American Public Education(APEI) - 2024 Q3 - Quarterly Results

Executive Summary Key Third Quarter 2024 Highlights American Public Education, Inc. reported a 1.5% year-over-year consolidated revenue increase to $153.1 million for Q3 2024, achieving net income of $731 thousand ($0.04 diluted EPS) compared to a net loss in the prior year, with Rasmussen University showing its first significant enrollment increase since acquisition, and narrowed full-year guidance Q3 2024 Key Financial Highlights | Metric | Q3 2024 | Q3 2023 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Consolidated Revenue | $153.1 million | $150.8 million | +1.5% | | Net Income (Loss) | $731 thousand | ($4.9 million) | N/A | | Diluted EPS | $0.04 | ($0.27) | N/A | | Adjusted EBITDA | $12.9 million | $18.1 million | -28.7% | - Q4 enrollments at Rasmussen increased 3.5% compared to Q4 2023, marking the first significant increase since its acquisition[4] - Full year revenue guidance narrowed to $620 million to $625 million, and Adjusted EBITDA updated to $64 million to $67 million[4] Management Commentary CEO Angela Selden highlighted continued progress towards annual goals, noting Rasmussen's positive year-over-year enrollment comparison and expected continued momentum, with Hondros College of Nursing also showing improvement and further enrollment growth anticipated, keeping the company on track to achieve its financial outlook for 2024, including Rasmussen being EBITDA positive in the second half - Rasmussen University achieved its first positive year-over-year enrollment comparison since its acquisition in Q3 2024, with continued momentum expected[5] - Hondros College of Nursing continues to show improvement in Q3, with expectations for further enrollment growth in Q4[5] - Management is confident in delivering on 2024 revenue, net income, and Adjusted EBITDA outlook, including Rasmussen being EBITDA positive in the second half of 2024[5] Financial Performance Third Quarter 2024 Financial Results In Q3 2024, APEI's consolidated revenue increased by 1.5% to $153.1 million, driven by growth across HCN, APUS, and RU segments, while total costs and expenses rose by 3.2%, primarily due to increases in general and administrative expenses and instructional costs, resulting in a net income of $731 thousand, a significant improvement from a net loss in Q3 2023, despite a decrease in Adjusted EBITDA Q3 2024 Consolidated Financial Highlights | Metric | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change (YoY) | | :--------------------------------------- | :--------------------- | :--------------------- | :----------- | | Revenues | $153,122 | $150,838 | +1.5% | | Total Costs and Expenses | $148,993 | $144,438 | +3.2% | | Net Income (Loss) available to common stockholders | $731 | ($4,853) | N/A | | Diluted EPS | $0.04 | ($0.27) | N/A | | Adjusted EBITDA | $12,923 | $18,102 | -28.7% | - Revenue increase was primarily due to a $1.8 million increase in HCN Segment, $0.6 million in APUS Segment, and $0.5 million in RU Segment[7] - General and administrative expenses increased by 13.4% ($4.1 million) due to higher IT costs, employee compensation, and professional fees[10] Consolidated Revenue Q3 Segment Revenues (in thousands) | Segment | Q3 2024 | Q3 2023 | Change (YoY) | | :------------------- | :------ | :------ | :----------- | | APUS Segment | $76,981 | $76,406 | +0.8% | | RU Segment | $52,604 | $52,073 | +1.0% | | HCN Segment | $15,493 | $13,741 | +12.8% | | Corporate and other | $8,044 | $8,618 | -6.6% | Costs and Expenses Q3 Costs and Expenses (in thousands) | Expense Category | Q3 2024 | Q3 2023 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | Instructional costs and services | $75,401 | $73,228 | +3.0% | | Selling and promotional | $33,459 | $33,315 | +0.4% | | General and administrative | $35,030 | $30,885 | +13.4% | | Depreciation and amortization | $5,080 | $7,026 | -27.7% | | Loss (gain) on disposals of long-lived assets | $23 | ($16) | N/A | | Total Costs and Expenses | $148,993 | $144,438 | +3.2% | - Costs and expenses for Q3 2024 included $1.1 million of information technology transition services costs[8] Net Income and EPS Q3 Net Income and EPS | Metric | Q3 2024 | Q3 2023 | | :--------------------------------------- | :------ | :------ | | Net income (loss) available to common stockholders | $731,000 | ($4.9 million) | | Net income (loss) per diluted