Q4 2023 American Public Education Inc Earnings Call

Okay.

Operator: Good afternoon, my name is Jeanne, and I will be your conference operator today. I would like to welcome you to the APEI reports fourth quarter 2023 results conference. All lines have been placed on mute to prevent any background noise.

Good afternoon, My name is Jamie and I will be your conference operator today.

We'd like to welcome you to the a P E. I reports fourth quarter 2023 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 would like to ask a question during that time simply press star followed by the number one on your telephone keypad if.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Chris Semenovsky, Investor Relations. You may begin your call. Good afternoon, everyone.

If you would like to withdraw your question Press Star one again.

I would now like to turn the call over to Chris <unk> Investor Relations you May begin your conference.

Great. Thank you operator, good afternoon, everyone and welcome to American Public Education Conference call to discuss fourth quarter 2023 results.

Chris Semenovsky: Welcome to American Public Education's conference call to discuss. Joining me on the call today are Angela Selden, President and Chief Executive Officer, Rick Sunderland, Executive Vice President and Chief Financial Officer, and Steve Summers, Senior Vice President and Chief Strategy and Corporate Development Officer. Materials for the call today are available in the events and presentation section of APEI's website. Statements made during this conference call and in any accompanying presentation regarding APEI and its subsidiaries that are not historical facts may be forward-looking statements based on current expectations, assumptions, estimates, and projections. Forward-looking statements may sometimes be identified by words such as anticipate, believe, seek, estimate, can, may, plan, should, will, would, and similar or opposite words.

Joining me on the call today are Andrew Sullivan, President and Chief Executive Officer.

Rick Sunderland Executive Vice President and Chief Financial Officer, and Steve Summers, Senior Vice President and Chief strategy and corporate development Officer.

Materials for the call today are available in the events and presentations section of <unk> website.

Statements made during this conference call.

And then any accompanying presentation regarding <unk> and its subsidiaries that are not historical facts may be forward looking statements based on current expectations assumptions estimates and projections and forward looking.

Statements may sometimes be identified by words, such as anticipate.

Believe seek could.

Estimate expect can may plan should will would and similar or opposite work.

Chris Semenovsky: Forward-looking statements include, without limitation, statements regarding expectations for registrations and enrollments, revenue, earnings, and Adjusted EBITDA, and Other Earnings Guidance, initiatives to improve NCLEX pass rates and reposition Rasmussen University for growth and other company initiatives, including with respect to future competition and demand and cost-saving efforts. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Forward looking statements include without limitation statements regarding expectations for registration and enrollment.

Revenue earnings and adjusted EBITDA and other earnings guidance.

Initiatives to improve <unk> pass rates and reposition rasmuson University for growth and the other company initiatives, including with respect to future competition and demand and cost saving efforts.

Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or.

Or implied by such statements.

Chris Semenovsky: These include, among other statements, the company's dependence on the effectiveness of its ability to attract students who persist and are likely to succeed, and the ability to effectively market programs or expand in new markets. The Reduction, Elimination, Suspension, or Discontinuation of Tuition Assistance. Changing market demands, economic and market conditions, the ability to meet regulatory and creditor requirements, and the impacts thereof, challenges with acquisitions, the company's ability to meet cost savings goals, matters related to debt and preferred stock, and risks described in today's presentation, today's press release, APEI's Form 10-K for 2023, and other S The company undertakes no obligation to update publicly any forward-looking statements for any reason unless required by law.

These include among other statements the company's dependence on the effectiveness of its ability to attract students who persist and are likely to succeed.

The ability to effectively market programs or expand in new markets.

The reduction or elimination suspension or disruption of tuition assistance.

Changing market demands economic and market conditions, the ability to meet regulatory and creditor requirements and the impacts thereof.

<unk> with acquisition, the company's ability to meet cost savings goals.

<unk> related to debt and preferred stock.

And risks described in today's presentation today's press release.

<unk> Form 10-K for 2023 and other SEC filings.

The company undertakes no obligation to update publicly any forward looking statements for any reason unless required by law.

Chris Semenovsky: This presentation contains references to non-GAAP financial information. A reconciliation between the non-GAAP financial measures we use and the most directly comparable GAAP measures is located in the appendix to today's presentation and in the earnings press 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. Now, I'd like to turn the call over to APEI's CEO, Angela Selden. Angie, please go ahead.

This presentation contains references to non-GAAP financial information.

A reconciliation between the non-GAAP financial matter measures, we use and the most directly comparable GAAP measures is located in the appendix to today's presentation and in the earnings release.

Management believes that the presentation of non-GAAP financial information provides useful supplemental information to investors regarding its results of operations and should only be considered in addition to and not a substitute for or superior to any measure of financial performance prepared.

In accordance with GAAP now I would like to turn the call over to <unk> CEO Angela Selden Angy. Please go ahead.

Angela K. Selden: Thank you, Chris. Good afternoon, and thank you for joining American Public Education's fourth quarter 2023 earnings call. Today, I am pleased to share details about three key themes. First, APEI has outperformed fourth-quarter 2023 guidance on all financial metrics, with better-than-expected performance from American Public University System, Rasmussen University, and Hondros College of Nursing. Second, Rasmussen and Hondros both have meaningfully improved pre-licensure NCLEX student outcomes for Q4 and full year 2023.

Thank you Chris Good afternoon, and thank you for joining American public Education's fourth quarter 2023 earnings call.

Today I am pleased to share details about three key themes.

First <unk>.

<unk> has outperformed fourth quarter 2023 guidance on all financial metrics with better than expected performance from American public University system.

Rasmussen University, and Honduras College of nursing.

Second Rasmussen and Honduras.

Both have meaningfully improved pre licensure and collect student outcome for Q4 and full year 2023.

Third we are initiating full year revenue and adjusted EBITDA guidance for 2024.

Angela K. Selden: We are initiating full-year revenue and adjusted EBITDA guidance for 2024. This is a reflection of our confidence in the outlook for 2024 and with investment areas that prioritize growth, Academic Quality, and Student Success.

