APEI earnings call transcript, November 9, 2026

My name is Caleb and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI third quarter 2026 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, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to turn the call over to Jack Landry, Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. Welcome to American Public Education's conference call. We'll discuss third quarter 2026 results. Joining me on the call today are Angela Seldin, President and Chief Executive Officer of APEI and Chancellor of the American Public University System, Edward Cotaspodi, Executive. Vice President and Chief Financial Officer and Gary Janssen, Chief Strategy and Growth Officer. Materials for today's call, which is being webcast and is open to the public, are available in the events and presentation section of APEI's website. Statement made state. Statements made during this call and in the accompanying presentation regarding APEI and its subsidiaries that are not historical facts may be forward-looking statements that are based on management's current expectations, assumptions, estimates and projections, forward-looking statements. are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including risks related to potential impacts from changing federal or state government policies, laws, practices and actions. including impacts on revenues or the timing and other factors identified in our form 10K and form 10Q under the heading risk factors and other SEC filings forward looking statements. may sometimes be identified by words like believe, estimate, expect, may, plan, potentially, project, target, outlook, path, position, on track, on pace, should, will, would, and...

to and not as a substitute for or superior to any measure of financial performance prepared in accordance with GAAP. I'd now like to turn the call over to APEI's president and CEO, Angela Selden. Angie, please go ahead.

Thank you, Jack. Good afternoon, and thank you very much for joining American Public Education, Inc.'s third quarter 2026 results call today. I'm very pleased to report that we exceeded our guidance on revenue, net income available to common stockholders, adjusted EBITDA, and diluted earnings per share. This is a continued result of the strong moat we've built in our military plus division where active duty enrollment is rebounding, enrollment in veterans and families continues to see double-digit growth, and the overall student value proposition of no out-of-pocket cost for undergraduate active duty military and a strong return on educational investment for veterans and families continues. We've also built a strong boat in health plus where our campus nursing and online health revenue continues to grow at double digits with enrollment growth and modest price increases as the tailwinds for health professionals continue to drive student demands for our education in the markets we serve. Here are the headlines. Military Plus net course registrations grew 3.8% to approximately 103,800 above our guidance range. Health Plus revenue grew approximately 9% with the mix shifting to campus nursing with low teens growth driving performance. We're also pleased with the strong mid-teens revenue growth in the quarter for online health care. Total revenue was muted by Online Plus non-health care revenue growth in low single digits. Total APEI revenue grew 3.6%

Thank you, Angie.

I'll begin with our third quarter results, then review our balance sheet and cash flow, provide an update on capital. Location and share repurchases and conclude with our outlook for the fourth quarter and full year 2026. Total revenue in the third quarter was $169.1 million compared to 100. $63.2 million in the prior year period, an increase of $5.9 million or 3.6%. Excluding $800,000 of Graduate School USA revenue in the prior year period. Revenue would have grown 4.2%. As we discussed on our last call, because Military Plus revenue was recognized rateably over the period of enrollment, the September 7th start date shifted approximately $6 million of revenue and approximately... $4 million of adjusted EBITDA from the third quarter into the fourth quarter. Now let's break down revenue by segment. At Military Plus, third quarter revenue was $82.7 million compared to $83.1 million in the... prior year period, a decrease of half a percent, reflecting the revenue timing shift. Military Plus segment income from operations was $21.4 million compared with $25.3 million in the third quarter of 2025. And segment EBITDA margin was 27% compared to 32%, reflecting the revenue timing shift and increased selling and promotional expenses. Net course registrations were approximately 103,800 compared to approximately 100,000 in the third quarter of 2025. At HealthPlus, third quarter revenue was $86.4 million compared to

30,000 in the third quarter of 2021. $79.3 million in the prior year period, representing 9% growth. The segment reported a loss from operations of $1.9 million compared to a loss of $2.1 million in the prior year period as the benefit from enrollment growth. It was partially offset by investment in advertising and bad debt expense partly driven by delays in Title IV disbursements following the institutional combination. We expect the delays in Title IV disbursements to be... ...temporary. Turning now to expenses and profitability, instructional costs and services were $74.9 million, essentially flat year-over-year, improving to 44.3% of revenue. ...from 45.8%, which reflects the operating leverage in our model. Selling and promotional expenses were $41.8 million, or 24.7% of revenue, compared to $36.1 million, or... ...22.1% of revenue in the prior year period. General and administrative expenses were $39.3 million, compared to $34.7 million, primarily driven by increase... ...in bad debt expense, and professional service costs related to investments in marketing optimization. Third quarter net income available to common stockholders was $5.9 million, or $0.32 per diluted share, compared to... ...$6 million, or $0.30 per diluted share, in the prior year period. Net interest income was half a million dollars, compared to net interest expense of $1.1 million in the prior year period.

