American Public Education - Earnings Call - Q3 2025

Executive Summary

• APEI delivered a clean beat across key metrics: revenue $163.2M (+6.6% YoY), GAAP diluted EPS $0.30, and adjusted EBITDA $20.7M (13% margin), all above the company’s Q3 guidance ranges; APUS registrations rose 8%, while Rasmussen (+16% revenue) and Hondros (+19% revenue) maintained double-digit growth.
• Management lowered FY 2025 outlook (revenue to $640–$644M; adj. EBITDA to $75–$79M; net income to $17.2–$19.6M) to reflect the federal government shutdown’s impact on APUS in Q4, while confirming strong nursing enrollment momentum (+9% in Q4 at Rasmussen; +9% at Hondros).
• Versus S&P Global consensus, APEI beat on revenue ($163.2M vs $160.8M*) and on Primary EPS (SPGI actual $0.54* vs -$0.09* consensus); note company-reported GAAP diluted EPS was $0.30 [functions.GetEstimates].
• Stock catalysts: resolution of the CR/Defense appropriations enabling normalized TA flow at APUS, sustained campus “fill the back row” utilization gains at Rasmussen, and any incremental color at the Nov 20 Investor Day (NYC) on 2026 trajectory and the planned institutional combination.

What Went Well and What Went Wrong

What Went Well

• Broad-based outperformance: “we have again exceeded our guidance ranges for all metrics” (revenue, net income, EPS, adj. EBITDA), aided by APUS registrations +8% YoY and double-digit enrollment growth at Rasmussen and Hondros.
• Margin expansion and operating leverage: adj. EBITDA +60% YoY to $20.7M and adj. EBITDA margin +424 bps YoY to 13%, with APUS and Rasmussen gross margin improvements driving expense ratio gains.
• Balance sheet strengthening: unrestricted cash reached $191.3M at 9/30; preferred stock redemption saves ~$6M annual cash dividends; sale of GSUSA eliminated ~$28M lease liability, boosting annual cash flow by ~$10M pre-tax.

What Went Wrong

• Government shutdown headwind: Q4 APUS net course registrations guided down 23%–33% YoY (65,000–74,400) due to muted military enrollments; FY guide cut reflects an estimated $20–$24M revenue impact.
• GSUSA sale-related costs: Q3 included a $3.9M loss on sale and ~$0.8M of related professional fees; Corporate/Other operating loss widened.
• Near-term OpEx pressure: higher advertising spend (+$2.7M YoY) as the company invests to drive enrollments; selling and promotional ratio ticked up to 22.1%.

Transcript

Operator (participant)

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 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Brian Prenoveau, Investor Relations. Please go ahead.

Brian Prenoveau (Head of Investor Relations)

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 Codespody, Executive Vice President and Chief Financial Officer; Gary Janssen, Senior Vice President of Growth and Strategy; Rick Sunderland, Executive Advisor 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.

Angela Selden (CEO)

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 Codespody, 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 Alumno 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 advisor 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 four 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 has outpaced our forecasts and significantly contributed to the outperformance in our financial metrics. Registrations at APUS in the third quarter increased 8% as compared to 3Q 2024. This also represents a sequential acceleration in the rate of growth from 2Q 2025. Enrollments at Rasmussen increased 10% versus 3Q 2024. 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 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 2024. Second, as previously disclosed, we completed the sale of Graduate School USA on July 25, 2025. Early this year, as we prioritized 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 USA 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, veteran, nursing, and other healthcare communities. Third, as we continue our work to simplify the overall operational businesses at APEI, at the end of Q2 2025, we received HLC approval and submitted our combination request to the U.S. Department of Education. In Q3 2025, 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 pre-tax 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 healthcare institutions. Rasmussen continues to produce strong results.

Rasmussen's enrollment increased 10% in 3Q 2025 and 9% in 4Q 2025, 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 2025 as compared to 4Q 2024 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 2025 enrollment was strong with 18% growth as compared to 3Q 2024.

4Q25 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 enrollment, 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 this 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 three 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, Edward Codespody.

