Q1 2021 American Public Education Inc Earnings Call
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Good afternoon. My name is Christina and I will be your conference operator today at this time I'd like to welcome everyone to the <unk> first quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question during that time. Please press star then.
On the followed by the number one on your telephone keypad, if you'd like to withdraw your question press the pound key.
I will now turn it over to Mr. Chris <unk>, Vice President of Investor Relations. Thank you you may begin.
Thank you operator, good evening and welcome to American Public Education first quarter 2021 conference call materials that accompany today's conference call are available in the events and presentations section of our website.
Note that statements made in this conference call and in the accompanying presentation materials regarding American public education.
Subsidiaries for asthma and University that on.
Non 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 those expressed or implied by such statements.
Forward looking statements may be able to be identified by words, such as anticipate believe seek could estimate expect intend may plan should will and similar words or their opposites.
Forward looking statements include without limitation statements regarding the impact of recent disruption to the army's tuition assistance programs.
<unk> growth expected registration and enrollment.
<unk> revenue expected earnings income and EBITDA debt.
<unk> of the acquisition of <unk> University.
Closing of the acquisition and its timing.
Expected financial results for API, assuming the acquisition of brass muscle University expected capital structure net debt the ability to deliver a return on a learner's educational investment.
The ability to maintain an attractive risk profile plans with respect to recent current and future initiatives, including marketing expenditures and future demand for nursing education.
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 loss of <unk> ability to receive funds under department of defense tuition assistance programs or the reduction or elimination or suspension of tuition.
Since the.
The effects of <unk> response to the COVID-19 pandemic.
Moderation or decrease in demand as the pandemic abates the acquisition of <unk> monthly University on the risk factors described in the risk factors section and elsewhere in the Companys quarterly report on form 10-Q filed with the SEC. Today. In addition, the Companys. Most recent annual report on form 10-K.
And 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 as Steve Somers, Our senior Vice President Chief strategy, and corporate Development Officer, I'll now turn the call over to Angela Selden Angy.
Thank you Chris good evening everyone.
We are very pleased with <unk> first quarter 2021 results.
Both apus.
And Honduras College of nursing demonstrated robust enrollment momentum, resulting in strong financial performance.
As highlighted on slide three we reported very strong Q1, 'twenty, one financial and operating results at both Apus and Hangzhou.
For the sixth consecutive quarter net course registrations.
<unk> increased year over year, primarily driven by active duty military student and graduate student enrollment.
We also saw on momentum from the continued demand for online education due in part to the COVID-19 pandemic.
Net course registrations increased 10% year over year, driven by a 14% year over year increase in new net course registrations.
At high growth, new and total student enrollment increased 45% year over year in the first quarter of 'twenty one.
The improvement at high growth is due to the key operational initiatives implemented and continuously being refined since 2019. These.
These initiatives include a new direct entry ADN program and the implementation of high growth is affordability grants, which limit student out of pocket cost to $200 per month.
Honda has moved to a fully online admissions process, which facilitated student recruitment and onboarding.
All of these initiatives were implemented prior to the pandemic.
Additionally, we believe some growth continues to be attributed to an increase in demand for nursing education.
Change in the competitive landscape in our markets due in part to the pandemic.
I am also pleased to report that the National League for Nursing Commission for nursing education accreditation or NL, and EMEA granted accreditation to Honduras Indianapolis campus.
Back in January 13th 2021 now.
Now I will turn the call over to Rick Underlines <unk> CFO to discuss our first quarter financial results.
Thank you Angie going on to slide four.
As Andy noted the net course registration growth at Apus and enrollment growth in high growth drove strong increases in revenue at both operating units and drove a 19% increase in consolidated revenue.
Strong top line performance translated into strong margin expansion for the business with operating income margin rising to 12% from 336% a year ago.
Adjusted EBITDA increased 87% to $15 9 million from $8 5 million, while adjusted EBITDA margin improved by 700 basis points to 18% from 11%.
In our API segment, <unk> revenue increased 15% and in our HCN segment revenue increased 48% compared to the prior year quarter.
Cost of expenses for the three months ended March 31, 2021 were $77 9 million, an increase of $6 8 million or eight 3% compared to $71 9 million in the prior year period the.
The increase in costs and expenses were primarily due to increases in employee compensation costs advertising costs information technology costs and professional fees in our API segment and increases in employee compensation costs bad debt expense and instructional materials costs in our HCN segment.
