American Public Education, Inc.

Thank you for standing by. My name is Pam and I will be your conference operator today. At this time, I would like to welcome everyone to the American Public Education Inc. Third Quarter 2024 Earnings 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 withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Brian Pranavo, Investor Relations. You may begin.

Thank you, Pam, and good afternoon, everyone. Welcome to the American Public Education's conference call to discuss third 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, 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 today 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. Forelooking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forelooking statements may sometimes be identified by words like anticipate, believe, seek, could, estimate, expect, can, may, plan, potentially, reject, should, will, would, and similar or opposite words. Forward-looking statements include, without limitation, statements regarding expectations for registration 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. 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 and should only be considered in addition to, 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 Seldon. Angela, please go ahead.

Thank you, Brian. Good afternoon, and thank you for joining American Public Education's third quarter 2024 earnings call. On today's call, we have four important areas to highlight. First, at APEI, on all key metrics, we have met or beat our third quarter 2024 guidance. Overall APEI revenues increased 1.5% year-over-year to $153 million, the fourth consecutive quarter of year-over-year growth and within our guidance range. Adjusted EBITDA was above our guidance range at $12.9 million. Net income of $731,000 equals 4 cents per diluted share and was at the high end of our guidance range. Second, in the third quarter of 2024, Rasmussen University posted its first year-over-year increase in total enrollment since the API acquisition. Next, our fourth quarter 2024 outlook is very strong. APUS total net course registrations are expected to grow 4% to 6% when compared to last year. At Rasmussen and Hondros, fourth quarter student enrollments are actuals because of the quarterly starts at these schools. At Rasmussen, fourth quarter total enrollment increased 4% when compared to the fourth quarter of 23 and is our second consecutive quarter of overall positive year-over-year enrollment growth. And earlier this year, we signaled this positive turn and are pleased that it is occurring. At Hondros, fourth quarter total student enrollment increased 19% year over year to approximately 3,700 students. And finally, because of these accomplishments and our overall progress, full year 2024 revenue guidance is $620 to $625 million, which is 3% to 4% greater than 2023. And full year adjusted EBITDA guidance is $64 to $67 million, and 7 to 12% greater than 2023. Both are within the 2024 annual guidance range we provided in 1Q24. Now, I'd like to provide more detail about the results and trajectory starting first with APEI's nursing and healthcare institutions. As discussed in previous calls, at Rasmussen, we have invested significant effort and resource to strengthen its foundation for long-term growth. These efforts are showing real dividends with continued improvement in student outcomes, increasing enrollment, and positive financial performance. 3Q24 was the first quarter that Rasmussen experienced positive year-over-year enrollment growth since API's acquisition. And now, in 4Q24, the trend has accelerated as enrollments are up 4%, when compared to the fourth quarter of last year. Notably, this enrollment growth has occurred even with the enrollment impact of Rasmussen's voluntary campus closings in Wisconsin. We are further encouraged by the underlying strength in enrollment momentum. Beyond enrollment, we signaled that Rasmussen would be EBITDA positive in the second half of 2024, and we affirm that we are on track to deliver on that promise. In terms of student outcomes, Rasmussen again produced strong NCLEX pass rates, where year-to-date 23 of 25 programs are meeting the required state threshold. Additionally, Rasmussen received positive news regarding its campuses in Moorhead, Minnesota and Overland Park, Kansas, where both received six-year continuing accreditation. And importantly, in Illinois, Our Romeoville campus, along with its off-campus instructional sites in Aurora, Naperville, Mokena, Tinley Park, and Rockford, received initial accreditation from the Accreditation Commission for Education and Nursing, or ACEN, following reviews and applications. From the underlying strength in enrollment trends and rebounding bottom-line financial performance to the continued improvement in student outcomes and accreditation results, we remain very optimistic about how Rasmussen is positioned for 2025 and beyond. At home growth, as previously reported, 3Q-24 enrollment remains strong with 10% growth versus third quarter of 2023. Fourth quarter enrollments in 2024 continue this trend, increasing more than 19% year over year to 3,700 students. This marks the 19th consecutive quarter that Hondros course posted year over year enrollment growth. Demand remains strong at Hondros for both the PN and ADN nursing programs. And we received welcome news at several of our campuses. Our Detroit, Michigan campus accreditation was affirmed in July. And in several Ohio campuses, we have improved overall retention above the 70% benchmark. With the positive results of both Rasmussen and Hondros, along with our efforts to simplify our healthcare platform, we underscore that these results reflect our continued belief that nursing and healthcare educational programs will meaningfully contribute to ATEI's overall future growth. As we have previously shared, nursing and healthcare practitioners remain in high demand. It is estimated that there are over 200,000 nurses needed every year in this country. Our colleges educate approximately 10,000 nurses per year, so we expect significant growth as we continue to close the gap in the NMAT market need. Now I'd like to turn our attention to API's online university serving the nation's military and veteran segment, APUS. In 3Q24, revenue at ATUS was approximately 1% higher due to both the overall growth in registration as well as higher average revenue per registration due to modest tuition and fee increases implemented last year. As we mentioned last quarter, EBITDA margins at ATUS declined modestly as the company has invested in 2024 to strengthen its online curriculum, IT infrastructure, and better align its marketing spend. In the fourth quarter, we are already experiencing increases in registration at AQS based on this work and expect 4Q24 registrations to grow 4% to 6% versus 4Q23. Additionally, we have seen some early returns on our extended family strategy to grow registration in our military families market. Overall, at APEI, we have carved out distinctive market positions. American Military University, or AMU, is the number one provider of higher education to both the United States military and has been named the top choice nationwide for veterans using their GI Bill benefits. Both Congress and Rasmussen continue to tackle the chronic nursing shortage by graduating thousands of new nurses each year, where the demand for nurses is expected to grow significantly for the foreseeable future. Overall, with Rasmussen and Honduras delivering revenue growth, margin expansion, and student success, expansion of our nursing campus footprint in the coming years will allow us to strengthen our impact in addressing the large demand for nursing and other clinical roles in our overstretched healthcare system. We expect APUS to continue to grow at a steady rate where we can leverage our strong reputation and value proposition of return on educational investment with students. We fundamentally believe in our vision that education can transform lives, advance careers, and improve communities. With higher education as one of the key factors in employment and advancement, we're proud of the value and affordability our programs provide. to those in healthcare fields, and military, veterans, and government employees. Each of our education units were purpose-built to deliver on that vision by attracting and educating service-minded students, offering accessible and affordable higher education and training across a diverse range of subjects. And our Learn to Earn focus enables students to experience a strong, lifelong return on their educational investment. With that, I will now turn the call over to APEI's CFO, Rick Sunderland.