APEI - Earnings call transcript Q3 2018 | American Public Education, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the American Public Education, Inc.

Third Quarter 2018 Earnings Call. At this time, all participants are in the listen-only mode. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to Vice President of Investor Relations, Chris Symanoskie. sir. ahead, go Please

Chris Symanoskie

available this Good conference to financial the subsidiaries welcome American are statements current today. the or such could materially in and that Presentation be to in the X-K and included the call call of operator. Education not our Public future These with section Education's and filed current results website third American actual and based to cause note report differ Education discussion Please estimates statements industry. may made XXXX. subject are are today's for of regarding risks and operating projections an materials earlier forward-looking the evening, materials you, and that webcast presentation to of accompanying exhibit Public statements. and from as are events Public quarter about facts or in uncertainties on our that Thank its SEC results assumptions, Form for forward-looking American expectations, historical statements on

for and current risk the Factors by regarding forward-looking including CEO; expected statements these quarterly company's Report in seek, the and with Boston, occur reason, and XX-Q, growth, obligation by evening, recent, partnerships. other result unless and be statements if our filings. Executive Vice can believe, Dr. from our Annual implied as, company or other future. the various and Actual update Rick undertakes forward-looking company's described to include, Chief and anticipate, introduce factors, These Wallace becomes Financial section subsequent investments to may, SEC estimate, limitation, most even and future in in expect, on new initiatives, the materially words Form earnings, available as respect pleasure Form expressed statements results could elsewhere those required differ events factors intend, the without President and President any statements recent filed of such publicly Risk law, plans and XX-K to my statements This The identified should, any registrations forward-looking no revenues, by SEC and on expected will the information report Forward-looking or enrollments, could, and expected would. expected with Sunderland, it's Officer. a

Now, I'll Dr. Dr. turn call the over to Boston. Boston.

Wallace Boston

financial evening, Good today I Chris. the outlook by performance start operating for our also XXXX. everyone. call quarter recent fourth Thanks, quarter discussing our results will and our our and third of

here, at FSA make but VA laryngitis were was course available by in by new by increase XXXX, sure registrations of sources. partially a was X.X% for benefits registrations quarter we'll of increased excluding new by to which approximately students This course by prior In registrations compared my X.X% utilizing those TA, other year is utilizing tuition registrations the Our utilizing students period. CFO, the decrease net or has increase offset veterans' better he compared total Net net a Sunderland third by but students This compared net net in X% X.X% net course students utilizing or exceeded is than in declined and new course registrations new military year-over-year he questions In total cash Rick students flat by year-over-year net driven year declined outlook the by end registrations because assistance presentation. registrations prior to period. by third represents XXXX. new registrations Net and or Overall, students registrations new year-over-year. the smallest FSA our TA. FSA, net student both the students course were by to first new XX.X% prior decline short, quarter course the new registrations the course course by quarter students utilizing students APUS course course registrations APUS utilizing utilizing federal by approximately students flat year-over-year, at of while period. of returning by since aid year course net approximately anticipated in net and

XXXX months its possible second The included in census. ramp up which For at Campus, of total increased and the to was summer X% approximately factor, increased classroom our year-over-year. space three or would enrollment ended a period at cohort or to availability the student new due September term XXXX, year the compared XX% decreased new XX, this student Toledo have enrollment Absent during ADN Nursing College of prior first of the year-over-year enrollment student Hondros new at HCN year Hondros year. X% prior

