American Public Education Inc Q1 FY2026 Earnings Call

Thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI First Quarter 2026 Earnings Call. Operator instructions were provided. And I would now like to turn the call over to Shannon Devine, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss first quarter 2026 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer; Edward Codispoti, Executive Vice President and Chief Financial Officer; and Gary Janson, Chief Strategy and Growth Officer. Materials for today's call, which is being webcast and open to the public, are available in the Events and Presentations section of the APEI website. Statements made during this call and in the accompanying presentation regarding APEI and its subsidiaries that are not historical facts may be forward-looking statements that are based on management's current expectations, assumptions, estimates and projections. 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, including risks related to potential impacts from government shutdowns or changing federal or state government policies, laws, practices and actions, including impacts on revenue or the timing of receivables and other factors identified in our Form 10-K and Form 10-Q under the heading Risk Factors and other SEC filings. Forward-looking statements may sometimes be identified by words like believe, estimate, expect, may, plan, potentially, project, target, outlook, past divisions, on track, on pace, should, will, would and similar words. Forward-looking statements include, without limitation, statements regarding expectations for registration and enrollments, revenue, earnings, adjusted EBITDA, adjusted EBITDA margin and other earnings guidance, our foundation for growth, strategic investments, capital allocation and M&A opportunities, operational milestones and timelines, the planned combination of our institutions, including the benefit and timeline thereof, governmental and regulatory actions, their impact and our response to those actions, changing market demands and our ability to satisfy such demands and other company initiatives. As Angie will discuss, beginning with the first quarter of 2026, we are reporting under two new segment structure, Military Plus and Health Plus, following the merger of the legal entities that owned our institutions on March 2, 2026. Our Form 10-Q for the first quarter reflects this change and all prior period comparative figures have been recast to reflect the two-segment structure rather than the historical three-segment structure of APEI U.S., Rasmussen University and Hondros College of Nursing. The call and the presentation contain reference to non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin. A reconciliation between each non-GAAP financial measure we use and the most directly comparable GAAP measure 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; it should only be considered in addition to and not a substitute for or superior to any measure of financial performance prepared in accordance with GAAP. I'd now like to turn the call over to APEI's President and CEO, Angela Selden. Angie, please go ahead.

