Q2 2026 American Public Education Inc Earnings Call

August 10, 2026

Operator: Thank you for standing by. My name is Jonathan, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI second quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to turn the call over to Jack Landry, investor relations. Please go ahead.

Operator: Thank you for standing by. My name is Jonathan, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI Q2 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to turn the call over to Jack Landry, investor relations. Please go ahead.

Speaker #1: 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, please press *1 to raise your hand.

Speaker #1: To withdraw your question, press *1 again. I would now like to turn the call over to Jack Landry, Investor Relations. Please go ahead.

Speaker #2: Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss Q2 2026 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer of APEI and Chancellor of the American Public University System; Edward Codispoti, Executive Vice President and Chief Financial Officer; and Gary Jansen, Chief Strategy and Growth Officer.

Jack Landry: Thank you and good afternoon, everyone. Welcome to American Public Education's conference call to discuss Q2 2026 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer of APEI, and Chancellor of the American Public University System, Edward Codispoti, Executive Vice President and Chief Financial Officer, and Gary Jansen, Chief Strategy and Growth Officer. Materials for today's call, which is being webcast and is open to the public, are available in the Events and Presentation section of APEI's website. Statements made during this call, and in the accompanying presentation regarding APEI and subsidiaries that are not historical facts, may be forward-looking statements that are based on management's current expectations, assumptions, estimates, and projections.

Speaker #2: Materials for today's call, which is being webcast and is open to the public, are available in the Events and Presentations section of APEI's website.

Speaker #2: Statements made during this call, and any accompanying presentation regarding APEI and its subsidiaries, that are not historical facts may be forward-looking statements, which are based on management's current expectations, assumptions, estimates, and projections.

Speaker #2: 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, including risks related to potential impacts from government shutdowns or changing federal or state government policies, laws, practices, and actions, including impacts on revenues or the timing of receivables, and other factors identified in our Form 10-K and Form 10-Q under the heading "Risk Factors and Other SEC Filings." Forward-looking statements may sometimes be identified by words like "believe," "estimate," "expect," "may," "plan," "potentially," "project," "target," "outlook," "path," "position," "on track," "on pace," "should," "will," "would," and similar or opposite words.

Jack Landry: Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expressed or implied by such statements, including risks related to potential impacts from government shutdowns or changing federal or state government policies, laws, practices, and actions, including impacts on revenues or the timing of receivables, and other factors identified in our Form 10-K and Form 10-Q under the heading Risk Factors and other SEC filings. Forward-looking statements may sometimes be identified by words like believe, estimate, expect, may, plan, potentially, project, target, outlook, path, position, on track, on pace, should, will, would, and similar or opposite words.

Speaker #2: Forward-looking statements include "without limitation" statements regarding expected operational efficiencies, technology platform implementations, marketing efficiency initiatives, expectations regarding the resilience of our programs to market or technological disruption, expectations for registration and enrollments, revenue earnings, adjusted EBITDA, adjusted EBITDA margin, and other earnings guidance.

Jack Landry: Forward-looking statements include, without limitation, statements regarding expected operational efficiencies, technology platform implementations, marketing efficiency initiatives, expectations regarding the resilience of our programs to market or technological disruption, expectations for registration and enrollments, revenue, earnings, adjusted EBITDA, adjusted EBITDA margin, and other earnings guidance, our foundation for growth and our current and future growth initiatives, strategic investments, capital allocation, and M&A opportunities, operational milestones and timelines to complete the combination of our institutions, governmental and regulatory actions, their impact and our response to those actions, changing market demands, and our ability to satisfy such demands and other company initiatives. The call and presentation contain references to non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin. A reconciliation between each non-GAAP financial measure we use and the most directly comparable GAAP measure is located in the appendix to today's presentation and in the earnings release.

Speaker #2: Our foundation for growth and our current and future growth initiatives—strategic investments, capital allocation, and M&A opportunities. Operational milestones and timelines to complete the combination of our institutions, government and regulatory actions and their impact, our response to those actions, changing market demands, and our ability to satisfy such demands in other company initiatives.

Speaker #2: The call and the presentation contain references to non-GAAP financial measures including adjusted EBITDA and adjusted EBITDA margin. A reconciliation between each non-GAAP financial measure we use and the most directly comparable GAAP measure is located in the appendix to today's presentation and in the earnings release.

Speaker #2: 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 as a substitute for or superior to any measure of financial performance prepared in accordance with GAAP.

Jack Landry: 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 as a substitute for or superior to any measure of financial performance prepared in accordance with GAAP. I'd now like to turn the call over to APEI's President and CEO, Angela Selden. Angie, please go ahead.

Speaker #2: I'd now like to turn the call over to APEI's President and CEO, Angela Selden. Angie, please go ahead.

Speaker #3: Thank you, Jack. Good afternoon, and thank you very much for joining American Public Education's Q2 2026 results call today. First, given the strength of our Q2 results and our visibility into the balance of the year, we are raising our full-year 2026 guidance on both revenue and adjusted EBITDA.

Angela Selden: Thank you, Jack. Good afternoon, and thank you very much for joining American Public Education's Q2 2026 results call today. First, given the strength of our second quarter results and our visibility into the balance of the year, we are raising our full year 2026 guidance on both revenue and adjusted EBITDA. In addition, I am very pleased to share American Public Education's second quarter 2026 results. Total revenue grew 5.5% year over year to $171.7 million, at the high end of our guidance range for the quarter. If you were to exclude $3.4 million of Graduate School USA revenue in the prior year period, which as a reminder, is the business that we sold in July of 2025, APEI's revenue would have grown 7.8%. We exceeded the high end of our guidance range on adjusted EBITDA, which grew 36.8% to $20.7 million, compared to $15.1 million in the prior year period.

Angela Selden: Thank you, Jack. Good afternoon, and thank you very much for joining American Public Education's Q2 2026 results call today.

Angela Selden: First, given the strength of our second quarter results and our visibility into the balance of the year, we are raising our full year 2026 guidance on both revenue and adjusted EBITDA. In addition, I am very pleased to share American Public Education's second quarter 2026 results. Total revenue grew 5.5% year over year to $171.7 million, at the high end of our guidance range for the quarter. If you were to exclude $3.4 million of Graduate School USA revenue in the prior year period, which as a reminder, is the business that we sold in July of 2025, APEI's revenue would have grown 7.8%. We exceeded the high end of our guidance range on adjusted EBITDA, which grew 36.8% to $20.7 million, compared to $15.1 million in the prior year period.

Speaker #3: In addition, I am very pleased to share American Public Education's Q2 2026 results. Total revenue grew 5.5% year over year to $171.7 million, at the high end of our guidance range for the quarter.

Speaker #3: If you were to exclude $3.4 million of graduate school USA revenue in the prior year period, which as a reminder is the business that we sold in July of 2025, APEI's revenue would have grown 7.8%.

Speaker #3: We exceeded the high end of our guidance range on adjusted EBITDA, which grew 36.8% to $20.7 million, compared to 15.1 million in the prior year period.

Speaker #3: We exceeded the high end of our guidance range on net income available to common stockholders and diluted earnings per share. Net income available to common stockholders was $9.8 million, or $0.52 per diluted share, compared to a loss of $0.03.

Angela Selden: We exceeded the high end of our guidance range on net income available to common stockholders and diluted earnings per share. Net income available to common stockholders was $9.8 million, or $0.52 per diluted share, compared to a loss of $3 million or $0.02 per diluted share in the prior year period. On 4 August 2026, we completed our institutional combination, combining American Public University System, Rasmussen University, and Hondros College of Nursing into the new American Public University System, or The System for short, to complete the final milestone in our multi-year simplification of our business. Today, we are announcing that we are underway building a new AI-enabled student lifecycle platform for The System with Salesforce, which we believe will begin delivering value in early 2027.

Speaker #3: Excuse me, 3 million, or 2 cents, per diluted share in the prior year period. On August 4, 2026, we completed our institutional combination. Combining American Public University System's Rasmussen University and Hondros College of Nursing into the new American Public University System, or the system for short, to complete the final milestone in our multi-year simplification of our business.

Speaker #3: And today, we are announcing that we are underway building a new AI-enabled student lifecycle platform for the system with Salesforce, which we believe will begin delivering value in early 2027.

Speaker #3: With those headlines, I will now provide some additional detail on our two segments: our institutional combination and our new AI student platform, before I turn it over to Ed Codispoti, APEI's Chief Financial Officer.

Angela Selden: With those headlines, I will now provide some additional detail on our two segments, our institutional combination, and our new AI student platform before I turn it over to Ed Codispoti, APEI's Chief Financial Officer. Let's start with Health+. Health+ revenue grew 11% to $86.2 million, driven by 7% enrollment growth to approximately 19,600 students and a modest price increase, demonstrating the continued durability of demand for pre-licensure nursing education. We continue to execute on our Fill the Back Row strategy to improve capacity utilization by adding students to available seats in existing programs and our on-ground healthcare campuses, which outpaced our total Health+ enrollment gains by delivering approximately 9% enrollment growth in the quarter. Our new Health+ Orlando campus welcomed its first class this quarter, where enrollment is outpacing our plan, and where we introduced our LPN program to the Orlando market.

