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AP

AMERICAN PUBLIC EDUCATION INC (APEI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered broad-based strength: revenue rose 7.4% YoY to $164.1M, diluted EPS was $0.63, and adjusted EBITDA was $31.4M, all above the top end of company guidance, driven by improvements at APUS, Rasmussen, and Hondros .
  • APUS registrations grew 7% YoY; Rasmussen posted a 9.3% YoY revenue increase and achieved $5.5M of EBITDA; Hondros revenue climbed 20% YoY with 19.3% enrollment growth .
  • 2025 outlook: Q1 revenue $161–$163M; FY revenue $650–$660M; FY adjusted EBITDA $75–$85M; management also plans to redeem preferred equity by end of Q2, which would be accretive to EPS .
  • Near-term catalysts: continued Rasmussen enrollment momentum, consolidation of institutions to simplify operations, and APUS steady registration growth; watch temporary headwind from Army/Air Force TA portal downtime impacting Q1 APUS registrations (late enrollments ongoing) .

What Went Well and What Went Wrong

  • What Went Well

    • “Revenue, earnings per share and Adjusted EBITDA all exceeded the top end of our guidance” for Q4 2024, reflecting execution across segments .
    • Rasmussen posted positive EBITDA in 2H 2024, with Q4 EBITDA of $5.5M, alongside 7% Q1 2025 enrollment growth (online +11.1% YoY; on-ground +3.2% YoY) .
    • APUS net course registrations rose 7% YoY in Q4; APUS EBITDA margin in Q4 was 34.5%, illustrating strong profitability even as APUS invests to modernize curriculum and IT .

  • What Went Wrong

    • Q1 2025 adjusted EBITDA guidance ($13.5–$15.5M) implies a YoY contraction due to deliberate increases in advertising (+$2.1M) and higher labor costs at APUS to support growth, pressuring near-term margins .
    • General & administrative expense rose 15.6% YoY in Q4 (to $36.2M) on higher IT and bad debt expense, partially offset by lower advertising and D&A .
    • APUS Q1 2025 registration growth is tempered (1.5–3%) by extended Army/Air Force TA portal maintenance overlapping the March session, though late registrations continue post-outage .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$152.9 $153.1 $164.1
Diluted EPS ($USD)($0.06) $0.04 $0.63
Adjusted EBITDA ($USD Millions)$10.9 $12.9 $31.4
Adjusted EBITDA Margin (%)7.2% 8.4% 19.1%

Segment breakdown (Q4 2023 vs Q4 2024):

SegmentRevenue Q4 2023 ($M)Revenue Q4 2024 ($M)Op Inc Q4 2023 ($M)Op Inc Q4 2024 ($M)
APUS$79.4 $82.4 $26.5 $27.3
Rasmussen (RU)$52.6 $57.5 ($2.9) $3.6
Hondros (HCN)$15.8 $18.9 $0.8 $0.7
Corporate & Other$5.1 $5.3 ($8.4) ($10.0)

KPIs (enrollments/registrations):

KPIQ2 2024Q3 2024Q4 2024
APUS Net Course Registrations (count)89,800 92,500 97,100
Rasmussen Total Student Enrollment13,600 13,500 14,600
Hondros Total Student Enrollment3,300 3,100 3,700

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Revenue ($M)Q4 2024$159–$164 $164.1 Raised vs prior: beat top end
Adjusted EBITDA ($M)Q4 2024$23–$26 $31.4 Raised vs prior: beat by $5.4–$8.4
Diluted EPS ($)Q4 2024$0.47–$0.56 $0.63 Raised vs prior: beat top end
Consolidated Revenue ($M)Q1 2025n/a$161–$163 Initiated
Net income to common ($M)Q1 2025n/a$1.7–$3.1 Initiated
Adjusted EBITDA ($M)Q1 2025n/a$13.5–$15.5 Initiated
Diluted EPS ($)Q1 2025n/a$0.09–$0.17 Initiated
APUS Net Registrations (count)Q1 2025n/a100,500–102,000 Initiated
Rasmussen Enrollment (count)Q1 2025n/a14,500 (online 8,000; on-ground 6,500) Initiated
Hondros Enrollment (count)Q1 2025n/a3,600 Initiated
Consolidated Revenue ($M)FY 2025n/a$650–$660 Initiated
Net income to common ($M)FY 2025n/a$19–$26 Initiated
Adjusted EBITDA ($M)FY 2025n/a$75–$85 Initiated
CapEx ($M)FY 2025n/a$18–$22 Initiated
Interest expense, net ($M)Q1 2025n/a$1.366 Initiated
Interest expense, net ($M)FY 2025n/a$8.332 Initiated
Income tax expense ($M)Q1 2025n/a$1.385–$1.985 Initiated
Income tax expense ($M)FY 2025n/a$10.595–$13.595 Initiated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Rasmussen enrollment momentum & profitabilityFirst slight YoY enrollment increase expected; 2H 2024 EBITDA turning positive; NCLEX improvements (22 of 25 meeting thresholds) Second consecutive quarter of YoY enrollment growth; 2H EBITDA positive; accreditation wins (23 of 25 meeting state standards) Q4 revenue +9.3% YoY; Q4 EBITDA $5.5M; Q1 2025 enrollments +7% YoY; online +11.1%, on-ground +3.2% Accelerating improvement
APUS marketing optimization & marginInvestments in curriculum, IT, admissions; margins modestly lower; Q3 margin expected similar Marketing uplift driving Q4 registrations +4–6%; strengthening admissions processes Q1 EBITDA contraction driven by +$2.1M advertising and higher labor; Q4 APUS margin 34.5% Increased investment, improving growth
Hondros growth & profitability pathRecord enrollments; program/campus moves; retention >70% at several campuses 19th consecutive quarter of YoY enrollment growth 20th consecutive quarter YoY growth; Q4 revenue +20%; Q1 2025 enrollments +9.6% Sustained strength
Military TA portals (Army/Air Force) downtimen/an/aMaintenance extended ~2 weeks, overlapping March session and dampening Q1 APUS registrations; late registrations ongoing now that portals are restored Transient headwind
Institutional consolidation (APUS, RU, HCN)n/an/aPlan to combine into one system in 2025; expected operational simplification, revenue and cost synergies Simplification underway
Preferred equity redemptionn/an/aIntend to redeem by end of Q2 2025; reduces preferred dividends ~$3M in 2025 if midyear, ~$6M annually; accretive to EPS Balance sheet/CFO action