Ed Codispodi (CFO)

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. Before that, I was with Alumno 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 enrollments for growth. In the third quarter, net income available to common shareholders was $5.6 million, which was almost seven times higher than net income of $700,000 in the prior year. 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 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 nine 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 nine-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 two corporate administrative office buildings in Charlestown, West Virginia, for net proceeds of $22.5 million. CapEx totaled $11.8 million in the first nine 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-$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-$644 million.

For the fourth quarter 2025, APUS total net course registrations are expected to be between 65,000-74,400 registrations, representing a 33%-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-$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-$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-$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?

Angela Selden (CEO)

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 (participant)

At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Thomas White with DA Davidson. Please go ahead.

Thomas White (Managing Director and Senior Analyst)

Great. Thanks for taking my question. Good evening. First off, nice results in 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. I do not 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? I had a follow-up.

Angela Selden (CEO)

Okay, great. Thanks, Tom. First, I would say a couple of things are happening, right? I would like to just emphasize a few. Even though the CR has not yet been approved, we are so pleased that the three 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. We have seen more registrations flowing in December than we had in October and November as a result. We are very pleased that we are 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. 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. The result of that was no decrease in our demand. 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.

Thomas White (Managing Director and Senior Analyst)

Great. That's very helpful. Thanks. Just maybe one follow-up, if I could, kind of on the plan to integrate the three 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 three institutions, either from sort of an expense or revenue synergy standpoint? Thanks.

Angela Selden (CEO)

Sure. Great question. We remain very committed to the combination of our three institutions, and nothing has changed about our conviction around that. I would say that this is a procedural matter. There is a different form that we needed to complete. 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. 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. With that, we needed to recalibrate.

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

Gary Janssen (SVP)

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. We're not sitting back and waiting for the combination to occur to move forward with our plans to expand our campus footprints as well as cross-pollinate programs from Rasmussen to Hondros in the interim period. We don't see the timing as being an obstacle for that.

Thomas White (Managing Director and Senior Analyst)

Thank you very much.

Angela Selden (CEO)

Thank you, Tom.

Operator (participant)

The next question comes from the line of Steven Selden with William Blair. Please go ahead.

Stephen Sheldon (Analyst)

Hey, thanks for taking my questions. First, congrats to you, Rick, on a great run, and really look forward to working with you, Ed. Maybe starting here on just the guide for the fourth quarter, just wanted to confirm that you're assuming effectively a two-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?

Ed Codispodi (CFO)

I would say definitely a slowdown in October where I think we previously announced 1,700 registrations of TA flowed through, which is a substantial decline. 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. We will see how that flows. If we can get the CR in place and we continue to see the flow through from the OBBA, then obviously that would be towards the higher end of our guide.

Stephen Sheldon (Analyst)

Got it. That is helpful. On the cost-saving side, I guess, can you talk some about where you have 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?

Ed Codispodi (CFO)

Not a lot, but I mean, we have previously said where we thought we had opportunities, and certainly we have 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. For the most part, which will be permanent, not, which will be permanent.

Angela Selden (CEO)

That is a permanent reduction in force, yeah.

Ed Codispodi (CFO)

We have also made sure that we do not affect the revenue side of the equation. 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 over-investing in military marketing is a good example where we could dial that back until we had some certainty of reopening. Some will flow through to next year, but not a huge amount.

Stephen Sheldon (Analyst)

Got it. Very helpful. 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. 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. Is that starting to play out here? Have you already seen any notable uptick in applications? Just generally, what are you seeing in terms of the top-of-funnel demand trends on the nursing side?

Angela Selden (CEO)

Yeah. 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. An LPN can make about $66,000 a year, and an ADN, so a two-year degree, RN can make $88,000. Those are very meaningful comp packages for a 40-year career for a single educational degree and license. It is attractive from an ROI perspective, especially with the price point of our programs.

There are plenty of open positions for people to obtain jobs. We also believe that having insourced our marketing in the last 18 months, we have really started to tighten those dials and identify how to reach those students in the local markets effectively. That is also driving the quarter-over-quarter, year-over-year performance improvement in our campus-based nursing program. We are very pleased with how that is performing.

Stephen Sheldon (Analyst)

Great to hear. Nice work in the quarter.

Angela Selden (CEO)

Thank you so much, Steven.