A reflection of our confidence in the outlook for 2024 and with investment areas that prioritize growth Act.

Academic quality and student success.

Angela K. Selden: Before I provide more details on those three key themes, I would like to first recognize the extraordinary efforts of our faculty and staff across each of our education units and at APEI. They are delivering on our vision of transforming lives, advancing careers, and improving communities. I am particularly proud of our entire team's ability to respond to the year's difficult challenges and their relentless efforts to improve student outcomes.

Before I provide more details on those three key themes I would like to first recognize the extraordinary effort of our faculty and staff across each of our education units and at API.

They are delivering on our vision of transforming lives advancing careers and improving communities.

I am, particularly proud of our entire team's ability to respond to the year's difficult challenges and their relentless effort to improve student outcomes.

Angela K. Selden: These efforts have resulted in remarkable improvements in 2023 and set the course for continued growth in 2024 and beyond. Now turning our attention to fourth-quarter 2023 results, APEI's financial and operating performance exceeded guidance on all metrics.

These efforts have resulted in remarkable improvements in 2023 and set the course for continued growth in 2024 and beyond.

Now turning our attention to fourth quarter 2023 result.

<unk> financial and operating performance exceeded guidance on all metrics.

Angela K. Selden: APEI's revenue exceeded the top end of our guidance range, reaching $152.8 million, and adjusted EBITDA exceeded our guidance by more than 50%, reaching $25.7 million, which is $8.8 million above the high end of the range and marking the second consecutive quarter of meaningful adjusted EBITDA outperformance. I am particularly proud of how our education units have contributed to the outperformance, with APUS achieving record EBITDA margins and both Rasmussen and Hondros delivering positive EBITDA results. Earnings per share also saw significant growth, rising from a loss of 35 cents in the prior year period to a gain of $0.64 per diluted share in the fourth quarter. This 4Q23 financial and operating performance also reflects our continuous improvement efforts, driven by operational changes we implemented throughout 2023. These changes include enhancing our marketing efficiency across all EU countries.

Revenue exceeded the top end of our guidance range, reaching $152 8 million and adjusted EBITDA exceeding our guidance by more than 50%.

<unk> $25 $7 million, which is $8 8 million above the high end of the range and marking the second consecutive quarter of meaningful adjusted EBITDA outperformance.

I am, particularly proud of how our education units have contributed to the outperformance with <unk> achieving record EBITDA margins and both rasmuson Alejandro delivering positive EBITDA results.

Earnings per share also saw significant growth rising from a loss of 35.

In the prior year period.

Two a gain of 64 cents per diluted share in the fourth quarter.

This <unk> 23 financial and operating performance also reflects our continuous improvement efforts.

Driven by operational changes we implemented throughout 2023.

These changes include enhancing our marketing efficiency across all EU.

Angela K. Selden: Right sizing the cost structure to our revenue base, and in particular within Rasmussen, and successfully executing on the APEI shared services transformation that we began a year ago. Now, let's turn our attention to APEI's education units, starting with APUS. In 4Q23, overall net course registrations increased 4% year over year to 90,700 registrations, which was at the top of our guidance range. APUS's strength with the military resulted in active duty registrations increasing by 5%, while veteran registration showed continued momentum with 13% year-over-year growth. A testament to the strong military franchise that AMU has built, non-military registrations continue to be sought in both the competitive labor and higher education markets for those students.

Right sizing of the cost structure to our revenue base and in particular within Rasmussen.

And successfully executing on the API shared services transformation that we began a year ago.

Now, let's turn our attention to Api's education units, starting with <unk>.

In <unk> 'twenty three overall net course registrations increased 4% year over year to 9700 registrations, which was at the top of our guidance range.

<unk> strength with the military resulted in active duty registrations, increasing by 5%, while that's been registration show continued momentum with 13% year over year growth.

A continued testament to the strong military franchise that AMU has built.

Non military registrations continue to be soft.

In both the competitive labor and higher Ed markets for those students.

Angela K. Selden: The 4% increase in registrations in the quarter, combined with the positive impact of pricing actions earlier in 2023, partially offset by the mixed shift to lower revenue military enrollment, resulted in an 8% increase in revenue at APUS. However, this strong revenue performance, coupled with cost containment and lower marketing spend, resulted once again in strong margin improvement in the fourth quarter, with EBITDA increasing to $27.7 million from $20.6 million just a year ago. This resulted in a 35% margin for the quarter as compared with 28% in the prior year period. Looking ahead to the first quarter of 2024, we expect total registrations at APUS to again increase year over year, but at a slightly slower pace than 2023's very strong performance. I am proud to report that last month, AMU was named the 2024 Institution of the Year by the Council of College and Military Educators. CCME is known for its dedication to educating active duty service members and their families. AMU was selected from over 2,000 institutions. This is the second time in 12 years that AMU has been honored with this award.

The 4% increase in registrations in the quarter combined with the positive impact of pricing actions earlier in 2023, partially offset by the mix shift to lower revenue military enrollments.

<unk> and an 8% increase in revenue at <unk>.

However, this strong revenue performance, coupled with cost containment and lower marketing spend resulted once again in strong margin improvement in the fourth quarter with EBITDA, increasing to $27 7 million from $26 million, just a year ago.

This resulted in a 35% margin for the quarter as compared with 28% in the prior year period.

Looking ahead to the first quarter of 2024, we expect total registrations at Apus to again increase year over year, but at a slightly slower pace than 2023 is a very strong performance.

I am proud to report that last month AMU was named the 2020 for institution of the year by the Council of college and military educators Cc.

<unk> for its dedication to educating active duty service members and their families.

AMU was selected from over 2000 institutions.

This is the second time in 12 years that AMU has been honored with this award.

