American Public Education Q1 2024 Earnings Call Transcript

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May 7, 2024

There are 7 speakers on the call.

Operator

Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Public Education, Inc. First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. Thank you. I would now like to turn the conference over to Brian Prenevo, Investor Relations. You may begin.

Speaker 1

Thank you, operator, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss Q1 2024 results. Joining me on the call today are Angela Seldin, President and Chief Executive Officer Rick Sunderland, Executive Vice President and Chief Financial Officer and Steve Summers, Senior Vice President and Chief Strategy and Corporate Development Officer. 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.

Speaker 1

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 registrations and enrollments, revenue, earnings and adjusted EBITDA and other earnings guidance, repositioning Rasmussen University for growth, changing market demands and our ability to satisfy such demands and other company initiatives, including with respect to future competition and demand and cost savings efforts. 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. These include, among other risks, failure to comply with regulatory and accrediting agency requirements or to maintain institutional accreditation and any actions taken to prevent or correct such failure dependence on the effectiveness of the company's ability to attract students who persist in its institutional programs, changing market demands, declines in enrollments at the company's education units, the enactment of legislation that adversely impacts the company or its education units the inability to effectively brand or market its education units or their programs or expand into new markets inability to maintain strong relationships with the military the loss or disruption of the ability to receive funds under tuition assistance programs or the reduction, elimination, suspension or disruption of tuition assistance.

Speaker 1

Adverse effects of changes to improve the student experience and enhance the ability to identify and enroll students who are likely to succeed, a loss of eligibility to participate in Title IV programs or ability to process Title IV financial aid, economic and market conditions, challenges with acquisitions, matters related to indebtedness or preferred stock, company's technology infrastructure, the inability to recognize the anticipated benefits of the company's cost savings efforts and risks described in today's presentation, today's press release, APEI's Form 10 ks for 2023 and other SEC filings. The company undertakes no obligation to update publicly any forward looking statement for any reason unless required by law. This presentation contains references to non GAAP financial information. A reconciliation between the non GAAP financial measures we use in the most provides useful supplemental information to 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. Now I'd like to turn the call over to APEI's CEO, Angela Sowton.

Speaker 1

Angie, please go ahead.

Speaker 2

Thank you, Brian. Good afternoon and thank you for joining American Public Education's Q1 2024 Earnings Call. With the release of our first quarter results, this is now the 5th consecutive quarter where we have exceeded our adjusted EBITDA guidance and expectations. By delivering results from the hard work of the Rasmussen turnaround, we have put Rasmussen back on a trajectory for growth and positive EBITDA. This has included a strong focus on improving student retention, preparing students for success on NCLEX exams and enrolling a more balanced mix of campus based nursing and health education programs while reducing our concentration in the ADN program.

Speaker 2

At the same time, at both APUS and Hondros, we have delivered continued student enrollment growth and margin expansion. Overall, in this past year, by addressing the operational challenges at Rasmussen and rightsizing the cost structure across APEI, we have positioned APEI for long term growth, driven by strong education units and an enterprise with strong financial standing. Let me share some highlights from the quarter. APEI's Q1 2024 revenue was $154,000,000 representing a 3% increase when compared to 1Q 'twenty three and ahead of the guidance range. We saw significant improvement in overall adjusted EBITDA, which totaled $17,100,000 in the Q1 of 2024, representing a 143% increase over 1Q 'twenty three.

Speaker 2

And notably, the adjusted EBITDA for this quarter was roughly $7,000,000 or 71% above the top end of our guidance range. Adjusted EBITDA margin expanded by 600 basis points in 1Q 2024 to 11% compared to 5% in 1Q2023. Collectively, margin improvements are being driven by a combination of optimized marketing, improved retention and the modest pricing actions and cost control initiatives implemented in 2023, including staffing realignments and reductions. With our strong first quarter outperformance, we are increasing our full year 2024 guidance for revenue and adjusted EBITDA, which Rick Sunderland, APEI's Chief Financial Officer, will detail in his comments shortly. With that context, I'd now like to spend some time sharing the progress of our education units, starting with our core Online Military and Veterans segment, APUS.

