American Public Education(APEI) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 19% increase in consolidated revenue, driven by strong enrollment growth at APUS and Hondros College of Nursing [11][12] - Adjusted EBITDA increased by 87% to $15.9 million from $8.5 million, with an adjusted EBITDA margin improvement of 700 basis points to 18% from 11% [11][17] - Consolidated net income for the quarter rose to $8.1 million or $0.49 per diluted share, compared to net income of $2.4 million or $0.16 per diluted share in the prior year [16] Business Line Data and Key Metrics Changes - At APUS, revenue increased by 15%, while at Hondros, revenue surged by 48% compared to the prior year quarter [11] - Net course registrations at APUS increased by 10% year-over-year, primarily driven by active-duty military students and graduate student enrollments [8] - New and total student enrollment at Hondros increased by 45% year-over-year, attributed to operational initiatives and increased demand for nursing education [9] Market Data and Key Metrics Changes - The company noted that the Army's tuition assistance program disruption negatively impacted registrations, particularly affecting the Army segment, which represented about 17% of total revenue in 2020 [27][51] - Despite the disruption, total enrollment levels at APUS were higher than pre-COVID levels in 2019, with a 7% two-year compound annual growth rate [24] Company Strategy and Development Direction - The company aims to drive sustainable growth in core businesses, acquire and integrate Rasmussen University, and bolster digital transformation to enhance student experience [30] - The acquisition of Rasmussen University is expected to diversify revenue sources and capitalize on the growth in nursing and healthcare education [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the disruption in Army TA registrations is temporary and expects a recovery once the new registration portal is fully operational [24][26] - The company anticipates a slowdown in growth rates as the pandemic abates, with second quarter total net course registrations at APUS expected to decrease by 4% to 8% year-over-year [26] Other Important Information - The company completed a public offering of common stock, resulting in $86.2 million in net proceeds, and secured a $175 million term loan B to fund the acquisition of Rasmussen University [18] - Cash at March 31, 2021, was $320.8 million, up from $227.7 million at December 31, 2020 [18] Q&A Session Summary Question: Discussion on Army disruption issue - Management acknowledged they were informed of the Army's transition a few weeks before the February 11 start date, which coincided with the year-end earnings announcement [33] Question: Impact of past disruptions on Navy registrations - Management noted that during the Navy's funding suspension, they lost 100% of Navy registrations, while Army soldiers can still register under an exception to policy [37] Question: Community college funding impact from Biden's plan - Management sees community colleges as a pathway for students to complete their degrees at APUS, with positive momentum in Navy registrations despite the Navy community college announcement [39][40] Question: Technology disruption and enrollment surge - Management does not expect a surge in enrollments once the Army portal is operational, as students are unlikely to increase course loads immediately [42] Question: Competitive environment at Hondros - Management reported favorable momentum at Hondros due to limitations at community colleges and state institutions, allowing them to attract students unable to access nursing programs [45] Question: Military environment and market share impact - Management confirmed they are the number one provider of education to active-duty military, but specific rankings for Army soldiers are unclear due to the ongoing disruption [51] Question: Portal issues and cash flow impact - Management indicated that the portal's issues are related to data conversion, affecting cash flow due to delayed processing of tuition assistance [56][62]