American Public Education, Inc. Stock

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.

[Operator Instructions]

I would now like to turn the call over to Jack Landry, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss Second Quarter 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 Janson, 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 Presentations 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.

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 base, should, will, would, and similar or opposite words.

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, the completed 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 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. 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.

Thank you, Jack. Good afternoon, and thank you very much for joining American Public Education's 2Q 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. 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 -- excuse me, $3 million or $0.02 per diluted share in the prior year period. On August 4, 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. With those headlines, I will now provide some additional detail on our 2 segments, our institutional combination, and our new AI student platform before I turn it over to Edward 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. Our Detroit II campus is on track to begin enrolling students in 2026, keeping us on track with our Trailblazer initiative to open 2 new campuses each year. 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. 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+. 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 Navy, Air Force, and Marine service members.

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. I would like to take a moment to honor 2 Military+ 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. Ceehan, 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.

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. 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. Notably, the last growth restriction on Rasmussen's total enrollments that was imposed in 2021 by the 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 4-year 2029 financials. Beyond the costs, 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. We expect the rollout to begin with our Health+ division in the first quarter of 2027, starting with student support and admissions, and to expand across both Health+ and Military+ through 2027 and into the first half of 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. 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. 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 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.

With that, I'll turn the call over to Ed to discuss our 2Q '26 financial results and our updated 2026 guidance in detail.

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.

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 investment in advertising and technology.

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. 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. Turning to our balance sheet, we ended the second quarter in a very strong balance sheet position. As of June 30, 2026, our 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%.

Total debt was $88.9 million, and we had excess cash and equivalents in 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 second quarter 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. 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.

We have publicly stated that we expect to open 8 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 4 to 5 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.

Based on our second quarter results and their visibility into the third quarter, we are raising our full-year 2026 outlook on revenue, net income, adjusted EBITDA, and diluted EPS, and we are initiating third quarter 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.

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 third quarter 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 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.

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. 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 second half of the year. We expect our margins next year to continue to expand in line with our 4-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%.

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.

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. 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.

At our November 2025 Investor Day, we laid out a multi-year framework with 9 value creation initiatives, 5 at Military+ and 4 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 U.S. defense strategies.

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.

[Operator Instructions] Your first question comes from the line of Griffin Boss from B. Riley Securities.

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.

Yes, 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. So 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. And 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 3 institutions combined.

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

Okay. Well, Yes, look forward to hearing about that. Then for my follow-up, one 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.

Yes. 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 Defense has to essentially approve the increase and the appropriations bill, which is what funds the entire Department of Defense, not just this small program, but the entire defense budget also has to be passed, which typically happens here before October 1. 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+ 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. It is an important development. We are paying careful attention to it, and we certainly will update all of you if we have further developments on that.

Your next question comes from the line of Tom White at D.A. Davidson.

This is Wyatt on for Tom. 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?

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? We did not want to anticipate the war would be over by the end of 2026, since it began after we had initiated guidance. So, we have assumed that the headwinds will remain as is for the remainder of 2026.

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?

Yes. Go ahead, Ed, if you want to.

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.

Your next question comes from the line of Luke Horton from Northland Capital Markets.

Congrats on a nice quarter. Just wanted to touch on the Health+ business. Just with the enrollment for 3Q, it looks like it's 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.

Sure. I'll start and then I'll have Gary Janson 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's a very small part of the Military+ 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+ division. On the Health+ side, our campuses for all of our nursing programs, same as the core of our Military+ division.

We are relying on brand awareness and really, as we've 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 2 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.

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 fourth quarter 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 enrollments back in line with what we had expected.

Okay. Got it. That is super helpful. Then just last bit 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 kind of M&A and the appetite there?

Luke, this is Ed. First, of course, as we have said in the past, we invest in our organic business first and foremost. Of course, as part of our Trailblazer plan, we are opening up 2 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 are always actively looking at acquisitions. There is nothing on the table right now, but we are actively looking at acquisitions. Our priority is to invest in growth at the end of the day and to increase shareholder value. We are going to take that cash and use it as wisely as possible to get the highest return possible.

Your next question comes from the line of Jasper Bibb at Truist Securities.

just following up on Luke's question within Health+, I guess I'm curious how much of the 3Q versus 2Q deceleration in enrollment growth is driven by online. I think you had ground enrollment plus 9% in the second quarter in the deck. So just curious if you're seeing a similar trend there in your third quarter guidance.

Yes. This is Gary. Jasper, 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, to 7%, which is well within line with what we're expecting. To answer your question, the vast majority was due to our online segment, and that's where we're really focused on, as Angie pointed out, of making sure that we optimize. As Angie said, we're comfortable with the referral rates in the military, and we're very comfortable with how the campus-based programs are progressing. We're 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 a long-term strategy.

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?

Yes, 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.

Your next question comes from the line of Eric Wold at Texas Capital Bank.

Two questions. I want to go back to the Military+ segment, obviously, the impact of the deployments. You mentioned that obviously U.S. Army enrollment continues to be strong or 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 kind of get a sense of just, it really is nice to pause and you are going to have data that is going to show that for those impacted segments?

Yes. 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. We would not see it immediately through actively asking for waivers. What we did see is a change in the enrollment patterns in those 3 branches that certainly is related to the deployments. That gave us a pretty good sense of what was going on, specifically in the U.S. Air Force, the United States Navy, and the U.S. Marine Corps.

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 U.S. Army, consistent with our long-range growth trajectory. We will have to see how the deployment rolls out. I know it changes. Every few weeks we hear new news. We are hopeful that things come to a good resolution, and we can get back to a normal state of operating.

Perfect. Then, 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 on that segment.

Sure. So, as a reminder, there were 3 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, and 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 2 opening this year and one already the lease signed for the first one for next year already. So we're 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. So, this was an important year for that to be lifted, because we certainly were approaching that limit.

So, we're very pleased to say that we no longer have that restriction. It would've required us to have to potentially redirect students to other types of payment plans, et cetera. Consequently, 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.

Your next question comes from the line of Elle Niebuhr from Lake Street Capital Markets.

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?

Hi, this is Ed. Yes. 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're on that 2 campus per year pace.

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?

Elle, thanks for the question. I would start by saying we continue to have tremendous enthusiasm about Fill the Back Row. That is working. We do not 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 is 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.

We are excited to lay out the timeline for those specific growth levers, and we will 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. We expect to see that that will grow at a faster rate in the future than what we have seen, and certainly also then muted by the deployments as well.

Your next question comes from the line of Stephen Sheldon at William Blair.

Nice work here. Angie, can you talk some more about the AI student life cycle platform that you're building with Salesforce? I think you mentioned some cost benefits that you're planning to quantify at some point. 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 how that might add stuff to the business?

Yes. We're excited about this, Stephen, 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 Kenigsberg. He has built a team that is really accelerating this strategy. 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. 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. 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 intelligence systems can do and identify where students are perhaps demonstrating early warning signals.

It's 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. 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. 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 2 quarters, and we look very forward to going live with this in early 2027.

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. So the costs are baked in already to our 4-year plan. It's just the upside benefits in terms of retention, better student service, et cetera, that we look forward to sharing with you in an upcoming call.

Great to hear. Look forward to learning more about that. Then just as a follow-up, gross margin trends here have been really strong, especially over the last year or so. 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. How you're 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?

Yes, I'll start, and Edward can chime in, too. So definitely where we've 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 had 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's one area. But 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 that we have opportunity to expand the gross margin at both businesses now.

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

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.

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

Thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI First Quarter 2026 Earnings Call. [Operator Instructions].

And I would now like to turn the call over to Shannon Devine, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss first quarter 2026 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer; Edward Codispoti, Executive Vice President and Chief Financial Officer; and Gary Janson, Chief Strategy and Growth Officer.

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

Statements made during this call and in the accompanying presentation regarding APEI and its subsidiaries that are not historical facts may be forward-looking statements that are based on management's current expectations, assumptions, estimates and projections. 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 revenue 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, past divisions, on track, on pace, should, will, would and similar opposite words. Forward-looking statements include, without limitations, statements regarding expectations for registration and enrollments, revenue, earnings, adjusted EBITDA, adjusted EBITDA margin and other earnings guidance our foundation for growth, strategic investments, capital allocation and M&A opportunities, operational milestones and time lines, the planned combination of our institutions, including the benefit in time line there of government, 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.

As Angie will discuss, beginning with the first quarter of 2026, we are reporting under 2 new segment structure, military plus and health cost following the merger of the legal entities that owned our institutions on March 2, 2026. Our Form 10-Q for the first quarter reflects this change and all prior period comparative figures have been recast to reflect the 2 segment structure rather than the historical 3 segment structure of APEI U.S. Rasmussen University and Hondros College of Nursing.

The call and the presentation contains reference 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.

Management believes that the presentation of non-GAAP financial information provides useful supplemental information to investors regarding its results of operations, it should only be considered in addition to and not 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.

Thank you, Shannon. Good afternoon, and thank you very much to each of you for joining us today. I'm very pleased to share American Public Education's First Quarter 2026 results. Total revenue grew 6.2% year-over-year and at the top end of our guidance range. Notably, when we exclude graduate schools 2025 revenue from the prior year period, the business that we sold in mid-2025, APEI's revenue would have grown 8.7%, which we believe is more indicative of the underlying strength of our business.

Beyond revenue, we beat guidance on adjusted EBITDA which grew to $29.2 million, which is a 37.5% improvement over 2025. The prior year period does include $2.2 million of graduate school losses and the 2026 period includes a onetime favorable impact from the tax treatment of our stock appreciation. Ed Codispoti, APEI's CFO, will discuss the details of these matters shortly.

We also beat eyes on net income per diluted common share, which was $0.94 a or 129% over the prior year period. Given the strength of our first quarter results and our visibility into the balance of the year, Today, we are leaving our full year 2026 guidance on both revenue and adjusted EBITDA.

Importantly, we are also raising our full year EPS guidance which at a midpoint represents an 85% increase over 2025, which is in large part a reflection of the 2025 improvements we made to the balance sheet. With those headlines, I want to provide some additional details on our 2 newly constituted reportable segments and an update on our institutional combination.

First, as we discussed on the last earnings call on March 2, 2026, we combined the legal entities that owned our 3 institutions into one. And beginning with this quarter, we report under 2 newly constituted reportable segments. Military plus, no longer called APU Global and Health Plus no longer called RU Health.

Prior period results have been recast to reflect these changes. So let's start with Health Plus. Our Health Plus institutions continue to perform very well. Health Plus revenue grew 11%, consistent with our 4-year plan. This was driven by both 8% enrollment growth which we shared on the previous earnings call and a modest price increase, demonstrating the durability of demand for pre-licensure nursing education.

Our campus expansion plans continue with our new [ Raison ] Orlando campus now enrolling students and building momentum in its first full quarter of operations. Additionally, we expect to complete the relocation of the Hondros College of Nursing -- since [ Matti ] Campus in the back half of 2026 to a more attractive location and our Hondros College of Nursing new Detroit campus to be ready to enroll students in the first quarter of 2027.

As we turn our attention to Q2 2026, Health Plus enrollment, we experienced enrollment growth of 7.1%, led by campuses and online at high single digits. Turning to military plus Military Plus delivered another quarter of revenue growth and exceptional profitability. The 4% registration growth met guidance, highlighted by the continued high teens registration growth for both military families and veterans.

The segment operated at an adjusted EBITDA margin of approximately 36% in the first quarter, while the EBITDA margin reflected a substantial increase above our long-range targets. A portion of this outperformance was due to shifts in marketing spend between Q1 and Q2, which is also reflected in our Q2 guidance.

Growth in our active duty channel in the first quarter was mid-single digits. As we described on our last earnings call, Q1 Coast Guard, the smallest enrollment contributor of the Armed Services branches we educate was affected by the then ongoing government shutdown and temporary suspension of the Department of Homeland Security funding. We had estimated that about 1% to 2% of total registrations were postponed. The good news is that DHS and the corresponding education funds are now available as of April 30. So we expect partial recovery in Q2, and we expect recovery of Coast Guard registrations in Q3 and beyond.

I was very proud to have participated in American Military University and American Public University's 30th annual commencement on Saturday, May 9. Over 17,700 students, including 23 doctoral students and our security and global study program received diplomas. The oldest graduate is 78 years old, and the youngest is 15. Over 92% of our graduates our active duty military veterans, military spouses or family members. They represented all 50 states, 30 countries and 6 territories.

Congratulations to all AMU and APU graduates. As we turn our attention to military plus registration growth in Q2, we are experiencing growth in Army registrations, our largest -- branch. This momentum is being offset by a slowdown of registrations in Navy, Air Force and Marines which we are attributing to the nature of this war in the Middle East, which has deployed and put into combat Navy, Air Force and Marine service members first.

This has been signaled by our internal practices where students have a mechanism to request the leave of assets accommodation and the ability to select deployment as a reason. We have seen an uptick in these requests for those 3 service branches. Offsetting this interruption, our Veterans & Family segments continues to demonstrate high teens registration growth in Q2 as well.

So while Navy, Air Force and Marine registrations are a headwind in the short term, we remain confident in our full year guidance. Historically, when our active duty students are deployed or preparing to deploy their educational progression can be delayed with these -- for the most part, return.

Additionally, with the performance of Army enrollments, we view this as a timing dynamic rather than a structural demand issue. Additionally, the Q2 adjusted EBITDA percentage reflects investments in incremental advertising of $2.2 million versus 2025 and as we focus on mitigating the near-term impact of these deployments.

Now let me turn to the positive progress on our institutional combination. On April 28, we received approval from our accreditor, Higher Learning Commission to consolidate our APS, [ Raison ] and Hondros College of Nursing programs, locations and operations into a single accredited institution, operating as the American Public University System, which we will refer to as the system in future communications.

Now only one step remains with the Department of Education, which is the department's approval of the combination and the completion of the APEI demerger. We are fully engaged with the department and their process steps and continue to target an effective date for consummation of the combination at the beginning of the third quarter of 2026.

Finally, as we turn our attention to full year 2026 performance. Given the strength of our first quarter results and our visibility into the balance of the year, today, we are raising our full year 2026 guidance on revenue, adjusted EBITDA and diluted EPS. I want to reinforce message I delivered at the end of our last earnings call. The foundation is built, the business is simplified. The balance sheet is strong and quarter after quarter, we are doing what we said we would do. Q1 '26 is the first quarter of a 4-year execution plan. We remain very confident about the significant runway ahead of us. We are just getting started.

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

Thank you, Angie. I'll begin with our first quarter results, then review our balance sheet, share an update on our share repurchase program and conclude with our updated outlook for the second quarter and full year 2026. Total revenue in the first quarter was $174.7 million compared to $164.6 million in the prior year period, an increase of $10.2 million or 6.2%.

First quarter revenue came in at the high end of our prior guidance range. Excluding [ $3.5 million ] of graduate school USA revenue in the prior year period, revenue would have grown 8.7% 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 under our new reportable structure. At Military Plus, First quarter revenue was $89.4 million compared to $83.9 million in the prior year period, representing 6.5% growth. The Military Plus segment income from operations was $30.7 million compared with $24.1 million in the first quarter of 2025, an increase of 27%. This segment delivered an adjusted EBITDA margin of approximately 36% in the quarter, reflecting the cost discipline work we completed during 2025. Net course registrations at Military Plus for the quarter were approximately 106,600 compared to 102,500 in the first quarter of 2025.

At Health Plus, first quarter revenue was $85.4 million compared to $76.9 million on a recast basis in the prior year period, representing 11% growth. This segment delivered income from operations of $500,000 compared to a loss of $800,000 in the prior year period, reflecting continued enrollment momentum disciplined cost management and early benefits from our fill the back row capacity utilization initiative. The 11% revenue growth includes the benefit of a modest tuition increase and continued enrollment momentum.

Turning to profitability. First quarter net income available to common stockholders was $17.7 million or $0.94 per diluted share. compared to $7.5 million or $0.41 per diluted share in the prior year period. This represents a 137.6% increase in net income available to common stockholders and a 129.3% increase in diluted EPS.

In addition to expanding operational margins, our below-the-line results were favorably impacted by an 8% effective tax rate during the quarter driven primarily by higher-than-expected tax deductions as a result of the increase in our stock price. We expect the income tax rate to normalize in future quarters this year.

First quarter adjusted EBITDA was $29.2 million, up $8 million or 37.5% compared to $21.2 million in the prior year period. Adjusted EBITDA margin was 16.7% compared to 12.9% in the first quarter of 2025, representing 381 basis points of margin expansion year-over-year. This reflects the operating leverage that is beginning to show up in our results. Please keep in mind that the prior year period included a graduate school USA loss of approximately $2.2 million in adjusted EBITDA that did not recur in the current period.

Turning to our balance sheet. We ended the first quarter in a very strong balance sheet position. As of March 31, 2026, our cash, cash equivalents and restricted cash totaled $221 million compared to $176.5 million at December 31, 2025, an increase of $44.5 million or 25% in a single quarter.

Total debt under our credit agreement was $90 million compared to $96.4 million at December 31, 2025. We had excess cash over debt of $131 million, up from $80.1 million at year-end 2025. As a reminder, in early March, we completed a refinancing of our debt that reduced our borrowing rate by approximately 375 basis points and lowered principal from $96.4 million to $90 million. In connection with that refinancing, we recognized a $1.7 million noncash write-off of deferred financing costs in the first quarter, consistent with what we previously communicated. For modeling purposes, interest income in 2026 is expected to approximate interest expense given our strong cash balances and improved borrowing rate. Also in March, our Board authorized a $50 million share repurchase program. During the first quarter, we repurchased approximately 17,840 shares of common stock for a total consideration of approximately $1 million.

Consistent with the framework we described last quarter, the share repurchase program is being executed primarily to offset dilution from share-based compensation with flexibility to repurchase opportunistically subject to market conditions and our disciplined approach to capital allocation. Our strong balance sheet and cash generation continue to provide us with significant financial flexibility for organic growth investments for opportunistic capital returns and for the tuck-in M&A opportunities that are part of our 4-year strategy.

I'll now discuss our updated guidance. Based on our first quarter results and our visibility into the second quarter, we are raising our full year 2026 outlook on both revenue and adjusted EBITDA, and we are initiating second quarter 2026 guidance. Our guidance for the second quarter of 2026 is as follows: revenue of $170 million to $172 million, Net income available to common stockholders of $6.5 million to $7.5 million, adjusted EBITDA of $16.5 million to $18 million and diluted earnings per share of $0.34 per share to $0.39 per share.

For the full year 2026, our updated guidance is as follows: revenue of $686 million to $696 million compared with our prior range of $685 million to $695 million. Net income available to common stockholders of $44.9 million to $51.6 million compared with our prior range of $41.3 million to $47.6 million.

Adjusted EBITDA of $93 million to $102 million compared with our prior range of $91.5 million to $100.5 million. diluted EPS of $2.33 per share to $2.68 per share compared with our prior range of $2.15 per share to $2.47 per share and CapEx of $28 million to $32 million, unchanged. Our updated guidance reflects our confidence in the trajectory of the business, continued enrollment momentum at Health Plus expanded margins across both segments and notable progress on each element of the strategic framework we outlined at Investor Day.

In summary, the first quarter of 2026 was a very strong quarter for APEI. We exceeded our guidance, raised our outlook for the balance of the year meaningfully strengthen the balance sheet and began returning capital to shareholders, all while 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.

Thank you, Ed. In closing, the first quarter was a very strong start to 2026 and early proof that the simplification and strengthening work we completed in 2025 is translating into top line revenue growth, margin expansion and EPS growth. Our Health Plus segment continued to demonstrate consistent enrollment and revenue growth expanding margins and durability of demand for nursing and health care education. Our military plus segment continues to deliver strong margins and growth even as we work through temporary active duty headwinds that we believe are event-related rather than structural.

At our November 2025 Investor Day, we laid out a multiyear framework with 9 value-creation initiatives, 5 at Military Plus and 4 at Health Plus, targeting organic revenue of $890 million to $925 million by 2029, representing an 8% to 9% revenue CAGR with adjusted EBITDA margins of 20% to 21% with strategic investment in new campuses and potential tuck-in acquisitions, we see a potential path to $1 billion in revenue by 2021.

That framework is intact. Our Trailblazer, new campus opening initiatives are on schedule. Our balance sheet is stronger than it has ever been, and we are only 1 quarter into a 4-year plan. 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 which are in high demand and resilient to disruption.

Nursing Education prioritizes in-person bedside care, and our military service members continue to be critical to U.S. defense strategies. We continue to believe that our education supports careers that requires human judgment and our AI resilience. Our platform and sector tailwinds and 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 and analysts for the dialogue and engagement we've had over the past quarter. I also want to thank our entire APEI team for their commitment to continued student engagement, persistence and success. With that, I would now like to hand the call back to the operator to begin our question-and-answer session.

[Operator Instructions]. And our first question comes from the line of Tom White with D.A. Davidson.

Two, if I could. I guess on the planned institutional combination, nice to see the HLC finally sign off on that. Can you kind of update us on how we should expect kind of the benefits of that to work their way through your financial model over the coming quarters? Is it sort of a situation where maybe we see it in kind of operating expense efficiencies first as you can maybe centralize certain functions and then maybe followed by revenue synergies, maybe just sort of an update on the model impact? And then just any early comments on the Orlando campus for RAS. I realize it's very early still, but just curious like how it's tracking versus, say, other kind of campus expansions that you guys have done over the years at this point?

Great. Thanks very much, Tom, for the questions. First, on the combination. In the back half of 2026, we don't expect significant financial improvements. And that's largely because we currently already operate in a shared services structure where we've got marketing, IT, legal, HR, finance. All shared and providing services to each of the education units today.

Our main enthusiasm for the combination is both our revenue synergies which we expect to start seeing in 2027 by bringing [ grad season ] expanded program offerings to Hondros's campuses and also cross-pollinating more Raisin programs to their existing campuses. So we also anticipate that as the combination moves forward, and we see success in your second question, which is our campus openings, we have the opportunity through the combination to accelerate investments in campus opening once we see that we are proving out the model of investment and return on those campuses. So for the Orlando, 2 campus progress. I'm going to turn it over to Gary, so he can give you a quick update on that.

Yes. So I think we -- we're pretty happy with how Orlando to opened. I would say that we were a little late in the game. So we only got about half of a quarter of enrollment yet I think we hit our start targets for that campus. And I think Q2 will be a pretty good indication of what the ramp rate will be. But so far, so good, and we're on track. One thing to note, I think that campus introduced practical nursing to the markets in Orlando, which we hadn't offered before and offered it in a nice -- weekends mode, which we also had not offered before. So it's great to see it up and running, and I think we'll see good progress in the enrollments in our third quarter.

Marbe just 1 quick follow-up, if I could. Just Angie, I think you used the word sort of accelerated openings. I mean, if Orlando goes well, and I think you guys have talked about kind of 2 new campuses kind of a year is in the plan. But is it safe to assume that you guys could kind of accelerate that pace, maybe not this year, but maybe next year depending on how the rest of this year goes.

We really are going to pay careful attention to what we call our Trailblazer initiative, which is the campus openings. We see that the main obstacle, Tom, that might prevent us from going faster is whether we are expanding outside of the states where we already operate. Inside the states where we operate, we typically have already overcome the obstacles from a regulatory perspective as we start to branch out to our adjacent states, there is a journey state by state on that regulatory process. But once we get our toehold in a new state, the expansion then accelerates again. So we are very confident we are on track right now, and we do hope that the early results will allow us to accelerate.

And our next question comes from the line of Griffin Boss with B. Riley Securities.

Just really 1 primary 1 for me would like to kind of expand upon. What was just talked about? And I do want to just make sure that I call out the $63 million of cash flow from operations in the quarter was stellar. So that's great to see. And kind of on that -- on that front, can you just maybe provide a little bit more color on your thought process around future strategic initiatives and investments. I mean you talked about, obviously, the campus relocations and you just talked about the Trailblazer initiative. Just curious kind of where your primarily focused on deploying that the cash and using your strong balance sheet? Is it going to be tucking in acquisitions? Is it going to be more so focused on further campus -- expansion initiatives, excuse me. Any out color would be helpful.

Yes. Great question, Griffin. Thank you. So first, we are making sure that we are spending into the growth in each one of our currently owned businesses, right? So you heard us investing more in marketing inside of APUS or the Military Plus division, that's somewhat to offset the near-term headwind from the war in the Middle East.

Beyond that, we are absolutely investing in our tech platform, one of the things we have underway is the combination of our nursing schools. And so consequently, we're moving on to a single tech platform. We're going to talk a little bit more about that in next quarters. call and what we're doing to innovate around that. So we're excited about that initiative. It does have some largely 2027 impact, but perhaps late '26 as well.

And then our -- certainly, our main focus are new campuses and our main focus is tuck-in acquisitions. So we're actively working on that. It's one of Gary's top priorities. It is a good time to be considering those possibilities, and we look forward to sharing any updates we have in future conversations.

And our next question comes from the line of Stephen Sheldon with William Blair.

Congrats to the team on the results. First on here on the updated 2026 guidance. I'm roughly estimating that it implies about 3% top line growth in the back half of the year if we adjusted for the estimated government shutdown drag -- late 2025, seems like that'd be more like 8% in the first half, excluding graduate school, USA. So is that mostly reflecting the slowdown in the certain military buckets you mentioned, the Navy, Air Force and Marine. And anything else to call out there beyond normal conservatism?

Stephen, thanks very much for the question. Are you specifically looking at the Military Plus division? Are you talking about overall...

Total company revenue guidance.

Total company revenue guidance. Gary, do you want to take that?

Yes. I mean, I'll have to look at the details. So I don't think we're looking at 3%. I don't think we've given the second half, the details of each quarter in the second half. But don't forget, we again had to shut down. Are you seeing excluding normalizing for the shutdown in the prior year?

If we added back the estimated drag from the shutdown in 4Q '25 and then taking out grad school U.S.A. in the first half of this year. So trying to compare it on a pure basis.