Speaker 2

In 1Q 2024, overall net course registrations increased 3% year over year to 99,000 registrations, the most in 8 years, reflecting the strong reputation upon which we continue to build and the compelling value proposition we offer. Active duty and veteran registrations delivered continued momentum with year over year growth, partially offset by lower non military registrations. The overall increase in registrations in the quarter, combined with the impact of tuition and fee increases in 2023, resulted in a 9% increase in revenue at APUS. This solid revenue performance, coupled with cost containment and lower marketing spend, drove very strong bottom line results for APUS, with EBITDA increasing 31 percent to $24,300,000 as compared with $18,500,000 in 1Q 'twenty three. EBITDA margin was 30% in the quarter compared with 25% in the prior year period.

Speaker 2

On a student success note, this week at its 28th annual commencement, APUS will celebrate its over 16,700 graduates in associates, bachelor's and master's degrees. Turning to Rasmussen, I am very pleased with the progress we have made and continue to make with its stabilization and turnaround. 1st quarter enrollments, which we shared in our last earnings call, were 13,500, which was a 6% decrease from a year earlier. Today, we are sharing 2nd quarter 2024 enrollments, which continue that improving trend with 13,600 students down just 2% from a year ago. This is now the 4th quarter in a row where total enrollment trends have continued to improve year over year.

Speaker 2

For the Q2, Brasmussen online enrollments increased 4%, while campus based nursing and health education enrollments declined by 9%. As has been the case for the last several quarters, the overall decline in enrollments has been driven predominantly by Rasmussen's campus based ADN program, but those declines are moderating and we are increasingly offsetting some of those declines with growth in our BSN and other campus based health education programs, moving closer to our goal of having a much more balanced portfolio of nursing and campus based health education offerings. Over time, the increase in BSN enrollments should also lead to higher average lifetime value per student because of the longer length of this program. Soon, as we move into positive enrollment territory for campus enrollments, the highly leveraged nature of the campus based business should lead to improved profitability. In terms of student outcomes, we again produced strong NCLEX pass rates in the Q1, where 20 of 24 programs at Rasmussen met the required thresholds.

Speaker 2

Worth noting is that 2 of the 4 programs that did not meet the threshold had very low numbers of test takers this quarter and which we think will move into passing territory as more students sit for the exams. While pass rates are only officially evaluated by state nursing boards annually, we track progress quarterly. We are pleased that this is the 3rd quarter in a row where the vast majority of our programs are meeting the state standards. Overall, at Rasmussen, we continue to expect to achieve positive enrollment growth at some point in the second half of twenty twenty four and a return to positive EBITDA, resulting in stronger financial footing for the university exiting 'twenty four and into future years. Turning our attention to Hondros.

Speaker 2

As reported, 1Q 2024 enrollment remains strong, showing a 22% increase when compared to 1Q2023. We also saw growth continue in 2Q2024 with enrollment increasing another 10% year over year to 3,300 students, which we view as particularly encouraging given the comparison to a very strong enrollment quarter in 2Q 2023. Demand remains strong for its PN and ADN nursing programs with the new Detroit campus performing very well. Legacy campuses also contributed to growth, including Indianapolis, where we still operate with enrollment caps as a new program despite exceptional NCLEX pass rates. Starts at Hondros remain robust and we remain very pleased with the growth that we are seeing.

Speaker 2

Also in 3Q, Hondros will be relocating 2 of its Ohio campus locations and expect some temporary but limited impact to enrollment in those locations. As for NCLEX pass rates, all programs at all Hondros campuses met the 1Q 'twenty four state benchmarks. Overall at APEI, our financial results continue to show significant improvement and in particular our return to adjusted EBITDA growth, which has exceeded our guidance now for the last 5 quarters. With the stabilization of enrollments and continued improvement in EBITDA at Rasmussen, coupled with strong top and bottom line performance at APUS and Hondros, we are now delivering positive growth in revenue, adjusted EBITDA and margins across APEI. In summary, we are confident in our strong position to provide online and campus based post secondary education and career learning opportunities to large and growing addressable markets.

