Title

Presentation

American Public Education, Inc. beats earnings expectations. Reported EPS is $0.41, expectations were $0.15.

Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI First Quarter Earnings Conference 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. [Operator Instructions] Thank you. And I would now like to turn the call over to Brian Brian Prenoveau. Please go ahead.

Brian Prenoveau: Thank you, and good afternoon, everyone. Welcome to American Public Education’s conference call to discuss first quarter 2025 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer; Rick Sunderland, Executive Vice President and Chief Financial Officer; and Steve Somers, 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 presentations 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 and state government politics or 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 or 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, our expectation [ph] for growth, the combination of our institutions, campus and corporate center consolidation, the redemption of our preferred stock, future government and regulatory actions 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 measures we use and the most directly comparable GAAP measures 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 and operations and should be only 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 President and CEO, Angela Selden. Angie, please go ahead.

Angela Selden: Thank you, Brian. Good afternoon, and thank you for joining American Public Education’s first quarter 2025 earnings call. Overall, we are very pleased with our outperformance in the first quarter of 2025 and are raising our full year adjusted EBITDA guidance by $2 million on both the top and bottom ends of the range to $77 million to $87 million. We have 4 areas to highlight during today’s call. First, APEI outperformed first quarter 2025 financial guidance. In the first quarter, we outperformed guidance for revenue, adjusted EBITDA, adjusted EBITDA margin and net income, continuing the trend observed in the latter half of 2024 to greater profitability as enrollments and registrations continue to increase. Our focus on stabilizing and growing enrollment at Rasmussen and in particular, growing our campus-based nursing enrollment is resulting in meaningful year-over-year improvement in profitability.

Rasmussen contributed a positive $5 million of adjusted EBITDA swing from a minus $2.6 million loss in first quarter of ’24 to a positive $2.4 million in 1Q ’25. Importantly, this trend is continuing into Q2, where Rasmussen is seeing an 8% year-over-year enrollment improvement with growth in both online and campus-based enrollments. Net income to common shareholders increased a positive $0.5 million from a negative $6.2 million net loss. Next, we are improving operating leverage, driven by increasing enrollment and focused disciplined cost management. Revenue of $164.6 million increased 6.6%, while adjusted EBITDA increased nearly 25%. Adjusted EBITDA margin expanded by nearly 200 basis points to 12.9% versus 11% in Q1 of 2024. We delivered net income of $7.5 million in the first quarter, historically our lowest quarter as compared to a net loss of $1 million in the first quarter of 2024.

Also, 2025 continues to be a year of simplification at APEI. We intend to redeem our preferred shares prior to the end of the second quarter, which would be accretive to net income and earnings per share, saving approximately $6 million in dividend expense annually beginning in 2026. In January, we announced a plan to combine our III degree granting institutions into a single consolidated institution. Last week, the Higher Learning Commission, our accreditor, confirmed that we are on their June agenda for review. As such, our combination plans remain on track, and we expect to close by year-end 2025, assuming all regulatory and accreditation steps have been completed. We have closed some underperforming campuses, terminated expensive leases and contracts and have 2 corporate buildings held for sale with anticipated net proceeds of more than $20 million from both, which are expected to close in Q3 of ’25.

These steps should strengthen the balance sheet and cost structure, resulting in significant net income and EPS growth in 2025 and beyond. Finally, at Graduate School USA, due primarily to DOGE initiatives, including government employee headcount reductions and the uncertainty around future budgets for training and professional development, we have held constant APEI’s full year revenue guidance and have begun to explore the best path forward for graduate school. Overall, we are increasing 2025 net income guidance expected to be between $23 million and $30 million, and we are increasing adjusted EBITDA guidance expected to be between $77 million and $87 million. We are maintaining the full year revenue expectation of $650 million to $660 million, moderated by the uncertainty at graduate school.