So I think, I would -- I think it should be a little bit higher than that. I would say, listen, our current revenue guidance right now is focused on the first half and the second half. We're being a little bit more conservative about the second half of what it should be. And you're right to say that the Military Plus segment is not showing what I'll call it, the 7% growth that we were seeing previous to that because we're trying to meter the impact of the deployments and see how that plays out.

But we're -- our guidance does imply continued growth within the Health Plus division, which we're seeing progressing at the rates we were talking about in the first half. So we're still moderating in the second half and then seeing what the impact is of the deployments and then also trying to understand what the year-over-year comp would be absent the shutdown from last year.

Okay. Got it. Yes, I can dig in more of that offline. Following up, this is probably more from an industry perspective. But I guess, have you noticed any changes in the type of applicants that are pursuing nursing pathways in the health -- on the health side, especially on pre-licensure nursing. And the reason I'm asking that, there's a lot of increasing uncertainty in other fields around how AI may negatively impact employment levels down the road. That doesn't seem to be much of a perceived risk in health care, including nursing, which -- and there's a lot of obviously favorable secular trends there. that could make it a very attractive pathway to employment. So just curious if you're seeing any changes in the profile of applicants kind of given those dynamics?

We continue to see enthusiasm for the nursing programs. As you know, because we offer 3 ways to become a nurse, an LPN, a 2-year degree RN or the bachelor's degree with this 3.5-year program. It gives many different types of students with different levels of preparedness, the opportunity to become a nurse. And so we haven't seen a slowdown. We've seen a lot of continued interest. As I mentioned, our nursing enrollments and are growing at high single digits. So we're very happy with the continued progress we're seeing in our nursing programs.

Our next question comes from the line of Luke Horton with Northland Securities.

Congrats on the quarter. Just wanted to circle back on the strategic investments. Just wondering if you could kind of outline sort of criteria you would be looking for a potential acquisition, whether that -- would you be looking at any smaller due to 4 campuses? Or would you wait for a larger kind of needle mover acquisition? Just any sort of criteria that you guys are evaluating there?

So this is Gary. I think our primary criteria is going into states which we're not currently operating. So if we can find -- and we're trying to say -- I think we said this before, trying to stay within the Midwest and the East Coast for right now. So we're looking at states where we currently don't have a license. We're looking at states that are generally contiguous to where we're operating. We're looking at locations where we believe that there is a good supply-demand imbalance in that state. And if we can accelerate or enter into that market by making acquisitions.

So those are the primary criteria. If we have a single campus, that's certainly something we'll look at. If it has multiple campuses, and we can get lucky enough to hit several of those opportunities in 1 sales group, we would certainly be interested in that as well. But we're not ruling out anything that fits within the larger criteria a state that we're interested in the supply-demand and balance in health care are the 2 primary criteria.

Okay. Great. That makes sense. And then second one just on the military plus with the kind of deployments across Navy, Air Force, Marines, I guess, historically, have you guys tracked like what sort of percentage of students that get deployed actually return and reenroll. And also, I guess, within your guidance, I guess, what are you assuming for either a rebound or timing for those sort of enrollments?

Luke, thanks for the question. So we -- I don't know that we have tracked in the past on the return of those who have flagged themselves as asking for an accommodation for deployment, but we will try and run that down and see if we can get more detail on that. This is a different circumstance. Typically, the wars begin with Army moving first, deploying setting up base camp and then basically waiting. This was a war that was different than what we've experienced in the last several years where it was an air and sea or immediately. And so when AV Marines and Air Force deployed, they were in combat right away.

So we saw more people requesting that a combination for deployment and not taking education while overseas than what we had experienced in past situations. So we'll try and run that down and see if we can get a stat for you on how many returns after deployment. Good question.

And our next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets.

Yes. I also wanted to follow up on the military enrollments. Just obviously, the conflict started at the end of February. Did you see -- was your first evidence of the kind of the active duty headwinds, was that with your May starts or with your April starts? And did you see a difference between the 2.

Yes. Great question, Eric. So our March start was very early in the quarter. And so at that point in time, we saw very few drops because you're right, the -- the award did begin technically and effectively on February 28. But we started to see the accommodation requests coming in for our April start and now for our may start. And so it didn't have as much of an effect in March. But we certainly started to see it happening as we had it into the completion of the April and May starts. Gary, do you want to add to that?

No, I think that's right. I mean we saw the uptick in deployment numbers. And then we saw that the branches that -- so we were like, okay, what's going on, why is that happening? And then we look back and looked, as Angie pointed out, army looks a little bit light, but not compared to what we've seen. We've seen good growth rates, but it was what we saw the numbers that were lower than what we expected coming in from the branches that were on the front lines of the deployment.

Okay. And then the second part is that the outlook, does it anticipate status quo? Does it anticipate a recovery at any point?

So I would say Q2, we would expect to be impacted a little bit more than in Q1 by the deployments. But we did -- as Angie pointed out, we did deploy marketing that we think will help to offset that. So we believe that towards the end of the quarter, namely the last month of the quarter in June, we'll see some recovery, and then we believe we'll see additional recovery going into Q3. And then we'll just have to see how much we have to manage the deployments going forward. It's unknown what happens from here, but I don't want to get too far ahead of ourselves not knowing what will or will not happen with the current situation over there.

But we do believe that the strength that we're seeing in veterans and military families gives us a very good foundation for us to invest behind. Those are high teens growth rates in the second quarter and so as we had been sharing for the last several quarters. And so we're going to invest behind those 2 segments and really try and offset any of the short-term impact we might get from the 3 branches who are active and deployed right now.

And our next question comes from the line of Raj Sharma with Texas Capital Bank.

Can I try not to beat a dead horse and go back to the military deployments there was -- historically, there's been a certain number of deployments for every certain number of deployments have resulted in a certain decrease in registrations. I think if I recall, like 50,000 deployed got you 1,500 registrations less. And how do you -- and I know you've talked about this, but how do you see this -- can you provide some color there in the sense of how do you see this particular deployment impacting the registration? And also I have a -- I have a question on -- I mean how do you -- how would you allocate the marketing dollars to offset this impact -- is this -- and is that related to the margin? I have a follow-on question on the margins in military -- sorry?

Yes, of course. So thanks, Raj. Great question. So 50,000 deployed active duty we know that about 10% use their education benefit at any given time. So that gives us 5,000 of those people are somewhere in their educational journey. We know that we educate 30% of all active duty who are taking classes. So that math that you laid out, absolutely 1,500 students, right?

Typically, our students in any given quarter are taking about 2 registrations, 1 to 2 registrations though you'd have to multiply that by, say, 1.5, 1.6, right? And I think that, that then really points to the difference between mid- to high single-digit registrations and mid-single-digit registration. So we're kind of triangulating this on several different measures, and that's another measure that I appreciate your bringing up.

So yes, we really believe that when we can redirect the marketing dollars that we talked about $2.2 million of incremental spend in Q2 beyond what we had originally planned towards veterans and family we will be able to drive more momentum in those segments. We also know, as you are all well aware, that our active duty come to us from referral at about a 40% rate.

So it does cost us a little bit more. You get our investments and our family members that it would cost us if we were investing that $2.2 million in our active duty. But we believe it's a very well-timed investment because we really are trying to be sure that we are continuing to deliver on the enrollment targets that we set out for APUS. And you can see our confidence in the business by the virtue of the fact that we raised guidance on the revenue and the adjusted EBITDA for the full year. So we believe that we got the mitigation strategies well in hand for APUS.

Got it. That's super helpful. And so I have a related question on -- if you look at the margin slide sheet, military, there's a solid margin increase, 32% to 36%. So you're saying that -- and I think you commented that perhaps that goes back down to 32% at the end of the year because you allocate more advertising and marketing costs.

That's correct, Raj, right? We don't -- great margin improvement, but we don't expect to sustain that throughout the year. And part of the reason is that incremental $2.2 million. Having said that, we're still guiding for the full year in the neighborhood of that 15% EBITDA margin, which would be an improvement over last year's 13.2%.

Perfect. Perfect. And then just following through to the nursing, there's an improvement in the margins there, but sequentially but there's a drop sequentially from Q4. That I want to understand, is that because nothing is kind of close to breakeven, so it's tough to kind of figure out how to scale that up quarter-to-quarter and get a consistent margin increase?

No, that's a I mean it's a good question. So if you recall last year, we had timing between Q1 and Q2 of instructional materials. So there's roughly $2.8 million of instructional materials last year that didn't exist as we rolled out new materials and then and modified margin in Q2. So it's really just the type of timing. It's just really the differences year-over-year of that $2.8 million that didn't exist. So we literally had no instructional materials due to the way the contract is written with our vendor at the time. And then there's some additional other items, a little bit more marketing spend, but that's really what drove the margin difference between -- I mean, you're right. The margin was very low in Q1 from where we had expected to be, and we would expect to see the flow-through margins much better in Q2 through Q4 for the remainder of the year.

That's a onetime contract matter, Raj. I think we talked about it last year in Q2, which -- the contracts gave us a quarter for free, basically. So we did not have instruction material costs in Q1 of 2025.

Got it. And then just if I can ask one last question. Just can you comment on the sensitivity of the Department of Education their sensitivity to the cohort -- the cohort default rates. And I presume that you are better positioned with a huge military focus to this issue how are you thinking about the upcoming CDR disclosures are you well positioned here in this regard?

Yes. I mean I'll answer it, and I think the answer is we're monitoring it. So certainly, with the military, we have a lower borrowing rate, but that's now it's measured it to students that did borrow amenity repaying loans. So one of the biggest concerns is what is the behavior and pattern of people that haven't been repaying. So we feel we're in good shape based on our third party that helps us out with these things.

But we're keeping an eye on it because students they were asked not to pay their loans for a long period of time, all of a sudden are being asked and changing that behavior, I think we'll be -- take some time to instill in student repayment. But the answer is we feel a bit about where we're at, but it's something we're going to have to be on top of as students go repayment for the first time in a long time.

And our final question comes from the line of Jasper Bibb with Truist Securities.

I'll just keep it to one. I was hoping you could talk about how your approaching student acquisition. I guess some of your competitors have talked about search auto changes or the shift to answer engines potentially impacting the top of the funnel bit, I think you mentioned earlier on the call, your referral rate is super high, so maybe you'd be dealing with less of that than some of your peers, but I just wanted to hear about your experience there and how you're managing some of these kind of changing consumer payers.

Yes. Great question to ask for the question. I'll start and turn it over to Gary as well. So you're absolutely right. At because we have such a significant amount of our new students coming from referral. But we aren't seeing really any meaningful change to our acquisition cost or the momentum behind acquisitions setting aside the 3 branches of the military. So we're very positive about the continued momentum at APS. We have not seen a slowdown in our acquisition of new nursing students. And I'll turn it over to Gary because he's been working closely with the marketing team and the enrollment team based on exactly what you've been hearing in the market, which is other people pointing to this particular topic.

Yes. I will say that, as Angie pointed out, so small portion of our business, we've seen some of that same behavior, right, which is the nonhealth care portion of our online at the Health Plus division and a small portion of our health online that we've seen that the algorithms that use AI are picking up ways to prioritize the words in the algorithms. And we're aware of it, and we were responding to it. We've deployed resources similar to others. We haven't seen a material impact because the other portions of our business are growing as we would expect. But it's something that we do -- we have to address just like everyone else's and feel comfortable. We understand what the root causes are and what we need to do to bring the algorithms back in line.

And that concludes our question-and-answer session. I will now turn the conference back over to Angie Selden for closing remarks.

Thank you very much for all who have participated today. We remain very enthusiastic about 2026 and our 4-year plan. We have built the foundation for the next several quarters of success. And we see in front of us significant momentum, both in top line revenue and expanding margins and also an expansion of our earnings per share contribution. So thank you to each of you for joining us today. We look forward to connecting with you all very soon.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI 4Q 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Shannon Devine, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss fourth quarter and full year 2025 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer; Edward Codispoti, Executive Vice President and Chief Financial Officer; and Gary Janson, Chief Strategy and Growth Officer. Materials for today's call are available in the Events and Presentations section of APEI's website.

Statements made during this call and in the accompanying presentation regarding APEI and its subsidiaries that are not historical facts may be forward-looking statements that are based on management's current expectations, assumptions, estimates and projections. 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, such as those identified in our Form 10-K under the heading Risk Factors, including those related to potential impacts from government shutdowns or changing federal or state government policies, practices and laws, including impacts on revenues or the timing of receivables.

Forward-looking statements may sometimes be identified by words like anticipate, believe, seek, could, estimate, expect, can, may, plan, potentially, project, should, will, would and similar or opposite words. Forward-looking statements include, without limitation, statements regarding expectations for registration and enrollments, revenue, earnings and adjusted EBITDA and other earnings guidance, our foundation for growth, the planned combination of our institutions, government, governmental and regulatory actions, their impacts and our response to those actions, changing market demands and our ability to satisfy such demands and other company initiatives.

The call and the presentation contain references to non-GAAP financial information. A reconciliation between each non-GAAP financial measure we use and the most directly comparable GAAP measure is located in the appendix in today's presentation and in the earnings release. 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 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.

Thank you, Shannon, and good afternoon, and thank you all for joining today's call about American Public Education's Fourth Quarter and Full Year 2025 performance. At the beginning of 2025, we set out to simplify and strengthen APEI. Today, I am very pleased to share the following results and highlight how our 2025 achievements create a strong jumping off point for our 4-year growth strategy, which we introduced at our recent Investor Day.

First, APUS delivered full year 2025 revenue growth, even with the fourth quarter registration interruption. APUS' student base, including veterans, extended military families and military service members across all branches demonstrated demand in line with our expectations. The underlying business is strong and the numbers reflect that.

Second, our nursing and health care institutions both had outstanding years. Rasmussen's full year 2025 revenue increased 14% and Hondros' full year revenue increased 11%. Third, APEI's full year consolidated revenue grew 4% to $649 million versus 2024. That growth was achieved even with the midyear sale of Graduate School USA, the announced closure of 2 Rasmussen campuses in Wisconsin and a registration interruption at APUS in the fourth quarter that affected TA registrations for 43 days. For context, by excluding Graduate School from both 2024 and 2025, consolidated revenue would have increased about 7% when compared to the prior year. These results reinforce the strength of our diversified portfolio.

Fourth, APEI's full year adjusted EBITDA reached $85.7 million, up 19% as compared to 2024, beating not only our revised guidance, but also beating the top end of our initial 2025 guidance. We trimmed costs across the enterprise, specifically at APUS and in APEI Technology, and these savings have reset the cost baseline for 2026 and beyond.

Finally, we did what we said we were going to do. At the beginning of 2025, we committed to redeeming our preferred equity, selling some corporate buildings and having the Department of Education lift the $25 million letter of credit and lift the 6 years of growth restrictions that prevented new campuses and new programs at Rasmussen before APEI's acquisition. Achievement of these commitments has simplified and strengthened our business for 2026 and beyond. And we delivered on these commitments while simultaneously growing enrollment, expanding margins and strengthening our balance sheet. Our teams demonstrated resilience, tenacity and confidence in overcoming obstacles and delivering remarkable results.

So now let's turn our attention to APEI's fourth quarter 2025 consolidated revenue. We delivered $158.3 million, and we exceeded our most recently stated guidance across all key financial metrics, including revenue, net income available to common stockholders, EPS and adjusted EBITDA. Our nursing and health care institutions demonstrated significant strength during 4Q '25. Rasmussen grew 16% and enrollments increased 9% year-over-year to approximately 15,900 students, representing our sixth consecutive quarter of year-over-year enrollment growth. What's particularly exciting is that our Fill the Back Row strategy of maximizing capacity utilization is working. Our nursing programs continue to show broad-based strength with particularly strong performance in our nursing programs. Our allied health programs, including surgical tech and radiological tech are also performing well. The most are at capacity, which creates opportunities for our planned expansion initiatives. By maximizing capacity utilization at our existing campuses, we are driving significant operating leverage and demonstrating impressive margin expansion.

Hondros continues to deliver strong results with fourth quarter 2025 enrollment of 4,000 students, a nearly 10% year-over-year revenue increase and 9% year-over-year enrollment growth. This performance demonstrates the durability of demand for pre-licensure nursing and our ability to effectively reach students in our local markets.

In fourth quarter 2025, APUS successfully navigated the 43-day federal government shutdown, which created an active duty military student registration interruption. As we have previously shared, it has been 12 years since the Defense Appropriations Bill, which funds Military Tuition Assistance, or TA, had remained unsigned by October 1, the beginning of the federal government's fiscal year. With the Defense Appropriations bill still unsigned by our November start, all 4 major military branches began utilizing their portion of the $100 million of tuition assistance funds authorized under the One Big Beautiful Bill Act to enable active duty military students to continue their education. Importantly, once the government reopened in December, we saw a 41% increase in TA registrations as compared to December 2024, which demonstrates resiliency in demand for education from our military students even in the face of funding disruptions. Because most APUS students take one course at a time, this simply delayed their progression rather than stopping their progression entirely. Additionally, an important bright spot in APUS' fourth quarter performance was the continued momentum in both our veteran and military families channels, where we continue to see high-teen registration growth.

Now let's turn our attention towards 2026. I want to highlight 2 key first half 2026 developments. First, we are making important progress on our institutional combination. In late February, the Higher Learning Commission approved a key step in our institutional combination. And on March 2, we combined the 3 institutions legal entities into one. Now we are working with the Department of Education and HLC to complete the remaining steps to combine our 3 institutions into one system with one OPE ID. We are targeting an expected effective date in the beginning of the third quarter of 2026 to become effective for the 2026 financial aid award year. In addition, today, we are formally announcing that we have 2 reporting segments, APUS Global and RU Health+ for fiscal year 2026 and beyond.

Second, we are launching 2 campuses in 2026, Rasmussen campus in Orlando, which is already enrolling students for 2Q '26 and Hondros campus in Detroit, which we anticipate will be prepared to enroll students in Q1 '27. Both represent important expansion into markets that have already demonstrated strong demand for our programs. In our next earnings call, we'll provide more details and progress on these first half '26 developments.

As we look to 2026 overall, we believe we have clear visibility into our revenue growth and our margin expansion drivers, including continued enrollment momentum at Rasmussen and Hondros to build on 2025 strong performance and our Fill the Back Row and leverage the ladder initiatives. We anticipate revenue synergies we gain from the Rasmussen and Hondros integration process. We plan for growth acceleration at APUS as government funding normalizes and marketing flexibility increases for military and veteran enrollment post combination. And we believe we will anticipate and experience improved profitability and cash flow due to the new refinancing of our debt and the cost savings associated with that.

In view of these and other factors, we are providing full year 2026 guidance as follows: APEI 2026 revenue will be between $685 million and $695 million. Adjusted EBITDA will be between $91.5 million and $100.5 million. And as for Q1 '26 guidance, because of where we are in the quarter this year, the timing of this earnings call gives us full visibility to all university enrollments. As a result, APEI revenue will be between $173 million and $175 million, and please note that the 1Q '25 comparable period includes $3.7 million of Graduate School revenue, which obviously is not included in 2026 due to its sale in July of 2025. And adjusted EBITDA will be $25.5 million to $27.0 million. Ed Codispoti, our CFO, will provide more details in his remarks, including Q1 enrollment and registration results, the refinancing of our debt and authorization of a new $50 million share repurchase program.

We are very clear about what the next 4 years require. It is all about execution. The foundation is built, our business is simplified, and we are operating with a strong balance sheet. We've developed a strategy, we are strengthening the team. And now it's about doing what we say we're going to do quarter after quarter. That's what you experienced in 2025, and that's what you should expect going forward. With that, I'll turn the call over to Ed to discuss our financial results and 2026 guidance in detail.

Thank you, Angie. I'll begin with our fourth quarter results, then review our full year 2025 performance and conclude with our outlook for the first quarter and full year 2026. Total revenue in the fourth quarter was $158.3 million, down $5.8 million or 3.5% compared to $164.1 million in the prior year period. Despite the federal government shutdown impact at APUS, we exceeded our most recently stated guidance.

Now let's break down revenue by segment. At APUS, fourth quarter revenue was $71 million, down 13.8% compared to $82.4 million in the prior year period. The decline reflects the impact of the federal government shutdown during October and November. Net course registrations for the quarter were 82,200, down 15.3% year-over-year. However, the underlying business fundamentals remain strong.

At Rasmussen, fourth quarter revenue was $66.6 million, up 15.9% compared to $57.5 million in the fourth quarter of the prior year. This strong performance was driven by 8.9% enrollment growth, bringing total students to 15,900. At Hondros College of Nursing, fourth quarter revenue was $20.7 million, up 9.2% compared to $18.9 million in the prior year period. This reflects continued enrollment momentum with 4,000 students, an increase of 8.1% year-over-year.

Now turning to profitability for the quarter. Fourth quarter net income available to common stockholders was $12.6 million or $0.67 per diluted share compared to $11.5 million or $0.63 per diluted share in the prior year period. This represents a 9.6% increase in net income and a 6.3% increase in diluted EPS. Fourth quarter adjusted EBITDA was $28.7 million compared to $31.4 million in the prior year period, representing an adjusted EBITDA margin of 18.1%. While down year-over-year due to the APUS shutdown impact, we exceeded our most recently stated guidance, demonstrating strong operational execution.

Turning now to our full year results. For full year 2025, consolidated revenue was $648.9 million, representing 3.9% growth over 2024 despite the federal government shutdown impact and the sale of Graduate School USA. Excluding Graduate School USA, revenue from -- if you exclude that revenue from both periods, revenue growth would have been approximately 7% APUS revenue was $319.8 million, up 0.9% year-over-year. Rasmussen revenue was $246.2 million, up 13.9% year-over-year. This growth was driven by sustained enrollment momentum and our successful Fill the Back Row growth strategy. Importantly, Rasmussen delivered segment income from operations of $4.1 million compared to a loss of $21.8 million in 2024. This represents a swing of nearly $26 million, demonstrating strong enrollment growth and significant margin expansion. Hondros revenue was $75 million, up 11.4% year-over-year, reflecting continued demand for pre-licensure nursing education.

Full year adjusted EBITDA reached $85.7 million, an increase of $13.4 million or 18.6% compared to $72.3 million in 2024. This represents a significant accomplishment and demonstrates the strength of our business model as our adjusted EBITDA margin expanded 164 basis points to 13.2% in 2025. Net income available to common stockholders for the full year was $25.3 million or $1.36 per diluted share compared to $10.1 million or $0.55 per diluted share in 2024. This 152% increase in net income reflects our operational execution, the absence of preferred dividends following our second quarter redemption and margin expansion.

We also ended 2025 with a very strong balance sheet. As of December 31, 2025, our cash, cash equivalents and restricted cash totaled $176.5 million compared to $158.9 million at December 31, 2024, an increase of $17.6 million or 11%. Total debt was $96.4 million, and our net cash position was $80.1 million. We further strengthened our balance sheet and liquidity position last Monday, March 9, when we refinanced our debt. Through the refinancing, we reduced our borrowing rate by approximately 375 basis points at current leverage levels and lowered our principal balance from $96.4 million to $90 million. The lower borrowing rate, combined with the reduction in principal is expected to generate $3.7 million in annual interest expense savings, excluding the amortization of debt issuance costs. For modeling purposes, you should expect our interest income to be roughly equivalent to our interest expense in 2026, given our strong cash balances and improved borrowing rate. Also, we will recognize a noncash write-off of approximately $1.6 million related to deferred financing costs associated with our previous loan.

Our strong balance sheet and cash generation provide us with significant financial flexibility for growth investments. This liquidity position was also a key factor in our ability to navigate the government shutdown without operational disruption. In addition, this week, our Board of Directors authorized a $50 million share repurchase program. We expect the program to be used primarily to offset dilution from share-based compensation while also providing flexibility to opportunistically repurchase shares depending on market conditions and other factors. The authorization reflects the Board's confidence in the company's long-term strategy, our strong cash flow profile and our commitment to disciplined capital allocation. Repurchases may be made from time to time through open market transactions or other permitted methods and the timing and amount of any repurchases will depend on market conditions, share price and alternative uses of capital.

I'll now discuss our guidance for first quarter and full year 2026. Our guidance for first quarter 2026 is as follows: revenue between $173 million and $175 million, net income available to common stockholders between $11.1 million and $12.2 million, adjusted EBITDA between $25.5 million and $27 million and diluted earnings per share between $0.58 per share and $0.64 per share. When considering this guidance, keep in mind that our results are subject to seasonality. The first quarter is typically our second strongest quarter of the year.

For full year 2026, our guidance is as follows: revenue between $685 million and $695 million, net income available to common stockholders between $41.3 million and $47.6 million, adjusted EBITDA between $91.5 million and $100.5 million, diluted earnings per share between $2.15 per share and $2.47 per share and CapEx between $28 million and $32 million.

In summary, 2025 was an excellent year for APEI. We exceeded our guidance despite external challenges, strengthened our balance sheet and positioned the company for accelerated growth in 2026. Our 2026 guidance reflects continued enrollment growth, improving margins and the benefits of our strengthened balance sheet, and we believe we are well positioned to achieve these targets. With that, I'll turn it back to Angie for closing remarks.

Thank you, Ed. In closing, we have spent the past year setting ambitious yet achievable financial and operating goals. Our RU Health+ segment comprised of Rasmussen University and Hondros College of Nursing are delivering consistent positive enrollment growth and improving profitability. Our APUS Global segment, with the exception of temporary enrollment disruptions from the federal government shutdown continues to deliver growth and strong margins.

I want to reinforce the multiyear growth framework we outlined at our November 2025 Investor Day. At that event, we introduced our vision through 2029 with 5 key value creation initiatives at APUS Global and 4 at our RU Health+ Healthcare division. Those growth drivers remain fully intact. These value creation initiatives build on each other and create a foundation for sustained growth. Our multiyear growth framework projected organic revenue of $890 million to $925 million by 2029, representing an 8% to 9% revenue CAGR with adjusted EBITDA margins at 20% to 21%. With strategic investments in new campuses and potential tuck-in acquisitions, we see a potential path to $1 billion in revenue by 2029.