Speaker 2

The improvements we have implemented and the return of momentum we have delivered have reenergized leadership, faculty and staff across the enterprise. We believe we are in a strong position to achieve long term success both operationally and financially and as always guided by our vision, mission and values that reward our students, employees and stakeholders. With that, let me turn the call over to APEI's CFO, Rick Sunderland.

Speaker 3

Thank you, Angie. Total revenue in the Q1 was $154,400,000 up $4,700,000 or 3.2 percent from the prior year period and exceeded our Q1 guidance. 1st quarter revenue growth was driven by increased revenue at APUS and Hondros, partially offset by revenue declines at Rasmussen and Graduate School. Total cost of expenses in the first quarter decreased 3.7% compared to the Q1 of 2023 and include a $2,900,000 loss on leases at Rasmussen. This period over period reduction was primarily driven by lower selling and promotional costs in the Q1 as compared to the prior year.

Speaker 3

For the quarter, advertising and marketing support costs decreased $6,600,000 Prior year selling and promotional costs include $2,400,000 in marketing transition service fees related to the termination of the Collegius marketing contract at Rasmussen. Depreciation and amortization expenses decreased year over year due to the full amortization of Rasmussen definite lived intangible assets in 2023. These decreases were partially offset by higher general and administrative costs. Current quarter general and administrative costs include $1,900,000 in information technology transition service costs added back to adjusted EBITDA. Excluding information technology transition service costs, general and administrative expenses increased less than 3% as compared to the prior year period.

Speaker 3

1st quarter diluted loss per common share was a loss of $0.06 compared to a loss of $0.38 in the prior quarter and again exceeded 1st quarter guidance. For the quarter, adjusted EBITDA was 17,100,000 compared to $7,000,000 in the prior year period. The Q1 results exceeded guidance and represented an adjusted EBITDA margin of 11% compared to 4.7% in the prior year quarter, reflecting the revenue growth and lower operating expenses. We exceeded Q1 guidance primarily due to actual expenses being lower than forecasted as follows: compensation and benefits costs lower by 2,000,000 dollars advertising costs at $1,000,000 lower than forecast and $3,000,000 of lower information technology and other general and administrative costs. At APUS, 1st quarter revenue increased 9% as compared to the prior year to $80,700,000 due to a nearly 3% increase in net course registrations and roughly 6% due to tuition and fee increases implemented in the 2nd and third quarters of last year.

Speaker 3

For the quarter, net course registrations increased 2.8% despite lower advertising and marketing support costs compared to the prior year quarter. In total, EBITDA margin at APUS increased 5% to 30% for the quarter. The increase in margin is primarily due to increased revenue and lower advertising and marketing support costs. At Rasmussen, 1st quarter revenue was $53,100,000 a decrease of 7.5% compared to the prior year due to lower average enrollment during the quarter, partially offset by tuition increases in the Q1 of 2023 2024. As Angie mentioned, the year over year enrollment decreases have narrowed for the past 4 quarters.

Speaker 3

We continue on our path to show positive enrollment trends in late 2024. We again saw improvement in Rasmussen's EBITDA loss for the quarter After adjusting for last year's marketing transition cost and this year's lease termination expense, Q1 Rasmussen EBITDA loss was a loss of $2,600,000 compared to an EBITDA loss in the prior year period of $4,500,000 an approximate 40% improvement year over year. The 1st quarter EBITDA loss improvement was driven by lower advertising costs and marketing support costs as well as labor savings from the 2023 cost realignment. At Hondros, 1st quarter revenue was $16,400,000 up 25% as compared to the prior year period due to continued growth in enrollments and the 2023 tuition increase. For the quarter, Hondros total enrollment grew 22% to approximately 3,300 students, the 2nd consecutive record setting quarter for enrollments.