Thank you, Shannon. Good afternoon, and thank you very much to each of you for joining us today. I'm very pleased to share American Public Education's First Quarter 2026 results. Total revenue grew 6.2% year-over-year and was at the top end of our guidance range. Notably, when we exclude the graduate schools that we sold in mid-2025 from the prior year period, APEI's revenue would have grown 8.7%, which we believe is more indicative of the underlying strength of our business. Beyond revenue, we beat guidance on adjusted EBITDA, which grew to $29.2 million, a 37.5% improvement over 2025. The prior year period does include $2.2 million of graduate school losses and the 2026 period includes a one-time favorable impact from the tax treatment of our stock appreciation. Ed Codispoti, APEI's CFO, will discuss the details of these matters shortly. We also beat guidance on net income per diluted common share, which was $0.94, or 129% above the prior year period. Given the strength of our first quarter results and our visibility into the balance of the year, today, we are leaving our full year 2026 guidance on both revenue and adjusted EBITDA. Importantly, we are also raising our full year EPS guidance which at the midpoint represents an 85% increase over 2025, which is in large part a reflection of the 2025 improvements we made to the balance sheet. With those headlines, I want to provide some additional details on our two newly constituted reportable segments and an update on our institutional combination. First, as we discussed on the last earnings call on March 2, 2026, we combined the legal entities that owned our three institutions into one. And beginning with this quarter, we report under two newly constituted reportable segments: Military Plus, no longer called APU Global, and Health Plus, no longer called RU Health. Prior period results have been recast to reflect these changes. So let's start with Health Plus. Our Health Plus institutions continue to perform very well. Health Plus revenue grew 11%, consistent with our four-year plan. This was driven by both 8% enrollment growth which we shared on the previous earnings call and a modest price increase, demonstrating the durability of demand for pre-licensure nursing education. Our campus expansion plans continue with our new Rasmussen Orlando campus now enrolling students and building momentum in its first full quarter of operations. Additionally, we expect to complete the relocation of a Hondros College of Nursing campus in the back half of 2026 to a more attractive location and our Hondros College of Nursing new Detroit campus to be ready to enroll students in the first quarter of 2027. As we turn our attention to Q2 2026, Health Plus experienced enrollment growth of 7.1%, led by campuses and online at high single digits. Turning to Military Plus, Military Plus delivered another quarter of revenue growth and exceptional profitability. The 4% registration growth met guidance, highlighted by the continued high-teens registration growth for both military families and veterans. The segment operated at an adjusted EBITDA margin of approximately 36% in the first quarter, reflecting a substantial increase above our long-range targets. A portion of this outperformance was due to shifts in marketing spend between Q1 and Q2, which is also reflected in our Q2 guidance. Growth in our active duty channel in the first quarter was mid-single digits. As we described on our last earnings call, Q1 Coast Guard, the smallest enrollment contributor of the Armed Services branches we educate, was affected by the then ongoing government shutdown and temporary suspension of Department of Homeland Security funding. We had estimated that about 1% to 2% of total registrations were postponed. The good news is that DHS funding became available as of April 30. So we expect partial recovery in Q2, and we expect recovery of Coast Guard registrations in Q3 and beyond. I was very proud to have participated in American Military University and American Public University's 30th annual commencement on Saturday, May 9. Over 17,700 students, including 23 doctoral students, in our security and global study program received diplomas. The oldest graduate is 78 years old, and the youngest is 15. Over 92% of our graduates are active duty military, veterans, military spouses, or family members. They represented all 50 states, 30 countries and six territories. Congratulations to all AMU and APU graduates. As we turn our attention to Military Plus registration growth in Q2, we are experiencing growth in Army registrations, our largest branch. This momentum is being offset by a slowdown of registrations in Navy, Air Force and Marines which we are attributing to the nature of this war in the Middle East, which has deployed and put into combat Navy, Air Force and Marine service members first. This has been signaled by our internal processes where students have a mechanism to request leave of absence accommodations and the ability to select deployment as a reason. We have seen an uptick in these requests for those three service branches. Offsetting this interruption, our Veterans & Family segments continue to demonstrate high-teens registration growth in Q2 as well. So while Navy, Air Force and Marine registrations are a headwind in the short term, we remain confident in our full year guidance. Historically, when our active duty students are deployed or preparing to deploy their educational progression can be delayed, but for the most part, they return. Additionally, with the performance of Army enrollments, we view this as a timing dynamic rather than a structural demand issue. Additionally, the Q2 adjusted EBITDA percentage reflects investments in incremental advertising of $2.2 million versus 2025 as we focus on mitigating the near-term impact of these deployments. Now let me turn to the positive progress on our institutional combination. On April 28, we received approval from our accreditor, the Higher Learning Commission, to consolidate our APS, Rasmussen and Hondros College of Nursing programs, locations and operations into a single accredited institution, operating as the American Public University System, which we will refer to as the system in future communications. Now only one step remains with the Department of Education, which is the department's approval of the combination and the completion of the APEI demerger. We are fully engaged with the department and their process steps and continue to target an effective date for consummation of the combination at the beginning of the third quarter of 2026. Finally, as we turn our attention to full year 2026 performance, given the strength of our first quarter results and our visibility into the balance of the year, today, we are raising our full year 2026 guidance on revenue, adjusted EBITDA and diluted EPS. I want to reinforce a message I delivered at the end of our last earnings call. The foundation is built, the business is simplified, the balance sheet is strong and quarter after quarter, we are doing what we said we would do. Q1 '26 is the first quarter of a four-year execution plan. We remain very confident about the significant runway ahead of us. We are just getting started. With that, I'll turn the call over to Ed to discuss our financial results and our updated 2026 guidance in detail.