Speaker #3: So let's start with HealthPlus. HealthPlus revenue grew 11% to $86.2 million, driven by 7% enrollment growth to approximately $19,600 students and a modest price increase.

Speaker #3: Demonstrating the continued durability of demand for pre-licensure nursing education. We continue to execute on our fill-the-back growth strategy, to improve capacity utilization by adding students to available seats in existing programs and our on-ground healthcare campuses, which outpaced our total HealthPlus enrollment gains by delivering approximately 9% enrollment growth in the quarter.

Speaker #3: Our new HealthPlus Orlando campus welcomed its first class this quarter, where enrollment is outpacing our plan, and where we introduced our LPN program to the Orlando market.

Speaker #3: Our Detroit 2 campus is on track to begin enrolling students in 2026, keeping us on track with our Trailblazer initiative to open two new campuses each year.

Angela Selden: Our Detroit 2 campus is on track to begin enrolling students in 2026, keeping us on track with our Trailblazer initiative to open two new campuses each year. I am also very pleased to announce that we have signed a lease for our first 2027 campus location in Fort Lauderdale, Florida, which is scheduled to begin enrolling students in Q4 2027. Finally, I want to share that Mark Arnold, President of the Health+ division, is leaving for personal reasons. We thank him for his service, and we wish him well. Duane Bertotto, who many of you met at APEI campus visits in Eagan and Tampa, as well as our November Investor Day in New York, will continue to run day-to-day operations for Health+, which includes our important Fill the Back Row and Leverage the Ladder initiatives. Now turning our attention to Military+.

Speaker #3: I'm also very pleased to announce that we have signed the lease for our first 2027 campus location in Fort Lauderdale, Florida, which is scheduled to begin enrolling students in Q4 2027.

Speaker #3: Finally, I want to share that Mark Arnold, President of the HealthPlus Division, is leaving for personal reasons. We thank him for his service and we wish him well.

Speaker #3: Dwayne Bertotto, who many of you met at APEI campus visits, in Eagan and Tampa, as well as our November Investor Day in New York, will continue to run day-to-day operations for HealthPlus, which includes our important fill-the-back row and leverage the ladder initiative.

Speaker #3: Now turning our attention to Military Plus, Military Plus revenue grew 4.7% to $85.5 million, on net course registration growth of 2%, to approximately 98,300 students.

Angela Selden: Military+ revenue grew 4.7% to $85.5 million on net course registration growth of 2% to approximately 98,300 students. Veterans and military families registrations continue to grow at a mid-teens rate and remain a key driver of overall growth. Our active duty channel has been challenged this year by the nature of the ongoing conflict in the Middle East, and in particular, the continued deployment of United States Navy, United States Air Force, and United States Marine Corps service members. Even so, our United States Army enrollment, historically representing the largest percent of our armed service registrations, continues to show strength, and we continue to collect evidence that this is event-related rather than a structural demand issue. I would like to take a moment to honor two Military+ students who, while serving our country, lost their lives in the conflict.

Speaker #3: Veterans and military families registrations continue to grow at a mid-teens rate and remain a key driver of overall growth. Our active duty channel has been challenged this year by the nature of the ongoing conflict in the Middle East and, in particular, the continued deployment of Navy, Air Force, and Marine service members.

Speaker #3: Even so, our Army enrollments historically representing the largest percent of our armed service registrations continues to show strength, and we continue to collect evidence that this is event-related rather than a structural demand issue.

Speaker #3: I would like to take a moment to honor two military plus students who, while serving our country, lost their lives in the conflict. We want to honor Sergeant Michael Swinton, who was pursuing a degree in counterterrorism studies, and First Lieutenant Tyler J.

Angela Selden: We want to honor Sergeant Michael Swinton, who was pursuing a degree in counterterrorism studies, and First Lieutenant Tyler J. Ceyhan, who was pursuing a master's degree in business administration. Now let's turn to an update on our institutional combination. I am very, very pleased to highlight that last week we crossed the finish line with our institutional combination. The Higher Learning Commission has approved the combination of all of our academic units under a single institutional accreditation, and the United States Department of Education has approved the combination for purposes of Federal Student Aid programs. American Military University, American Public University, Rasmussen University, and Hondros College of Nursing now operate as one unified HLC-accredited institution with more than 290 degree programs, approximately 109,000 students, and over 250,000 alumni worldwide.

Speaker #3: Fihan, who was pursuing a master's degree in business administration. Now, let's turn to an update on our institutional combination. I'm very, very pleased to highlight that last week we crossed the finish line with our institutional combination.

Speaker #3: The Higher Learning Commission has approved the combination of all of our academic units under a single institutional accreditation, and the Department of Education has approved the combination for purposes of federal student financial aid programs.

Speaker #3: American Military University, American Public University, Rasmussen University, and Hondros College of Nursing now operate as one unified HLC-accredited institution, with more than 290 degree programs, approximately 109,000 students, and over 250,000 alumni worldwide.

Speaker #3: Notably, the last growth restriction on Rasmussen’s total enrollments, which was imposed in 2021 by the Department of Education when APEI purchased Rasmussen, was also lifted as a result of the combination.

Angela Selden: Notably, the last growth restriction on Rasmussen's total enrollment that was imposed in 2021 by the United States Department of Education when APEI purchased Rasmussen, was also lifted as a result of the combination. We are also pleased to announce a new AI-powered student lifecycle platform, or what we call SLP, with Salesforce for the American Public University System using their next-generation student information platform, along with Data 360 and Agentforce. As an important note, we had already anticipated these costs in our original four-year 2029 financials. Beyond the cost, however, we expect operating efficiencies and additional financial benefits, which were not included, and we will share more detail on a future call. Over time, we expect this to support a more connected, cost-effective view of our students across admissions, advising, and other student services, along with ensuring data protections are built in.

Speaker #3: We are also pleased to announce a new AI-powered Student Lifecycle Platform, or what we call SLP, with Salesforce for the American Public University System, using their next-generation student information platform along with Data360 and Agentforce.

Speaker #3: As an important note, we had already anticipated these costs in our original four-year 2029 financials. Beyond the cost, however, we expect operating efficiencies and additional financial benefits which were not included and we will share more detail on a future call.

Speaker #3: Over time, we expect this to support a more connected, cost-effective view of our students across admissions, advising, and other student services, along with ensuring data protections are built in.

Speaker #3: We expect to roll out to begin with our HealthPlus division in the first quarter of 2027, starting with student support and admissions, and to expand across both HealthPlus and military plus through 2027 and into the first half of 2028.

Angela Selden: We expect the rollout to begin with our Health+ division in Q1 2027, starting with student support and admissions, and to expand across both Health+ and Military+ through 2027 and into the H1 2028. This is one part of our broader measured approach to applying technology where we believe it can have an improvement in both efficiency and student experience over time. Turning our attention to our new university system overall, on our last earnings call, we shared that we have been experiencing some increases in cost per lead for our non-core segments, which has resulted in some lower enrollments in our non-core student segments. While we have not seen our core segments of active duty veterans, families, and campus nursing affected by this, we did initiate an end-to-end evaluation of marketing efficiency and effectiveness across all student segments and channels with a third party.

Speaker #3: This is one part of our broader, measured approach to applying technology where we believe it can improve both efficiency and the student experience over time.

Speaker #3: Turning our attention to our new university system overall, on our last earnings call, we shared that we have been experiencing some increases in cost per lead for our non-core segments.

Speaker #3: This has resulted in some lower enrollments in our non-core student segments. While we have not seen our core segments of active duty, veterans, families, and campus nursing affected by this, we did initiate an end-to-end evaluation of marketing efficiency and effectiveness across all student segments and channels with a third party.

Speaker #3: Our early findings point to meaningful opportunities to lower cost per start and increase effectiveness, and we have already begun implementing changes to processes, practices, and organizational structure with improvements expected to begin to take hold in Q4 '26.

Angela Selden: Our early findings point to meaningful opportunities to lower cost per start and increase effectiveness, and we have already begun implementing changes to processes, practices, and organizational structure with improvements expected to begin to take hold in Q4 2026. In summary, we remain pleased with the continuing performance of our Health+ and Military+ enrollments. In particular, with our Fill the Back Row initiative continuing to perform as we have expected, this reinforces the moats we have built around our large revenue and margin segments. I want to reinforce the message I delivered last quarter with one new important addition. The foundation is built, the business is simplified, the balance sheet is strong, and now the institutional combination is complete. Quarter after quarter, we are doing what we said we would do. We remain very confident about the significant runway ahead of us.

Speaker #3: In summary, we remain pleased with the continuing performance of our health-affiliated and military-affiliated enrollments, in particular with our fill-the-back row initiative continuing to perform as we have expected, this reinforces the moats we have built around our large revenue and margin delivered last quarter with one new important addition.

