Q1 2025 American Public Education Inc Earnings Call
and Brian Prinovau. Thank you. Thank you.
Richard Sunderland, Steven Sunderland, Steven Sunderland
Tina: Thank you for standing by. My name is Tina, and I will be your Comfort Operator today. At this time I would like to welcome everyone to the API.
Tina: First quarter, earnings conference call. All lines have been placed on mute to prevent any background noise.
Tina: For the speaker's remarks, there will be a question and that suggestion. If you would like to ask a question during this 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. And I would now like to turn the call over to Brian Prenoveau. Please go ahead. Thank you.
Thank you and good afternoon everyone.
Brian Prinoveau: Welcome to American Public Education's conference call to discuss first quarter 2025 results.
Brian Prinoveau: Joining me on the call today are Angela Selden, President and Chief Executive Officer Rick Sunderland, Executive Vice President and Chief Financial Officer
Steve Summers: and Steve Somers, Senior Vice President and Chief Strategy and Corporate Development Officer.
Steve Summers: Materials for the call today are available in the events and presentation section of APEI's website.
Steve Summers: Forward looking statements may sometimes be identified by words like anticipate believe seek could estimate expect can may plan essentially project should will would or similar or opposite works.
Steve Summers: Forward looking statements include without limitation statements regarding expectations for registrations in enrollments revenue earnings and adjusted EBITDA and other earnings guidance Our foundation for growth the combination of our institutions campus and corporate center consolidation the redemption of our preferred stock future government and regulatory.
Steve Summers: Actions and our response to those actions changing market demands and our ability to satisfy such demands and other company initiatives.
Steve Summers: 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 release management believes that the presentation of non-GAAP financial information provides useful supplemental.
Steve Summers: All information to investors regarding its results and operations and should be only and should only be considered in addition to not as a substitute for or superior to any measure of financial performance prepared in accordance with GAAP.
Angela Selden: Now I'd like to turn the call over to <unk>, President and CEO Angela Selden Angy. Please go ahead.
Angela Selden: Thank you, Brian and good afternoon, and thank you for joining American public Educations first quarter 2025 earnings call.
Angela Selden: Overall, we are very pleased with our outperformance in the first quarter of 2025 and are raising our full year adjusted EBITDA guidance by $2 million and both the top and bottom ends of the range to 77 million to $87 million.
Angela Selden: We have four areas to highlight during today's call.
Angela Selden: First API outperformed first quarter 2025 financial guidance.
Angela Selden: In the first quarter, we outperformed guidance for revenue adjusted EBITDA adjusted EBITDA margin and net income continuing the trend observed in the latter half of 2024 to greater profitability as enrollments and registrations continue to increase.
Angela Selden: Our focus on stabilizing and growing enrollment at Rasmussen and in particular growing our campus based nursing enrollment is resulting in meaningful year over year improvement in profitability.
Angela Selden: Rasmussen contributed a positive $5 million of adjusted EBITDA sway from minus $2 6 million dollar loss in first quarter of 24 to a positive $2 4 million in <unk> 25.
Angela Selden: Importantly, this trend is continuing into Q2, whereas this is seeing an 8% year over year enrollment improvement with growth in both online and campus based enrollment.
Angela Selden: Net income to common shareholders increased a positive point $5 million from a negative $6 2 million net loss.
Angela Selden: Next we are improving operating leverage driven by increasing enrollment and focused disciplined cost management Rev.
Angela Selden: Revenue of $164 $6 million increased six 6%, while adjusted EBITDA increased nearly 25%.
Angela Selden: Adjusted EBITDA margin expanded by nearly 200 basis points to 12, 9% versus 11% in Q1 of 'twenty 'twenty four.
Angela Selden: We delivered net income of $7 $5 million in the first quarter historically, our lowest quarter as compared to a net loss of $1 million in the first quarter of 2024.
Angela Selden: Also 2025 continues to be a year of simplification at API.
Angela Selden: We intend to redeem our preferred shares prior to the end of the second quarter, which would be accretive to net income and earnings per share saving approximately $6 million in dividend expense annually beginning in 2026.
Angela Selden: In January we announced a plan to combine our three degree granting institutions into a single consolidated institution.
Angela Selden: Last week, the higher learning Commission, our creditor confirmed that we are on their June agenda for review.
Angela Selden: As such our combination plans remain on track and we expect to close by year end 2025, assuming all regulatory and accreditation steps have been completed.
Angela Selden: We have closed some underperforming campuses terminated expensive leases and contracts and have two corporate buildings held for sale with anticipated net proceeds of more than $20 million from both which are expected to close in Q3 of 25.
Angela Selden: These steps should strengthen our balance sheet and cost structure, resulting in significant net income and EPS growth in 2025 and beyond.
Angela Selden: Finally, a graduate school USA due primarily to dos initiatives, including government employee head count reductions and the uncertainty around future budgets for training and professional development. We have held constant <unk> full year revenue guidance and have begun to explore the best path forward for <unk>.