Thank you, Angie. I'll begin with our first quarter results, then review our balance sheet, share an update on our share repurchase program and conclude with our updated outlook for the second quarter and full year 2026. Total revenue in the first quarter was $174.7 million compared to $164.6 million in the prior year period, an increase of $10.2 million or 6.2%. First quarter revenue came in at the high end of our prior guidance range. Excluding $3.5 million of graduate school USA revenue in the prior year period, revenue would have grown 8.7% year-over-year. We believe this comparable growth rate is a cleaner read on underlying top line momentum. Now let's break down revenue by segment under our new reportable structure. At Military Plus, first quarter revenue was $89.4 million compared to $83.9 million in the prior year period, representing 6.5% growth. The Military Plus segment income from operations was $30.7 million compared with $24.1 million in the first quarter of 2025, an increase of 27%. This segment delivered an adjusted EBITDA margin of approximately 36% in the quarter, reflecting the cost discipline work we completed during 2025. Net course registrations at Military Plus for the quarter were approximately 106,600 compared to 102,500 in the first quarter of 2025. At Health Plus, first quarter revenue was $85.4 million compared to $76.9 million on a recast basis in the prior year period, representing 11% growth. This segment delivered income from operations of $0.5 million compared to a loss of $0.8 million in the prior year period, reflecting continued enrollment momentum, disciplined cost management and early benefits from our fill-the-back-row capacity utilization initiative. The 11% revenue growth includes the benefit of a modest tuition increase and continued enrollment momentum. Turning to profitability, first quarter net income available to common stockholders was $17.7 million or $0.94 per diluted share, compared to $7.5 million or $0.41 per diluted share in the prior year period. This represents a 137.6% increase in net income available to common stockholders and a 129.3% increase in diluted EPS. In addition to expanding operational margins, our below-the-line results were favorably impacted by an 8% effective tax rate during the quarter driven primarily by higher-than-expected tax deductions as a result of the increase in our stock price. We expect the income tax rate to normalize in future quarters this year. First quarter adjusted EBITDA was $29.2 million, up $8.0 million or 37.5% compared to $21.2 million in the prior year period. Adjusted EBITDA margin was 16.7% compared to 12.9% in the first quarter of 2025, representing 381 basis points of margin expansion year-over-year. This reflects the operating leverage that is beginning to show up in our results. Please keep in mind that the prior year period included a Graduate School USA loss of approximately $2.2 million in adjusted EBITDA that did not recur in the current period. Turning to our balance sheet, we ended the first quarter in a very strong balance sheet position. As of March 31, 2026, our cash, cash equivalents and restricted cash totaled $221 million compared to $176.5 million at December 31, 2025, an increase of $44.5 million or 25% in a single quarter. Total debt under our credit agreement was $90 million compared to $96.4 million at December 31, 2025. We had excess cash over debt of $131 million, up from $80.1 million at year-end 2025. As a reminder, in early March, we completed a refinancing of our debt that reduced our borrowing rate by approximately 375 basis points and lowered principal from $96.4 million to $90 million. In connection with that refinancing, we recognized a $1.7 million non-cash write-off of deferred financing costs in the first quarter, consistent with what we previously communicated. For modeling purposes, interest income in 2026 is expected to approximate interest expense given our strong cash balances and improved borrowing rate. Also in March, our Board authorized a $50 million share repurchase program. During the first quarter, we repurchased approximately 17,840 shares of common stock for a total consideration of approximately $1 million. Consistent with the framework we described last quarter, the share repurchase program is being executed primarily to offset dilution from share-based compensation with flexibility to repurchase opportunistically subject to market conditions and our disciplined approach to capital allocation. Our strong balance sheet and cash generation continue to provide us with significant financial flexibility for organic growth investments, for opportunistic capital returns and for the tuck-in M&A opportunities that are part of our four-year strategy. I'll now discuss our updated guidance. Based on our first quarter results and our visibility into the second quarter, we are raising our full year 2026 outlook on both revenue and adjusted EBITDA, and we are initiating second quarter 2026 guidance. Our guidance for the second quarter of 2026 is as follows: revenue of $170 million to $172 million, net income available to common stockholders of $6.5 million to $7.5 million, adjusted EBITDA of $16.5 million to $18 million and diluted earnings per share of $0.34 to $0.39 per share. For the full year 2026, our updated guidance is as follows: revenue of $686 million to $696 million compared with our prior range of $685 million to $695 million; net income available to common stockholders of $44.9 million to $51.6 million compared with our prior range of $41.3 million to $47.6 million; adjusted EBITDA of $93 million to $102 million compared with our prior range of $91.5 million to $100.5 million; diluted EPS of $2.33 to $2.68 per share compared with our prior range of $2.15 to $2.47 per share; and CapEx of $28 million to $32 million, unchanged. Our updated guidance reflects our confidence in the trajectory of the business, continued enrollment momentum at Health Plus, expanded margins across both segments and notable progress on each element of the strategic framework we outlined at Investor Day. In summary, the first quarter of 2026 was a very strong quarter for APEI. We exceeded our guidance, raised our outlook for the balance of the year, meaningfully strengthened the balance sheet and began returning capital to shareholders, all while continuing to execute on the long-term strategy we laid out at Investor Day. With that, I'll turn it back to Angie for closing remarks.