Speaker #3: The foundation is built, the business is simplified, the balance sheet is strong, and now the institutional combination is complete. Quarter after quarter, we are doing what we said we would do. We remain very confident about the significant runway ahead of us.

Speaker #3: With that, I'll turn the call over to Ed to discuss our Q2 '26 financial results and our updated 2026 guidance in detail.

Angela Selden: With that, I'll turn the call over to Ed to discuss our Q2 2026 financial results and our updated 2026 guidance in detail.

Speaker #1: Thank you, Angie. I'll begin with our second quarter results, then review our balance sheet share and update on our share repurchase program, and conclude with our updated outlook for the third quarter and full year 2026.

Edward Codispoti: Thank you, Angie. I'll begin with our second quarter results, then review our balance sheet, share an update on our share repurchase program, and conclude with our updated outlook for the third quarter and full year 2026. Total revenue in the second quarter was $171.7 million, compared to $162.8 million in the prior-year period, an increase of $8.9 million or 5.5%. Excluding $3.4 million of Graduate School USA revenue in the prior-year period, revenue would have grown 7.8% year over year. We believe this comparable growth rate is a cleaner read on underlying top-line momentum. Now let's break down revenue by segment. At Military+, second quarter revenue was $85.5 million, compared to $81.7 million in the prior-year period, representing 4.7% growth.

Speaker #1: Total revenue in the second quarter was $171.7 million. Compared to $162.8 million, in the prior year period, an increase of 8.9 million or 5.5%.

Speaker #1: Excluding 3.4 million of graduate school USA revenue in the prior year period, revenue would have grown 7.8% year over year. We believe this comparable growth rate is the cleaner read on underlying top-line momentum.

Speaker #1: Now, let's break down revenue by segment. At Military Plus, second quarter revenue was $85.5 million, compared to $81.7 million in the prior year period, representing 4.7% growth.

Speaker #1: Military plus segment income from operations was $23.7 million, compared with $21.4 million, in the second quarter, of 2025, an increase of 10.6%, reflecting a segment adjusted EBITDA margin expansion of $150 basis points to $29.4%.

Edward Codispoti: Military+ segment income from operations was $23.7 million, compared with $21.4 million in the second quarter of 2025, an increase of 10.6%, reflecting a segment adjusted EBITDA margin expansion of 150 basis points to 29.4%. Net course registrations at Military+ for the quarter were approximately 98,300, compared to 96,400 in the second quarter of 2025. At Health+, second quarter revenue was $86.2 million, compared to $77.7 million in the prior-year period, representing 11% growth. This segment delivered income from operations of $0.3 million compared to a loss of $2.4 million in the prior-year period, reflecting continued enrollment momentum and early benefits from our Fill the Back Row capacity utilization initiative, partially offset by investments in advertising and technology.

Speaker #1: Net course registrations at military plus for the quarter were approximately $98,300, compared to $96,400 in the second quarter of 2025. At health plus, second quarter revenue was $86.2 million, compared to $77.7 million, in the prior year period, representing 11% growth.

Speaker #1: This segment delivered income from operations of $0.3 million compared to a loss of $2.4 million in the prior year period, reflecting continued enrollment momentum and early benefits from our Fill-the-Back-Row capacity utilization initiative, partially offset by investment in advertising and technology.

Speaker #1: Turning to profitability, overall, APEI's second quarter net income available to common stockholders was $9.8 million, or $0.52 per diluted share, compared to a loss of $0.3 million, or $0.02 per diluted share, in the prior year period.

Edward Codispoti: Turning to profitability, overall, APEI's Q2 net income available to common stockholders was $9.8 million, or $0.52 per diluted share, compared to a loss of $0.3 million, or $0.02 per diluted share in the prior-year period. Q2 adjusted EBITDA was $20.7 million, up $5.6 million, or 36.8%, compared to $15.1 million in the prior-year period. Adjusted EBITDA margin was 12%, compared to 9.3% in the Q2 of 2025, representing 275 basis points of margin expansion year over year. Turning to our balance sheet. We ended the Q2 in a very strong balance sheet position. As of 30 June 2026, our cash equivalents, restricted cash and short-term investments totaled $222.8 million compared to $176.5 million at 31 December 2025, an increase of $46.3 million or 26.2%.

Speaker #1: Second quarter adjusted EBITDA was $20.7 million, up $5.6 million, or 36.8%, compared to $15.1 million in the prior year period. Adjusted EBITDA margin was 12%, compared to 9.3% in the second quarter of 2025, representing 275 basis points of margin expansion year over year.

Speaker #1: Turning to our balance sheet, we ended the second quarter in a very strong balance sheet position. As of June 30, 2026, our cash, cash equivalents, restricted cash, and short-term investments totaled $222.8 million compared to $176.5 million at December 31, 2025, an increase of 46.3 million or 26.2%.

Speaker #1: Total debt was $88.9 million, and we had excess cash and equivalents and short-term investments over debt of $133.9 million. Year-to-date cash flows from operations were $75.4 million, up 45.6% year over year.

Edward Codispoti: Total debt was $88.9 million, and we had excess cash and equivalents and short-term investments over debt of $133.9 million. Year-to-date cash flows from operations were $75.4 million, up 45.6% year over year. In March, our board authorized a $50 million share repurchase program. We remained active during the Q2 and currently have $45 million remaining available under the authorization. I'd like to take a moment to share our perspective on what drives APEI's strong cash generation. Our Military+ segment carries attractive margins, requires very little incremental capital to grow, and converts strongly to cash flow as enrollment scales. Our Health+ segment focuses on our Fill the Back Row and Leverage the Ladder strategies that utilize existing capacity, and because the infrastructure and support organization is largely in place, incremental margins on those students approach 50%. Additionally, our Trailblazer Nursing campus expansion strategy is highly efficient.

Speaker #1: In March, our board authorized a $50 million share repurchase program. We remained active during the second quarter and currently have $45 million remaining available under the authorization.

Speaker #1: I'd like to take a moment to share our perspective on what drives APEI's strong cash generation. Our military plus segment carries attractive margins, requires very little incremental capital to grow, and converts strongly to cash flow as enrollment scales.

Speaker #1: Our Health Plus segment focuses on our fill-the-back-row and leverage-the-ladder strategies that utilize existing capacity. Because the infrastructure and support organization are largely in place, incremental margins on those students approach 50%.

Speaker #1: Additionally, our trailblazer nursing campus expansion strategy is highly efficient. We have publicly stated that we expect to open 8 new campuses between 2026 and 2029.

Edward Codispoti: We have publicly stated that we expect to open eight new campuses between 2026 and 2029. We plan for each new campus to require approximately $3.5 million of investment, reach breakeven in about 18 months, and generate approximately $12 million of annual revenue within four to five years. The combination of a high-margin, capital-light online business, along with incremental revenue and margin expansion from our existing campuses and a highly efficient campus expansion strategy, creates a powerful growth framework. Our model is designed to enable us to expand while simultaneously generating significant free cash flow. We believe the combination of a capital-light, high-margin Military+ platform, significant operating leverage within Health+, attractive new campus economics, and strong returns on invested capital differentiates APEI and positions us to create substantial long-term shareholder value. I'll now discuss our updated guidance.

Speaker #1: We plan for each new campus to require approximately $3.5 million of investment, reach break-even in about 18 months, and generate approximately $12 million of annual revenue within 4 to 5 years.

Speaker #1: The combination of a high margin, capital-light online business, along with incremental revenue and margin expansion from our existing campuses, and a highly efficient campus expansion strategy, creates a powerful growth framework.

Speaker #1: Our model is designed to enable us to expand, while simultaneously generating significant free cash flow. We believe the combination of a capital-light, high-margin military plus platform significant operating leverage within health plus, attractive new campus economics, and strong returns on invested capital positions us to create substantial long-term shareholder value.

Speaker #1: I'll now discuss our updated guidance. Based on our second quarter results and our visibility into the third quarter, we are raising our full-year 2026 outlook on revenue, net income, adjusted EBITDA, diluted and diluted EPS, and we are initiating third quarter 2026 guidance.

Edward Codispoti: Based on our Q2 results and our visibility into the Q3, we are raising our full year 2026 outlook on revenue, net income, adjusted EBITDA, and diluted EPS, and we are initiating Q3 2026 guidance. For the full year 2026, our updated guidance is as follows. Revenue of $690 million to $698 million, compared with our prior range of $686 million to $696 million. Net income available to common stockholders of $46.5 million to $52.5 million, compared with a prior range of $44.9 million to $51.6 million. Adjusted EBITDA of $96 million to $104 million, compared with our prior range of $93 million to $102 million. Diluted EPS of $2.48 per share to $2.79 per share, compared with our prior range of $2.33 per share to $2.68 per share.

Speaker #1: For the full year 2026, our updated guidance is as follows: revenue of $690 million to $698 million compared with our prior range of $686 million to $696 million.

Speaker #1: Net income available to common stockholders of $46.5 million to $52.5 million, compared with the prior range of $44.9 million to $51.6 million. Adjusted EBITDA of $96 million to $104 million, compared with our prior range of $93 million to $102 million.

