American Public Education, Inc.

At this time, I would like to welcome everyone to the APEI first quarter 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 one again. Thank you. And I would now like to turn the call over to Brian Prinevo. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss first quarter 2025 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 presentations 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. including those related to potential impacts from government shutdowns or changing federal and state government politics or policies, practices, and laws, including impacts on revenues 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, or 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, our foundation for growth, the combination of our institutions, campus and corporate center consolidation, the redemption of our preferred stock, future government and regulatory actions, and our response to those actions, changing market demands, and our ability to satisfy such demands in other company initiatives. 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 and 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 president and CEO, Angela Seldon. Angie, please go ahead.

Thank you, Brian. Good afternoon, and thank you for joining American Public Education's first quarter 2025 earnings call. Overall, we are very pleased with our outperformance in the first quarter of 2025 and are raising our full year adjusted EBITDA guidance by $2 million and both the top and bottom ends of the range to $77 million to $87 million. We have four areas to highlight during today's call. First, APEI outperformed first quarter 2025 financial guidance. In the first quarter, we outperformed guidance for revenue, adjusted EBITDA, adjusted EBITDA margins, and net income, continuing the trend observed in the latter half of 2024 to greater profitability as enrollments and registrations continue to increase. Our focus on stabilizing and growing enrollment at Rasmussen, and in particular growing our campus-based nursing enrollment, is resulting in meaningful year-over-year improvement in profitability. Rasmussen contributed a positive $5 million of adjusted EBITDA swing from a minus $2.6 million loss in first quarter of 24 to a positive $2.4 million in one Q25. Importantly, this trend is continuing into Q2, where Rasmussen is seeing an 8% year-over-year enrollment improvement with growth in both online and campus-based enrollments. Net income to common shareholders increased a positive $0.5 million from a negative $6.2 million net loss. Next, we are improving operating leverage driven by increasing enrollment and focused discipline cost management. Revenue of $164.6 million increased 6.6%, while adjusted EBITDA increased nearly 25%. Adjusted EBITDA margin expanded by nearly 200 basis points to 12.9% versus 11% in Q1 of 2024. We delivered net income of $7.5 million in the first quarter, historically our lowest quarter, as compared to a net loss of $1 million in the first quarter of 2024. Also, 2025 continues to be a year of simplification at APEI. 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, saving approximately $6 million in dividend expense annually beginning in 2026. In January, we announced a plan to combine our three degree-granting institutions into a single consolidated institution. Last week, the Higher Learning Commission, our accreditor, confirmed that we are on their June agenda for review. As such, our combination plans remain on track, and we expect to close by year end 2025, assuming all regulatory and accreditation steps have been completed. We have closed some underperforming campuses, terminated expensive leases and contracts, and have two corporate buildings held for sale with anticipated net proceeds of more than $20 million from both, which are expected to close in Q3 of 25. These steps should strengthen the balance sheet and cost structure, resulting in significant net income and EPS growth in 2025 and beyond. Finally, at Graduate School USA, due primarily to DOGE initiatives, including government employee headcount reductions and the uncertainty around future budgets for training and professional development, we have held constant APEI's full-year revenue guidance and have begun to explore the best path forward for graduate school. Overall, we are increasing 2025 net income guidance, expected to be between $23 million and $30 million, and we are increasing adjusted EBITDA guidance, expected to be between $77 million and $87 million. We are maintaining the full-year revenue expectation of $650 million to $660 million, moderated by the uncertainty at graduate school. Our CFO, Rick Sunderland, will give a deeper dive into updated 2025 guidance. Now I'll provide more details about 1Q25 results, starting first with APEI's nursing and healthcare institutions. Rasmussen continues to produce strong results. The three-pronged strategy to improve outcomes, manage costs, and grow enrollments began bearing fruit in the second half of 24 and continues in the first half of 25. Rasmussen's enrollment increased 7% in 1Q25 and 8% in 2Q25, representing the fourth consecutive quarter of year-over-year enrollment increases. As previously discussed, Rasmussen's fixed cost structure allows positive enrollment trends to significantly enhance the flow-through margin leading to improved operating leverage and profitability. At Hondros, as previously reported, 1Q25 enrollment was strong, with 9.6% growth as compared to 1Q24. 2Q25 enrollment continues a positive trend, increasing 13.5% year-over-year to 3,700 students. We're building on the momentum of 2024 into 2025 at both Rasmussen and Hondros with two Q25 reported student enrollments as actuals because these quarterly starts have already begun. Now let's turn our attention to APEI's online university, educating our nation's military, veterans, and their families, currently called APUS. First, I would like to congratulate the over 18,000 students who received their diplomas from APUS last weekend. Here are some impressive statistics and a fun fact. 66% of APUS graduates are active duty military, National Guard or reservists. 19% are veterans and 4% are military spouses or dependents. APUS conferred over 13,500 associates or bachelor's degrees 4,600 master's degrees and 11 doctoral degrees. Over 4,200 or 23% of APUS graduates this year are earning their second AMU or APU degree or certificate. And the fun fact, the oldest graduate is 81 years old and the youngest 17 years old. Now turning our attention to 1Q25 for APUS, Overall net course registrations increased 3.5% year over year. 2Q25 registration guidance at the midpoint is 5.5%, showing a sequential improvement in year over year growth. In summary, building on our successful performance in 24 and the sustained momentum in the first half of 2025, we are optimistic about our future growth prospects and our capacity to convert that growth into enhanced profitability both in terms of adjusted EBITDA and diluted EPS. We remain laser-focused on educating service-minded students, offering classes, certificates, and degrees in fields that have high demand. APEI enables students to experience a valuable, lifelong return on their educational investment. Our mission remains to power purpose, potential, and prosperity for those in service to others. Each of our education units was purpose-built to deliver accessible and affordable higher education and training across a diverse range of subjects. I'd like to take a moment to thank each of our approximately 6,000 employees and educators that work tirelessly to make our mission a reality each and every day. With that, I'd like to turn the call over to APEI's CFO, Rick Sunderland.