Thank you, Ed. In closing, the first quarter was a very strong start to 2026 and early proof that the simplification and strengthening work we completed in 2025 is translating into top line revenue growth, margin expansion and EPS growth. Our Health Plus segment continued to demonstrate consistent enrollment and revenue growth, expanding margins and durability of demand for nursing and health care education. Our Military Plus segment continues to deliver strong margins and growth even as we work through temporary active-duty headwinds that we believe are event-related rather than structural. At our November 2025 Investor Day, we laid out a multiyear framework with nine value-creation initiatives, five at Military Plus and four at Health Plus, targeting organic revenue of $890 million to $925 million by 2029, representing an 8% to 9% revenue CAGR with adjusted EBITDA margins of 20% to 21% with strategic investment in new campuses and potential tuck-in acquisitions. We see a potential path to $1 billion in revenue by 2029. That framework is intact. Our Trailblazer new campus opening initiatives are on schedule. Our balance sheet is stronger than it has ever been, and we are only one quarter into a four-year plan. There is meaningful runway ahead of us, and we are as optimistic today as we have ever been about APEI's long-term potential. Our organization is purpose built to deliver affordable and accessible educational opportunities in fields which are in high demand and resilient to disruption. Nursing education prioritizes in-person bedside care, and our military service members continue to be critical to U.S. defense strategies. We continue to believe that our education supports careers that require human judgment and are AI-resilient. Our platform and sector tailwinds position APEI to accelerate growth and bring more educational opportunities to a greater audience. Before we move to questions, I want to thank our investors and analysts for the dialogue and engagement we've had over the past quarter. I also want to thank our entire APEI team for their commitment to continued student engagement, persistence and success. With that, I would now like to hand the call back to the operator to begin our question-and-answer session.

Operator instructions were provided. And our first question comes from the line of Tom White with D.A. Davidson.

Two, if I could. I guess on the planned institutional combination, nice to see the HLC finally sign off on that. Can you kind of update us on how we should expect the benefits of that to work their way through your financial model over the coming quarters? Is it sort of a situation where maybe we see it in operating expense efficiencies first as you can maybe centralize certain functions and then maybe followed by revenue synergies? Maybe just sort of an update on the model impact? And then just any early comments on the Orlando campus for Rasmussen. I realize it's very early still, but just curious how it's tracking versus, say, other campus expansions that you guys have done over the years at this point?

Great. Thanks very much, Tom, for the questions. First, on the combination. In the back half of 2026, we don't expect significant financial improvements. And that's largely because we currently already operate in a shared services structure where we've got marketing, IT, legal, HR, finance, all shared and providing services to each of the education units today. Our main enthusiasm for the combination is both our revenue synergies which we expect to start seeing in 2027 by bringing expanded program offerings to Hondros's campuses and also cross-pollinating more Rasmussen programs to their existing campuses. So we also anticipate that as the combination moves forward, we have the opportunity to accelerate investments in campus openings once we see that we are proving out the model of investment and return on those campuses. So for the Orlando campus progress, I'm going to turn it over to Gary so he can give you a quick update on that.

Yes. So I think we're pretty happy with how Orlando opened. I would say that we were a little late in the game, so we only got about half of a quarter of enrollment yet I think we hit our start targets for that campus. And I think Q2 will be a pretty good indication of what the ramp rate will be. But so far, so good, and we're on track. One thing to note, that campus introduced practical nursing to the market in Orlando, which we hadn't offered before, and offered it in a weekend mode, which we also had not offered before. So it's great to see it up and running, and I think we'll see good progress in the enrollments in our third quarter.

Maybe just one quick follow-up, if I could. Just Angie, I think you used the word sort of accelerated openings. I mean, if Orlando goes well, and I think you guys have talked about kind of two new campuses a year in the plan. But is it safe to assume that you guys could kind of accelerate that pace, maybe not this year, but maybe next year depending on how the rest of this year goes?