Our CFO, Rick Sunderland, will give a deeper dive into updated 2025 guidance. Now I’ll provide more details about 1Q ’25 results, starting first with APEI’s nursing and health care institutions. Rasmussen continues to produce strong results. The 3-pronged strategy to improve outcomes, manage costs and grow enrollments began bearing fruit in the second half of ’24 and continues in the first half of ’25. Rasmussen’s enrollment increased 7% in 1Q ’25 and 8% in 2Q ’25, representing the fourth consecutive quarter of year-over-year enrollment increases. As previously discussed, Rasmussen’s fixed cost structure allows positive enrollment trends to significantly enhance the flow-through margin, leading to improved operating leverage and profitability.

At Hondros, as previously reported, 1Q ’25 enrollment was strong with 9.6% growth as compared to 1Q ’24. 2Q ’25 enrollment continues a positive trend, increasing 13.5% year-over-year to 3,700 students. We’re building on the momentum of 2024 into 2025 at both Rasmussen and Hondros with 2Q ’25 reported student enrollments as actuals because these quarterly starts have already begun. Now let’s turn our attention to APEI’s online university, educating our nation’s military, veterans and their families currently called APUS. First, I would like to congratulate the over 18,000 students who received their diplomas from APUS last weekend. Here are some impressive statistics and a fun fact. 66% of APUS graduates are active duty military, national guard or reserves, 19% are veterans and 4% are military spouses or dependents.

APUS conferred over 13,500 associates or bachelor’s degrees, 4,600 master’s degrees and 11 doctoral degrees. Over 4,200 or 23% of APUS graduates this year are earning their second AMU or APU degree or certificate. And the fun fact, the oldest graduate is 81 years old and the youngest 17 years old. Now turning our attention to 1Q ’25 for APUS. Overall net course registrations increased 3.5% year-over-year. 2Q ’25 registration guidance at the midpoint is 5.5%, showing a sequential improvement in year-over-year growth. In summary, building on our successful performance in ’24 and the sustained momentum in the first half of 2025, we are optimistic about our future growth prospects and our capacity to convert that growth into enhanced profitability, both in terms of adjusted EBITDA and diluted EPS.

We remain laser-focused on educating service-minded students, offering classes, certificates and degrees in fields that have high demand. APEI enables students to experience a valuable lifelong return on their educational investment. Our mission remains to power purpose, potential and prosperity for those in service to others. Each of our education units was purpose-built to deliver accessible and affordable higher education and training across a diverse range of subjects. I’d like to take a moment to thank each of our approximately 6,000 employees and educators that work tirelessly to make our mission a reality each and every day. With that, I would like to turn the call over to APEI’s CFO, Rick Sunderland.

Rick Sunderland: Thank you, Angie. Total revenue in the first quarter was $164.6 million, an increase of $10.1 million or 6.6% from the prior year period. First quarter revenue growth was driven by increased revenue at Rasmussen, APUS and Hondros. Revenue growth at Rasmussen and APUS outpaced enrollment and registration growth due to tuition and fee increases implemented last year. Total cost and expenses in the first quarter were $152.3 million, a 2% increase compared to the first quarter of 2024. The increase was primarily driven by increases in employee compensation costs and advertising costs, partially offset by a decrease in information technology costs and depreciation and amortization expenses. In the first quarter, net income available to common shareholders was $7.5 million compared to a net loss of $1 million in the prior year.

First quarter diluted net income per common share was $0.41 as compared to a loss per diluted share of $0.06 in the prior year period. First quarter adjusted EBITDA was $21.2 million, a $4.2 million or 25% increase over the prior year. This was above the top end of the guidance range and represented an adjusted EBITDA margin of 12.9% as compared to 11% in the prior year period. The outperformance to guidance was due in part to military registrations at APUS, student retention at Rasmussen and the timing of approximately $1.4 million of expenses. At APUS, first quarter revenue increased to $83.9 million, a 4.1% increase as compared to the prior year period. First quarter net course registrations increased 3.5%. For the quarter, APUS EBITDA was $25.2 million and EBITDA margin was 30% as compared to 30.2% in the prior year period.

