American Public Education, Inc.

I would like to welcome everyone to the American Public Education Incorporated Report's fourth quarter 2024 results 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 one again. Thank you. I would now like to turn the call over to Brian Perneveau, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss fourth quarter and full year 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 presentations 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 are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. such as those identified in our Form 10-K under the heading Risk Factors and those related to potential impacts from government shutdowns or changing federal government policies and practices, including impacts on revenue or the timing of receivables. 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. Forelooking 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, combination of our institutions, financing and spending plans, future governmental and regulatory actions, and our response to those actions, changing market demands and our ability to satisfy such demands, and other company initiatives, including, with respect to future competition and demand, 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 in the earnings release. Management believes that the presentation of non-GAAP financial information provides useful supplemental information to investors regarding It's results of operations and should be only 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 President and CEO, Angela Seldon. Angela, please go ahead.

Thank you, Brian. Good afternoon, and thank you for joining American Public Education's fourth quarter and full year 2024 earnings call. We are very pleased with our results. in both the fourth quarter and full year 2024 and remain enthusiastic about our path forward. We have four areas to highlight during today's call. First, APEI outperformed fourth quarter 2024 financial guidance. In the fourth quarter, we exceeded guidance for revenue, net income, and adjusted EBITDA. Importantly, as we signaled at the beginning of the year, Rasmussen, in the fourth quarter, delivered both positive EBITDA and positive enrollment growth. Next, APEI outperformed full-year 2024 financial guidance. We delivered on the full-year guidance that we first established at the beginning of 2024 and then raised. Revenue of $624 million exceeded the top end of the original guidance and met the midpoint of our raised revised guidance. Adjusted EBITDA of $72.3 million exceeded both the high end of our original and revised guidance range, which was $65 million. Capital expenditures were in line. Third, 2025 will be a year of simplification at APEI. In January, we announced a plan to combine our three degree-granting institutions into a single, consolidated institution. This should provide simpler operations and an opportunity to find both revenue and cost synergies over the long term. Additionally, we intend to redeem our preferred shares prior to the end of the second quarter, which would be accretive to net income and earnings per share. We have closed some underperforming campuses, terminated expensive leases and contracts, and have two corporate buildings held for sale. These steps should simplify the balance sheet and cost structure, resulting in significant earnings growth in 2025. Finally, 2025 will be another year of revenue and adjusted EBITDA growth. We're initiating 2025 guidance with revenue of $650 million to $660 million and adjusted EBITDA of $75 million to $85 million. Rick Sunderland, APEI's CFO, will provide more details on guidance in his remarks. Now I'll provide more detail about the fourth quarter and full year 2024 results, starting first with APEI's nursing and healthcare institution. Much of the work over the past two years at Rasmussen has been focused on strengthening its foundation for long-term growth. We have made real progress and, in particular, are pleased with the previously guided financial results in the second half of 24. 3Q24 was the first quarter in which Rasmussen experienced positive year-over-year enrollment growth since API's acquisition. In 4Q24, the trend continued with a 4% year-over-year enrollment increase. In the first quarter of 2025, this momentum has accelerated with a 7% increase in enrollment compared to 1Q24, including positive enrollment in our on-ground nursing and healthcare programs. Beyond enrollments, we signaled that Rasmussen would be adjusted EBITDA positive in the second half of 2024 and we achieved that goal with $6.4 million of adjusted EBITDA in 4Q24 and positive $3.1 million for the second half of 2024. Of particular note is that this growth has been achieved even with the suspending of enrollment in two Wisconsin campuses and the Bloomington ADN program. These results support our belief that there remains significant upside to Rasmussen growth and profitability. Additionally, we continue to prioritize student outcomes and NCLEX pass rates that support real career opportunities and a positive ROI on students' educational investment. In 2024, 23 of our 25 nursing reporting entities met the state NCLEX pass rate threshold. At Hondros, as previously reported, 4Q24 enrollment was very strong, with 19% growth as compared to 4Q23. 1Q25 enrollment continues a positive trend, increasing 9.6% year over year to 3,600 students. This marks the 20th consecutive quarter that Hondros has posted year-over-year enrollment growth. We're building on that momentum of 24 into 2025 at both Rasmussen and Hondros with one Q25 reported student enrollments as actuals because these quarterly starts have already begun. We believe our nursing schools can continue to be a significant driver of growth and margin expansion going forward. The higher fixed cost base of these businesses allows for increased EBITDA flow through as we fill existing spaces in classes and on campuses. Further, the market dynamics present for new nurses remains as when we acquired Rasmussen in 2021. With an annual shortage of approximately 200,000 nurses each year, and with Hondros and Rasmussen currently educating over 9,000 students per year, there remains significant runway for further growth and expansion. Now I'd like to turn our attention to APEI's online university, educating our nation's military, veterans, and their families, currently called APUS. In 4Q24, overall net course registrations increased 7% year over year. Revenue at APUS was almost 4% higher due primarily to the overall growth in registrations. EBITDA margins in the fourth quarter were 34.5% at APUS, which was down slightly as compared to 35% in 4Q23, as APUS invested in various initiatives in the back half of 24, aiming to modernize and strengthen its online curriculum, IT infrastructure, and to better optimize its marketing spend while aligning student support headcount to growing segments, including non-military and military families. For the full year 2024, APUS total net course registrations increased 3% as compared to 2023. We're pleased with the return to strong registration growth in the fourth quarter and expect continued registration growth in the low to mid single digits in 2025. 2025 will be a year of simplification for APEI. As announced in January of this year, we are planning to combine APUS, Rasmussen, and Hondros into one consolidated institution, American Public University System. which we are now referring to as the system. We are targeting the fourth quarter of 2025 for the combination to be completed, assuming all regulatory and accreditation steps have been satisfied. This system will have a healthcare division, which will include Rasmussen University and Honduras College of Nursing, Combining and expanding our nursing campus footprint will allow us to strengthen our ability to address the growing demand for nursing and other clinical roles in the healthcare ecosystem. We're very excited that Mark Arnold, Rasmussen's new president, will be leading that division. The system will also have a military and veteran division called APUS Global. We're also very pleased that Nuno Fernandez will continue to lead that division. We have upcoming process steps with our accreditor, Higher Learning Commission, and the US Department of Education. We'll provide updates and future earnings calls as we complete key milestones. Overall, we're very proud of our results and achievements in 2024. We believe in our future growth and opportunities in 2025 and beyond. Each of our education units was purpose-built to deliver accessible and affordable higher education and training across a diverse range of subjects. By aiming to educate service-minded students and their families, and by offering classes, certificates, and degrees in fields that will continue to have high demand, APEI enables students to experience a valuable, lifelong return on their educational investment. Our mission reflects those priorities. to power purpose, potential, and prosperity for those in service to others. We're proud of the foundation for growth we have built, and we remain focused on setting clear, achievable goals for 2025 and beyond. With that, I will now turn the call over to APEI's Chief Financial Officer, Rick Sunderland.