Instructional costs and services expenses increased $3 1 million or 10, 6% to $32 3 million and as a percentage of revenue decreased to 36, 5% from 39, 2% in the prior year period.
The increase in instructional costs and services expenses was primarily due to an increase in employee compensation costs in our API segment and increases in instructional materials costs and employee compensation costs in our HCN segment.
Selling and promotional expenses increased $1 2 million or six 7% to $19 4 million and as a percentage of revenue decreased to 21, 9% from 24, 4% in the prior year period.
Advertising costs increased a total of <unk> 7 million and our API and HCN segments compared to the prior year period the.
The increase in selling and promotional expenses was primarily due to increases in advertising costs employee compensation costs and marketing support materials costs in our API segment and an increase in advertising costs in our HCN segment.
General and administrative expenses increased $2 5 million or 12, four zero percent to $23 5 million and as a percentage of revenue decreased to 26, 6% from 28, 1% in the prior year period the.
The increase in general and administrative expenses was primarily the result of increases in employee compensation costs information technology costs and professional fees on our API segment and increases in bad debt expense and employee compensation costs in our HCN segment.
First quarter consolidated bad debt expense was $1 5 million or one 7% of revenue compared to 1.0 million to one 3% on revenue in the prior year period.
Results for the first quarter 2021 includes the following costs on a pre tax basis.
$8 million in information technology costs related to our multi year technology transformation project and <unk> 5 million in professional fees associated with the RASK, perhaps less on acquisition in our API segment.
And a <unk> 7 million increase in advertising costs in our API and HCN segments.
For the three months ended March 31, 2020 included the following on a following costs on a pre tax basis.
<unk> $9 million of information technology costs related to our multi year technology transformation program, and <unk> 6 million associated with strategic opportunities in our API segment.
Depreciation and amortization expense decreased approximately <unk> 6 million to $2 7 million and as a percentage of revenue decreased to three 3% of revenue from four 5% of revenue in the prior year period.
Operating income for the first quarter of 2021 increased by $7 9 million to $10 6 million compared to operating income of $2 7 million in the prior year period.
Consolidated net income for the quarter increased to $8 1 million or <unk> 49 per diluted share compared to net income of $2 4 million or <unk> 16 per diluted share in the prior year period.
As noted adjusted EBITDA for the three months ended March 31, 2021 was $15 9 million compared to $8 5 million in the prior year period, adjusted EBITDA excludes noncash compensation expense loss on disposals of long lived assets and M&A related professional fees, most of which was related to <unk>.
<unk> planning for Rasmussen, a reconciliation of EBITDA and adjusted EBITDA to net income the comparable GAAP financial measure is included in the table of our earnings release under the caption GAAP net income to adjusted EBITDA.
During the first quarter of 2021, API closed its previously announced underwritten public offering of common stock.
<unk> sold three 680000 shares of its common stock in the offering resulting in $86 2 million in net proceeds. In addition, API completed the syndication of its committed financing facility comprising $175 million term loan B to fund a portion of the purchase of Rasmuson universe.
City, and a $20 million revolving line of credit.
The facility is expected to close in connection with the acquisition of Rasmussen in conjunction with the debt syndication.
<unk> received debt ratings of <unk> from Moody's double B minus from S&P cash.
Cash at March 31, 2021 was $320 8 million compared to $227 7 million at December 31.
At this time I will turn the call back to Andrew.
Thanks, Rick now moving to page five.
<unk> second quarter 2021 enrollment momentum continued with new student enrollment, increasing 37% and total student enrollment increasing 36% to 20 378 student another record for Honduras.
Additionally, beginning in Q2 'twenty one we welcomed the first cohort of students at hundreds of New Akron, Ohio campus, the seventh Congress campus.
Gross momentum combined with our pending acquisition of rapid from University will help accelerate our growth and create a scaled platform in nursing education to address the shortage of registered nurses in the U S.
On a pro forma basis in the last 12 months ending in March 2021 high growth and <unk> had $183 million of nursing revenue.
On the acquisition will add a number one market position and pre licensure nursing two the two existing number one position in active duty military and veterans education at Apus today.
Today pre licensure nursing education or the curriculum to create new nurses is roughly half of the $28 billion total nursing education market.