Management Commentary

  • “We are very pleased with APEI’s full year 2024 results… in the fourth quarter of 2024, revenue, earnings per share and Adjusted EBITDA all exceeded the top end of our guidance” — Angela Selden, CEO .
  • “In 4Q ’24… Rasmussen delivered both positive EBITDA and positive enrollment growth… we achieved that goal with $6.4 million of adjusted EBITDA in 4Q ’24 and positive $3.1 million for the second half of ’24” — Angela Selden .
  • “2025 will be a year of simplification… we intend to redeem our preferred shares prior to the end of the second quarter… close underperforming campuses, terminate expensive leases and contracts, and have 2 corporate buildings held for sale” — Angela Selden .
  • “Fourth quarter adjusted EBITDA was $31.4 million… margin 19.1% vs. 16.8% last year” — Rick Sunderland, CFO .
  • “First quarter guidance is negatively impacted by scheduled maintenance of the Army and Air Force TA portals… extended slightly over 2 weeks… we are continuing to late register students” — Rick Sunderland .

Q&A Highlights

  • APUS Q1 slowdown tied to Army/Air Force TA portal maintenance; impact built into guidance, late registrations ongoing post-restoration .
  • Rasmussen margin trajectory: management sees strong flow-through as enrollment momentum accelerates; longer-term margin improvement anticipated without giving multiyear guidance .
  • Q1 2025 EBITDA contraction driven by increased advertising (+$2.1M) and higher student-facing labor at APUS to support lead conversion and growth .
  • Consolidation synergies: management expects revenue synergies (e.g., Hondros students access Rasmussen post-licensure curriculum; alternative start patterns), with selective cost synergies, but emphasis is on growth rather than cost-cutting .
  • Rasmussen marketing yield drivers: shift to organic leads and hyperlocal marketing (including radio) reduced spend while improving conversion, benefitting both online and campus segments .

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) for Q4 2024 EPS and revenue was unavailable due to a retrieval limit error today; therefore, we cannot quantify beats/misses versus Street estimates at this time [GetEstimates error].
  • As a proxy, results materially exceeded company guidance: revenue above the range top, adjusted EBITDA above the range top, and diluted EPS above the range top .
  • Implication: Street models may need to reflect stronger-than-expected Q4 operating leverage and improving Rasmussen profitability; near-term Q1 margins incorporate higher growth investment and APUS late registrations due to TA portal outage .

Key Takeaways for Investors

  • Q4 upside versus guidance across revenue, EPS, and adjusted EBITDA signals multi-segment momentum (APUS registrations, Rasmussen EBITDA, Hondros enrollments) heading into 2025 .
  • Rasmussen’s return to profitability and accelerating enrollment (Q1 2025 +7% YoY) is a key inflection supporting consolidated margins through 2025 despite Q1 investment drag .
  • APUS remains a profit engine (Q4 EBITDA margin 34.5%); marketing and admissions investments should continue to drive registrations while temporarily compressing Q1 EBITDA .
  • Preferred equity redemption targeted by end of Q2 is a tangible EPS accretive action and simplifies capital structure; monitor timing and funding .
  • Institutional consolidation (APUS/RU/HCN) is a structural catalyst for cross-program laddering, compliance, and potential synergies; execution and regulatory milestones will shape the 2025 narrative .
  • Temporary APUS headwind from military TA portal downtime is transitory; late registrations underway and future sessions not impacted, supporting full-year trajectory .
  • Balance sheet strength (cash $158.9M at year-end) and free cash flow profile support growth investments and capex ($18–$22M in 2025) while maintaining flexibility .