We really are going to pay careful attention to what we call our Trailblazer initiative, which is the campus openings. We see that the main obstacle, Tom, that might prevent us from going faster is whether we are expanding outside of the states where we already operate. Inside the states where we operate, we typically have already overcome the obstacles from a regulatory perspective as we start to branch out to adjacent states, there is a journey state by state on that regulatory process. But once we get our toehold in a new state, the expansion then accelerates again. So we are very confident we are on track right now, and we do hope that the early results will allow us to accelerate.

And our next question comes from the line of Griffin Boss with B. Riley Securities.

Just really one primary one for me, would like to expand upon what was just talked about. And I do want to call out the $63 million of cash flow from operations in the quarter was stellar. So that's great to see. And kind of on that front, can you just maybe provide a little bit more color on your thought process around future strategic initiatives and investments? I mean you talked about, obviously, the campus relocations and you just talked about the Trailblazer initiative. Just curious kind of where you're primarily focused on deploying that cash and using your strong balance sheet? Is it going to be tuck-in acquisitions? Is it going to be more so focused on further campus expansion initiatives? Any color would be helpful.

Yes. Great question, Griffin. Thank you. So first, we are making sure that we are investing into growth in each one of our currently owned businesses. So you heard us investing more in marketing inside of APUS or the Military Plus division; that's somewhat to offset the near-term headwind from the war in the Middle East. Beyond that, we are absolutely investing in our tech platform. One of the things we have underway is the combination of our nursing schools. Consequently, we're moving onto a single tech platform. We're going to talk a little bit more about that in next quarter's call and what we're doing to innovate around that. So we're excited about that initiative. It does have some largely 2027 impact, but perhaps late '26 as well. And then our main focuses are new campuses and tuck-in acquisitions. So we're actively working on that. It's one of Gary's top priorities. It is a good time to be considering those possibilities, and we look forward to sharing any updates we have in future conversations.

And our next question comes from the line of Stephen Sheldon with William Blair.

Congrats to the team on the results. First, here on the updated 2026 guidance. I'm roughly estimating that it implies about 3% top line growth in the back half of the year if we adjust for the estimated government shutdown drag in late 2025. Seems like that'd be more like 8% in the first half, excluding Graduate School USA. So is that mostly reflecting the slowdown in certain military buckets you mentioned, the Navy, Air Force and Marine? And anything else to call out there beyond normal conservatism?

Stephen, thanks very much for the question. Are you specifically looking at the Military Plus division? Are you talking about overall company revenue guidance?

Total company revenue guidance.

Gary, do you want to take that?

Yes. I mean, I'll have to look at the details. So I don't think we're looking at 3%. I don't think we've given the second half details of each quarter in the second half. But don't forget, we again had the shutdown in the prior year, so are you seeing excluding normalizing for the shutdown in the prior year? I think it should be a little bit higher than that. I would say our current revenue guidance right now is focused on the first half and the second half. We're being a little bit more conservative about the second half of what it should be. And you're right to say that the Military Plus segment is not showing what I'll call the 7% growth that we were seeing previously because we're trying to meter the impact of the deployments and see how that plays out. But our guidance does imply continued growth within the Health Plus division, which we're seeing progressing at the rates we were talking about in the first half. So we're still moderating in the second half and then seeing what the impact is of the deployments and then also trying to understand what the year-over-year comp would be absent the shutdown from last year.

Okay. Got it. Yes, I can dig in more on that offline. Following up, this is probably more from an industry perspective. But I guess, have you noticed any changes in the type of applicants that are pursuing nursing pathways in the health side, especially on pre-licensure nursing? The reason I'm asking is there's a lot of increasing uncertainty in other fields around how AI may negatively impact employment levels down the road. That doesn't seem to be much of a perceived risk in health care, including nursing, which—and there's a lot of favorable secular trends there—that could make it a very attractive pathway to employment. So just curious if you're seeing any changes in the profile of applicants given those dynamics?

We continue to see enthusiasm for the nursing programs. As you know, because we offer three ways to become a nurse—an LPN, a two-year degree RN or the bachelor's degree with the 3.5-year program—it gives many different types of students with different levels of preparedness the opportunity to become a nurse. And so we haven't seen a slowdown. We've seen a lot of continued interest. As I mentioned, our nursing enrollments are growing at high single digits. So we're very happy with the continued progress we're seeing in our nursing programs.