Our APEI organization is purpose-built to deliver affordable and accessible education opportunities in fields which are in high demand and resilient to disruption. Nursing education prioritizes in-person bedside care, and our military service members continue to be critical to U.S. defense strategies, especially in these heightened times in the Middle East and Latin America. We believe that careers that require judgment are AI resilient and will continue to need humans to operate. Our platform and sector tailwinds position APEI to accelerate growth and bring more educational opportunities to a greater audience. We are as optimistic today as we have ever been about the long-term potential of our company.

Before we move to questions, I want to acknowledge the valuable feedback we've received from many of you. In our ongoing effort to continue to be more transparent with our investor community, we are committed to providing you with clear insights into our performance, our strategic initiatives and the long-term value creation opportunities ahead of us. Importantly, I also want to take a moment to honor Sergeant First Class, Nicole M. Amor, a Rasmussen University graduate who is 1 of 6 killed in Kuwait on March 1, while serving her country. Nicole embodies everything we believe in at APEI, and we are deeply grateful for her service and sacrifice. Our thoughts are with her family and fellow military service members. With that, I would now like to hand the call back to the operator to begin our question-and-answer session.

[Operator Instructions] Your first question comes from the line of Griffin Boss with B. Riley Securities.

Spectacular results amid what was a tough macro with the government shutdown in the fourth quarter. So I just want to start off on the CapEx cadence and step-up given these new campus openings. So is that going to be linear throughout the year? Or is that going to ramp towards the back half of the year as that Hondros campus gets ready to start enrollment?

Griffin, we would -- we expect on the campus openings that most of the CapEx related to the new campuses would be in the fourth quarter, maybe a little bit in the third quarter. But a good question. It will be mostly in the second half of the year.

Okay. Great. And then just on that note, too, can you just remind us -- I know you spoke about it on your Investor Day, but it would be helpful, I think, here to remind all of us about the economics of these new campuses. What's the expected revenue per new campus once it's ramped, margin expectations and when you expect to be cash flow breakeven? And I apologize. I don't know if there's background noise on my end. I'm hearing a little bit of that, but I could repeat the question if you could.

You're good. Yes.

We don't hear that. So I think as we said, our campuses are relatively CapEx light. We expect them to be -- cost about $3.5 million to open, take about 18 months before we turn cash flow positive. And I think the economics we said at scale, we would expect the campus to do about $12 million in revenue and have about a 35% EBITDA margin.

I was just going to say, and we're still on a pace to open 2 campuses per year. That's the current plan that was baked into the 4-year plan we shared at Investor Day.

Right. Yes. And so I guess before I get to my last one, just to follow up on that. So we could expect kind of a heightened level of CapEx, at least above the '25 levels going forward beyond '26. I know you're not guiding to that, but is that a reasonable expectation?

Yes. I think what Ed guided to in his comments for the full year this year is kind of our standard number we would use, which includes about $7 million for new campus openings. Is that fair?

Fair -- the range between $28 million and $32 million. So $7 million of that would be for campus openings.

Sure. Okay. Makes sense. And then just last one before I hand it off, hop back in the queue. I understand going forward, there's just going to be 2 operating segments. But is there any chance you could break out kind of the expectation for the first quarter for Rasmussen and Hondros for us before we start to model just kind of 2 divisions going forward?

We are moving towards this 2-segment combination. And as a result, we won't be breaking it out for the investor community going forward, no.

Your next question comes from the line of Luke Horton with Northland Securities.

Congratulations on a very nice quarter here. I guess I kind of want to dive into the marketing strategy and how this sort of shifts after the institution combination kind of takes effect. Could you just kind of talk through kind of marketing strategy there?

Yes. Great question, Luke. Let me start by saying Rasmussen's brand and Hondros' brand will continue to be present in their local markets. And so the marketing strategy will continue to attract students to those campuses with those brand names. So -- but what we are doing is we are bringing the better practices from each of the 3 education units to each other. So the best practices from APUS' online to Rasmussen Online, the best practices from Rasmussen campuses to Hondros and vice versa. So we are continuing to optimize our marketing spend. The difference between what we do digitally, primarily for online students and what we do in a more scrappy on-the-ground fashion for our campuses but we will continue to be enrolling students in each of those brands for 2026.

Okay. Great. That's helpful. And then lastly, just on the course registrations at APUS. I think you said it was up like 41% in the month of December year-over-year. I guess was there like when the government was shut down and the funding was paused, was there like a wait list where students could like sign up to for course registration once funding was returned? Or I guess what was kind of the leader of the big bump in course registrations for December?

Yes, great question. I'll have Gary answer that question. Go ahead.

Yes, I was going to say, I think we were pleasantly surprised. We didn't know how much we would bounce back or whether it would just be a permanent kind of loss, but we saw that significant bounce back from the military students, I think that indicates that there was good demand and without the ability to have the funding in place, they were just sitting on the sidelines. So it was a combination of new students and continuing students came back, which we didn't have a good indicator there. So that was a nice surprise for us in December. And obviously, that helped to start the year off as well.

So keep in mind that those 20,600 TA registrations in October and November ended up getting dropped. So those were students that were already enrolled in class, and we had to drop them for nonpayment. So when you say, was there a waitlist or what have you, they had already intended to take their courses in October and November. So when funding became available again, they jumped right back in, and we were really pleased. And we were pleased that December, which is of the quarter, the lighter of the enrollment month just because it's the holidays, et cetera, didn't seem to slow them down and wanting to jump back in and take their courses.

Your next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets.

Yes. I also wanted to dive in on the enrollments at APUS, but more focused on the non-TA side. seeing Q4 up 11% for the non-TA. I was just curious, could you remind me how did that compare with the first 9 months of the year? Was that an acceleration?

Great question. I'm going to let Eric turn that over to Gary for him to answer.

Yes. I think we are very pleased with the nonmilitary segments. And we saw -- I think Drew mentioned it, that we saw high teens in both the veterans and the extended family markets. Our -- the other category was a little bit lighter, but the combination of the non-military active duty segment was about 11% growth combined.

Okay. And then for the first quarter, that 4% year-on-year that you saw, was that -- did you see that sustain in the first quarter?

Yes, we'll probably give more color on that in our next call. But yes, we did see that same trend continue, which we're very pleased with. And then we think there's good momentum there, which is what we were hoping to see and certainly very pleased with the outcomes. The team has worked really hard to build the extended families and the veterans as they take more courses on average and have a little bit higher tuition rate. So it's pacing out nicely despite a little bit of a softness in the active duty due to a partial shutdown in Q1.

Got it. And then my last question has to do with the use of cash, the priorities here. You've obviously come out with the new repurchase plan, the $50 million. You talked about sort of absorbing stock-based comp, the dilution from that. Just what is the priority? Is it anything beyond that, we're going to focus on debt paydown? Or is the current stock price appetizing to you guys? What's the focus?

Yes. Great question, Eric. I'm going to turn it over to Ed for him to answer that.

Yes. Look, from a priority standpoint, we're always going to focus initially on organic growth. That's going to be our #1 priority. And we want to do so while we maintain a conservative balance sheet. M&A is something that will continue to look at. It has to be opportunistic in nature. There are reasons why we might want to expand geographically a deal that might make sense in terms of its footprint. And when all of that is said and done, then we turn to the return of capital to shareholders. In the case of this $50 million authorization, as you said, we're very focused on the dilution of stock-based comp and mitigating that. And then in the event that there are market events or changes in stock price that would make sense for us to be opportunistic to repurchase more, then we'd execute from that perspective as well.

Your next question comes from the line of Jasper Bibb with Truist Securities.

Maybe following up on an earlier question. I wanted to ask what your '26 guidance envisions as far as on-ground health care growth or maybe any additional detail on what you're seeing in health care student demand this year would be great.

Jasper, thanks very much for the question. I'll start by saying we continue to see strong interest in our campus programs and specifically our nursing -- pre-licensure nursing campus programs. I'll turn it over to Gary, and he'll give you a little bit more detail on that.

Yes. I think we said we would see somewhat linear growth in relation to our longer-term strategic plan. So I think we're targeting, call it, high single-digit growth in our health care platform entirely. And obviously, we intend to grow -- not obviously, but we intend to grow our campuses at a slightly faster rate than the online in the Healthcare division. So that is our target rate. And then obviously, getting APUS to be growing at a similar rate, maybe lower -- slightly lower than the health care platform.

And then it's probably too early to say, but could you frame for us on whether the Iran war is having an impact on the behavior of your active duty students at APUS or maybe historically, how that part of your student population behaves when military activity picks up?

Great question, Jasper. -- great question. So Yes. Presently, we don't know what the exact troop count is. But primarily, those being deployed are in the Navy, the Air Force, cyber and some regional base personnel. And so our largest enrollment population is the Army and the boots-on-the-ground deployment hasn't happened yet. With the March start, which was a really important checkpoint for us to see what kind of impact, if any, we would experience, we had really no difference in our start rate for March, even with the Middle East war. And we don't anticipate a significantly positive or a significantly negative registration impact just based on what we've seen over the years with military deployments. So sometimes people suspend their education because they're deployed and aren't sure they will have access to a computer. And we see others ramping up their education because they are deployed but are -- have a free time and connection to the Internet and a computer, and so they decide to take courses. So it all kind of balances out in the end. So right now, we don't think there will be any impact in a meaningful way at APUS on registrations in 2026. But we'll certainly keep you posted as we learn more.

Your next question comes from the line of Rajiv Sharma with Texas Capital.

And great results and solid guidance. This has been a pleasure to -- I had a couple of questions. How do you specifically plan to fill in the back seats? Any -- I know you had talked at the Analyst Day. Can you numerate certain specific tactics?

Yes. Great question, Raj, and thanks for the compliments. So we are really honing in on our marketing strategies that are attracting the students to the programs that have the -- not just the biggest supply-demand gap, but also the biggest employment demands in the local markets. And so we are refining our marketing approaches. And in some markets, we are actually investing more marketing dollars than we had originally planned because we're seeing great yield and great results. So we're looking at being thoughtful, but also being aggressive about how we take EBITDA outperformance at Rasmussen in particular, and investing some of those dollars into the marketing so we can continue to grow and Fill the Back Row growth. So we are just going to continue to do what we did in 2025, which delivered great results. I'll turn it over to Gary for more commentary.

I'd also say that we plan to -- at campuses, cross-pollinate programs. So we have a nice portfolio. Not every campus has the same programs in nursing and allied health. So part of the strategy, by example, in the new campus in Orlando, we're offering an LPN program in that market that we didn't have before. And that becomes another opportunity for us as we look at campuses. So it's a combination of just continuing the marketing, but also creating -- using the campuses and expanding programs that they may not have in their portfolio. And we've got a very detailed plan campus by campus on what programs we plan to roll out over the next 4 years.

Got it. That's very helpful. And then you've guided fiscal '26 to top line revenue of a little over 6%. I think in your remarks, you just said -- is it right to assume that nursing and Hondros are going to be high single digits then through the year growth and...

I'm sorry, I mean to cut you off. Sorry, finish your question, Raj, sorry.

No. Just that you break out the nursing and the APU. Is it that high single digit and low single digit?

Yes. I do want to just first remind all who are looking at comparative year-over-year results that we do have Graduate School revenue in the first half of 2025. So we put on the Q1 guidance page, the fact that the Q1 revenue includes $3.7 million of Graduate School. We did -- I can see now we did not put the total Graduate School revenue to be able to deduct from the 2025 as a year-over-year comparison. So that, if you were to do an apples-to-apples comparison, our growth rate is approaching 8% at the midpoint. And then certainly, when you get to full year, you will also have the opportunity to see that we would likely be able to recover the enrollment that we had to forgo in October and November as a result of the government shutdown. And so we think that there are some puts and takes in those numbers that would signal that the midpoint of our full year is probably closer to 8% with -- yes, with APUS, as you were calling out in the mid-single digits and our health care schools in the high single to low double digits, yes.

That's really helpful. And then just following on that last question. With the increase in the revenues at Rasmussen and Hondros, you've achieved incremental margins, right? I think last year, fiscal '24 and '25 was greater than 50%. And this year, it seems to be implied with fiscal '26 guidance, the incremental profit margins are implied at 25%. Do you expect healthier incremental profit margins than the guidance would indicate?

So obviously -- this is Gary. I think we are obviously tracking to that. We are making some strategic investments to make sure that we can hit those numbers, as Angie mentioned in some marketing. Last year, we saw -- I think it was 75% flow-through margins at Rasmussen is what we ended up doing full year. We'll continue to monitor that, but -- and it will progress throughout the year. I think we're right now making sure that we stay focused on a healthy top line growth to Fill the Back Row, and that may mean some additional S&M spend and some faculty ahead of that. And don't forget the campuses as we go, they will suppress the margins a bit, not as much in 2026, but in out-years.

The new campuses.

New campuses, sorry.

Which we didn't have. Yes, in the Rasmussen numbers in '25.

Your next question comes from the line of Stephen Sheldon with William Blair.

You have Matt Filek on for Stephen Sheldon. Congrats on a strong finish to the year. I wanted to start with a quick follow-up on filling the back row. I think you have previously said that nursing campus utilization is currently around 60%, but your target is closer to 90%. And I was wondering if you can share anything on the rough time line and cadence to getting to that 90% target level across your nursing campuses.

Yes. Matt, great question. It's our favorite topic. So we signaled when we did Investor Day that we would be approaching that 90% when we get to year 4. And we also signaled that we expect a rather smooth progression over the 4 years. So we think that, that's just going to be basically consuming capacity and adding students on a rather smooth trajectory over the next 4 years.

Got it. Yes. That makes a ton of sense. And then just had a quick one on teacher capacity. How do you feel about your current teacher capacity across educational units? And are there any areas where you may be slightly over understaffed?

Great question. I think if you remember at the Investor Day meeting, we talked a little bit about making sure we're not just enrolling students, but we're also making -- managing those constraints, right, and making sure that we have all the necessary resources in place, which includes faculty, availability of clinicals, et cetera, right? So the good news is since we are far past COVID now, the availability of faculty has really not been a constraint in our markets of late, which is really good news because that is certainly one of the things that makes it difficult for you to enroll at the paces that we were enrolling at. So we don't have any campuses right now where we have a faculty shortage. And in fact, we have all of our Dean positions filled at all of our Rasmussen and Hondros campuses. So we really feel like we're in very strong shape from a talent and faculty perspective going into '26.

Your next question comes from the line of Alex Paris with Barrington Research.

I'll add my congratulations on the strong finish to the year. A couple of dogs and cats here. On the government shutdown impact on revenue in the fourth quarter, I think you had sort of guided that the impact would be between $20 million and $24 million. Can you quantify the actual impact on Q4?

We think that after having gone through Q4 and December was better than we expected, we ended up probably $12 million to $15 million short from the government impact.

This is below what you had said, Alex.

Yes, $20 million to $24 million is what you signaled on the Q3 call, I think. Correct.

That's right.

But you said a really strong December.

Well, it was -- yes, it's certainly the strong December, both, as we mentioned in the materials that we saw a rebound of our October and November active duty enrolling in TA classes in December. And -- and we also had stronger than we had seen in prior quarters momentum from our veterans and our military families. So that's a segment that's growing and gaining momentum. So December was a very strong quarter -- December was a very strong month in that quarter for us.

Great. And then I think Gary said in response to a previous question that there was some impact from the partial shutdown here in Q1. Can you expand on that?

Yes, I'll start. So for those of you who follow, and I know, Alex, you do, the Department of Homeland Security is where the Coast Guard gets their TA funding. And the Department of Homeland Security is still not funded. And so consequently, some of the Coast Guard, which is the smallest by far of all of our branches, students are still waiting for their funding. They have been using some of the One Big Beautiful Bill Act funds to allow those students to take courses. So that was one very small blip, but that's factored into the numbers we shared with you because our Q1 for APUS is an actual, which is unusual. It's just because of where the call landed on the calendar that we have all of Q1 for APUS in. And then the second small blip was during that very small period of time when they were not funded, the Army reservists who were not deployed on military activities were also not funded. So these are very, very small populations of students. So we didn't make a big point of calling them out. But it was -- it did have about a 1% to 1.5% impact on APUS' potential registration actuals for Q1, had everyone been able to fully enroll.

That's very helpful. And then just to be clear on segment reporting going forward, this was the fourth quarter, so you reported APUS, RU and Hondros. The guidance just gives APUS Global and then RU Health+. So that's going to be the way it's going forward. This is the last of the 3 segments being reported specifically.

That's right. And we will -- as we move into that new rhythm, we'll certainly be showing you the comparison by combining Rasmussen and Hondros, right, into the RU Health+ segment. That's really the only thing that's changing other than in the first half of '26, as I mentioned, a few folks before you. The first half of '26 still includes revenue from Graduate School. So we'll do a better job of explaining how to think about what that baseline comparison for 2025 should be in the first half of '25 versus the first half of '26 because obviously, we don't have access to that revenue any longer.

Got you. And you did say what the Q1 of '25 revenue was for.

We did. Yes. I -- when I was looking at the PowerPoint, I realized we didn't give that equivalent number for the full year. So that was -- yes, it was $3.7 million of Graduate School revenue that one would deduct from the $164.6 million in order to create more of an apples-to-apples comparison.

Got you. Helpful. And then lastly and related, once you do complete the combination of the institutions in OPE ID number, you'll still be reporting the 2 segments though, because that's the way you look at it.

Yes, we absolutely will. Yes.

That concludes our question-and-answer session.

Ladies and gentlemen, this concludes the APEI Fourth Quarter 2025 Earnings Call. Thank you all for joining. You may now disconnect.

All right. I am so excited to welcome all of you to our APEI 2025 Investor Day. Can someone join David in the table over. He's all by himself over here. There are so many of you. I've had the good fortune of meeting in person. But I feel like I've met almost all of you because we've had Zooms for a long time. And so it is surprising sometimes when you realize it's been years and you haven't met each other in person.

But I'm really excited for our meeting today and can't wait to share the story of where we're headed. But for those I haven't spent a lot of time with, I want to give you a little bit of background about who I am. Basically, I am a product of a small town in Central Wisconsin. And I was part of a family where my dad actually completed his undergrad degree through the GI bill.

He was an Air Force veteran and was able to leverage those benefits after he left the services and then I was born. But what's really interesting as well is that he also served as the Head of HR. There's a very large VA hospital in Tomah, Wisconsin, which is where I grew up. And I distinctly remember even when we were having family dinners that he would come home and tell us how frustrated he was that he couldn't get enough nurses in the VA hospital in Tomah, Wisconsin. And so that problem obviously continues to plague us even here today and something exciting as a tailwind that we're about to talk about.

My mom was a teacher. She was a preschool teacher, ran a school there as well. And what -- so the environment I grew up in was an environment of my parents in service to others. My dad was in service to his colleagues at the VA hospital, my mom in service to her children in her school. And it was really an important backdrop. So people have also asked me, how did you come to APEI? How did this happen? And I said, when I first was introduced to APEI, I was astonished at the value proposition. And for those of you who know me, I used to call APEI and still do, higher education's best kept secret.

So more of you know the secret here today than you did 6 years ago when I first joined. But what made me think that were a couple of incredible facts, which are still true today, and you'll hear about this in a few minutes. 72% today of our APUS students graduate with no student debt from APUS, 72%. And that's because of our deep affiliation with the Department of Defense and active duty military. I was astonished.

Also, Hondros, which we owned at the time before I joined, had a value proposition that was incredible for nurses, where in 12 to 18 months, you could complete your degree, you could get a very well-paying job, even better these days. And in 12 to 18 months, you would have a full ROI on your educational investment and a career that would last for 40 years. So when I was introduced to APEI, I said, my gosh, this story has to be told. We have to get this news out to the world because this is an incredible way for us to support our society. And so many of you know that story.

So today's meeting here is to tell you about the next chapter of where APEI is headed. But before we tell you any of that stuff, of course, I have to give you the forward-looking statement disclaimer, right, because we'll be saying some things here today that our legal team wants to make sure you're reminded of forward-looking statements.

But back to this idea of APEI being higher education's best kept secret. I think when you look at higher education today, there are many institutions who are now pretty unsure of who they are and who they serve. And at the same time, as the world starts to get more complicated and changing, students are looking at the places they graduated from and wondering now today, what those schools actually stand for.

I'm here to tell you today that our purpose is clear, and it remains clear that we don't have those problems here. We educate people who serve. We support military learners, veterans, nurses, frontline professionals, all who keep this country moving. This is not a marketing message. It's the foundation of our identity, and it's the core of our value.

A lot of institutions talk about online learning. It became very in vogue after COVID when people had to scramble to find different learning modalities. But very few institutions have the discipline, the commitment and the mobility and the flexibility to support a military learner. For nearly 35 years, APUS has earned the trust of the Department of Defense and the veteran community. If you think about that for a minute, trust is not something you can borrow, and it's not something you can buy. It's built slowly. And once you have it, it becomes a long-term advantage that competitors simply cannot match.

You see that same strength for us in health care. Rasmussen around for 125 years. Hondros around for almost 20 years. We train nurses in a moment when the country needs them more than ever. The nursing shortage will define the next decade. Some institutions teach online, some in the campuses, but we offer both. We believe that gives us flexibility, the opportunity to scale, and it provides our partners with a very reliable, consistent pipeline of high-quality graduates. It also puts us, as many of you know, at the center of one of the most essential workforce transitions in America.

There's another point, though, that I want to make sure we all remember. The careers that we support rely on human judgment and compassion and real presence. These are roles that are aligned with the future of work and remain largely protected from automation and from AI. That gives us a rare position. We serve fields that are stable and enduring, and we are using technology ourselves to make learning more personal and more efficient.

Technology gives us the opportunity for growth, resilience and room to innovate. But you're all here today because we're going to talk about our next chapter. We are just at the beginning of this growth path for APEI. The progress that you're going to learn more about today reflects the first stage of a larger shift, where our business will use data, technology and to drive efficiency and improve the economics of how we serve our students.

We all know there's more value to unlock, and we have a long runway ahead. So when we look at what is the core of APEI, it's about purpose, it's about resilience and it's about discipline. These results that we'll talk with you about today and the future that we're about to unfold happen when purpose, resilience and discipline come together. When you know who you serve, when you operate with clarity, when you support essential careers and when you run the enterprise with a long-term view, you create something very rare.

So APEI has a mission that matters. It's a company that compounds value over time. When students today are questioning the value of higher education, our purpose is unmistakable and tied to real workforce needs. We serve those essential AI-resilient careers. We have strong financial discipline, and we are still very early in our growth story. So my hope is that you leave here today learning something new about us, but more important that you leave here today striving to know even more.

So before we get started, I want to send a big congratulations and thank you to our team at MZ. Roy is here today. Brian is somewhere here. Brian? Brian is in the back, who helped make this event happen and also our great team at APEI, Jess and David and A.J. and Desy, who helped to make this meeting happen. They are all here to support you. So if you need anything, please don't hesitate to reach out to them, and they'll be happy to assist you in any way. All right. So with that, let's dive in.

How many of you know the APEI story? Raise your hand. Okay. There's a lot of you. So we're going to move quickly here, but we wanted to make sure that for those of you who don't, we can do a quick grounding in who we are. We have 3 institutions today, and we transform lives, advance careers and improve communities.

Our education is purpose-built. It is specifically built for active duty military, veterans, military families, nurses and health professionals. We're proud of the accessible, meaning easy for people to enroll, affordable, 72% of APUS students graduate with no debt, post-secondary education. And this year, we are educating 108,000 students.

You can see APUS is our educator of active duty military and veterans, and we have 2 universities today, Rasmussen and Hondros College of Nursing, which together comprise our multistate nursing and health sciences program. So why are you all sitting in this room here today? I know you all have a lot of ideas about why. Let me just tell you a few.

We believe that this purpose-built platform that educates those in service to others is a critical differentiator to those that you may compare us to in the market. We prioritize execution that delivers continuous improvement in student outcomes.

And today, when we talk about student outcomes, we mean -- how well do we retain students? Do they graduate? How quickly do they consume courses? You'll hear that from Nuno because APUS offers a nontraditional educational experience where students can take one class at a time. It's not like when you went to college and you did 4 quarters or 4 classes in the fall and 4 classes in the spring. It's a very different learning model. So those metrics matter.

George, where is George talk to him this morning about NCLEX. That's another metric that matters. So we prioritize the focus on the metrics that matter. We're really proud of the results that we've produced, especially in 2025. And we are very confident that that's a springboard for where we're headed in '26 and beyond. We are strengthening our business by simplifying.

We talked a lot this year on the investor calls about simplification, closing corporate offices, selling graduate school, redeeming the preferred, all things that strengthened our balance sheet and simplified our operating model. Our planned efforts to explore new markets and add new programs is a pretty exciting part of what we're going to talk with you about today.

We've got a military family segment. We call it the USAA strategy that Nuno is going to talk about, which is showing great promise, very connected to the primary markets that we currently serve today. And we also have a very exciting opportunity to grow Rasmussen and Hondros several different ways, more programs to existing campuses, more campuses in existing states, new states and new markets. And so we're really excited to talk with you about all of that as well.

And finally, our strong balance sheet. You all have probably peeked around the corner. We'll talk about that in just a minute. But the significant amount of cash that we are able to generate gives us that platform to be able to do some really thoughtful things. And so we're really excited to have Ed talk today a little bit about where we're focused on investing that capital, but it is a daily choice. It really is because we want to make sure that, that next dollar we invest is the best return on investment for all of you. And so with that, I want to turn then to a quick primer, not too much time because you're all pretty familiar with us.

Who is APUS? #1 educator of active duty military, #1 educator of veterans, fully online school, one class at a time. That's why when you hear us talk about enrollment momentum at APUS, that's why we talk about registrations. Because Eric, you could be taking 1 class every 8 weeks, and I could be taking 2 or 3. So we are not equal students in terms of counting revenue. So we count revenue at APUS through registrations. APUS has a very robust course catalog. We offer students a lot of choice, 200 degree and certificate programs. 89,000 students were taking classes with us in 2025, and we have 160,000 alumni. Those aren't 160,000 people that have taken a class with us. That's 160,000 people who have graduated at APUS, an incredible number.

