AMERICAN PUBLIC EDUCATION INC Q1 FY2025 earnings call

Management Statement and Operational Highlights

• APEI outperformed first quarter 2025 financial guidance, raising full-year adjusted EBITDA guidance to $77 million to $87 million.
• Rasmussen saw enrollment growth and a positive EBITDA swing from loss to profit, with Q2 enrollment 8% higher year-over-year. Hondros also had enrollment growth.
• Plan to redeem preferred shares by the end of the second quarter, which will be accretive to net income and save ~$6 million in dividend expense annually starting in 2026.
• Combination of III degree-granting institutions is on track, expected to close by year-end 2025 pending regulatory and accreditation steps.
• Closed underperforming campuses, terminated expensive leases, and has 2 corporate buildings held for sale with anticipated net proceeds over $20 million expected in Q3 2025.
• APUS had over 18,000 graduates, with impressive stats on military, veteran, and dependent graduates.

Segment Performance

• APUS (Online University): First quarter revenue was $83.9 million, a 4.1% increase year-over-year. Net course registrations increased 3.5% year-over-year. Q2 registration guidance midpoint is 5.5%. 66% of APUS graduates are active duty military, national guard or reserves, 19% are veterans, and 4% are military spouses or dependents.
• Rasmussen: First quarter revenue was $59.3 million, a 11.5% increase year-over-year. Enrollment grew 7.4% to 14,500 students. Positive EBITDA was $2.1 million compared to a loss of $2.7 million in the prior year. Q2 enrollment was 8% higher year-over-year.
• Hondros: First quarter revenue was $17.7 million, a 7.5% increase year-over-year. Enrollment grew 10% to approximately 3,600 students. EBITDA loss was $0.2 million compared to breakeven in the prior year. Q2 enrollment was 14% higher year-over-year to approximately 3,700 students.
• Graduate School USA: First quarter revenue was $3.7 million, a 11.9% decrease year-over-year. EBITDA loss was $2.1 million compared to a loss of $1.1 million in the prior year, impacted by DOGE initiatives.

Guidance

• Raised full-year 2025 adjusted EBITDA guidance to $77 million to $87 million and net income available to common shareholders to $23 million to $30 million.
• Q2 2025 consolidated revenue expected to be between $160 million and $162 million.
• Q2 2025 net loss available to common shareholders expected to be between a loss of $2.5 million and $0.7 million or between a loss of $0.13 and $0.04 per diluted share.
• Q2 2025 adjusted EBITDA expected to be between $11.5 million and $14 million.
• APUS Q2 2025 total net course registrations expected to be between 93,500 to 96,100, representing a 4% to 7% increase year-over-year.

Risks

• Potential impacts from government shutdowns, changing federal and state government policies affecting revenues or receivables timing.
• Uncertainty around graduate school due to DOGE initiatives and contract cancellations related to career learning and training for the federal workforce.
• Risks associated with regulatory and accreditation steps for the combination of III degree-granting institutions.

Question and Answer

Q: Jasper Bibb asked about the impact of APUS TA portal outage on margin and enrollment.

A: Rick Sunderland said the outage ended prior to the quarter end, registrations were picked up, and the impact on margin was minimal, with Q2 registration guidance showing a slight improvement.

Q: Jasper Bibb inquired about graduate school EBITDA losses and guidance.

A: Angela Selden stated graduate school downside is developing, but adjusted EBITDA guidance includes expected downside, and they are managing costs and exploring options for graduate school.

Q: Eric Martinuzzi asked about CapEx guidance and quarter-by-quarter expectations.

A: Rick Sunderland said CapEx timing varies due to project-specific factors but is expected to stay within the range.

Q: Stephen Sheldon asked about levers to accelerate Rasmussen's profit trajectory.

A: Angela Selden mentioned filling campus capacity, right program mix by campus, and improved marketing effectiveness as levers.

Q: Alex Paris asked about Q1 net income timing of expenses and graduate school revenue impact.

A: Rick Sunderland explained ~$1.4 million of expenses were delayed to Q2, and graduate school revenue decline in Q1 was limited, with ongoing contracts and programs.

Q: Griffin Boss asked about heavy interest expense in Q2.

A: Rick Sunderland said it includes the preferred redemption premium, a one-time hit.

Q: Raj Sharma asked about Hondros EBITDA and APUS portal impact on receivables.

A: Angela Selden and Rick Sunderland discussed mix shift at Hondros and minimal impact of APUS portal outage on receivables and invoicing.