AMERICAN PUBLIC EDUCATION INC Q4 FY2024 earnings call

• Outperformance of guidance: APEI outperformed fourth quarter 2024 financial guidance, exceeding guidance for revenue, net income, and adjusted EBITDA. Also outperformed full year 2024 financial guidance with revenue of $624 million exceeding the top end of original guidance and adjusted EBITDA of $72.3 million exceeding the guidance range.
• 2025 simplification plan: In January, announced plan to combine three degree-granting institutions into a single consolidated institution. Intend to redeem preferred shares prior to end of second quarter. Closed some underperforming campuses, terminated expensive leases and contracts, and have two corporate buildings held for sale.
• Enrollment momentum: Rasmussen had 4% year-over-year enrollment increase in 4Q 2024 and 7% increase in 1Q 2025. Hondros had 19% enrollment growth in 4Q 2024 and 9.6% increase in 1Q 2025. APUS had 7% year-over-year increase in net course registrations in 4Q 2024.
• EBITDA performance: Rasmussen delivered positive EBITDA of $5.5 million in 4Q 2024 compared to $0.6 million in prior year. Hondros had EBITDA of $1.3 million in 4Q 2024 compared to $1.2 million in prior year. APUS had EBITDA of $28.4 million in 4Q 2024 with margin of 34.5%.

Nursing and Healthcare Institutions

• Rasmussen: In 4Q 2024, Rasmussen had a 4% year-over-year enrollment increase. It achieved adjusted EBITDA of $6.4 million in 4Q 2024 and $3.1 million for the second half of 2024. In 1Q 2025, enrollment increased 7% compared to 1Q 2024. Online enrollment in 1Q 2025 at Rasmussen increased 11.1% to approximately 8,000 students, and on-ground enrollment increased 3.2% to approximately 6,500 students, with aggregate enrollment up 7% year over year.
• Hondros: 4Q 2024 enrollment was very strong with 19% growth compared to 4Q 2023. 1Q 2025 enrollment increased 9.6% year over year to 3,600 students. Fourth quarter revenue was up 20% to $18.9 million, and total enrollment increased 19.3% to approximately 3,700 students.

APUS (online university)

• 4Q 2024 overall net course registrations increased 7% year over year. Revenue was almost 4% higher. EBITDA margin in 4Q was 34.5%, slightly down from 35% in 4Q 2023. Full year 2024 total net course registrations increased 3%. First quarter 2025 APUS total net course registrations are expected to be between 100,500 to 102,000 registrations, representing a 1.5% to 3% increase from the prior year.

• 2025 guidance: Initiating 2025 guidance with revenue of $650 million to $660 million and adjusted EBITDA of $75 million to $85 million.
• 2025 first quarter guidance: APUS total net course registrations expected to be between 100,500 to 102,000 registrations (1.5% - 3% increase from prior year). Consolidated revenue expected to be between $161 million and $163 million. Net income available to common shareholders expected to be between $1.7 million and $3.1 million, or between $0.09 and $0.17 per diluted share. Adjusted EBITDA expected to be between $13.5 million and $15.5 million.
• Full year 2025 guidance: Anticipated consolidated full year 2025 revenue between $650 million and $660 million. Full year adjusted EBITDA between $75 million and $85 million. Net income available to common shareholders between $19 million and $26 million. Anticipated 2025 capital expenditures between $18 million and $22 million, free cash flow between $53 million and $67 million.

• Risks related to potential impacts of government shutdowns or changing federal government policies and practices, including impacts on revenue or the timing of receivables. - Changing market demands and ability to satisfy such demands. - Potential impacts on future competition and demand, cost savings efforts.

Q: About the portfolio consolidation into one institution, any info on G&A savings and potential timing?

A: Anticipate revenue synergies (e.g., offering post-licensure curriculum to Hondros students, aligning start patterns for students) and cost synergies (e.g., streamlining services, aligning accreditation teams). Expect to close in fourth quarter of 2025. Primary short-term cost synergies include a few leadership positions at Hondros and aligning academic teams.

Q: Drivers of enrollment strength and marketing yield for Rasmussen's online growth?

A: Optimization of marketing spend, turning attention to organic lead generation with increased leads and conversion rates. Also, hyperlocal marketing for campus-based enrollments has had significant positive effect.

Q: Expectation of Rasmussen's contribution in 2025 EBITDA guidance and quarterly look?

A: Don't break out margin contributions by education unit presently, but revenue improvements at Rasmussen will have substantial flow through to bottom line for EBITDA and margin improvement in 2025.