Thank you for joining us. I'm Jeannie, your conference operator for today. I would like to welcome everyone to the First Quarter 2024 Earnings Conference Call for American Public Education, Inc. I will now hand it over to Brian Prenoveau from Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss first quarter 2024 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer; Rick Sunderland, Executive Vice President and Chief Financial Officer; and Steve Somers, Senior Vice President and Chief Strategy and Corporate Development Officer. Materials for the call today are available in the Events and Presentations section of APEI's website. Statements made during this conference call and any accompanying presentation regarding APEI and its subsidiaries are not historical facts; they may be forward-looking statements based on current expectations, assumptions, estimates, and projections. Forward-looking statements may sometimes be identified by words like anticipate, believe, seek, could, estimate, expect, can, may, plan, potentially, project, should, will, would, and similar or opposite words. Forward-looking statements include, without limitation, statements regarding expectations for registrations and enrollments, revenue, earnings, adjusted EBITDA, and other earnings guidance, repositioning Rasmussen University for growth, changing market demands and our ability to satisfy such demands, and other company initiatives, including respect to future competition, demand, and cost-saving efforts. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These include, among other risks, failure to comply with regulatory and accrediting agency requirements or to maintain institutional accreditation and any actions taken to prevent or correct such failure, dependence on the effectiveness of the company's ability to attract students who persist in institutional programs, changing market demands, declines in enrollments at the company's education units, enactment of legislation that adversely impacts the company or its education units, inability to effectively brand or market its education units or their programs, or expand into new markets, and inability to maintain strong relationships with the military. The loss or disruption of the ability to receive funds under tuition assistance programs for reduction, elimination, suspension, or disruption of tuition assistance. Adverse effects of changes to improve the student experience and enhance the ability to identify and enroll students who are likely to succeed, loss of eligibility to participate in Title IV programs or ability to process Title IV financial aid, economic and market conditions, challenges with acquisitions, matters related to indebtedness or for stock company's technology infrastructure, inability to recognize the anticipated benefits of the company's cost-saving efforts, and risks described in today's presentation, today's press release, APEI's Form 10-K for 2023, and other SEC filings. The company undertakes no obligation to update publicly any forward-looking statements for any reason unless required by law. This presentation contains references to non-GAAP financial information. A reconciliation between the non-GAAP financial measures we use and the most directly comparable GAAP measures is located in the appendix to today's presentation and in the earnings release. Management believes that the presentation of non-GAAP financial information provides useful supplemental information to investors regarding its results of operations and should only be considered in addition to and not as a substitute or superior to any measure of financial performance prepared in accordance with GAAP. Now I'd like to turn the call over to APEI's CEO, Angela Selden. Angie, please go ahead.

