Earnings Call Transcript - APEI Q4 2020

Operator, Operator

Thank you for joining us for the American Public Education Fourth Quarter 2020 Results Conference Call. Currently, all participants are in listen-only mode. Following the presentations, there will be a question-and-answer session. Please note that today’s conference is being recorded. I will now turn the call over to Chris Symanoskie, Vice President of Investor Relations. Thank you, and please proceed.

Chris Symanoskie, Vice President of Investor Relations

Thank you, operator, good evening, and welcome to American Public Education's fourth quarter and full year conference call. Materials that accompany today's conference call are available in the Events and Presentations section of our website. Please note that statements made in this conference call and in the accompanying presentation materials regarding American Public Education, its subsidiaries or Rasmussen University that are not historical facts may be forward-looking statements based on current expectations, assumptions, estimates and projections about American Public Education and the industry. These forward-looking statements are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Forward-looking statements can be identified by words such as anticipate, believe, seek, could, estimate, expect, intend, may, plan, should, will and would. Forward-looking statements include, without limitation, statements regarding the benefits of the acquisition of Rasmussen University, the closing of the acquisition and its timing, expected growth, expected registration and enrollments, expected revenues, expected earnings, income and EBITDA, expenses, expected financial results for Rasmussen University, the expected capital structure, net debt, the ability to deliver a return on learners' educational investment, the ability to maintain an attractive risk profile, and plans with respect to recent, current and future initiatives. Actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risks related to: the effects of and APEI's response to the COVID-19 pandemic; the acquisition of Rasmussen University; and the risk factors described in the Risk Factors section and elsewhere in the company's annual report on Form 10-K filed with the SEC today as well as the company's other SEC filings. The company undertakes no obligation to update publicly any forward-looking statements for any reason unless required by law, even if new information becomes available or other events occur in the future. This evening, it's my pleasure to introduce Angela Selden, our Chief Executive Officer; and Rick Sunderland, our Executive Vice President and Chief Financial Officer. Also available for questions today is Steve Summers, Senior Vice President of Strategy and Corporate Development. Now, I'll turn the call over to Angela Selden. Angie?