Rasmussen and Hondros is our nursing platform and health sciences platform. We are a leading educator in the associates' degree, the LPN and the BSN. Sometimes those acronyms are confusing, so let me just clear it up quickly. Two of those acronyms lead to an RN license. Any you want to tell me what the 2 are? Oh, no, it's okay.

Thank you, George. ADN Associates degree, that's the 2-year degree. And a BSN is the Bachelor's degree, all right? So basically, it's the same nursing content and the Bachelor's degree tacks on the Gen Ed so that you get a 4-year undergraduate degree, but you sit for the same license. It's a really important differentiation.

And why our students choose an ADN is because it is a great return on educational investment for them. They can do their 2 years of nursing and they can sit for the RN license, and they are off to the races making $90,000 a year for 2 years of education for the rest of their life, incredible value proposition. LPN, 1-year degree, they are making $62,000 a year right now for a 1-year investment in nursing education.

So we have students coming to us who believe that, that's an incredible return on their educational investment. You've all heard this many times, Rasmussen operates both online with our post-licensure nursing and health sciences, many other degrees. Mark is going to talk a little bit about that in a minute. But we have 26 campuses where we deliver our first licensure nursing education. Across those 2 organizations, 60 degrees and certificate programs, the full ladder of nursing, 20 health -- 20 health sciences programs and 20,000 students between Rasmussen and Hondros today. Great.

Let's talk about how Rasmussen and Hondros compare now from a revenue perspective to APUS. And we're pleased to say that they're roughly equal now. This number, obviously, on a trailing 12-month basis does not include graduate school, the business that we sold, it creates a little confusion in the pie. So this is net of graduate school. All right.

So why do we do this? Tuition assistance has been on everyone's mind in this room for the last 3 months, all right? And let's tell you what that is, all right? The Department of Defense has many ways where they can attract volunteer service members to serve our country.

One of the most effective ways for them to attract volunteer service members is through tuition assistance. In exchange for your service to our country, you can get a subsidized, I'm not going to say free, subsidized education, all right? You can choose from 2,350 schools to get that education. Why do almost 30% of those students choose us? Because we offer the same -- tuition at the same reimbursement rate that they get for any program they may take anywhere.

So that's where 72% of our students pay 0 out-of-pocket. Because if you're an active duty military using tuition assistance or TA, we will be sure that you are not paying any out-of-pocket cost at APUS for that degree. And why does it -- why besides recruiting, does that matter to the Armed services?

Because they are trying to build a smarter, more flexible, more creative, more capable service force. So they believe that higher education, an investment that they're making because they're the ones who pay for the service members' education reinforces the capabilities of our armed services.

So it's a smart investment that the Department of Defense is making on behalf of their service members. So we talk a lot about TA. It's a big focus for us. It's the roots of APUS, but I'm here to tell you today, we got some big markets to go after. Because if you look at the relative size of tuition assistance, which is active duty military or 2.1 million potential students, we've got 3x as many students we can go after who are in the age range of 18 to 55 who have the opportunity to take additional education as veterans.

And oh, by the way, we are the #1 educator of veterans. We have the right to win there. And then this new segment, Nuno is going to talk about where we're seeing substantial growth is our USAA segment, the people who understand who APUS is because they are part of this military and veteran community. They are members of the family. Nuno is going to talk about how we're winning with them.

You all have probably -- you're probably done with hearing about TA, but I'm just going to tell you, it's a big budget that they invest every year. Those of you who have asked about the One Big beautiful bill and the $100 million, we are so happy that, that was in that bill because it allowed during the shutdown for Navy and Army and Air Force to actually use those $100 million of already appropriated funds to let people keep it -- let people take courses during the time when the rest of the government was shut down.

So we were really excited about the fact that they invested more in the TA funds through the One Big Beautiful Bill. Great. So now we're moving on. Nuno is going to fill all of this out. So I'm not going to steal his thunder. I've talked a lot about zero out-of-pocket costs, but I'm just going to reinforce these outcomes that are so distinctive to APUS, not just the 72%, which I've said several times already, 40% of our students who are active-duty military come from referral. What does that mean?

We are not paying marketing costs to get those students. And Nuno is going to show you the different segments, which are equally stunning. 30% of our students, think about this, 30% of our 160,000 alumni have come back for a second degree. No marketing cost, incredible statement about the quality of the education we offer at APUS. Why nursing and health care? You all know this. I don't need to tell you about these tailwinds, right? Nursing employment is expected to increase 6%. We've got 50% of the nursing -- eligible nurses ready to retire, preparing to retire in the next 3 years, 200,000 openings each year for the next 10 years for nursing.

And I told you about this median salary, which changed after COVID. People were not making this much money before COVID. LPNs were continuing through to get their RN license, which we're not seeing at Hondros anymore. They're stopping off at the LPN, because they can walk away with $62,000 a year salaries for 1 year of education.

But we know we've got a great platform and a place to jump off of with 8 states and 26 campuses between Rasmussen and Hondros. Mark is going to cover a lot of this today. Why do we win at Rasmussen and Hondros. We have an entry point for any student. Because of that nursing ladder, if your best entry point is an LPN, we've got it. If you've already got an undergrad in nursing, you've got your BSN, we've got an MSN for you. If you've got an ADN, you're a 2-year degree and you want to get your bachelors, we've got that, too.

So no matter where you're entering, we can turn that lead into a converted student. And so we have an offer for everyone. We talked about these different growth levers Mark is going to take you through. And one of the things that we're really excited about with regard to the combination of Rasmussen and Hondros is that ladder of nursing and health sciences programs only exists today at Ras, okay?

We have 20 allied health programs. We have 10 nursing programs. Hondros has 2. So all of that curriculum when we combine can be sold into those locations, those students that all exist in the Hondros campuses. All right. I know you knew all this already. I get it. You're all sitting at the edge of your seat because you've already read ahead, you flipped ahead through the deck and you know it's coming, all right. But I do want to say where are we going from here, right?

So first, what I want to do is say we're going to introduce a new APEI. So we decided that at this moment in our history, it was critical that we modernize the way we present ourselves to the public markets and to our students, to our employees, to all of you. The brand is important, and it's distinctive. The stake in the P represents our stake in our military and our health care communities. The I, which is the little part of the P that swings up is an arrow towards future growth. So we couldn't be more excited about what the APEI -- the new APEI brand stands for.

We're also introducing new divisions. We don't have to say Ras and Hondros anymore. We're actually combining things like you've all been asking us to do for a long time. We're introducing APUS Global. This is important. All right? You say, wait a minute, why are you going global? Well, we already are. And Nuno is going to talk a little bit about the fact that today already, we educate people in 80 countries. 80 countries and all 50 states.

So what we're going to do is extend our reach at APUS. He'll talk a little bit about how we're going to bring multilingual programs into the U.S. and to other markets. But distinctively, if you look at either side of the APUS global logo, you'll still see APU, which is a student brand and AMU, American Military University. Those brands remain the same, and those are the brands that our students are going to be enrolling into.

Same at RU Health Plus. The RU obviously stands for Rasmussen. The health incorporates Hondros. And the Plus says we actually do some other things besides health. And Mark is going to tell you why those things at our Rasmussen campuses are really important. So it allows us, though, to create one division, APEI's healthcare platform. And much like APUS Global's brand, you have the Ras Insignia on the left and you have the Hondros Insignia on the right.

So when students are enrolling, especially at Rasmussen because it's such a local market experience for students, we're giving them the opportunity to continue to be a Rasmussen student or a Hondros student, but we're going to be talking with you in the future about RU Health Plus.

But make no mistake, from my opening remarks, our vision, our mission, our values and our purpose, educating those in service to others remains exactly the same. All right. So here's the big reveal. [ Matt's ] already told me he's right ahead. So we are very excited about what we're going to share with you today because our plans suggest that in 2029, we will deliver between $890 million and $925 million of organic revenue that does not include strategic investments in campuses or other perhaps tuck-in acquisitions.

So we have reserved the opportunity to have those wonderful opportunities to be part of our future. And we believe that 1 or 2 of those could actually propel us to $1 billion in revenue by 2029. As all of you have asked us over the last several earnings calls, what's your flow-through margin? And I'm here to tell you today that with a $900 million organic revenue target, we're going to generate between $182 million and $192 million worth of adjusted EBITDA, which is a 20% to 21% enterprise margin. And we have confidence that those strategic investments will allow us to maintain our margins at that level.

So while you see a 9% to 10% revenue CAGR, we are going to see a 24% to 26% adjusted EBITDA CAGR. by 2029. So how about a round of applause? That's like exciting, right? All right. Okay. The rest of the day is going to give you some details on all of that, all right? So we're really happy to introduce now the team who's going to do that. Oh, sorry, I thought that was a built.

First, I'm really pleased to introduce Ed Codispoti, who is 4 weeks at APEI. So among other remarkable things, he's standing up in front of you today to tell the story of where we're headed 4 weeks in. So he's a very courageous man, and we're really happy to have you on board. Nuno Fernandes has been leading the incredible transformation at APUS and has so much exciting information to share with you about where APUS is headed.

And we have 2 folks from Rasmussen here today, Mark Arnold, who's our new President, who he would have been the new guy on the block until Ed showed up, right? So he's been here for less -- a little less than a year. And then Dwayne, Dwayne is over here, yes, who is the old guy on the block. He's been with Rasmussen for 19 years. And so they're here to tell the story of where our RU Health Plus division is headed.

So what do we have in front of us here? We're probably off schedule. I'm notorious for that. But we're going to jump into APUS. We're going to jump into RU Health Plus. We're going to take a quick break. And during that break, I would encourage you -- I know you probably saw the student panels over in the break room. There is a QR code on those student panels. And if you scan them, there a video will come up and you'll be able to hear that student story, and some of them will actually bring you to tears.

And I'm here to say that we -- those student stories are the reason we do what we do every day, and it's worth grabbing a couple of those and just really understanding the lives of people that we touch. Ed will, after the break, do the financial outlook. I'll give you a quick wrap-up. And then we'd like to spend as much of the last part of our time together with a panel Q&A. And we are going to include more of our esteemed colleagues in the panel when we get to that point.

So I'd ask -- I know you may have a few questions for us right now, but I would ask if you could write them down, and we'll collect those questions as we head to the panel discussion, make sure we can get to as many of those questions as we can. So with that, I'm going to introduce APUS Global and Nuno Fernandes. As I said, I could not be more excited to have Nuno having joined our organization just a little over 3 years ago, and you'll see the imprint and the impact that he's had on our organization.

But it's not a surprise. He actually came from a financial background. He spent the first decade at a Global 500 organization, leading sales and marketing. In 2012, he headed into higher education, first as the Chief Marketing Officer at Illumina, which is an ed tech company, owned universities, also provided OPM services to many institutions in Latin America.

And in 2018, he actually became the CEO and President of that company. He's growth-minded. You'll see that in the first 3 minutes. He's also financially driven. And throughout his career, he has built a track record of delivering profitable growth, margin expansion and market share improvements.

I am just so honored to introduce Nuno Fernandes.

[Presentation]

Well, good morning, everyone. Welcome to New York. For those of you joining remotely, also welcome to the event. I'm Nuno Fernandez, Angie just introduced me. I'm the President of APUS. I started in September 2022. And a little bit about why I'm here. I had dinner with Angie when we were doing the process of interim process and 2 things attracted me to this organization. One is professional and one was personal, and I'm going to describe the professional one first.

The professional one first is that I immediately saw the opportunity to continue expanding APUS in terms of revenue, profitability and social impact. And I believe my instincts were correct. I'm going to show you some data today that I think proves that I was right. But also personally and probably most importantly, I was born in Portugal, and my grandparents were completely illiterate. This means that they didn't know how to read or write.

And my parents were first generation in our family to attend college. My father became a lawyer, my mother became a teacher actually. And I could witness firsthand how education transformed their lives and consequently, my life as well. And it's really incredible to think that had they not attended university, I would not be here with you today. I would probably still be living in that small village where I was born. So that's the impact of education that is the impact of what we do, and I could witness personally how impactful that is.

But also, additionally, my father before becoming a lawyer, he served this country, Portugal in the special forces as a Ranger for many years. And when your father is a Ranger, you learn a few things. You learn how to do pushups when you're 3 years old. But you also learn to have the utmost respect for everyone that serves. So I was born with that respect, and I was raised with respecting everyone that serves this country. So when I was confronted with the opportunity to lead a school that wants to increase access to quality and affordable education to those who serve or to those who have served, I thought how cool would it be to do to many families, what happened to my family. And that's why I'm here.

So today, I look forward to spending time together telling you about the successes we've had over the last 3 years, but more importantly, about where we're heading and all the exciting projects we have ahead of us. So I will start by just with some few highlights about APUS and how unique APUS is. So APUS was founded as AMU, American Military University 34 years ago by a man. His name was Jim Mather. And he had the dream was very simple. His dream was he wanted to offer education with no out-of-pocket costs for active duty military.

As a fun fact, we have a few, the university started on a picnic table in the founder's basement. And the first class had 5 people, 2 of them from Holland that no one ever knew how they got here. When APUS opened its doors, they had 4 employees, the founder, a Dean, a Secretary and a COO, which is kind of a fancy name for the guy that was doing all the work. That's it for employees.

But today, APUS is the leading educator of military and veterans in the United States. We have almost 90,000 students, more than 160,000 graduates and 25% of our faculty and staff are military or veterans. APUS has been recognized as a center of excellence for cybersecurity by the NSA and Department of Homeland Security. And just recently, last year, we placed 6 in an asset challenge of how to build a robot that wants to go to the moon based on AI. And we placed 6 out of some household names that you might recognize like Harvard, for example.

We were the winners of the CCME award. This is the Council of College and Military Educators. Last year, we won this award for the second time. It's important to say that once you win this award, you cannot win it again for 8 years. Otherwise, I believe we will get it probably every year.

And we also recognized by the National Department of Transportation for our defense and transport impact. Additionally, we work with a lot of great partners on the B2B area. You see some names there on the screen, Boeing, UPS, FedEx. And this is a channel that has been growing and been getting more and more important for APUS. So we're very honored and proud to work with such powerful partners.

But also, I'd like to share some additional highlights about what makes APUS so unique. And this is very important. I want to spend some time here. I think it's important for you to understand why APUS is very hard to replicate and copy. We're very unique because -- we have a purpose-built platform that has been -- that we've been developing over the last 2 decades to serve the military.

And this is incredibly hard to replicate simply because you cannot buy it off the shelf. You cannot go to market and say, give me a platform that serves the military. You cannot buy it. You have to customize it, you have to invest a lot of time, a lot of money. And then you're going to do that to serve a population that is going to pay you a very affordable low tuition.

So it's something that is very hard for the universities to replicate. We have an academic model. Angie briefly touched on this, that has monthly starts, and that has a very generous credit transfer policy. So we recognize, for example, military service. We give them credit for their service. It's very unique about APUS as well. And we offer 0 out-of-pocket costs for all undergraduate active duty students. That means that they study for free with no cost. It's paid by the tuition assistance that the Department of Defense gives them.

And here, I want to spend just a few seconds explaining our tuition model because it's going to be relevant for the rest of our presentation. We essentially have a 3-tiered tuition model. We have a price for military students, which matches the Department of Defense tuition assistance. We have a special price for veterans. And then we match that price of military and veterans, we match their price for their extended families. This is what Angie was referring to as the USAA model, which is if you are a veteran, if you are a military person, your extended family as the same price that you would have even if you are not a student at APUS.

That's a new channel that we started in 2024, and it's growing significantly, and I'll share some data today, but it's something that for us, it's been very interesting because we always -- we were always debating how can we compete in the "civilian market", in the nonmilitary market. And we found a way that is logical for us to compete, which is we found a way to compete that makes sense with our DNA, which is to serve the extended families of the military and veterans. And we've been doing this very successfully, although it's a new channel for us.

We also offer career services for life. And why is this important? It's important because a lot of our military students, eventually, they want to transition to the civilian life, right? And when they transition, they're going to look for a job. They want to know how to do an interview. They want to be prepped. They want to look for job opportunities.

So we offer them career services for life with no cost. And finally, a large point of differentiation that we have is our military outreach team, which is essentially a large team that is out there visiting the main military installations and building relationships with service members and their education service officers.

All these things produce some results that are incredible. We have 72% of our students graduating with no student debt. We have 40% of our students on the military side coming from referrals. I've been in education for more than 12 years now, and I've never seen a referral rate this high. I'm not saying it's the highest, but I've never seen a highest -- high referral rate than this one.

40% of our students, they come with no marketing costs associated, and this translates into high conversion rates and lower acquisition costs. But also 30%, think about this, 1/3 of our students, 1/3 of our military student veterans students, they come back for a second degree, 1/3. They like it so much that they decide to do a second one. And this speaks highly about the satisfaction and the loyalty that they have towards our brand.

Now over the years, we have served hundreds of thousands of students. We have more than 160,000 graduates in the 50 states and 80 countries around the world. Many of our students, I would say the large majority of our students, they evolve to being promoted in the military or they evolve like to meet management positions once they transition to the civilian life. Many of them become entrepreneurs in small businesses, and we have a lot of stories to share, actually some beautiful ones. But at the same time, we're very proud of our overachievers, and we also have a lot of them. And these are 3 examples of overachievers, 3 individuals that are notable graduates.

General Caine is the highest ranked individual in the U.S. military and one could argue in the world. Nicole was the first woman flying the Thunderbirds, and JD is the Chief Medical Officer of NASA. Now 2 things are interesting about this individual is that they chose APUS for their graduate studies. This is not -- they didn't choose APUS for their undergraduate studies. They chose APUS for their graduate studies. And not only they were students, but for a period of time, General Caine and JD were also faculty.

This is not uncommon. A lot of our students, they want to give back to the community. And the way they decide to do this is by being part-time faculty. And they've been part-time faculty for a long period of time. They no longer do that, but it's not uncommon. And in fact, a lot of our faculty are working practitioners in the fields that they teach, which is something that is a very high value for our students.

Now -- when you look at APUS market leadership, and let's start with the market share in the military market. And I'm going to say this, over the last 5 years alone, APUS has gained 1,090 basis points of market share or 60% more. So I'm going to say this again because 1,090 basis points of market share and 60% or a 60% improvement. APUS and UGC UMGC stands for University of Maryland Global Campus, which is the second largest player in this market. They hold almost 50% of this audience.

And one could ask, why is that? There are about 2,500 universities and colleges that could serve this audience. Why is it that only 2 of these schools have 50% of the market. We believe the reason for this concentration is that it is very hard, sometimes impossible for most universities to be competitive in the military space while being profitable. For us, we were built and engineered around tuition assistance. So for us to charge $250 per credit hour is not the exception. That's the norm. So where others struggle, we thrive because we were built and engineered around that tuition assistant value, and we are able to deliver excellent quality education with 30% plus EBITDA margins.

I can share a quick story that just happened last year when actually I was receiving the CCME award in 2024. And I was invited to a panel with 2 other presidents. One of the presidents was President of a private school, a very large one, and the other was President of a state school. And we were talking to a military audience, right? And they spend, I'm going to say, 80% of their time arguing that it's almost impossible for them to serve the students because with $250 per credit hour, they cannot do it in a profitable way.

And when I was asked the question, I said, we're fine. Our numbers are public. You can see our numbers. We're fine. Of course, if the tuition assistance value goes up, we'll all benefit from it, but we are delivering excellent education as 30% plus EBITDA margins. So we were engineered around that tuition rate, while others have to adapt to serve that audience. And I believe that's why there's so much concentration, and I believe that's why APUS continues to gain market share in this segment because we were purpose-built to serve it.

Having said that, I think there are significant growth opportunities. You might have heard or read in the news, that this year, for the first time in a while, the enlistments targets were achieved, right? So that will eventually translate into more people entering the system in terms of education.

And it is also clear from conversations with high-ranked senior officials, and we have 2 3-star generals on our Board actually. And when we talk with these high-ranked senior officials, it is clear that the needs of our armed forces are evolving. The modern warfare is not what it used to be, and it will not be what it used to be. It's going to be around cyber, AI, quantum computers, homeland security, supply chain management and many other aspects.

So the theory that we have is that the military will need more education. The military will need to learn all these new skills. The military will need to learn all these new these new things that will define the future of warfare, and we are here to serve them. So we are uniquely positioned to continue expanding in this market, as you can see. And I believe that organically, you will continue to see an increase in our market share over time.

Now when you look at the veteran market, it's very different, right? The veteran market, it is much larger. Angie said, and it's there on the screen, there's 6.2 million veterans between the ages 18 and 54. But the veteran market is a lot more interesting for many universities because they pay with the GI bill. And what that means is that they don't have the same caps that the tuition assistance does. So they are able to pay higher tuition rates, which opens the market for more universities that can indeed compete at a profitable -- in a profitable way with veterans.

However, even in those circumstances, -- and I would argue that when you look at our marketing cost vis-a-vis the other competitors, we are incredibly efficient. Even under those circumstances, APUS is the #1. And that speaks highly about the loyalty that these students have towards us because a lot of these students were military and eventually, they transition to being veterans. And we are the leading educator of this audience as well.

And finally, to conclude this chapter, just some -- a few additional highlights. So of course, not surprisingly, our population is heavily skewed towards military and veterans, but 16% of our students are nonmilitary. And this is the sum of civilians and extended families. Extended families is growing very rapidly. I will address that momentarily.

The TAMs are quite large, 2.1 million for military. Currently, only 10% of this population is using tuition assistance. Only 10% of the 2.1 million is currently enrolled in higher education is in tuition assist. So it's a major opportunity for APUS if that percentage expands in the future.

There are 6.2 million -- sorry, I apologize, there are 6.2 million veterans, as I said. And the size of the extended families, these are 20 million people between the ages 18 and 45 that do not have a higher education degree. There are siblings, spouses, partners, parents, children, which is what we call extended families, anyone that is directly connected to the military person or to the veteran.

Something quite extraordinary about APUS, and I mentioned this before, are the student referrals. I don't want to repeat myself, but these are probably the highest numbers I've ever seen in my career, and it's not even a cold second. It's not even a cool second. There might be larger numbers, I've never seen them. But also the number of students that come back for a second degree, and I've also mentioned these, it's very impressive in the military and veteran side.

But also when you look at extended families and nonmilitary, it's actually equally impressive, not as impressive, but equally impressive. And the growth. In the military, year-to-date, this is year-to-date September, so 25 September versus 24 September. With the military, our growth year-to-date was 3%'s very stable, mature market. But look at the growth we're having with veterans, 15% and look at the growth we were having with extended families, 22%, 22%. We are serving an audience that is deeply connected with the military and veteran lifestyle. And again, as I said, we found a way of addressing the "civilian market" in a way that makes sense for us and that it is very close to our DNA.

Now for the balance of our time together, I want to focus on 3 topics. And really, that's it. If you can leave here today with these 3 ideas, I did a good job. And hopefully, you'll be as excited as I will try to be when I present them. The first one is I want to show you the great work that the management team has done over the last 3 years, where we delivered 12 consecutive quarters of growth, 12 consecutive quarters of growth, margin expansion, market share expansion and student satisfaction expansion, 12 quarters of consecutive growth.

Then I want to talk about the value creation initiatives we have for the next 4 years. And we have 4 value creation initiatives that are based on growth, and one value creation initiative that is based on margin expansion. And finally, my last chapter is how all these things come together in a 4-year plan that we believe is ambitious but realistic, and I'm excited to close with that.

So moving on to some financial highlights over the last 3 years, this is for the period '22, '24. Registrations increased by 8%. Revenue increased by 11%. Why is that? Well, it's because the mix is changing, and we're bringing students that have a higher tuition. So consequently, the revenue increased more than the registrations. The average value of per student increased 3% for the same period of time.

But look at what happened to the EBITDA margin. The EBITDA margin increased by 740 basis points -- 740 basis points. And we have now been operating at 30% plus EBITDA margins for 3 years. So a question you might be asking yourselves is, okay, what happened to the EBITDA? Why did it increase so much? And this was very intentional, and it was achieved through proactive strategic and tactical initiatives that we've done. We've improved processes.

We continue implementing our digital transformation efforts. We rationalized resources, and we have been optimizing our marketing investments, and our CMO is here today, and we've been doing a fantastic job of doing more for less on the marketing front. All of this allowed to scale our model to produce 30% EBITDA margins for 3 years -- for 3 consecutive years now. In other words, I believe that these margins are not only sustainable, but we believe they can be improved over time, and I'm going to present that when we get to the 4-year plan.

Now on the revenue side, why -- what triggered the 11% growth? A few things. The new student retention has improved by 270 basis points. This is the result of a lot of initiatives, and we can talk about that more in the Q&A if that's of interest to you. But we have a lot of smart, experienced people inside APUS working on improving our retention levels and working with students. That retention -- those initiatives also triggered a higher course consumption.

Angie explained that our students consume course per course every month they start. And we have increased our course consumption, meaning how many courses a student consumes per year, 11%. But also on the student satisfaction side, we start measuring NPS in 2023, the Net Promoter Score. And our Net Promoter Score is 65. The industry average is 32. For those of you familiar with Net Promoter Score, a Net Promoter Score of 65 is considered excellent in the scale of Net Promoter Scores, right? So we're very happy with this.

Our growth for the period, our primary audiences has been 10% with Active duty and for veterans has been 18% for that audience. But what is most interesting, I believe, the most interesting thing about this slide that I'd like for you to keep in mind, if possible, is that we are proving that operational excellence, growth, margin expansion and high student satisfaction can coexist.

And I would argue that not only they can coexist, but they need to coexist because if one of them fails and everything else fails. But we've increased revenue, we've increased retention. We've increased course consumption. We increased EBITDA, we increased market share. And our students are as happy as they've ever been measured by the Net Promoter Score, and we have almost 200,000 surveys done over the last 2 years.

So we're excited to continue delivering exactly that. So now as Angie said, I'm a growth-minded executive. I like growth, but I like profitable growth. And something that I'm very excited about is that we have 4 levers where we have high confidence that we can execute on them to continue delivering profitable growth and creating shareholder value in the near future. And we can continue to scale our model and produce more growth and sustain the high margins that we've been operating with the last -- over the last 3 years.