Angela Selden: That's cool.
Angela Selden: Overall, we are increasing 2025 net income guidance expected to be between $23 million and $30 million and we are increasing adjusted EBITDA guidance expected to be between 77 million and $87 million.
Angela Selden: We are maintaining the full year revenue expectation of $650 million to $660 million moderated by the uncertainty I graduate school.
Angela Selden: Our CFO, Rick Sunderland will give a deeper dive into the updated 2025 guidance.
Angela Selden: Now I'll provide more details about <unk> 25 results, starting first with a P H nursing and health care institutions.
Angela Selden: Rasmussen continues to produce strong results. The three three pronged strategy to improve outcomes manage cost and grow enrollments began bearing fruit in the second half of 'twenty four and continues in the first half of 'twenty five rashes.
Angela Selden: Rasmussen enrollment increased 7% in <unk> 25, and 8% in <unk> 25, representing the fourth consecutive quarter of year over year enrollment increases.
Angela Selden: As previously discussed Rasmussen fixed cost structure allows positive enrollment trends to significantly enhance the flow through margin leading to improved operating leverage and profitability.
And high growth as previously reported one Q twenty-five enrollment was strong with nine 6% growth as compared to <unk> 24.
Angela Selden: Two Q twenty-five enrollment continues a positive trend increasing 13, 5% year over year to 3700 students. We're building on the momentum of 2024 into 2025 at both Rasmussen and Handros with two Q twenty-five reported student enrollments as actuals because these quarterly.
Angela Selden: Darts have already begun.
Angela Selden: Now, let's turn our attention to <unk> online University educating our nation's military veterans and their families currently called <unk>.
Angela Selden: First I would like to congratulate the over 18000 students who received their diplomas from Apu asked last weekend.
Angela Selden: Here are some impressive statistics and a fun fact.
Angela Selden: 66% of Apus graduate our active duty military National Guard or reserve at 19% of our veteran and 4% are military spouses or dependants.
Angela Selden: Apos conferred over 13500 associates or bachelors degrees 4600 Masters degrees and 11 doctoral degrees.
Angela Selden: Over 4200, or 23% of <unk> graduates. This year are earning their second AMU or Apu degree or certificate and the fun fact, the oldest graduate is 81 years old and the youngest 17 years old.
Angela Selden: Now turning our attention to <unk> 25 for <unk> overall, net course registrations increased three 5% year over year to <unk> 25 registration guidance at the midpoint is five 5% showing a sequential improvement in year over year growth.
Angela Selden: In summary building on our successful performance in 'twenty, four and the sustained momentum in the first half of 2025, we are optimistic about our future growth prospects and our capacity to convert that growth into enhanced profitability. Both in terms of adjusted EBITDA and diluted EPS.
Angela Selden: We remain laser focused on educating service minded students offering classes certificates and degrees in fields that have high demand.
Angela Selden: <unk> enables students to experience a valuable lifelong return on their educational investment.
Angela Selden: Our mission remains to power purpose potential and prosperity for those in service to others.
Angela Selden: Each of our education units was purpose built to deliver accessible and affordable higher education and training across a diverse range of subjects.
Angela Selden: I'd like to take a moment to thank each of our approximately 6000 employees and educators that worked tirelessly to make our mission a reality each and every day.
Rick Sunderland: With that I'd like to turn the call over to <unk> CFO Rick Sunderland.
Speaker Change: Thank you Angie.
Speaker Change: Total revenue in the first quarter was $164 6 million, an increase of $10 1 million or six 6% from the prior year period.
Speaker Change: First quarter revenue growth was driven by increased revenue at Rasmussen.
Speaker Change: And Honduras revenue growth at Rasmussen.
Speaker Change: Enrollment and registration growth due to tuition fee increases implemented last year.
Speaker Change: Total cost of expenses in the first quarter were $152 3, million% to 2% increase compared to the first quarter of 2020 for.
Speaker Change: The increase was primarily driven by increases in employee compensation costs and advertising costs, partially offset by a decrease in information technology costs, and depreciation and amortization expenses.
Speaker Change: In the first quarter net income available to common shareholders was $7 5 million compared to a net loss of $1 million in the prior year.
Speaker Change: First quarter diluted net income per common share was <unk> 41.
Speaker Change: As compared to a loss per diluted share of <unk> in the prior year period.
Speaker Change: First quarter, adjusted EBITDA was $21 2 million, a $4 2 million or 25% increase over the prior year.
Speaker Change: This was above the top end of the guidance range and represented an adjusted EBITDA margin of 12, 9% as compared to 11% in the prior year period.
Speaker Change: The outperformance of the guidance was due in part to military registrations at Apus.
Speaker Change: Student retention.
Speaker Change: Rasmussen.
Timing of approximately $1 4 million of expenses.
Speaker Change: First quarter revenue increased to $83 9 million, a four 1% increase as compared to the prior year period.
Speaker Change: First quarter net course registrations increased three 5%.