Speaker 3

The increased revenue combined with effective cost management delivered positive EBITDA of $300,000 for the Q1 compared to an EBITDA loss of $1,000,000 in the prior year period. Revenue in graduate school included in corporate and other was $4,300,000 compared to $5,200,000 in the prior year period, primarily due to lower enrollments in the quarter amid a slower start to the year in part caused by delays in approval of the U. S. Federal budget. At March 31, 2024, total cash, cash equivalents and restricted cash was $153,200,000 an increase of $8,900,000 from year end 2023.

Speaker 3

For the Q1 of 2024, cash flow from operations was $20,700,000 an increase of $8,000,000 or 63% as compared to the prior year. CapEx for the quarter was 6,200,000 dollars Free cash flow defined as adjusted EBITDA less CapEx was $10,800,000 compared to $3,800,000 a year ago. Principal on API's term loan at March 31 is unchanged from year end at $99,000,000 With unrestricted cash of $125,000,000 API continues to be net cash positive. Additionally, there are no borrowings under API's $20,000,000 revolving credit facility, which remains fully available. During the quarter, we repurchased 251,000 shares of common stock for an aggregate purchase price of 2,800,000 dollars Turning now to the Q2 2024 outlook.

Speaker 3

APUS total net course registrations are expected to be between 89,500 to 92,200 registrations, an increase of between +1.5 percent and+4.5 percent over the prior year period. At Rasmussen and Hondros, 2nd quarter student enrollments are actual because of the quarterly starts at these schools. At Rasmussen, 2nd quarter total on ground healthcare enrollment decreased 9% to approximately 6,000 200 students, while total online student enrollment increased 4% year over year to approximately 7,400 students for an aggregate enrollment of 13,600 students, which is a 2% decrease when compared to the Q2 of 2023. At Hondros, 2nd quarter total student enrollment increased 10% year over year to approximately 3,300 students, the highest enrollment ever at Hondros. In the Q2 of 2024, consolidated revenue is expected to be between $153,000,000 to $155,000,000 The company expects net loss to common shareholders to be between a loss of 2,000,000 and income of $800,000 or between a loss of $0.11 and positive $0.05 per diluted share.

Speaker 3

Adjusted EBITDA is expected to be between $8,000,000 $12,000,000 for the Q2 of 2024. For the full year 2024, as Angie shared, we anticipate consolidated full year 2024 revenue in a range of 620,000,000 dollars to $630,000,000 We are also increasing our adjusted EBITDA guidance and now expect it to range between $60,000,000 to $70,000,000 for the full year 2024. Our CapEx estimate of between $17,000,000 $20,000,000 for the year is unchanged. With that, operator, we would like to open the line for questions.

Operator

Thank you. The floor is now open for questions. And your first question comes from the line of Jasper Bibb with True Securities. Please go ahead.

Speaker 4

Hey, good afternoon. With the goal to get Rasmussen back to total enrollment growth in the back half of the year, how should we think about what that would mean for segment EBITDA margins there if you're successful?

Speaker 3

Hey, Jasper, it's Rick. As we've said, the fixed cost nature of the campus based business would have high accretion with increases in those enrollments, right? And I think we've previously said, we expect RASK to get to breakeven EBITDA by the end of the year. And so you see reaching breakeven enrollment, increasing enrollment should result and will result in breakeven or positive EBITDA.

Speaker 4

Thanks. That makes sense. And then, it seems like a good pickup in revenue per student at APUS this quarter. Can you just outline the drivers of that, whether it was pricing increases, mix and any expectations on revenue per student over the balance of the year?