Speaker #1: Diluted EPS of $2.48 per share to $2.79 per share, compared with our prior range of $2.33 per share to $2.68 per share. And we are lowering capital expenditures to $25 million to $28 million, compared with our prior range of $28 million to $32 million.

Edward Codispoti: We are lowering capital expenditures to $25 million to $28 million, compared with our prior range of $28 million to $32 million. Our updated guidance reflects our confidence in the trajectory of the business, continued enrollment momentum at Health+, the timing and investment dynamics I just described at Military+, and notable progress on each element of the strategic framework we outlined at Investor Day, including the completion of our institutional combination. As we turn our attention to Q3 guidance, I would like to discuss an infrequent revenue timing shift related to our monthly starts. Because our Military+ revenue is recognized ratably over the period of enrollment in Q3 2026, based on a 7 September start date, approximately $6 million of revenue and roughly $4 million of adjusted EBITDA associated with these enrollments is forecasted in Q4 rather than Q3.

Speaker #1: Our updated guidance reflects our confidence in the trajectory of the business, continued enrollment momentum at health plus, the timing and investment dynamics I just described at military plus, and notable progress on each element of the strategic framework we outlined at investor day, including the completion of our institutional combination.

Speaker #1: As we turn our attention to third quarter guidance, I would like to discuss an infrequent revenue timing shift related to our monthly starts. Because our military plus revenue is recognized ratably over the period of enrollment, in Q3 2026, based on a September 7 start date, approximately $6 million of revenue and roughly $4 million of adjusted EBITDA associated with these enrollments is forecasted in Q4 rather than Q3.

Speaker #1: With that, third quarter 2026 guidance is as follows: revenue of $164.5 million to $167 million; net income available to common stockholders of $3.4 million to $5.4 million; adjusted EBITDA of $14 million to $17 million; and diluted EPS of $18 per share to $29 per share.

Edward Codispoti: With that, Q3 2026 guidance is as follows. Revenue of $164.5 million to $167 million. Net income available to common stockholders of $3.4 million to $5.4 million. Adjusted EBITDA of $14 million to $17 million. Diluted EPS of $0.18 per share to $0.29 per share. The adjusted EBITDA guide in Q3 2026 of $14 million to $17 million includes the Military+ revenue timing anomaly of approximately $4 million and non-recurring expenses related to marketing optimization in the H2 of the year. We expect our margins next year to continue to expand in line with our four-year plan. This assumes military net registrations of 101,000 to 103,000, up 1% to 3% year over year, and health enrollment of approximately 19,100, up approximately 3% year over year, with campus enrollment growth of 7%.

Speaker #1: The adjusted EBITDA guide in Q3 2026 of $14 million to $17 million includes the military plus revenue timing anomaly of approximately $4 million and non-recurring expenses related to marketing optimization in the second half of the year.

Speaker #1: We expect our margins next year to continue to expand in line with our four-year plan. This assumes military net registrations of 101,000 to 103,000, up 1% to 3% year over year, and health enrollment of approximately 19,100, up approximately 3% year over year, with campus enrollment growth of 7%.

Speaker #1: As we raise our full year 2026 guidance on both revenue I'm sorry, on revenue, net income, adjusted EBITDA, and diluted EPS, we remain committed to continuing to execute on the long-term strategy we laid out at investor day.

Edward Codispoti: As we raise our full year 2026 guidance on revenue, net income, adjusted EBITDA, and diluted EPS, we remain committed to continuing to execute on the long-term strategy we laid out at Investor Day. With that, I'll turn it back to Angie for closing remarks.

Speaker #1: With that, I'll turn it back to Angie for closing remarks.

Speaker #2: Thank you, Ed. In closing, the second quarter was another strong quarter. And further proof that the simplification and strengthening work we completed in 2025 is translating into durable top-line growth and margin expansion.

Angela Selden: Thank you, Ed. In closing, Q2 was another strong quarter, and further proof that the simplification and strengthening work we completed in 2025 is translating into durable top-line growth and margin expansion. The core of our Health+ segment continues to demonstrate consistent enrollment and revenue growth, expanding margins, and the durability of demand for nursing and healthcare education. Our Military+ segment continues to deliver strong margins and growth, even as we work through the lingering active duty headwinds that we believe are event related rather than structural. Notably, last week we completed our institutional combination, the final milestone in the multi-year simplification of our business.

Speaker #2: The core of our health plus segment continues to demonstrate consistent enrollment and revenue growth, expanding margins, and the durability of demand for nursing and healthcare education.

Speaker #2: Our Military Plus segment continues to deliver strong margins and growth, even as we work through the lingering active-duty headwinds that we believe are event-related rather than structural.

Speaker #2: Notably, last week we completed our institutional combination the final milestone in the multi-year simplification of our business. At our November 2025 investor day, we laid out a multi-year framework with nine value creation initiatives, five at military plus, and four at health plus, targeting an 8 to 12 percent revenue CAGR, organic, and inorganic revenue of $890 million to $1 billion by 2029, and adjusted EBITDA margins of 20 to 21 percent.

Angela Selden: At our November 2025 Investor Day, we laid out a multi-year framework with nine value creation initiatives, five at Military+ and four at Health+, targeting an 8% to 12% revenue CAGR, organic and inorganic revenue of $890 million to $1 billion by 2029, and adjusted EBITDA margins of 20% to 21%. That framework is intact. Our Trailblazer new campus initiatives are on schedule. Our balance sheet remains very strong. There is meaningful runway ahead of us, and we are as optimistic today as we have ever been about APEI's long-term potential. Our organization is purpose-built to deliver affordable and accessible educational opportunities in fields that are in high demand and resilient to intelligent system disruption. Nursing education prioritizes in-person bedside care, and our military service members continue to be critical to the US defense strategy.

Speaker #2: That framework is intact, our Trailblazer new campus initiatives are on schedule, our balance sheet remains very strong, there is meaningful runway ahead of us, and we are as optimistic today as we have ever been about APEI's long-term potential.

Speaker #2: Our organization is purpose-built to deliver affordable and accessible educational opportunities in fields that are in high demand and are resilient to intelligent system disruption. Nursing education prioritizes in-person, bedside care, and our military service members continue to be critical to the U.S.

Speaker #2: We continue to believe that our education supports careers that require human judgment, and is AI-resilient. We are also continuing to invest in technology, including the student lifecycle platform we announced today, in ways we believe can improve efficiency and the student experience over time.

Angela Selden: We continue to believe that our education supports careers that require human judgment and are AI resilient. We are also continuing to invest in technology, including the student lifecycle platform we announced today, in ways we believe can improve efficiency and the student experience over time. Our platform and sector tailwinds position APEI to accelerate growth and bring more educational opportunities to a greater audience. Before we move to questions, I want to thank our investors, analysts, and the APEI team for the dialogue and engagement we have had over the past quarter. In our ongoing effort to be transparent with our investor community, we remain committed to providing you with clear insights into our performance, our strategic initiatives, and the long-term value creation opportunities ahead of us. With that, I would now like to hand the call back to the operator to begin our question and answer session.

Speaker #2: Our platform and sector tailwinds position APEI to accelerate growth and bring more educational opportunities to a greater audience. Before we move to questions, I want to thank our investors, analysts, and the APEI team for the dialogue and engagement we have had over the past quarter.

Speaker #2: In our ongoing effort to be transparent with our investor community, we remain committed to providing you with clear insights into our performance, our strategic initiatives, and the long-term value creation opportunities ahead of us.

Speaker #2: With that, I would now like to hand the call back to the operator to begin our question-and-answer session.

Speaker #3: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Griffin Boss from B. Riley Securities. Your line is now open. Please go ahead.

Speaker #3: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimal sound quality.

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Griffin Boss from B.

Speaker #3: Reilly Securities, your line is now open. Please go ahead.

Speaker #4: Hi. Good afternoon. And thank you for taking my questions. So first, just off the bat, regarding the combination acknowledging that this was completed last week, I'm just curious if there is any initial sentiment with regard to any changes in the synergies that you expect to unlock with that combination, particularly on the revenue side or if there are any cost synergies that have arisen.

Griffin Boss: Hi, good afternoon, and thank you for taking my questions. First, just off the bat, regarding the combination, acknowledging that this was completed last week, I am just curious if there is any initial sentiment with regard to any changes in the synergies that you expect to unlock with that combination, particularly on the revenue side, or if there are any cost synergies that have arisen?

Speaker #2: Yeah, great question. We are really excited now, Griffin, to turn our attention to revenue synergies, which we've discussed in the past—namely, bringing these RAFASN programs, both the RN to BSN and the post-licensure healthcare programs, along with the BSN programs, to our Honduras campuses.