Angela Selden, CEO

Thank you, Chris, and good evening everyone. What a remarkable year it has been at APEI. We've introduced many important changes and launched several key initiatives. These changes are creating energy at APEI and driving momentum inside APUS and Hondros. At the heart of each of these changes is the common theme of providing a highly affordable higher education leading to strong career outcomes. At APEI, our mission is to set adult learners on the path toward achieving their dreams by driving down the cost of higher education and helping them obtain degrees in schemes to achieve their potential. We call this higher education return on investment, or HEROI. Beginning in late 2019, we set out to build a growth strategy around that mission. Since then, we've experienced a return to growth at both APUS and Hondros. We've added dynamic new leadership across each of the three business units, launched an enterprise-wide technology modernization, and have begun to amplify our value proposition to a wider audience. The 2020 results speak for themselves. Strong new and total course registration growth at APUS and record enrollment at Hondros; further accelerating our growth strategy was the October 2020 announcement about our pending acquisition of Rasmussen University. The acquisition of Rasmussen will nearly double APEI's revenues and will create a large scale platform to address the U.S. registered nursing shortage. The resulting APEI business will deliver over $165 million in pre-licensure nursing education revenue, primarily by creating new registered nurses. Today, pre-licensure nursing education is roughly half of the $28 billion in total nursing education, which is estimated to grow to $60 billion over the next few years. The acquisition will add a number one market position in pre-licensure nursing to the two existing number one positions in active duty military and veteran's education at APUS today. Moving to Page 4, the enrollment momentum at APUS began in 2019, continuing for a fifth consecutive quarter with total net course registration increasing by 11% in the fourth quarter, driven by a robust 17% increase in new student registration. For all of 2020, net course registrations increased nearly 12% with new registrations growing at 18% for the year. The momentum at Hondros was even more pronounced during 2020 as new leadership along with key enrollment and operational initiatives produced an impressive turnaround in a very short period of time. Both new and total enrollment increased 34% year-over-year in the fourth quarter of 2020, while nursing starts through the full year were up 50%, leading to an all-time record enrollment of 2,139 students at the end of 2020. Momentum that we expect will continue into 2021 and which our CFO, Rick Sunderland, will discuss in more detail shortly. Overall, full year Hondros enrollment growth was 18% compared to 2019. On Page 5, contributors to the continued growth at APUS include increased investment in marketing to the micro-segments where we believe a higher education return on investment value proposition resonates. The implementation of our proprietary and self-funded freedom grant, which eliminated out-of-pocket costs for active duty military students in graduate programs using TA, adding to the active duty undergraduate student population benefiting from this grant since 2001, additional investments in technology to improve the student experience as well as increase student satisfaction and enrollment rates, and tailwinds from increased demand for online education caused by the COVID-19 pandemic. We don't expect to repeat the full $10 million of incremental marketing that we invested in 2020, but plan to continue to be targeted in directing our marketing to the most productive segments in 2021. Some of the momentum that we had in 2020 carried into the first quarter of this year and is expected to result in a sixth consecutive quarter of year-over-year growth in net course registrations at APUS. The turnaround and performance at Hondros that Harry Wilkins and his team have executed with student-centric and purpose-built initiatives to create new nurses, while some of the growth at Hondros can be attributed to an increase in demand for nursing education and a change in the competitive landscape due in part to COVID-19, we believe much of the improvement was due to key initiatives like launching the direct entry ADN program, implementing affordability grants to limit students' out-of-pocket costs to $200 per month, moving to fully online admissions processes, and improving transparency and conversion of prospective students through sales force automation. Throughout the year, we saw our marketing efficiency improve and have been seeing increased enrollment with lower marketing spend in recent months. In addition, Hondros shifted its academic coursework online during the pandemic and managed to optimize its physical footprint for labs and practicums in order to remain open and continue to serve our students while many competitors, including several public institutions, restricted nursing enrollment indefinitely. The strong enrollment during both Q4 2020 and the full year drove top-line growth with fourth quarter consolidated revenues increasing 16% compared to the prior year period, while full year APEI revenue increased 12.4% versus 2019. At APUS, fourth quarter 2020 revenues increased 14% compared to the prior year period and full year revenues increased 11%. At Hondros, revenue growth was higher, increasing 32% in the fourth quarter and 22% in the full year 2020 on the strength of its enrollment growth. Moving to Page 7 with a return to growth in our core businesses and especially at Hondros, we turned our sights to expanding APEI's portfolio and platform with a focus on nursing. This effort resulted in the pending acquisition of Rasmussen University, a regionally accredited institution with a 120-year history and a growing student population of over 18,000. Rasmussen is the nation's Number 1 educator of pre-licensure ADN nurses and will nearly double the overall revenue of APEI, giving APEI scale, a national platform in nursing, and synergy opportunities. Nursing enrollment at Rasmussen has increased at a five-year CAGR of 16% to over 8,200 nursing students. Upon completion of the acquisition and including Hondros, APEI will collectively educate more than 10,000 nurses through 32 campuses and facilities. Beyond scale and growth, Rasmussen shares the same focus on student affordability and has a strong mission and cultural alignment with APEI. Now I'd like to turn it over to our CFO, Rick Sunderland, to provide a financial perspective.