So there's 4 value creation -- 4 plus 1 value creation is 4 on the revenue side and 1 on the cost side. The first one is to continue maximizing market share and penetration in the military, and I'm going to talk about -- more about each one of them momentarily. The second one is to continue expanding with veterans and extended families. It seems logical. The third one is through new program expansion, something I'm very excited about. And the fourth one is through global expansion in English and in Spanish, and this one is actually really exciting as well, and I'm going to talk about that in a second.

But also, while these 4 levers are focused on growth, the last one at the bottom is focused on scale and cost efficiency. And the idea is that we will continue to accelerate our digital transformation and AI implementation. And I will elaborate more on this momentarily as well. So let me start with the growth in the military. As I said, we have a military outreach team. This team is fantastic. They're out there every day talking to the installations, talking to potential leads, talking to the education service officers.

And we want to continue expanding this team, getting more geographic coverage, getting more penetration and building trust. This is a team that builds trust, and it's very unique in our industry. Second, we want to continue creating content that is highly relevant for the military market. As I said in the beginning, the warfare strategy, the future of warfare is changing. So we want to continue creating programs that are going to satisfy those needs.

And this is something that only APUS is doing, for example, creating concentration in drones and manned vehicles, modern warfare, things like that, that it's very hard for other schools to build. For example, APUS had a homeland security degree before 9/11. I think we were the only school that had such a degree before 9/11. Third, we want to unlock the potential of almost 1 million followers on social media. As a fun fact, our social media follower base was 300,000 in 2022. Over the last 3 years, we multiplied by 3, a bit more than 3 actually.

We're close to 1 million now. We have 1 million followers on all the social media channels. And we believe that this is a channel that has been underutilized from a marketing perspective in terms of lead gen. So we work with the marketing teams to continue generating interest and low-cost leads and low-cost acquisition. And also, we will continue our marketing and optimization efforts that we've been doing very successfully with our marketing team.

And the idea is to continue promoting the TA benefits and user expansion. As I said, only 10% of active duty today utilizes TA. So this is a tremendous opportunity, not only for us, but for them, they have this benefit, they should take advantage of it. In terms of growth with veterans and families, we want to continue communicating the message that we have this benefit.

The extended families benefit is something unique to APUS. We want to continue communicating it. And we want to use our outreach team that is out there to promote this message in face-to-face interactions with the service members. And we want to maximize our student alumni network.

So think about it, we have 90,000 students, 160,000 graduates. That's almost 300,000 people that we can simply communicate your family has this benefit as well. It's a very low-cost initiative that is promoting this benefit to all of them and the families can take advantage of a low tuition that most likely they will not find anywhere else.

And finally, with our marketing team, we're doing some exciting things. Karmela can talk about that later. But we are working, for example, with large language models and podcasts to find ways of creating additional demand creation and maximizing decision-making process. We were one of the pioneers in APUS to enter podcast as a marketing channel end of last year. We selected a few podcasts that made sense for our audience.

And just this year, in Q1 and Q2, 10% of all new students were originated by the podcast channel. We were one of the pioneers doing that in education, and it's working really well for us. Now in terms of program expansion, this is very interesting because APUS, Angie mentioned this briefly, we have more than 1,000 courses in our inventory. So if you think about these as LEGO bricks, right? We have 1,000 courses, we have 1,000 bricks that we can customize and build different things.

So for us, it's very easy, very fast and very -- and we can do it very efficiently to build new programs, utilizing the courses we have just by adding others, right? So over the next 3 years, we'll be expanding our portfolio significantly in English with 23 high demand or high potential programs. And we'll also be expanding our portfolio in Spanish with 30 translations of existing programs. And I'm going to address that in the next slide.

Now I want to take a moment here because I come from a product management background. That's what I did for a long part of my career. In fact, the first time when I came to the U.S. in 2008, I was the Senior Vice President of Product Management and Marketing for the company I was working for. And we've developed at APUS a product management approach to creating new academic programs.

So what this means is that we look at things like the market demand, the intensity of competition, the size of the opportunity, the employability outcomes, the unique selling points. We look at these really in a sophisticated way, almost like you look at consumer goods. So when we launch a program in market, we're very, very certain that, that program is going to be successful.

At the same time, along the process, we say, you know what, this program does not have the capacity to be successful, so we stop it. So for us, product management is something that we take very seriously, and we approach it in a very sophisticated way, especially considering the education industry that usually is not very sophisticated for that kind of stuff.

So the fourth VCI and global expansion. This is a true diversification strategy. And this opportunity leverages one of our biggest strengths, which is our scalable model. It's very easy for us to enter new geographies, new audiences with a very low cost. At the same time, we believe that we have a unique strength inside APUS, which is our management team, myself, Karmela, Eddie, many others in the management team, we have more than 40 years of experience working in international markets and successful delivering growth, profitable growth and market share gains.

So I can tell you from my experience with Latin America, I tried for many years to find an American partner that was able to deliver education with the price point that was needed for that industry. And unfortunately, unfortunately, I never found a partner that was willing to adjust the price to serve those audiences. However, we don't have to adjust anything. Our price is already there. Our price is already competitive. So that's the beauty of APUS. Also, we know that the nonmilitary market in the U.S. is highly competitive. But that's not the case when you look outside the United States.

In developing countries, online education is growing at 10% to 15% per year steadily, and we believe this will continue to happen over the next 10 years. And the middle class is rapidly expanding. And when the middle class expands, one of the things that expands with it is the demand for higher education. And also, as you know, it's been all over the news. The recent barriers for Visa for immigration is triggering, we believe, a demand for online options that are quality-driven and affordable.

So there's a lot of aspirational pull towards American degrees. We believe there's a hidden demand that we can offer, and we are excited about trying to expand into new audiences. As again, as I said, our model allows us to do this for a very -- in a very efficient way and for a very low cost. And finally, the last VCI is focused on cost optimization and margin expansion.

And our digital transformation philosophy is actually very simple. We want to do more for less. What this means is that we want to use technology, AI, RPA, process transformation to deliver better student satisfaction, more revenue and lower cost. And me coming from an ad tech background, this is something that gets me really excited, and I know that James is also really excited about it as well.

So we have some initiatives on the marketing and enrollment side. I can comment, for example, I mentioned the LLMs. You probably played around with ATLAS, the new browser from OpenAI. So we believe that, that type of search will be the future of how people will consume products. So we are working to being relevant in that space from the very beginning.

So if someone asks OpenAI, please tell me a really good and affordable MBA. We want to be sure that our name comes first. So we're seeing these as sort of the new SEO, and we're working with marketing to position ourselves successfully. On the teaching and learning side, we're working with AI for content production, and we're working with AI for faculty scheduling.

What we believe will occur is that over time, we'll be able to have a faculty serving more students on average than what they do today. And this will generate lower delivery costs. On the student side, we have a lot of things going on. We have 24/7 student support inside the classroom with virtual tutors, and we have 24/7 self-service platforms. We believe this will generate high retention levels, higher course consumption, higher student satisfaction and also lower costs.

So in summary, technology will allow us to do more for less. And this is nothing new for APUS. This is something that we started in 2023. You saw how the EBITDA has been performing. One of the reasons of why the EBITDA has been performing so well is the digital transformation efforts that we started about 3 years ago.

As an interesting data point to close this chapter, as an interesting data point, because of our digital transformation work and our process optimization, today, we have less staff at APUS than what we had in 2021. Today, we have less people working at APUS as a staff than what we had in 2021 with a lot more revenue and a lot more EBITDA. So this is an example of the efforts that we've been trying to implement and we will continue to implement.

So as I conclude my presentation, I'd like to show how all of this comes together in terms of numbers, which I know are top of mind for you. So as a summary of the impact of our value creation initiatives over the next 4 years, APUS is expected to deliver between $91 million and $106 million in additional revenue. This is an average growth rate between 7% and 8%. And we will continue to see a slight optimization on the EBITDA side, where we expect 8% to 9% EBITDA growth to deliver between $33 million and $38 million of additional EBITDA.

And this means that by 2029, we would end the year with an adjusted EBITDA margin of 31%. So as I finish my presentation, it's my last slide, I want to leave with 3 simple but powerful messages. First, our management team over the last 3 years has delivered 12 quarters of consecutive growth, margin expansion, market share expansion, and our students are as happy as they've ever been. Second, we have -- our model allows us to scale into new markets, into new geographies and to expand and enter high potential markets around the world. And we have 4 value creation initiatives that we believe will deliver a lot of value for our shareholders in the next 4 years.

And third, we have a plan -- high confidence plan that generates about $100 million of additional revenue and puts us on a path to a 31% EBITDA margin by 2029. So thank you for your time today. Thank you for the opportunity to share the APUS story. We're truly excited to continue creating value for you and to support your investments for many years to come. Thank you.

Pretty exciting stuff at APUS. Thank you very much, Nuno. I'm now honored to introduce Mark Arnold, who is our President of Rasmussen University today and will be overseeing our RU Health Plus division going forward when we are able to complete the combination of institutions. Mark has a really wonderful background that we think is uniquely aligned with where we're headed.

He's spent almost his entire career in health care. and he'll tell you a little bit about how he knows a bit about what it is to sit in your chair. He was a consultant. He followed different institutions who provided health care services and then ran 2 different organizations that had bricks-and-mortar based or campus-based delivery operations in the health care space. So he really understands what it means to have to ring out that next dollar profitability out of the campus locations. He joined us in January of '25. So he's just about to lap his first year. And we're so excited to have him here today to bring his expertise.

So welcome, Mark Arnold.

[Presentation]

Good morning. I think that the video there to kind of tie the legacy theme together. Our theme this year was about helping our students create a legacy of opportunity. We help create that legacy opportunity, help them create their own legacies. And our students really embrace that. You heard it a little bit in the video.

As Angie mentioned about the QR codes and the student experiences that you can click on outside of the room here, some of these stories really do bring in tears. And what our students have overcome is really pretty incredible and really something that's worth listening to. Angie gave a little bit of my background.

Most of my background has been in health care. And from that background, I felt firsthand the workforce shortages that we're going to talk more about today. During COVID, I was running an outpatient mental health business. trying to expand. We went from 16 to 51 clinics, went from 1 to 4 states in a 2-year period. And my biggest challenge was I couldn't hire enough mental health therapists. I couldn't hire enough nurse practitioners. I have more demand than I had the ability to meet in our communities.

And the only thing holding us back from even greater growth was our ability to hire quality health care professionals. Same thing when I helped run one of the largest radiology companies in the country. We grew pretty significantly from 2011 to 2020. I had 122 locations in 22 states. Same challenge. I couldn't hire enough radiology techs in our markets. I couldn't hire nurses in some of our markets where we offered interventional procedures. So these challenges aren't new. These challenges have existed for a long time. And I've lived it on that side of the table and recognize firsthand just how important it is what we do at Rasmussen and Hondros today and the opportunity for us to continue to grow.

So I'm going to try to catch us up a little bit because I know we're running a little bit behind. But to give you a little bit of background on Hondros and Rasmussen and kind of where we came from because I think a lot of people don't realize Rasmussen has been around for 125 years. It's our 125th anniversary this year. The organization was founded in 1900 Walter Rasmussen saw a huge need for skilled workers at that point in time. And think back to 1900, women didn't make up a very large portion of the workforce.

And in 1900, he saw a chance to create educational opportunities for women that could help fill that upskill women with -- and help them fill that labor shortage. And so Rasmussen was founded in St. Paul, Minnesota as Rasmussen Practical School business in 1900, continued to grow, was HLC accredited in 2001 and in 2005, launched its first nursing program, and I want to come back to that in a minute.

Hondros, a lot newer organization, founded in 2007 as Hondros College of Nursing really was acquired by APEI in 2013, but continued to grow and expand first in Ohio, then into Indiana in 2020 and into Michigan in 2022. But what's unique on here, and you'll see this, we're calling this market inflection point, kind of that mid-2000s time period. I was sitting on that side of the table then. I was a Wall Street analyst covering health care service organizations.

And if any of you were following the health care space in the 2005 to 2010 time frame, every single investment thesis centered around the aging baby boomers and the expected increase in health care utilization that was going to be a result of the first baby boomers retiring around that 2010, 2011 time. So no coincidence that Rasmussen and Hondros started their nursing programs in that 2005 to 2007 time period.

So Andrew introduced RU Health Plus, the name of our new division, combining Rasmussen and Hondros earlier. Why are we doing this? It's pretty simple, to be honest. There's this huge nursing opportunity. We're going to talk a lot about that today, but significant tailwinds behind it. The demand is large. It's growing. And as Angie mentioned, there's a great ROI for students in this field, whether they're in the PN programs, the different RN programs, the ADN and BSN and then the other opportunities to ladder into some of these advanced degrees.

And you're seeing scope of practice continue to be expanded for nurses, which creates more opportunities for them to come back and get advanced degrees to advance their careers as well. We're differentiated, both Rasmussen and Hondros, we differentiate at the local level, and we do it through access, and we do it through superior service to our students.

You noticed I didn't mention price, a little bit different than Nuno's presentation, but we really do differentiate around access to our programs and superior service to our students. And as Angie mentioned, at Rasmussen, we have an entry point for any student interested in a degree in health care.

Now most of our students don't come to us and say, I want to be or get an associate's degree in nursing -- degree or a bachelor's degree or a PN degree. They come to us and say, I want to be a nurse. And we have to work with them to figure out what's the right program for them based on where they are in their life, their skills, their ability to hit certain test scores, et cetera. But we help them find the right program for them. And sometimes that's not even a nursing program.

Sometimes it's an allied health program or another health science program. And we talked about our campuses. We'll show that here in a minute.

But there's some significant revenue and cost synergies that come about from us combining as well. Hondros doesn't have all of those programs. It can't say it has it's that entry point for all students, but it can in the future. And the combination will allow us to bring those programs from Rasmussen to Hondros and really provide that same opportunity in those markets.

And Hondros is in some pretty big metropolitan markets in Ohio, Michigan and Indiana. So -- and then the cost savings opportunities, we've captured some of these efficiencies already, but there'll be more to come as we're able to bring -- come together as an organization, particularly when we're able to bring our systems together under one common system in the future. So this creates additional just operating efficiencies as we go.

Angie talked about this demand -- the demand for nursing, but it's worth us highlighting this a little bit more. Over 200,000 annual job openings are expected for the foreseeable future in the nursing space. 50% of the nursing workforce today is over the age of 50. So not only do we have an aging demographic overall that's increasing health care utilization and the demand for health care services, we have a nursing demographic that's aging at an even faster rate.

It's going to require even more trained nurses to fill that gap. And almost 40% of nurses, almost 40% expect to leave the field in the next 5 years. That's a crazy number. So it just highlights how big of an opportunity there is for us in the nursing space here, and you're going to hear a lot about that in our growth initiatives.

Mentioned our 26 campuses, you can see that footprint here. It really is a jumping off point for growth for us. But I think what also is highlighted on here is just how much room we have to continue to grow, both in our existing states and existing markets, but also all of the white space on here. And we'll talk a little bit about campus expansion later in the presentation.

We've talked about our ladder of nursing programs. But this, I think, visually just highlights to you that opportunity that I mentioned that exists where Rasmussen has this full ladder today, but we can bring that full ladder to Hondros markets and Hondros students as well. And one thing to note on here, the top of the ladder, Rasmussen has these programs, but we've been limited in our ability to grow them because we aren't Title IV eligible at this point for the top 2. That's because of the multiple changes of control at Rasmussen over the last 7 years. Those growth restrictions got lifted earlier this year.

We have our application into the Department of Education to give us or to grant us that eligibility, which should happen. It would have already probably happened without the government shutdown, but should happen here shortly, and that will allow us to continue to grow those programs at Rasmussen into the future as well.

So key takeaways today. I want to tell you a little bit more about who we are and really talk a little bit more about our business because it is a little bit -- can be a little bit confusing. I think it's easy -- it's helpful for you guys to understand the Rasmussen business today, both our campus-based programs as well as our online programs and how these things come together with Hondros as well. We're going to talk a lot about executing on this nursing opportunity. And then a little bit at the end just to kind of bring it all together and how we're going to deliver on our 4-year plan.

So jumping in, introducing our RU Health Plus.

We are a national leader in first licensure or pre-licensure nursing. We offer that full array of ADN, BSN and PN programs. That's not something that most nursing schools do. Most traditional 4-year institutions offer BSN programs. Most community colleges and technical colleges may offer an ADN or a PN program, maybe both. Most of our for-profit competitors are a little bit more focused on the BSN market, particularly in the RN to BSN world.

But we offer both the campus space and the online programs that really meet that full gamut and specifically in the pre-licensure space, we provide that access to that full array of programs. We have about 10,000 nursing students today combined between Rasmussen and Hondros. That number is growing. And we talked a lot about this comprehensive ladder of programs, both the pre-licensure and the post-licensure nursing programs.

And then not to be overlooked, but our allied health programs are growing as well. We have over 15 allied health programs today. Some of these we'll talk about are on our campuses, some are online, but this is a growth opportunity for us as well. I mentioned that we differentiate on access and customer service to our students. And that really does go to the core of what we do to make accessing this education both possible and achievable.

And at Hondros, we have quarterly starts. At Rasmussen, it's actually twice a quarter. So we have our traditional quarterly starts and then a midterm start that allows students to come on board and jump start their program to accelerate getting that completed. We provide immediate entry into our nursing programs.

Traditional -- most traditional 4-year schools have very limited immediate access, direct entry into their programs. Most nursing students have to enroll and then hope that they're able to get into the nursing program after they've enrolled in the school in many traditional 4-year schools. Not the case at Hondros and Rasmussen at RU Health Plus. Today, you get immediate entry into those nursing programs.

And then we mentioned that service focus. It starts with our admissions representatives and how they work with the students to get them enrolled, goes to our advisers and our faculty as well. But it's really with that student-centric and service-minded focus that our staff and faculty operate.

We're going to introduce to you today kind of the 3 segments of our business, what we're calling our campus health care business. That's the on-ground nursing and allied health programs. Our online health care programs because a significant amount of our online students are in health science programs today. And then our online plus segment, which is all of the non-health care programs, kind of the legacy programs of Rasmussen that are still a significant piece of our business and how they all kind of come together, but we'll spend more time on the next few slides on that.

And then one other note, and Nuno talked about this at APUS, but it's true at Rasmussen and specifically today and a bit at Hondros as well, but we have a lot of alliance partnerships and corporate partnerships as well. Over 900 new students annually come to us through those alliance partnerships. It's a great way for us to market our services across organizations. This includes many health care institutions as well. And that includes both employees of those institutions that have come to us for health care degrees, but also for business, human resources, IT degrees as well.

I think the last couple -- the last reason as we talk about why we're coming together as RU Health Plus and kind of where we're at today. The last 2 years, we've really created a foundation for future growth. The last couple of years have been returning to growth in enrollment at Rasmussen. We now have 6 straight quarters of year-over-year enrollment growth, and it's accelerating.

At Hondros, 23 straight quarters of enrollment growth. We spent a lot of effort and energy on improving our student nursing outcomes and have seen a pretty significant improvement in that across the board. And in 2025, you saw that dramatic improvement in profitability. And really, the last couple of years have been really building this value proposition built around access and service and return on educational investment.

So telling you a little bit more about these 3 segments. This just visually allows you to kind of get a sense as to the size of each one of them. So the yellow on the bottom is our campus -- our campuses, our campus-based programs. And combined with the middle blue section, which is our online health business, we have almost 14,000 students in kind of these nursing and allied health programs today. This is average active enrollment for 2025. So it's not our current enrollment, it's our average for the year. We thought it was just easier to show that to you.

And as you can see here, it's accelerating. We're seeing growth accelerate in our campuses. We're seeing growth really accelerate in our online health programs and seeing really solid mid-single-digit growth in our online plus the non-health care programs as well. So a little bit more about each one of these segments. Our campus nursing and health programs. We've talked about being that national leader in first licensure nursing, including the ADN, BSN and PN programs.

The chart on the right gives you a breakdown of the current mix of our pre-licensure nursing students. So about half are ADN students today, associates degree students pursuing an RN licensure. About 14% BSN pursuing that RN licensure. Now that number is going to grow for a couple of reasons. One, we don't offer BSN today in those Hondros markets. So that's an opportunity. But two, this wasn't really a big focus of Rasmussen going back 5 years ago. So BSN is growing at a pretty fast clip for us at Rasmussen as well. So you'll see further growth of the BSN program, both at Rasmussen, but then specifically at Hondros as well.

So this will change a little bit over time, but still a big focus on ADN. And then at Hondros, the PN program is a key driver and the largest piece of their business today. We have these other allied health programs. In particular, I'll call out a few of them, medical assisting. You'd be shocked when you walk into health systems, sometimes they say the bigger need for them -- when you ask them what their biggest need is, many of them start with medical assistance. And the answer -- you ask why. They're looking for ways to deliver services at a lower cost, and it's hard to find medical assistance.

Now the problem is they don't pay very well for medical assistance. So part of the reason they have such a difficulty hiring them is the opportunity isn't quite as strong. So we don't view this as the big growth opportunity for us, but it is something that is part of the history of Rasmussen, and we have 10 programs across the country. And these are all starting to grow a little bit more here in the last couple of quarters. So we do still see this as a key part of our program offering in the future.

Rad tech, I have a huge history and a large background in this space. huge unmet need. We have 4 programs today. We just actually got approval for our fourth program in the Tampa metro market here just a few weeks ago. But we're expanding our caps in this space and have an opportunity to continue to grow this both in existing campuses, but also bringing this to some additional campuses in some of the larger metropolitan markets.

Same thing with surgical tech and then a couple of other programs in physical therapy and medical lab tech as well. Online health, this segment has about 3,100 students today. So these are preparing students for careers in nursing and health care. So you see there on the chart on the right, this is where our fully online post-licensure nursing students sit is in our online health programs.

But you can also see here that post-licensure nursing is a relatively small piece of this overall pie today, but an opportunity for us to continue to grow. But a pretty significant health science offering here. And this is growing at double-digit rates this segment. This includes programs in health care administration, medical technology, health, wellness and public health and pharmacy as well. And then finally, our online plus programs.

So these are the programs we have in kind of 4 schools today, school of business, education and criminal justice, technology and design. And these are many of the legacy programs that Rasmussen offered in the past on campus going back 25, 30 years ago, but now fully online for quite some time. We have over 5,000 students in this segment. It continues to grow at a mid-single-digit rate.

And these -- like many of our programs across all of these segments, they're designed for students to seamlessly advance to that next credential degree, to ladder to that next credential degree. About 13% of our new enrollments are previous graduates seeking additional credentials.

Let's talk a little bit more about how these segments fit together because I think that's a key piece. And it is really an advantage. We call it our Rasmussen advantage, but it's also an opportunity for us. Our Rasmussen campuses really drive online growth and vice versa. So here are some statistics that I think help reinforce that. In states with campuses generate 7x to 30x more online leads per capita.

In those same states, our conversion rate is 3x what it is in those -- on those leads and what it is in states that we don't have campuses. And interestingly, 40% of all of our online students live within a 30-minute drive of one of our -- so there's this great synergy that's created through the combination of these businesses, and it goes both directions.

And it really comes back to brand awareness, our ability to leverage those brand awareness dollars that we spend across a wider array of programs, that reputation that we've built locally in these markets that strengthens who we are and our name recognition in those markets. It shows up in these numbers, which brings down our average acquisition cost for both programs. And this is a great opportunity for us as we take these programs to Hondros markets as well because that doesn't exist today.

And it's a great opportunity for us to grow in those Hondros markets, but also as we expand our campus footprint, the online growth can follow that. So how are we going to execute on our nursing opportunity? We're going to spend the good part of the presentation here talking about this, and Dwayne will be up here shortly to comment on some of these pieces.

But a couple of items here. So one, we've been restricted in growing new programs and new campuses. And that's going to be a part of our growth story. But a bigger part is just adding more students to our existing campuses. So some of the challenges we had in the past have limited our ability to do that. As I mentioned, the last 2 years have been kind of building that foundation. We're in a really great spot today to add more students and what we're calling fill the back row, but our approach to adding more students to our existing campuses, nursing students specifically. We have this opportunity to cross-pollinate programs from Rasmussen to Hondros, which will help drive growth in particularly those nursing programs and help drive our growth as well.

We have the opportunity to add new campuses and enter new markets and also adding new programs, which is something we haven't been able to do for quite some time. And then a bigger opportunity than that is new partnerships. So we'll talk a little bit about our hand-in-hand initiative here in a minute around building health care partnerships. What does that mean? By 2029, gives us a path to $485 million to $505 million of revenue and driving EBITDA margins for the Healthcare division to 18% to 20%.

So I mentioned a couple of these already, but these are our 4 health care value creation initiatives. One, fill the back row, which is really around leveraging our existing capacity in campuses, specifically for those nursing and allied health programs. The second is leveraging the ladder. It's taking advantage of that ladder of nursing programs that we have today and how we can really continue to push people up that ladder to provide those opportunities and take advantage of that opportunity, both at the Hondros campuses, but even at our Rasmussen campuses, where I think we can do a better job of executing on this. The hand-in-hand partnerships, these are health care partnerships that we're pursuing and working on, and Dwayne will speak more to that.

And then what we're calling our Trailblazer expansion initiative, which is our campus expansion growth, and we'll come back and talk about that as well. So with that, I'd like to introduce Dwayne Bertotto. Dwayne is our Chief Operating Officer at Rasmussen and knows way more about this business than I do. So really happy for him to be up here this year. Thank you.

Good morning. Angie, you referred to me as the old man. So I think you did -- I think it's weather tested as of late. But a little about myself. My name is Dwayne Bertotto. I'm our Chief Operations Officer at Rasmussen University. I've been with the university for quite a while. I've had 19 years of experience in higher education. 18 of those with Rasmussen. For the past 14 years, I've served in an executive leadership role focused on enrollment growth. So retention and our enrollment -- front end of our business and our admissions processes. I did leave Rasmussen a couple of years ago for 4 months, a short stint. I left for an opportunity. I came back with a couple of conversations with Angie and a dinner, which I'm starting to see as a theme to know as well.

