American Public Education(APEI) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - APEI's revenue for Q4 2023 reached $152.8 million, exceeding guidance and marking a 0.2% increase from the prior year [22] - Adjusted EBITDA for Q4 2023 was $25.7 million, significantly above guidance and up from $15.4 million in the prior year, resulting in an adjusted EBITDA margin of 16.8% compared to 10.1% [23] - Earnings per share improved from a loss of $0.35 in the prior year to a gain of $0.64 in Q4 2023 [9] Business Line Data and Key Metrics Changes - APUS saw revenue increase to $79.4 million in Q4 2023, an 8.1% rise year-over-year, driven by growth in net course registrations and tuition increases [24] - Rasmussen's revenue decreased by 13.4% to $52.6 million in Q4 2023 due to lower enrollment, although EBITDA turned positive at $0.4 million [25] - Hondros achieved revenue of $15.8 million in Q4 2023, up 24.9% year-over-year, with positive EBITDA of $1.1 million compared to a loss in the prior year [26] Market Data and Key Metrics Changes - APUS reported a 4% increase in net course registrations year-over-year, with active duty registrations up 5% and veteran registrations up 13% [10] - Rasmussen's overall enrollment decreased by 6% in Q1 2024, with on-ground healthcare enrollments declining by 11% [29] - Hondros recorded a 22% increase in total student enrollment year-over-year, reaching approximately 3,300 students [30] Company Strategy and Development Direction - APEI is focusing on growth, academic quality, and student success, with investments in curriculum modernization and faculty wage increases [19] - The company plans to relocate two Hondros campuses and introduce new programs to better meet local community needs [19] - APEI aims to strengthen its market position and improve student experience through technology upgrades and operational enhancements [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for 2024, initiating full-year revenue guidance of $610 million to $620 million and adjusted EBITDA guidance of $55 million to $65 million [18] - The company acknowledged ongoing challenges but highlighted improvements in enrollment trends, profitability metrics, and NCLEX scores as indicators of progress [20] - Management emphasized the importance of attracting and retaining strong leaders to drive operational enhancements and uphold educational promises [19] Other Important Information - APEI's cash flow from operations increased by 55.8% to $45.5 million in 2023, attributed to higher revenue and operating income at APUS [27] - The company repurchased 1.76 million shares for $12.5 million over the past year, indicating a commitment to returning value to shareholders [28] Q&A Session Summary Question: How to bridge the Q4 margin exit rates with 2024 guidance? - Management noted that Q4 is seasonally strong and that investments in course improvement, faculty salaries, and technology will impact margins in 2024 [33][34] Question: What is the expected normalization of receivables? - Management confirmed that changes in billing policy will lead to a decline in receivables, but not to previous levels due to the new billing timing [39] Question: What are the drivers of improving NCLEX pass rates? - Key initiatives included hiring new leadership, strengthening faculty training, and investing in student success coaches [44] Question: What options exist to reduce risk related to the 90/10 rule? - Management discussed initiatives to bolster non-federal funding sources, including enrolling non-title IV eligible students and exploring programmatic mix options [48] Question: Can you provide more color on the greater-than-expected profitability? - Management attributed the improved profitability to lower marketing and advertising expenses and a lower-than-expected bonus accrual [51] Question: What is the status of the ADN program in Bloomington? - The decision to close the ADN program was voluntary, driven by the need to focus on BSN programs that align better with market demand [58]