Operator (participant)

The next question comes from the line of Jasper Bibb with Truist Securities. Please go ahead.

Jasper Bibb (VP)

Hey, good afternoon, everyone. Just on the filling the back row strategy, I am 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?

Angela Selden (CEO)

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 multi-year view of the different capacity opportunities. We've clustered our campuses into three 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 the single market also have significant demand. We really look forward to sharing that with you on November 20. Okay.

Jasper Bibb (VP)

Yeah, looking forward to hearing 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 2025 calculation? I imagine from a mixed perspective that might be helpful.

Angela Selden (CEO)

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

Jasper Bibb (VP)

Got it. Thanks for taking the question.

Angela Selden (CEO)

Great question. Thanks.

Operator (participant)

The next question comes from the line of Eric Martinuzzi with Lake Street. Please go ahead.

Eric Martinuzzi (Senior Analyst)

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

Gary Janssen (SVP)

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

Eric Martinuzzi (Senior Analyst)

Gotcha. It was great to see the Rasmussen on-ground 13% enrollment growth. Is that something that you feel is sustainable, that there's a tail end here macro-wise?

Angela Selden (CEO)

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. We believe there's a tremendous amount of opportunity to fill the back row of our RAS campuses. We are focusing a disproportionate amount of our marketing spend where it makes sense to make sure that we are continuing to deliver on that enrollment momentum. Yes.

Eric Martinuzzi (Senior Analyst)

Okay. That's it for me. We'll keep our fingers crossed for Tom.

Gary Janssen (SVP)

Great. Thanks, Eric.

Angela Selden (CEO)

Thank you, Eric. See you next week. Thank you.

Operator (participant)

The next question comes from the line of Griffin Boss with B. Riley. Please go ahead.

Griffin Boss (Analyst)

Hi. Good evening. Thanks for taking my questions, and 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. In terms of the OpEx, just curious, I mean, are we going to see kind of a little bit more initiative on 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 we're not able to implement cost-saving initiatives?

Ed Codispodi (CFO)

Yeah. I think we talked a little bit about this previously, but definitely 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 non-student-facing functions. 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. There are three big buckets there, aside from the little things that you always look at like external consulting and travel entertainment and the like. Those are the major areas that are contributing to the cost savings.

Griffin Boss (Analyst)

Got it. Okay. Thanks for the color. Great work navigating what has been a tough environment. I look forward to hearing more details next week at the investor day.

Angela Selden (CEO)

Super. See you there, Griffin. Thank you.

Operator (participant)

The next question comes from the line of Raj Sharma with Texas Capital. Please go ahead.

Raj Sharma (Managing Director and Analyst)

Hi. Good afternoon. Thank you for taking my questions. 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?

Angela Selden (CEO)

Raj, that's a good question. Yeah. 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. I'll turn it over to Rick, who's on our call here today. Rick, do you want to say anything about that?

Rick Sunderland (Executive Advisor)

Yes. Thank you. Raj, it is impacted by staffing at the various branches. They're just not there to process the invoices. 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. What feels long, but is actually relatively short given the month or two of processing that would be otherwise processed.

Raj Sharma (Managing Director and Analyst)

Got it. Thank you, Rick. I wanted to understand that now that the government shut, 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. Also, any of these registrations that you weren't able to get in October and November, are these sort of lost? Is this lost revenue, or is there a scenario where service personnel might want to double their course load to make up?

Angela Selden (CEO)

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 do not often have time to do more than one at a time. Our flexibility allows them to pause and then restart. 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. I think by and large, we are forecasting that we are basically going to just see those shift to when everything restarts in earnest.

Raj Sharma (Managing Director and Analyst)

Got it. Thank you. On the Rasmussen 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?

Ed Codispodi (CFO)

Yeah. I would say our allied health programs are RADTEC, and our surg tech programs are doing good, although they're pretty capped right now. We're working on, as part of our plans, to expand that. It's really nursing. It's been across the board, predominantly in our ADN program and BSN. It's also important to note that our growth of 13% includes the closure of two campuses in Wisconsin. Not that they were huge contributors to enrollment, but it gives you a sense of how our nursing programs are growing. We're really pleased with both our BSN and ADN programs, and it's a little bit smaller extended Rasmussen and the LPN program. It's across the board nursing.

