American Public Education, Inc.

At this time, I would like to welcome everyone to the APEI 3Q25 earnings 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 Prenneville, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss third quarter 2025 results. Joining me on the call today are Angela Seldon, President and Chief Executive Officer, Edward Kodispody, Executive Vice President and Chief Financial Officer, Barry Jansen, Senior Vice President of Growth and Strategy, Rick Sunderland, Executive Advisor to APEI, is also on today's call and will be available for the Q&A session. 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, including those related to potential impacts from government shutdowns or changing federal or state government 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, and may, plan potentially project 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, our foundation for growth, the plan combination of our institutions, governmental and regulatory actions, their impact, and our response to those actions. changing market demands and our ability to satisfy such demands and other company initiatives. This presentation contains references to non-GAAP financial information. A reconciliation between the non-GAAP financial measure we use and the most directly comparable GAAP measure 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 and not as a substitute for or superior to any measure of financial performance prepared in accordance with GAAP. With that said, I'd like to turn the call over to APEI's President and CEO, Angela Sonnen. Angie, please go ahead.

Thank you, Brian. Good afternoon, and thank you for joining American Public Education's Third Quarter 2025 Earnings Call. Before we begin with the third quarter results, I would like to take this moment to introduce Ed Kodaspody, APEI's new Chief Financial Officer. Ed joined APEI on October 20th, 2025, and we're very excited to have him on board. Ed joins us from NV5, a leader in technology and engineering consulting solutions. Prior to NV5, Ed was CFO of Alumno Holdings, a higher education company providing learning platforms and technology solutions to universities in Latin America. I will let Ed introduce himself further before he provides the financial overview. I also want to take this opportunity to thank Rick Sunderland for his dedicated service. For over 12 years, he has been instrumental in building and shaping APEI. During Rick's tenure, APEI has navigated significant transformation across the enterprise, including the integration of new institutions and strengthening of the company's long-term position. Rick has been a steady hand, always steering APEI in the right direction through periods of growth and change, and his leadership has left a lasting positive impact on the organization. We appreciate that he has agreed to serve as an executive advisor over the next few months to facilitate a smooth transition. We will certainly miss him while also wishing him the best during his next chapter. Moving on to the third quarter, we have four areas to highlight during today's call. First, I am very pleased with APEI's third quarter 2025 performance, as we have again exceeded our guidance ranges for all metrics, including revenue, net income, EPS, and adjusted EBITDA through continued registration and enrollment momentum and expanding margins. Registration and enrollment growth has outpaced our forecast and significantly contributed to the outperformance in our financial metrics. Registrations at APUS in the third quarter increased 8% as compared to 3Q24, This also represents a sequential acceleration in the rate of growth from 2Q25. Enrollments at Rasmussen increased 10% versus 3Q24. This represents the fifth consecutive quarter of year-over-year enrollment growth. I am particularly pleased that on-ground enrollments at Rasmussen are accelerating, taking advantage of our existing capacity or what we call filling the back row. Enrollments at Hondros College of Nursing continued their strong momentum, increasing 18% as compared to 3Q24. Second, as previously disclosed, we completed the sale of Graduate School USA on July 25th, 2025. Early this year, as we prioritize the combination of our degree-granting institutions We determined that the graduate school training business was no longer a strategic fit within our future growth strategy. We were very pleased to find a new home for graduate school that is more aligned with its mission and market position, allowing us to focus on growing our core degree-granting businesses, including the military, military-affiliated, veteran, nursing, and other healthcare communities. Third, as we continue our work to simplify the overall operational businesses at APEI, at the end of Q2 2025, we received HLC approval and submitted our combination request to the Department of Education. In Q3 2025, after dialogue with the Department of Education team newly assigned to our transaction, we were informed that we should follow a different process for the planned combination of our institutions rather than the one originally undertaken. As a result, in September, we were required to submit and completed the submission of a new application first to the HLC, which will be reviewed at their board meeting in February of 2026. This application contains substantially the same content as our prior submission. We have also provided to the Department of Education our expected timeline for the completion of this newly submitted combination plan to take effect in the beginning of the third quarter of 2026 for the 2026 Student Financial Aid Award year. Fourth, our simplification actions have also strengthened our balance sheet and should enable our subsidiary institutions to continue to produce improved financial results. With the Department of Education removing the