Speaker Change: For the quarter <unk> EBITDA was $25 2 million and EBITDA margin was 30% as compared to 32% in the prior year period.
Speaker Change: <unk> first quarter revenue was $59 3 million, an increase of 11, 5% as compared to the prior year.
Speaker Change: In the first quarter online enrollment increased 11, 1% on ground enrollment increased three 2% and total enrollment grew seven 4% to 14500 students as compared to the prior year period in.
Speaker Change: In the first quarter <unk> delivered positive EBITDA of $2 1 million as compared to an EBITDA loss of $2 7 million in the prior year.
Speaker Change: <unk> first quarter revenue was up seven 5% to $17 7 million as compared to the prior year period due to continued enrollment growth.
Speaker Change: For the quarter Congress total enrollment increased 10% to approximately 3600 students at.
Speaker Change: <unk> the first quarter EBITA loss was.
Speaker Change: $2 million as compared to EBITDA of zero breakeven in the prior year period.
Speaker Change: Revenue at graduate school included in corporate and other was $3 7 million as compared to $4 2 million in the prior year period for.
Speaker Change: For the quarter graduate school EBITA was a loss of $2 1 million compared to an EBITDA loss of $1 1 million in the prior year period.
Speaker Change: First quarter cash flow from operations was $37 million compared to $20 7 million in the prior year.
Speaker Change: At March 31, 2025, total cash cash equivalents and restricted cash was $187 5 million an increase of $28 6 million from year end 2024.
Speaker Change: The increase in cash flow from operations and cash was driven by the collection of tuition assistance or Ta accounts receivable at Apus and a reduction in operating losses at Rasmussen.
Speaker Change: Capex in the first quarter was $3 9 million compared to $6 2 million in the prior year.
Speaker Change: Looking ahead, we expect to complete the sale of two buildings in Charles Town West Virginia in the third quarter with proceeds from the sale of approximately $22 million.
Speaker Change: Principal on Api's term loans at March 31 was unchanged at $96 4 million and our $20 million revolving credit facility remains fully available.
Speaker Change: With unrestricted cash of $161 6 million API continues to be net cash positive.
Speaker Change: As disclosed on our last earnings call, we intend to redeem all of our series a senior preferred stock in the second quarter.
Speaker Change: Turning now to our second quarter.
Speaker Change: Full year outlook, which covers forward looking statements subject to the various risks risks noted earlier for.
Speaker Change: For the second quarter 2025.
Speaker Change: Total net course registrations are expected to be between 93590, 6100 registrations, representing a 4% to 7% increase when compared to last year.
Speaker Change: And Ross lesson and address second quarter student enrollments are actual because of the quarterly starts at these schools.
Speaker Change: <unk> second quarter total online enrollment increased 11, 6% to approximately 8300 students while total on ground enrollment increased 3% to approximately 6400 students for an aggregate enrollment of approximately 14700 students. This.
Speaker Change: This represents an 8% increase when compared to the second quarter of 2024. It is our fourth consecutive quarter of overall positive year over year enrollment growth Erasmo soon.
Speaker Change: And Honduras second quarters total student enrollment increased 14% year over year to approximately 3700 students.
Speaker Change: In the second quarter of 2025 consolidated revenue is expected to be between $160 million and $162 million.
Speaker Change: I will note that second quarter and full year revenue guidance is negatively impacted by the increasing headwinds at graduate school due to changing federal priorities and policies.
Speaker Change: Including actions taken by the department of government efficiency or dose, which have resulted in uncertainty related relating to the provision of career learning and contract training to the federal workforce.
Speaker Change: The company expects second quarter net loss available to common shareholders to be between a loss of $2 5 million and <unk> 7 million or between a loss of <unk> 13 and.
Speaker Change: <unk> <unk> per diluted share our second quarter guidance for net loss available to common shareholders includes a redemption premium on the planned redemption of our series a senior preferred stock of approximately $2 9 million and expected costs related to our previously announced combination of Aps Rasmussen.
Speaker Change: Hydro's of approximately $1 7 million.
Speaker Change: Second quarter 2025, adjusted EBITDA is expected to be between $11 5 million and $14 million.
Speaker Change: For the full year 2025, there is no change to our anticipated consolidated revenue of between $650 million and $660 million.
Speaker Change: We are increasing our full year 2025, adjusted EBITDA guidance to be between $77 million and 80 $787 million and net income available to common shareholders to be between $23 million and $30 million.
Speaker Change: Our full year net income guidance assumes the redemption of our preferred equity in the second quarter, which will reduce preferred dividend payments by approximately $3 million in 2025 and $6 million.
Speaker Change: Italy thereafter.
Speaker Change: This full year adjusted EBITDA guidance translates to free cash flow expectations for the full year defined as adjusted EBITDA less capex to be between $55 million and $69 million.
Speaker Change: I will now pass it back to angi to offer some closing remarks, after which we will begin our question and answer session Angie.
Speaker Change: Thank you Rick.