Speaker 3

It's both mix and the modest tuition increases Jasper. There is also an impact on if you just do a straight calculation of revenue per student of the timing of the start at APUS, The monthly start is the 1st Monday of each month. And so as that maybe earlier in the month with the first of the month start, you're going to see a little bit higher revenue per student than if that start is pushed off to the 7th of the month, right, whatever the day the 1st day of the month is. So it's a combination of mix, price increases as well as just the simple timing of those monthly starts.

Speaker 4

That's helpful. Last question for me. I wanted to dig a bit more into the Florida Rasmuson programs that were put on probation in March. Could you outline for us, I guess, first of all, if that creates any restrictions on your ability to enroll new students at those campuses and just what you're doing kind of in response to that?

Speaker 2

Hi, Jasper, it's Angie. Thanks for the question. And you know that we've been paying careful attention over the last, year and a half around our quarterly NCLEX pass rates because we want to show quarter over quarter improvement. What's interesting about those two campuses and frankly is true of all of our campuses in Florida is that if you were to exclude Q1 of 2023 from the calculation for all of 2023, so doing 2Q through 4Q, our each of our Florida campuses would significantly pass. And so while modeling we recognize that that's not how the state does the calculation.

Speaker 2

But the reason why I'm pointing this out is because we saw a significant number of laggard test takers taking the exam in 1Q 2023 because there were concerns about what the next gen NCLEX exam would bring and those folks hadn't been educated under a next gen curriculum. And so we saw a significant number of beyond 45 day test takers in Q1. And we do not see the results of that continuing in Q2 through Q4 of 2023 nor in Q1 of 20 24. So and just to put a finer point, on one of those two campuses, Fort Myers actually missed the Florida benchmarks for the year by less than 8 points and in particular Ocala missed the benchmark by 0.3%. So we do not have any limits on our ability to enroll students in those programs and we are very bullish about the continued improvements that we expect in our full year 2024 NCLEX pass rates in Florida.

Speaker 4

All very helpful context. Thank you.

Speaker 2

Thank you.

Operator

And your next question comes from the line of Alex Paris with Barrington.

Speaker 5

Please go ahead.

Speaker 6

Hi, guys. Thanks for taking my question. Congratulations on the beat and raise. I thought maybe I would dig a little bit into critical investments planned for 2024. You've sort of telegraphed that, that would be the case.

Speaker 6

You have a higher CapEx expectation for the full year. I'm just wondering if you can review for us what are the relative or what are the investments per institution, Rasmussen, APUS, Hondros? And how are they coming along? And are they front end loaded or back end loaded or evenly spread?

Speaker 2

Hi, Alex. It's Angie. I'll start and then I'll ask Rick to follow along if I've missed anything. Let's start with Hondros because there are some important things happening there. We as I mentioned in my comments, we have 2 campus moves happening at Hondros beginning in the Q3 of 2024.

Speaker 2

Those are critical. When we bought Hondros over 10 years ago, along with the purchase came 10 year leases with some premium lease payments to the previous owner of Hondros. Those leases are expiring and we are finding ourselves presented with a great opportunity to locate to more favorable locations and at lower lease costs. So while we may see some very short term overlap in expenditure or a modest disruption in enrollments as a result of the move. We've already seen from moves of other campuses at Hondros really meaningful improvement, Dayton being

Operator

the most notable in 2024,

Speaker 2

where we've seen meaningful improvement in enrollment and margin expansion for that campus. The second thing that we're investing in at Hondros is the MA program. We've talked about this in prior quarters and that program is launching in Ohio in Q3 and we look forward to sharing more results about that program as we have this call upcoming in the next quarter. Turning our attention to APUS. There are investments that we had signaled in the prior quarter that we will continue to invest in throughout the rest of 2024 around modernizing the curriculum.

Speaker 2

There is a focus on both refreshing the content in some of our core programs and at the same time looking for ways to incorporate a more digital forward content and focus into the curriculum at APUS. So we're very excited about how that will help us attract different student segments into APUS in future quarters. Those are really the primary investment areas for the time being, Rick, unless I've missed anything that you would want to share.