Thank you, Brian. Good afternoon, and thank you for joining American Public Education's First Quarter 2024 Earnings Call. With the release of our first quarter results, this is now the fifth consecutive quarter where we have exceeded our adjusted EBITDA guidance and expectations. By delivering results from the hard work of the Rasmussen turnaround, we have put Rasmussen back on a trajectory for growth and positive EBITDA. This has included a strong focus on improving student retention, preparing students for success on NCLEX exams, and enrolling a more balanced mix of campus-based nursing and health education programs, while reducing our concentration in the ADN program. At the same time, at both APUS and Hondros, we have delivered continued student enrollment growth and margin expansion. Overall, in this past year, by addressing the operational challenges at Rasmussen and rightsizing the cost structure across APEI, we have positioned APEI for long-term growth, driven by strong education units and an enterprise with strong financial standing. We saw a significant improvement in overall adjusted EBITDA, which totaled $17.1 million in the first quarter of 2024, representing a 143% increase at the top end of our guidance range. Adjusted EBITDA margin expanded by 600 basis points in 1Q '24 to 11% compared to 5% in 1Q '23. Collectively, margin improvements are being driven by a combination of optimized marketing, improved retention, and staffing realignments and reductions. With our strong first quarter outperformance, we are increasing our full adjusted EBITDA guidance, which Rick Sunderland, APEI's Chief Financial Officer, will detail in his comments shortly. With that context, I'd now like to spend some time sharing the progress of our education units, starting with our core online military and veteran segment, APUS. In 1Q '24, overall net course registrations increased 3% year-over-year to 99,000 registrations, the most in 8 years, reflecting the strong reputation upon which we continue to build and the compelling courses offered. Continued momentum with year-over-year growth was partially offset by lower non-military registrations. The overall increase in registrations in the quarter combined with the impact of tuition and fee increases in 2023 resulted in a 9% increase in revenue at APUS. This solid revenue performance, coupled with cost containment and lower marketing spend, drove very strong bottom-line results for APUS with EBITDA increasing 31% to $5 million in 1Q '24. EBITDA margin was 30% in the quarter compared with 25% in the prior year period. On a positive note, this week at its 28th annual commencement, APUS will celebrate its over 16,700 graduates. Turning to Rasmussen. I am very pleased with the progress we have made and continue to make with its stabilization and turnaround. First quarter enrollments, which we shared in our last earnings call, were 13,500, which was a 6% decrease from a year earlier. Today, we are sharing second quarter 2024 enrollment figures, which show 13,600 students, down just 2% from a year ago. This is now the fourth quarter in a row where total enrollment trends have continued to improve year-over-year. For the second quarter, Rasmussen online enrollments increased 4%, while campus-based nursing and health education enrollments declined by 9%. As has been the case for the last several quarters, the overall decline in enrollments has been driven predominantly by the Rasmussen campus-based ADN program, but those declines are closing with growth in our BSN and other campus-based health education programs, moving closer to our goal of having a much more balanced portfolio of nursing and campus-based health education offerings. Over time, the increase in BSN enrollments should also lead to higher average lifetime value per student because of the longer duration of this program. As soon as we move into positive enrollment territory for campus enrollments, the highly leveraged nature of the campus-based business should lead to improved profitability. In terms of student outcomes, we again produced strong NCLEX pass rates in the first quarter with 20 thresholds. Worth noting is that 2 of the 4 programs that did not meet the threshold had very low numbers of test-takers this quarter, and we believe they will move into passing territory as more students sit for the exam. While pass rates are only officially evaluated by state nursing boards annually, we track progress quarterly. We are pleased that this is the third quarter in a row where the vast majority of our programs are meeting the state standard. We continue to expect to achieve positive enrollment growth at some point in the second half of '24 and a return to positive EBITDA, resulting in stronger financial footing for the university exiting 2024 and into future years. Turning our attention to Hondros, as reported, 1Q '24 enrollment remains strong, showing a 22% increase when compared to 1Q '23. We also saw growth continue in 2Q '24, with enrollment increasing another 10% year-over-year to 3,300 students, which we view as particularly encouraging given the comparison to a very strong enrollment quarter in 2Q '23. Demand remained strong for its PN and ADN nursing program, with the new Detroit campus performing very well. Legacy campuses also operate with enrollment caps as a new program, despite exceptional NCLEX pass rates. Starts at Hondros remain robust, and we are very pleased with the growth that we are seeing. Also in 3Q, Hondros will be relocating 2 of its Ohio campus locations and expect some temporary but limited impact to enrollment in those locations. As for NCLEX pass rates, all programs at all Hondros campuses met the 1Q '24 state benchmarks. Overall, at APEI, our financial results continue to show significant improvement, particularly our return to adjusted EBITDA growth, which has exceeded our guidance of enrollments and continued improvement in EBITDA at Rasmussen, coupled with strong top and bottom-line performance at APUS and Hondros. We are now delivering positive growth in revenue, adjusted EBITDA, and margins across APEI. In summary, we are confident in our strong position to provide online and campus-based post-secondary education and career learning opportunities to large and growing addressable markets. The improvements we have implemented and the return of momentum we have delivered have reenergized leadership, faculty, and staff across the enterprise. We believe we are in a strong position to achieve long-term success, both operationally and financially, as always guided by our vision, mission, and values that reward our students, employees, and stakeholders. With that, let me turn the call over to APEI's CFO, Rick Sunderland.