Angela K. Selden: From a regulatory perspective, APUS met the Department of Ed's 90-10 rule for 2023 with a ratio of 89 percent. As a reminder, 2023 was the first year that Military Tuition Assistance and Veterans Education funding were included in the 90 portion of the calculation. Turning our attention to Rasmussen, the team delivered in 4Q23 the best bottom-line performance in a year with positive EBITDA of $409,000, even while enrollments decreased 10% in the quarter. Additionally, on-ground nursing and health ed programs showed strong growth, including the BSN program, up over 20 percent. Raffles enrollments were finalized for the first quarter of 2024, and overall enrollment decreased just 6% as compared with double-digit declines for each of the last four quarters.

From a regulatory perspective apos met the department of Ed 90, 10 rule for 2023 with a ratio of 89%.

As a reminder, 2023 was the first year that military tuition assistance and veterans Education funding were included in the 90 portion of the calculation.

Turning our attention to Rasmussen.

The team delivered in <unk> 'twenty three the best bottom line performance in a year with positive EBITDA of $409000.

Even while enrollments decreased 10% in the quarter.

Additionally, on ground nursing and health AD program showed strong growth, including the BSN program up over 20%.

Rapid enrolments are finalized for the first quarter of 2024, and overall enrollment decreased just 6% as compared with double digit declines for each of the last four quarters.

Angela K. Selden: Online enrollments were slightly positive, while on-ground healthcare enrollments declined 11%, driven primarily by declines in Rasmussen's ADN program. Please note that to more closely align our public reporting with how Rasmussen has been operating the university internally since the reorganization in late 2022, we will discontinue our public reporting of nursing versus non-nursing, effective next quarter, and shift to campus healthcare versus online reporting instead. For compatibility, we've included a table in the appendix of our 4Q23 earnings presentation. As for Rasmussen's 4Q23 NCLEX results, based on final scores reported for all states except Wisconsin, which has not yet reported, but where Rasmussen expects all four programs to pass. Rasmussen's on-ground pre-licensure nursing programs achieved or surpassed the respective state threshold for 26 of 29 programs, or 90% of all programs, in the fourth quarter of 2023.

Online enrollments were slightly positive while on ground Harold healthcare enrollments declined 11% driven primarily by declines in <unk> ADN program.

Please note that to more closely align our public reporting with how <unk> has been operating the university internally since the reorganization in late 2022, we will discontinue our public reporting of nursing versus non nursing effective next quarter and shift to <unk>.

Campus healthcare versus online reporting instead.

For compatibility we've included a table in the appendix of our <unk> 23 earnings presentation.

As for Rasmussen, <unk> 23, and <unk> results based on final scores reported for all states, except Wisconsin, which has not yet reported but we're rasmussen expect all four programs to path.

Rasmussen on ground pre licensure nursing programs achieved or surpassed the respective state threshold for 26 of 29 programs or 90% of all program in the fourth quarter 2023.

Angela K. Selden: This was up from about 80% in the third quarter and considerably up from 60% a year ago for the entire year 2023 measurement period. 20 of 29 programs, or about 70%, passed, which includes the preliminary results for Wisconsin, and that is over 20 points higher than a year earlier. Importantly, the trend has improved steadily each quarter since 1Q23, even as Rasmussen has delivered much better scores over the past year.

This was up from about 80% in the third quarter and considerably up from 60% a year ago.

For the entire year 2023 measurement period.

<unk> of 29 programs or about 70% past, which includes the preliminary results for Wisconsin.

And that is over 20 points higher than a year earlier.

Importantly, the trend has improved steadily each quarter since <unk> 23.

Even as Rasmussen has delivered much better scores over the past year.

Angela K. Selden: Rasmussen's Bloomington, Minnesota ADN program has continued to perform below state standards. As a result, Rasmussen has taken the difficult decision to voluntarily close the ADN program at this campus, effective in 1Q24, and has received approval from the Minnesota Board of Nursing to teach out this program by the end of 2Q24. Rasmussen had already stopped enrolling new students in the Bloomington ADN program as of the last quarter, and we expect minimal impact on enrollments and revenue given that fewer than 50 students will still be in the program upon closing. While this has been a difficult decision to make, Rasmussen remains committed to offering strong nursing programs in the Twin Cities.

Rasmussen Bloomington, Minnesota ADN program has continued to perform below state standards.

As a result rasmuson has taken the difficult decision to voluntarily closed the ADN program at this campus.

<unk> and <unk> 24, and has received approval from the Minnesota Board of nursing to teach out this program by the end of <unk> 'twenty four.

Rasmussen had already stopped enrolling new students in the Bloomington ADN program as of the last quarter, and we expect minimal impact on enrollments and revenue given that fewer than 50 students will still be in the program upon closing.

While this has been a difficult decision to make rasmuson remains committed to offering strong nursing programs in the twin cities as such rasmuson will focus on attracting BSN students to that location instead, where rasmussen has reported in over 90% and <unk> pass rates for BSM.

Angela K. Selden: As such, Rasmussen will focus on attracting BSN students to that location instead, where Rasmussen has reported an over 90% NCLEX pass rate for BSN students in the most recent quarter. This pivot to BSN also reflects the high demand for BSN nurses in the Twin Cities healthcare market relative to ADN nurses. Rasmussen expects further growth in its non-ADN health ed campus-based programs, and the institution's more targeted programmatic marketing efforts are helping to drive improved enrollment in these areas by streamlining processes for identifying and attracting new students. At Hondros, it delivered record enrollment of 3,300 students in the first quarter of 2024, surpassing 3,000 enrolled students for the second consecutive quarter. Demand remains strong for its PN and ADN nursing programs, with the new Detroit campus continuing to perform very well. Legacy campuses, including Indianapolis, while still operating with enrollment caps as a new program, have also contributed to growth.

In the most recent quarter.

This pivot to BSN also reflects the high demand for BSN nurses in the twin cities healthcare market relative to ADN nurses.

Rasmus and expect further growth in its non ADN health Ed campus based programs and the institution's more target targeted programmatic marketing efforts are helping to drive improved enrollment in these areas by streamlining processes for identifying and attracting new students.

At Handros it delivered record enrollment of 3300 students in the first quarter of 2024.