Speaker 3

Yes. I would just say in terms of timing, Alex, it's more weighted to 1H than it is to 2H. A lot of the CapEx is in the campus investments as Angie just described. And with the moves being completed early in the Q3, we're going to see a disproportionate level of investment in 1H. The other large investment is in information technology.

Speaker 3

We've talked in the past and you can see in the queue about the various moves that are being made related to IT infrastructure. We're going to be in sourcing, Collegius and then various parts of the IT operations are being outsourced. So there is significant investment that's going on related to technology infrastructure associated with the various phases of that project. So more heavily weighted to 1H, Alex, than 2H.

Speaker 6

Good. Super helpful. And then question is CapEx sort of peaking this year or do you expect a similar level going forward?

Speaker 3

Well, certainly with the campuses, we're not going to be moving campuses every year. We do so you're going to see probably a moderation because of that. And then on the technology side, probably similarly, You can see and I think you commented how it's up year over year. Last year, 2023 was probably a little bit lower than normal simply because of the financial performance of both Rasmus and InHydro. So we probably pulled back on some of our capital investments.

Speaker 3

We're catching up this year in some ways. We're investing in new campuses, which is really important. So I would say you'd see some moderation off of this year's number as you go forward.

Speaker 2

The one additional thing I would share as we look into the end of 2020 4 and into 2025 is that upon acceptance of the 2023 financial results for APEI, Rasmussen will no longer be subject to growth restrictions. And so consequently, we will have the opportunity to look at opening campuses and investing in programs at Rasmussen. And so that could be a place where we decide to invest into future growth at RAS.

Speaker 6

Great. That makes sense. Then I guess just the last little of the cats and dogs, FAFSA, obviously the delays there, the big mess that's going on. You don't have the traditional 18 to 22 year old. You don't have the traditional semesters usually.

Speaker 6

I mean, there might be exceptions there. What do you think your exposure is to FAFSA, FAFSA delays?

Speaker 3

Alex, to date, this is Rick. It really hasn't been much of a headwind, particularly at Apis with their monthly starts. There's probably a minimal impact at Hondros and RAS, which have to your point a more traditional kind of quarterly cadence. But really at this point, Alex, it hasn't been a significant matter at any of those schools.

Speaker 6

Good. That's helpful. I'll get back in the queue. Thanks guys.

Speaker 2

Thank you.

Operator

Your next question comes from the line of Raj Sharma with B. Riley. Please go ahead.

Speaker 5

Yes. Thank you for taking my questions. Again, congratulations for really good results and the beat and raise. I wanted to kind of touch upon again Rasmussen and there were certain changes that were put in place. There was new management that was integrated into the operations and enrollments were an issue.

Speaker 5

Would you characterize rasmussen as under control in terms of enrollments? And then could you give some color on the cost control at Rasmussen?

Speaker 2

Sure. I'll start Rick and then certainly weigh in here for me. Nice to hear from you, Raj. So yes, the management team has now been in place for a year. 1st and foremost, there is clarity around the campus program combinations for all of our campus based programs and the marketing investments that we're making to grow and reweight the mix, so that we are growing both nursing and non nursing on the campuses.

Speaker 2

So that has been a keen focus for that management team and the results are certainly paying off as you could see the continued improvement in the trends that we've seen on the campus based enrollments. Certainly, online has seen significant improvement and we've got positive online enrollments for this quarter and that trend has continued for last several quarters. So the marketing is aligned now with our growth areas and that has been a significant amount of work in partnership between the Rasmussen management team and the API marketing team. And so both are pleased with the progress that we've made there. As it relates to the cost structure, there was a significant amount of rightsizing of costs both at Rasmussen in the 3rd Q4 of last year as well as at APEI related to some of the services particularly in IT and in marketing that were being provided to Rasmussen.