Thank you, Angie. Total revenue in the first quarter was $154.4 million, up $4.7 million or 3.2% from the prior year period and exceeded our first quarter guidance. First quarter revenue growth was driven by increased revenue at APUS and Hondros, partially offset by revenue declines at Rasmussen and Graduate School. Total cost of expenses in the first quarter decreased 3.7% compared to the first quarter of 2023 and included a $2.9 million loss on leases at Rasmussen. This period-over-period reduction was primarily driven by lower selling and promotional costs in the first quarter compared to the prior year. For the quarter, advertising and marketing support costs decreased $6.6 million. Prior year selling and promotional costs included $2.4 million in marketing transition service fees related to the termination of the collegiate marketing contract at Rasmussen. Depreciation and amortization expenses decreased year-over-year due to the full amortization of Rasmussen's definite live intangible assets in 2023. These decreases were partially offset by higher general and administrative costs. In the current quarter, general and administrative costs included $1.9 million in information technology transition service costs added back to adjusted EBITDA. Excluding information technology transition service costs, general and administrative expenses increased less than 3% compared to the prior year period. First quarter diluted loss per common share was a loss of $0.06, compared to a loss of $0.38 in the prior year quarter and again exceeded first quarter guidance. For the quarter, adjusted EBITDA was $17.1 million compared to $7 million in the prior year period. The first quarter results exceeded guidance and represented an adjusted EBITDA margin of 11% compared to 4.7% in the prior year quarter, reflecting the revenue growth and lower operating expenses. We exceeded first quarter guidance primarily due to actual expenses being lower than forecasted, specifically: compensation and benefits costs lower by $2 million, advertising costs at $1 million lower than forecast, and $3 million of lower information technology and other general and administrative costs. At APUS, first-quarter revenue increased by 9% compared to the prior year to $80.7 million due to a nearly 3% increase in net course registrations and roughly 6% due to tuition and fee increases implemented in the second and third quarters of last year. For the quarter, net course registrations increased 2.8% despite lower advertising and marketing support costs compared to the prior year quarter. In total, EBITDA margin at APUS increased 5% to 30% for the quarter. The increase in margin is primarily due to increased revenue and lower advertising and marketing support costs. At Rasmussen, first-quarter revenue was $53.1 million, a decrease of 7.5% compared to the prior year due to lower average enrollment during the quarter, partially offset by tuition increases in the first quarter of 2023 and 2024. As Angie mentioned, the year-over-year enrollment decreases have narrowed for the past 4 quarters. We continue on our path to show positive enrollment trends in late 2024. We again saw improvement in Rasmussen's EBITDA loss for the quarter after adjusting for last year's marketing transition costs and this year's lease termination expenses. The first-quarter Rasmussen EBITDA loss was a loss of $2.6 million compared to an EBITDA loss in the prior year period of $4.5 million, an approximate 40% improvement year-over-year. The first-quarter EBITDA loss improvement was driven by lower advertising costs and marketing support costs as well as labor savings from the 2023 cost realignment. At Hondros, first-quarter revenue was $16.4 million, up 25% compared to the prior year period due to continued growth in enrollments and the 2023 tuition increase. For the quarter, Hondros total enrollment grew 22% to approximately 3,300 students, marking the second consecutive record-setting quarter for enrollments. The increased revenue combined with effective cost management delivered positive EBITDA of $300,000 for the first quarter compared to an EBITDA loss of $1 million in the prior year period. Revenue in graduate school, included in corporate and others, was $4.3 million compared to $5.2 million in the prior year period, primarily due to lower enrollments in the quarter and a slower start to the year, in part caused by delays in the approval of the U.S. federal budget. As of March 31, 2024, total cash, cash equivalents, and restricted cash stood at $153.2 million, an increase of $8.9 million from year-end 2023. For the first quarter of 2024, cash flow from operations was $20.7 million, an increase of $8 million or 63% compared to the prior year. CapEx for the quarter was $6.2 million. Free cash flow, defined as adjusted EBITDA less CapEx, was $10.8 million compared to $3.8 million a year ago. Principal and APEI's term loan as of March 31 was unchanged from year-end at $99 million, with unrestricted cash of $125 million. APEI continues to be net cash positive. Additionally, there were no borrowings under APEI's $20 million revolving credit facility, which remains fully available. During the quarter, we repurchased 251,000 shares of common stock for an aggregate purchase price of $2.8 million. Turning now to the second quarter 2024 outlook, APEI's total net course registrations are expected to be between 89,500 to 92,200 registrations, an increase of between 1.5% and 4.5% over the prior year period. At Rasmussen and Hondros, second-quarter student enrollments are actual because of the quarterly starts at these schools. At Rasmussen, second-quarter total on-ground health care enrollment decreased 9% to approximately 6,200 students, while total online student enrollment increased 4% year-over-year to approximately 7,400 students for an aggregate enrollment of 13,600 students, which is a 2% decrease when compared to the second quarter of 2023. At Hondros, second-quarter total student enrollment increased 10% year-over-year to approximately 3,300 students, the highest enrollment ever at Hondros. In the second quarter of 2024, consolidated revenue is expected to be between $153 million to $155 million. The company expects a net loss to common shareholders to be between a loss of $2 million and income of $800,000 or between a loss of $0.11 and positive $0.05 per diluted share. Adjusted EBITDA is expected to be between $8 million and $12 million for the second quarter of 2024. For the full year 2024, as Angie shared, we anticipate consolidated full year 2024 revenue in a range of $620 million to $630 million. We are also increasing our adjusted EBITDA guidance and now expect it to range between $60 million to $70 million for the full year 2024. Our CapEx estimate of between $17 million and $20 million for the year is unchanged. With that, operator, we would like to open the line for questions.