Rick Sunderland, CFO

Thank you, Angie, good evening. As announced in October, APEI plans to acquire Rasmussen University for $329 million. This acquisition will be funded by cash on the balance sheet, a $175 million term loan, and $29 million in preferred stock, which may be replaced by cash at our option. The addition of Rasmussen to APEI's platform is expected to diversify APEI's revenue to approximately one-third military and military affiliated, one-third nursing, and one-third online working adults. APUS, Hondros, and Rasmussen have solid regulatory track records and a history of strong student outcomes. These three separately accredited and branded institutions will continue serving their respective audiences, while we work to leverage cost synergies, share best practices, and cross-pollinate certain in-demand programs. As announced last week, APEI closed an underwritten public offering of its common stock on March 1st. APEI sold 3,680,000 shares of common stock, including the exercise of the underwriters' option to purchase an additional 480,000 shares. Gross proceeds from the sale were $92 million before deducting the underwriting discounts, commissions, and other offering expenses payable by APEI. The net proceeds were approximately $86.4 million from the offering, adding liquidity to the $228 million in cash and cash equivalents reported as of December 31, 2020. After the anticipated closing of the Rasmussen acquisition, net debt is expected to be approximately zero; however, this is subject to change. Post-closing, future liquidity is expected to be further supported by a $20 million revolving line of credit. Going on to Page 9; as Angie noted earlier, the continued net course registration growth at APUS and enrollment growth at Hondros drove strong increases in revenue at both operating units. For the fourth quarter of 2020, consolidated revenue increased 15.5% as compared to the prior period. In our APEI segment, APUS revenue increased 13.5%, and our HCN segment revenue increased 31.8% compared to the prior year quarter. In the fourth quarter, costs of expenses were $76.2 million, an increase of $10.4 million or 15.8% compared to $65.8 million in the prior year period. This increase was primarily due to increases in employee compensation costs, advertising costs, professional fees, and information technology costs in our APEI segment and increases in employee compensation costs and instructional materials costs in our HCN segment, partially offset by a decrease in advertising costs in our HCN segment and bad debt expense in our APEI segment. Consolidated instructional cost and services expenses increased approximately $3.1 million to $31.1 million, and as a percentage of revenue decreased to 36.2% compared to 37.7% in the prior year period. The increase in instructional cost and services expenses was primarily due to increases in employee compensation costs and instructional material costs in both our APEI and HCN segments. Selling and promotional expenses increased approximately $4.2 million to $19.2 million, and as a percentage of revenue increased to 22.4% compared to 20.2% in the prior year period. The increase in selling and promotional expenses was primarily due to increases in advertising costs and employee compensation costs in our APEI segment, partially offset by a decrease in advertising costs in our HCN segment. General and administrative expenses increased approximately $3.9 million to $22.7 million, and as a percentage of revenue increased to 26.5% from 25.5% in the prior period. The increase in general and administrative expenses is primarily the result of increases in professional fees and information technology costs in our APEI segment. In the fourth quarter of 2020, general and administrative expenses included $1.2 million in professional fees associated with the Rasmussen acquisition. Fourth quarter consolidated bad debt expense was $1.0 million or 1.1% of revenue in 2020 compared to $0.9 million or 1.3% of revenue in 2019. Depreciation and amortization expenses decreased approximately $0.8 million to $3.0 million, and as a percentage of revenue decreased to 3.5% of revenue from 5.2% in the prior year period. Operating income for the fourth quarter of 2020 increased by $1.1 million to $9.7 million compared to operating income of $8.6 million in the prior year period. Consolidated net income for the quarter increased 25% to $7.1 million or $0.47 per diluted share compared to net income of $5.7 million or $0.37 per diluted share in the prior period. Adjusted EBITDA for the three months ended December 31, 2020, was $15.8 million compared to $13.4 million in the prior period. For the three months ended December 31, 2020, and 2019, adjusted EBITDA excludes non-cash compensation expense as well as the disposal of long-life assets and M&A related professional fees. A reconciliation of EBITDA and adjusted EBITDA to the net income, the comparable GAAP financial measure is included in the tables of our earnings release under the caption GAAP net income to adjusted EBITDA. Going on to Page 10, for the full year 2020, consolidated revenue increased 12.4% year-over-year to $321.8 million. In our APEI segment, APUS revenue increased 11.2% year-over-year to $285.8 million and HCN segment revenue increased 22.4% to $36.1 million. For 2020, costs and expenses include the following items on a pretax basis: a $10.4 million increase in advertising costs in our APEI and HCN segments, $5.6 million in information technology costs related to our information technology transformation program, and $5.0 million in professional fees associated with strategic growth opportunities, including the Rasmussen acquisition, both in our APEI segment. For 2019, costs and expenses include the following on a pretax basis: approximately $2.8 million in employee compensation costs for post-employment benefits payable to the former APUS President upon his retirement, and $2.1 million in information technology costs related to our information technology transformation program in our APEI segment and a non-cash impairment of goodwill of $7.3 million in our HCN segment. For the full year 2020, operating income increased $12.0 million to $24.8 million, and net income increased $8.8 million to $18.8 million or $1.25 per diluted share. Cash flow from operations for the 12 months ended December 31, 2020, increased 16.7% to $44.8 million compared to $38.4 million in the prior year period. Capital expenditures were approximately $4.9 million for the 12 months ended December 31, 2020, compared to $7.3 million in the same period of 2019. Total cash and cash equivalents as of December 31, 2020, were approximately $227.7 million compared to $202.7 million as of December 31, 2019. Going on to Page 11. APEI's outlook for the first quarter of 2021 is as follows: At APUS, the course registrations by new students are expected to increase approximately 13% year-over-year and total net course registrations are expected to increase approximately 9% year-over-year. This will represent the sixth consecutive quarter of year-over-year registration growth at APUS. At Hondros, new and total enrollment is expected to increase by 45% year-over-year. In the first quarter of 2021, we expect consolidated revenue to increase approximately 18% year-over-year with year-over-year increases in both our APEI and HCN segments. The company expects net income to be between $6.4 million and $7.3 million and net income per diluted share to be between $0.39 and $0.44. Adjusted EBITDA is expected to be between $13.8 million and $14.7 million in the first quarter of 2021. A reconciliation of EBITDA and adjusted EBITDA to net income, the comparable GAAP financial measure is included in the tables in our earnings release under the caption GAAP outlook net income to outlook adjusted EBITDA. Now I will turn the call back over to Angie for closing comments.