Surpassing 3000 enrolled students for the second consecutive quarter.

Demand remains strong for is Pn and ADN nursing program with the new Detroit campus continuing to perform very well.

Legacy campuses, including Indianapolis, while still operating with enrollment cap as a new program also contributed to growth.

Angela K. Selden: This robust enrollment growth has driven a strong top line, with revenue growing 25% in the fourth quarter of 2023 and 21% for the full year of 2023. During 2023, Hondros implemented a modest price increase in the second quarter, reduced headcount to optimize operating costs, and delivered positive EBITDA of $1.1 million in the fourth quarter, compared to a loss of $700,000 in the prior year period. This represented a 7% margin, and with that strong fourth quarter performance, Hondros delivered positive adjusted EBITDA for the year of $400,000 as compared to a loss last year. Hondros maintained its track record of achieving high NCLEX scores in its PN program in 2023 and, for the first time since 2014, has also reached the passing criterion for its RN program in Ohio. This achievement sets the stage for Hondros to have the opportunity to expand its ADN-RN program to Indianapolis and Detroit, where that program is not currently offered. Additionally, in 2024, Hondros plans to begin offering a medical assisting program at all its Ohio campuses.

This robust enrollment growth has driven a strong top line with revenue growing 25% in the fourth quarter 23, and 21% for the full year 2023.

During 2023, Honduras implemented a modest price increase in the second quarter.

We reduced head count to optimize operating costs and delivered positive EBITDA of $1 1 million in the fourth quarter compared to a loss of $700000 in the prior year period.

This represented a 7% margin and with that strong fourth quarter performance, Honduras delivered positive adjusted EBITDA for the year of $400000 as compared to a loss last year.

Honduras maintained its track record of achieving high <unk> scores and its Pn program in 2023 and for the first time. Since 2014 has also reached the passing criterion for its RN program in Ohio.

This achievement sets the stage for Honduras to have the opportunity to expand its ADN RN program to India, Indianapolis, and Detroit, where that program is not currently offered.

Additionally, in 2020 for Honduras plans to begin offering a medical assisting program at all Honduras, Ohio campuses. This will increase utilization of both these locations and prospective student leads and will lead to increased access to health care education for.

Angela K. Selden: This will increase utilization of both these locations and prospective student leads and will lead to increased access to health care education for the local community population, which will also improve profitability. I would now like to turn our attention briefly to 2024. We are pleased to provide full-year 2024 guidance for revenue and adjusted EBITDA. For revenue, we expect a range of $610 to $620 million, and for adjusted EBITDA, we expect a range of $55 to $65 million. In 2024, we are investing in several initiatives that we believe will strengthen our market position, set the stage for improved student experience and success, and will lead to additional growth. These areas include APUS, which is both investing in curriculum modernization to improve student experience and satisfaction, and has announced the first part-time faculty wage increase in 14 years. Hondros is relocating two campuses and has plans to add programs to increase access and to better meet the needs of its students and health partners in the local community.

The local community population, which will also improve profitability.

I would now like to turn our attention briefly to 2024.

We are pleased to provide full year 2024 guidance for revenue and adjusted EBITDA.

For revenue, we expect a range of $610 million to $620 million.

And for adjusted EBITDA, We expect a range of $55 million to $65 million.

In 2024, we are investing in several initiatives that we believe will strengthen our market position set the stage for improved student experience and success and will lead to additional growth.

These areas include <unk>, which is both investing in curriculum modernization to improve the student experience and satisfaction.

And has announced the first time first part time faculty wage increase in 14 years.

Han growth is relocating two campuses and has plans to add programs to increase access and to better meet the needs of its students and health partners in the local communities.

Angela K. Selden: APEI, which is modernizing and optimizing our enterprise technology platform to improve the student experience, includes the technology transition for Rasmussen from Collegiates and the upgrade of the training platform at GSUSA. In closing, it remains my top priority to attract and retain strong leaders across APEI and our education universities. Operational Enhancement and to foster a culture of excellence and trust among our internal and external stakeholders to uphold the educational promises we make to over 107,000 students each year. Before turning the call over to Rick Sunderland, our CFO, I'd like to summarize by saying while challenges remain and our efforts to address them are ongoing, 1Q24 guided, coupled with the fourth quarter's outperformance, signifies a return to year-over-year growth and profitability and improved visibility.

API, which is modernizing and optimizing our enterprise technology platform to student experience includes the technology transition for Rasmussen from collegiate and the upgrade of the training platform.

USA.

In closing it remains my top priority to attract and retain strong leaders across API.

And our education unit.

To drive operational enhancements and to foster a culture of excellence and trust among our internal and external stakeholders.

Uphold the educational promises we make to over 107000 students each year.

Before turning the call over to Rick Sunderland, our CFO I'd like to summarize by saying while challenges remain and our efforts to address them are ongoing or <unk> 24 guidance, coupled with the fourth quarter's outperformance.

<unk>, a return to year over year growth and profitability and improved visibility.

Angela K. Selden: Tangible proof points, whether enrollment trends, profitability metrics, or NCLEX scores, reflect the steps we have taken to strengthen our schools and the overall enterprise. Having exceeded our revenue and adjusted EBITDA outlook for each of the last two quarters, we are well positioned as we enter 2024. Our entire APEI team recognizes the significance of the challenges we have faced and is energized by how we have come together to strengthen our organization to prepare for the next phase of our journey.

Tangible proof points, whether enrolment trends profitability metrics or <unk> scores reflects the steps we have taken to strengthen our schools and the overall enterprise.

Having exceeded our revenue and adjusted EBITDA outlook for each of the last two quarters, we are well positioned as we enter 2024.

Our entire API team recognizes the significance of the challenges we have faced and are energized by how we have come together to strengthen our organization to prepare for the next phase of our journey.

Angela K. Selden: As we begin 2024, we do so from a position of stability, with a large and growing addressable market, a committed leadership team, a distinctive value proposition, and a well-established franchise among service-minded adult learners. With that, let me turn the call over to APEI's CFO, Rick Sunderland. Thank you, Angie.