Speaker Change: Recent financial and operating results show that we have strengthened our institutions and have established a solid foundation for growth this year and for years to come.
Speaker Change: We are also prioritizing simplification in 2025, and there will be financial benefits that will be realized across 2025 and beyond.
Speaker Change: As announced in January we are planning to combine <unk> Rasmussen anhydrous into one consolidated institution.
Speaker Change: Our American public University system, which now we're referring to as the system, combining and expanding our nursing campus footprint will allow us to strengthen our ability to address the growing demand for nursing and other clinical roles in the health care ecosystem by allowing Rasmussen programs to be offered at hardrock.
Speaker Change: Campuses and for us to think about and expand our campus footprint.
Speaker Change: Also allow us to accelerate growth in our military that trend and families division to be called <unk> global and with that I'd like to hand, it back to the operator to begin our question and answer session operator.
Speaker Change: Thank you Angie as a reminder.
Speaker Change: You ask a question simply press star followed by the number one on your telephone keypad and we'll pause for just a moment to compile the Q&A roster.
Speaker Change: And our first question comes from the line of Jasper Bibb with Trust Securities. Please go ahead.
Speaker Change: Hey, good evening everyone.
Speaker Change: Really strong margin for us in the quarter and I think you are actually dealing with some downtime on the army and Air Force tuition assistance.
Speaker Change: Who are those two so just hoping you could outline if there was a margin or enrollment headwind from the ta downtime in the first quarter and maybe if youre expecting any catch up in the second quarter of errors that are such that it should be back on line for the full quarter.
Jasper: Hi, Jasper Great question. Thank you for that.
Speaker Change: Shoot that directly.
Speaker Change: Okay. Thank you Hey, Jasper.
Speaker Change: Actually.
Speaker Change: The team really organized at Apus really organized.
Speaker Change: Through a variety of communication channels.
Speaker Change: Really able to minimize the impact of the Portola outage.
Speaker Change: Thats ended just prior to.
Speaker Change: To the end of the quarter right and so they were able to.
Speaker Change: Pick up the registrations that.
Speaker Change: Otherwise would have been lost and so you can see.
Speaker Change: From the margin that we reported it had really no effect on.
Speaker Change: On the.
Speaker Change: On the margin. So if you want a piece of the two quarters together you can see registrations increased about three 5% in the first quarter.
Speaker Change: We are guiding to roughly 555% in the second quarter.
Speaker Change: No.
Speaker Change: So really the effect if there was any was minimal in the first quarter and we're seeing.
Speaker Change: A slight improvement.
Speaker Change: In the second quarter in terms of registration guidance. So all in all you have to be very proud of the team at Aps for working with the various Eso's education service officers to get.
The students registered which is a real benefit to the students.
Speaker Change: Thanks, and then.
Speaker Change: You mentioned the higher graduate school drag on the EBITDA Guide and then also does impact there right I know theres some seasonality in the business. So maybe that <unk> losses, maybe not representative.
Speaker Change: We're expecting for the full year, but.
Speaker Change: If you held back the guidance increase for graduate school is there anyway you can.
Speaker Change: Maybe frame for us what guidance now assumes for EBITA losses graduate school in 'twenty five.
Speaker Change: Thanks for the question, Jeff, There's certainly it's a developing matter.
Speaker Change: As we know.
Speaker Change: There is talk that the those offices.
Speaker Change: Potentially even sunsetting and the leader may be going back to other businesses that he has responsibility for so the graduate school downside is something that we are not able to give guidance on right now and predict.
Speaker Change: What we do believe is that the.
Speaker Change: The adjusted EBITDA guidance that we gave here for the full year by raising $2 million is something that we are confident includes what we believe is the downside of graduate school and the fact that we have maintained the revenue guidance also includes what we believe is the downside of graduate school. So.
Speaker Change: We.
Speaker Change: Our are confident in the guidance that we've given and we look forward to seeing what unfolds in the next couple of quarters related to graduate school. So in addition to a.
Speaker Change: Very aggressively managing our cost to graduate school to lineup with that reduced revenue. We are also looking at.
Speaker Change: Ah different options and considerations for the path forward for graduate school.
Speaker Change: Makes sense.
Speaker Change: Last one from me really impressive enrollment growth at <unk>.
Speaker Change: Within the quarter and I apologize if I missed it but did you give the number of nursing campuses that Matt.
Speaker Change: <unk> thresholds in the first quarter.
Speaker Change: We're doing such a good job on <unk> that we are not reporting on that any longer but I can tell you that.
Speaker Change: We had all but one campus program combination so 24 25 now.
Speaker Change: Meeting that meeting those benchmarks and so we believe that.
Speaker Change: Given the consistent reporting success that we've had in the last really four quarters. We have chosen not to continue to report that since it does.
Speaker Change: Seem to be behind us in terms of any kind of any issues that we were that we have.
Speaker Change: Okay, great. Thank you for taking my questions.
Speaker Change: Thanks Jesper.