Angela Selden: Yeah, great question. We are really excited now, Griffin, to turn our attention to revenue synergies, which we have discussed in the past, namely bringing these Rasmussen programs that are both the RN to BSN and the post-licensure healthcare programs, along with the BSN programs to our Hondros campuses. In the upcoming calls, we are going to put a number around that, what we believe is the growth opportunity now that we have line of sight to the fact that the combination is complete. Because of course, that had to be complete before we would be able to complete the necessary regulatory steps to accomplish that. Then as it relates to simplification and other cost synergies, certainly the first step is bringing Rasmussen and Hondros together, and then looking at the three institutions combined.

Speaker #2: So, in the upcoming calls, we're going to put a number around that—what we believe is the growth opportunity now that we have a line of sight to the fact that the combination is complete.

Speaker #2: Because, of course, that had to be complete before we'd be able to complete the necessary regulatory steps to accomplish that. And then, as it relates to simplification and other cost synergies, certainly the first step is bringing RAFASN and Honduras together, and then looking at the three institutions combined. We look forward to sharing with you some of those findings, results, and guidance in the next call.

Angela Selden: We look forward to sharing with you some of those findings and results and guidance in the next call.

Speaker #4: Okay. Well, yeah, I look forward to hearing about that. And then for my follow-up, one thing that we've been following of late is the Senate and House authorization bills, and specifically the possible increase for tuition assistance benefits from $250 to $350 per credit hour.

Griffin Boss: Well, yeah, look forward to hearing about that. Then for my follow-up, a thing that we have been following of late is the Senate and House authorization bills, and specifically the possible increase for tuition assistance benefits from $250 to $350 per credit hour. Obviously, I assume this is something that you are following as well, and this is a longer-term possible event that could happen. But I am curious just if you have any commentary about how APEI is thinking about that, what it would intend to do with its tuition rate if that increase passes, and then, more specifically too, and related, if there is any detail you could provide about the military students that currently use TA-funded credits and to what degree that is in terms of credits per year. If there is any more color you could provide, that would be helpful.

Speaker #4: Just obviously, I assume this is something that you are following as well, and this is a longer-term possible event that could happen. But I'm curious just if you have any commentary about how APEI is thinking about that, what it would intend to do with the its tuition rate if that increase passes, and then a more specifically to and related, how if there's any detail you could provide about the military students that currently use TA-funded credits and what to what degree that is in terms of credits per year, if there's any more color you could provide that'd be helpful.

Speaker #2: Yeah, great question, Griffin. Thank you for asking that. So, as you may have followed in the press, the NDAA bill did pass the House, which is a step that has not happened for this particular matter in the past.

Angela Selden: Yeah. Great question, Griffin. Thank you for asking that. As you may have followed in the press, the NDAA bill did pass the House, which is a step that has not happened for this particular matter in the past. What is in the House version of the bill is a 40% increase in the per credit hour tuition assistance reimbursement rate. There are some additional process steps that this has to complete, which is getting the bill passed in the Senate, and then the Department of War has to essentially approve the increase and the appropriations bill, which is what funds the entire Department of War, not just this small program, but the entire defense budget also has to be passed, which typically happens here before 1 October. So those are several process steps that have to be completed.

Speaker #2: The what is in the House version of the bill is a 40% increase in the per credit hour tuition assistance reimbursement rate. And there are some additional process steps that this has to complete.

Speaker #2: Which is getting the bill passed in the Senate, and then the Department of War has to essentially approve the increase and the appropriations bill, which is what funds the entire Department of War—not just this small program, but the entire defense budget also has to be passed—which typically happens here before October 1.

Speaker #2: And so those are several process steps that have to be completed. If that were to come to pass, then it does really create an opportunity for the military plus division to reevaluate the price per credit hour for our active-duty military and the primary reason is because we have, for 20 years, for 20 years, over 20 years, committed to not requiring active-duty military to pay out-of-pocket to get an undergraduate education.

Angela Selden: If that were to come to pass, then it does really create an opportunity for the Military+ division to reevaluate the price per credit hour for our active duty military. The primary reason is because we have, for over 20 years, committed to not requiring active duty military to pay out of pocket to get an undergraduate education. For 23 years, we have been able to drive efficiency and optimization in our business to be able to create the margin profile that we continue to deliver, and at the same time, honor that commitment to our active duty service members for that zero out-of-pocket cost. So it's an important development. We're paying careful attention to it, and we certainly will update all of you if we have further developments on that.

Speaker #2: And so for 23 years, we have been able to drive efficiency and optimization in our business to be able to create the margin profile that we continue to deliver.

Speaker #2: And at the same time, honor that commitment to our active-duty service members for that zero out-of-pocket cost. So it's an important development. We're paying careful attention to it.

Speaker #2: We will certainly update all of you if we have further developments on that.

Speaker #4: Excellent. Very much appreciate that detail, Angie, and thank you for taking my questions.

Speaker #2: Thanks very much, Griffin.

Griffin Boss: Excellent. Very much appreciate that detail, Angie, and thank you for taking my questions.

Speaker #3: Your next question comes from the line of Tom White at D.A. Davidson. Your line is now open. Please go ahead.

Angela Selden: Thanks very much, Griffin.

Operator: Your next question comes from the line of Tom White at D.A. Davidson. Your line is now open. Please go ahead.

Speaker #5: Hey, this is Wyatt on for Tom. Thanks for taking our questions. With the conflict in the Middle East not resolved yet, could you maybe talk about what's contemplated in your guidance and how you're thinking about the active-duty headwinds relative to last quarter?

[Analyst] (D.A. Davidson): Hey, this is Wyatt on for Tom. Thanks for taking our questions. With the conflict in the Middle East not resolved yet, could you maybe talk about what is contemplated in your guidance and how you are thinking about the active duty headwinds relative to last quarter?

Speaker #2: You bet. So I believe on our last earnings call, maybe even the one prior to that, we described that the headwinds for Navy, Air Force, and Marines have been included in our guidance for the rest of the year, all right?

Angela Selden: You bet. I believe on our last earnings call, maybe even the one prior to that, we described that the headwinds for United States Navy, United States Air Force, and United States Marine Corps have been included in our guidance for the rest of the year. We did not want to anticipate the war would be over by the end of 2026, since it began after we had initiated guidance. We have assumed that it will remain as is. The headwinds will remain as is for the remainder of 2026.

Speaker #2: So, we didn't want to anticipate that the war would be over by the end of 2026, since it began after we had initiated guidance. So, we have assumed that it will remain as is—the headwinds will remain as is for the remainder of 2026.

Speaker #5: Got it. That's helpful. And then with continued progress, mid-teens growth, and adding non-active-duty military to Military Plus, how should we think about the opportunity and the contribution to overall growth in that segment in the coming quarters?

[Analyst] (D.A. Davidson): Got it. That is helpful. With continued progress, mid-teens growth and adding non-active duty military to Military+, how should we think about the opportunity and the contribution to overall growth in that segment in the coming quarters?

Speaker #2: Yeah, go ahead, Ed, if you want to.

Speaker #6: Well, I would just say that, yeah, on the veterans and military families, those are growing in the double digits. So when you think about the full-year guidance, what it implies is a 14–15% adjusted EBITDA margin.

Angela Selden: Yeah. Go ahead, Ed, if you want to-

Edward Codispoti: Well, I would just say that, yes, on the veterans and military families, those are growing in the double digits. When you think about the full year guidance, what it implies is a 14% to 15% adjusted EBITDA margin. Despite those low single-digit military growth rates, as Angie mentioned, it does include the headwinds from the deployment. It still suggests an 8% revenue growth if you adjust for Graduate School USA.

Speaker #6: And despite those low single-digit military growth rates, as Angie mentioned, it does include the headwinds from the deployment. It still suggests an 8% revenue growth if you adjust for Graduate School USA.

Speaker #5: Got it. Thanks, guys.

Speaker #6: Yeah.

Speaker #2: Thank you very much, Wyatt.

[Analyst] (D.A. Davidson): Got it. Thanks, guys.

Speaker #3: Your next question comes from the line of Luke Horton from Northland Capital Markets. Your line is now open. Please go ahead.

Angela Selden: Thank you very much, Wyatt.

Operator: Your next question comes from the line of Luke Horton from Northland Capital Markets. Your line is now open. Please go ahead.

Speaker #4: Hey, guys. Congrats on a nice quarter. Thanks for taking the questions. Just wanted to touch on the Health Plus business. So just with the enrollment for Q3, it looks like it's decelerating a little bit to that 2.5% starts growth.

Lucas John Horton: Hey, guys. Congrats on a nice quarter. Thanks for taking the questions. Just wanted to touch on the Health+ business. Just with the enrollment for Q3, it looks like it is decelerating a little bit to that 2.5% starts growth. Was just wondering if you guys are seeing, since several competitors have kind of called this out this earnings cycle, with the increasing usage of AI to search for schools causing some enrollment disruptions. Are you guys seeing any of that on the healthcare side? I know the military side is more referral-based, but just any details you could provide there.

Speaker #4: Was just wondering if you guys are seeing since several competitors have kind of called this out, this earnings cycle with the increasing usage of AI to search for schools causing some enrollment disruptions.