As we begin 2024, we do so from a position of stability with a large and growing addressable market a committed leadership team a distinctive value proposition and a well established franchise amongst service minded adult learners.

With that let me turn the call over to <unk> CFO Rick Sunderland.

Thank you Angie.

Richard W. Sunderland: Looking at our fourth quarter 2023 financial results, total revenue for the quarter was 152.8 million, up 0.4 million or 0.2% from the prior year period and better than our fourth quarter guidance. Fourth quarter revenue growth was driven by increased revenue at APUS and Honduras, partially offset by revenue declines at Rasmussen and Graduate School. For the quarter, Adjusted EBITDA was also above our previously issued guidance due in part to lower than expected advertising costs in the quarter at APUS and Rasmussen and lower than expected compensation costs. For the quarter, Adjusted EBITDA was $25.7 million, compared to $15.4 million in the prior period. The current quarter results represent an adjusted EBITDA margin of 16.8% compared to 10.1% in the prior quarter, reflecting the modest revenue growth in the quarter combined with lower advertising and marketing costs and lower compensation costs due to the third quarter reduction in force. Compared to the prior quarter, in total, advertising and marketing costs decreased $10.7 million year over year.

Our fourth quarter 2023 financial results total revenue for the quarter was $152 8 million up $4 million or 2% from the prior year period and better than our fourth quarter guidance fourth quarter revenue growth was driven by increased revenue at <unk> and <unk>, partially offset by revenue declines at Rasmussen.

And graduate school for.

For the quarter adjusted EBITDA was also above our previously issued guidance due in part to lower than expected advertising costs in the quarter at Apus and Rasmussen and lower than expected compensation costs for the quarter. Adjusted EBITDA was $25 7 million compared to $15 4 million in the prior year period.

The current quarter results represent an adjusted EBITDA margin of 16, 8% compared to 10, 1% in the prior year quarter, reflecting a modest revenue growth in the quarter combined with lower advertising and marketing costs and lower compensation costs due to the third quarter reduction in force.

Compared to the prior quarter in total advertising and marketing costs decreased $10 7 million year over year.

Richard W. Sunderland: Our diluted EPS in the fourth quarter was $0.64, a significant improvement from the loss of $0.35 in the prior year period and again exceeding fourth quarter guidance. At APUS, revenue was $79.4 million in the fourth quarter, up 8.1% as compared to the prior year due to continued growth in net course registrations from students utilizing TA and VA education funding and the impact of tuition and fee increases implemented in the second and third quarters of 2023. APUS continued to achieve more with less. For the quarter, net course registrations increased 4% on lower advertising and marketing costs of $1.8 million compared to the prior year. For the year 2023, advertising and marketing costs were $6.8 million lower than the prior year.

Our diluted EPS in the fourth quarter was 64.

A significant improvement from a loss of 35.

In the prior year period, and again exceeding fourth quarter guidance.

And <unk> revenue was $79 4 million in the fourth quarter up eight 1% as compared to the prior year due to continued growth in net course registrations from students utilizing ta and VA education funding and the impact of tuition and fee increases implemented in the second and third quarters of 2023.

If you have continued to achieve more with less for the quarter net course registrations increased 4% on lower advertising and marketing costs of $1 8 million compared to the prior year.

For the year 2023 advertising and marketing costs was $6 8 million lower than the prior year.

Richard W. Sunderland: APUS EBITDA for the fourth quarter was $27.7 million compared to $20.6 million in the prior year, an increase of 34% year-over-year. APUS EBITDA margin for the quarter increased to 35% compared to 28.1% in the prior year period. At Rasmussen, fourth-quarter revenue was $52.6 million, a decrease of 13.4% compared to the prior year due to lower enrollment during the quarter. However, the rate of revenue decline improved in the fourth quarter as compared to the third-quarter decline of 15.4%. Rasmussen's EBITDA turned positive in the quarter and was $0.4 million compared to an EBITDA loss in the prior year period. Fourth quarter EBITDA benefited from lower advertising expenses and labor savings from the previous reduction in force. For the quarter, advertising and marketing spend was $4.5 million lower than the prior quarter.

Adjusted EBITDA for the fourth quarter was $27 7 million compared to $20 6 million in the prior year, an increase of 34% year over year.

<unk> EBITA margin for the quarter increased to 35% compared to 28, 1% in the prior year period.

At Rasmussen fourth quarter revenue was $52 6 million a decrease of 13, 4% compared to the prior year due to lower enrollment during the quarter. However, the rate of revenue decline improved in the fourth quarter as compared to the third quarter decline of 15, 4%.

Restaurants is EBITDA turned positive in the quarter and was <unk> 4 million compared to an EBITDA loss in the prior year period fourth quarter EBITDA benefited from lower advertising expense and labor savings from the previous reduction in force for the quarter advertising and marketing spend was $4 5 million lower than the prior year quarter for.

Richard W. Sunderland: For the year 2023, advertising expense was $11.1 million lower than the prior year. At Honduras, revenue was $15.8 million for the fourth quarter, up 24.9% as compared to the prior year due to continued growth in enrollment. For the quarter, Honduras' total enrollment grew 19.2% to approximately 3,100 students, the highest enrollment ever.

The year 2023 advertising expense was $11 1 million lower than the prior year.

At high gross revenue was $15 8 million for the fourth quarter up 24, 9% as compared to the prior year due to continued growth in enrollments for the quarter <unk> total enrollment grew 19, 2% to approximately 3100 students the highest enrollment ever for the quarter progress achieved positive EBITDA.

Richard W. Sunderland: For the quarter, Honduras achieved positive EBITDA of $1.1 million compared to an EBITDA loss of $0.7 million in the prior quarter. Graduate school, included in corporate and other, experienced a 10% decline in revenue to $5.1 million, primarily due to lower enrollments in the quarter. Graduate school enrollments continue to be negatively impacted by the continuing federal agency funding uncertainty over federal funding, either through continuing resolutions or the passing of annual funding legislation. For the quarter, Graduate School's EBITDA loss was $1.1 million, compared to an EBITDA profit of $0.1 million in the prior period.