Angela Selden, CEO

Thank you, Rick. As you can see from our first quarter guidance, we expect our momentum to continue into 2021. Our priorities for 2021 include building on our successful enterprise transformation, focusing on an effective integration of Rasmussen University, and driving growth, especially in our core military, veterans and nursing segments. We believe there is ample room for growth in these markets where we enjoy a defendable leadership position. Our ongoing technology modernization and anticipated integration of Rasmussen utilizing our shared services platform are both expected to help us increase operating efficiency and drive growth through scale, synergies, and improved student outcomes. Most importantly, all of these efforts are highly aligned with our mission to help learners of all backgrounds maximize their higher education return on investment, or HEROI. We are working to build a high-quality scale platform in higher education. One that is uniquely affordable, flexible, and inclusive. We believe this focus will drive sustainable growth and operating leverage and help us maintain an attractive regulatory profile. To briefly comment on the recent 90/10 legislation, we understand that the Senate version that is currently under consideration in the House for approval keeps the ratio at 90/10 versus shifting it to 85/15. As we have shared, based on the current 90/10 calculation methodology, we currently meet the 90/10 ratio when our TA and VA revenue are included in the 90 calculation. We also understand that the first measurement year is currently proposed to be in 2023, which we believe gives us sufficient time to address any mix changes inorganically through acquisition or organically as required. In closing, by building durable institutions of higher education, we are creating momentum and energy focused on setting adult learners on the path toward achieving their dreams by providing them with the skills necessary to maximize the return on their higher education investment. With that, I'd like to ask the operator to please open the line for questions.

Operator, Operator

Our first question comes from Stephen Sheldon with William Blair. Your line is open.

