American Public Education, Inc. (APEI) Earnings

Management highlights

- **Institutional Combination Completion** * On August 4, 2026, APEI completed the combination of American Public University System, Rasmussen University, and Hondros College of Nursing into a single unified accredited institution called the new American Public University System. * All required regulatory approvals from the Higher Learning Commission and the U.S. Department of Education have been received, and the 2021-enforced total enrollment growth restriction on Rasmussen has been lifted. * The combined institution now offers over 290 degree programs, serves approximately 109,000 students, and has over 250,000 alumni worldwide. - **New AI-Enabled Student Lifecycle Platform (SLP)** * APEI is developing a new AI-powered student lifecycle platform in partnership with Salesforce, using Salesforce's next-generation student information platform, Data360, and AgentForce. * All capital costs for the platform were already included in the original 2029 four-year financial plan, with unbudgeted upside from expected operating efficiencies and student experience improvements. * Rollout will begin with Health Plus student support and admissions in Q1 2027, expanding across both segments through 2027 and into H1 2028. - **Health Plus Strategic Updates** * The "Fill the Back Row" capacity utilization strategy continues to outperform expectations, with on-ground enrollment growth exceeding total segment growth. * The new Orlando campus welcomed its first class in Q2 2026, with enrollment outpacing internal projections; the second 2026 new campus in Detroit 2 remains on track to start enrolling students this year, in line with the Trailblazer initiative goal of opening two new campuses annually. * A lease has been signed for the first 2027 new campus in Fort Lauderdale, Florida, scheduled to begin enrollment in Q4 2027. * Health Plus Division President Mark Arnold stepped down for personal reasons; Dwayne Bertotto will assume day-to-day operations of the division. - **Military Plus Performance Context** * Mid-teens growth continues in registrations from veterans and military families, which remains the primary driver of overall segment growth. * Active duty enrollment has faced headwinds in 2026 from ongoing deployments of Navy, Air Force, and Marine service members tied to the Middle East conflict; management confirms this is event-related, not a structural demand issue, as Army enrollment (the largest service segment) remains strong. - **Marketing Efficiency Review** * After observing increased cost per lead and lower enrollments in non-core online non-health segments, APEI initiated a third-party end-to-end review of marketing efficiency across all segments and channels. * Early findings identify meaningful opportunities to lower cost per start and improve effectiveness; organizational and process changes are already being implemented, with improvements expected to take effect in Q4 2026. - **Financial and Balance Sheet Strength** * Adjusted EBITDA grew 36.8% year-over-year to $20.7 million, with adjusted EBITDA margin expanding 275 basis points to 12%. Net income available to common stockholders was $9.8 million ($0.52 diluted EPS), up from a $0.3 million net loss ($0.02 diluted EPS) in the prior year. * As of June 30, 2026, total cash, equivalents, restricted cash, and short-term investments totaled $222.8 million, with total debt of $88.9 million, resulting in $133.9 million of net excess cash. * Year-to-date operating cash flow grew 45.6% year-over-year to $75.4 million; $45 million remains available under the $50 million authorized share repurchase program.

Guidance

- Management raised full-year 2026 guidance across all core metrics, driven by stronger than expected Q2 2026 results and clear visibility into the remainder of the year: * Full-year 2026 revenue is guided to $690 million to $698 million, up from the prior range of $686 million to $696 million * Net income available to common stockholders is guided to $46.5 million to $52.5 million, up from the prior range of $44.9 million to $51.6 million * Adjusted EBITDA is guided to $96 million to $104 million, up from the prior range of $93 million to $102 million * Diluted EPS is guided to $2.48 to $2.79, up from the prior range of $2.33 to $2.68 * Capital expenditure guidance was lowered to $25 million to $28 million from the prior range of $28 million to $32 million - APEI initiated Q3 2026 guidance, which includes a $6 million revenue timing shift (and $4 million adjusted EBITDA shift) to Q4 2026 due to the September 2026 course start date: * Q3 2026 revenue is guided to $164.5 million to $167 million * Net income available to common stockholders is guided to $3.4 million to $5.4 million * Adjusted EBITDA is guided to $14 million to $17 million, which also includes non-recurring marketing optimization expenses * Diluted EPS is guided to $0.18 to $0.29 - The long-term 2029 strategic framework laid out at the November 2025 Investor Day remains fully intact, targeting 8% to 12% annual revenue CAGR, total revenue of $890 million to $1 billion by 2029, and adjusted EBITDA margins of 20% to 21%.

