Earnings Call Transcript - APEI Q4 2025

Operator, Operator

Thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI 4Q 2025 Earnings Call. I would now like to turn the call over to Shannon Devine, Investor Relations. Please go ahead.

Shannon Devine, Investor Relations

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss fourth quarter and full year 2025 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 are available in the Events and Presentations section of APEI's 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, such as those identified in our Form 10-K under the heading Risk Factors, including those related to potential impacts from government shutdowns or changing federal or state government policies, practices, and laws, including impacts on revenues or the timing of receivables. 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 registration and enrollments, revenue, earnings, adjusted EBITDA, and other earnings guidance, our foundation for growth, the planned combination of our institutions, government, governmental and regulatory actions, their impacts, our response to those actions, changing market demands, our ability to satisfy such demands, and other company initiatives. The call and the presentation contain references to non-GAAP financial information. A reconciliation between each non-GAAP financial measure we use and the most directly comparable GAAP measure is located in the appendix in 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 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.

Angela Selden, CEO

Thank you, Shannon, and good afternoon, and thank you all for joining today's call about American Public Education's Fourth Quarter and Full Year 2025 performance. At the beginning of 2025, we set out to simplify and strengthen APEI. Today, I am very pleased to share the following results and highlight how our 2025 achievements create a strong jumping-off point for our 4-year growth strategy, which we introduced at our recent Investor Day. First, APUS delivered full year 2025 revenue growth, even with the fourth quarter registration interruption. APUS's student base, including veterans, extended military families, and military service members across all branches demonstrated demand in line with our expectations. The underlying business is strong, and the numbers reflect that. Second, our nursing and health care institutions both had outstanding years. Rasmussen's full year 2025 revenue increased 14%, and Hondros' full year revenue increased 11%. Third, APEI's full year consolidated revenue grew 4% to $649 million versus 2024. That growth was achieved even with the midyear sale of Graduate School USA, the announced closure of 2 Rasmussen campuses in Wisconsin, and a registration interruption at APUS in the fourth quarter that affected TA registrations for 43 days. For context, by excluding Graduate School from both 2024 and 2025, consolidated revenue would have increased about 7% when compared to the prior year. These results reinforce the strength of our diversified portfolio. Fourth, APEI's full year adjusted EBITDA reached $85.7 million, up 19% as compared to 2024, beating not only our revised guidance, but also the top end of our initial 2025 guidance. We trimmed costs across the enterprise, specifically at APUS and in APEI Technology, and these savings have reset the cost baseline for 2026 and beyond. Finally, we did what we said we would do. At the beginning of 2025, we committed to redeeming our preferred equity, selling some corporate buildings, and having the Department of Education lift the $25 million letter of credit and lift the 6 years of growth restrictions that prevented new campuses and new programs at Rasmussen before APEI's acquisition. Achievement of these commitments has simplified and strengthened our business for 2026 and beyond. And we delivered on these commitments while simultaneously growing enrollment, expanding margins, and strengthening our balance sheet. Our teams demonstrated resilience, tenacity, and confidence in overcoming obstacles and delivering remarkable results. So now let's turn our attention to APEI's fourth quarter 2025 consolidated revenue. We delivered $158.3 million, and we exceeded our most recently stated guidance across all key financial metrics, including revenue, net income available to common stockholders, EPS, and adjusted EBITDA. Our nursing and health care institutions demonstrated significant strength during 4Q '25. Rasmussen grew 16%, and enrollments increased 9% year-over-year to approximately 15,900 students, representing our sixth consecutive quarter of year-over-year enrollment growth. What's particularly exciting is that our Fill the Back Row strategy of maximizing capacity utilization is working. Our nursing programs continue to show broad-based strength with particularly strong performance in our nursing programs. Our allied health programs, including surgical tech and radiological tech, are also performing well. Most are at capacity, which creates opportunities for our planned expansion initiatives. By maximizing