But I came back to lead these initiatives that I'm going to share with you today. So fill the back row, Mark kind of tees what we're doing with fill the back row. He spoke recently here about the headwinds that we had over the last couple of years at Rasmussen based upon some of those growth restrictions. Our team really weathered through those growth restrictions. And in 2023, when I came back, we created a motto, informal model about returning to excellence. In 2024, we approved our financials by the end of the year. And what that gave us the ability to do is take a more proactive approach in 2025 to our operations and start creating strong plans that are going to give us strong organic growth.

So I want to start a little bit with a visual. There are a couple of markets that we operate in today. Major markets where most of our campuses are at. Those are cities that can host up to about 2 campuses, very large cities. That's where a significant amount of our population resides. We have 2 super school clusters in Minneapolis and Chicagoland. In the future, we may have more, but these are metropolitan areas that we feel like they have 3 or more campuses.

And then we have a number of schools that are in smaller markets. These are cities that will support one campus. The green on the chart represents our current enrollment as of Q4 2025. The blue represents the capacity that we have available to us in our physical campuses. This is estimated based upon square footage, parking, a number of different things that come into play.

Today, we believe that we are utilizing somewhere around 2/3 of the capacity at our campuses. Our goal by 2029 is to be able to move that towards 90% or an additional 5,900 students where we sit today. So how are we going to do that, is that we have 2 areas that we're focused on and fill the back row. The first is about a cross-pollination of existing programs that we have today that will be entered going into existing campuses.

The second one is focusing on enrollment caps that we have in a couple of our programs. So in 2025, we started early last year identifying and doing the work behind the scenes to be able to expand these 4 programs, our BSN, and ADN program, a PN program and our rad tech program into 7 campuses. We've made really good progress on that. And as of 3 weeks ago, we had approval for our first BSN expansion and our rad tech expansion at one of our campuses. And we've activated and we actually started enrolling in those campuses.

So we'll have students that will be starting in January at those 2 campuses and those programs. The second is -- this cap expansion. So we have a few nursing programs that do have caps that are placed on them by state regulations, boards of nursing. We also have our premium allied health programs that most of those have caps that are brought on by the accreditor.

Once we start hitting those caps and we can show that there's a market need for those programs, we can show that we have clinical access, we can show we can get faculty in those programs. We're in a position where we're able to ask to increase those caps. This has been something that, I would say, over the last 3 or 4 years has been a bit stagnant.

In 2025, we've made some really, really good progress. We've already accomplished a few of our goals on these caps. And in 2026, we're looking at expansion of our ADN program in 2 campuses, caps and then the caps in our rad tech program at 2 additional.

Outside of that, in 2029, we've identified a great deal of expansion opportunities, again, of existing programs and existing campuses. This is a lot -- is very heavy Hondros as we come together as RU Health Plus being able to expand the BSN programs and some of these premium allied health programs in rad tech and surg tech. But as you can see, there's a large amount of opportunity for expansion in the footprints that we live in today.

The second component to filling the back row is about my team and my team executing at the highest level. And 2025 has really allowed us to be able to start looking at what we're doing. The last 2 years, I'll admit, it's been -- we were grabbing growth where we could grab growth. And that put us in a position that we can do what we're doing today. And now we're taking a more surgical approach.

So when we identify with our teams what keeps us at a campus from growing and filling that back row, these are the 5 things that we came up with. We need clinical opportunities. We need faculty staffing, inquiry generation, our admissions operations, which includes staffing and conversion and then, of course, student success and retention, so we can retain those students.

So what we did is that we created a rubric for each one of our campuses to look at these 5 areas, and we've gauged each one of these campuses to allow us to know where their weak spot is or their strengths. So this is just an illustration of a sample that I put together. And what we can see here is that we have a campus that has strong inquiry generation, but we are not in a good spot when it comes to clinical health or our clinical opportunities.

So the plan that we're putting forth for this campus is going to focus heavily on acquiring more clinical sites and strengthening those relationships. These initiatives are going to be owned by our 3 Vice Presidents in each one of our regions and our campus executive directors. The way I look at it is kind of fine-tuning a golf swing, looking at specifically what's going on, making those adjustments so that we can get better overall.

So this is in play now. This rubric has been created and our campuses are currently working with our Vice Presidents on making these execution plans for early 2026. So what does this mean? The importance of this work is really based upon incremental enrollments inside of the university. We're at a point now where as we bring in additional enrollments that we see strong flow-through to the bottom line. So this is an example of -- for every 100 students that we're bringing in can create $2 million in additional revenue.

If we have an expected flow-through margin of 50%, we're going to be creating $1 million dropping to the bottom line. How do we get to that? So our revenue model is such that our nursing tuition equates to about $20,000 annually for a student. The program length is about 18 to 24 months. When we leverage our fixed costs, which our occupancy, our campus management teams, central operations and then APEI shared services, we see strong impact to our bottom line.

The second initiative that we've talked about, and you've seen this slide is our ladder. So I want to point out a couple of things on this. First of all, it was mentioned earlier about 13% of our students that start with us each term have earned a degree earlier or before, and they're coming back for additional learning. We think there's a great opportunity to increase that.

This last year, we launched our alumni Association, which Rasmussen has not had. In the video, you probably saw one of our graduate speakers with an alumni pin on. We feel like this is an opportunity for us to tap into. Mark and I have attended multiple different alumni events over the last year in Chicago. We met a woman there that she's earned 3 degrees from Rasmussen up to her master's degree in education. And I think her quote was if there was another one, she would come back and get that one as well.

So we're trying to tap into that portion of it. The other thing I want to point out is our ADN population. A slide earlier showed the pie chart about the heavy amount of students that we have in our ADN program. It sits at the bottom of this ladder. It is an entry point that has a lot of learning above it. So tapping into those ADN graduates to come back for a BSN degree masters or becoming a practicing nurse in the future in some capacity is a major opportunity for us. And then I think it's a really good visual to look at what is going to be the future with Hondros.

Today, they offer these 2 programs. We're excited to be able to move into the BSN world and give access to our online nursing suite postgraduate to Hondros, and we feel like we'll have a lot of growth from that. Finally, before I pass this back to Mark, I want to talk about hand-in-hand. And what hand-in-hand is what we're -- our relationship building inside of our communities with large health systems.

We're -- the current model we have found when speaking with these health systems, it's broken. It's not producing strong outcomes for students, and it's not producing strong outcomes for these hospital systems that are really plagued by staffing shortages. The traditional model, very transactional. So they would get -- host students that would come off for clinicals. They would get low stickiness.

We met with a hospital system last week. They talked even about a student not knowing there was job opportunities, a clinical student, not knowing there was job opportunities inside of the hospital, just a lack of communication when it comes to recruiting.

These nurses are entering the job force, and they've learned in a very generic way, and they're not job-ready because most of our hospital systems and partners have specific skills they want to see from those students. And then finally, it's -- there's a lot of cost for students in the nursing school, but it's costing these hospital systems a tremendous amount as well as they're using agencies to staff and lots of bonuses to capture nurses.

So what our vision is, and I apologize, I won't behind. What our vision is, is a new connected model, a significant opportunity to create a better financial model that have students that are more clinically ready when they go into these hospital systems. We're flipping the script is what we're calling it.

And what it looks like is a student that begins their education with us has the opportunity to enter into some sort of a program or relationship with one of our partners. And they start learning the partner way. So an example for this is when we met last week is an Alaris pump is a pump that administers medication through IVs. They have specific rules and safeguards that this organization wants us to take and utilize in our skills labs and our simulation labs.

So these are the types of things when they get that nurse back into the hospital system, they've already learned the way that, that hospital system has done it. So they're learning the partner way. They graduate and they're onboarded and they jump start more quickly. It reduces the orientation period for that student attracting them.

At the end of the day, we still have this opportunity on the ladder. So when students want to come back to us, they know us, they're comfortable with us, and they can come back through that partnership and be able to pursue higher degrees. So what's the value for the partner? Our partners will have students that will have that customized experience. They learn that way. There's familiarity because of a lot of the clinical instruction that happens is actually being instructed by employees of that hospital that are in adjunct roles with Rasmussen.

So it creates familiarity and culture, which, in turn, ends up decreasing overall attrition of nurses and turnover. It creates a preferred hiring pipeline that's very, very consistent and predictable. For our students then, they get this opportunity to say, I know where my clinicals are going to be for the next 3 to 4 quarters. It helps them plan. Again, many of our students working adults, they have families at home. So this is a big value add to them. They have that employment secured prior to graduation. They have apprenticeship opportunities. And then there's employee tuition support that normally comes along with these hospital systems to help them afford their degree.

Overall, to Rasmussen, it means that we have access to their employee base, which is important to us. And then there's co-branding activities available to us. So when we're working on helping solve this nursing shortage in a certain city or a town, we have the ability to partner with them and just grow the nursing piece overall.

So I'm going to pass this back to Mark to talk about our new campus expansion.

Thanks, Dwayne. I'm glad he's better at executing operationally than he is on improving his golf swing. Our Trailblazer expansion, this is our campus expansion program, and I'll go through this pretty quick. But we are in a position now where we can actually focus on growing and building new campuses. And we've been working on this for a while. Our plan is going to be measured. We're going to do this in a strategic and achievable way where we don't overextend ourselves. So our target is to add 2 new campuses a year starting in 2026.

It takes about 18 to 24 months to develop a new campus and go through the regulatory process in the state through the regulatory process with our accreditors and the Department of Education. So that's the typical time line. So if we're opening 2 in 2026, you can imagine we've been working on this really throughout 2025. Capital requirements. We expect a new campus to be about a $3.5 million capital investment to be funded from our operating cash flow, although we do have that balance sheet to provide us the flexibility to spend more if we need to and expected returns.

We expect to be cash flow breakeven in about 18 months, full capacity in, call it, 48 to 60 months. Revenue at scale of these new campuses is about $12 million. And if we hit those numbers, our EBITDA margin should be somewhere around 35%. So generate a really strong IRR if we're able to accomplish that, and we believe these are achievable numbers.

So finally, kind of how do we evaluate markets. We're not going to get into specifics and tell you which markets we're going to go into for competitive reasons. But these are really the key drivers, the things that we're looking at to make those decisions. The size of that market, the total addressable market of potential nursing students in that area, presence of competitors in that marketplace.

Most of our competition is local in our campuses, and that is a combination depending on where we are in the country, typically of community colleges and technical schools, some local nursing schools, for your institutions and in some cases, some national for-profit competitors. We're looking at employment demand in those markets because it's not the same everywhere.

Probably one of the biggest ones, our ability to find faculty, nursing faculty. This is a challenge anywhere you go, we need to be proactive on it, but it's something we look at when we're looking at new campus locations. The regulatory landscape is a big one. There are certain states where you will not see us. And -- but every state is different. And so you need to understand that and factor that into our analysis of new markets.

And then not to be overlooked the availability of clinical partners. We have to have those clinical partners to allow our students to have the clinical experiences that are part of and a key part of their nursing program. So we factor -- all 6 of these things together to really identify the right type of market for us. And there's a few other ones that are center around operational -- our ability to operationally execute that could factor in as well. But we're really excited about the ability to add new campuses here going forward.

So finally, delivering this 4-year plan, I'm going to give you a quick high-level overview. I'm going to note right away, the boxes in the middle are not to scale. That's intentional. But we're showing some pretty significant growth here at RU Health Plus. So going from kind of the midpoint of our guidance today, revenue of around $320 million this year to projected revenue in 2029 of $485 million to $505 million.

So this is 11% to 12% compound annual growth rate on revenue. The 3 boxes in the middle represent kind of those value creation initiatives that we talked about. While they're not to scale, you can guess that the biggest one is going to be taking advantage of our existing operations, filling that back row, filling up some of our unused capacity, bringing programs to Hondros markets.

Those are bigger opportunities in the short term. But going forward, as we add new programs and new campuses, it's going to contribute to our growth a little bit here in this 4-year time window, but really help make sure that we have the ability to continue to grow beyond it.

And then on the EBITDA side, similarly here, the midpoint of our guidance this year, we saw a nice return to profitability at Rasmussen this year, $14 million of adjusted EBITDA is our projection, but growing pretty dramatically here. And this just highlights the assets we have in place today and our ability to leverage that with a pretty strong flow-through margin that gets us to EBITDA of $85 million to $100 million by 2029. So thank you for your time today.

I'm going to turn it back over to Angie.

Okay. We're going to do a quick break, 10 minutes. And Ed and I are going to work hard to get us back on track so we can give you plenty of time for Q&A. I do want to point out some esteemed guests. We have our Chairman of our Board, Daniel Pianko, who is in the back room.

So if anyone wants to pop in and say hello to him, he'll be at the break. And I also want to -- I think he may have left -- there you are. James Kenigsberg, one of our esteemed Board members who has our great good fortune, stepped into a leadership role at APEI, leading our technology innovation organization, and we couldn't be more excited about James, and you'll get to meet him at the panel, along with we've got some other folks in our panel that I'll introduce afterwards. But 10 minutes.

We'll be back in this room. A quick overview on how Ed will bring this all together for us, and then we're off to the races on our panel discussion. So thank you very much. We'll see you in 10.

[Break]

Okay, everyone. If I could ask to have you take your seats. We're going to try and get ourselves back on schedule so we can have a very robust panel discussion. So next up, I'd like to introduce APEI's newest team member, Ed Codispoti. He seems to have a lot of connections in this room. And so I hope by your showing up today here, it says that we made a good choice, and I know that we did.

I'm thrilled to have Ed join our team. He is an experienced public company CFO. The bonus for us was that he actually spent several years in higher education actually with Nuno at Illumina. So the 2 of them know each other. In fact, Nuno turned us on to Ed. So we're very grateful for that introduction. And so we've got a team of folks that already know how to work together, but more importantly, that Ed brings familiarity with the higher education space as well.

And I'll turn it over to Ed, and he'll give you a little bit of overview on his background. No video this time, though. This is the boring finance guy. So no video.

Thank you, everyone. Good morning. Like Angie said, a lot of familiar faces here, which is great. So I've only been here a month, if you can believe that. In that short month, earnings release, preparing for Investor Day and many, many other things. So it's been a little bit of a blur, but very grateful and excited to be here. Rick Sunderland is also here, who was APEI's CFO for the last 12 years and just very grateful to Rick in helping me transition. It's a heavy lift, and he's been so, so helpful. So thank you, Rick.

A little bit about me. I have over 25 years of financial leadership experience, mostly in public companies, more recently at a company called NV5 Global, which is an engineering and technology firm. Very acquisitive company. We did about -- over the course of 6 years, while I was there, we did about 45 acquisitions and grew significantly, grew that top line significantly.

Before that, as Angie said, I was at Illumina with Nuno and others. And at Illumina, I just fell in love with the higher education industry. I realize that the financial decisions that are made can really impact students and affect lives. And so just a wonderful industry that I enjoy very much. And so when Angie reached out and we sat down and talked about the role, it just made so much sense for me, right? Because APEI, I know from researching leading into that meeting that they've been growing the top line significantly, expanding margins, cash flows and to combine that with what I was looking for was just a great fit.

And so grateful to be here with existing investors and analysts. It's a great opportunity given that I've been here such a short period of time to meet you, and I'm sure there's some prospective investors here in the room or also listening that I can meet as well. So great morning so far. You've heard from our team members. You've heard details behind each of the business units of how we're going to drive growth. This is a good kind of segue into what does that mean on a consolidated basis. When you pull that all together, how does it look?

And so what is our growth story? And before I get into the numbers on this slide, if you heard our Q3 release, you know that we grew 7% overall. And if you back out the impact of the July 25 sale of a graduate school, that was actually a 12% growth. What this slide is showing is enrollment and revenue for the enrollment, it's September '25 to September of '24. And the revenue is a TTM period through September '25 to '24.

So as you can see, APUS grew 8% in enrollment and 5% growth. That was really just by gaining market share, as Nuno was alluding to earlier. Rasmussen grew 10% enrollment and 12% revenue, addressing all the initiatives that Mark spoke about, primarily filling the back row and taking advantage of that capacity. And Hondros College of Nursing grew 18% enrollment and 14%, primarily through new campuses that were added in prior periods and the benefits of that. So that results in a 7% growth.

If you back out graduate school, that's equivalent to about a 9% growth. In this next slide, you can see our trend -- our growth trend over a longer period of time, starting with 2022. When you look at it on an annual basis and then TTM for the last period, it's about a 3% CAGR. We started with $606 million and then running up to $655 million. And the margin expanded 410 basis points over that time period.

But the bigger story is in the bottom chart, which looks at our growth on a trailing 12-month basis for each of the periods. And that's where you see the acceleration. We started with a 2% increase from '23 to '24 and then a 7% increase in the most recent period. And the margins in this case, expanded 530 basis points.

Here, you can see that our balance sheet is extremely strong and stable. We have about $191.3 million in unrestricted cash. Debt, $96.4 million has been relatively stable. It's been at that level for the last 2 years. Prior to that, another $3 million higher, but relatively stable. With that stability, you have the backdrop of EBITDA increasing. And so our leverage has gone from 1.7x in 2022 to 1.1x currently. That's a gross leverage, right, because we have more unrestricted cash than we have debt.

So in reality, our excess cash is $94.9 million. And there are several points here that are very worth highlighting because they're recent and they've even -- they've really stabilized and strengthened that balance sheet even more. The first is that in the second quarter of this year, we redeemed our preferred equity, which is going to save us $6 million of annual cash outlay going forward. The other point I want to make is that when we sold Graduate School USA, we eliminated a $28 million liability from the balance sheet, which saves us $4 million annually on a pretax basis.

And then finally, we released $24.5 million of collateral for letters of credit that was previously held as restricted cash. So all of those things have strengthened our balance sheet.

Let's take a look at cash flow now. On a free cash flow basis. Look at this graph. We started with $13.4 million for the TTM period in 2023. That grew 64% to the following period, TTM '24, and then 173% to get us to $60 million of free cash flow in the 2025 TTM period. That represents about a 10% free cash flow yield. So strong balance sheet, and we're generating free cash flow.

So we've talked about our past performance, the revenue growth, the margin expansion, the cash flow yield, what does that look like in the future? Angie touched on this earlier today, but it's worth bringing up again since we're pulling all the numbers together. You can see that the revenue targets have been laid out for 2029. Our targeted organic revenue is between $890 million and $925 million. And with tuck-in acquisitions and other strategic investments, we aim to achieve a revenue of $1 billion by 2029. This would represent a CAGR of between 9% and 12%, not necessarily linear because we're investing in new campuses along the way and all of that.

So a bit of a compounding effect. But nonetheless, a target that we're very focused on. On an adjusted EBITDA basis, we're targeting a CAGR of between 24% and 27% over the next 4 years, which would represent adjusted EBITDA of between -- on the low end, $182 million and on the high end, $200 million. So basically getting us close to that 20% EBITDA margin.

Now let's talk about capital allocation. We, as a company, have a very disciplined and balanced approach. And of course, we have many different options in terms of our capital allocation to invest in. And we evaluate the rate of return of each of those opportunities so that we can maximize the return to shareholders.

We estimate that over the next 4 years, what this $300 million to $400 million represents is we have our 5-year model. We've built in assumptions for CapEx, for example. So our CapEx is relatively light. We're a CapEx-light business. We, on a regular maintenance run rate, might spend between $18 million and $22 million of CapEx. Our new campuses that we've discussed earlier would cost about $3.5 million per campus, where we've factored in 2 of those campuses per year.

The $300 million to $400 million left over is after all of that has been factored in. And so we would deploy that into a number of different ways. One would be to fund the business. And when I say fund the business, those would be things like intelligent systems, campus modernization. The next category would be growth initiatives. So again, new campuses like we just spoke about and program expansion, and those new campuses would be anything above and beyond those that we've spoken about already. And tuck-in acquisitions, we would be opportunistic.

Why would we invest in a tuck-in acquisition? It could be geographic in nature, right, to take advantage of geographies where we don't have a presence where there's a demand for our programs or it could be a state that's highly regulated, and it's an easier way to enter that market. But when it's all said and done, we're going to continue to evaluate those investments based on the rates of return. And it's possible that at some point, we would return money to shareholders through a buyback.

So pulling it all together, again, summarizing as we wrap up the financial section, we're targeting an organic revenue growth of 9% to 12%, and we're focused on a target of $1 billion if you include those strategic investments that we just mentioned and EBITDA margins of 20% to 21% when we get out to that 2029 period. We believe we're well positioned for continued future growth, and we're very excited about the next 4 years. I know I am, as we look towards executing these initiatives. So thank you very much for your time. Again, very excited to be here and excited about the prospects for the next 4 years.

I'll turn it back over to Angie.

Okay. That was the punch line right there. I'm just going to try and pull it all together in just a couple of minutes. In the meantime, we should probably start mobilizing for the panel. So we'll ask our panelists to come up, and they're going to be redoing the stage real quick.

First up, what is APUS going to do in the next 4 years? We have to continue to maximize that 10% of students today use TA. What a wonderful opportunity to get more students to take tuition assistance and to gain share from the 70% of folks who are already using TA today who actually don't take their classes from APUS.

So tremendous room to grow with our active duty military. The growth in veterans and military families is enormous. You saw that the markets are huge. Our slice of the pie is very small. And the newly discovered USAA strategy around wrapping our tuition benefits around those military families has yielded some near-term incredible growth numbers from that new segment called military families.

Nuno talked about 23 degree programs that he's adding in English and many of them oriented around supporting that strengthening of the armed services and the military force, which is a significant differentiator for us. And at the same time, converting 30 programs to Spanish so that we can enter Spanish-speaking markets, but also offer Spanish programs to our colleagues here in the United States.

And then obviously, the final part is to use AI because as we know, with a very steady growth business that APUS represents, being able to ring out profitability through technology optimization in the areas he discussed is critically important. And so that AI enablement of our tech platform will be a big driver of profitability at APUS.

Now let's talk about RU Health Plus, fill the back row. I had a chance to talk with a lot of you folks during the break, and it is a big deal. And you saw those numbers, you did the math. It's a big part of our next 4 years, along with leveraging the latter.

We also know that these partnerships, which Dwayne spent a minute talking about, I'm pretty excited about because today, as you think about it, we sell in eaches. We have to recruit one student at a time. We have to spend marketing dollars for each one. And when we create these partnerships with health systems, now we're saying, we'll do a whole cohort for you. We'll do 25, 30, 40, 48 students for you with a customized experience around the systems that they use, the methods, the quality, et cetera.

And so those partnerships are really a great opportunity for us to not be selling in eaches anymore, but being able to sell in bundles. And then finally, the Trailblazer expansion, which we all know is a wonderful opportunity, both in the states we already operate as well as in new states is a great way for us to build scale, which, as you saw from Hondros, 23 consecutive quarters of year-over-year revenue growth, Hondros has opened 4 campuses during that period of time.

Rasmussen has been under growth restrictions for 5 years and has not been able to open a single campus. There is a correlation between the growth at Hondros and their new campuses and the slower growth that has happened at Rasmussen because of their -- the limits on their ability to open campuses. But we are here to say that fill the back row is a really big deal, and we are going to work really hard to maximize the throughput of each of the Ras and Hondros campuses.

So Ed went through these numbers. I just want to bring to your attention that a $900 million revenue business in 2029 with a 20% EBITDA margin and $300 million to $400 million worth of cash generated not already used for normal CapEx deployment is a really exciting story, and we're so happy to have been able to share it with you today.

So with that, we're going to bring up our panelists. I'd like to introduce some folks that you haven't yet had the opportunity to meet today. Rick Sunderland, we're so honored to have him still here helping us. He's helping make sure we have a very smooth transition. We couldn't be more grateful, Rick, for your 12 years of service. I call him my wingman. It's hard to not have him right here next to me. So I get a little weepy about that. So we're just thrilled to have him here today.

Karmela Gaffney, who's our Chief Marketing Officer, Nuno gave her a shout out. She has a tremendous background, not just in the LatAm markets, but in higher education, and we couldn't be more grateful for her to be here today and be able to answer any questions you might have around marketing. And then Gary Janson, many of you have had the opportunity to meet him.

Over the last several months and years. Gary is our Head of Strategy and Growth, and he really is the guy who peeks around the corner for us every single day and helps make sure we're taking advantage of that next best opportunity and that we're dodging that little pothole that might be coming our way. So in addition to those 3 who are coming up, I introduced James Kenigsberg before.

Again, James was the co-founder of 2U and the Chief Technology Officer there. So his expertise in higher education, seeing and operating businesses that supported, I don't know, 40 institutions, along with the fact that he is just a modern technologist by heart, by mind, and he is in the flow of everything that's going on in technology today, has a team of people that follow him everywhere that we are now the beneficial recipients of.

We just could not be more grateful for James stepping away from our Board and stepping into helping us strengthen our technology organization at APEI. So with that, everyone come up. We're going to get rid of this podium, and we're going to be here to answer all your questions. So we're switching mics.

Eric, he's got it. He's right in there. Number one. All right, over to you. Introduce yourself.

I am Eric Martinuzzi. I'm with Lake Street Capital Markets. I appreciate all the detail. It's really great to dive in deep on the story. One of the things, Angie, that we talked a little bit about -- you talked about the strategic investments, and I know that M&A is something that is an option, obviously, on the Rasmussen side or on the RU Health Plus side, we had the Hondros was 2013 and Rasmussen was 2021. Where is -- is this kind of a, hey, if something walked in the door, we take a look at it? Or is there an active M&A strategy on the RU Health Plus?

Great question. So we are looking, but we are not pursuing, all right? We want to make sure we understand where the opportunities are. But as you can see, we can build a $900 million business with $180 million to $200 million of EBITDA and do it by just doing a great job doing what we do every day.

And so if something were to come our way and it made strategic sense, we would take a look. We have our ear to the market to make sure we don't miss any of those opportunities, but it's not something that we're here to say today, we're about to announce an acquisition coming up in 2026. Anybody questions?