With the shortage of registered nurses in the United States.
And the demand for nursing education is expected to accelerate particularly for our pre licensure education.
As we work towards closing the acquisition of Raskin from University in late Summer 2021, I am pleased to report that wrap this is accrediting body, the higher learning commission or HFC.
<unk> focused site visits relating to the change in ownership application.
The HFC is expected to consider this matter at their June 2021 meeting, which is consistent with our timeline to complete their assets in acquisition in the third quarter of 2021.
Additionally, we have been keenly focused on executing a high quality integration process.
This includes best practice identification process analysis across all shared services functional areas.
Detailed sequencing and timing of integration activities as well as an emphasis on aligning culture and establishing clear communication. We have engaged third parties to assist us in these efforts and to help ensure that we provide a high quality experience for all constituencies student.
Faculty staff and shareholders.
This acquisition will be an important milestone in the history of our company as we've discussed since announcing the transaction rasmuson as a high quality institution with an attractive regulatory profile that has seen impressive gains in recent years as a result of continued enrollment growth in its nursing school and a focus on on.
Operating efficiency.
Importantly, <unk> is strongly aligned with our API mission, helping learners of all backgrounds maximize their higher education return on investment or ROI.
As we turn to page six.
As Rick will discuss in more detail shortly.
<unk> outlook for net course registrations in the second quarter is expected to be impacted by the temporary delay and suspension of the Army's new registration portal Army ignite ad.
Active duty Army soldiers are Apos's largest student segment, representing about one quarter of all apus registrations in 2020.
The army pre announced that the registration portal go Army add we'll go offline on February 11th.
A march 8th go live date for the new portal Army ignite at the.
The new portal came on line on Marty.
And after a few hours with taken down due to technical challenges.
The army did not make and has not made available the prior go army add portal.
Following armies continuing challenges in activating its new registration portal Apus registrations from the army in the month of April 2021 declined meaningfully year over year.
As of today. The current portal is currently undergoing a limited user test. However, the army has given no assurance.
When it will be fully operational.
Our best assessment at this stage is that the portal is expected to reopen in June 'twenty, one, but we can't confirm when the new program will be fully available.
While this was an unexpected disruption to the strong momentum and growth that we have been experiencing we believe that this is a temporary issue.
Even with the disruption and army Ta registrations.
Shows Q2, 'twenty, one total enrollment levels higher than pre COVID-19 levels in 2019, with a 7% two year CAGR.
Excluding army and based on the midpoint of our guidance.
Total net course registrations for all other student segments combined are expected to be positive in Q2, 'twenty, one compared to Q2 of 'twenty.
I will now turn the call back over to Rick to provide more detail and discuss what this means for our second quarter outlook.
Thank you Angie going on to page seven.
<unk> outlook for the second quarter of 2021 is as follows.
While the ongoing transition to army ignite Ed did not adversely affect registrations in revenue for the quarter ended March 31 Army enrollment subsequent to March 31 have been adversely impacted by this transition. We expect the continued disruption to army Ta and resulting decreases in army registrations to have an adverse impact on the <unk>.
Quarter because of the uncertainty created by this disruption, we will not be giving new student registration guidance. This quarter and we will provide a wider range on total net course registrations in our guidance.
In making that decision. We also we are also taking into account the general uncertainty in demand levels. As a result of the pandemic. We believe that it depend emmick debates demand will moderate and we expect our growth rate to flow.
Second quarter total net course registrations at Apus are expected to decrease by between minus 8% and minus 4% year over year on.
Institutions, serving active duty military rely on the ability of the army and the other branches of the armed forces to process service members tuition assistance or Ta two portals like army ignite Ed and from time to time changes to processes and systems have impacted service members ability to request da.
Please note that this is not the first time, we've experienced disruptions on Tia utilization for active duty military for example in 2019. The Navy suspended Ta funding from late May until September 30 of that year. Despite.
Despite these periodic disruptions.
And <unk> have grown market share over the long run and remain the number one provider of higher education to active duty military.
Also note that although army Ta represented approximately 17% of total API revenue in 2020 looking ahead, we anticipate army Ta would represent approximately 10% of total rental revenue on a pro forma basis with the acquisition of restaurants.
Turning to high growth that <unk> second quarter, new student enrollment increased 37% and total student enrollment increased 36% year over year.