capacity utilization at our existing campuses, we are driving significant operating leverage and demonstrating impressive margin expansion. Hondros continues to deliver strong results with fourth quarter 2025 enrollment of 4,000 students, a nearly 10% year-over-year revenue increase and 9% year-over-year enrollment growth. This performance demonstrates the durability of demand for pre-licensure nursing and our ability to effectively reach students in our local markets. In the fourth quarter 2025, APUS successfully navigated the 43-day federal government shutdown, which created an active duty military student registration interruption. As we have previously shared, it has been 12 years since the Defense Appropriations Bill, which funds Military Tuition Assistance, or TA, had remained unsigned by October 1, the beginning of the federal government's fiscal year. With the Defense Appropriations bill still unsigned by our November start, all 4 major military branches began utilizing their portion of the $100 million of tuition assistance funds authorized under the One Big Beautiful Bill Act to enable active duty military students to continue their education. Importantly, once the government reopened in December, we saw a 41% increase in TA registrations compared to December 2024, which demonstrates resiliency in demand for education from our military students even in the face of funding disruptions. Because most APUS students take one course at a time, this simply delayed their progression rather than stopping their progression entirely. Additionally, an important bright spot in APUS' fourth quarter performance was the continued momentum in both our veteran and military families channels, where we continue to see high-teen registration growth. Now let's turn our attention towards 2026. I want to highlight 2 key first half 2026 developments. First, we are making important progress on our institutional combination. In late February, the Higher Learning Commission approved a key step in our institutional combination. And on March 2, we combined the 3 institutions' legal entities into one. Now we are working with the Department of Education and HLC to complete the remaining steps to combine our 3 institutions into one system with one OPE ID. We are targeting an expected effective date in the beginning of the third quarter of 2026 for the 2026 financial aid award year. In addition, today, we are formally announcing that we have 2 reporting segments, APUS Global and RU Health+ for fiscal year 2026 and beyond. Second, we are launching 2 campuses in 2026, Rasmussen campus in Orlando, which is already enrolling students for 2Q '26, and Hondros campus in Detroit, which we anticipate will be prepared to enroll students in Q1 '27. Both represent important expansion into markets that have already demonstrated strong demand for our programs. In our next earnings call, we'll provide more details and progress on these first half '26 developments. As we look to 2026 overall, we believe we have clear visibility into our revenue growth and our margin expansion drivers, including continued enrollment momentum at Rasmussen and Hondros to build on 2025's strong performance and our Fill the Back Row and leverage the ladder initiatives. We anticipate revenue synergies we gain from the Rasmussen and Hondros integration process. We plan for growth acceleration at APUS as government funding normalizes and marketing flexibility increases for military and veteran enrollment post-combination. And we believe we will anticipate and experience improved profitability and cash flow due to the new refinancing of our debt and the cost savings associated with that. In view of these and other factors, we are providing full year 2026 guidance as follows: APEI 2026 revenue will be between $685 million and $695 million. Adjusted EBITDA will be between $91.5 million and $100.5 million. And as for Q1 '26 guidance, because of where we are in the quarter this year, the timing of this earnings call gives us full visibility to all university enrollments. As a result, APEI revenue will be between $173 million and $175 million, and please note that the Q1 '25 comparable period includes $3.7 million of Graduate School revenue, which obviously is not included in 2026 due to its sale in July of 2025. And adjusted EBITDA will be $25.5 million to $27.0 million. Ed Codispoti, our CFO, will provide more details in his remarks, including Q1 enrollment and registration results, the refinancing of our debt, and authorization of a new $50 million share repurchase program. We are very clear about what the next 4 years require. It is all about execution. The foundation is built, our business is simplified, and we are operating with a strong balance sheet. We've developed a strategy, and we are strengthening the team. And now it's about doing what we say we're going to do quarter after quarter. That's what you experienced in 2025, and that's what you should expect going forward. With that, I'll turn the call over to Ed to discuss our financial results and 2026 guidance in detail.