Our next question comes from the line of Luke Horton with Northland Securities.

Congrats on the quarter. Just wanted to circle back on the strategic investments. Just wondering if you could kind of outline sort of criteria you would be looking for a potential acquisition, whether that would be any smaller single campuses or would you wait for a larger kind of needle-mover acquisition? Just any sort of criteria that you guys are evaluating there?

So our primary criteria is going into states which we're not currently operating. We're trying to stay within the Midwest and the East Coast for right now. So we're looking at states where we currently don't have a license, states that are generally contiguous to where we're operating. We're looking at locations where we believe that there is a good supply-demand imbalance in that state. And if we can accelerate or enter into that market by making acquisitions. So those are the primary criteria. If we have a single campus, that's certainly something we'll look at. If it has multiple campuses, and we can get lucky enough to hit several of those opportunities in one sales group, we would certainly be interested in that as well. But we're not ruling out anything that fits within the larger criteria: a state that we're interested in and a supply-demand imbalance in health care are the two primary criteria.

Okay. Great. That makes sense. And then second one just on Military Plus with the deployments across Navy, Air Force, Marines, I guess, historically, have you guys tracked what sort of percentage of students that get deployed actually return and reenroll? And also, within your guidance, what are you assuming for either a rebound or timing for those enrollments?

Luke, thanks for the question. We don't know that we have tracked in the past the exact return rate of those who flagged themselves as asking for an accommodation for deployment, but we will try and run that down and see if we can get more detail on that. This is a different circumstance. Typically, wars begin with Army moving first, deploying and setting up base camp and then basically waiting. This was a war that was different than what we've experienced in the last several years where it was an air and sea or immediate operations. And so when Marines and Air Force deployed, they were in combat right away. So we saw more people requesting leave of absence accommodations and not taking education while overseas than what we had experienced in past situations. So we'll try and run that down and see if we can get a stat for you on how many return after deployment. Good question.

And our next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets.

Yes. I also wanted to follow up on the military enrollments. Just obviously, the conflict started at the end of February. Did you see—was your first evidence of the active duty headwinds with your May starts or with your April starts? And did you see a difference between the two?

Great question, Eric. So our March start was very early in the quarter, and at that point in time, we saw very few drops because, you're right, the war began effectively on February 28. But we started to see the accommodation requests coming in for our April start and now for our May start. So it didn't have as much of an effect in March, but we certainly started to see it happening as we moved into the April and May starts. Gary, do you want to add to that?

No, I think that's right. We saw the uptick in deployment numbers, and then we looked at which branches were being impacted. As Angie pointed out, Army looks a little bit light, but not compared to what we've seen historically; the numbers that were lower than expected came from the branches that were on the front lines of the deployment.

Okay. And then the outlook, does it anticipate status quo? Does it anticipate a recovery at any point?

I would say Q2 we would expect to be impacted a little bit more than Q1 by the deployments. But we did deploy marketing that we think will help to offset that. So we believe that towards the end of the quarter—namely the last month of the quarter in June—we'll see some recovery, and then we believe we'll see additional recovery going into Q3. And then we'll just have to see how much we have to manage the deployments going forward. It's unknown what happens from here, but I don't want to get too far ahead of ourselves without knowing what will or will not happen with the current situation.

But we do believe that the strength that we're seeing in veterans and military families gives us a very good foundation for us to invest behind. Those are high-teens growth rates in the second quarter as we've been sharing for the last several quarters. So we're going to invest behind those two segments and really try and offset any of the short-term impact we might get from the three branches who are active and deployed right now.

And our next question comes from the line of Raj Sharma with Texas Capital Bank.

Can I try not to beat a dead horse and go back to the military deployments? Historically, there's been a certain number of deployments that resulted in a certain decrease in registrations. I think if I recall, like 50,000 deployed got you about 1,500 registrations fewer. How do you see this particular deployment impacting registration? And also — how do you allocate the marketing dollars to offset this impact — is this related to the margin?