$1 1 million compared to an EBITDA loss of $7 million in the prior year quarter Greg.

Graduate school included in corporate and other experienced a 10% decline in revenue to $5 1 million, primarily due to lower enrollments in the quarter.

So school enrollments continue to be negatively impacted by the continuing federal agency funding uncertainty over federal funding either through continuing resolutions, where the passing of annual funding legislation for the quarter graduate schools EBITDA loss was $1 1 million compared to an EBITDA profit of <unk> $1 million in.

The prior year period.

Richard W. Sunderland: At December 31, 2023, cash equivalents and restricted cash were $144.3 million, an increase of $14.9 million from year-end 2022. Reserved cash at December 31 was approximately $27.7 million and continues to be almost entirely comprised of a restricted certificate of deposit that secures a letter of credit for Rasmussen with the Department of Education. For the year 2023, cash flow from operations was $45.5 million, an increase of $16.3 million, or plus 55.8% as compared to the prior year. The increase in cash and cash flow was primarily due to higher revenue and operating income at APUS, increased payments received from the Army, including payments related to periods prior to 2023, and the timing of other receipts and payments, partially offset by our investment in capital expenditures, payment of preferred dividends, Principal on API's term loan at December 31 is unchanged from the prior year and at approximately $99 million. With unrestricted cash at approximately $117 million, API continues to be net cash positive. Additionally, there are no borrowings under API's $20 million revolving credit facility, which remains fully available.

At December 31, 2023, cash cash equivalents and restricted cash was $144 3 million an increase of $14 9 million from year end 2022.

Restricted cash at December 31 was approximately $27 7 million and continues to be almost entirely comprised of a restricted certificate of deposit that secures a letter of credit for Rasmussen with the department of education.

For the year 2023 cash flow from operations was $45 5 million, an increase of $16 3 million or plus 55, 8% as compared to the prior year.

The increase in cash and cash flow was primarily due to higher revenue and operating income at Apus increased payments received from the army, including payments related to prior periods prior to 2023, and the timing of other receipts and payments, partially offset by our investment in capital expenditures payment of preferred dividends.

Repurchases of common stock and the change in billing approach in the fourth quarter for Ta at Apus.

Principal principal on Api's term loan at December 31 is unchanged from the prior year end at approximately $99 million with unrestricted cash at 100 at approximately 117 million API continues to be net cash positive. Additionally, there are no borrowings under Apis 20 million.

Revolving credit facility, which remains fully available.

Richard W. Sunderland: During the fourth quarter, we repurchased 1.7 million of our common stock, bringing our repurchases in 2023 to 1.5 million shares for $9.7 million or an average price of approximately $6.40. In addition, we repurchased an additional 251,000 shares in the first quarter of 2023 for $2.8 million. So, over the past year, we've repurchased an aggregate of 1.76 million shares for $12.5 million at an average price of approximately $7.08.

During the fourth quarter, we repurchased one 7 million of our common shares common stock, bringing our repurchases in 2023 to one 5 million shares for $9 $7 million or an average price of approximately.

$6 40.

In addition, we repurchased we repurchased an additional 251000 shares in the first quarter of 2023 for $2 8 million. So over the past year, we've repurchased an aggregate of $1 76 million shares for $12 5 billion at an average price of approximately.

$7 eight.

Richard W. Sunderland: Turning now to the first quarter, 2024 Outlook, APUS net course registrations are expected to be between 97,000 and 99,000 registrations, an increase of between 1% and 3% over the prior period. At Rasmussen and Hondros, first quarter student enrollments are actual because of the quarterly starts at these schools. At Rasmussen, first quarter total on-ground enrollment decreased 11% to approximately 6,300 students, while total online student enrollment increased 1% year-over-year to approximately 7,200 students, for an aggregate enrollment decline of approximately 6% year-over-year to approximately 13,500 students. At Honduras, first quarter total student enrollment increased 22% year-over-year to approximately 3,300 students, the highest enrollment ever at Honduras.

Turning now to the first quarter 2020 for outlook.

Net course registrations are expected to be between 97 at 99000 registrations and increase of between 1% and 3% over the prior year period at.

<unk> first quarter student enrollments are actual because of the quarterly start to these schools.

Rasmussen first quarter total on ground enrollment decreased 11% to approximately 6300 students while total online student enrollment increased 1% year over year to approximately 7200 students for an aggregate enrollment decline of approximately 6% year over year to approximately 13000.

500 students.

At <unk> first quarter total student enrollment increased 22% year over year to approximately 3300 students the highest enrollment ever at hydrous.

Operator: In the first quarter of 2024, consolidated revenue is expected to be between $151 million and $153 million. The company expects its net loss to common shareholders to be between $4.4 million and $3.0 million, or a loss between $0.25 and $0.17 per diluted share. Adjusted EBITDA is expected to be between $8 million and $10 million for the first quarter of 2024. For the full year 2024, we anticipate consolidated full-year revenue of between $610 million and $620 million and adjusted EBITDA of between $55 million and $65 million. With that, Operator, we would like to open the line for questions. If you would like to ask a question, press star followed by the number one on your telephone keypad.

In the first quarter of 2024 consolidated revenue is expected to be between $151 million to $153 million.

The company expects net loss to common shareholders to be between $4 4 million at $3 <unk> million or a loss between <unk> 25.

At <unk> 78 per diluted share adjust.

Adjusted EBITDA is expected to be between $8 million and $10 million for the first quarter of 2024.

For the full year 2024, we anticipate consolidated full year revenue of between $610 million and $620 million and adjusted EBITDA of between $55 million and $65 million.

With that operator, we would like to open the line for questions.

If you would like to ask a question press star followed by the number one on your telephone keypad.

Jasper James Bibb: Your first question comes from the line of Jasper Bibb with True Securities. Your line is open. Hey, good evening.