Speaker #4: Are you guys seeing any of that on the healthcare side? I know the military side is more referral-based, but just any details you could provide there.

Speaker #2: Sure. I'll start, and then I'll have Gary add to the comments. So what we see, both at Military Plus, Luke, and also with our healthcare business, is that the nature of our core businesses—which is our active-duty military, veterans, and families—those are driven primarily by referrals.

Angela Selden: Sure. I will start and then I will have Gary add to the comments. What we see both at Military+, Luke, and also with our healthcare business, is that the nature of our core businesses, which is our active duty military veterans and families, those are driven primarily by referrals. It is much more driven by brand marketing and other brand awareness than it is what you would consider traditional search. There is a very small part of the Military+ business, what we call our civilian business, which likely is being modestly affected by that. But it is an incredibly small part of the Military+ division. On the Health+ side, our campuses for all of our nursing programs, same as the core of our Military+ division.

Speaker #2: So it is much more driven by brand marketing and other brand awareness than it is what you would consider traditional search. There's a very small part of the military plus business—what we call our civilian business—which likely is being modestly affected by that, but it's an incredibly small part of the military plus.

Speaker #2: On the health plus side, our campuses for all of our nursing programs are the same as the core of our Military Plus division. We are relying on brand awareness and, really, as we've talked about in the past, very local, market-driven marketing strategies.

Angela Selden: We are relying on brand awareness and really, as we have talked in the past, very local market-driven marketing strategies, bus wraps, billboards, radio campaigns, et cetera, which allows our local market students to be aware of our campus-based, both nursing and other healthcare programs. As you recall from Investor Day, we do have two online program categories at Health+, and one is the health-related, and the other is our what we call plus or the non-health related. As we mentioned in our last call, in that non-health online program, we were seeing cost per lead, cost per enrollment going up.

Speaker #2: Bus wraps, billboards, radio campaigns, etc. which allows our local market students to be aware of our campus-based both nursing and other healthcare programs. As you recall from investor day, we do have two online program categories at Health Plus, and one is the health-related, and the other is our what we call plus or the non-health-related.

Speaker #2: As we mentioned in our last call, in that non-health online program, we were seeing cost per lead and cost per enrollment going up.

Speaker #2: So we have, in this past quarter, engaged a third party not just to look at that small slice of Health Plus, but to look at the entire end-to-end marketing strategy—capabilities, organization, processes, practices, etc.

Angela Selden: We have, in this past quarter, engaged a third party not just to look at that small slice of Health+, but look at the entire end-to-end marketing strategy, capabilities, organization, processes, practices, et cetera, to be sure that we are not being negatively affected and can position ourselves in this new environment. That work is underway. We expect to see Q4 results in a positive manner. Again, for the Health+, which is what your question was, we believe that that cost per lead increasing is something we are tackling right away in order to be able to get our online non-healthcare enrollment back in line with what we had expected.

Speaker #2: To be sure that we are not being negatively affected and can position ourselves in this new environment. That work is underway, and we expect to see fourth quarter results in a positive manner.

Speaker #2: And again, for the Health Plus—which is what your question was—we believe that the cost per lead increasing is something we're tackling right away in order to be able to get our online non-healthcare enrollments back in line with what we had expected.

Speaker #4: Okay, got it. That's super helpful. And then just lastly from me, on the cash position—obviously, you grew cash from $46 million to over $220 million.

Lucas John Horton: Okay, got it. That's super helpful. Just lastly from me, just the cash position. Obviously, you grew cash $46 million to over $220 million. You've got $45 million remaining on the buyback. I guess, how do you guys think of the pace of repurchases versus other capital deployment options or specifically M&A and the appetite there?

Speaker #4: You've got $45 million remaining on the buyback. I guess, how do you guys think about the pace of repurchases versus other capital deployment options, specifically kind of M&A and the appetite there?

Speaker #6: Well, hi, Luke. This is Ed. Yeah, so first, of course, as we've said in the past, we invest in our organic business first and foremost.

Edward Codispoti: Well, hi, Luke. This is Ed. First, of course, as we've said in the past, we invest in our organic business first and foremost. Of course, as part of our Trailblazer plan, we're opening up two campuses per year, but we always have the option to open up more as we begin to ramp up and get the cadence going. We're always actively looking at acquisitions. There's nothing on the table right now, but we are actively looking at acquisitions, and our priority is to invest in growth at the end of the day and to increase shareholder value. So we're going to take that cash and use it as wisely as possible to get the highest return possible.

Speaker #6: Of course, as part of our Trailblazer Plan, we're opening up two campuses per year, but we always have the option to open up more as we begin to ramp up and get the cadence going.

Speaker #6: And we're always actively looking at acquisitions. That's something that we are—there's nothing on the table right now, but we are actively looking at acquisitions.

Speaker #6: And our priority is to invest in growth at the end of the day and to increase shareholder value. So we're going to take that cash and use it as wisely as possible to get the highest return possible.

Speaker #4: Makes sense. Awesome. Thanks, Ed. Thank you, guys.

Speaker #6: Yeah.

Speaker #2: Thank you, Luke.

Lucas John Horton: Makes sense. Awesome. Thanks, Ed. Thank you, guys.

Speaker #3: Your next question comes from the line of Jasper Bibb at Truist Securities. Your line is now open. Please go ahead.

Edward Codispoti: Yep.

Angela Selden: Thank you, Luke.

Operator: Your next question comes from the line of Jasper Bibb at Truist Securities. Your line is now open. Please go ahead.

Speaker #7: Hey, good afternoon, everyone. Maybe just following up on Luke's question within Health Plus. I guess I'm curious how much of the Q3 versus Q2 deceleration in enrollment growth is driven by online. I think you had ground enrollment plus 9% in the second quarter in the deck.

Jasper Bibb: Hey, good afternoon, everyone. Maybe just following up on Luke's question within Health+, I guess I am curious how much of the Q3 versus Q2 deceleration and enrollment growth is driven by online. I think you had ground enrollment +9% in the second quarter in the deck. So just curious if you are seeing a similar trend there in your third quarter guidance.

Speaker #7: So, just curious if you're seeing a similar trend there in your third quarter guidance. Yeah. So our fill-the-back row, as is Gary, Jasper—so the fill-the-back row, which is our campus-based portion of that, which is the area we're really focused on from a capacity utilization standpoint—went from 9% growth, which we're very happy with, to 7%, which is well within line with what we're expecting.

Gary Jansen: Yeah. This is Gary. Jasper, the Fill the Back Row, which is our campus-based portion of that, which is the area we are really focused on from a capacity utilization standpoint, went from 9% growth, which we are very happy, to 7%, which is well within line with what we are expecting. To answer your question, the vast majority was due to our online segment and an area, and that is where we are really focused on, as Angie pointed out, of making sure that we optimize. As Angie said, we are comfortable with the referral rates in the military, and we are very comfortable with how the campus-based programs are progressing. We are just trying to make sure that we optimize to grow the other little slivers of the business that are important but not as significant for our long-term strategy.

Speaker #7: So to answer your question, the vast majority was due to our online segment. And that's an area—and that's where we're really focused, as Andy pointed out—on making sure that we optimize. So, as Andy said, we're comfortable with the referral rates and the military.

Speaker #7: And we're very comfortable with how the campus-based programs are progressing. So we're just trying to make sure that we optimize to grow the other little slivers of the business that are important.

Speaker #7: But not as significant for our long-term strategy. Thanks for that. And then I think you mentioned some opportunities—you’re analyzing the cost per lead and some things you could do to improve that with your advisors.

Jasper Bibb: Thanks for that. I think you mentioned some opportunities. You are analyzing the cost per lead and some things you could do to improve that with your advisors. I guess just any more detail on what some of those opportunities might be or changes that you are planning to implement based on what you have learned through that process?

Speaker #7: I guess just any more detail on what some of those opportunities might be, or changes that you're planning to implement, based on what you've learned through that process.

Speaker #2: Yeah, I'll start. Certainly, the first thing we need to do is create a much more agile environment. So, when I mentioned organizational changes, we're really focusing on how we are implementing the latest thinking around agile strategies for our marketing organization.

Angela Selden: Yeah, I will start. Certainly, the first thing we need to do is create a much more agile environment. So when I mention organizational changes, we are really focusing on how we are implementing the latest thinking around agile strategies for our marketing organization. We are also looking at various places where we perhaps have spent beyond the optimal level in order to get the next lead and reinvest those dollars in places that have more opportunity. So it is really what I would call tweaking what we already have in place really for optimization purposes and being able to move more quickly to respond to what we are seeing are signs and trends of developing patterns. So, very excited to share with you more about those details in an upcoming call.

Speaker #2: We're also looking at various places where we perhaps have spent beyond the optimal level in order to get the next lead, and reinvest those dollars in places that have more opportunity.

Speaker #2: So it's really what I would call tweaking what we already have in place, really for optimization purposes, and being able to move more quickly to respond to what we are seeing are signs and trends of developing patterns.

Speaker #2: I'm very excited to share more details with you during an upcoming call.

