American Public Education, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Outperformance: Exceeded second quarter 2025 financial guidance in revenue, net income, EPS, and adjusted EBITDA.
• Balance Sheet Improvements: Sold 2 corporate administrative buildings for ~$22 million, DOE removed $24.5M letter of credit restriction, redeemed preferred equity ~$43 million, saving $6M annually.
• Graduate School Sale: Completed sale of Graduate School, not a strategic fit for future growth.
• Enrollment Growth: Rasmussen +10% year-over-year, Hondros +18% year-over-year.
• Leadership Change: Appointed James Kenigsberg as Interim Chief Innovation and Technology Officer.
• Institution Consolidation: Received HLC and state approvals, ongoing discussions with DOE and HLC on timeline for combining institutions.
• Full Year Guidance: Maintained revenue guidance, increased adjusted EBITDA guidance to $81M-$88M.

Segment Performance

• APUS: Second quarter revenue was $81.7 million, a 6.1% increase year-over-year. Net course registrations rose 7.3% year-over-year. APUS EBITDA was $22.4 million with a margin of 27.4% (vs 25.3% prior year).
• Rasmussen: Second quarter revenue was $59.5 million, a 12.2% increase year-over-year. Online enrollment grew 12.2%, on-ground enrollment 3.2%, total enrollment 7.4% to ~14,600 students. Delivered positive EBITDA of $0.2 million (vs prior year loss of $4.7 million).
• Hondros: Second quarter revenue was $18.1 million, a 10.5% increase year-over-year. Total enrollment increased 13.5% to ~3,700 students. EBITDA was $0.1 million (vs prior year loss of $0.4 million).
• Graduate School: Revenue was $3.4 million (vs $6.4 million prior year). EBITDA loss was $2.5 million (vs prior year loss of $0.7 million).

Guidance

• Third Quarter 2025: APUS total net course registrations expected 97,000-99,000. Consolidated revenue expected $159M-$161M. Net loss expected $0.8M-$2.9M. Adjusted EBITDA expected $15M-$17M.
• Full Year 2025: Maintained revenue guidance $650M-$660M. Net income expected $18M-$24M. Adjusted EBITDA expected $81M-$88M. CapEx expected $18M-$22M. Free cash flow expected $59M-$70M.

Risks

• Government Shutdowns/Regulatory Changes: Potential impacts on revenues or timing of receivables.
• Department of Education Actions: Possible impacts on enrollments, revenues, or regulatory compliance.
• Market Demands: Ability to satisfy changing market demands.

Question and Answer

Q: Congratulations on solid ongoing execution and solid results. On the military business, any more color on potential enrollments and Big Beautiful Bill clarity?

A: Funding in the bill, military recruiting goals met early, $100M authorized through 2029. Uncertainty on distribution of funds.

Q: Rasmussen's margins down sequentially Q2 vs Q1 on flat revenues. Any more on operating leverage?

A: Sequential margin drop due to new course material vendor and salary increases. Operating leverage expected as enrollments grow.

Q: Rasmussen new programs, NCLEX scores?

A: Investor meeting in Nov to share program addition strategy. NCLEX scores pacing as expected, awaiting some results.

Q: Institution consolidation timeline, marketing streamline?

A: Timelines pending DOE confirmation. Streamlined marketing with single landing page, local market nursing brands retained.

Q: Big Beautiful Bill accountability standards impact?

A: Minimal impact, funding widens TAM, accountability standards mirror legacy metrics, no significant negative impact.