Jasper Bibb with Truist Securities. I think going back to maybe it was like a 10% target enrollment CAGR for Rasmussen. Could you maybe piece out for us how much of that is like maybe same-store isn't the right way to say it, but enrollments at existing campuses versus new campuses or program expansions? Because I think going back to one of those slides, you had maybe it was 60% utilization. So it seems like you have a lot of capacity to grow in all those aspects. I was just hoping you could piece out the assumptions for us.

Thanks, Jasper.

I'll break it out a little bit. You can expect that a good chunk is coming from the existing campuses. We have capacity at all of our campuses today. So some have more than others, but we have capacity across all of our campuses. So that's a key point of our growth that you're seeing in there. The new campuses, we showed you the time line to build. We're planning to open 2 a year starting next year and the breakeven point on those campuses.

So just based on those assumptions, they're going to contribute more to growth in the future on the end of that investment period and even into beyond the 2029 investment period or the strategic plan period. So most of that growth is going to come from our existing campuses, whether it be from just pure organic growth or from program expansion.

And if I could add, Jasper, because certainly, we've got a lot of folks, including Mark with expertise around how you bring out profitability in these physical footprints. So the capacity that we estimated is standard and customary operating procedures, right?

It's not adding nights and weekends programs. It's not reconfiguring the way in which curriculum is taught either on the campus or changing the mix of how the education is taught to perhaps move some of the more didactic courses online. So that's just the assumption of operating the way we operate today. So we believe those 2 horizons are also in front of us to be able to bring out even more profitability out of those campuses. Great. Next question.

Matt Filek, William Blair. Thank you for having us and really appreciate all the detail today. On the nursing side of the business, I believe when you acquired Rasmussen, the margins were in the 13% to 14% range and the longer-term margin guidance for nursing is now near 20%. So I was just wondering if you could maybe give us a little more detail on the biggest drivers to getting that margin expansion? And then do you kind of see 20% as where margins top out just given the in-person component for nursing compared to something like APUS that's fully online?

Yes. So I think you've seen this year, the flow-through margins of our existing campuses. And when you think about the vast majority of Mark was talking about our growth is going to be coming from our existing footprint. We feel pretty confident that those margins will continue to contribute that 20% when we modeled it out.

So in fact, the campus, new campuses are probably going to depress those margins a little bit, but the flow-through is really strong, and we see that continuing. There will be some more investment to make sure we hit the top line growth, which is really important to hit those margins. So the 70% we saw this year is probably a little aggressive compared to what we'll see in the out years.

I guess the only thing I'd add is there's a reason we're focusing on filling the back row. And I think -- I wasn't here at the time of the acquisition. A lot of us weren't here at that point in time. But we're really confident in what we have in the plan. And if we just execute on it, we think those margins are very achievable.

Raj is next?

I'm Raj Sharma, Texas Capital, and I'm an analyst and cover APEI for several years. Thank you for doing this. This is fantastic. It's been a long time coming. And really seeing you guys all guys and gals all up there and understanding the business units has been fantastic. I have 2 questions. One on -- can you talk a little bit about the employment side on graduation, the placement and any relationships you've built, obviously, on the Rasmussen and Hondros side, any relationships you've built with the employers, the hospitals, sort of the emphasis on that?

Dwayne, do you want to take that?

Great question. So we have a career service department that works closely with our students. I would tell you on the nursing and the allied health side, it's -- those services are there. I would say they're less necessary than some of the other programs that we're offering. Many of our students upon graduation are already taking offers from hospital systems and clinical systems. So it's very, very aggressive.

We have a lot of our partnerships that are attending things like our pinning ceremonies as nursing are graduating, and we're bringing them into orientation early on. So what we're seeing now in these partnerships is how do I get earlier access to those students because if I wait until graduation, I waited too long to get them.

And I'll just add. So at APUS, vast majority of the students are working adults, right? So they're not looking for employment. They're looking for promotion or continuing in their existing positions if they're in the military. Then at Hondros, we actually have reported placement rates. We have to hit a 70% benchmark at our locations. And as Dwayne said, it's the same thing there. We actually have to track that, track their wages at Hondros, but it's very similar. There are plenty of jobs available in nursing careers in the markets...

Can I have one more follow-up. So I saw on the M&A -- on the capital allocation slide, you were going to spend money on general business and then M&A options. But share buybacks seem to be low on the total pole. Is there...

Well, let me tackle that one, right? So we still have -- today, we have a $26 million share buyback that's available for use. And that comes from 2 different places, but it's available today. We don't need any authorization from the Board.

As you can see, our goal is really to have a disciplined process for how we use cash and capital. And we want to make sure that, that dollar we spend is going to create the best ROI. So I can tell you that share buybacks are a frequent conversation and certainly not something that is off the table.

We want to just balance that in conjunction with all of the other choices that we're making around the ways in which we can scale and grow the business. But we do have that authorization already available for $26 million of share buyback. Tom?

Tom White, D.A. Davidson. Two quickies, if I could. One, extended family opportunity at APUS, it seems like there's a lot of growth there. Maybe just talk about how penetrated you are and where that could reasonably get to and maybe whether you have to sort of maybe adjust or evolve your offering in the coming?

Yes. So well, thank you for the question. The extended family initiative started in Q3 of 2024. So it's fairly new. And it was the result of strategizing around the fact of how could we compete in the "civilian market" in a way that makes sense for APUS because the extended families are closely connected to our DNA, right? They have a military background or a veteran background.

So you saw the numbers. We're getting double-digit growth with that audience, but it's a fairly new initiative. We believe we will continue to perform well. We're very optimistic. We are working closely with marketing on many efforts to promote those.

For example, the podcasting initiative that I mentioned in the beginning, a lot of that -- a lot of those podcasting efforts are around promoting the extended families' benefit. But if you ask in terms of how much we've penetrated that market, I'd say that it's still very small. We've shown a TAM of 20 million people between ages 18 and 45 that don't have a degree. So the market is very large, and we're just starting.

Okay. And then just one on tuition assistance. So the $250 per credit hour, I don't think it's changed here for a couple of decades. I don't know how should we think about the potential for that to get adjusted upward and just the impact to your model?

Yes. So there's been a lot of -- I would say, a lot of noise around that from several universities. As I mentioned, a lot of universities, they believe that they cannot operate efficiently and in a profitable way with that value.

There's been some discussions in the big beautiful bill that there was a provision there that at some point, people thought that it was going to be used for that, but it wasn't. And that provision actually was used during the shutdown to fund tuition assistance for the students by the Navy, the Army and the Air Force. At this point, we don't really -- we don't have any information that the value is going to change or not. The numbers we presented today do not include any changes in the value moving forward. If those changes occur, then we'll adjust the values accordingly.

Can I add that?

Absolutely.

So any increase, and it's been a quarter century, right? So it's a long time. Any increase would obviously have a very positive impact on the financials of APUS. But I would also say aligned with what Nuno said, it might increase the competitive landscape in that market. So there's a large economic benefit and then maybe there's a competitive element to it also.

Luke Horton with Northland Securities. I just wanted to touch on the kind of significant opportunity on filling the back row. I think it was kind of going to 90% capacity utilization by 2029. Just wondering what is the biggest governor to adding these students? Are there initiatives that are being implemented now, so we might see that accelerate in outer years? Or just how do you kind of think about that?

I'll start and then maybe Dwayne can jump in and Karmela. Dwayne described the kind of 5 elements. I think it was 5 growth drivers to making that successful operationally. So it's -- it really is that combination of inquiry generation and Karmela can comment a little bit more on that. Clinical excellence or clinical access our admissions teams, student advising and what am I missing?

Retention, admissions, [indiscernible] inquiry gen and faculty staffing.

Faculty staffing, which is not one that I should miss because that is a big one. But those are really the 5 things that we have to execute on to hit those numbers. So -- and I wouldn't say that one is more important than the other. They're all important for us to execute on. And I mean, obviously, the one that's easiest for you guys to look at is inquiry generation, right? But we do need to deliver on those other 4 equally in order to drive it. So Karmela?

Just from an acquisition standpoint, we've made huge strides in the last 2.5 years on the marketing side, looking at not just quantity of leads, but the quality of prospective students coming in, those that have a propensity to enroll and those who have a propensity to be successful. So when you look at it from the standpoint of consideration all the way through commencement, how do you keep the student for persisting, that's what we're focusing on as well as looking at different geographies.

So we have a huge advantage. We have a proprietary system internally that we utilize as far as modeling for our marketing efforts as well as utilizing external third-party data sources to monitor where is that next best dollar spent so that we can continue to invest and grow in the campuses.

Last thing I want to answer the part of the question, do we have anything started? We do. So one of the slides I spoke about was cross-pollination programs. Prior to this year, when it was owned, it was owned by multiple different people. And I think that we didn't get the acceleration.

So Mark and myself put somebody in charge now. We have a Vice President that's in charge of that. And some of those slides when I told you that we've been able to start recruiting early on that BSN program at one of our campuses in rad tech is specifically based upon the work that, that person is doing.

From a clinical standpoint, which is an area that we always need to be focused on, we centralized our clinical operations, so we have consistent interaction with our clinical partners. That is one of the most important things to them. They open up their doors to Rasmussen and Hondros. We want to make sure that we're good guests. And by having that centralized is that we're delivering a consistent clinical experience. And we're not on what I would consider their naughty list, if you will.

Okay. Jasper.

Yes, Jasper Bibb with Truist Securities. I was hoping you could give us a bit more detail on the international expansion at APUS. Maybe how large that business is today? I think you sketched out a bunch of target countries you wanted to be in, some in Europe, Colombia, Mexico. Can you give us any context on where you're up and running there today to the markets that you still want to enter, what the associated costs or gating factors might be to standing up operations in Colombia, Mexico, some of those countries?

Thank you. So I'll divide in Spanish-speaking and then English-speaking, right? So on the Spanish speaking, we're going to be focused on Mexico and Colombia for different reasons. Those are the 2 most mature markets in terms of online education in LatAm, and they are also markets that are growing at double digit in terms of interest in online education, especially with graduate programs, which is what we will offer.

We will not have direct operations ourselves. We are working with the partner. So the partner is going to be doing the marketing efforts, of course, with our supervision. They're going to be doing the enrollment efforts, of course, with our supervision. And then there's a revenue share model in place where we share the revenue with the partner. So that's for the Spanish-speaking part of the world.

For the English-speaking part of the world, we are in negotiations with a similar partner where we plan to also have a partner to explore in Europe, certainly, the U.K., Germany, probably France, countries where there's a large affinity with American culture and sort of an aspirational side to that. And also in the Middle East, we're exploring the UAE, Saudi Arabia and Qatar as being markets that we're going to explore as well.

Just a quick follow-up. Like in the context of the '29 plan, like how big do you think the international portfolio is going to be from a registration enrollment perspective, either as a share of total enrollments, just absolute numbers? Is there any context you could give around that?

We are optimistic in terms of international, but we're being conservative. So I would say that if the numbers we shared today, they would not be significantly different without -- if you take out the international component.

Okay. We're going to go to Griffin, and then I have a question for James.

Griffin Boss with B. Riley Securities. So just a quick one for me, jumping back to RU Health Plus. Mark, you talked about the revenue at scale in these new campuses that you expect to build out $12 million. Just curious what you mean by at scale, what capacity does that -- do you underwrite there? Is that the 2/3 capacity you have today? Is that 90% capacity utilization?

It's a great question. Without getting into too specific detail, it has us up in that higher utilization level, so that 80% to 90% level. And as Angie mentioned earlier, again, it assumes how we're delivering today and doesn't account for changes that we could make to our delivery model that could expand capacity.

And so that's true with our existing campuses, but it's also true with our -- as we think through the economics of those new campuses as well. So we've got some flexibility to -- related to all those. But as we think about what a campus looks like, the footprint of that campus, the makeup of the inside of that campus, that's what gets us to those numbers and assumes it's fairly well utilized at that point.

Great. Okay. I'm going to pop in with a question. I know we got 2 over here. One of the big benefits of bringing James from the Board into APEI is to accelerate the digital transformation that's necessary at APUS and the platform modernization, meaning technical as well as the campus experience at Rasmussen and Hondros, taking advantage of all the modern technology capabilities. AI is the buzz, right? James, tell us how you're thinking about tech for APEI in the next 4 years.

Best question today, by the way. I mean I was speaking to someone during the break, and I think I said nothing online is small and great. If you think about all the things you use are -- require scale. And that's where technology comes in. You can teach a classroom of 20 students and do a fairly decent job. But if you want to teach a classroom of 20,000 students, you need technology to do that.

Sort of in my career, I specialized in working with very slow-growing businesses like research nonprofit universities, for example, at 2U and working with sort of trying to innovate a very slow -- we used to say that innovation in universities is like a total being robbed by 2 snails and when the cops came and ask what happened that I don't know because everything happened so fast. And that's kind of transformation of higher education.

And so I've been spending the last 2 decades of my life trying to build intelligent systems, whether it is sort of -- the way I see it, there is a student life cycle from an IP address of you being interested in sort of bettering your life in some fashion and then you graduating and us sort of becoming your continuum of education because as people live longer, we need to -- and the world changes around us, we need to keep coming back. And all that is really stands on a great data strategy because you mentioned AI, and I always push back because I say AI is just frosting on top of your data strategy cake.

And my goal is to build out a data strategy where -- which combines all of the strength of APEI and all of the sort of vertical businesses inside of it, but also lets each individual degree be individual in a way as well. We're creating a single source of record for APEI, which I'm very excited about.

And when that all comes together, AI will just set us free, whether it is doing simple things like having AI help us read transcripts and tell us what people's GPAs are, which today requires humans to do that, to helping us score our prospects better, understand our vendors, understand our data a lot better. And that's really my goal. And all the like glitzy stuff will follow.

Obviously, we will help faculty. I think AI is a huge multiplier for faculty. We are experimenting with some now. Students, we're experimenting with bots and things of that nature. We have a bot that I think a student like pinked 120 times studying for a test, things like that. And so we're experimenting with that, but I'm mostly excited about our data strategy and how it all comes together.

Great. Okay. Over to the room, yes.

Scott Schneeberger with Oppenheimer. Two questions. I'll ask them upfront, but feel free to ask me to repeat. First one, just could you speak a little bit to the restricted cash, its reduction, where that's going, the opportunity to deploy?

And then the second question is just speaking a little bit about how you think about online versus campus. You have really nice free cash flow conversion. Can you just juxtapose yourself versus the industry and how you think about that strategically as far as building that metric?

With respect to the restricted cash, that was -- we had $24.5 million that was collateral for letters of credit. And when we -- that was basically lifted during the time period. So that's why you see a significant jump there. Rick, do you want to add to the nature of the

The Department of -- we had a restricted letter of credit -- letter of credit with the Department of Ed, which required collateral for cash, which is restricted cash. And so -- we got that when we acquired Rasmussen. And then this is lower within the company after many, many quarters of trying to get the department to release that. Having satisfied all the requirements, they finally released the cash. We had a lot of conversation around that. Do you want to talk...

Yes. So in terms of what we're going to do with that cash, that obviously brought up our -- when you think about that $300 million to $400 million cash generation, that's '26 to '29. So I think your point is, hey, as we sit here today, we still have quite a bit of capital that can be deployed. And the answer is the same. We would still consider all of those different categories of initiatives, including, as Angie said, in certain cases, buybacks, but we're going to evaluate everything on the table. And so really, that's on top of the $300 million to $400 million that we discussed.

Okay. Do we have another question over here? Oh, George.

This is a question for Rick. Rick, you've been probably the longest at APEI all this time. So if you look back 3 years ago, if you put yourself back 3 years ago and you look at APEI now, what would surprise you the most about what happened in those past because you've had some nice improvement. And then you look at the plan and maybe from then or from here, what surprises you the most about where you think you're going?

Right. We operate high-quality schools. And for those of you that know me, we -- I most often say we change people's lives. And we operate schools in good segments of the market, military, the veterans and nursing. And so I'm not surprised that we're all sitting here today telling the story.

We went through some very challenging times immediately after the acquisition of Rasmussen, and we've talked about that, but that's all behind us now. And through the team that's been assembled through the creation of the balance sheet that we have and by serving the markets that we do, we really have built the foundation to describe the plan that we've described today.

And I think I'm most proud of the team that is here, Angie's leadership through what was a number of very challenging years and to be able to sit here with this group and say, we really have a good plan because we have good schools, because we have great programs, because we're in great markets to do the things that we described today.

So I don't know that there's anything about today that surprises me because it was always there and maybe it was just a little bit hidden by some of the challenges that we have. And today, we're able to more fully pull back the curtain and describe that. So it's a really bright future in front of us. And I'm very proud about that. I'm probably most proud about that.

That was a lovely question, George, to ask for Rick to wrap up. Okay, Eric, one more question, and then we're going to -- one more from Raj, and then we got it -- we'll move to -- we have food for you at lunch. So we can move next door if you'd like to ask more questions, but we'll do these last 2.

So the fourth quarter was impacted by the government shutdown. From what I can tell, it looks like the can at the federal government has been kicked until the end of January. The question is for Nuno. What are -- is there -- are there steps you're taking to prepare -- to better prepare your part of the business for that potential.

Yes. So I'll divide the answer in 2 parts. The first one is that we're obviously working really hard with all our students to try to support them during Q4 to come back to classes. And we hope to see some positive momentum there now that the tuition assistance is available again.

I think the second part of your question is related to what if it happens again, right, if it happens end of January. So we had -- the good news is that during the shutdown, the branches, as we described, the Navy, Army and Air Force, at least these 3 branches, they found a way to use the money, the big beautiful bill to support tuition assistance.

So we are hopeful that if it happens again, that they will continue to do that because there are still funds available and now they know that it's possible, right? So we don't know if that's going to happen for sure, but we anticipate that it would.

Having said that, we're also working with our contacts at the education service centers inside the installations in order to remind them that if it happens again that, that option is available so that maybe they will be readily available to support them from day 1 as opposed to the disruption that we had last time where they had to find the process in order to fund education. So certainly, it's not ideal, but we're hopeful that if it happens that there's a way to continue funding education that they found during this initial shutdown.

Can I add to that, please? So Nuno is being a little modest. So we haven't had a shutdown that impacted TA registrations since 2013, right? So it's fairly rare, and we've explained the circumstances of why that is. So with this shutdown, given how rare it is, his team had to write the playbook how to work through this particular situation. And I would tell you, they did a really good job learning and creating as we went along. And so that playbook exists now, right?

You talked about what would happen at the various branches and how they could use OB3 as a backstop and actually process TA. But internally, the team is prepared, should that happen again to run that playbook and probably improve upon it because you always learn from the things that you've done. But internally, they're very prepared to deal with that should it ever happen again.

May be Raj has question here.

My question is on -- you've laid out the CAGRs on revenue and EBITDA for the different divisions out to 2029. Is it reasonable to assume that this is -- the growth is not back-ended and that those CAGRs would hold sort of consistently from next year all the way up to '29. And also the same thing with the EBITDA margins. Is that a straight line up in the improvement?

Yes, 2 separate pieces. So the growth won't be completely linear, but it's reasonable to assume that it will happen. It's not going to happen all at the back end to your question, it's not a hockey stick on the revenue side.

On the EBITDA margins, it will be more -- you're not going to get a 20% EBITDA margin next year, if that's what you're asking. It will be more towards the back end once we fully utilized and fill the back grow at Rasmussen and we continue to grow and hit the margins we're doing at APUS. So I think it's going to be a little choppy, but not extreme gyrations from as we...

Okay, everyone. Thank you so much for your engagement, your curiosity. Did anybody learn anything new today? Raise your hand. I hope that was the case. Excellent. That was my goal, and I hope you feel like there's a lot more to learn. So I'll wrap up by saying someone asked me what my proudest moment has been.

And I thought about all the things that we've tackled, all the highs and lows in the last 6 years, it's today. This team what we've accomplished, where we're headed, the opportunity that's in front of us. I could not be more proud of APEI, these universities, what we do for our students, the mission we live every day and the future in front of us. It is such an exciting time, and we can't wait to have this meeting with you guys again in the future.

So thank you so much. And especially those that are dialing in online. We look forward to hosting you next time we all get together for another APEI Investor Day. Thank you very much.

Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI 3Q '25 Earnings Call. [Operator Instructions]

I'd now like to turn the call over to Brian Prinovo, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss third quarter 2025 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer; Edward Codispoti, Executive Vice President and Chief Financial Officer; Gary Janson, Senior Vice President of Growth and Strategy; Rick Sunderland, Executive Adviser to APEI is also on today's call and will be available for the Q&A session.

Materials for the call today are available in the Events and Presentations section of APEI's website. Statements made during this conference call and any accompanying presentation regarding APEI and its subsidiaries that are not historical facts may be forward-looking statements based on current expectations, assumptions, estimates, and projections. 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, such as those identified in our Form 10-K under the heading Risk Factors, including those related to potential impacts from government shutdowns or changing federal or state government policies, practices and laws, including impacts on revenues or the timing of receivables.

Forward-looking statements may sometimes be identified by words like anticipate, believe, seek, could, estimate, expect, can, may, plan, potentially, project, should, will, would, and similar or opposite words. Forward-looking statements include, without limitation, statements regarding expectations for registration and enrollments, revenue, earnings, and adjusted EBITDA and other earnings guidance, our foundation for growth, the planned 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.

This presentation contains references to non-GAAP financial information. A reconciliation between the 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. 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.

With that said, I'd like to turn the call over to APEI's President and CEO, Angela Selden. Angie, please go ahead.

Thank you, Brian. Good afternoon, and thank you for joining American Public Education's Third Quarter 2025 Earnings Call. Before we begin with the third quarter results, I would like to take this moment to introduce Ed Codispoti, APEI's new Chief Financial Officer. Ed joined APEI on October 20, 2025, and we're very excited to have him on board. Ed joins us from NV5, a leader in technology and engineering consulting solutions. Prior to NV5, Ed was CFO of Alumina Holdings, a higher education company providing learning platforms and technology solutions to universities in Latin America. I will let Ed introduce himself further before he provides the financial overview.

I also want to take this opportunity to thank Rick Sunderland for his dedicated service. For over 12 years, he has been instrumental in building and shaping APEI. During Rick's tenure, APEI has navigated significant transformation across the enterprise, including the integration of new institutions and strengthening of the company's long-term position. Rick has been a steady hand, always steering APEI in the right direction through periods of growth and change, and his leadership has left a lasting positive impact on the organization. We appreciate that he has agreed to serve as an executive adviser over the next few months to facilitate a smooth transition. We will certainly miss him while also wishing him the best during his next chapter.

Moving on to the third quarter. We have 4 areas to highlight during today's call. First, I am very pleased with APEI's third quarter 2025 performance, as we have again exceeded our guidance ranges for all metrics, including revenue, net income, EPS, and adjusted EBITDA through continued registration and enrollment momentum and expanding margins. Registration and enrollment growth have outpaced our forecast and significantly contributed to the outperformance in our financial metrics. Registrations at APUS in the third quarter increased 8% as compared to 3Q '24. This also represents a sequential acceleration in the rate of growth from 2Q '25.

Enrollments at Rasmussen increased 10% versus 3Q '24. This represents the fifth consecutive quarter of year-over-year enrollment growth. I am particularly pleased that on-ground enrollments at Rasmussen are accelerating, taking advantage of our existing campus capacity, or what we call filling the back row. Enrollments at Hondros College of Nursing continued their strong momentum, increasing 18% as compared to 3Q '24. Second, as previously disclosed, we completed the sale of Graduate School USA on July 25, 2025. Early this year, as we prioritize the combination of our degree-granting institutions, we determined that the graduate school training business was no longer a strategic fit within our future growth strategy. We were very pleased to find a new home for Graduate School that is more aligned with its mission and market position, allowing us to focus on growing our core degree-granting businesses, including the military, military-affiliated, veterans, nursing, and other health care communities.

Third, as we continue our work to simplify the overall operational businesses at APEI, at the end of Q2 '25, we received HLC approval and submitted our combination request to the Department of Education. In Q3 '25, after dialogue with the Department of Education team newly assigned to our transaction, we were informed that we should follow a different process for the planned combination of our institutions rather than the one originally undertaken. As a result, in September, we were required to submit and completed the submission of a new application first to the HLC, which will be reviewed at their Board meeting in February of 2026. This application contains substantially the same content as our prior submission.

We have also provided to the Department of Education our expected timeline for the completion of this newly submitted combination plan to take effect in the beginning of the third quarter of 2026 for the 2026 Student Financial Aid award year.

Fourth, our simplification actions have also strengthened our balance sheet and should enable our subsidiary institutions to continue to produce improved financial results. With the Department of Education removing the restrictions on the $24.5 million letter of credit that dated before the close of our acquisition of Rasmussen, that cash, now unrestricted on our balance sheet, contributes to the unrestricted cash and equivalents totaling $193.1 million as of September 30, 2025. As a result of our recent redemption of our preferred equity at the end of the second quarter, we will save approximately $6 million annually from the elimination of the cash dividend payments. Also, the sale of graduate school eliminated a $28 million lease liability, which will save us approximately $4 million in lease payments annually and also reduces our total liabilities.

These changes have improved our cash position and will increase our cash flow by approximately $10 million per year on a pretax basis, which will meaningfully improve net income and earnings per share. We believe we are now positioned with more financial flexibility and an improved capital structure to more confidently pursue our growth initiatives.

Moving now to more details about the third quarter 2025 results, starting first with APEI's nursing and health care institutions. Rasmussen continues to produce strong results. Rasmussen's enrollment increased 10% in 3Q '25 and 9% in 4Q '25, representing the fifth and sixth consecutive quarters of year-over-year enrollment increases. As mentioned in previous calls, by leveraging its existing fixed cost structure, Rasmussen has been and will continue to experience increased operating leverage as enrollments continue to increase. Continued enrollment growth will also flow through to EBITDA margins. Importantly, we are carrying an additional 1,300 enrollments into 4Q '25 as compared to 4Q '24 that we will continue to build upon in 2026. With our current campus footprint, we believe our strategy that we call filling the back row by working to ensure each of our classes and sections is maxing out capacity at our current campuses, has been successful with increasing enrollments and improving EBITDA flow-through on each incremental student.