Thank you. The floor is now open for questions. Your first question comes from Jasper Bibb with Truist Securities.

With the goal to get Rasmussen back to total enrollment growth in the back half of the year, how should we think about what that would mean for segment EBITDA margins there if you're successful?

As we've said, the fixed cost nature of the campus-based business would have high accretion with increases in those enrollments, right? And I think we've previously said we expect Rasmussen to get to breakeven EBITDA by the end of the year. And so you see reaching breakeven increasing enrollment should result and will result in breakeven or positive EBITDA.

And then it seems like a good pickup in revenue per student at APUS this quarter. Can you just outline the drivers of that, whether it was pricing increases, mix and any expectations on revenue pursuing over the balance of the year?

It's both mix and the modest tuition increases, Jasper. There is also an impact on if you just do a straight calculation of revenue per student of the timing of the start at APUS. Monthly starts on the first Monday of each month mean that if that start occurs earlier in the month, you'll see a little bit higher revenue per student. If, however, that start is pushed off to the 7th of the month, then the calculation adjusts. So, it's a combination of mix, price increases, and just the timing of those monthly starts.

I wanted to dig a bit more into the Florida Rasmussen programs that were put on probation in March. Could you outline for us, I guess, first of all, if that creates any restrictions on your ability to enroll new students at those campuses and just what you're doing in response to that?

You know that we've been paying careful attention over the last 1.5 years to our quarterly NCLEX pass rates because we want to show quarter-over-quarter improvement. What's interesting about those 2 campuses and frankly, is true of all of our campuses in Florida is that if you were to exclude Q1 of '23 from the calculation for all of 2023, so during 2Q through 4Q, each of our Florida campuses would have significantly passed. And while modeling, we recognize that that's not how the state does the calculation. The reason why I'm pointing this out is that we saw a significant number of lagging test-takers taking the exam in 1Q '23 because there were concerns about what the next-gen NCLEX exam would bring. Those folks hadn't been educated under a next-gen curriculum. Therefore, we saw a significant number of test-takers beyond the typical time frame in Q1. We do not see the results of that continuing in Q2 through Q4 '23 nor in Q1 of '24. To further clarify, Fort Myers actually missed the Florida benchmarks for the year by less than 8 points, and in particular, Ocala missed the benchmark by 0.3%. So, we do not have any limits on our ability to enroll students in those programs, and we are very optimistic about the continued improvements that we expect in our full year 2024 and quit pass rates in Florida.