At Rasmussen, first quarter revenue was $59.3 million, an increase of 11.5% as compared to the prior year. In the first quarter, online enrollment increased 11.1%, on-ground enrollment increased 3.2% and total enrollment grew 7.4% to 14,500 students as compared to the prior year period. In the first quarter, Rasmussen delivered positive EBITDA of $2.1 million as compared to an EBITDA loss of $2.7 million in the prior year. At Hondros, first quarter revenue was up 7.5% to $17.7 million as compared to the prior year period due to continued enrollment growth. For the quarter, Hondros total enrollment increased 10% to approximately 3,600 students. At Hondros, the first quarter EBITDA loss was $0.2 million as compared to EBITDA of zero breakeven in the prior year period.

Revenue at graduate school included in corporate and other was $3.7 million as compared to $4.2 million in the prior year period. For the quarter, graduate school EBITDA was a loss of $2.1 million compared to an EBITDA loss of $1.1 million in the prior year period. First quarter cash flow from operations was $37 million compared to $20.7 million in the prior year. At March 31, 2025, total cash, cash equivalents and restricted cash was $187.5 million, an increase of $28.6 million from year-end 2024. The increase in cash flow from operations and cash was driven by the collection of tuition assistance, or TA, accounts receivable at APUS and a reduction in operating losses at Rasmussen. CapEx in the first quarter was $3.9 million compared to $6.2 million in the prior year.

Looking ahead, we expect to complete the sale of 2 buildings in Charlestown, West Virginia in the third quarter with proceeds from the sale of approximately $22 million. Principal on API’s term loan at March 31 was unchanged at $96.4 million and our $20 million revolving credit facility remains fully available. With unrestricted cash of $161.6 million, API continues to be net cash positive. As disclosed on our last earnings call, we intend to redeem all of our Series A senior preferred stock in the second quarter. Turning now to our second quarter and full year outlook, which covers forward-looking statements subject to the various risks noted earlier. For the second quarter 2025, APUS total net course registrations are expected to be between 93,500 to 96,100 registrations, representing a 4% to 7% increase when compared to last year.

At Rasmussen and Hondros, second quarter student enrollments are actual because of the quarterly starts at these schools. At Rasmussen, second quarter total online enrollment increased 11.6% to approximately 8,300 students, while total onground enrollment increased 3% to approximately 6,400 students for an aggregate enrollment of approximately 14,700 students. This represents an 8% increase when compared to the second quarter of 2024 and is our fourth consecutive quarter of overall positive year-over-year enrollment growth at Rasmussen. At Hondros, second quarter total student enrollment increased 14% year-over-year to approximately 3,700 students. In the second quarter of 2025, consolidated revenue is expected to be between $160 million and $162 million.

I will note that second quarter and full year revenue guidance is negatively impacted by the increasing headwinds at graduate school due to changing federal priorities and policies and including actions taken by the Department of Government Efficiency, or DOGE, which have resulted in uncertainty relating to the provision of career learning and contract training to the federal workforce. The company expects second quarter net loss available to common shareholders to be between a loss of $2.5 million and $0.7 million or between a loss of $0.13 and $0.04 per diluted share. Our second quarter guidance for net loss available to common shareholders includes a redemption premium on the planned redemption of our Series A senior preferred stock of approximately $2.9 million and expected costs related to our previously announced combination of APUS, Rasmussen and Hondros of approximately $1.7 million.

Second quarter 2025 adjusted EBITDA is expected to be between $11.5 million and $14 million. For the full year 2025, there is no change to our anticipated consolidated revenue of between $650 million and $660 million. We are increasing our full year 2025 adjusted EBITDA guidance to be between $77 million and $87 million and net income available to common shareholders to be between $23 million and $30 million. Our full year net income guidance assumes the redemption of our preferred equity in the second quarter, which will reduce preferred dividend payments by approximately $3 million in 2025 and $6 million annually thereafter. This full year adjusted EBITDA guidance translates to free cash flow expectations for the full year, defined as adjusted EBITDA less CapEx to be between $55 million and $69 million.