Edward Codispoti, CFO

Thank you, Angie. I'll begin with our fourth quarter results, then review our full year 2025 performance and conclude with our outlook for the first quarter and full year 2026. Total revenue in the fourth quarter was $158.3 million, down $5.8 million or 3.5% compared to $164.1 million in the prior year period. Despite the federal government shutdown impact at APUS, we exceeded our most recently stated guidance. Now let's break down revenue by segment. At APUS, fourth quarter revenue was $71 million, down 13.8% compared to $82.4 million in the prior year period. The decline reflects the impact of the federal government shutdown during October and November. Net course registrations for the quarter were 82,200, down 15.3% year-over-year. However, the underlying business fundamentals remain strong. At Rasmussen, fourth quarter revenue was $66.6 million, up 15.9% compared to $57.5 million in the fourth quarter of the prior year. This strong performance was driven by 8.9% enrollment growth, bringing total students to 15,900. At Hondros College of Nursing, fourth quarter revenue was $20.7 million, up 9.2% compared to $18.9 million in the prior year period. This reflects continued enrollment momentum with 4,000 students, an increase of 8.1% year-over-year. Now turning to profitability for the quarter. Fourth quarter net income available to common stockholders was $12.6 million or $0.67 per diluted share compared to $11.5 million or $0.63 per diluted share in the prior year period. This represents a 9.6% increase in net income and a 6.3% increase in diluted EPS. Fourth quarter adjusted EBITDA was $28.7 million compared to $31.4 million in the prior year period, representing an adjusted EBITDA margin of 18.1%. While down year-over-year due to the APUS shutdown impact, we exceeded our most recently stated guidance, demonstrating strong operational execution. Turning now to our full year results. For full year 2025, consolidated revenue was $648.9 million, representing 3.9% growth over 2024 despite the federal government shutdown impact and the sale of Graduate School USA. Excluding Graduate School USA revenue from both periods, revenue growth would have been approximately 7%. APUS revenue was $319.8 million, up 0.9% year-over-year. Rasmussen revenue was $246.2 million, up 13.9% year-over-year. This growth was driven by sustained enrollment momentum and our successful Fill the Back Row growth strategy. Importantly, Rasmussen delivered segment income from operations of $4.1 million compared to a loss of $21.8 million in 2024. This represents a swing of nearly $26 million, demonstrating strong enrollment growth and significant margin expansion. Hondros revenue was $75 million, up 11.4% year-over-year, reflecting continued demand for pre-licensure nursing education. Full year adjusted EBITDA reached $85.7 million, an increase of $13.4 million or 18.6% compared to $72.3 million in 2024. This represents a significant accomplishment and demonstrates the strength of our business model as our adjusted EBITDA margin expanded 164 basis points to 13.2% in 2025. Net income available to common stockholders for the full year was $25.3 million or $1.36 per diluted share compared to $10.1 million or $0.55 per diluted share in 2024. This 152% increase in net income reflects our operational execution, the absence of preferred dividends following our second quarter redemption, and margin expansion. We also ended 2025 with a very strong balance sheet. As of December 31, 2025, our cash, cash equivalents, and restricted cash totaled $176.5 million compared to $158.9 million at December 31, 2024, an increase of $17.6 million or 11%. Total debt was $96.4 million, and our net cash position was $80.1 million. We further strengthened our balance sheet and liquidity position last Monday, March 9, when we refinanced our debt. Through the refinancing, we reduced our borrowing rate by approximately 375 basis points at current leverage levels and lowered our principal balance from $96.4 million to $90 million. The lower borrowing rate, combined with the reduction in principal is expected to generate $3.7 million in annual interest expense savings, excluding the amortization of debt issuance costs. For modeling purposes, you should expect our interest income to be roughly equivalent to our interest expense in 2026, given our strong cash balances and improved borrowing rate. Also, we will recognize a noncash write-off of approximately $1.6 million related to deferred financing costs associated with our previous loan. Our strong balance sheet and cash generation provide us with significant financial flexibility for growth investments. This liquidity position was also a key factor in our ability to navigate the government shutdown without operational disruption. In addition, this week, our Board of Directors authorized a $50 million share repurchase program. We expect the program to be used primarily to offset dilution from share-based compensation while also providing flexibility to opportunistically repurchase shares depending on market conditions and other factors. The authorization reflects the Board's confidence in the company's long-term strategy, our strong cash flow profile, and our commitment to disciplined capital allocation. Repurchases may be made from time to time through open market transactions or other permitted methods, and the timing and amount of any repurchases will depend on market conditions, share price, and alternative uses of capital. I'll now discuss our guidance for the first quarter and full year 2026. Our guidance for first quarter 2026 is as follows: revenue between $173 million and $175 million, net income available to common stockholders between $11.1 million and $12.2 million, adjusted EBITDA between $25.5 million and $27 million, and diluted earnings per share between $0.58 per share and $0.64 per share. When considering this guidance, keep in mind that our results are subject to seasonality. The first quarter is typically our second strongest quarter of the year. For full year 2026, our guidance is as follows: revenue between $685 million and $695 million, net income available to common stockholders between $41.3 million and $47.6 million, adjusted EBITDA between $91.5 million and $100.5 million, diluted earnings per share between $2.15 per share and $2.47 per share, and CapEx between $28 million and $32 million. In summary, 2025 was an excellent year for APEI. We exceeded our guidance despite external challenges, strengthened our balance sheet, and positioned the company for accelerated growth in 2026. Our 2026 guidance reflects continued enrollment growth, improving margins, and the benefits of our strengthened balance sheet, and we believe we are well positioned to achieve these targets. With that, I'll turn it back to Angie for closing remarks.

