American Public Education, Inc.

Thank you for standing by. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI reports first quarter 2023 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 followed by the number one on your telephone keypad. If you would like to draw your question again, press the star 1. Thank you. Ryan Koren, AVP, Investor Relations and Relations Development. You may begin your conference.

Thank you and good afternoon everyone. Welcome to American Public Education's conference call to discuss first quarter 2023 financial and operating results. Joining me on the call today are Angela Seldon, 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 call today are available under the Events and Presentations section of the APEI website. Statements made during this conference call and any accompanying presentation regarding APEI and its subsidiaries that are not historical facts may be forward-looking statements based on current expectations, assumptions, estimates, and projections. Forward-looking statements may sometimes be identified by works like anticipate, believe, seek, could, estimate, Expect, can, may, plan, should, will, would, and similar or opposite words. Forward-looking statements include, without limitation, statements regarding expectations for registrations and enrollments, revenue, earnings, and EBITDA, and other earnings guidance, initiatives to improve NCLEX pass rates and reposition Rasmussen University for growth, and other company initiatives, including with respect to leadership changes and future competition and demands. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These include, among other things, our dependence on the effectiveness of our ability to attract students who persist and are likely to succeed, our inability to effectively market our programs or expand into new markets, the reduction, elimination, suspension, or disruption of tuition assistance, changing market demands, economic and market conditions, our inability to meet regulatory and accreditor requirements and the impacts thereof, challenges with acquisitions, risks related to our debt and preferred stock, and risks described in our presentation, today's press release, our Form 10-K for 2022, our Form 10-Q filed today, and other SEC filings. The company undertakes no obligation to update publicly any forward-looking statement for any reason unless required by law. This presentation contains references to non-GAAP financial information, a reconciliation between the non-GAAP financial measures we use, and the most directly comparable GAAP measures is located in the appendix to our presentation and in our earnings release. 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 Selden. Angie, please go ahead.