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

Angela Selden: Thank you, Rick. Recent financial and operating results show that we have strengthened our institutions and have established a solid foundation for growth this year and for years to come. We are also prioritizing simplification in 2025, and there will be financial benefits that will be realized across 2025 and beyond. As announced in January, we are planning to combine APUS, Rasmussen and Hondros into one consolidated institution, APUS or American Public University System, which now we’re referring to as the system. Combining and expanding our nursing campus footprint will allow us to strengthen our ability to address the growing demand for nursing and other clinical roles in the health care ecosystem by allowing Rasmussen programs to be offered at Hondros campuses and for us to think about and expand our campus footprint.

It will also allow us to accelerate growth in our military, veteran and families division to be called APUS Global. And with that, I’d like to hand it back to the operator to begin our question-and-answer session. Operator?

Operator: Thank you, Angie [Operator Instructions]. And our first question comes from the line of Jasper Bibb with Truist Securities. Please go ahead.

Jasper Bibb: Hey. Good evening, everyone. Really strong margin for APUS in the quarter, and I think you’re actually dealing with some downtime on the Army and Air Force Tuition Assistance, portals too. So just hoping you could outline if there was a margin or enrollment headwind from the TA downtime in the first quarter and maybe if you’re expecting any catch-up in the second quarter there as those systems should be back online for the full quarter?

Angela Selden: Hi, Jasper, great question. Thank you for that. I’m going to shoot that to Rick, please.

Rick Sunderland: Okay. Thank you. Hey, Jasper, Actually, the team really – at APUS really organized and through a variety of communication channels was really able to minimize the impact of the portal outage. The outage ended just prior to the end of the quarter, right? And so they were able to pick up the registrations that otherwise would have been lost. And so you can see from the margin that we reported, it had really no effect on the on the margin. So if you want to piece the two quarters together, you can see registrations increased about 3.5% in the first quarter, and we’re guiding to roughly 5%, 5.5% in the second quarter. So really, the effect, if there was any, was minimal in the first quarter, and we’re seeing a slight improvement at APUS in the second quarter in terms of registration guidance.

So all in all, we have to be very proud of the team at APUS for working with the various ESOs, education service officers to get their students registered, which is a real benefit to the students.

Jasper Bibb: Thanks. And then you mentioned the higher graduate school drag on the EBITDA guide and then also the DOGE impact there. I know there’s some seasonality in the business, so maybe that 1Q loss is maybe not representative of you’re expecting for the full year. But if you held back the guidance increase for graduate school, is there any way you could maybe frame for us what guidance now assumes for EBITDA losses at graduate school in ’25?

Angela Selden: Thanks for the question, Jasper. Certainly, it’s a developing matter. As we know, there is talk that the DOGE office is potentially even sunsetting and the leader may be going back to other businesses that he has responsibility for. So the graduate school downside is something that we are not able to give guidance on right now and predict. What we do believe is that the — the adjusted EBITDA guidance that we gave here for the full year by raising $2 million is something that we are confident includes what we believe is the downside at graduate school and the fact that we have maintained the revenue guidance also includes what we believe is the downside of graduate school. So we are confident in the guidance that we’ve given, and we look forward to seeing what unfolds in the next couple of quarters related to graduate school.

So in addition to very aggressively managing our cost at graduate school to line up with that reduced revenue, we are also looking at different options and considerations for the path forward for graduate school.

Jasper Bibb: Makes sense. Last one for me. Really impressive enrollment growth at Rasmussen in the quarter. And I apologize if I missed it, but did you give the number of nursing campuses that met the state NCLEX threshold in the first quarter?

Angela Selden: We’re doing such a good job on NCLEX that we are not reporting on that any longer, but I can tell you that we had all but one campus program combination. So ’24 of ’25 now meeting that — meeting those benchmarks. And so we believe that given the consistent reporting success that we’ve had in the last really 4 quarters, we have chosen not to continue to report that since it does seem to be behind us in terms of any kind of NCLEX issues that we have.

Jasper Bibb: Okay, great. Thank you for taking the questions.

Angela Selden: Thanks, Jasper.

Operator: And our next question is from Eric Martinuzzi with Lake Street Capital Markets. Please go ahead.