Speaker Change: And our next question is from Eric Martin Mucci with Lake Street Capital markets. Please go ahead.
Speaker Change: Yes.
Speaker Change: Pleased to see the 8% enrollment growth, whereas in it looks like that kind of goes in line with the 7% from Q1, just wondering what your thoughts are for 2025 is this a kind of a.
Speaker Change: We can expect 5% to 10% range is that are you comfortable with that.
Speaker Change: Hi, Eric and welcome Thanks for joining the call today.
Speaker Change: We don't give individual.
Speaker Change: Institution guidance beyond the next quarter, what we do is we give them.
Speaker Change: Full year guidance for the enterprise overall, but I can tell you that we continue to be pleased with the momentum that we see at Ross within this is now Q2 is now the fourth consecutive quarter of positive enrollment growth.
Speaker Change: And we don't see any headwinds as it relates to <unk> enrollment in the back half of the year.
Speaker Change: Got it understand.
Speaker Change: And then the.
Speaker Change: You've submitted for approval on that.
Speaker Change: Getting rasmussen cleared for potential expansion any update there from the department of Ed.
Speaker Change: Great question last week I had the opportunity to meet with a senior member of the Department of Education, and we discussed the matter of getting our second year of audited financials, which we submitted in.
Speaker Change: Really early Q2 of 2024 approved.
Speaker Change: And he is taking that matter upon himself to get resolved and.
Speaker Change: We're expecting to hear some outcome on that in the near term.
Speaker Change: Okay.
Brian Prinoveau: And then Rick I'm curious on the Capex I think your guidance is unchanged here at 18 to 22, if I was to spread that across the year. It would seem like Q1 was a little bit light.
Brian Prinoveau: Whats the expectation for kind of quarter by quarter, how we should think about capex.
Brian Prinoveau: Eric.
Brian Prinoveau: You don't spread that.
Brian Prinoveau: It depends on.
Brian Prinoveau: Facility and it investments right and.
Brian Prinoveau: Those projects.
Brian Prinoveau: They have anticipated start dates, but sometimes the timing.
Brian Prinoveau: Changes due to.
Brian Prinoveau: Call it a permitting issue.
Brian Prinoveau: One of the facilities or a re prioritization of projects within the.
Brian Prinoveau: I T Department so.
Brian Prinoveau: No.
Brian Prinoveau: I am sorry, I don't want to I don't want to spread that we.
Speaker Change: We feel confident that we will get.
Brian Prinoveau: Comfortably within that range and you did calculated.
Brian Prinoveau: Correctly.
Brian Prinoveau: I think I think for purposes of modeling I would.
Brian Prinoveau: Add to.
Brian Prinoveau: <unk>.
Brian Prinoveau: Equal across the orders if you will for the remainder because it probably won't vary much above or below that as a kind of <unk>.
Brian Prinoveau: As our numbers matter.
Speaker Change: Gotcha, Okay. Thanks for taking my questions and good luck on the rest of the and good luck on Q2.
Brian Prinoveau: Thanks very much.
Stephen Sheldon: Our next question comes from the line of Stephen Sheldon with William Blair. Please go ahead.
Stephen Sheldon: Hey, Thanks, and really nice job on the quarter.
Speaker Change: First one here just as we think about the profit trajectory at Rasmussen are there more levers that you could pull to accelerate the profit trajectory or at this point will it mainly be about continued leverage of fixed cost as you can.
Stephen Sheldon: <unk> to grow the topline.
Speaker Change: Hi, Steven Thanks for the question I'll start and then ask Rick to add some commentary.
Stephen Sheldon: So as you know.
Stephen Sheldon: As you know when you think about a half of revenue at routes within its campus based revenue.
Stephen Sheldon: Big focus for US continues to be what we call it filling the filling the back row, making sure that each of the classes and sections is maxing out the capacity at our current campuses and so that will allow us to expand the margin and grow the revenue at the same time.
Stephen Sheldon: We have with our new President there Mark Arnold our focus on the right program mix by campus to be sure that the program mix. It that we offer aligns with both the Tam.
Stephen Sheldon: Of students available to take those courses as well as employer demand for those programs. So we will be making some tweaks to ensure that we're on.
Stephen Sheldon: Not shortchanging the programs that we have the opportunity to expand enrollment in and.
Stephen Sheldon: And also re dedicating space that may be dedicated programs, where we have less addressable market. So we're really focused on optimization within within the campuses.
Stephen Sheldon: We also continue to see great success in the effectiveness of our marketing related to our nursing program and we.
Stephen Sheldon: We are seeing the improvement in <unk>.
Stephen Sheldon: In lead to start conversion.
Stephen Sheldon: As a result of the improvement in the effectiveness of marketing and so we think those levers will all help us.
Stephen Sheldon: Deliver a better profitable revenue mix in 2025, and see topline growth as well.
Stephen Sheldon: Great. Thanks.
Stephen Sheldon: And then just a higher level follow up there has typically been counter cyclicality in higher Ed enrollments.
