American Public Education, Inc. (APEI) Earnings

Management highlights

• **Overall Financial Performance** - Total Q1 2026 revenue was $174.7 million, a 6.2% year-over-year increase; excluding the sold Graduate School USA business, underlying revenue grew 8.7% year-over-year, hitting the top end of prior guidance. - Adjusted EBITDA grew 37.5% year-over-year to $29.2 million, beating guidance, with adjusted EBITDA margin expanding 381 basis points to 16.7%. Net income per diluted share was $0.94, a 129% increase over the prior year. - The company ended Q1 with a strong balance sheet: $221 million in total cash/cash equivalents/restricted cash, $90 million in total debt, and $131 million in excess cash over debt, after a March 2026 debt refinancing that cut borrowing rates by 375 basis points. - A $50 million share repurchase program was authorized in March 2026; ~17,840 shares were repurchased for $1 million in Q1, primarily to offset dilution from share-based compensation. • **Segment Operational Updates** - Health Plus: The new Rasmussen Orlando campus is enrolling students in its first full quarter of operations. The Hondros College of Nursing Cincinnati campus relocation is expected to complete in H2 2026, and a new Detroit campus is on track to start enrolling students in Q1 2027. Q2 2026 enrollment growth is 7.1%, led by high single-digit growth at campuses and online health programs. - Military Plus: 4% overall registration growth met guidance, with high-teens growth for military families and veterans, and mid-single-digit growth for the active duty channel. Q1 Coast Guard registrations were impacted by the early 2026 government shutdown, with 1-2% of total registrations postponed; funding was restored in late April, with partial recovery expected in Q2 and full recovery in Q3. In Q2, strong Army registration growth is offset by a slowdown in Navy, Air Force, and Marine registrations tied to deployments for the Middle East conflict, though veterans and family segments continue to see high-teens growth. The company attributes this slowdown to temporary timing, not structural demand issues, and deployed $2.2 million in incremental Q2 advertising to mitigate the impact. • **Institutional Combination Progress** - APEI received Higher Learning Commission accreditor approval in late April 2026 to consolidate APUS, Rasmussen, and Hondros College of Nursing into a single accredited institution (American Public University System). Only Department of Education approval and OPEID merger remain, with a targeted effective date at the start of Q3 2026.

Guidance

- APEI raised its full year 2026 guidance, driven by strong Q1 results and improved business visibility: new full year guidance is $686 million to $696 million in total revenue (prior guidance: $685 million to $695 million), $44.9 million to $51.6 million in net income available to common stockholders (prior: $41.3 million to $47.6 million), $93 million to $102 million in adjusted EBITDA (prior: $91.5 million to $100.5 million), and $2.33 to $2.68 diluted EPS (prior: $2.15 to $2.47). Full year CapEx guidance is maintained at $28 million to $32 million. - Q2 2026 guidance was initiated: $170 million to $172 million in total revenue, $6.5 million to $7.5 million in net income available to common stockholders, $16.5 million to $18 million in adjusted EBITDA, and $0.34 to $0.39 diluted EPS. - The company's long-term 4-year strategic framework (laid out at November 2025 Investor Day) remains intact, targeting $890 million to $925 million in organic revenue by 2029 (8% to 9% CAGR) with 20% to 21% adjusted EBITDA margins, with a potential path to $1 billion in total revenue by 2029 including campus expansion and tuck-in acquisitions.

Segment performance

APEI reports under two new segments as of Q1 2026, with all prior period figures recast to match this structure: 1. **Military Plus**: Q1 2026 revenue was $89.4 million, a 6.5% year-over-year increase from $83.9 million in Q1 2025. This segment contributed 51.2% of APEI's total Q1 2026 revenue. Segment income from operations was $30.7 million, a 27% increase from $24.1 million in the prior year, with an adjusted EBITDA margin of approximately 36% in the quarter. Net course registrations totaled ~106,600, up from ~102,500 in Q1 2025, representing 4% overall registration growth. 2. **Health Plus**: Q1 2026 revenue was $85.4 million, an 11% year-over-year increase from $76.9 million on a recast basis in Q1 2025. This segment contributed 48.8% of APEI's total Q1 2026 revenue. The segment turned an operating income of $500,000 in Q1 2026, compared to an operating loss of $800,000 in the prior year period. 11% revenue growth was driven by 8% enrollment growth and a modest tuition increase.

Risks & headwinds

- Temporary headwinds to Military Plus registrations: Deployments of Navy, Air Force, and Marine service members for the Middle East conflict have caused a short-term enrollment slowdown, with the duration and magnitude of this impact tied to future developments in the conflict. - Regulatory and licensing hurdles for accelerated campus expansion into new adjacent states, which could limit the pace of new campus growth beyond existing states of operation. - Potential changes in federal/state education policy, government shutdowns, and timing impacts on federal education funding and receivables, which have already disrupted Q1 2026 Coast Guard registrations. - Uncertainty around upcoming cohort default rate (CDR) disclosures from the Department of Education, as student loan repayment requirements resume after an extended pause, which could create unexpected regulatory risk even though APEI currently expects to be well-positioned. - Search algorithm shifts driven by AI answer engines could impact top-of-funnel student acquisition for online programs, though APEI has not yet seen material impacts from this dynamic.

Analyst Q&A

• Q: What is the expected timeline for financial benefits from the approved institutional combination, and how is the new Orlando campus performing so far? /

  A: No significant financial improvements are expected in H2 2026, as APEI already uses a shared services structure across its institutions today. Revenue synergies from cross-pollinating program offerings across campuses are expected to start in 2027, and the combination could accelerate new campus investment if the current expansion model proves successful. Orlando hit its initial enrollment targets despite only opening halfway through Q1, and it introduced new program formats (nights/weekends practical nursing) to the market, with strong expected enrollment growth moving into Q3.

• Q: What is APEI's priority for deploying its strong excess cash balance for strategic initiatives? /

  A: First priority is investing in organic growth of existing businesses: incremental marketing to mitigate near-term Military Plus deployment headwinds, and investment to merge all institutions onto a single unified tech platform (with impacts mostly expected in 2027). The top capital priorities after that are new Health Plus campus expansion under the Trailblazer initiative and targeted tuck-in acquisitions, which are an active focus for the strategy team.

• Q: What criteria does APEI use to evaluate potential acquisition targets? /

  A: Primary criteria are acquisitions that accelerate entry into new contiguous states (Midwest and East Coast) where APEI does not currently hold operating licenses, and targets in markets with favorable supply-demand balance for healthcare nursing education. APEI will consider both single-campus and multiple-campus opportunities that fit these core geographic and market criteria, with no preference for deal size beyond matching these requirements.

• Q: What is the timing of the Middle East deployment impact on Military Plus enrollments, and what is the expected recovery timeline embedded in guidance? /

  A: The conflict started in late February, so there was minimal impact on the March Q1 start, but noticeable upticks in leave of absence requests for deployment for the April and May Q2 starts. Guidance expects larger deployment impacts in Q2 than Q1, with partial recovery starting in June 2026 and further recovery in Q3. Incremental $2.2 million marketing spend is redirected to the fast-growing veteran and military family segments to offset the active duty shortfall, which is reflected in the updated full year guidance.