Eric Martinuzzi: Yes. I was pleased to see the 8% enrollment growth at Ras, and it looks like that kind of goes in line with the 7% from Q1. Just wondering what your thoughts are for 2025. Is this a kind of a – we can expect 5% to 10% range? Is that – are you comfortable with that?

Angela Selden: Hi, Eric. Welcome. Thanks for joining the call today. We don’t give individual institution guidance beyond the next quarter. What we do is we give full year guidance for the enterprise overall. But I can tell you that we continue to be pleased with the momentum that we see at Rasmussen. This is now – Q2 is now the fourth consecutive quarter of positive enrollment growth. And we don’t see any headwinds as it relates to Rasmussen’s enrollment in the back half of the year.

Eric Martinuzzi: Got it. Understand. And then the – you’ve submitted for approval on that – getting Rasmussen cleared for potential expansion. Any update there from the Department of Ed?

Angela Selden: Great question. Last week, I had the opportunity to meet with a senior member of the Department of Education, and we discussed the matter of getting our second year of audited financials, which we submitted in really early Q2 of 2024, approved. And he has taken that matter upon himself to get resolved, and we’re expecting to hear some outcome on that in the near term.

Eric Martinuzzi: Okay. And then, Rick, curious on the CapEx. I think your guidance is unchanged here at 18 o 22. If I was to spread that across the year, it would seem like Q1 was a little bit light. What’s the expectation for kind of quarter-by-quarter, how we should think about CapEx?

Rick Sunderland: Eric, we don’t spread that. It depends on facility and IT investments, right? And those projects they have anticipated start dates, but sometimes the timing changes due to, call it, a permitting issue at one of the facilities or a reprioritization of projects within the IT department. So I don’t – I’m sorry, I don’t want to spread that. We feel confident that we’ll get comfortably within that range, and you did calculate it correctly. I think for purposes of the modeling, I would do it equal across the orders, if you will, for the remainder because it probably won’t vary much above or below that as a kind of just as a numbers matter.

Eric Martinuzzi: Got you. Okay. Thanks for taking my questions and good luck on the rest of the year. And good luck on Q2.

Angela Selden: Thanks very much.

Operator: Our next question comes from the line of Stephen Sheldon with William Blair. Please go ahead.

Stephen Sheldon: Hey, thanks. And really nice job in the quarter. First one here, just as we think about the profit trajectory at Rasmussen, are there more levers that you could pull to accelerate the profit trajectory? Or at this point, will it mainly be about continued leverage of fixed cost as you continue to grow the top line?

Angela Selden: Hi, Stephen. Thanks for the question. I’ll start and then ask Rick to add some commentary. So as you know, when you think about a half of the revenue at Rasmussen is campus-based revenue. A big focus for us continues to be what we call filling the back row, making sure that each of the classes and sections is maxing out the capacity at our current campuses. And so that will allow us to expand the margin and grow the revenue at the same time. We have, with our new President there, Mark Arnold, a focus on the right program mix by campus to be sure that the program mix that we offer aligns with both the TAM of students available to take those courses, as well as employer demand for those programs. So we’ll be making some tweaks to ensure that we’re not changing the programs that we have the opportunity to expand enrollments in and also rededicating space that may be dedicated to programs where we have less addressable market.

So we’re really focused on optimization within the campuses. We also continue to see great success in the effectiveness of our marketing related to our nursing programs. And we are seeing the improvement in lead to start conversion as a result of the improvement in the effectiveness of marketing. And so we think those levers will all help us deliver a better profitable revenue mix in 2025 and see top line growth as well.

Stephen Sheldon: Great. Thanks. And then just a higher-level follow-up. There’s typically been countercyclicality in higher ed enrolments, so how are you thinking about APEI’s ability and, I guess, competitive positioning to capture enrollment share across your institutions if we are in a backdrop where unemployment moves higher over the rest of this year and into next? And have you seen any signs that top of funnel, I guess, applications are picking up? So yes, how you’re positioning to benefit from it if it does happen, are you seeing it at all yet?