restrictions on the $24.5 million letter of credit that dated before the close of our acquisition of Rasmussen, that cash, now unrestricted on our balance sheet, contributes to the unrestricted cash and equivalents totaling $193.1 million as of September 30th, 2025. As a result of our recent redemption of our preferred equity at the end of the second quarter, we will save approximately $6 million annually from the elimination of the cash dividend payments. Also, the sale of graduate school eliminated a $28 million lease liability, which will save us approximately $4 million in lease payments annually and also reduces our total liabilities. These changes have improved our cash position and will increase our cash flow by approximately $10 million per year on a pre-tax basis, which will meaningfully improve net income and earnings per share. We believe we are now positioned with more financial flexibility and an improved capital structure to more confidently pursue our growth initiatives. Moving now to more details about the third quarter 2025 results, starting first with APEI's nursing and healthcare institutions. Rasmussen continues to produce strong results. Rasmussen's enrollment increased 10% in 3Q25 and 9% in 4Q25, representing the fifth and sixth consecutive quarters of year-over-year enrollment increases. As mentioned in previous calls, by leveraging its existing fixed cost structure, RASISN has been and will continue to experience increased operating leverage as enrollments continue to increase. Continued enrollment growth will also flow through to EBITDA margins. Importantly, we are carrying an additional 1,300 enrollments into 4Q25 as compared to 4Q24 that we will continue to build upon in 2026. With our current campus footprint, we believe our strategy that we call filling the back row by working to ensure each of our classes and sections is maxing out capacity at our current campuses has been successful with increasing enrollments and improving EBITDA flow through on each incremental student. At Hondros College of Nursing, as previously reported, 3Q25 enrollment was strong with 18% growth as compared to 3Q24. 4Q25 enrollments continue a positive trend, increasing 9% year-over-year to 4,000 students off of a very strong prior year comp. We believe that the business combination of Rasmussen and Hondros College of Nursing will provide us with an improved platform to add programs, scale enrollment, and increase margins. Turning to APEI's online university educating our nation's military, veterans, and their families, in the third quarter, overall APUS net course registrations increased 8% year over year. Revenue at APUS also increased over 8%. Turning our attention to Q4, the government shutdown has muted military enrollments at APUS for October and November. We are, however, pleased that several of the military branches are now authorizing tuition assistance benefits through the use of the $100 million of tuition assistance funds that were authorized in the One Big Beautiful Bill Act. Further, those branches have been selectively bringing back furloughed workers to help assist with those TA approvals. Additionally, last night's Senate vote Test vote yielded enough votes for the amended CR to pass the Senate, perhaps even today, and head back to the House for consideration, possible approval, and passage to the president for signature, perhaps as early as the end of this week. It is our understanding that upon presidential signature, workers would be called back from furlough and TA funds would again be available for use during the CR period. We remain confident that TA will continue to be a critical Department of Defense recruiting tool, as it is a benefit to service members in exchange for voluntary enlistment. It is also seen as a force shaping tool because by offering these educational opportunities, the military can attract and develop human capital with a higher skill set, thus strengthening our U.S. Armed Services Forces. As we await the passage of this CR and the defense appropriations bill, we have implemented various cost saving measures and are continuing to evaluate additional opportunities to mitigate the adverse impacts. Overall, across our three education units, we are so pleased with the resilience of our team, especially given the government shutdown uncertainty. We've delivered consistent performance that we've demonstrated over the last 18 months. We are confident in our ability to continue executing and taking advantage of the growth drivers that we believe will accelerate growth and profitability and provide more students with more educational opportunities. We look forward to welcoming investors and analysts to our November 20th, 2025 Investor Day at the New York Athletic Club in New York City. to provide a longer-term view of APEI's growth strategies and financial outlook. APEI enables students to experience a valuable lifelong return on their educational investment. Our vision remains to offer education that transforms lives, advances careers, and improves communities by providing online and campus-based post-secondary education to over 107,000 students. Our mission to power purpose, potential, and prosperity for those in service to others reflects our focus on a student population which is resilient in the face of AI transformation and potential threat. Our nursing education prioritizes in-person bedside care, and our military service members continue to be critical, active participants to U.S. military strategies. Each of our education units is purpose-built to deliver accessible and affordable higher education across a diverse range of subjects. I'd like to thank each of our employees and faculty that work tirelessly to make our mission a reality. With that, I will now turn the call over to APEI's new Chief Financial Officer, Ed Kodespody.