Your first question comes from the line of Jasper Bibb with true Securities. Your line is open.

Hey, good evening nice results here I guess the obvious question is you did a really strong 17% EBITDA margin in the fourth quarter and I guess, that's always kind of a seasonally strong.

Jasper James Bibb: Nice results here. I guess the obvious question is, you know, you achieved a really strong 17% EBITDA margin in the fourth quarter. And I guess that's always kind of a seasonalally strong margin in the fourth quarter, but the guide implies a 10% margin or so. So I guess you mentioned the growth investments earlier, but how do we bridge the 4Q margin exit rates where you're diving in 24? Well, Jasper, the fourth quarter is seasonally strong, and by giving an indication of adjusted EBITDA for the year, you can see a sort of an increase year-over-year in that margin, but we're investing in a number of initiatives, which Angie outlined in her remarks. Importantly, course improvement, faculty salaries, and technology. I think those are the three primary areas of investment, and they're all going to lead to improved student experiences and improved student outcomes. Angie, would you like to comment further? I would just say bridging, which would be looking back at 4Q of 23, Jasper. A couple of things just to highlight. First, we were able to conserve our marketing spend and spent about $3 million less than we had expected.

In the fourth quarter, but the guide implies a 10% margin ourselves. So I guess you mentioned the growth investments are aware, but how do we bridge the <unk> margin exit rates, where you're guiding in 2004.

Well just for the fourth quarter is seasonally strong.

By giving an indication of adjusted EBITDA for the year, you can see sort of increase year over year of that margin.

But we've invest we're investing in a number of initiatives, which <unk> outlined in her in her remarks.

Importantly course.

Improvement in faculty salaries and technology I think those are the three primary areas of investment.

And Theyre, all going to lead to improved student experience and improve student outcomes as you would like to comment further.

I would just say bridging which.

I would be looking back at <unk> 23, Jasper a couple of things as to to highlight.

First we were able to convert conserve our marketing spend.

And and spent about $3 million less than we had expected.

Angela K. Selden: At the same time, we had been accruing a somewhat larger bonus accrual than what we ended up spending for the year, so that saved some money and obviously resulted in a higher performance in the fourth quarter than we had originally forecasted. We had some revenue outperformance at APUS above what we had expected and lower expenses at HONDRO. All of those things added up to a very favorable 4Q 23 that was above what we had guided to before. Got it.

At the same time, we had been accruing a somewhat larger bonus accrual than what we ended up spending for the year. So that saved some money and obviously resulted in a higher performance in the fourth quarter than we had originally forecasted and and.

And we had some revenue outperformance at <unk> above what we had expected and lower expenses at <unk>. So all of those things added up to a very favorable <unk> 23 that was above what we had guided to before.

Got it would there be any way to frame.

Richard W. Sunderland: Would there be any way to frame the size of those growth investments and like an absolute dollar perspective versus, I guess, what would be considered normal or what you're spending in those categories in 2020? I think at this point, right from a guide standpoint, the metrics we're comfortable providing are revenue and just EBITDA and obviously CapEx. You know, we're not prepared at this time to kind of dig into that level of detail and bridge from 23 to 24, right?

The size of those growth investments in like an absolute dollar perspective versus I guess, what would be considered normal or what you are spending in those categories in 2023.

Yeah, Hi, Jasper, Steve I think at this point right from a guidance standpoint.

The metrics, we're comfortable providing a revenue just EBITDA obviously capex.

We're not we're not prepared at this time to kind of dig into that level of detail.

Enbridge from 23 to 24 and it will also depend on some of the timing.

Richard W. Sunderland: And it will also depend on some of the timing of when that happens. So, you know, there's a range that we've got internally, but I think that's captured in the overall guidance range that we provided for adjusted EBITDA. Well, fair enough; I figured I'd ask.

When that happens so.

There is a range that we've got internally, but I think that's captured.

In the overall guidance range that we provided for adjusted EBITDA.

No fair enough I figured I'd ask.

Jasper James Bibb: Maybe next one for me, it looks like the receivables balance picked up quite a bit in the fourth quarter with some of the billing changes at Army. Would you expect those DSOs to normalize down in the first half of 2024? And, longer term, like how do you plan to manage that? I think it's 26 million in receivables from Army for 2022 and 2023 in light of 9010 compliance. Thanks.

Maybe next one for me it looks like the receivables balance picked up quite a bit in the fourth quarter with some of the billing changes at army when.

Would you expect those.

Dsos to normalize down in the first half of 2024, and I guess longer term like how do you plan to manage that I think it's $26 million in receivables from army for 'twenty, two and 'twenty three.

In light of 90 10 compliant.

Richard W. Sunderland: Well, Jasper, we talked about a change in our billing policy effective January 1, and we will see a normalization in receivables, you'll see a decline from the year-end number, and I don't think you'll see a return to where we were at June 30. So because we've changed the timing of how we bill the military. Okay.

Well, Jeff we talked about a change in our billing policy effective January one we will see a normalization in receivables youll see a decline from the year end number I don't think Youll see a return to where we were at $2 30 simply because we've changed the timing of how we bill.

Military.

Yeah.

Okay understood.

Jasper James Bibb: And I guess maybe at the segment level, and doesn't have to be particularly specific, but just any color on how you're thinking about segment margins for your main three segments in 2024. Yeah, Jasper, I think the way I think about the various segments, right, we're not providing segment-level detail, but we expect that we'll see improvement, you know, at Hondra's graduate school and Rasmussen. APIS is relatively flat, and that reflects some of the investments that Angie just talked about in terms of technology and curriculum and quality improvement. So, I think you should also think, from a sequential flow or a quarterly flow perspective, that our quarters will follow a similar pattern as to what we delivered in 2023. That's really helpful. Thanks, guys. Your next question comes from the line of Stephen Sheldon with William Blair. Your line is open.

And I guess, maybe at the segment level and it.

It doesn't have to be like particularly specific but just any color on how youre thinking about.