Angela Selden: Well, as I think you’re well aware, the two businesses that we have, our military business and our health care business, both have natural moats around them. The military business continues to see improvement in growth and growing our share of the students in active duty who are taking classes with APUS. So we continue to see expansion there, but we think that’s somewhat insulated. APUS is somewhat insulated from the cyclicality of the market because it’s really focused on the number of military and veteran students who are taking courses. At Ras and Hondros, we are seeing continued, as you can see, high single-digit case of Hondros Q2, mid-double-digit in enrollment growth. And so we continue to see people coming to the nursing profession as an important way for them to have long-term job security and a great ROI on their educational investment.

So we do believe that our momentum there is can be attributed to our successful marketing effectiveness improvements and the countercyclicality of, in particular, a nursing job, which we know will have durability for the next 40 years.

Stephen Sheldon: Makes sense. Thank you.

Angela Selden: Thanks very much.

Operator: And our next question comes from Alex Paris with Barrington Research. Please go ahead.

Alex Paris: Hi, guys. Thanks for taking my questions. And congratulations on the strong start to the year.

Angela Selden: Thanks, Alex,

Alex Paris: A couple of clarifying questions, please. Rick, I think you said something about net income in the quarter that was partially attributed to a $1.4 million in timing of expenses. Could you give us a little color on that?

Rick Sunderland: Yes. Thank you, Alex. There were approximately $1.4 million of expenses that we anticipated incurring in the first quarter that were not due to some timing matters. So they’ve been moved to the second quarter for purposes of that guidance. There were things that were – we thought would process in the quarter that just ended up being delayed. And so it’s a variety of things, Alex, some course materials at Rasmussen being a large matter. And then there were some event-related expenses in the – that we expected at APUS that ended up that they were delayed and late in the second quarter. So it’s one large thing in materials cost at Rasmussen a bunch of little things that all aggregate to about $1.4 million.

Alex Paris: And that’s a pretax number, $1.4 million that…

Rick Sunderland: It is pretax. Yes, I should have said that out. Thank you.

Alex Paris: Yes. I started my question by saying net. So I just wanted to be clear. And then second question with regard to your guidance, I believe you’re talking about the second quarter. The second quarter guide includes a redemption premium of $2.9 million, and that’s in the adjusted EBITDA and net income guidance for Q2?

Rick Sunderland: It’s in the net income guidance, Alex, not the adjusted EBITDA.

Alex Paris: Okay. Yes. That’s below the line. And then the $1.7 million of expected costs related to the combination, was that an impact on full year? Or was that an impact on Q2?

Rick Sunderland: I’m sorry, Alex, repeat the question?

Alex Paris: You said that guidance included two things, one, the redemption premium for $2.9 million and then expected costs related to the combination of $1.7 million.

Rick Sunderland: That’s correct. That’s a pretax number. And yes, if you go to the…

Alex Paris: Okay.

Rick Sunderland: Yes, if you go to the guidance, it’s….

Angela Selden: In Q2, Alex, in Q2. And obviously, then it will be part of the full year, but it will be – it will occur in the second quarter.

Alex Paris: So I would assume that these sorts of expenses would occur in Q3 and Q2, maybe not this magnitude, but more spending on combination.

Rick Sunderland: No, don’t assume that, Alex. If you – we guided to $4 million to $5 million of costs, I think, for the entire year for the combination, right? And so the combination is expected to close in the third quarter, assuming we get all the required approvals. And as Angie said, we’re on track to do that. So I think you would see that tail off in the fourth quarter.

Alex Paris: Okay. Fair enough. And then last question regarding both of those, $2.9 million and $1.7 million. Together, that’s $4.6 million. So net income available to common guidance for Q2 would have been $4.6 million higher had it not been for the redemption and these expected costs related to the combination.

Rick Sunderland: After you tax effect.

Alex Paris: Yes. Okay. After tax effect. Okay. Thank you. Last question on graduate school. You reported revenue of $3.2 million versus $4.2 million. Was there any impact from DOGE or contract cancellations in the Q1 number?

Angela Selden: Yes, it was…

Rick Sunderland: It was little, yes, go ahead, Angie.

Angela Selden: No, go ahead, Rick.