common share | $0.04 | ($0.27) | - Q3 2023 included a $5.2 million net loss on equity investment, which, if excluded, would have resulted in a net income per diluted common share of $0.02[3][11] Adjusted EBITDA Q3 Adjusted EBITDA (in thousands) | Metric | Q3 2024 | Q3 2023 | Change (YoY) | | :-------------- | :------ | :------ | :----------- | | Adjusted EBITDA | $12,923 | $18,102 | -28.7% | - Adjusted EBITDA excludes adjustments for impairment of goodwill and intangible assets, severance costs, loss on leases, stock compensation, loss on disposals of long-lived assets, and transition services costs[12][20] Year-to-Date 2024 Financial Results For the nine months ended September 30, 2024, APEI's consolidated revenue increased by 2.8% to $460.4 million, with the company significantly improving its net income position, reporting a net income of $3.1 million compared to a substantial net loss in the prior year, largely due to the absence of goodwill impairment charges, and Adjusted EBITDA also saw a notable increase YTD 2024 Consolidated Financial Highlights | Metric | YTD 2024 (in thousands) | YTD 2023 (in thousands) | Change (YoY) | | :--------------------------------------- | :---------------------- | :---------------------- | :----------- | | Revenues | $460,449 | $447,741 | +2.8% | | Total Costs and Expenses | $448,918 | $511,979 | -12.3% | | Net Income (Loss) available to common stockholders | ($1,448) | ($64,769) | N/A | | Diluted EPS | ($0.08) | ($3.54) | N/A | | Adjusted EBITDA | $40,905 | $33,901 | +20.6% | Consolidated Revenue YTD Segment Revenues (in thousands) | Segment | YTD 2024 | YTD 2023 | Change (YoY) | | :------------------- | :------- | :------- | :----------- |\n| APUS Segment | $234,685 | $223,941 | +4.8% | | RU Segment | $158,773 | $161,511 | -1.7% | | HCN Segment | $48,349 | $41,147 | +17.5% | | Corporate and other | $18,642 | $21,142 | -11.8% | Costs and Expenses YTD Costs and Expenses (in thousands) | Expense Category | YTD 2024 | YTD 2023 | Change (YoY) | | :-------------------------------- | :------- | :------- | :----------- | | Instructional costs and services | $224,042 | $222,115 | +0.9% | | Selling and promotional | $99,753 | $106,205 | -6.1% | | General and administrative | $105,733 | $96,907 | +9.1% | | Depreciation and amortization | $15,440 | $22,735 | -32.1% | | Impairment of goodwill and intangible assets | - | $64,000 | N/A | | Loss on leases | $3,715 | - | N/A | | Loss (gain) on disposals of long-lived assets | $235 | $17 | N/A | | Total Costs and Expenses | $448,918 | $511,979 | -12.3% | Net Income and EPS YTD Net Income and EPS | Metric | YTD 2024 | YTD 2023 | | :--------------------------------------- | :------- | :------- | | Net income (loss) available to common stockholders | ($1,448) | ($64,769) | | Net income (loss) per diluted common share | ($0.08) | ($3.54) | Adjusted EBITDA YTD Adjusted EBITDA (in thousands) | Metric | YTD 2024 | YTD 2023 | Change (YoY) | | :-------------- | :------- | :------- | :----------- | | Adjusted EBITDA | $40,905 | $33,901 | +20.6% | Balance Sheet and Liquidity APEI's total cash, cash equivalents, and restricted cash increased by 12.4% to $162.2 million at September 30, 2024, compared to the end of 2023, indicating improved liquidity Cash and Cash Equivalents | Metric | September 30, 2024 | December 31, 2023 | Change | | :------------------------------------ | :------------------- | :------------------ | :----- | | Total cash, cash equivalents, and restricted cash | $162.2 million | $144.3 million | +12.4% | Operational Metrics: Registrations and Enrollment Q3 2024 Enrollment Performance In Q3 2024, American Public University System (APUS) net course registrations saw a slight increase, while Rasmussen University's total student enrollment remained flat, and Hondros College of Nursing demonstrated strong growth with a 10.4% increase in total student enrollment Q3 2024 Registrations and Enrollment | Institution | Q3 2024 | Q3 2023 | % Change | | :------------------------------------ | :------ | :------ | :------- | | APUS Net Course Registrations | 92,500 | 92,300 | 0.2% | | Rasmussen University Total Student Enrollment | 13,500 | 13,500 | 0% | | Hondros College of Nursing Total Student Enrollment | 3,100 | 2,800 | 10.4% | Financial Outlook Fourth Quarter 2024 Outlook APEI projects strong enrollment growth for Q4 2024 across its key institutions, with Hondros College of