Angela Selden, CEO

Thank you, Ed. In closing, we have spent the past year setting ambitious yet achievable financial and operating goals. Our RU Health+ segment, comprised of Rasmussen University and Hondros College of Nursing, are delivering consistent positive enrollment growth and improving profitability. Our APUS Global segment, with the exception of temporary enrollment disruptions from the federal government shutdown, continues to deliver growth and strong margins. I want to reinforce the multiyear growth framework we outlined at our November 2025 Investor Day. At that event, we introduced our vision through 2029 with 5 key value creation initiatives at APUS Global and 4 at our RU Health+ Healthcare division. Those growth drivers remain fully intact. These value creation initiatives build on each other and create a foundation for sustained growth. Our multiyear growth framework projected organic revenue of $890 million to $925 million by 2029, representing an 8% to 9% revenue CAGR with adjusted EBITDA margins at 20% to 21%. With strategic investments in new campuses and potential tuck-in acquisitions, we see a potential path to $1 billion in revenue by 2029. Our APEI organization is purpose-built to deliver affordable and accessible education opportunities in fields that 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, especially in these heightened times in the Middle East and Latin America. We believe that careers that require judgment are AI resilient and will continue to need humans to operate. Our platform and sector tailwinds position APEI to accelerate growth and bring more educational opportunities to a greater audience. We are as optimistic today as we have ever been about the long-term potential of our company. Before we move to questions, I want to acknowledge the valuable feedback we've received from many of you. In our ongoing effort to continue to be more transparent with our investor community, we are committed to providing you with clear insights into our performance, our strategic initiatives, and the long-term value creation opportunities ahead of us. Importantly, I also want to take a moment to honor Sergeant First Class, Nicole M. Amor, a Rasmussen University graduate who is 1 of 6 killed in Kuwait on March 1, while serving her country. Nicole embodies everything we believe in at APEI, and we are deeply grateful for her service and sacrifice. Our thoughts are with her family and fellow military service members. With that, I would now like to hand the call back to the operator to begin our question-and-answer session.

Operator, Operator

Your first question comes from the line of Griffin Boss with B. Riley Securities.

Griffin Boss, Analyst

Spectacular results amid what was a tough macro with the government shutdown in the fourth quarter. So I just want to start off on the CapEx cadence and step-up given these new campus openings. So is that going to be linear throughout the year? Or is that going to ramp towards the back half of the year as that Hondros campus gets ready to start enrollment?

Gary Janson, Chief Strategy and Growth Officer

Griffin, we expect on the campus openings that most of the CapEx related to the new campuses would be in the fourth quarter, maybe a little bit in the third quarter. But a good question. It will be mostly in the second half of the year.