Rick Sunderland: I was going to say it was very limited, Alex, in the first quarter. Revenue year-over-year was only down $500,000 in the first quarter at graduate school. When you look at it, it’s really largely started in the second quarter.

Alex Paris: And we’re – is it sort of that we’re expecting zero from here on out or not that dramatic?

Rick Sunderland: Not that dramatic.

Angela Selden: No, no. There are contracts that have full year revenue associated with them that are continuing to run. There are additional basically cohort-based programs that are continuing to run. And we are seeing individual students continuing to enroll in courses, albeit at a lower pace than what we had seen in the past. And so it is just now in the second quarter where we’re starting to see the effect of that third – that third stream, which is students who individually enroll. We are seeing a slight pickup from the beginning of the quarter. So we’re being very conservative about how we’re forecasting the full year revenue for graduate school presently, and we’re keeping a careful eye on all that we can do to continue to scoop up all those – all that revenue and those enrollments between now and the end of the year.

Alex Paris: But whatever your expectation is, it’s incorporated into the aggregate revenue guidance for the full year, hence, the reason that you didn’t increase that in the quarter here?

Angela Selden: Correct. Correct. Yes. So you can see we’ve got positive registration growth at APUS at Ras at Hondros, right? And so just offset by what we are conservatively anticipating at graduate school. So it is not zero for the rest of the year.

Alex Paris: Got you. And I spent a lot of time on it. I mean the more important things are APUS, Ras and Hondros, which have continued to do very well. So thank you very much for that additional cover. I appreciate it.

A -: Of course. Thank you, Alex. Thank you very much.

Operator: Our next question comes from Griffin Boss with B. Riley Securities. Please go ahead.

Griffin Boss: Hi. Good evening and thanks for taking my question. So just to start off, you mentioned it in the prepared remarks, but just curious if you can remind us what the revenue synergies that you expect to see from this consolidation are, particularly on the health care side of the business?

Angela Selden: Hi, Griffin, it’s Angie. Welcome to the call. Thank you very much for your question. We have not provided revenue synergies specifically, we have talked about categories, where one of the exciting benefits of combining Rasmussen and Hondros together is that Hondros will be able to offer not just the nursing curriculum that Rasmussen has, which includes the early nursing curriculum, as well as the post-licensure, but it also allows Hondros to be able to offer the catalog that Rasmussen offers online as well. So we have talked about categories of synergies, but we have not attributed numbers yet to what we believe the revenue synergies will be.

Griffin Boss: No, that’s great. That’s what I was looking for. So I appreciate the color there, Angie. And just yes, final one for me. I noticed in your EBITDA schedule in the 8-K, you have the interest expense line, which seems to be outsized in 2Q, and I apologize if I missed this, if it was discussed earlier. I’m just curious what’s driving the heavy interest expense in the second quarter. I wouldn’t expect it to be related to the redemption of the preferred stock, but maybe correct me if I’m wrong or if that’s coming from somewhere else.

Angela Selden: Rick, can you address that, please?

Rick Sunderland: Yes. Sure. It includes the preferred redemption premium, which is why it’s a higher number.

Griffin Boss: Okay. All right. Got it. Thank you for – to answer my question. Appreciate it.

Angela Selden: Yes, that will be a onetime hit. So, yeah. Thank you very much. Griffin, thanks for the call.

Griffin Boss: Sure. Thanks.

Operator: And our final question comes from the line of Raj Sharma with Texas Capital Bank. Please go ahead.

Raj Sharma: Hi. Thank you for taking my questions. Great execution. You’ve been talking about growing Rasmussen enrollment and that momentum is very positive. Positive EBITDA, just trying to get a sense of the fixed versus the variable costs at Rasmussen and for every dollar increase in revenues from here, how much of that you think drops down to the EBITDA level from these levels, especially given your nice enrollment growth at Rasmussen trying to get a sense of the magnitude of the EBITDA profits that Rasmussen can generate.

