020. Just a few weeks ago, based on favorable NCLEX results and overall student outcomes, the Indiana State Board of Nursing granted Hondros an increase to 200 enrolled students for 2022, up from 60. This significant increase was made possible by the Hondros team's commitment to high-quality education and focus on maintaining top-tier regulatory and state board standards. where we currently have 100% NCLEX pass rates. Additionally, in fall of 22, we anticipate welcoming our first nursing student cohort in HONDRO's new Detroit, Michigan campus. Even though nursing growth remains positive and we continue to see heightened interest in our nursing program, The recent impacts of COVID and the Omicron variant have dampened some students' ability to begin or continue their nursing education. For example, in Ohio, in Q1 of 22, over 120 of our new predominantly female and single parent students had to defer education from the impact of COVID, including public school bus system shutdowns, forcing our students to remain home to educate their children. We anticipate this impact will be temporary as COVID restrictions subside and the high interest levels in the programs should translate to strong enrollments. In Q122, we anticipate total nursing enrollment to increase by roughly 4% compared to the same period of 2021. Notably, positive growth is against deep comparable periods in 2021. when the programs were exhibiting very strong growth, 22% at Rasmussen and 45% at Hondros. The two-year CAGR for Rasmussen nursing is 12%, generating 8,400 current student enrollments, and the two-year CAGR for Hondros nursing is 25%, leading to 2,460 enrollments. Moving to slide seven, at APUS, While total net registrations were down 2% to 86,600 in 4Q21, this does not reflect the positive two-year enrollment momentum of 4%. And in particular, in 4Q21, where APUS faced a very difficult prior year comp of 11% positive in 4Q of 20. This is also a marked improvement versus the previous two quarters. There are several green shoots at APUS. First, we are experiencing a return of Army enrollment momentum. Army registrations were up approximately 4% during 4Q21 compared to a tough comp of 29% positive in the same period of 2020 and represents a 16% two-year CAGR. Due to our improved focus on student persistence and completion that started in Q3 of 21, we are experiencing returning military student acceleration across every degree type and notably year-over-year quarterly growth in our three largest branches, Army, Navy, and Marines. We are encouraged that the Army IGNITE-Ed portal impact on soldier registrations has subsided and a soldier's ability to register through the system has improved, with over 70% utilization of the new IGNITE-Ed tools and processes by Army soldiers in the most recent start. We believe APUS is increasing its market share, as other universities have suspended the use of exception to protocol, or ETP, due primarily to delays in Army reimbursement, while APUS has been willing to accommodate those students. While enrollment challenges have abated, the receivable from Army has not meaningfully decreased due to Army's significant backlog of payments to process. However, as a result of productive conversations we have had with Army leadership and recent system enhancements, we have seen reimbursements beginning to flow and steps outlined to resolve the payment backlog. We have been pleased to have the opportunity to proactively collaborate on data reconciliation with the Army and are satisfied that the data is consistent between the two systems. Therefore, we strongly believe the remaining receivable balances and payments are now primarily a timing issue. Also, as we previously mentioned, military students continue to provide a strong recurring foundation of registrations that is more insulated from the broader higher education enrollment trends for adult learners in a tight labor market. Moving on to our other APUS student segments, While returning veteran registrations declined, bright spots with veterans include new student growth in associate's degrees and master's degrees. The softness in non-military registrations are offset by green shoots of student growth in associate's degrees and certificates, yet reflect the overall weak market enrollment trends, which drove the roughly 2% decline in total non-military registrations. The implementation of our modernized CRM platform has simplified enrollment and is increasing lead to conversion rates in Q1 of 2022. At Rasmussen, approximately 50% of enrollment and 60% of revenue come from nursing. So as we turn to non-nursing, For several years, Rasmussen has invested behind the acceleration of nursing and has directed the corresponding prioritization of marketing investments toward that segment, resulting in a 4Q21 decline of 13% in non-nursing enrollments. Rasmussen's legacy northern region, which includes Minnesota and Wisconsin, are experiencing historically low unemployment rates at 2.7% and 2.8% respectively, and the labor participation rate in those states is also declining. The severe labor shortage generally has driven wages higher and resulted in an overall tight labor market, which has dampened the urgency for prospective students to consider career changes or additional education to qualify for work advancement. Despite non-nursing softness, Rasmussen does have some green shoots, starting with strong improvements in retention, with the winter term increasing to 85.6% overall, and graduate education programs offered below $10,000 have seen significant acceleration. We don't expect the labor market tightness to change in the near term, and it will continue to weigh on our non-nursing, non-military registrations. Nonetheless, we still expect registrations in the first quarter at APS to increase 0% to 3% to between 92,900 and 95,700, reflecting continued military improvement. At Rasmussen, we anticipate non-nursing enrollment to decrease roughly 14% in the first quarter of 2022 compared to the prior year period due to the general student behavioral trends in the U.S. At APUS, non-military students only represent about 15% of our student population, while at Rasmussen, the non-nursing and non-healthcare population represents 30% of enrollment, but roughly only 24% of revenue. I would now like to turn the call over to Rick to review our fourth quarter and full year results in further detail.