Stephen Sheldon, Analyst

Hey, thanks. At APUS, can you talk about the strategy for how you'll continue to better serve active duty military and veterans? What do you need to do to sustain improved growth there? And what dynamics have you seen in terms of the per learner engagement in courses taken within those populations?

Angela Selden, CEO

Hey, Stephen, I'll start, and then I'll ask Rick to continue to comment. So we're really excited about the active duty military segment. So a couple of things that you called out, first of which is that we believe that there is room in the 2Q reimbursement that they currently enjoy to be able to take additional course registrations down what they do say. So we see organic growth from the student population that we currently serve. Second, our marketing segmentation and the micro-market work that we've done has identified populations inside of the active duty military where we see increased persistence and retention and creates really great opportunities for us to continue to attract and serve that military population. Let me turn it over to Rick and see if he has any additional comments on the question.

Rick Sunderland, CFO

Just a couple of things, Stephen. So number one, we are seeing momentum in terms of the number of courses that our military and military affiliated students are taking. So we're building some momentum there. I would add by adding the relevant courses that are meaningful to the active duty military and then having a broader course curriculum that really serves the needs of everyone, including the veteran's population. We continue to be very relevant in those populations. The other item I would mention is, we've implemented what we're now calling the freedom grants for our graduate military students in January of 2020. So that's really creating momentum as it eliminated out-of-pocket costs for that population that they previously had to pay, which is driving some momentum at that graduate military level. So we would expect to see that continue.

Stephen Sheldon, Analyst

Got it. That's really helpful. Maybe just as a follow-up. Clearly, really strong growth acceleration over the last year; I know you're only providing guidance for the first quarter, but can you maybe frame at a high level how you're thinking about growth over the remainder of the year, especially as you face some tougher comparisons starting in the second quarter for both APUS and in Hondros?

Angela Selden, CEO

Let me turn that question over to Rick.

Rick Sunderland, CFO

Yes. So Steve, we're going to stick with our one-quarter metric. But I would say that the second quarter will be more challenging. Obviously, we're going to have a more challenging comparison in the second quarter, but the things that we're doing, as we just described, lists for the military have enduring value and are going to continue to lift those registrations whether it's at that current pace or just last because some of that is indeed due to COVID. But we have great confidence that we're going to continue to see momentum at APUS in registrations. And then, what can you say about Hondros and Harry and his team, up 34/34 in the fourth quarter and up 45/45 in the first quarter? That team is quite competent themselves in the fourth quarter and in the first quarter.

Angela Selden, CEO

If I could just add that we also believe the micro-targeting that we're doing with the veteran's community will show acceleration because it's a larger addressable market, and they typically will enroll in more courses on an annual basis than some of our other segments. It's a very attractive market, and we're seeing early momentum from our efforts in the veterans' market.

Stephen Sheldon, Analyst

Great. Thank you.

Operator, Operator

Our next question comes from Greg Pendy with Sidoti. Your line is open.

Greg Pendy, Analyst

Hey, thanks for taking my question. Just real quick on Hondros, just given the momentum and it continued into the first quarter. How should we be thinking about what the capacity is, and are you going to eventually run into some capacity constraints at Hondros in terms of, I guess, just the total number of students?

Angela Selden, CEO

Sure. Thanks for the question. I'll start, and then Rick, if there's anything you'd like to share. One of the things is – you hate to really say that anyone is benefiting from the impact of COVID, but one of the things that the COVID pandemic has done for Hondros is really driven a lot of operating efficiency in the delivery model, both from an admission and enrollment perspective, but also in terms of academic delivery. So even though we've had to move the labs and practicums to CDC guidelines for social distancing, because as we've moved much of the academic work – coursework online, it's freed up the facilities to be able to use them in a much more robust way for labs and practicums. Certainly, as we continue to see enrollment momentum growing, we have considered taking on additional temporary space in order to be able to conduct those labs and practicums for the students that are taking their coursework online. And we don't see any restrictions right now on our ability to do that; we don't see any constraints on enrollment growth that we would come to expect from Hondros because of any kind of facility constraints. Anything else, Rick from your perspective?

