American Public Education, Inc.

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 withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Brian Pranovo, Investor Relations. You may begin.

Thank you, Operator, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss first quarter 2024 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 in the events and presentation section of APEI's 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 words like anticipate, believe, seek, could, estimate, expect, can, may, plan, potentially, project, should, will, would, and similar or opposite words. Forward-looking statements include, without limitation, statements regarding expectations for registrations and enrollments, revenue, earnings, and adjusted EBITDA, and other earnings guidance, repositioning Rasmussen University for growth, changing market demands, and our ability to satisfy such demands, and other company initiatives, including with respect to future competition and demand and cost savings efforts. 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 risks, failure to comply with regulatory and accrediting agency requirements or to maintain institutional accreditation and any actions taken to prevent or correct such failure, dependence on the effectiveness of the company's ability to attract students who persist in its institutional programs, changing market demands, declines in enrollments at the company's education units, the enactment of legislation that adversely impacts the company or its education units, the inability to effectively brand or market its education units or their programs or expand into new markets, the inability to maintain strong relationships with the military, the loss or disruption of the ability to receive funds under tuition assistance programs or the reduction, elimination, suspension, or disruption of tuition assistance. adverse effects of changes to improve the student experience and enhance the ability to identify and enroll students who are likely to succeed, a loss of eligibility to participate in Title IV programs or ability to process Title IV financial aid, economic and market conditions, challenges with acquisitions, matters related to indebtedness or preferred stock, company's technology infrastructure, the inability to recognize the anticipated benefits of the company's cost savings efforts, and risks described in today's presentation, today's press release, APEI's Form 10-K for 2023, 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 today's presentation and in the earnings release. Management believes that the presentation of non-GAAP financial information provides useful supplemental information to investors regarding its results of operations. It 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. Now, I'd like to turn the call over to APEI's CEO, Angela Southern. Angie, please go ahead.