In the second quarter of 2021 consolidated revenue is expected to decline between minus 5% and minus 3% year over year. The company expects net income to be between a loss of <unk> 8 million and positive $6 6 million and income.
Or on an earnings per share basis, a loss of <unk> <unk> per share.
Positive <unk> <unk> per share on.
On the range the fully diluted earnings per share the outlook for second quarter. Net income includes approximately 3 million to $4 million and integration planning costs related to the <unk> acquisition are approximately 12 to 16 per diluted share adjusted EBITDA is expected to be between $7 2 million and $9 2 million in.
The second quarter of 2021.
Now I will turn the call back to LNG to discuss our priorities for 2021 and to provide closing comments.
Thank you again Rick.
<unk> growing educational platform is uniquely affordable flexible and inclusive, which we believe will drive sustainable growth and operating leverage.
Our 2021 priorities are focused on driving the platform's growth, while staying keenly focused on student outcomes and academic quality. These.
These priorities are deeply aligned with our mission.
<unk> adult learners on the path toward achieving their dreams, while maximizing the return on their higher education investment or ROI.
We have aligned resources and management attention.
Again, three key pillars of value creation in 2021.
Driving sustainable growth in our core businesses.
There are large addressable market and where we enjoy a defensible leadership number one market position.
Acquiring and successfully integrating Rasmussen university to diversify our revenue sources and continue to capitalize on the secular growth in nursing and healthcare education.
And bolstering our digital transformation to create a distinctive student experience.
In summary at API, we are pleased with the high quality scale platform. We are building and look forward to updating you on the progress of our 2021 priorities on our next earnings call.
Before we open the line for questions I would like to personally thank Chris <unk>, Our vice President of Investor Relations for over 14 years of service and contribution to API.
Who will be leaving us after this earnings release.
Since our IPO in 2007, Chris has led our corporate communications and Investor Relations activities and has done so with the professionalism and accuracy, we all expect.
We wish him all the best in his next endeavor.
Operator, please now open the line for questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
And your first question comes from the line of Jeff Silber with BMO.
Thank you gentlemen, excuse me. Thank you so much.
Wanted to talk about this army disruption issue you mentioned some day and there I'm. Assuming this was something that you were not aware of when you reported your fourth quarter numbers.
Hi, Jeff I'm going to turn that question over to Rick.
So if we did learn a couple of weeks before.
The February 11th.
<unk> of the transition that that was the date that army would be.
Transitioning the period.
The blackout period was stated as.
February 11th two March 8th.
So the go live then.
Essentially coincided with our yearend and.
Year end earnings announcement, so they were right on top of each other.
As it relates to when the portal was announced to go back on line.
Okay, and you mentioned that these unfortunately happened in the past on I completely understand that.
You use. The example, I think it was on the Navy in 2019 and can you remind us what the impact was from these kind of disruptions. If you happen to have some range as that would be great.
Well, let me tell you this.
When you look at Army registrations and you compare those to Navy Army registrations looking at 2020 were about two five times the size of the Navy so while the Navy outage.
Existed for a period, probably similar to what we're seeing here the impact was smaller just because of the relative size of the two branches yes.
Yes, I guess I was referring to maybe the impact on the Navy. If you happen to have that handy if not I can follow up on <unk>.
Navy enrollment of course registrations well.
Jeff that was they just stopped funding so the impact was 100% we launched every single Navy registration during that period.
Here, we're still seeing new we're still seeing army registration. The army has something called an exception to policy. We would not we are not allowed under the Dod Mou to quote unquote voucher students they have to be approved for Ta before we can let them in the classroom.
So what the army has made an exception to that policy, where they've said.
All students can register with Us and net the army will retroactively.
We'll retroactively.
Yes.
Right. So we're we're submitting monthly list of students that were serving and the army will then match that up with students that are requesting ta once the once the.
Once the portal goes live on.
Also say similar to the Navy experienced back in 2019. These are matters that affect all schools that are a party to the Mou and serving students under the tuition assistance program right. So.
On the impact on us as the number one provider is is larger than others, but everyone else is going to be experiencing the same matters that we are.
Okay. That's really helpful. I really appreciate the color.
Keeping the conversation down on D C.
President Biding released the American families plan I.
I guess it was a few weeks ago I was talking about funding to community colleges I know that's not your exact competition, but do you think any of the things in his plan in terms of funding more towards nonprofit entities will impact your business going forward.