Griffin Boss, Analyst

Okay. Great. Can you remind us about the economics of the new campuses? Specifically, what is the expected revenue per new campus once it is fully ramped, what are the margin expectations, and when do you anticipate reaching cash flow breakeven? I apologize if there is background noise on my end; I'm hearing a bit of it, but I can repeat the question if needed.

Angela Selden, CEO

You're good. Yes.

Gary Janson, Chief Strategy and Growth Officer

We don't hear that. So I think as we said, our campuses are relatively CapEx light. We expect them to cost about $3.5 million to open, taking about 18 months before we turn cash flow positive. And I think the economics we said at scale, we would expect the campus to do about $12 million in revenue and have about a 35% EBITDA margin.

Angela Selden, CEO

I was just going to say, and we're still on a pace to open 2 campuses per year. That's the current plan that was baked into the 4-year plan we shared at Investor Day.

Griffin Boss, Analyst

Right. Yes. And so I guess before I get to my last one, just to follow up on that. So we could expect kind of a heightened level of CapEx, at least above the '25 levels going forward beyond '26. I know you're not guiding to that, but is that a reasonable expectation?

Gary Janson, Chief Strategy and Growth Officer

Yes. I think what Ed guided to in his comments for the full year this year is kind of our standard number we would use, which includes about $7 million for new campus openings. Is that fair?

Edward Codispoti, CFO

The range is between $28 million and $32 million, so $7 million of that would be for campus openings.

Griffin Boss, Analyst

Sure. Okay. Makes sense. And then just last one before I hand it off, hop back in the queue. I understand going forward, there's just going to be 2 operating segments. But is there any chance you could break out kind of the expectation for the first quarter for Rasmussen and Hondros for us before we start to model just kind of 2 divisions going forward?

Angela Selden, CEO

We are moving towards this 2-segment combination. And as a result, we won't be breaking it out for the investor community going forward, no.

Operator, Operator

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

Lucas John Horton, Analyst

Congratulations on a very nice quarter here. I guess I kind of want to dive into the marketing strategy and how this sort of shifts after the institution combination kind of takes effect. Could you just kind of talk through kind of marketing strategy there?

Angela Selden, CEO

Yes. That's a great question, Luke. I want to emphasize that the Rasmussen and Hondros brands will remain visible in their respective local markets. Our marketing strategy will keep attracting students to those campuses using those brand names. However, we are also working on sharing best practices among our three education units. This includes leveraging the effective strategies from APUS's online platform for Rasmussen Online, as well as exchanging tactics between Rasmussen campuses and Hondros. We're actively optimizing our marketing expenses. The approach for online students is different from our more hands-on strategy for campus students, but we will continue to enroll students under each of those brands through 2026.

Lucas John Horton, Analyst

Okay. Great. That's helpful. And then lastly, just on the course registrations at APUS. I think you said it was up like 41% in the month of December year-over-year. I guess was there like when the government was shut down and the funding was paused, was there like a wait list where students could sign up for course registration once funding was returned? Or I guess what was kind of the leader of the big bump in course registrations for December?

Angela Selden, CEO

Yes, great question. I'll have Gary answer that question. Go ahead.

Gary Janson, Chief Strategy and Growth Officer

Yes, I was going to say, I think we were pleasantly surprised. We didn't know how much we would bounce back or whether it would just be a permanent kind of loss, but we saw that significant bounce back from the military students. I think that indicates that there was good demand and without the ability to have the funding in place, they were just sitting on the sidelines. So it was a combination of new students and continuing students came back, which we didn't have a good indicator there. So that was a nice surprise for us in December. And obviously, that helped to start the year off as well.

Angela Selden, CEO

So keep in mind that those 20,600 TA registrations in October and November ended up getting dropped. So those were students that were already enrolled in class, and we had to drop them for nonpayment. So when funding became available again, they jumped right back in, and we were really pleased. And we were pleased that December, which is of the quarter, the lighter of the enrollment month just because it’s the holidays, et cetera, didn’t seem to slow them down and wanting to jump back in and take their courses.

Operator, Operator

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

Eric Martinuzzi, Analyst

Yes. I also wanted to dive in on the enrollments at APUS, but more focused on the non-TA side. Seeing Q4 up 11% for the non-TA. I was just curious, could you remind me how did that compare with the first 9 months of the year? Was that an acceleration?