Thank you, Brian. Good afternoon, and thank you for joining American Public Education's first quarter 2024 earnings call. With the release of our first quarter results, this is now the fifth consecutive quarter where we have exceeded our adjusted EBITDA guidance and expectations. By delivering results from the hard work of the Rasmussen turnaround, we have put Rasmussen back on a trajectory for growth and positive EBITDA. This has included a strong focus on improving student retention, preparing students for success on NCLEX exams, and enrolling a more balanced mix of campus-based nursing and health education programs while reducing our concentration in the ADN program. At the same time, at both APUS and Hondros, we have delivered continued student enrollment growth and margin expansion. Overall, in this past year, by addressing the operational challenges at Rasmussen and right-sizing the cost structure across APEI, we have positioned APEI for long-term growth, driven by strong education units and an enterprise with strong financial standing. Let me share some highlights from the quarter. APEI's first quarter 2024 revenue was $154 million, representing a 3% increase when compared to 1Q23 and ahead of the guidance range. We saw significant improvement in overall adjusted EBITDA, which totaled $17.1 million in the first quarter of 2024, representing a 143% increase over 1Q23. And notably, the adjusted EBITDA for this quarter was roughly $7 million or 71% above the top end of our guidance range. Adjusted EBITDA margin expanded by 600 basis points in 1Q24 to 11% compared to 5% in 1Q23. Collectively, margin improvements are being driven by a combination of optimized marketing, improved retention, and the modest pricing actions and cost control initiatives implemented in 2023, including staffing realignments and reductions. With our strong first quarter outperformance, we are increasing our full year 2024 guidance for revenue and adjusted EBITDA, which Rick Sunderland, APEI's Chief Financial Officer, will detail in his comments shortly. With that context, I'd now like to spend some time sharing the progress of our education units, starting with our core online military and veteran segment, APUS. In 1Q24, overall net course registrations increased 3% year over year to 99,000 registrations, the most in eight years, reflecting the strong reputation upon which we continue to build and the compelling value proposition we offer. active duty and veteran registrations delivered continued momentum with year-over-year growth, partially offset by lower non-military registrations. The overall increase in registrations in the quarter combined with the impact of tuition and fee increases in 2023 resulted in a 9% increase in revenue at APUS. This solid revenue performance coupled with cost containment and lower marketing spend, drove very strong bottom line results for APUS, with EBITDA increasing 31% to $24.3 million as compared with $18.5 million in 1Q23. EBITDA margin was 30% in the quarter compared with 25% in the prior year period. On a student success note, this week, At its 28th annual commencement, APUS will celebrate its over 16,700 graduates in associates, bachelor's, and master's degrees. Turning to Rasmussen, I am very pleased with the progress we have made and continue to make with its stabilization and turnaround. First quarter enrollments, which we shared in our last earnings call, were 13,500. which was a 6% decrease from a year earlier. Today, we are sharing second quarter 2024 enrollments, which continue that improving trend with 13,600 students down just 2% from a year ago. This is now the fourth quarter in a row where total enrollment trends have continued to improve year over year. For the second quarter, Rasmussen online enrollments increased 4%, while campus-based nursing and health education enrollments declined by 9%. As has been the case for the last several quarters, the overall decline in enrollments has been driven predominantly by Rasmussen's campus-based ADN program, but those declines are moderating, and we are increasingly offsetting some of those declines with growth in our BSN, and other campus-based health education programs, moving closer to our goal of having a much more balanced portfolio of nursing and campus-based health education offerings. Over time, the increase in BSN enrollments should also lead to higher average lifetime value per student because of the longer length of this program. Soon, as we move into positive enrollment territory for campus enrollments, The highly leveraged nature of the campus-based business should lead to improved profitability. In terms of student outcomes, we again produced strong NCLEX pass rates in the first quarter, where 20 of 24 programs at Rasmussen met the required thresholds. Worth noting is that two of the four programs that did not meet the threshold had very low numbers of test takers this quarter. and which we think will move into passing territory as more students sit for the exams. While pass rates are only officially evaluated by state nursing boards annually, we track progress quarterly. We are pleased that this is the third quarter in a row where the vast majority of our programs are meeting the state standards. Overall, at Rasmussen, we continue to expect to achieve positive enrollment growth at some point in the second half of 24 and a return to positive EBITDA, resulting in stronger financial footing for the university exiting 24 and into future years. Turning our attention to HONDROs, as reported, 1Q24 enrollment remains strong, showing a 22% increase when compared to 1Q23. We also saw growth continue in 2Q24 with enrollment increasing another 10% year over year to 3,300 students, which we view as particularly encouraging given the comparison to a very strong enrollment quarter in 2Q23. Demand remains strong for its PN and ADN nursing programs, with the new Detroit campus performing very well. Legacy campuses also contributed to growth, including Indianapolis, where we still operate with enrollment caps as a new program despite exceptional NCLEX pass rates. Starts at Hondros remain robust and we remain very pleased with the growth that we are seeing. Also in 3Q, Hondros will be relocating two of its Ohio campus locations and expect some temporary but limited impact to enrollment in those locations. As for NCLEX pass rates, all programs at all Hondros campuses met the 1Q24 state benchmarks. Overall at APEI, our financial results continue to show significant improvement and in particular our return to adjusted EBITDA growth, which has exceeded our guidance now for the last five quarters. With the stabilization of enrollment and continued improvement in EBITDA at Rasmussen, Coupled with strong top and bottom line performance at APUS and Hondros, we are now delivering positive growth in revenue, adjusted EBITDA, and margins across APEI. In summary, we are confident in our strong position to provide online and campus-based post-secondary education and career learning opportunities to large and growing addressable markets. The improvements we have implemented and the return of momentum we have delivered have re-energized leadership, faculty, and staff across the enterprise. We believe we are in a strong position to achieve long-term success, both operationally and financially, and as always, guided by our vision, mission, and values that reward our students, employees, and stakeholders. With that, let me turn the call over to APEI's CFO, Rick Sunderland.