Speaker #7: Super helpful. Thanks for taking the question.

Speaker #2: Thank you, Jasper.

Jasper Bibb: Super helpful. Thanks for taking the question.

Speaker #3: Your next question comes from the line of Eric Wool at Texas Capital Securities. Your line is now open. Please go ahead.

Angela Selden: Thank you, Jasper.

Operator: Your next question comes from the line of Eric Wold at Texas Capital Securities. Your line is now open. Please go ahead.

Speaker #8: Thank you, and thanks for taking my questions. Two questions. I want to go back to the military segment—obviously, the impact of the deployments.

Eric Wold: Thank you, and thanks for taking my questions. Two questions. I want to go back to the Military+ segments, obviously, the impact of the deployments. You mentioned that obviously Army enrollment continues to be strong as that is not impacted. Anything you have seen or any kind of data around those students that may have delayed the start or paused their programs to be deployed, coming back and restarting to get a sense of just a really nice pause and any kind of data to show that for those impacted segments?

Speaker #8: You mentioned that obviously army enrollment continues to be strong as that's not impacted. Anything you've seen or any kind of data around those students that may have delayed the start or paused their programs to be deployed coming back and restarting is going to get a sense of just it really is kind of just a pause and kind of more kind of data kind of show that for those impacted segments?

Speaker #7: Yeah. So I think while we see students that have actively asked for waivers for deployment—and obviously, that spiked up during that time period—what we're really seeing is just a trend of stopouts.

Gary Jansen: Well, I think while we see students that have actively asked for waivers for deployment, and obviously, that spiked up during that time period, what we have really seen is just a trend of stopouts. Our students do not have to tell us that they are stopping out for a period of time because they are in the military and they are more of a part-time student. We allow them to have grace periods. So we would not see it immediately through actively asking for waivers. But what we did see is a change in the enrollment patterns in those three branches that certainly is related to the deployments. That gave us a pretty good sense of what was going on, specifically in the Air Force, the Navy, and the Marines.

Speaker #7: And our students don't have to tell us that they're stopping out for a period of time because they're in the military, and they're more of a part-time student.

Speaker #7: We allow them to have grace periods. We wouldn't see it immediately through actively asking for waivers, but what we did see is a change in the enrollment patterns in those three branches that certainly is related to the deployments.

Speaker #7: They gave us a pretty good sense of what was going on, specifically in the Air Force, the Navy, and the Marines. We've seen a little bit of improvement in new students in one of those branches, but the good news—which we said makes us feel like there's nothing structural—is we continue to see very strong numbers in the Army, consistent with our long-range growth trajectory.

Gary Jansen: We have seen a little bit of improvement in new students in one of those branches, but the good news, we said, makes us feel like there is nothing structural, is we continue to see very strong numbers in Army consistent with our long-range growth trajectory. So we will have to see how the deployment rolls out. I know it changes. Every few weeks, we hear new news. But we are hopeful that things come to a good resolution, and we can get back to a normal state of operating.

Speaker #7: So we'll have to see how the deployment rolls out. I know it changes every few weeks—we hear new news—but we're hopeful that things come to a good resolution and we can get back to a normal state of operating.

Speaker #8: Perfect. And then, with the growth restrictions now removed from Raffles, and with the combination, maybe talk about how you expect to benefit from that and how quickly you could start seeing any incremental growth in that segment.

Gary Jansen: Perfect. With the growth restrictions now removed from Rasmussen with the combination, maybe talk about how you expect to benefit from that and how quickly you could start seeing any incremental growth in that segment.

Eric Wold: Perfect. With the growth restrictions now removed from Rasmussen with the combination, maybe talk about how you expect to benefit from that and how quickly you could start seeing any incremental growth in that segment.

Speaker #2: Sure. So, as a reminder, there were three types of growth restrictions that the Department of Ed imposed on us when we completed the transaction in 2021.

Angela Selden: Sure. As a reminder, there were three types of growth restrictions that the Department of Ed imposed on us when we completed the transaction in 2021. The first was the ability to add new campuses. The second was adding new programs. Both of those were lifted last year. Consequently, it is just this year that we are able to open new campuses, which you heard Ed talking about the fact that we now have two opening this year and one already the lease signed for the first one for next year already. We are taking advantage of those already. This growth restriction was on the total number of students at Rasmussen who could engage or basically take financial aid from the department. This was an important year for that to be lifted, because we certainly were approaching that limit.

Speaker #2: The first was the ability to add new campuses. The second was adding new programs. And both of those were lifted last year. And then, of course—and so, consequently—it is just this year that we are able to open new campuses, which you heard Ed talking about, the fact that we now have two opening this year and one already, the lease signed for the first one for next year already.

Speaker #2: So we're taking advantage of those already. This growth restriction was on the total number of students at Raffleson who could engage or basically take financial aid from the Department.

Speaker #2: And so this was an important year for that to be lifted, because we certainly were approaching that limit. And so we're very pleased to say that we no longer have that restriction.

Angela Selden: We are very pleased to say that we no longer have that restriction. It would have required us to have to potentially redirect students to other types of payment plans, et cetera. Consequently, the students can engage with the department as in the normal course and be able to take financial aid without any kind of limit that we had on the total number of students with financial aid.

Speaker #2: It would have required us to potentially redirect students to other types of payment plans, etc. And so, consequently, the students can engage with the department as in the normal course and be able to take financial aid without any kind of limit that we had on the total number of students with financial aid.

Speaker #8: Perfect. Thank you. Thank you, both.

Speaker #2: Thank you very much.

Angela Selden: Perfect. Thank you. Thank you, both.

Eric Wold: Perfect. Thank you. Thank you, both.

Speaker #3: Your next question comes from the line of Elnivor from Lake Street Capital Markets. Your line is now open. Please go ahead.

Angela Selden: Thank you very much.

Operator: Your next question comes from the line of Ellen Rohr from Lake Street Capital Markets. Your line is now open. Please go ahead.

Speaker #9: Hey, guys. Thanks for taking my questions. So, with CapEx now in the range of $25 to $28 million versus about $16 million last year, just wondering how much of that increase is related to campus expansion strategy, and what level of returns are you targeting on these investments?

Ellen Rohr: Hey, guys. Thanks for taking my questions. With CapEx now in the range of $25 million to $28 million versus about $16 million last year, just wondering how much of that increase is related to campus expansion strategy, and what level of return are you targeting on these investments?

Ellen Niebuhr: Hey, guys. Thanks for taking my questions. With CapEx now in the range of $25 million to $28 million versus about $16 million last year, just wondering how much of that increase is related to campus expansion strategy, and what level of return are you targeting on these investments?

Speaker #8: Hi. This is Ed. Yes. So when you think about that CapEx number, about 7 million dollars is related to CapEx expansion. So we're on our cadence has us at about three and a half million dollars per campus.

Edward Codispoti: Hi, this is Ed. When you think about that CapEx number, about $7 million is related to CapEx expansion. Our cadence has us at about $3.5 million per campus, so about $7 million of that combined since we are on that two campus per year pace.

Speaker #8: So about $7 million of that combined, since we're on that two-campus-per-year pace.

Speaker #9: Gotcha. Thanks. And then as you look towards 2027, which of the current growth initiatives gives you the most confidence that APEI can sustain that above-market revenue growth while continuing the EBITDA margins?

Ellen Rohr: Got you. Thanks. As you look towards 2027, which of the current growth initiatives gives you the most confidence that APEI can sustain that above-market revenue growth while continuing the EBITDA margins?

Ellen Niebuhr: Got you. Thanks. As you look towards 2027, which of the current growth initiatives gives you the most confidence that APEI can sustain that above-market revenue growth while continuing the EBITDA margins?

Speaker #2: El, thanks for the question. I would start by saying we continue to have tremendous enthusiasm about Fill the Back Row. That's working. We don't see the marketing being affected by any kind of LLM or Google Search.

Angela Selden: Ellen, thanks for the question. I would start by saying, we continue to have tremendous enthusiasm about Fill the Back Row. That's working. We don't see the marketing being affected by any kind of LLM or Google search. We are very excited about Fill the Back Row and believe that there's a lot of potential there. Second is our Leverage the Ladder, and we talked a little bit about that a few minutes ago, which is the ability for us to bring the Rasmussen programs that are not already offered at Hondros campuses to those students, either as alums or as new students, considering which program they want to engage in. That has a few regulatory thresholds we need to tackle. But the road is clear now for us to be able to do that now that we are finished with the combination.

Speaker #2: And so we're very excited about fill the back row and believe that there's a lot of potential there. Second is our leveraged ladder. And we talked a little bit about that a few minutes ago, which is the ability for us to bring the Rasmussen programs that don't already, are not already offered at Hondros campuses, to those students—either as alums or as new students considering which program they want to engage in. That has a few regulatory thresholds we need to tackle, but the road is clear now for us to be able to do that, now that we are finished with the combination.

Speaker #2: So we're excited to lay out the timeline for those specific growth levers, and we'll share that in our next call. On the APUS side, we are very excited about our military and veterans growth strategy, also continuing with our families. We have the opportunity to invest more behind our active duty now as a result of the combination.