Stephen Sheldon: So.
Speaker Change: Are you thinking about API ability in and I guess competitive positioning to capture enrollment share.
Speaker Change: Cross your institutions, if we are in a backdrop, where unemployment moves higher.
Speaker Change: Over the rest of this year and into next and have you seen any signs that top of funnel.
Speaker Change: Applications are picking up so yes, your positioning to benefit from it if it does happen are you seeing that at all yet.
Speaker Change: Uh huh.
Speaker Change: Well as I think you're well aware the two businesses that we have our military business and our health care business. Both have natural moats around them. The military business continues to see improvement in growth and growing our share of the students in inactive.
Speaker Change: Judy who are taking classes with AP.
Speaker Change: So we continue to see expansion there, but we think that's somewhat insulated Aps is somewhat insulated from the cyclicality of the market because it's really focused on the number of of military and veteran students who are taking courses at RASM Handros. We are seeing continued.
Speaker Change: You know as you can see high single digit cases, Chondrus Q2, mid double digit in enrollment growth and so we continue to see people coming to the nursing profession.
Speaker Change: An important way for them to have long term job security and a great ROI on their educational investment. So we do believe that our momentum there it can be attributed to our successful marketing effectiveness improvements and the counter cyclicality of.
Speaker Change: In particular, our nursing job, which we know will have durability for the next 40 years.
Speaker Change: Makes sense. Thank you.
Speaker Change: Thanks very much.
Speaker Change: Our next question comes from Alex Paris, with Barrington Research. Please go ahead.
Alex Paris: Hi, guys. Thanks for taking my questions and congratulations on the strong start to the year.
Speaker Change: Thanks Alan.
Alex Paris: A couple of.
Speaker Change: Clarifying questions. Please.
Speaker Change: Richard I think you said something about.
Speaker Change: Net income in the quarter.
Speaker Change: That was partially attributed to a $1 4 million dollar in timing of expenses could you give us a little color on that.
Speaker Change: Yeah. Thank you Alex.
Speaker Change: There were approximately $1 4 million of expenses that.
Speaker Change: We anticipated.
Speaker Change: Incurring in the first quarter that were not due to some timing matters. So they could move to the second quarter.
Speaker Change: For purposes of that guidance.
Speaker Change: Things that were.
We thought would processed in the quarter that just.
Speaker Change: Ended up.
Speaker Change: Being delayed.
Speaker Change: And so it's a variety of things Alex.
Speaker Change: Of course materials Rasmussen.
Speaker Change: Being a being a large.
Speaker Change: A matter and then there were some event related expenses.
Speaker Change: That we expected.
Speaker Change: <unk>.
Speaker Change: Is it up to <unk>.
Speaker Change: Related and we'll lead in the second quarter itself.
Speaker Change: Yes.
Speaker Change: One large thing materials cost it Ross.
Speaker Change: Bunch of little things.
Speaker Change: All aggregated to about $1 $4 million.
Speaker Change: And Thats, a pretax number $1 4 million.
Speaker Change: And as a pretax I should've said, okay. Thank you.
Speaker Change: I started my question by saying that so I just wanted to be clear.
Speaker Change: And then.
Speaker Change: Second question with regard to your guidance I believe you were talking about the second quarter.
Speaker Change: Yes.
Speaker Change: The second quarter guide includes a redemption premium of $2 $9 million and that's in the.
Speaker Change: Adjusted EBITDA and net income guidance for Q2.
Speaker Change: It's in the net income guidance, Alex not the adjusted EBITA.
Speaker Change: Okay Yeah.
Speaker Change: Oh boy.
Speaker Change: And then.
Speaker Change: The $1 7 million of expected costs related to the combination was that.
Speaker Change: And impact on full year or was that an impact on Q2.
Speaker Change: Im sorry, Alex can be two questions.
Speaker Change: You said that guidance included two things one the redemption premium for two point and then expected cost related to the combination of $1 7 million.
Speaker Change: That's correct, that's a pretax number.
Speaker Change: Okay.
Speaker Change: Yes, if you go to the guidance.
Speaker Change: Thank you Alex in Q2.
Speaker Change: And it'll be part of the full year, but it'll be it'll occur in the second quarter.
Speaker Change: So I would assume that these sorts of expenses would occur in Q3, and Q2, maybe not this magnitude, but more spending on on.
Speaker Change: On combination.
Alex Paris: No don't assume that Alex.
Speaker Change: We guided to 4 million to $5 million of costs.
Speaker Change: I think for the entire year for the combination.
Speaker Change: Alright, and so.
Speaker Change: The combination is expected to close in the third quarter, assuming we.
Speaker Change: Get get all the <unk>.
Speaker Change: Wired approvals and as Andrew said, we're on track to do that.
Speaker Change: So I think you would see that tail off in the fourth quarter.
Speaker Change: Okay Fair enough and then last question regarding both of those $2 91, seven together Thats $4 6 million. So net income available to common guidance for Q2 would be would have been $4 6 million higher had it not been for the redemption and these expected costs related to the combination.