Nursing leading with an anticipated 19% increase, consolidated revenue expected to grow between 4% and 8%, while net income and diluted EPS are projected to decrease year-over-year, and Adjusted EBITDA is expected to range from a 10% decrease to a 2% increase Q4 2024 Enrollment Guidance | Institution | Q4 2024 Guidance | % Yr/Yr Change | | :-------------------------- | :--------------- | :------------- | | APUS Net course registrations | 94,400 to 96,100 | 4% to 6% | | HCN Student enrollment | 3,700 | 19% | | RU Student enrollment | 14,600 | 4% | | - On-ground Healthcare | 6,300 | -3% | | - Online | 8,300 | 9% | Q4 2024 Financial Guidance (in millions, except EPS) | Metric | Q4 2024 Guidance | % Yr/Yr Change | | :--------------------------------------- | :--------------- | :------------- | | APEI Consolidated revenue | $159.0 – $164.0 | 4% to 8% | | APEI Net loss/income available to common stockholders | $9.0 – $11.0 | (20%) – (4.0%) | | APEI Adjusted EBITDA | $23.0 – $26.0 | (10%) to 2% | | APEI Diluted EPS | $0.47 – $0.56 | (26%) to (13%) | Full Year 2024 Outlook For the full year 2024, APEI anticipates consolidated revenue growth of 3% to 4%, reaching $620 million to $625 million, Adjusted EBITDA is projected to increase by 7% to 12%, while capital expenditures are expected to rise significantly, between 37% and 58% Full Year 2024 Financial Guidance (in millions) | Metric | Full Year 2024 Guidance | % Yr/Yr Change | | :--------------------------------------- | :---------------------- | :------------- | | APEI Consolidated Revenue | $620 – $625 | 3% to 4% | | APEI Net income available to common stockholders | $7-$9 | n.m. | | APEI Adjusted EBITDA | $64 – $67 | 7% to 12% | | APEI Capital Expenditure (CapEx) | $19 – $22 | 37% to 58% | Non-GAAP Financial Measures Definition and Rationale APEI utilizes non-GAAP financial measures, specifically EBITDA and Adjusted EBITDA, to provide investors with a clearer evaluation of its operating profit and cash generation capabilities, with Adjusted EBITDA excluding non-cash and non-recurring expenses such as stock compensation, impairment of goodwill, severance costs, and transition services costs, offering a supplementary view to GAAP results - EBITDA is defined as earnings before interest, taxes, depreciation, and amortization[19] - Adjusted EBITDA is EBITDA less non-cash expenses (e.g., stock compensation) and non-recurring expenses (e.g., severance costs, loss on leases, transition services costs)[19][20] - These non-GAAP measures are considered useful for evaluating operating profit and cash generation but should not be viewed in isolation from GAAP results due to inherent limitations[19][21] Reconciliation Tables The report provides detailed reconciliations of GAAP net income to Adjusted EBITDA for both the three and nine months ended September 30, 2024 and 2023, as well as for the Q4 and full-year 2024 outlook, with these tables itemizing specific adjustments, including preferred dividends, income tax expense, interest expense, equity investment loss, depreciation and amortization, impairment charges, severance costs, loss on leases, other professional fees, stock compensation, and transition services costs, to derive Adjusted EBITDA GAAP Net Income to Adjusted EBITDA Reconciliation (Q3 & YTD, in thousands) | Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--------------------------------------- | :------ | :------ | :------- | :------- | | Net income (loss) available to common stockholders | $731 | ($4,853) | ($1,448) | ($64,769) | | Preferred dividends | $1,531 | $1,525 | $4,597 | $4,469 | | Net income (loss) | $2,262 | ($3,328) | $3,149 | ($60,300) | | Income tax expense (benefit) | $1,236 | $3,712 | $2,433 | ($12,839) | | Interest expense, net | $631 | $792 | $1,542 | $3,668 | | Equity investment loss | - | $5,224 | $4,407 | $5,233 | | Depreciation and amortization | $5,080 | $7,026 | $15,440 | $22,735 | | EBITDA | $9,209 | $13,426 | $26,971 | ($41,503) | | Impairment of goodwill and intangible assets | - | - | - | $64,000 | | Severance Costs | $25 | $2,959 | $530 | $2,959 | | Loss on leases | - | - | $3,715 | - | | Other professional fees | $813 | - | $813 | - | | Stock compensation | $1,761 | $1,733 | $5,502 | $6,025 | | Loss (gain) on disposals of long-lived assets | $23 | ($16) | $235 | $17 | | Transition services costs | $1,092 | - | $3,139 | $2,403 | | Adjusted EBITDA | $12,923 | $18,102 | $40,905 | $33,901 | GAAP Outlook Net Income to Outlook Adjusted EBITDA Reconciliation (Q4 & Full Year, in thousands) | Metric | Q4 2024 Low | Q4 2024 High | FY 2024 Low | FY 2024 High | | :--------------------------------------- | :---------- | :----------- | :---------- | :----------- | | Net income available to common stockholders | $8,575 | $10,735 | $7,127 | $9,287 | | Preferred dividends | $1,503 | $1,503 | $6,100 | $6,100 | | Net Income | $10,078 | $12,238 | $13,227 | $15,387 | | Income tax expense | $4,425 | $5,265 | $6,858 | $7,698 | | Interest expense | $458 | $458 | $1,750 | $1,750 | | Loss on minority investment | - | - | $4,408 | $4,408 | | Depreciation and amortization | $4,860 | $4,860 | $20,300 | $20,300 | | EBITDA | $19,820 | $22,820 | $46,542 | $49,542 | | Stock compensation | $1,898 | $1,898 | $7,400 | $7,400 | | Other professional fees | $1,050 | $1,050 | $1,813 | $1,813 | | Loss on leases | - | - | $3,950 | $3,950 | | Transition services cost | $651 | $651 | $4,295 | $4,295 | | Adjusted EBITDA | $23,419 | $26,419 | $64,000 | $67,000 | Company Overview Business Description American Public Education, Inc. (APEI) is a portfolio of education companies providing online and campus-based postsecondary education and career learning to over 125,000 students through four subsidiary institutions, with a mission to provide education that transforms lives, advances careers, and improves communities - APEI is a portfolio of education companies serving over 125,000 students through online and campus-based postsecondary education and career learning[1][23] - The company's mission is to provide education that transforms lives, advances careers, and improves communities[23] Subsidiary Institutions APEI operates through four main subsidiary institutions: American Public University System (APUS), Rasmussen University, Hondros College of Nursing, and Graduate School USA (GSUSA), each serving distinct student populations with specialized educational offerings, ranging from military and veteran students to nursing and federal workforce training, all holding relevant institutional accreditations - American Public University System (APUS) is a leading educator for active-duty military and veteran students, serving approximately 88,000 adult learners globally[23][24] - Rasmussen University is a 120-year-old institution focused on nursing and health sciences, serving about 13,500 students across 20 campuses and online[23][25] - Hondros College of Nursing educates pre-licensure nursing students at eight campuses, primarily in Ohio, and is the largest educator of PN (LPN) nurses in Ohio, serving approximately 3,100 students[23][26] - Graduate School USA (GSUSA) is a leading training provider for the federal workforce, offering customized contract training and open enrollment programs[23][27] - APUS and Rasmussen are accredited by the Higher Learning Commission (HLC), Hondros by the Accrediting Bureau of Health Education Schools (ABHES), and GSUSA by the Accrediting Council for Continuing Education & Training (ACCET)[28] Forward-Looking Statements & Disclaimers This section clarifies that statements regarding APEI's future path, growth, enrollments, revenues, income, EBITDA, and capital expenditures are forward-looking and subject to various risks and uncertainties, including regulatory compliance, student attraction and retention, market demands, legislative changes, and economic conditions, among others, which could cause actual results to differ materially from projections - Forward-looking statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially[30][31] - Risks include failure to comply with regulatory requirements, dependence on student attraction and persistence, changing market demands, declines in enrollments, adverse legislation, and economic conditions[31] - Investors are cautioned not to place undue reliance on forward-looking statements, and APEI undertakes no obligation to update them unless required by law[31] Contact Information This section provides contact details for American Public Education, Inc.'s Public Relations and Investor Relations departments, including names, titles, email addresses, and phone numbers for inquiries - Company Contact: Frank Tutalo, Director, Public Relations, ftutalo@apei.com, 571-358-3042[32] - Investor Relations: Brian M. Prenoveau, CFA, MZ North America, Direct: 561-489-5315, APEI@mzgroup.us[32]