Rick Sunderland, CFO

Yes. I would just add to that. Yes, that really addresses it at the campus level. And Greg, as you know, we're going to begin offering courses in Akron, Ohio in April of this year. We're already at sites in Southern Michigan, suburbs of Detroit, and plan to open a campus in 2022. So we will sustain that momentum by utilizing the leverage we have, as Angie described, as well as opening new campuses which expand the overall capacity of the school.

Greg Pendy, Analyst

That's very helpful. Thanks.

Operator, Operator

Your next question comes from Raj Sharma from B. Riley. Your line is open.

Raj Sharma, Analyst

Hello. Hi, congratulations guys on a solid quarter and some good guidance. I just had a couple of questions on the new course registration. Is there a sort of a breakdown if military did better than veterans or civilians, and any color there?

Angela Selden, CEO

Thanks for the question, Raj, and thanks for the accolades. So I'll share perspectives on the interest level, and then I'll turn it over to Rick for any kind of additional commentary. We're seeing favorable momentum for our military affiliated in associate's degrees, bachelor's and master's degrees. We're seeing that same momentum in our active duty military. We're also seeing a lot of interest from the non-military students, particularly in our certificates. I can turn it over to Rick and he can add any other details you'd like to share based on the question.

Rick Sunderland, CFO

Yes, that's exactly right, Angie. Generally, I don't have anything to add; that's where the highest level of interest is coming from.

Raj Sharma, Analyst

And thank you. And then is this outlook and the rise in starts here largely due to the improved marketing and the sort of micro-targeting that you're talking about, or is the uncertainty in the economy playing any parts here?

Angela Selden, CEO

I think we think it's a combination of many factors; certainly the marketing we're trying to be very deliberate about the students that have the attributes that we see as high persisters and completers. Number two, we see that we served; I believe 88% of our students are working adults. So we believe that career advancement is also a key theme in how our students think about education amplifying and accelerating their careers. Certainly, the way in which we have addressed the out-of-pocket costs in particular for the graduate students in the active duty military has been a big contributor in 2020 of that momentum.

Raj Sharma, Analyst

Got it. And then I may have missed the – you were talking – you spoke just briefly on the 90/10 reclassification, I think – so just to confirm your numbers would, including military and veterans, would be under 90%?

Angela Selden, CEO

That is right. Assuming that's because that remains the methodology as calculated today, yes, we are under 90%.

Raj Sharma, Analyst

Got it. And then there has been a lot of talk by the administration making community colleges free. Could you kind of touch upon a little bit? What the impact of that on your starts and registrations would be?

Angela Selden, CEO

Sure. There again, I'll turn it over to Rick or Steve for any additional commentary. Typically, that community college student isn't necessarily our target market, right? Again, 88% of our students are adult learners who are working adults, and oftentimes the community college structure just doesn't work for them. So community college is typically oriented towards a younger student that has more availability. We will pay careful attention to the idea of free community college. But we also see oftentimes that a two-plus-two progression, where students complete their community college work and then move to complete their four-year degree, is a highly attractive progression to APUS in particular because of its online accessibility.

Rick Sunderland, CFO

Raj, this is Rick. That last point is really important. The vast majority – first of all, associate's degrees are a minority in APUS's database. But a lot of the vast majority of our students come in with transfer credits, and the students that are the most successful are the ones that come in with at least nine transfer credits. So if you think about getting a solid experience at a community college, proving your academic abilities, and then transferring those credits to APUS, I think it's a powerful combination. I think there's really an argument to be made that if you can really increase successful students at community colleges, APUS is an online successor to that progression beyond community college, which could benefit us. It really doesn't detract from us, and it could actually be some significant tailwinds pushing us forward.