Angela Selden, CEO

Great question. I'm going to let Eric turn that over to Gary for him to answer.

Gary Janson, Chief Strategy and Growth Officer

Yes, we are very pleased with the nonmilitary segments. We observed high teens growth in both the veterans and extended family markets. The other category was a bit lighter, but the overall growth in the non-military active duty segment was about 11% combined.

Eric Martinuzzi, Analyst

Okay. And then for the first quarter, was that 4% year-on-year growth sustained in the first quarter?

Gary Janson, Chief Strategy and Growth Officer

Yes, we'll probably give more color on that in our next call. But yes, we did see that same trend continue, which we're very pleased with. And then we think there's good momentum there, which is what we were hoping to see and certainly very pleased with the outcomes. The team has worked really hard to build the extended families and the veterans as they take more courses on average and have a little bit higher tuition rate. So it's pacing out nicely despite a little bit of a softness in the active duty due to a partial shutdown in Q1.

Eric Martinuzzi, Analyst

Got it. And then my last question has to do with the use of cash, the priorities here. You've obviously come out with the new repurchase plan, the $50 million. You talked about sort of absorbing stock-based comp, the dilution from that. Just what is the priority? Is it anything beyond that? Are we going to focus on debt paydown? Or is the current stock price appetizing to you guys? What's the focus?

Angela Selden, CEO

Yes. Great question, Eric. I'm going to turn it over to Ed for him to answer that.

Edward Codispoti, CFO

Yes. Look, from a priority standpoint, we're always going to focus initially on organic growth. That's going to be our #1 priority. And we want to do so while we maintain a conservative balance sheet. M&A is something that will continue to look at. It has to be opportunistic in nature. There are reasons why we might want to expand geographically in a deal that might make sense in terms of its footprint. And when all that is said and done, then we turn to the return of capital to shareholders. In the case of this $50 million authorization, as you said, we're very focused on the dilution of stock-based compensation and mitigating that. And then in the event that there are market events or changes in stock price that would make sense for us to be opportunistic to repurchase more, then we'd execute from that perspective as well.

Operator, Operator

Your next question comes from the line of Jasper Bibb with Truist Securities.

Jasper Bibb, Analyst

Maybe following up on an earlier question. I wanted to ask what your '26 guidance envisions as far as on-ground health care growth or maybe any additional detail on what you're seeing in health care student demand this year would be great.

Angela Selden, CEO

Jasper, thanks very much for the question. I'll start by saying we continue to see strong interest in our campus programs and specifically our pre-licensure nursing campus programs. I'll turn it over to Gary, and he'll give you a little bit more detail on that.

Gary Janson, Chief Strategy and Growth Officer

Yes. I think we mentioned that we expect somewhat linear growth in line with our long-term strategic plan. We are targeting high single-digit growth across our health care platform as a whole. Additionally, we aim for our campuses to grow at a slightly faster pace than the online segment within the Healthcare division. That is our target growth rate. We also anticipate that APUS will grow at a similar pace, possibly slightly lower than the health care platform.

Jasper Bibb, Analyst

And then it's probably too early to say, but could you frame for us on whether the Iran war is having an impact on the behavior of your active duty students at APUS or maybe historically, how that part of your student population behaves when military activity picks up?

Angela Selden, CEO

Great question, Jasper. So yes, presently, we don't know what the exact troop count is. But primarily, those being deployed are in the Navy, the Air Force, cyber and some regional base personnel. And so our largest enrollment population is the Army, and the boots-on-the-ground deployment hasn't happened yet. With the March start, which was a really important checkpoint for us to see what kind of impact, if any, we would experience, we had really no difference in our start rate for March, even with the Middle East war. And we don't anticipate a significantly positive or a significantly negative registration impact just based on what we've seen over the years with military deployments. So sometimes people suspend their education because they're deployed and aren't sure they will have access to a computer. And we see others ramping up their education because they are deployed but have free time and connection to the Internet and a computer, and so they decide to take courses. So it all kind of balances out in the end. So right now, we don't think there will be any impact in a meaningful way at APUS on registrations in 2026. But we'll certainly keep you posted as we learn more.