And your next question comes from Alex Paris with Barrington.

Congratulations on the beat and raise. I thought maybe I would dig a little bit into critical investments planned for 2024. You've sort of telegraphed that this would be the case. You have a higher CapEx expectation for the full year. I'm just wondering if you can review for us what are the relative investments per institution: Rasmussen, APUS, Hondros, and how are they coming along? Are they front-end loaded or back-end loaded or evenly spread?

Let’s start with Hondros because there are some important things happening there. As I mentioned in my comments, we have 2 campus moves happening at Hondros beginning in the third quarter of '24. Those are critical. When we bought Hondros over 10 years ago, along with the purchase came 10-year leases with some premium lease payments to the previous owner of Hondros. Those leases are expiring, and we are finding ourselves presented with a great opportunity to locate to more favorable locations at lower lease costs. While we may see some very short-term overlap in expenditure, or a modest disruption in enrollment as a result of the move, we've already seen from moves of other campuses of Hondros really meaningful improvement. This is most notable in 2024, where we see meaningful improvement in enrollment and margin expansion for that campus. The second thing that we're investing in at Hondros is the MA program. We've talked about this in prior quarters, and that program is launching in Ohio in Q3, and we look forward to sharing more results about that program as we have this call upcoming in the next quarter. Turning our attention to APUS, there are investments that we had signaled in the prior quarter that we will continue to invest in throughout the rest of 2024 around modernizing the curriculum. There is a focus on refreshing the content in some of our core programs while also incorporating a more digitally forward content and focus into the curriculum at APUS. So we're very excited about how that will help us attract different student segments into APUS in future quarters. Those are really the primary investment areas for the time being, Rick, unless I've missed anything that you would want to share.

Yes, I would just say in terms of timing, Alex, it's more weighted to the first half than the second half. A lot of the CapEx is in the campus investments as Angie just described, and with the moves being completed early in the third quarter, we're going to see a disproportionate level of investment in the first half. The other large investment is in information technology; we've talked in the past, and you can see in the queue about the various moves that are being made related to IT infrastructure. We're going to be insourcing collegiate, and then various parts of the IT operations are being outsourced. So there is significant investment that's going on related to the technology infrastructure associated with the various phases of that project. More heavily weighted to the first half than the second half.

And another question is: Is CapEx sort of peaking this year? Or do you expect a similar level going forward?

Well, certainly, with the campuses, we're not going to be moving campuses every year. So, you're going to see probably a moderation because of that. And then on the technology side, probably similarly, you can see, and I think you commented how it's up year-over-year. Last year, '23 was probably a little bit lower than normal simply because of the financial performance of both Rasmussen and Hondros. So we probably pulled back on some of our capital investments. We're catching up this year in some ways; we're investing in new campuses, which is really important. So, I would say you'd see some moderation off of this year's number as you go forward.

The one additional thing I would share is as we look into the end of '24 and into '25, upon acceptance of the 2023 financial results for APEI, Rasmussen will no longer be subject to growth restrictions. Consequently, we will have the opportunity to look at opening campuses and investing in programs at Rasmussen, and so that could be a place where we decide to invest into future growth at Rasmussen.

And then I guess just the last little bit of the kits and dogs. FSA, obviously, the delays there, the big mess that's going on. You don't have the traditional 18 to 23-year-old; you don't have the traditional semesters usually. I mean there might be exceptions there. What do you think your exposure is to FSA? Except the delay.

To date, it really hasn't been much of a headwind, particularly in APUS with their monthly starts. There's probably a minimal impact at Hondros and Rasmussen, which have, to your point, a more traditional kind of quarterly cadence. But really, at this point, Alex, it hasn't been a significant matter at any of those schools.

Your next question comes from the line of Raj Sharma with B. Riley.

Again, congratulations on really good results in the beat and raise. I wanted to touch upon Rasmussen again; there were certain changes that were put in place. There was new management that was integrated into the operations and enrollments were an issue. Would you characterize Rasmussen as under control in terms of enrollments? And then could you give some color on the cost control at Rasmussen?