Angela Selden: We are excited to lay out the timeline for those specific growth levers, and we'll share that in our next call. On the APUS side, we are very excited about our Military and Veterans growth strategy, also continuing with our families. We have the opportunity to invest more behind our active duty now as a result of the combination. That will allow us to redirect some of our marketing dollars we have been spending in other cash pay categories and really focus on what is our core in that division, which is our active duty military and our veterans segment. So we expect to see that that will grow at a faster rate in the future than what we've seen, and certainly also than muted by the deployments as well.

Speaker #2: And so that will allow us to redirect some of our marketing dollars we had been spending in other cash-pay categories, and really focus on what is our core in that division, which is our active duty military and our veterans segment.

Speaker #2: So we expect to see that will grow at a faster rate in the future than what we've seen, and certainly also then be muted by the deployments as well.

Speaker #9: Awesome. Thanks, guys.

Speaker #2: Thank you very much.

Ellen Rohr: Awesome. Thanks, guys.

Ellen Niebuhr: Awesome. Thanks, guys.

Speaker #3: Your next question comes from the line of Steven Sheldon at William Blair. Your line is now open. Please go ahead.

Angela Selden: Thank you very much.

Operator: Your next question comes from the line of Stephen Sheldon at William Blair. Your line is now open. Please go ahead.

Speaker #10: Hey, thanks, and nice work here. Angie, can you talk some more about the AI student lifecycle platform that you're building with Salesforce? I think you mentioned some cost benefits that you're planning to quantify at some point.

Stephen Sheldon: Hey, thanks, and nice work here. Angie, can you talk some more about the AI student lifecycle platform that you're building with Salesforce? I think you mentioned some cost benefits that you're planning to quantify at some point, but on the latter part, how should we think about the way it could impact and boost the overall student experience? Are there any early insights that you can share on how that might add to the business?

Speaker #10: But on the latter part, I think—how should we think about the way it could impact and boost the overall student experience? Are there any early insights that you can share on what you think, how that might add to the business?

Speaker #2: Yeah, we're excited about this, Steven, so thank you for asking this question. We really—I think as you may recall—we talked last year about some experiments that we had been doing in and around the idea of using AI across different processes.

Angela Selden: Yeah. We're excited about this, Steven, so thank you for asking this question. I think as you may recall, we talked last year about some experiments that we had been doing in and around the idea of using AI across different processes. We've really moved from experimentation now to actually embedding AI in every single process and practice that we're doing in conjunction with our students. We believe we've evolved, as we've learned more, and frankly, we've built an AI-first team, led by our former board member, now our Chief Innovation and Technology Officer, James Koenigsberg. He has built a team that is really accelerating this strategy. We're very excited about that.

Speaker #2: And we have really moved from experimentation to actually embedding AI in every single process and practice that we're undertaking in conjunction with our students.

Speaker #2: And so we believe we've evolved as we've learned more, and frankly, we've built an AI-first team led by our former board member, now our Chief Innovation and Technology Officer, James Kenningsburg. He has built a team that is really accelerating this strategy.

Speaker #2: So we're very excited about that. To answer your question about the cost benefits and the revenue benefits, or the student satisfaction, student success, and retention, which is really a big part of what we believe this will do for us.

Angela Selden: To answer your question about the cost benefits and the revenue benefits or the student satisfaction, student success, and retention, which is really a big part of what we believe this will do for us. First, on the cost side, we certainly expect that the benefit will be more about throughput, right? We want to make sure that we can increase speed to service for our students, that we are their first choice, and that, as a result, we can deploy the people that we have working today to serve more and more students, maybe students who have complex problems. So we really are excited about the ability to drive efficiency and effectiveness with our teams, especially at the first part of the pipe. As you described, retention is a critical part of what intelligent systems can do and identify where students are perhaps demonstrating early warning signals.

Speaker #2: First, on the cost side, we certainly expect that the benefit will be more about throughput, right? We want to make sure that we can increase speed to service for our students, that we are their first choice.

Speaker #2: And that as a result, we can deploy the people that we have working today to serve more and more students, maybe students who have complex problems.

Speaker #2: We really are excited about the ability to drive efficiency and effectiveness with our teams, especially at the first part of the pipe. As you described, retention is a critical part of what intelligent systems can do.

Speaker #2: And identify where students are perhaps demonstrating early warning signals, and so it's very difficult, certainly in particular at APUS or on the Rasmussen online side, to necessarily sense those things early on.

Angela Selden: It is very difficult, certainly, in particular at APUS or on the Rasmussen online side, to necessarily sense those things early on. You can have a better sense of that with our campus-based programs and seeing students struggling. Using these for our online students to be able to understand more quickly where they may be struggling or stepping away will increase retention, which we all know increases revenue, and also reduces the cost to serve per student because we are not having to go out and spend marketing dollars on replacing that student with someone new. We are going to give you some quantification of that in an upcoming call, because we have just launched this initiative in the last two quarters, and we look very forward to going live with this in early 2027.

Speaker #2: You can have a better sense of that with our campus-based programs and seeing students struggling. So, using these for our online students to be able to understand more quickly where they may be struggling or stepping away will increase retention, which we all know increases revenue and also reduces the cost to serve per student, because we're not having to go out and spend marketing dollars on replacing that student with someone new.

Speaker #2: So we're going to give you some quantification of that in an upcoming call, because we've just launched this initiative in the last two quarters, and we look very forward to going live with this in early 2027.

Speaker #2: But I do want to reiterate, as I said in my comments, that when we met you all last year in New York, we had anticipated the move to this platform.

Angela Selden: I do want to reiterate, as I said in my comments, that when we met you all last year in New York, we had anticipated the move to this platform, so the costs are baked in already to our four-year plan. It is just the upside benefit in terms of retention, better student service, et cetera, that we look forward to sharing with you in an upcoming call.

Speaker #2: So the costs are baked in already to our four-year plan. It's just the upside benefit in terms of those—in terms of retention, better student service, etc.

Speaker #2: That we look forward to sharing with you on an upcoming call.

Speaker #10: Great to hear. I look forward to learning more about that. And then, just as a follow-up, gross margin trends here have been really strong, especially over the last year or so.

Stephen Sheldon: Great to hear. Look forward to learning more about that. Just as a follow-up, gross margin trends here have been really strong, especially over the last year or so. Can you talk some about the levers driving this degree of year-over-year expansion? How much Fill the Back Row and just general improving campus utilization may be playing into that, and how you are thinking about the trajectory over the back half and into early 2027? Are there still levers to pull to keep providing year-over-year expansion?

Speaker #10: So, can you talk some about the levers driving this degree of year-over-year expansion? How much filling the back row and just general improving campus utilization may be playing into that?

Speaker #10: And how are you thinking about the trajectory over the back half and into early 2027? Are there still levers to pull to keep providing year-over-year expansion?

Speaker #11: Yeah, so I'll start, and I can chime in too. So definitely where we've seen the most improvement has been actually in our Military Plus, where the team over there is constantly, because of the fixed price of $250 per credit, constantly has a practice of trying to find operating efficiencies.

Gary Jansen: Well, I will start and Edward can chime in too. Definitely where we have seen the most improvement has been actually in our Military+, where the team over there is constantly, because of the fixed price of $250 per credit hour, constantly have a practice of trying to find operating efficiencies in the business. I believe if you ask that team, they believe they could continue to find those improvements in gross margin, especially in gross margin over the next few years. That is one area. Then certainly in Health+, just the flow through because of the fixed cost nature of our campuses, we expect that to be equally as strong in the business model. Both of those are contributing and I feel like we have opportunity to expand the gross margin at both businesses now.

Speaker #11: In the business. And I believe if you ask that team, they believe they could continue to find those improvements in gross margin, especially in gross margin, over the next few years.

Speaker #11: That's one area. But then certainly, in the health plus, just the flow-through because of the fixed-cost nature of our campuses, we expect that to be equally as strong in the business model.

Speaker #11: But both of those are contributing, and I feel like we have the opportunity to expand the gross margin at both businesses now.

Speaker #10: Makes sense. Thank you.

Speaker #2: Terrific. Thanks, Steven.

Stephen Sheldon: Makes sense. Thank you.

Angela Selden: Terrific. Thanks, Stephen.

Speaker #3: There are no further questions at this time. This concludes the Q&A session. I will now turn the call back to Angie Selden for closing remarks.

Operator: There are no further questions at this time. This concludes the Q&A session. I will now turn the call back to Angie Selden for closing remarks.

Speaker #2: Thank you, Jonathan. And thanks to all of you who joined our call today. We look forward to sharing continued updates with you about the developments in our business.

Angela Selden: Thank you, Jonathan, and thanks to all of you who joined our call today. We look forward to sharing with you continued updates about the developments in our business. Thank you again for joining us this evening.

Speaker #2: So, thank you again for joining us this evening.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q2 2026 American Public Education Inc Earnings Call

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