Speaker Change: After you tax effect.
Oh, yes, okay after tax effect.
Speaker Change: Okay.
Thank you Doug.
Speaker Change: Last question on graduate school.
Speaker Change: You reported.
Speaker Change: <unk>.
Speaker Change: $3 2 million versus $4 2 million was there any impact from those your contract cancellations in the Q1 number.
Speaker Change: Yes, it was very little.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: No go ahead Greg.
Greg: As I say it was very it was very limited Alex in the first quarter.
Greg: Revenue year over year was only down 500000.
Greg: In the first quarter a graduate school.
Greg: When you look at it it's really largely started in the second quarter.
Greg: Mhm.
Greg: And.
Greg: We're.
Greg: Is it sort of that we're expecting zero from here on out or not that dramatic.
Greg: No.
Greg: No no there are there are.
Greg: Contracts that have full year revenue associated with them that are continuing to run there are.
Greg: Additional.
Greg: Basically cohort based programs that are continuing to run and we are seeing individual.
Greg: Students continuing to enroll in courses, albeit at a lower pace than what we had seen in the past and so it is just now in the second quarter, where we're starting to see.
Greg: The effect of that third.
Greg: Third stream, which is students who individually enroll.
Greg: We are seeing a slight pick up from the beginning of the quarter. So we're being very conservative about how we're forecasting the full year revenue for graduate school presently and we're keeping a careful eye on.
Greg: Although we can do to continue to scoop up all those all that revenue and those enrollments between now and the end of the year.
Greg: But whatever your expectation is it's incorporated into the aggregate revenue guidance for the full year. Hence the reason that you didn't increase that.
Greg: In the quarter here.
Greg: Correct correct.
Greg: Yes. So you can see we've got positive registration growth that if you asked that RASM handros right and so.
Greg: Just offset by what.
Greg: What we are conservatively anticipating at graduate school. So it is not there for the rest of the year.
Greg: Got you and I spent a lot of time on it I mean, the more important things are.
Greg: Yes.
Greg: As in.
Greg: And.
Greg: Honduras, which.
Greg: Continue to do very well so thank you very much for that additional color I appreciate it.
Of course, thank you Alex Thank you very much.
Christian Buss: Our next question comes from Christian Buss with B Riley.
Greg: Securities. Please go ahead.
Greg: Hi, good evening and thanks for taking my question. So just to start off you mentioned in the prepared remarks.
Speaker Change: Just curious if you can remind us what the revenue synergies you expect to see from this consolidation are particularly on the healthcare side of the business.
Griffin: Hi, Griffin is Sanjay welcome to the call. Thank you very much for your question, we have not provided a revenue synergies.
Griffin: Specifically, we have talked about category right where.
Griffin: One of the exciting benefits of combining <unk> together is that <unk> will be able to offer not just.
Griffin: You know the nursing curriculum that that <unk> has which includes the early nursing curriculum as well as opposed to licensure, but it also allows.
Griffin: <unk> to be able to be able to offer the catalogs that rasmussen offers online as well. So we have talked about categories of synergies that we have not attributed numbers yet to what we believe the revenue synergies will be.
Speaker Change: No that's great. That's what I was looking for so I appreciate the color there.
Griffin: Final one for me.
Griffin: I noticed in your EBITDA schedule in the 8-K, you have the interest expense line, which seems to be outsized in Q2, and I apologize if I missed this if it was discussed earlier I'm just curious what's driving the <unk>.
Griffin: Interest expense in the second quarter I wouldn't expect it to be related to that.
Griffin: Redemption.
Speaker Change: Of the preferred stock, but maybe correct me if I'm wrong, if that's coming from somewhere else Hey, Rick can you address that please.
Griffin: Sure.
Griffin: It includes the preferred redemption premium which is why.
Griffin: It's a higher number.
Speaker Change: Okay, Alright, great. Thank you for answering my questions appreciate it.
Speaker Change: Yeah that'll be a one time hit so yes. Thank you very much Griffin thanks for the call sure thing.
Speaker Change: Okay.
Speaker Change: And our final question comes from the line of Raj Sharma with Texas Capital Bank. Please go ahead.
Raj Sharma: Hi, Thank you for taking my questions.
Speaker Change: Great execution.
Speaker Change: You've been talking about growing.
Speaker Change: Ross listen well.
Speaker Change: And that momentum is very positive.
Speaker Change: EBIT <unk>, just trying to get a sense of.
Speaker Change: The fixed versus the variable cost.
Speaker Change: Susan.
Speaker Change: Every dollar increase in revenues from here how much of that do you see drops down to the EBITDA level from these levels, especially given.
Speaker Change: You had nice enrollment growth.
Speaker Change: Divestments and trying to get a sense of the magnitude of the EBITDA profits.
Speaker Change: Who can generate.
Raj Sharma: Hi, Raj welcome Great to talk to you.
Speaker Change: You just said.