I'll start and then Rick if you want to add some details that would be great.
One of the questions that we've received in the past is about the Navy community card and what the Navy community cause may due to enrollment at Apus and what we're actually seeing positive momentum in our Navy registration even with the announcement of the Navy community College.
So as we've discussed before in that matter and I think is also true with.
With the broader community College initiative announced by the by the administration.
We see community College education as a pathway to.
Two completing their degree with with Apus, we offer a highly affordable way to complete their four year degree and Furthermore.
We also see that the.
<unk>.
The community College process.
Students prepare for the completion of their four year degree and so often times if we have.
Student, who may enroll with apus without a significant amount of Pryor.
On higher education and experience they don't always persist at the same rate. So we actually warmly embraced community college students because we really do believe that they've demonstrated persistent in their educational endeavors.
The size of that or about 18% of our registration.
At the associate level.
It's not it's not bachelors are the majority and so I've always been thinking about it as it is.
Opening pathways for students and as Andrew said when students come to us with an associates degree.
They've got that.
<unk>.
The associated level right college level.
And they tend to be better better students in terms of persistence and completion so.
We don't know what the impact on the true the college of the Navy is going to be but.
We are as David said, we are seeing some current momentum in the Navy and if it opens pathways for students to come to us with an associate's degree we find those to be.
Good students for us.
Thanks, Jeff.
And once again that is star one for any questions.
And your next question comes from the line of Tobey Sommer with tourists securities.
Thanks.
Just to delve into the.
So it's technology disruption.
Do you have.
Okay any prior experiences to know whether you'll have a sort of a surge in enrollment.
Okay.
This system is up and running in June.
Or do you just kind of perhaps go back to where you were before I'm really just trying to get us on where you think that.
There is pent up demand accumulating as a result of this.
Good question.
We do have prior experience in these matters and the good news is with our monthly starts service members. In this case soldiers who have been disrupted and many are still taking classes, but there is obviously a disruption of a meaningful nature.
Have the opportunity to price.
Process 30 day once the system goes live and start with US the first Monday of the following month.
That's the good news, we don't have a quarterly system, where if you're locked out the first month of the quarter, you've got to wait two months to start.
I don't think youre going to see a surge in demand. If you were going to take one course and you were unable to do so or chose not to do so it's unlikely you're going to take two courses with the system comes back online so.
We would see.
<unk>, who were unexpectedly and unfortunately delayed begin that registration process, but it's unlikely that they would increase the number that day that they would be taking immediately just because they were unable to take a class that's our experience.
I will say Tobey the one thing that we did see in Q1 was that there was meaningful momentum in our army segment.
So just returning to a level similar to what we saw in Q1, we have a very favorable result for the business.
On the soldiers are able to fully.
Engage with the new Florida.
Thanks, and at a localized level can you give us an update on.
Changes in the competitive environment, Honduras, and the Ohio marketplace.
How the debt.
Community colleges and other other kind of.
Our local competitors there has evolved and maybe.
<unk> gotten a little bit better at delivering more services.
The pandemic has worn off.
Yes.
Sure actually.
In many ways we are seeing.
The opposite of for example.
We continue to see that four year state institutions turning away.
Students once they've completed their general education, and not admitting them directly into the nursing program.
And so consequently, we are.
We have been able to attract many new.
Who and that was that program we call. The direct entry ADN program students, who have some higher education, who don't have to begin with the practical nursing degree that can come in.
And.
And start their registered nurse progression.
That's become a very popular onboarding tracker pathway as Rick described it.
To attract a new class of students into hundreds that are not being able to access other educational opportunities to become a new nurse in the state of Ohio. So we continue to see significant favorable momentum as a result of those limits that are.
Thats still exist both at the community college level as well as at the four year state schools.
I would add I mean, the second quarter guidance is strong credit and thats actual numbers because of the quarterly start system.
And Perry keeps reminding us that he is going to be comping against this on our numbers. So it continues to.
To perform well even against the numbers he was able to put up last year.
Thanks.
Just kind of wanted to ask a longer term question with respect to the <unk>.
Company's ability at Honda Us too.
Attract and retain educators.
That seems to be an area of bottleneck within the healthcare education market could you.
Maybe speak to that and any thoughts you have on new initiatives you could put.