Margins for your main three segments in 2024.

Yes, Jeff I think the way to think about the.

The various segments right, we're not providing segment level detail, but we expect that we'll see improvement.

Andres Graduate school and.

Rasmussen Apus is relatively flat and that reflects.

Some of the investments that Andrew just talked about in terms of technology and.

And curriculum and quality improvement.

I think you should also think from a sequential flow or quarterly flow perspective that our quarters will follow a similar pattern as to what we delivered in 2023.

That's really helpful. Thanks, guys.

Okay.

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

Matthew R. Filek: Hey team, you have Matt Filek on for Steve and Sheldon. Thank you for taking my questions. I wanted to start with one on NCLEX pass rates. I was wondering if you could talk about what the main driver of the improving first-time NCLEX pass rates has been, given you have a variety of initiatives underway there. And then, as a second part to that, could you also talk about what campuses may still be facing enrollment caps due to underperforming NCLEX scores, whether those be self-imposed or from the nursing board? Thanks for the questions.

A team you have Matt <unk> on for Stephen Sheldon. Thank you for taking my questions.

Wanted to start with one on <unk> pass rates I was wondering if you could talk about what the main driver of the improving first time <unk> pass rates has been given you have a variety of initiatives underway. There and then as a second part to that could you also talk about what campuses may still be facing.

<unk> caps due to underperforming <unk> scores, whether those be self imposed or from the nursing boards.

Thanks for the question.

Angela K. Selden: The first thing I will answer by saying, If you recall, earlier last year, we did hire new leadership in our nursing program at Rasmussen. And what Dr. Palifko has implemented includes strengthened faculty onboarding and training to provide more visibility to help students have awareness around the importance of NCLEX exams early in the curriculum. The second was that we invested at Rasmussen in student success coaches to help strengthen the NCLEX preparation that was already present on the campuses. We implemented assessments during the middle and end of the program to help give students remediation strategies, identify areas of focus, and help them really pinpoint the areas that they needed to pay attention to as they prepared for the NCLEX exam.

First I will answer by saying.

If you recall earlier last year, we did hire new leadership in our nursing program at Rasmussen and with Doctor Politico has has implemented include.

Our strengthened faculty Onboarding and training to provide more visibility to helping students have awareness around that.

The importance of MPLX exams early in the curriculum.

The second was that we invested at Rasmussen in student success coaches.

To help.

Strengthen the <unk> preparation that was present at the campuses already.

We implemented assessment during the middle and end of the program to help give students remediation strategies identify areas of focus and help them.

Really really pinpoint the areas that they needed to pay attention to as they prepared for the uncollected Tam.

And certainly the changes to the overall <unk>.

Angela K. Selden: And certainly, the changes to the overall NCLEX exam to NextGen have seen NCLEX scores increase across the nation. The second part of your question is, which campuses are affected by enrollment caps? As we've mentioned previously, Kansas has caps, but those are not related to NCLEX scores or anything that we've imposed. It's simply a programmatic level cap, which we intend to explore in 2024. Illinois has a cap that has historically been present as a result of... More about the accreditation, the full accreditation of the program than the NCLEX scores themselves. Recently, and we talked about this in our last call, the Illinois Legislature and Board of Nursing have removed the temporary approval, and Rasmussen has been granted the accreditation for its program in Illinois, and the state of Illinois has removed any kind of penalty that any, any nursing programs in Illinois would have expected as So those are very meaningful, important developments for our four campuses in Illinois. And then, as we discussed, we have only had caps in the Bloomington, Minnesota ADN program, which, as you heard from our voluntary action, will no longer be relevant as we phase out that program over the course of 2024. Okay, I got it.

<unk> exam to Nextgen has has seen the end credit scores increase across the nation.

The second part of your question is with campuses are affected by enrollment cap.

As we've mentioned previously Kansas has cap, but those are not related to end credit scores or anything that we've imposed it's simply a programmatic level cap, which we intend to.

To explore in 2024.

Illinois has a tap that had historically been present as a result of.

More about the.

The accreditation of the full accreditation of the program than the than the <unk> scores themselves.

Recently, we talked about this in our last call the Illinois Legislature board of nursing have.

Removed.

<unk>.

The temporary approval and Rasmussen has been granted the accreditation.

<unk> for its program in Illinois, and the state of Illinois has removed the any kind of.

Penalty that any any nursing programs in Illinois would have expected as a result of lower than state average <unk> scores and as a result.

It has three years now to meet the state standard for nursing.

Nursing program. So those are very meaningful important developments for our four campuses in Illinois, and then as we discussed.

We have.

Only had cap in Bloomington, Minnesota, ADN program, which as you heard from our voluntary action will.

No longer be relevant as we teach out that program over the course of 2024.

Okay got it Super helpful overview, Angie. Thank you for that and then just wanted to circle back on the 90 10 rule note was briefly touched on.

Matthew R. Filek: Super helpful overview, Angie, thank you for that. And then just wanted to circle back on the 9010 rule. It was briefly touched on in a previous question, but can you just talk about the options you have to reduce risk related to the 9010 rule in 2024, especially given it looks like APUS was close to exceeding that threshold in 2023. Right, so there are numerous initiatives, and this is Rick, there are numerous initiatives that will bolster the 10 side of that 90-10 ratio, right? So sources of non-federal funds. I would point out that there were several initiatives that were implemented in 2023, which had a favorable impact on that 2023 number. But because they were implemented throughout the year, some in the second half of the year, we haven't seen the full benefit.

In a previous question, but can you just talk about the options you have to reduce risk related to the 90 10 rule in 2024, especially given it looks like.

POS was close to.

Exceeding that threshold in 2023.

Right. So there are numerous and this is Rick there are numerous initiatives that will bolster the Penn side of that 90 10 ratio right. So sources of non federal funds.

I'd point out that there are several initiatives that were implemented.

In 2023, which had a favorable impact on that 2023 number but because they were implemented.

Through the year and some in the second half of the year, we haven't seen the full benefit.