Speaker Change: For these for these.
Speaker Change: Positive revenue enrollment.
Speaker Change: Now it rasmuson, we're seeing about 60% flow through.
Speaker Change: We do believe we do believe as.
Speaker Change: We continue to optimize our marketing spend and as I said, Phil the backfill of the classroom, we could expect to see something higher potentially but for now it's a really positive accelerator to the profitability.
Speaker Change: Of of Rasmussen campuses as as you well know you've been following the story for quite a while once we turned that corner.
Speaker Change: The flow through has a very significant positive impact on the profitability of processing.
Speaker Change: Got it.
Speaker Change: That's very positive and thank you for that clarification.
Speaker Change: Just overall in the operating cost I know, you've got some marketing in house and outsourced Nike functions that gave you cost cuts.
Speaker Change: In the current year fiscal 'twenty five.
Is this opex level.
Speaker Change: Could that be assumed to be to see.
Speaker Change: Absolute levels stable opex levels for the entire organization.
Speaker Change: I'll start and then Rick can jump in so first I would say.
Speaker Change: Where we are seeing positive enrollment momentum, we're going to invest behind the marketing to continue to accelerate the growth.
Speaker Change: So.
Speaker Change: That's something we'll continue to invest behind as it relates to.
Speaker Change: The technology cost there are a couple of things that we've signaled.
Speaker Change: One is that we are actively pursuing a different AI initiatives, both to reduce the cost of development as well as some operational improvement and we'll see those take hold later on in 2025.
And so we may be redirecting some of our technology spend in a manner that will drop more profitability to the bottom line as we spend less and get more. So we are we are actively pursuing the use of advanced technologies and AI to help us streamline and reduce our overall technology.
Speaker Change: Print cost.
Great Great. Thank you that's very helpful. And then just on Honduras doesn't rise in revenues.
Speaker Change: Year over year.
Speaker Change: That resulted in a lower EBITDA.
Speaker Change: The level of anything happening on the expenses side or is it just.
Speaker Change: Sort of a blip.
Speaker Change: Yes.
Stephen Sheldon: That's an astute question Raj Thank you for asking that.
Speaker Change: We've seen.
Speaker Change: A bit of a mix shift of the program back to the LPN.
Speaker Change: LPN program, which is.
Speaker Change: You know a shorter program then the ADN program and as a result, you have to enroll students more often in order to be able to refill. The revenues. So again, one of the significant benefit of the <unk>.
Speaker Change: Combination is allowing us to have those longer programs, the BSN program and some of the other.
Speaker Change: Non nursing degree programs be available to Honduras campuses in Honduras students and we believe that that will allow us to rebalance that mix. So that we can.
Speaker Change: Enroll students, who will have a longer tenure with us then.
Speaker Change: Where the mixed shift has moved in the first quarter of 2025.
Speaker Change: Thank you that's very helpful. And then just lastly on the portal issues at the army.
Speaker Change: I know Rick mentioned no impact from the registration desk.
Excellent do you foresee any impact on the.
Speaker Change: Accounts receivable collection or any working capital.
Speaker Change: Impacts from the bone of outage.
Rick Sunderland: I'll start and then turn it over to Rick So funny enough it wasn't army.
Speaker Change: Air Force.
Rick Sunderland: Oh, yes, sorry.
Rick Sunderland: So there was a blip there, but Rick do you want to talk about the.
Rick Sunderland: The receivables.
Rick Sunderland: Yes, so raj the portal Alvin.
Rick Sunderland: Outage affected.
Rick Sunderland: The.
Rick Sunderland: Students ability to impact it.
Rick Sunderland: It didn't affect the timing of how we invoiced.
Rick Sunderland: So we had some catch up of collections in the first quarter.
Rick Sunderland: Really related to the fourth quarter, but we're seeing normal normal invoicing and collections from the from all the branches, including Air Force.
Rick Sunderland: Soon the ability to enroll.
Rick Sunderland: That's what he was he meant to say.
Rick Sunderland: That was really impacted the enrollment.
Rick Sunderland: Really didn't have much impact on invoicing and collections.
Rick Sunderland: It was not nearly as extensive it wasn't I wasn't upgrade it was a maintenance upgrade that took longer than they had originally forecasted it wasn't anything like the army ignite add matter that you had.
Thanks, Bob Yeah, No no no no not at all.
Speaker Change: So I guess I was too fixated on that oops.
Speaker Change: Great. That's super helpful. Thank you. Thank you again for answering my questions again, great execution great results.
Speaker Change: Thanks, Nice to hear from me Raj will be helpful.
Speaker Change: Yes. Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: This concludes our question and answer session I would now like to turn the call back over to Andrew for closing remarks sure.
Speaker Change: Thank you operator, and I'd like to thank each of you for joining our earnings conference call for Q1, 2025 Hope you each have a very wonderful evening take care.
This concludes today's conference teleconference. You may now disconnect your lines.
Speaker Change: Thank you everyone for joining and have a wonderful day.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.