Thanks, Raj. Great question. So 50,000 deployed active duty, we know that about 10% use their education benefit at any given time. So that gives us 5,000 of those people who are somewhere in their educational journey. We know that we educate about 30% of all active duty who are taking classes. So that math you laid out is right—about 1,500 students. Typically, our students in any given quarter are taking about one to two registrations, so you'd have to multiply that by, say, 1.5 or 1.6. I think that points to the difference between mid- to high-single-digit registrations and mid-single-digit registrations. We're triangulating this on several different measures, and that's another measure that I appreciate your bringing up. So yes, we really believe that when we redirect the marketing dollars—those $2.2 million of incremental spend in Q2 beyond what we had originally planned—towards veterans and family, we will be able to drive more momentum in those segments. We also know our active duty students come to us from referral at about a 40% rate. So it does cost us a little bit more to acquire family members than it would active duty if we were investing that $2.2 million in active duty. But we believe it's a well-timed investment because we are trying to continue to deliver on the enrollment targets we've set out for APUS. And you can see our confidence in the business by the virtue of the fact that we raised guidance on the revenue and the adjusted EBITDA for the full year. So we believe our mitigation strategies are well in hand for APUS.

Got it. That's super helpful. I have a related question on margins: Military shows a solid margin increase from 32% to 36%. You mentioned that perhaps that goes back down to 32% by year-end because you allocate more advertising and marketing costs. Is that correct?

That's correct, Raj. We don't expect to sustain that 36% throughout the year, and part of the reason is that incremental $2.2 million in marketing spend. Having said that, we're still guiding for the full year in the neighborhood of that 15% company EBITDA margin, which would be an improvement over last year's 13.2%.

Perfect. And then just following through to the nursing margins, there's an improvement year-over-year but a sequential drop from Q4. Is that because of timing items making quarter-to-quarter margin comparisons more variable?

Good question. If you recall last year, we had timing between Q1 and Q2 of instructional materials. There's roughly $2.8 million of instructional materials last year that didn't occur the same way this year due to the timing of a vendor contract. So it's really just the timing differences year-over-year of that $2.8 million. We also had a little more marketing spend. So that's what drove the margin difference between periods. We would expect to see better flow-through margins in Q2 through Q4 for the remainder of the year.

That was a one-time contract matter. I think we talked about it last year in Q2—the contracts gave us a quarter with different timing, so we did not have instructional material costs in Q1 of 2025.

Got it. And then one last question—can you comment on sensitivity to cohort default rates and student loan repayment? I presume you are better positioned with a large military focus. How are you thinking about upcoming CDR disclosures? Are you well positioned?

We're monitoring it closely. With the military, we tend to have lower borrowing rates among our students who borrow, which helps, but the key is behavior and patterns of students who have not been repaying. Students were asked not to pay their loans for a long period of time, and now they're being asked to resume repayment, so behavior may change and it may take time. We feel we're in good shape based on work with our third-party partners who help us with these analyses, but it's something we'll have to stay on top of as students go back into repayment.

And our final question comes from the line of Jasper Bibb with Truist Securities.

I'll just keep it to one. I was hoping you could talk about how you're approaching student acquisition. Some competitors have talked about search and AI changes or shifts to answer engines potentially impacting the top of the funnel. I think you mentioned earlier your referral rate is super high, so maybe you'd be dealing with less of that than some of your peers, but I just wanted to hear about your experience there and how you're managing these changing consumer behaviors.

Great question. I'll start and turn it over to Gary as well. You're absolutely right that because we have such a significant amount of new students coming from referral, we haven't seen a meaningful change to our acquisition cost or the momentum behind acquisitions, aside from the impacts related to the three branches of the military that are deployed. So we're very positive about the continued momentum at APUS. We have not seen a slowdown in our acquisition of new nursing students. Gary, would you add?

Yes. As Angie pointed out, there's a small portion of our business where we've seen some of those algorithm and AI-driven behaviors affecting search. That's in the non-healthcare portion of our online offerings and a small portion of our health online business. We're aware of it and responding to it by deploying resources, similar to others in the industry. We haven't seen a material impact because other portions of our business are growing as we would expect. But it's something we need to address and understand, and we're actively working on adjustments to respond to the root causes and bring acquisition algorithms back in line.

And that concludes our question-and-answer session. I will now turn the conference back over to Angie Selden for closing remarks.

Thank you very much to all who have participated today. We remain very enthusiastic about 2026 and our four-year plan. We have built the foundation for the next several quarters of success. And we see in front of us significant momentum, both in top line revenue and expanding margins and also an expansion of our earnings per share contribution. So thank you to each of you for joining us today. We look forward to connecting with you all very soon.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.