Segment performance

APEI reports total Q2 2026 revenue of $171.7 million, representing 5.5% year-over-year growth (7.8% after excluding the sold Graduate School USA business from the prior year period). 1. **Military Plus**: Q2 2026 revenue was $85.5 million, a 4.7% year-over-year increase from $81.7 million, accounting for 49.8% of total segment revenue. Segment operating income was $23.7 million, a 10.6% increase from $21.4 million in the prior year, with an adjusted EBITDA margin of 29.4% (150 basis points of expansion). Net course registrations grew 2% year-over-year to approximately 98,300. 2. **Health Plus**: Q2 2026 revenue was $86.2 million, an 11% year-over-year increase from $77.7 million, accounting for 50.2% of total segment revenue. The segment delivered operating income of $0.3 million, an improvement from a $2.4 million operating loss in the prior year. Total enrollment grew 7% year-over-year to approximately 19,600 students, with on-ground campus enrollment growing 9% outpacing total segment growth.

Risks & headwinds

- Ongoing Middle East conflict deployments have created temporary headwinds for Military Plus active duty enrollment across the Navy, Air Force, and Marine segments, with continued deployment activity creating uncertainty around the timing of a return to normal enrollment patterns. - Changes to search engine behavior driven by AI adoption have increased cost per lead for small non-core online non-health segments, negatively impacting enrollment in these portions of the business. - The proposed 40% increase in military tuition assistance per credit hour has not yet completed full legislative and regulatory approval, with multiple remaining process steps required before the change takes effect. - All forward-looking statements are subject to additional general risks including potential impacts from government shutdowns, changing federal and state education policies, and regulatory changes that could impact revenue timing, receivables, and operating results, as detailed in APEI's SEC filings.

Analyst Q&A

• Q: What synergies does management expect to unlock from the newly completed institutional combination, on both revenue and the cost side? /

  A: Management is now turning full attention to capturing expected revenue synergies, specifically cross-offering existing Rasmussen RN-to-BSN, post-licensure healthcare, and BSN programs to Hondros College of Nursing students. Management will share quantified growth targets for these opportunities in an upcoming call, as regulatory steps can now proceed following the combination approval. For cost synergies, the team is currently evaluating simplification opportunities across the three combined institutions, and will share findings and updated guidance once analysis is complete. The bulk of the combination process has been finished, with the final milestone completed in August 2026. (391 characters)

• Q: How is APEI positioned if the proposed 40% increase in military tuition assistance (TA) per credit hour is passed, and what would that mean for active duty tuition pricing? /

  A: The TA increase was included in the House-passed NDAA bill, but still requires Senate passage, Department of Defense approval, and a full appropriations bill to be passed before October 1 to take effect. APEI has maintained a 23-year commitment to zero out-of-pocket undergraduate tuition costs for active duty military students. If the TA increase is approved, APEI will re-evaluate its per credit hour pricing to maintain this commitment while optimizing margins. Management is monitoring the legislative process closely and will update investors as developments occur. (426 characters)

• Q: How have AI-driven search changes impacted Health Plus enrollment, and what changes is management making to address rising cost per lead? /

  A: Core campus-based Health Plus nursing programs rely on local brand marketing rather than digital search, so they have not seen material disruption from AI-driven search changes. Higher cost per lead has only impacted the small online non-health segment of Health Plus, which drove the slight Q3 enrollment growth deceleration compared to Q2. APEI has launched a full third-party marketing review, and is implementing organizational changes to build more agile marketing processes and reallocate spend from underperforming areas to higher-opportunity channels. Improvements from these changes are expected to materialize in Q4 2026. (443 characters)

• Q: Now that Rasmussen's enrollment growth restriction is lifted, how quickly can APEI expect incremental growth from this change? /

  A: The restriction was a cap on the total number of Rasmussen students that could receive federal student financial aid, which APEI was approaching ahead of the combination approval. The lifted restriction removes the need to redirect students to alternative payment plans, allowing unconstrained normal enrollment operations. Two other restrictions (on adding new campuses and new programs) were lifted in 2025, and APEI is already taking advantage of that: two new campuses are opening in 2026, and the first 2027 campus lease has already been signed. (387 characters) Total: 1647 characters