Raj Sharma (Managing Director and Analyst)

Got it. Thank you. That's it for me. I look forward to seeing you all at the analyst day.

Angela Selden (CEO)

Great. See you next week, Raj. Thank you.

Raj Sharma (Managing Director and Analyst)

Yeah. Absolutely. Thank you. Take care.

Angela Selden (CEO)

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

Alex Paris (President)

Hi, guys. Thanks for taking my call. And quick welcome to Ed. Look forward to working with you. And so long to Rick. I've enjoyed working with you.

Thank you. Looking forward to it. Great. Now I know how to pronounce your last name, now that you have the surname.

Rick Sunderland (Executive Advisor)

There it is. There you go. Perfect.

Alex Paris (President)

Just a few follow-ups. First question. On the fourth quarter guidance, just overall revenue, and then APUS registrations, what are the assumptions at the low end and the high end? A related question, and 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 students that had been previously approved. In November, you said you're able to bring in 5,000 under the $100 million OBBA?

Gary Janssen (SVP)

Yeah. I'll answer that, Scary. If you think about November, about 30% of what was the prior year's registrations made it through. On the prior year TA registrations. Prior year TA registrations. We're modeling on the low end that that's probably the same, knowing that we've seen some improvement. That was OBBA. Literally, those changes got enacted at the very end of the enrollment cycle. Some of the branches did keep open for continued enrollment for seven days. We expect to do better than that. At the high end, we're obviously assuming that we're able to improve upon that number. 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.

Alex Paris (President)

Just to remind me, what was the October TA registrations as a % of the prior year? It was like 40% lower, was it not?

Gary Janssen (SVP)

Oh, a lot. No. It was 1,700 registrations on what normally would have been, I'm going to say this is not exactly right, but 17,000 registrations. So it was probably 10%. It was a very small number made through.

Alex Paris (President)

All right. In 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. 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.

Gary Janssen (SVP)

That's correct.

Alex Paris (President)

Okay. Good. Thank you. Question two. That was question one and two, actually. Question three, the Graduate School USA loss of $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-$8.5 million loss on sale.

Angela Selden (CEO)

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

Rick Sunderland (Executive Advisor)

Yes. And the answer is yes. Alex, in the prior call, we estimated $6.5 million-$8 million. It came in at $3.9 million. The difference was the resolution of the—this is an accounting matter—the accumulated deficit that existed on the books of Graduate School USA of 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.

Alex Paris (President)

Thank you. And then the last question, again, just a point of clarification. Post-licensure, pre-licensure. Hondros is all pre-licensure or?

Angela Selden (CEO)

Yes. All pre.

Alex Paris (President)

And then Rasmussen has some post-licensure?

Angela Selden (CEO)

Yes. A small percentage.

Alex Paris (President)

Yeah.

Angela Selden (CEO)

Yeah. But not. So the post-licensure is contained within what is currently categorized as our online business, right? Because that's all delivered without a need for a campus. Yeah.

Alex Paris (President)

Great. Thank you very much. I'll take the rest of my questions offline.

Angela Selden (CEO)

Okay. Thanks, Alex.

Alex Paris (President)

Thank you.

Operator (participant)

The next question comes from the line of Luke Horton with Northland Capital Markets. Please go ahead.

Luke Horton (Senior Analyst)

Yeah. Hey, guys. Congrats on the next 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 demographic at all with the students that you're gaining here? 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?

Angela Selden (CEO)

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

Luke Horton (Senior Analyst)

Okay. I got it. 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 from Florida to Kansas, are you seeing any specific campuses outperforming on new students' starts at all? Or is it pretty much broad-based?

Ed Codispodi (CFO)

I was going to say, and it's a good question, but I would say 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 ADN 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, at Minnesota, as well as in Florida.

Luke Horton (Senior Analyst)

Okay. Great. Awesome. Thank you, guys, for taking the questions, and congrats again on the quarter.

Angela Selden (CEO)

Thank you, Luke.

Operator (participant)

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.

Angela Selden (CEO)

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.

Angela Selden (CEO)

If we were unable to answer any of your questions, please reach out to our IR firm, MC 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. Back to you, Operator.

Operator (participant)

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