Speaker 2

One of the most notable is the relationship the IT relationship with the 3rd party outsourcer, Collegius. We are in the final stages of migrating that IT infrastructure from the 3rd party to APEI and its providers And that will lead to a significant margin expansion for Rasmussen in beginning in the Q4 of 2024 and certainly we'll see the benefit of that for the entire year of 2025. I'll turn it over to Rick to see if he's got anything else he wants to share.

Speaker 3

Yes. Hey Raj, just to add a few things. S and P in total is down $7,500,000 almost $6,000,000 of that is at RAS. You have the $2,400,000 Collegius fee that didn't repeat. But marketing costs, advertising, marketing support are down almost another $2,000,000 So we have to thank the marketing team for optimizing while delivering on what we consider a favorable enrollment trend at Rasmus.

Speaker 3

And to Angie's point, just across the board, good cost control by the entire management team. So we applaud that. And particularly in the area of labor, probably leveraging off of some of the rightsizing that was done last year, but also, continuing that cost focus. And one of my favorite terms is trim while investing. So they are actually investing in areas like admission staff, which is important to drive the enrollment trend.

Speaker 3

So it's not all about reducing, it's also about investing where it makes sense to deliver the results that we expect to be seeing later this year and beyond.

Speaker 2

I'll just do one shout out to the academic team who has been focused on with the admissions enrollment team on retention. There's been a significant improvement in particular in 1st term and second term retention in that partnership between those two teams. And as you know, if you don't have to source a new student to backfill for that revenue, you keep the students that you have and allow them to persist and graduate, everybody wins. And so that has been a significant effort and there's been meaningful improvement in retention at Rasmuson as a result.

Speaker 5

Got it. That's really helpful. And then on the enrollment side on Rasmussen, I see really improving you can even see the improving enrollment trends. Would you say we are close to a bottom?

Speaker 2

As we have signaled now for a few quarters, Raj, we do believe that we will, in the back half of twenty twenty four, see enrollment trends turn positive. So yes.

Speaker 5

Got it. Right. Got it. That's very helpful. And then on the AR collection side, are we all kind of current on the with respect to the Army?

Speaker 3

Raj, there remains an amount that is hung up in what I'll call the GoArmyEd transition. So that's quite old. It's not a significant amount of money. We continue to work directly with the relevant parties at the Army to clean that up. So there is an amount small compared to the total that is beyond that, let's call it 60 days, 90 days from start, which is how we measure our effectiveness from a collection side.

Speaker 3

The system is functioning as designed at this point, billing monthly, collecting monthly. And so it's really just the tail dollars associated with that trend.

Speaker 2

And those amounts are from 2021 and 2022, right? They're not amounts getting generated now, right?

Speaker 3

No, no. We're collecting on the current billings, which is reflective of the system working. But there is still some cleanup to do and we're diligently working to clean those up with the Army, right? They're still engaged directly with the relevant parties at Army that collect those older amounts.

Speaker 5

That's great color. Thank you. And just lastly on Grad School, I know it's a much smaller business. Any sort of color on the margins were slightly worse year on year due to a reduction in revenues, any sort of plans or just some color?

Speaker 2

Sure. So grad school, as we reported, I think, in our last earnings call, had been affected by the government's continuing resolution or the fact that the budget had not been passed. And many of the agencies who use their government funding for training dollars had to pause their training. We are now that we're out from underneath that, there is a renewed focus from that team on both individual registrations by individual federal workers as well as group training that is now getting scheduled. So there is a significant push to close that gap between now and the end of the year.

Speaker 2

And the entire both graduate school and API team are leaning in to do what we can do to close that gap in the revenue for the remainder of the year.

Speaker 5

Great. Thank you. Thank you for answering my questions. Again, congratulations on raising the guidance and the beat and raise. I'll take it offline.

Speaker 5

Thank you.

Speaker 2

Thanks very much, Raj.

Speaker 3

Thanks, Raj.

Operator

There are no further questions at this time. Thank you everyone for your participation. This concludes today's conference call. You may now disconnect.

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American Public Education Q1 2024
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