Raj Sharma, Analyst

Got it. Thank you. And then I have one last question on just post this recent raise of close to $80 million – close to $90 million of net proceeds. Any thoughts around the change in capital structure? I know that when you announced Rasmussen you've been talking about taking on that amount of debt and the preferred, is there now enough cash to do most of the transaction in cash? Does that change your outlook on how you would finance the acquisition at all?

Angela Selden, CEO

Rick, you take that.

Rick Sunderland, CFO

Yes. Sure, I'll take that. No, it doesn't, Raj. We're committed with Macquarie Capital to the $175 million in Term Loan B. We would have flexibility even without the capital raise to replace the preferred with cash, which we're evaluating. So we've bolstered our ability to do that, but what it really does is it just increases our liquidity, right? To the extent the cash is there, it will reduce our net debt, which we think is good, and it gives us flexibility to look at other smaller acquisitions because there are things that we want to do. I'll let Angie or Steve comment on that last piece. But no, I don't think we’re still going to take the long-term debt. We think it's a prudent amount of debt. It's not excessive, and it just gives us flexibility to do other things.

Raj Sharma, Analyst

Great. Does it give you the flexibility to perhaps lower the cost of capital on that debt?

Rick Sunderland, CFO

In theory, it does, right. More equity should translate to better pricing on that debt, but I guess we'll see.

Raj Sharma, Analyst

Okay. Well, thank you. That’s it. Thanks a lot again. Congratulations on the solid numbers and outlook.

Angela Selden, CEO

Thank you, Raj.

Operator, Operator

Our next question comes from Austin Moldow with Canaccord Genuity. Your line is open.

Austin Moldow, Analyst

Hi. Thanks for taking my questions. You mentioned that the $10 million incremental marketing spend was not likely to be replicated this year. So can you talk about what level you do expect? Is it going back down to 2019 levels or did you mean it would be sort of flat at 2020 levels? And can you also talk about how you've spent that historically, as it pertains to the mix between APUS and HCN? And what that might change to with Hondros and Rasmussen under one roof?

Angela Selden, CEO

You bet. Thank you for the question. I'm going to turn it over to Rick because he does have that historical perspective and can talk about that next split.

Rick Sunderland, CFO

Right? So, if you look back to periods prior to 2020, we were in the kind of 19%, 20% of revenue range; that number jumped up to, in the fourth quarter, I think it was closer to 22%. To answer your question, we're going to keep spending to produce the results, right? We're balancing customer acquisition with lifetime value. We're looking for a return on that investment, but we said we're not going to continue to spend at that level. We're not going to regress to the earlier levels; we will probably spend somewhere in between.

Austin Moldow, Analyst

Got it. Thank you for that. And can you maybe talk a little bit about the dynamics of the rest of the marketing funnel, how the growth is trending and what your conversion to course registrations and new enrollments has been recently?

Angela Selden, CEO

Great question. We have put a keen focus on every step, starting with lead generation all the way through enrollment and then re-enrollment and persistence. Our students can, with APUS, enroll in a single course at a time. So making sure that they have a great first course experience and re-enroll is a big focus for us. We have had a deep analysis across each step along that student acquisition, I call it our supply chain, to make sure that we are doing all that we can to maximize the conversion of every lead that comes in at the top of the funnel. We're really working to bring out enrollment momentum from every lead that we can. That's going to continue to be a focus of improvement for APUS through 2021.

Austin Moldow, Analyst

Great. Thanks for the color.

Operator, Operator

There are no further questions at this time. I turn the call back over to Chris for closing remarks.

Chris Symanoskie, Vice President of Investor Relations

Thank you, operator. Well, that will conclude our call for today. We wish to thank you for listening and for your continued interest in American Public Education. Good evening, everyone.

Operator, Operator

This concludes today's conference call. You may now disconnect.