So yes, the management team has now been in place for a year. First and foremost, there is clarity around the campus program combinations for all of our campus-based programs and the marketing investments that we're making to grow and reweight the mix so that we are growing both nursing and non-nursing on the campuses. This has been a key focus for that management team, and the results are certainly paying off, as you can see in the continued improvement in the trends that we've seen on campus-based enrollments. Certainly, online has seen significant improvement, and we've got positive online enrollment for this quarter, and that trend has continued for the last several quarters. The marketing is now aligned with our growth areas, and that has been a significant amount of work in partnership between the Rasmussen management team and the APEI marketing team. So both are pleased with the progress we've made. As it relates to the cost structure, there was a substantial amount of rightsizing of costs both at Rasmussen in the third and fourth quarter of last year, as well as at APEI related to some services, particularly in IT and in marketing that were being provided to Rasmussen. One of the most notable is the relationship with the third-party outsourcer collegiate. We are in the final stages of migrating that IT infrastructure from the third-party to APEI and its providers. This will lead to a significant margin expansion for Rasmussen beginning in the fourth quarter of 2024. And certainly, we'll see the benefit of that for the entire year of 2025. Richard, you've got something that you want to share?

Yes. Just to add a few things, total expenses are down $7.5 million; almost $6 million of that is at Rasmussen. You have the $2.4 million costs related to the previous year that clearly didn't repeat. Additionally, marketing costs, advertising and marketing support, are down almost another $2 million. So we have to thank the marketing team for optimizing while delivering on what we consider favorable enrollment trends at Rasmussen. To Angie's point, across the board, there is good cost control by the entire management team. So we applaud that, particularly in the area of labor, probably leveraging off some of the rightsizing that was done last year, but also continuing that cost focus. One of my favorite terms is trim while investing. They are actually investing in areas like admission staff, which is important to drive the enrollment trend. So it's not all about reducing; it's also about investing where it makes sense to deliver the results that we expect to see later this year and beyond.

I'll just do one shout out to the enrollment team who has been focused on retention. There has been a significant improvement, in particular, in first-term and second-term retention. The partnership between those two teams has led to cohesive work. If you don't have to source a new student to backfill for that revenue, you keep the students you have and allow them to persist and graduate; it’s a win-win for everyone. Thus, there has been meaningful improvement in retention at Rasmussen.

And then on the enrollment side, on Rasmussen, I'm seeing really improving trends. Would you say we are close to a bottom?

As we have signaled now for a few quarters, Raj, we do believe that we will, in the back half of '24, see enrollment trends turn positive.

And then on the AR collection side, are we all kind of current with respect to the Army?

Raj, there remains an amount that is held up in what I'll call the GoArmy and transition. It’s not a significant amount of money. We continue to work directly with the relevant parties with the Army to clean that up. So there is an amount, small compared to the total, that is beyond that 60 days, 90 days from start, which is how we measure our effectiveness from a collection side. The system is functioning as designed at this point, billing monthly, collecting monthly. It’s really just the tail dollars associated with that.

And those amounts are from '21 and '22. They're not amounts getting generated now, right?

No, we're collecting on the current billings, which is reflective of the system working, but there is still some cleanup to do, and we're diligently working to clear those up with the Army.

That's great color. And just lastly, on grad school, I know it's a much smaller business. Any sort of color on the margins were slightly worse year-on-year due to a reduction in revenues. Any sort of plans or just some color?

So grad school, as we reported, I think, in our last earnings call, had been affected by the government's continuing resolution or the fact that the budget has not been passed, and many of the agencies that use their government funding for training dollars had to pause their training. Now that we're out from underneath that, there is a renewed focus from that team on both individual registrations by federal workers as well as group training that is now getting scheduled. There is a significant push to close that gap between now and the end of the year. The entire graduate school and APEI team are leaning in to do what we can to close that gap in the revenue for the remainder of the year.

Again, congratulations on raising the guidance and the beat and raise.

There are no further questions at this time. Thank you, everyone, for your participation. This concludes today's conference call. You may now disconnect.