Operator, Operator

Your next question comes from the line of Rajiv Sharma with Texas Capital.

Rajiv Sharma, Analyst

And great results and solid guidance. This has been a pleasure. I have a couple of questions. How do you specifically plan to fill in the back seats? I know you mentioned some strategies at the Analyst Day. Can you outline specific tactics?

Angela Selden, CEO

Yes, thank you for the kind words, Raj. We are focusing our marketing strategies on attracting students to programs that not only have the greatest supply-demand gap but also significant employment demand in local markets. We are refining our marketing tactics, and in some areas, we are investing more in marketing than we initially intended due to the positive outcomes we're observing. We plan to be both thoughtful and aggressive in leveraging EBITDA outperformance at Rasmussen by allocating some of those funds to marketing to support ongoing growth and fill the back row. We aim to replicate the successful strategies from 2025, which yielded excellent results. I’ll now pass it over to Gary for additional insights.

Gary Janson, Chief Strategy and Growth Officer

We plan to enhance collaboration across our campuses by expanding our program offerings. Each campus has a different set of programs in nursing and allied health. For example, at our new campus in Orlando, we're now introducing an LPN program that was previously unavailable in that area. This creates additional opportunities as we evaluate our campuses. Our strategy involves not only ongoing marketing efforts but also leveraging the campuses to broaden their program offerings. We have developed a detailed plan for each campus outlining the programs we aim to introduce over the next four years.

Rajiv Sharma, Analyst

Got it. That's very helpful. You have projected a little over 6% top line revenue growth for fiscal '26. Is it correct to assume that nursing and Hondros will see high single-digit growth throughout the year?

Angela Selden, CEO

I'm sorry, I mean to cut you off. Sorry, finish your question, Raj, sorry.

Rajiv Sharma, Analyst

No. Just that you break out the nursing and the APUS. Is it that high single-digit and low single-digit?

Angela Selden, CEO

I want to remind everyone looking at year-over-year results that we have Graduate School revenue for the first half of 2025. Our Q1 guidance indicates that Q1 revenue includes $3.7 million from the Graduate School. However, we did not specify the total Graduate School revenue for comparison to 2025. Therefore, if you were to make an apples-to-apples comparison, our growth rate is approaching 8% at the midpoint. Additionally, by the end of the year, we expect to recover enrollment that we delayed in October and November due to the government shutdown. Hence, we believe the midpoint of our full-year growth is likely closer to 8%, with APUS in the mid-single digits and our healthcare schools in the high single to low double digits.

Rajiv Sharma, Analyst

That's really helpful. And then just following on that last question. With the increase in the revenues at Rasmussen and Hondros, you've achieved incremental margins, right? I think last year, fiscal '24 and '25 was greater than 50%. And this year, it seems to be implied with fiscal '26 guidance, the incremental profit margins are implied at 25%. Do you expect healthier incremental profit margins than the guidance would indicate?

Gary Janson, Chief Strategy and Growth Officer

So obviously, this is Gary. I think we are tracking to that. We are making some strategic investments to ensure we can hit those numbers, as Angie mentioned in marketing. Last year, we achieved 75% flow-through margins at Rasmussen for the full year. We'll continue to monitor that, and it will progress throughout the year. Right now, we are focusing on healthy top-line growth to fill the Back Row, which may require some additional spending and resources ahead of that. Additionally, as we expand campuses, they will slightly suppress the margins, not as much in 2026, but in later years.

Operator, Operator

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

Matt Filek, Analyst

You have Matt Filek on for Stephen Sheldon. Congrats on a strong finish to the year. I wanted to start with a quick follow-up on filling the back row. I think you have previously said that nursing campus utilization is currently around 60%, but your target is closer to 90%. And I was wondering if you can share anything on the rough timeline and cadence to getting to that 90% target level across your nursing campuses.