Put in place to to continue to grow that resource.
Good idea.
Great question, and certainly something that.
It is.
Top of mind for us, making sure that we can create that great educational experience.
For our students as the number of students that we serve is growing.
Social distancing requirements have diminished somewhat but still create.
A different capacity maximum for some of our labs and practicum. So we continue to take advantage of the ability for students to take some of their coursework online which has given us.
Leverage with our with our existing faculty.
Created some creative solutions, which include.
Allowing us to have some of our full time nurses work part time as an educator.
And the third thing that we're seeing certainly is that as the as the pandemic.
Pandemic starts to subside.
Practicing nurses, who are really looking to take a pause.
And.
And perhaps provide an education.
Experience for students for a period of time, rather than being on the frontline.
It's not to say that where we are fully staffed.
We're in constant recruiting mode.
All of our campuses.
But we've done I think a very admirable job of.
On putting great faculty in front of our students even with the growing enrollment that we've seen over the last six quarters.
Thank you very much.
Thanks Tobey.
Your next question comes from the line of.
Greg <unk> with Sidoti.
Hey, guys. Thanks for taking my question can you just talk specifically about the military environment I guess, given the disruption that's going on right now and kind of market shares how that might be impacted because you mentioned, obviously that are there other people serving that industry that market will also be impact.
So can you just give us a little bit of color on that.
It will impact us.
Sure I'll start.
Im sorry, I Didnt mean to cut you off Greg do you want to finish your question no no I just wanted to I mean, obviously I was going to say, you're very levered to that that vertical, but just kind of how it will impact the landscape and maybe your personal or your market share.
Sure. So first of all I, just really want to make sure that for clarity purposes. The portal only his army. So it's not all branches of the new military and.
And we saw that.
Really meaningful positive momentum in all other branches on the military in Q2 of 'twenty, one so far based on what we've seen so far in the forecast.
We do know based on publicly available information that we are the number one provider of education to active duty military. So that's the umbrella of all the different branches.
But we do not have transparency around our position.
Serving and educating army soldiers specifically.
So we don't know where we rank, but we do know overall among all military branches that we are the number one educator.
I did mention that.
It is nearly a quarter of our.
Student enrollment in 2020, so you can deduce that it's a very meaningful part of our business and as Rick mentioned.
It is it is different from the Navy disruption, where the navy essentially shut off funds completely and no Navy soldiers could take.
On.
Could take courses without using a different kind of funding source. If they wanted to use a different funding source like FSA.
They could do so but their ta was not available in this case, we still have army.
Soldiers.
Taking courses, but not nearly at the levels that we've experienced in the last several quarter.
Yes, Greg I would add as I said earlier the portal applies to every institution.
And so I wouldn't expect it would we arranged debt.
Order of the of the chairs on the deck.
One is being impacted and David to your point there could be.
Variations in the level of disruption, but we have no indication of such as we talked to our peer institutions overall, we're all.
Going through the same thing.
I think yes, I think the other thing I would just add to this is.
One of the things we described when we announced the <unk> acquisition in October was the importance of diversification.
We are known as the number one provider of of active duty and veterans education.
We also wanted to make sure while preserving those number one positions that we on.
On behalf of the shareholders on.
Offer diversification and Thats why we believe the momentum that we're seeing in nursing and the acquisition of <unk>.
Help us.
Have a diminished reliance on.
Any branches in military.
In.
In the period of time after we have completed the acquisition of of Rasmussen.
That's very helpful. Thanks, a lot.
Thanks for your question Greg.
Your next question from from the line of Raj Sharma with B Riley.
Hi, good afternoon.
Okay.
Questions.
All relate to the portal.
Right now so.
So what has been gathered volume with the portal.
Are you seeing that.
Sure.
The portal administration.
As.
Communicating to the schools.
Hey, Raj it's Rick.
The communication is thin.
But what we can discern from from the various communications and some some verbal communication right, we have contracts to shell to radically.
It's a data conversion issue that the data conversion.
Somehow incomplete as we said earlier the few portal did come on line for a few hours and then was taken down.
So the best of our understanding it was a data conversion issue.
We've actually started exchanging files with the army in advance of this limited user test.
But I think there is still working on just the fundamentals of transferring data from the old system to the new system.
I would just add that.
The.
It is adding complexity to this process is it also a change in provider.