At Hondros College of Nursing, as previously reported, 3Q '25 enrollment was strong with 18% growth as compared to 3Q '24. 4Q '25 enrollments continue a positive trend, increasing 9% year-over-year to 4,000 students off of a very strong prior year comp. We believe that the business combination of Rasmussen and Hondros College of Nursing will provide us with an improved platform to add programs, scale enrollments, and increase margins.

Turning to APEI's online university, educating our nation's military, veterans, and their families. In the third quarter, overall APUS net course registrations increased 8% year-over-year. Revenue at APUS also increased over 8%.

Turning our attention to Q4. The government shutdown has muted military enrollments at APUS for October and November. We are, however, pleased that several of the military branches are now authorizing tuition assistance benefits through the use of the $100 million of tuition assistance funds that were authorized in the One Big Beautiful Bill Act. Further, those branches have been selectively bringing back furloughed workers to help assist with those TA approvals. Additionally, last night's Senate vote test vote yielded enough votes for the amended CR to pass the Senate, perhaps even today, and head back to the House for consideration, possible approval, and passage to the President for signature, perhaps as early as the end of this week. It is our understanding that upon presidential signature, workers would be called back from furlough and TA funds would again be available for use during the CR period.

We remain confident that TA will continue to be a critical Department of Defense recruiting tool, as it is a benefit to service members in exchange for voluntary enlistment. It is also seen as a force-shaping tool because by offering these educational opportunities, the military can attract and develop human capital with a higher skill set, thus strengthening our U.S. Armed services forces. As we await the passage of the CR and the defense appropriations bill, we have implemented various cost-saving measures and are continuing to evaluate additional opportunities to mitigate the adverse impacts.

Overall, across our 3 education units, we are so pleased with the resilience of our team, especially given the government shutdown uncertainty. We've delivered consistent performance that we've demonstrated over the last 18 months. We are confident in our ability to continue executing and taking advantage of the growth drivers that we believe will accelerate growth and profitability and provide more students with more educational opportunities. We look forward to welcoming investors and analysts to our November 20, 2025, Investor Day at the New York Athletic Club in New York City to provide a longer-term view of APEI's growth strategies and financial outlook.

APEI enables students to experience a valuable lifelong return on their educational investment. Our vision remains to offer education that transforms lives, advances careers, and improves communities by providing online and campus-based post-secondary education to over 107,000 students. Our mission to power purpose, potential, and prosperity for those in service to others reflects our focus on a student population, which is resilient in the face of AI transformation and potential threats. Our nursing education prioritizes in-person bedside care, and our military service members continue to be critical active participants to U.S. military strategies. Each of our education units is purpose-built to deliver accessible and affordable higher education across a diverse range of subjects. I'd like to thank each of our employees and faculty that work tirelessly to make our mission a reality.

With that, I will now turn the call over to APEI's new Chief Financial Officer, Ed Codispoti.

Thank you, Angie. I'm delighted to be on today's earnings call as I begin my fourth week with the company. As Angie mentioned earlier, I came to APEI after serving as CFO of NV5 Global, an engineering and technology solutions firm. And before that, I was with Alumina Holdings, a company that owned universities and delivered technology solutions to higher education institutions across Latin America. The CFO role at APEI is an exciting opportunity to bring together my experience in driving growth and advancing higher education while focusing on meaningful student outcomes.

I'd also like to say that I very much appreciate working with Rick Sunderland, who has done such a great job as CFO of APEI for over 12 years. The transition so far has been seamless. I look forward to meeting with investors and analysts in the coming weeks and months.

Turning now to our quarterly results. Total revenue in the third quarter was $163.2 million, an increase of $10.1 million or 7% from the prior year period. As you know, we sold Graduate School USA in July. If you exclude Graduate School USA, third quarter revenue of $800,000 and third quarter of prior year revenue of $8.1 million, our revenues would have been 5% higher, or aggregate growth of 12%.

Total costs and expenses in the third quarter were $153.5 million, an increase of $4.5 million or 3% as compared to the third quarter of 2024. The increase was primarily driven by a $3.9 million loss related to the sale of Graduate School USA in July 2025 and a $2.5 million increase in advertising costs as we invest in student enrollment for growth. In the third quarter, net income available to common shareholders was $5.6 million, which was almost 7x higher than net income of $700,000 in the prior year. And EPS increased significantly to $0.30 per diluted share in the third quarter of 2025 versus $0.04 in the third quarter of last year.

Third quarter adjusted EBITDA increased 60% to $20.7 million as compared to the prior year period adjusted EBITDA of $12.9 million, driven by increased revenue and margin expansion of 424 basis points. This was above the top end of the guidance range and represented an adjusted EBITDA margin of 13% as compared to 8% in the prior year.

Looking now at our segments. At APUS, third-quarter revenue increased $83.1 million, an 8% increase as compared to the prior year period. The increase was driven by third-quarter 2025 net course registrations, which increased 8% as compared to the prior year period. EBITDA for APUS was $26.2 million for the quarter, a 19% increase over the prior year period. At Rasmussen, third-quarter revenue was $60.8 million, an increase of 16% as compared to the third quarter of last year. The increase was fueled by a 12% increase in on-ground enrollment and an 11% increase in online enrollment. This enrollment growth brings total Rasmussen student enrollment to 14,900 students and contributed to our EBITDA of $825,000, which grew significantly from the EBITDA loss of $4.5 million in the prior year period.

At Hondros College of Nursing, third-quarter revenue was up 19% to $18.4 million as compared to the prior year period due to continued enrollment growth. For the quarter, Hondros College of Nursing's total enrollment increased 8% -- I'm sorry, 18% to approximately 3,700 students, and third quarter EBITDA was a loss of $336,000 compared to the loss of $259,000 in the prior year period. Our balance sheet and cash flows also improved when compared to the prior year period.

Cash flow from operations for the 9 months ended September 30, 2025, increased 56% to $73.5 million. Our free cash flow, defined here as adjusted EBITDA less CapEx, nearly doubled for the 9-month period at $45.2 million. As of September 30, 2025, total cash, cash equivalents, and restricted cash increased 22% to $193.1 million, an increase of $34.2 million from the year ended 2024. Subtracting our $96.4 million secured note, our net cash position was $96.7 million at quarter end. Additionally, as noted earlier, at the end of the second quarter, we redeemed all our outstanding preferred stock for $43.1 million and completed the sale of 2 corporate administrative office buildings in Charlestown, West Virginia, for net proceeds of $22.5 million.

CapEx totaled $11.8 million in the first 9 months of 2025 compared to $17.7 million in the prior year period. Principal on APEI's term loan at September 30 was consistent with the prior quarter at $96.4 million, and our $20 million revolving credit facility remains fully available. I believe this demonstrates the strength of our balance sheet, which we believe positions us well for future growth.

Turning now to our fourth quarter and full year outlook, which covers forward-looking statements subject to the various risks noted earlier. Before I discuss our guidance for fourth quarter 2025, it would be helpful to refer to Slide 12 of the presentation deck so that we can describe how we have incorporated the government shutdown in our guidance. Our original revenue guidance for full year 2025 was within a range of $650 million to $660 million. We are pleased that APUS and Rasmussen outperformed with respect to our previous expectations by about $22 million. Additionally, we sold Graduate School USA in 2025 and its negative impact to the guidance, including its first half underperformance, was approximately $18 million. If we assume that the shutdown would result in an impact to revenue between $20 million and $24 million, our revised guidance for the year would be $640 million to $644 million.

For the fourth quarter 2025, APUS total net course registrations are expected to be between 65,000 to 74,400 registrations, representing a 33% to 23% decrease when compared to last year, impacted by the government shutdown. At Rasmussen and Hondros College of Nursing, fourth quarter student enrollments are actual because the quarterly starts at these schools are known at this time. At Rasmussen, fourth quarter total on-ground enrollment increased 13% to approximately 7,100 students, and total online enrollment increased 6% to approximately 8,800 students for an aggregate enrollment of approximately 15,900 students. This represents a 9% increase when compared to the fourth quarter of 2024. At Hondros College of Nursing, fourth quarter total student enrollment increased 9% year-over-year to approximately 4,000 students.

In the fourth quarter of 2025, consolidated revenue is expected to be between $150 million and $153.5 million, again, impacted by the government shutdown. The company expects fourth quarter net income available to common stockholders to be between a profit of $5.9 million and $8.3 million or between $0.32 and $0.45 per diluted share. Fourth quarter 2025 adjusted EBITDA is expected to be between $18.5 million and $22 million. Therefore, for the full year 2025, we are changing our anticipated consolidated revenue to a range of $640 million to $644 million.

Net income available to common shareholders for the year is expected to be between $17.2 million and $19.6 million. Our full year 2025 adjusted EBITDA guidance is between $75 million and $79 million, and our full year CapEx is expected to be between $15 million and $17 million. The updated full-year adjusted EBITDA and CapEx guidance translates to free cash flow expectations for the full year, defined as adjusted EBITDA less CapEx, to be between $58 million and $64 million.

I'll now pass it back to Angie for closing remarks, after which we will begin our question-and-answer session. Angie?

Thank you, Ed. Great job on your first call. In closing, we have spent much of the past year setting financial and operating goals and then delivering on those results. Rasmussen and Hondros College of Nursing are delivering consistent positive enrollment growth and profitability. APUS, with the exception of the market anomaly of the government shutdown, continues to deliver growth and high margins.

At the beginning of the year, we set expectations for redeeming our preferred equity, selling our corporate buildings, and simplifying our business structure, and we have delivered on these actions. Our organization was purpose-built to deliver affordable and accessible educational opportunities in fields which are in high demand. We believe that our platform and the sector tailwinds set APEI up to accelerate growth and bring more educational opportunities to a greater audience across the country and across the world. We are as optimistic today as we've ever been about the long-term potential of our company, and we look forward to sharing more details about that long-term potential on our November 20 Investor Day in New York City.

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

[Operator Instructions] Your first question comes from the line of Thomas White with D.A. Davidson.

First off, nice results on the quarter, guys. Congrats to you, Ed, on the new role, and good luck to Rick going forward. I guess just on the tuition assistance disruption at APUS, I was hoping, Angie, maybe you could just talk a little bit about your plans for driving kind of re-enrollments for the students that were forced to be dropped. And I don't know, do you guys expect that there will be any sort of permanent demand kind of destruction as a result of this? Or is it just temporary? And then I had a follow-up.

Thanks, Tom. First, I would say a couple of things are happening, right? And I'd like to just emphasize a few. Even though the CR has not yet been approved, we are so pleased that the 3 largest branches, Army, Air Force, and Navy, are using the one big beautiful bill, $100 million of tuition assistance funds, to allow service members to register even without the approval of the CR. So we have seen more registrations flowing in December than we had in October and November as a result.

So we're very pleased that we're starting to see demand come back already in December, even without the passage of the CR, and inside the CR is the Defense Appropriations bill. We have electronic marketing campaigns to every single student who was registered in October and November and who got dropped for nonpayment. And we fully expect that those folks are going to continue their education. This has only happened once in the last 12 years, which was the last time was in 2013. And the result of that was no decrease in our demand. So while we can't be certain about what our future expectations for TA enrollments are going to be, that data point tells us that this should be a short-term matter and not a long-term decline in our expectations for TA enrollment.

And then just maybe one follow-up, if I could, on the -- kind of on the plan to integrate the 3 institutions. It sounds like maybe there's been a minor speed bump there. Can you just maybe explain whether the new process -- does it change at all kind of how you're thinking about the ultimate benefits of integrating the 3 institutions, either from sort of an expense or revenue synergy standpoint?

Sure. Great question. We remain very committed to the combination of our 3 institutions, and nothing has changed about our conviction around that. I would say that this is a procedural matter. There's a different form that we needed to complete. And when we submitted to the HLC the second time around, instead of 3,600 pages of documentation, we submitted 4,000 pages of documentation to support the change. But I would say substantially all of what we had in the first submission was reused and reorganized for the second submission. When the Department of Education was reduced in force at the beginning of 2025, we received a new team assignment. And that team assignment had a different view on which process we should follow than the team we had been working with prior. And so with that, we needed to recalibrate.

We are completely in compliance with that new process and are still on track with the dialogue that we've had with the Department of Education for the expectation of a 3Q third quarter 2026 implementation in time for the 2026 financial aid award year. So we will continue to brief people if something were to change there, but that's fully still the timeline we're operating against.

And this is Gary. On your second question about synergy opportunities, we're moving ahead with the opportunity to cross-pollinate the revenue. You'll hear more about that on the Investor Day. So we're not sitting back and waiting for the combination to occur to move forward with our plans to expand our campus footprint as well as cross-pollinate programs from Rasmussen and Hondros in the interim period. So we don't see the timing as being an obstacle for that.

The next question comes from the line of Stephen Sheldon with William Blair.

First, congrats to you, Rick, on a great run, and really look forward to working with you, Ed. So maybe starting here on just the guide for the fourth quarter. I just wanted to confirm that you're assuming effectively a 2-month slowdown for APUS registrations here and then kind of more or less back to normal trajectory in December and into 2026. Are we kind of thinking about that the right way?

So I would say definitely a slowdown in October, where I think we previously announced 1,700 registrations of TA flow through, which is a substantial decline. And then about 30% we were able to recoup for the November compared to the prior year, about 5,000 registrations. The low end of our guidance does contemplate some shortfall in December as we ramp up, not knowing the full timing for the CR. But we'll see how that flows. If we can get the CR in place and we continue to see the flow-through from the OVA, then obviously, that would be towards the higher end of our guide.

And then on the cost savings side, I guess, can you talk some about where you've been able to cut near-term spending? How much of that could be temporary reductions versus cost-cutting that could be more permanent and be something that helps support profit and margin trends heading into 2026? Any detail there?

Not a lot. But I mean, we said -- previously said where we thought we had opportunities. And certainly, we've dialed back our variable costs that we think that we can manage through. We have taken the opportunity to streamline some operations at APUS. So that is an important piece of this. But for the most -- which will be permanent. Which will be permanent.

That's a permanent reduction in force.

But we've also made sure that we don't affect the revenue side of the equation. So we wanted to take the cost measures that we could that we thought were discrete and would not harm the business going forward. Things like not overinvesting in military marketing is a good example where we could dial that back until we had some certainty of reopening. But some will flow through to next year, but not a huge amount.

And then just one more, if I could sneak it in, just on the nursing side. I guess can you just talk about how general demand to pursue nursing pathways has changed? It seems like you've been putting up very strong growth here at both Hondros and Rasmussen, both 3Q and into 4Q. And generally, I think it's becoming even more attractive to learners to pursue nursing, given shortage, increasing pay, limited AI disruption risk, at least relative to other industries. So is that starting to play out here? Are you seeing any notable uptick in applications? And just generally, what are you seeing in terms of the top of funnel demand trends on the nursing side?

Yes. I'll start by saying we're seeing acceleration. Obviously, we reported that we have a 13% enrollment growth on the campus side of Rasmussen in the fourth quarter, which we're very pleased to see. We reiterate that the nurses that we primarily educate are first licensure, meaning that those folks are becoming nurses for the first time, as opposed to post-licensure, where they already have a license and are trying to advance their career. I think that there is a challenge across some sectors of the market around investing in that post-licensure degree program because the pay increase maybe isn't meaningful enough to invest in that post-licensure career in the short term.

We're seeing substantial pay in our markets right now, and LPN can make about $66,000 a year, and an ADN, so a 2-year degree, RN can make $88,000. And so those are very meaningful comp packages for a 40-year career for a single educational degree and license. And so it is attractive from an ROI perspective, especially with the price point of our programs. And there are plenty of open positions for people to obtain jobs. So we also believe that having in-sourced our marketing in the last 18 months, we've really started to tighten those dials and identify how to reach those students in the local markets effectively, and that is also driving the quarter-over-quarter year-over-year performance improvement in our campus-based nursing program. So we're very pleased with how that's performing.

Your next question comes from the line of Jasper Bibb with Truist Securities.

Just on the filling the back row strategy, I'm not sure if maybe utilization is the perfect measure here, but is there any way for you to frame for us how much more room you have to drive enrollment into those existing programs and campuses at Rasmussen?

Great question, Jasper. We're going to talk about this next week in our upcoming Investor Day, where we're going to give you a multiyear view of the different capacity opportunities. We've clustered our campuses into 3 segments because as we've talked in previous calls, our smaller campuses have arguably less total seats available. Our basically single market campus opportunity is the area where we believe there's the biggest opportunity in terms of filling those campuses. And then our multi-campus clusters in a single market also have significant demand. So we really look forward to sharing that with you on November 20.

Okay. Well, yes, looking forward to hear more detail on that later this month. And then just last one for me. Are you expecting the decline in the registrations at APUS during the fourth quarter should give you a bit more cushion against 90-10 in the '25 calculation? I imagine from a mix perspective, that might be helpful.

What we have seen is interestingly a shift of our -- primarily of our graduate military students paying their shortfall with cash. So instead of sitting out on the sidelines and not using TA -- waiting for TA to come back, we actually see grad military paying cash. And so every cash payer, you can get one of those for every 9 or 8.9 TA or FSA users. So that certainly has had in a somewhat unusual way had a positive impact on our 90/10 calculation, yes.

Your next question comes from the line of Eric Martinuzzi with Lake Street.

Yes. Just curious to know the -- for the nonmilitary, so the military affiliate and veteran, if those -- the registration trends are on track for you for those student segments?

Yes. Actually, Q3 and year-to-date, it's Gary. We've seen very nice acceleration in the growth of both the extended family segments as well as the veteran segments. So I would say a lot of the 8% growth that we saw in Q3 was attributable to those 2 segments where the military is, I'll call it, steady Eddie, 3%, 4% growth. So I think we're very pleased with the performance year-to-date and especially in Q3 of those 2 adjacencies.

And then it was great to see the Rasmus and on-ground 13% enrollment growth. Is that something that you feel is sustainable if there's a tailwind here macro-wise?

I'll start by saying we're firing on all cylinders now in terms of enrolling in our campuses. Certainly, as we start lapping ourselves, the comps are going to get trickier, but we believe there's a tremendous amount of opportunity to fill the back row of our RaaS campuses. And so we're focusing a disproportionate amount of our marketing spend where it makes sense to make sure that we're continuing to deliver on that enrollment momentum.

Your next question comes from the line of Griffin Boss with B. Riley.

I appreciate all the color you've given so far. Just one for me. I'm curious if you could dig into kind of where we should expect to see some of these cost-saving initiatives implemented in the fourth quarter. Obviously, it looks like you pushed out some CapEx spend, maybe to 2026 or beyond. That guidance came down a little bit. But in terms of the OpEx, just curious, I mean, are we going to see kind of a little bit more initiative on like the selling and promotional marketing expenses? Or where should we see kind of a relative uptick as a percentage of revenue in some of these areas that maybe you were not able to implement cost-saving initiatives?

Yes. I think we talked a little bit about this previously. But definitely in S&P, there will be a little bit of savings there. We want to make sure -- obviously, the timing of when everything comes back online will dictate that. We are looking at temporary and sometimes more permanent staff reductions in nonstudent-facing functions. And then I would say we talked also about our variable comp that is tied to performance, and that is another lever. It's also important to note that given our variable cost model at APUS, which is on a per-registration basis that while we may lose x number of registrations, the variable cost for that will also come down. So there are 3 big buckets there outside from the little things that you always look at like external consulting and travel and entertainment and the like. So those are the major areas that are contributing to the cost savings.

Great work navigating what has been a tough environment and look forward to hearing more details next week at the Investor Day.

Your next question comes from the line of Raj Sharma with Texas Capital.

Again, solid performance and resilience in the face of tough testing conditions. I had a question on the -- it was great that the $100 million tuition assistance fund was -- you're able to use that. Any delays in payments from this to you?

Raj, it's a good question. We are going to bill according to our stated policies. I think the question is whether or not there are people working on the other end to actually push the button. But I'll turn it over to Rick, who's on our call here today. Rick, do you want to say anything about that?

Yes. Thank you. Raj, it is impacted by staffing at the various branches. They're just not there to process the invoices. But the good news is, as was highlighted on the call, I mean, we've got a pretty substantial cash reserve to weather the very short-term shutdown feels long, but is actually relatively short given the month or 2 of processing that would be otherwise processed.

And then I wanted to understand that now that the government -- assuming when the government shutdown is over, it's business as usual in the sense that there likely isn't any medium-term or permanent damage from this on the enrollment? And then also, any of these registrations that you weren't able to get in October and November, are these sort of loss -- is this lost revenue? Or is there a scenario where service personnel might want to double their course load to make up?

Well, I would say that we are forecasting, Raj, that what would have otherwise occurred in October and November has just simply shifted on the calendar, right? We know that the reason why we purpose-built our education model to allow students to take one course at a time is because they don't often have time to do more than one at a time. And our flexibility allows them to pause and then restart. So we may see some people who are gunning for a promotion or something who want to keep moving, like we saw some of these grad military students who are paying cash to keep going. But I think, by and large, we're forecasting that we're basically going to just see those shift to when everything restarts in earnest.

And then on Rasmussen's side, the programs that are particularly showing really good momentum, the on-ground healthcare, up 13%. Any specific programs there that are doing really well, and you expect that enrollment environment to sort of continue?

Yes. I would say our allied health programs, our ad tech, and our SurgTch programs are doing good, although they're pretty caps right now that we're working on as part of our plans to expand that. But it's really nursing. It's been across the board, predominantly in our ADN program and BSN. And it's also important to note that our growth of 13% includes the closure of 2 campuses in Wisconsin, not that they were huge contributors to enrollment, but it gives you a sense of how our nursing programs are growing. So we're really pleased with both our BSN and ADN programs, and to a little bit smaller extent at Rasmussen and the LPN program, but it's across the board nursing.

The next question comes from the line of Alex Paris with Barrington Research.

Quick welcome to Ed. Look forward to working with you, and so long to Rick, I've enjoyed working with you. Just a few follow-ups. First question, on the fourth quarter guidance on just overall revenue and then APUS registrations, what are the assumptions at the low end and the high end? And a related question, just to be clear, in October, even though you had to stop out some students, you still kept 1,700 students under TA. And then that have been previously approved. And then in November, you said you're able to bring in 5,000 under the $100 million OBBB?

Yes. So I'll answer that. It's Gary. So if you think about November, about 30% of what was the prior year's registrations made it through. So or TA. Prior year TA registrations. So we're modeling on the low end that that's probably the same, knowing that we've seen some improvement. That was OBDA, literally, those changes got enacted the very end of the enrollment cycle. Some of the branches did keep over open for continued enrollment for 7 days. So we expect to do better than that. So at the high end, we're obviously assuming that we're able to improve upon that number. So we're trying to bracket it on what we saw in November. on the low end and on the high end, what we would expect to see on normal pacing once either the CR goes through or if the OBBA funding continues to flow.

And then what -- just remind me, what was the October TA registrations as a percent of the prior year? It was like 40% lower, wasn't it?

It was 1,700 registrations on what normally would have been. I'm going to say this isn't exactly right, but 17,000 registrations. So it was probably 10%. So it's a very small number.

And then it improved, you got 30% on a year-over-year basis. You got 30% of what you had in the previous year as opposed to just 10% in the previous year. And then in December, you're saying the low end would assume that same 30% of the year-ago month. And the high end would be something higher than that.

That's correct.

Question 3, the Graduate School USA loss about $3.9 million, was that a lot less than you had forecast? I thought on the last call, you said to assume a $7 million to $8.5 million loss on sale.

Yes. Rick, do you want to answer that one?

Yes. And the answer is yes. Alex, in the prior call, we estimated $6.5 million to $8 million. We came in at $3.9 million. The difference was the resolution of the -- some accounting matter, the accumulated deficit that existed on the books of graduate school as a separate company, to eliminate the deficit, we had to record a credit, which was an offset to the otherwise higher number. So that number came down.

And then the last question, again, this point of clarification. post-licensure pre-licensure. Hondros is all pre-licensure or--

All pre.

And then Rasmussen has some post-licensure?

Yes, a small percentage. Yes. But not -- so -- but the post-licensure is contained within what is currently categorized as our online business, right, because that's all delivered without a need for campus.

Your next question comes from the line of Luke Horton with Northland Capital Markets.

Congrats on the nice quarter. I know we've kind of answered most of the questions here, but just wanted to kind of touch back on the strong enrollment trends at Rasmussen, specifically on ground. Are you seeing a change in student demographics at all with the students that you're gaining here? And is this simply just a function of more efficient marketing and macro demand? Or is there -- just anything else you could provide there would be great.

Yes. Great question. Nice to hear from you, Luke. We are really trying to expand our marketing reach to not just enroll ADN or the 2-year degree RN students, but also the BSN, the 4-year -- 3.5-year degree RN students. And so we are seeing momentum in both, but we are seeing an acceleration in our BSN students, which we're really pleased about, has a longer tail of revenue, often stronger NCLEX results. So we love that we are expanding our pool of BSN students at Rasmussen.

And then just one more, I guess, on the campus-based enrollment, I mean, are you seeing anything from a geographical standpoint? I know you're mainly Midwest at Rasmussen, but in Florida to Kansas, like are you seeing any specific campuses outperforming on new start or new student starts at all? Or is it pretty much broad-based?

It's a good question, but I would say we're -- it's broad. I think we're especially pleased with the, I'll call it, Minnesota, where, as you recall, we ceased enrolling in our ADM program, and to what Angie just said, the BSN has been a nice lift there. But no, it's been across the board. I mean it's been nice to see in Kansas, in Illinois, Minnesota, as well as in Florida.

There are no more questions at this time. I would now like to turn the call back over to Angela Selden for closing remarks. Please go ahead.

Thank you, Eric. I'd like to thank each of you for joining our earnings conference call today. We look forward to continuing to update you on our ongoing progress and growth as we continue our rapid pace of enrollment growth, revenue growth, and margin expansion. We also look forward to welcoming many of you to New York City next week for our 2025 APEI Investor Day Conference. If we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, whose contact information is on the last page of the PowerPoint, and they will be more than happy to assist getting us all connected together. So back to you, operator.

Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.