Angela Selden: Hi, Raj, welcome. Great to talk to you. For these positive revenue enrollment now at Rasmussen, we’re seeing about 60% flow-through. We do believe as we continue to optimize our marketing spend and as I said, fill the back row of the classroom, we could expect to see something higher potentially. But for now, it’s a really positive accelerator to the profitability of Rasmussen’s campuses. As you well know, you’ve been following the story for quite a while. Once we turn that corner, that flow-through has a very significant positive impact on the profitability of Rasmussen.

Raj Sharma: Got it. That’s very positive. And thank you for that. Thanks for clarification. Just overall in the operating costs, I know you got the marketing in-house and then you’ve outsourced certain IT functions and that gave you cost cuts. In the current year, fiscal ’25, is this OpEx level could that be assumed to be – to stay at current levels? Is it a stable OpEx level for the entire organization?

Angela Selden: I’ll start and then Rick can jump in. So first, I would say where we are seeing positive enrollment momentum, we are going to invest behind the marketing to continue to accelerate the growth. So that’s something we’ll continue to invest behind. As it relates to the technology costs, there are a couple of things that we’ve signaled. One is that we are actively pursuing different AI initiatives, both to reduce the cost of development, as well as some operational improvements. And we’ll see those take hold later on in 2025. And so we may be redirecting some of our technology spend in a manner that will drop more profitability to the bottom line as we spend less and get more. So we are actively pursuing the use of advanced technologies and AI to help us streamline and reduce our overall technology footprint cost.

Raj Sharma: Great. Great. Thank you. That’s very helpful. And then just on Hondros, there’s a rise in revenues, but year-over-year, there is – that resulted in a lower EBITDA level. Anything happening on the expenses side? Or it’s just a sort of a blip?

Rick Sunderland: Certainly…

Angela Selden: Yeah, that’s – that’s an astute question, Raj. Thank you for asking that. We’ve seen a bit of a mix shift of the programs back to the LPN program, which is a shorter program than the ADN program. And as a result, you have to enroll students more often in order to be able to refill the revenue. So again, one of the significant benefits of the combination is allowing us to have those longer programs, the BSN program and some of the other non-nursing degree programs be available to Hondros campuses and Hondros students. And we believe that, that will allow us to rebalance that mix so that we can enroll students who will have a longer tenure with us than where the mix shift has moved in the first quarter of 2025.

Raj Sharma: Thank you. That’s very helpful. And just lastly, on the portal issues at the Army. I know Rick mentioned no impact on the registration. That’s excellent. Do you foresee any impact on the accounts receivable collection or any working capital impact from the portal outage?

Angela Selden: Yes, I’ll start and then turn it over to Rick. So funny enough, it wasn’t Army this time, it was Air Force. So, let’s see. So there was a blip there. But Rick, do you want to talk about the receivables?

Rick Sunderland: Yes. So Raj, the portal outage affected the students’ ability to impact, it really didn’t affect the timing of how we invoiced. So we had some catch-up collections in the first quarter that really related to the fourth quarter, but we’re seeing normal invoicing and collections from all the branches, including Air Force.

Angela Selden: Students’ ability to enroll. Yes, is what he meant to say. Yeah.

Rick Sunderland: Yes. That was really impacting the enrollment really didn’t have much impact on invoicing or collections.

Angela Selden: It was not nearly as extensive. It was an upgrade. It was a maintenance upgrade that took longer than they had originally forecasted. It wasn’t anything like the ArmyIgnitED matters of…

Raj Sharma: That you had a few years ago.

Angela Selden: No, no, no, not at all.

Raj Sharma: That’s right. So I guess I was too fixated on that, like oh. Great. That’s super helpful. Thank you, thank you again for answering my questions. Again, great execution, great results. Congratulations.

Angela Selden: Hey, thank you here from Raj.

Raj Sharma: Yeah. Thank you.

Operator: And this concludes our question-and-answer session. I’d now like to turn the call back over to Angie for closing remarks.

Angela Selden: Thank you, operator. And I’d like to thank each of you for joining our earnings conference call for Q1 2025. Hope you each have a very wonderful evening. Take care.

Operator: This concludes today’s teleconference. You may now disconnect your lines. Thank you, everyone, for joining, and have a wonderful day.