Reflecting our stronger cash and short-term investment position, and lower debt and borrowing rates. Third quarter adjusted EBITDA was $17.5 million, above the high end of our guide. ...range compared to $20.7 million in the prior year period. Adjusted EBITDA margin was 10.4% compared to 12.7%. The year-over-year decline was expected and reflected in our guide. On a trailing 12-month basis, adjusted EBITDA was $96.1 million and adjusted EBITDA margin was 14.3% up from 13.5% a year ago. Turning now to our balance sheet and cash flow. As of September 30, 2026, our cash, cash equivalents, restricted cash, and short-term investments totaled $216.4 million compared to $116.4 million compared to $116.4 million. $176.5 million at December 31, 2025, an increase of $39.9 million or 22.6%. Outstanding debt was $87.8 million. And we had excess cash, cash equivalents, restricted cash, and short-term investments over debt outstanding of $128.7 million. We also have $40 million of available capacity under our revolving credit facility. Year-to-day cash flows from operations were $87.3 million, up 18.7% year-over-year. Third quarter operating cash flow was $11.8 million, compared to $21.7 million in the previous year. Prior year period, including because of delays in Title IV disbursements following the institutional combination. Turning to capital allocation. Our capital allocation framework is deliberate and dis-

We evaluate alternative uses of capital, including organic growth, new campuses, technology, M&A, and share repurchases against hurdle rates that we set for each use. Our first . . . priority remains investing in organic growth, including our Trailblazer campuses and the student lifecycle platform, both of which are funded within our four-year plan. Management and our board are also very focused on share report . . . share repurchases as an important component of our capital allocation strategy. At the same time, our cash generation allows us to return capital to shareholders. In the third quarter, we repurchased 186 . . . . 274,232 shares for approximately $9 million, more than double the amount we repurchased in the second quarter. Year-to-date, we have repurchased 274,237 shares for approximately $14 million under the $50 million . . . program our board authorized in March. Accordingly, we have approximately $36 million remaining under the authorization. As a result of our share repurchases so far this year, our weighted average diluted share . . . share count declined to $18.7 million in the third quarter compared to $18.8 million in the prior year period. I'll now discuss our outlooks. Based on our third quarter results and our visibility into the fourth quarter . . . we are raising four-year guidance on revenue, net income available to common stockholders, adjusted EBITDA, and diluted EPS. For the full year 2026, our updated guidance is as follows. Revenue . . .

of $695 million to $701 million, compared with our prior range of $690 million to $698 million. Net income available to common stockholders of $48.5 million to $53 million. compared with our prior range of $46.5 million to $52.5 million. Adjusted EBITDA of $98 million to $105 million, compared with our prior range. of $96 million to $104 million. Diluted EPS of $2.59 to $2.84, compared with our prior range of $2.48 to $2.48. And we lowered our full year capital expenditure guidance to $23 million to $26 million from $25 million to $28 million. For the fourth quarter of 2026. Guided says as follows. Revenue of $179.4 million to $185.4 million. Net income available to common stockholders of $15.2 million to $19.8 million. Adjusted EBITDA of $30.6 million to $37.6 million. And diluted EPS of $0.81 to $1.07. This assumes military plus net registrations of $100,000 to $105,000. Up 21.7% to 27.7% year over year. And health plus enrollment of approximately $20,100. Up approximately 1% year over year. As a reminder, our fourth quarter includes the approximately $6 million revenue shifted from the third quarter and the prior year fourth quarter was impacted by the federal government shutdown. We remain committed to executing on the long-term strategy we laid out at Investor Day. With that, I'll turn it back to Angie for closing remarks.

Thank you, Ed.

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

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. This question comes from the line of Eric Martinuzzi with Lake Street Capital Markets. Your line is open. Please go ahead.

Your next question.

Hi, good afternoon.

Thanks for taking my question.

Appreciate it. Great to see the strong results. And I just wanted to. Tone in on the price increases, the modest price increases you mentioned, Angie. Just curious if there's any more color you can give on your pricing plans for 2027, if there's anticipated ongoing price increases. Beyond this year. And then, you know, kind of the tolerance for any sort of future price increases, just kind of taking into account, you know, affordability pressures and whatnot. Sure.

Thanks for the question, Griffin.

So we'll start with Military Plus. As you know, our active duty, we, for undergraduate students, really have held true to our value proposition of no out-of-pocket costs. And so the $2.50 per credit hour dictates the price we charge for undergraduate active duty military. We have, at times, passed through a small expense increase for the other categories, for veterans and for families. We anticipate a very small process. Price increase in 2027 for those categories. And then if you turn your attention to health plus, we had communicated in the November 2025. For your strategic plan meeting that we discussed, we did signal that we would do an every other year price increase for the programs in our health plus division.

Okay, got it. That's great, Keller.

Thank you, Angie.

I appreciate it. I'll hop back in the queue.

Your next question comes from the line of Luke Horton with Northland Securities. Your line is open. Please go ahead.

Your next question comes from the line of Stephen Sheldon with William Blair. Your line is open. Please go ahead.

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

There are no further questions at this time.

Thank you for attending.

You may now disconnect.