Thank you, Ryan. Good afternoon and thank you for joining our call to discuss 1Q23 results for American Public Education. Throughout today's call, you will hear more details about some key themes, including APEI exceeded its profitability guidance and delivered $7 million of adjusted EBITDA in 1Q23. We continue to address the ongoing headwinds at Rasmussen University one of which has been the absence of permanent senior leadership in the last 12 months. We are excited to announce that Paula Singer has accepted the role of president at Rasmussen University. Paula brings 27 years of experience at Laureate Education, including as president of Walden University and CEO of Laureate Online, where she built a reputation as a highly regarded education and business leader. She and her team will be evaluating key aspects of RASPASIN to unlock value and build on the operational improvements started in 4Q22. Each of our other three education units, APUS, Hondros College of Nursing, and Graduate School USA, will deliver 1H23 enrollment growth and momentum. APUS delivered a seven-year high for net registrations in Q123, and Hondros delivered all-time highs in both one Q23 with 2,700 students and then two Q23 with almost 3,000 students. We are confident that now, with leaders in place at each of our four education units, we will have the proper focus and talent to execute on our strategy of leadership in military and healthcare education, and career learning while setting APEI on a path for long-term growth and profitability. Now I'd like to provide more details about APEI's first quarter results. Starting with APUS, net course registrations increased 2% during the first quarter over the prior year period. This was driven primarily by continued strong military performance strengthening APUS's number one active duty educator position. Today, total active duty registrations grew by 7% during 1Q23 compared to the prior year period, with all branches of the armed services seeing year-over-year increases, including Army at plus 6%, Air Force at plus 9%, and Coast Guard at plus 11%. APUS's strong military growth was offset partly by a year-over-year decline in total non-military and veteran registrations. Overall momentum continues into 2Q23, where we expect net course registrations to be in the range of plus 2% to plus 6% compared to the prior year period. Overall, we expect to see strong revenue, substantial cash generation, and improving EBITDA margins throughout 2023 for APUS. At Hondros, one Q23 set another all-time high total enrollment record with 2,700 students and delivered a 10% increase compared to the prior year period. During two Q23, all but one of the Hondros campuses had year-over-year enrollment growth, leading to another all-time high total Hondros student enrollment of approximately 3,000 students or plus 22% above the prior year period. Hondros strong 2Q23 enrollment reflects our successful efforts to re-enroll approximately 300 students who returned to Hondros to continue their pursuit of an LPN degree after having previously paused their education in many cases due to COVID related disruptions. I am also pleased to announce that Hondros Detroit campus which opened in 4Q22 has been a strong success as we are enrolling LPN students on the back of strong word of mouth demand with over 100 students enrolled in 1Q23 and over 200 enrolled in 2Q23. This demonstrates the acute need for nursing programs in the Michigan region and we expect this campus to continue to grow rapidly during 2023. Also yesterday, Hondros opened its newly relocated Dayton campus to a more central location to serve a larger portion of the Dayton market. We are working on initiatives to increase enrollment at each Hondros campus, which may include launching additional programs to increase campus utilization and drive down total cost per student. As we mentioned last quarter, we expect revenue growth EBITDA increases and margin expansion during 2023 at Hondros. Graduate School USA has also started 2023 with solid enrollment momentum, which translated to over $5 million in revenue and increase of more than 60% compared to the prior year period. For 2023, we still expect mid to high team percentage revenue growth year over year and improved adjusted EBITDA. Given the continued inflationary pressures on APEI's overall cost structure, including at each of the education units, we have implemented select tuition increases. This includes certain tuition increases implemented in January at Ratheson and increases at APUS and Hondros that took effect in April, with additional planned fee increases in the coming months, resulting in a meaningful increase in revenue and margin in 2H23. We are committed to providing affordable, high-quality education to our students, but also recognize the heightened inflationary pressures and believe the tuition increases are both prudent and reasonable. As stated on our previous earnings call, 2023 will be a year of rebuilding at Rasmussen to replenish leadership and drive enrollment momentum for long-term sustainable growth and profitability. I'm pleased to announce that we are making progress towards these goals with the hiring of Paula Singer as president. Additionally, Paula has brought in two senior leaders to assist in the Rasmussen transformation, a nearly 25-year veteran of Laureate education to lead finance and transformation, and an industry veteran to lead nursing education as associate provost and vice president for the School of Nursing. Paula deeply believes in the Rasmussen mission, the talent of its teams, and the ability for Rasmussen to create great educational outcomes for its students. Together, Paula and these two new executives round out our Rasmussen leadership team. This new leadership team, with the express goal of returning Rasmussen to excellence, has established its priorities and is executing on key initiatives. Turning to Rasmussen enrollment, We have seen the third consecutive quarter of growth for our Rasmussen online segment, which represents over half of Rasmussen's total enrollment. However, Rasmussen's on-ground nursing enrollment declined due to tightened admissions policies and enrollment caps in Illinois and the Twin Cities, which represented over 50% of the enrollment decline. The new leadership team has put several initiatives in place to help mitigate these challenges and position the university for overall future growth and success. One initiative is to more fully utilize Rasmussen campuses to increase enrollments with both nursing and allied health programs that are already approved on those campuses. Our analysis has shown that on most campuses, Rasmussen has 25 to 50% more student capacity as compared to what is being utilized today. Additionally, with the restructured operating model of Rasmussen Online and Rasmussen campuses, each segment can focus on its unique growth and value levers. Even though the COVID-19 pandemic is behind us, We are still educating a large portion of pre-licensure nursing students who began their program during the nine quarters from 2Q20 through 2Q22 when Rasmussen chose to educate students exclusively online. We have seen NCLEX results decrease as a result of this online education experience, and even though we have moved back to on-ground delivery of labs, clinicals, and most nursing courses, we have not yet consistently and predictably seen NCLEX improvements. We anticipate that improvements are on the horizon and we remain focused on providing enhanced support to our nursing students through our Center for Nursing Excellence and with the leadership of our new VP School of Nursing and Associate Provost. Turning our attention to APEI. We also wanted to highlight that effective March 28, 2023, Michael Brainer, a managing partner of 325 Capital, which is one of APEI's larger common shareholders, was appointed to the APEI Board of Directors. Michael has significant experience partnering with management teams to enhance long-term value creation, which aligns well with APEI's priorities. We are excited for him to have joined the APEI board. As we indicated publicly after our 4Q22 earnings call, there was a remaining $8 million share repurchase authorization under our existing share repurchase program. From the end of March to the end of April 2023, we exhausted that $8 million by repurchasing over 1.3 million shares in the open market. I would now like to turn the call over to Rick Sunderland, APEI CFO, to review our first quarter results and second quarter outlook in further detail.