Release Date: March 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• American Public Education Inc (NASDAQ:APEI) outperformed its 4th quarter 2024 financial guidance, exceeding expectations for revenue, net income, and adjusted EBITDA.
• APEI's full-year 2024 revenue of $624 million exceeded the top end of the original guidance and met the midpoint of the revised guidance.
• Rasmussen University experienced positive year-over-year enrollment growth for the first time since APEI's acquisition, with a 4% increase in 2024.
• Hondros College of Nursing reported strong enrollment growth, marking the 20th consecutive quarter of year-over-year enrollment increases.
• APEI plans to consolidate its three degree-granting institutions into a single entity, which is expected to simplify operations and provide revenue and cost synergies in the long term.

Negative Points

• APEI's adjusted EBITDA margin at APUS decreased slightly from 35% in 4Q23 to 34.5% in 4Q24 due to investments in IT infrastructure and marketing.
• The first quarter of 2025 guidance is negatively impacted by a two-week outage of the Army and Air Force TA portals, affecting enrollment.
• APEI's first quarter 2025 adjusted EBITDA is expected to be down year-over-year due to increased advertising and labor costs.
• The consolidation of institutions is not primarily aimed at cost reduction, indicating that immediate cost savings may be limited.
• APEI's graduate school reported an EBITDA loss of $0.7 million in the fourth quarter of 2024, although this was an improvement from the prior year.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with APEI.

Q: Within APUS, there was a mention of portal timing headwinds affecting enrollments in the first quarter. How significant was this impact, and how should we think about enrollment trends for the rest of the year? A: The exact impact is still being assessed as we continue to register students late. The anticipated impact is built into the first quarter guidance, which reflects a mid-single-digit percentage impact. The portal outage lasted slightly over two weeks, affecting first-quarter guidance, but it is now resolved, and students can register for future sessions.

Q: Great to see Rasmussen turning a profit this quarter. How long might it take for Rasmussen to return to a double-digit adjusted EBITDA margin profile? A: While we are not providing multi-year guidance, we are pleased with the enrollment momentum at Rasmussen, both online and campus-based. We expect significant revenue flow-through to the bottom line and are optimistic about Rasmussen's future performance.

Q: Regarding the profit guidance for the first quarter, revenue is expected to grow mid-single digits, but adjusted EBITDA is projected to decline. What is driving this contraction? A: The year-over-year change is driven by increased advertising spend, which is up by about $2.1 million, and higher labor costs. We have invested in student-facing staff and marketing functions to support the growing number of prospects and new students.

Q: Can you provide insights into the expected G&A savings from the portfolio consolidation into one institution and the potential timing for these savings? A: We anticipate both revenue and cost synergies from the consolidation, expected to close in the fourth quarter of 2025. Revenue synergies include offering a full ladder of post-licensure curriculum to Hondros students and leveraging different start patterns across institutions. Cost synergies will primarily come from aligning accreditation and academic teams at the system level, but this is not primarily a cost reduction initiative.

Q: The online growth for Rasmussen has been strong. What are the drivers of this growth, and what are you seeing from a marketing yield perspective? A: The growth is driven by optimizing marketing spend, focusing on organic lead generation, and increasing conversion rates. We have reduced marketing spend while improving conversion rates, particularly for online enrollments. Additionally, hyperlocal marketing strategies have positively impacted campus-based enrollment growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.