There is one provider providing go army add and that is sunsetting and a new provider is standing up army ignite AD and so that I think is adding complexity to this data conversion process.
Got it and then.
So the weighted on looking at 22% of new business.
2020 was on the in.
On the month of April saw a 25% decline so.
In the registrations.
The guidance, we're down less than 25% on 23, 6% decline.
In Boston the revenue decline is that.
Is that the impact and if it reopens.
Do you expect an impact on the following quarter at all.
On enrollment.
Well on the last part Rajiv it certainly depends on when it comes back online.
Our first start after June 30th as the first Monday of July I don't have a calendar up and obviously.
Students registered in advance of that start so.
We really don't have any visibility at this point, whether its going to come up the first week in June or the third week in June and that would have a.
A meaningful impact on.
The July registration.
In theory, if it comes back in June.
Partial recovery and then full recovery after that.
Right and then is this the right way of looking at his 23 percentage of business basically.
Past quarter of that business did not enroll.
Is not expected to enroll.
I think your math is directionally correct.
Okay, and then and then how does the cash flow get impacted.
You said that you can they can enroll and then you can apply to <unk>.
Tuition assistance.
Do you collect the tuition.
On the spot on the way I guess.
On the occurred.
On those sort of application.
From April for example.
That's correct. So we build we build each of the services has its own portal and the processing is different based upon the portal in the third party that that is processing invoices in the case of the army we bill in arrears. So it's after the start.
And.
The processing time.
Typically around 30 days.
Got.
Our backlog in the invoicing because the systems down in.
And it does affect cash flow.
But we feel comfortable at $329 million in cash what we're going to be able to work our way through that.
Once it comes back on line, we don't have any.
Experience with processing through Army ignite Ed that's number one so what I said about.
The cadence of payment may be altered.
And we also know that it would take more time to process. A backlog then it would concurrent processing right. So we would expect.
Cash flow impact related to the army.
And.
The portion of the business it is.
For for some period of time.
But we have we have plenty of cash cushion and we do believe that.
Processing will materially result, right there may be some bad debt expense above what we normally see but right now we don't view that as a significant matter.
Got it and then just my last question is on the debt syndication.
So the cash balance does not include any debt has not been funded debt rating will be funded concurred with the acquisition.
That's correct. We had also made $1 million right.
Tried before.
Well, we still have the option to replace the $29 million in preferred with cash.
But as it relates to the cash.
Associated with the debt.
We.
We have not funded debt right.
As we said in the Q. There is there's really two commitments we've made number one on theirs.
The OID right. So there is a underwriter fee that will come out of the net proceeds and then there are what we call. It ticking fees there are.
Amount that has to be.
That are committed if you will as advanced interest that will be paid at closing.
Right and then any sort of thoughts on.
There's going to be a substantial on a cash balance.
Post acquisition any thoughts on that.
Or.
Right. So I think you can you can.
Do some math on that so we've got $321 million, we've got roughly a quarter on a half.
To go we're going to add $175 million and then we repatriate hundred million on $329 million in cash and so I think if you do the pluses and minuses, you'll you'll find that we retained.
A lot of cash.
Alright, so purposely want to manage the business on that basis.
Alright, okay. Thank you so much I'll take my questions offline. Thank.
Thank you Raj Thank you Raj.
And your last question comes from the line of Tobey Sommer with true Securities.
Thanks, just a follow up question. Thank you for free.
Taking it on.
With respect to the <unk>.
Army portal are there any expense impacts we should think of is the timing plays out as you currently envision sort of with June normalizing such as for example, potentially.
On a spike in marketing as you've kind of revenue.
The courses back up.
Alert everybody that they can.
Get back to their education.
Tobey I don't think it would be a material amount on what we're really doing we've got our military outreach folks. There is roughly 25 of those that interact with Dsos Education service officers and then we've got our student facing teams and so what we're what we're planning is a communication effort that would include.
<unk>.
The individuals that are already on staff.
I haven't heard from Beth Laguardia, our CMO of any.
Outside of spending it.
Immediate launch of the <unk>.
The portal.
Hi.
Okay.
Thank you very much.
Thanks again Tony.
There are no further questions at this time, Mr. <unk> I will now turn the call back over to you.
Thank you operator 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.
And this concludes today's conference call. Thank you for participating and you may now disconnect.
Okay.
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