Angela Selden, CEO

Yes. Matt, great question. It’s our favorite topic. So we signaled when we did Investor Day that we would be approaching that 90% when we get to year 4. And we also signaled that we expect a rather smooth progression over the 4 years. So we think that that's just going to be basically consuming capacity and adding students on a rather smooth trajectory over the next 4 years.

Matt Filek, Analyst

Got it. Yes. That makes a ton of sense. And then just had a quick one on teacher capacity. How do you feel about your current teacher capacity across educational units? And are there any areas where you may be slightly over-understaffed?

Angela Selden, CEO

Great question. I think if you remember at the Investor Day meeting, we talked a little bit about making sure we're not just enrolling students, but we're also managing those constraints, right, and making sure that we have all the necessary resources in place, which includes faculty, availability of clinicals, etc. So the good news is since we are far past COVID now, the availability of faculty has really not been a constraint in our markets of late, which is really good news because that is certainly one of the things that makes it difficult for you to enroll at the paces that we were enrolling at. So we don't have any campuses right now where we have a faculty shortage. In fact, we have all of our Dean positions filled at all of our Rasmussen and Hondros campuses. So we really feel like we're in very strong shape from a talent and faculty perspective going into '26.

Operator, Operator

Your next question comes from the line of Alex Paris with Barrington Research.

Alexander Paris, Analyst

I'll add my congratulations on the strong finish to the year. A couple of dogs and cats here. On the government shutdown impact on revenue in the fourth quarter, I think you had sort of guided that the impact would be between $20 million and $24 million. Can you quantify the actual impact on Q4?

Edward Codispoti, CFO

We think that after having gone through Q4 and December was better than we expected, we ended up probably $12 million to $15 million short from the government impact.

Alexander Paris, Analyst

Great. And then I think Gary said in response to a previous question that there was some impact from the partial shutdown here in Q1. Can you expand on that?

Angela Selden, CEO

Yes, I'll start. So for those of you who follow, and I know, Alex, you do, the Department of Homeland Security is where the Coast Guard gets their TA funding. And the Department of Homeland Security is still not funded. And so consequently, some of the Coast Guard, which is the smallest by far of all of our branches, students are still waiting for their funding. They have been using some of the One Big Beautiful Bill Act funds to allow those students to take courses. So that was one very small blip, but that's factored into the numbers we shared with you because our Q1 for APUS is an actual, which is unusual. It's just because of where the call landed on the calendar that we have all of Q1 for APUS in. And then the second small blip was during that very small period of time when they were not funded, the Army reservists who were not deployed on military activities were also not funded. So these are very, very small populations of students. So we didn't make a big point of calling them out. But it did have about a 1% to 1.5% impact on APUS' potential registration actuals for Q1, had everyone been able to fully enroll.

Alexander Paris, Analyst

That's very helpful. And then just to be clear on segment reporting going forward, this was the fourth quarter, so you reported APUS, RU, and Hondros. The guidance just gives APUS Global and then RU Health+. So that's going to be the way it's going forward. This is the last of the 3 segments being reported specifically.

Angela Selden, CEO

That's right. As we transition into a new rhythm, we will show you the comparison by combining Rasmussen and Hondros into the RU Health+ segment. This is the only significant change, except for the fact that the first half of 2026 will still include revenue from the Graduate School. We will clarify how to approach the baseline comparison for 2025 in the first half of 2025 versus the first half of 2026 since we will no longer have access to that revenue.

Alexander Paris, Analyst

Got you. And you did say what the Q1 of '25 revenue was for.

Angela Selden, CEO

We realized we didn't provide the equivalent number for the full year. There was $3.7 million of Graduate School revenue that should be deducted from the $164.6 million to create a more accurate comparison.

Alexander Paris, Analyst

Got you. Helpful. And then lastly and related, once you do complete the combination of the institutions in OPE ID number, you'll still be reporting the 2 segments though, because that's the way you look at it.

Angela Selden, CEO

Yes, we absolutely will.

Operator, Operator

That concludes our question-and-answer session. Ladies and gentlemen, this concludes the APEI Fourth Quarter 2025 Earnings Call. Thank you all for joining. You may now disconnect.