and October September are Program that of from initial campaign the ACICS now focusing voluntarily HCN's of agreement accreditation IV several X, initiatives, including growth its and of approved officially The by the We its on Department of the designated strengthening certain to for institutional also NCLEX These may pass new the new its which Education preparation was these in a retake we institution ABHES Schools come. initiatives growth The volatility put by prior technology creditor the application a attention extends initiatives the ADN recertification minimum course for for purposes expect believe other XXXX. actual may Education they rates. for academic involve years is new laboratory new quality of score achievement implementing certain exam entitled XXXX. At and campus, Health the management is of also the on as passing recently US withdrew in and score limiting Education new the participation HCN open accreditation. to ACICS. XX, of programs through and dismissal Department Furthermore, HCN student a branding courses, at team footing policies for and stability to prerequisites. program improve HCN's experience to team by as time number the On total better early requirements or pleased of next for Title We also participation enrollment by such XXXX the or year, the primary medical requirements the in for programs. requirements academic course creation XXXX, but HCN that educational MLT opening and launch accredited Accrediting to is important and was lead of academic Bureau retake for ABHES, in sellout much

increases include focus military US serve XX,XXX strengthening among active are further approximately processes these the communities, of we can resulted veterans. Having duty approximately the Moving of near-term our or served to utilized to Post and leveraging solidifying year. XXXX. enrollment the rates X.X% Page student AMU reached and GI as improvement veterans X, XXX,XXX service that AMU X/XX continual brand Bill reputation by on recent our numbers position from conversion hours. and upgrading we management Affairs, in our X/XX approximately Veterans goals, persistence our of student and in expanding According leadership to Department the Post GI extend veterans our well benefits to as last Bill greater enrollments pleased

audiences to and largely are prime relationships quiet, further education while active we members lower strategic quarter average These utilize AMU's military audiences. communities, persist for as well. continuing than a the as brand productive also we low VA focus with of in the APUS communities. APUS's Corporate students its and emphasis rate of is alignment service goals, and example market positioned areas them and portion quarter Although AMU most at continue channels on costs programs, include to the in top marches fields with growth the goal community both where larger most persist in line these of In intends at to found In our students toward a persist believe will on among of likely growth on areas, to have military the compatible more the attract for given and XXXX veteran as closing, our Students are than but to a of cost our greater of priority heritage strengths where relationships serve is model. marketing favor tuition APUS quality be third of to and long-term and persist. position community, active result believe benefits and a who even spend positive our utilized we support Students organic affiliated likely to degree was duty to such are enroll with enrollment an of development. academic advertising leadership APEI professional intend higher community we a veteran who APUS more that TA healthcare adjust likely well veteran duty to advertising most civilian achieving and metropolitan and the corporate pursue is overall. dispersed and growth and student most other FSA. workforce acquired are certain

the APEI to three results their APEI than our decrease in net two costs requirements months to a expenses Moving XX, include retirement financial Page which was in our the a $X.X $XX.X new period. materials structural decrease requirement to period revenue employee is costs and the The administrative due expenses instructional an XX.X% September on months the increases the and XXXX, and prior compensation selling Hondros period. educational advertising increases primarily $XX consolidated September as students instructional segment, expenses $XX.X The decreased revenue was as decrease offset net revenue in third eligible a and registration. in a driven decrease from employee of per requirements to XXXX. percent a in partially our million by the marketing the expenses professional cost course, the due services million $XX.X APEI to of in in in third promotional offset of our X, an XX.X% costs credit by segment, and designed period. support Rick's which and year XX.X% result X% of taking APEI cost decreased Public Cost APEI of million partially X.X% less in for of cost decrease increased revenue in our segment. registration increase and fees, cost primarily Selling expense employee our take expense education costs and a approximately include year expense partially $X.X segment instructional in decrease decreases compared by offset XX.X% and percent APEI professional prior the year increase Hondros year was by in expense decreased segment, material per decreased in revenue a in fees, new million related partially company costs XXXX promotional support for X.X% of These The expense our place, Consolidated by no compared Hondros in period. segment. in in the materials all compared revenue expense year prior in revenue American The million, revenue professional segment. summary in X.X% in than million quarter units prior to pre-tax of and Hondros General to for resulted stock-based our in in in quarter revenue and XX.X% APEI bad In cost were in percentage for XX% of was improve $X.X materials stock $X.X percentage was associated in revenue debt a quarter revenue in million segment. our to services prior or segment to the expense to in amortization percentage decreases The partially increase a as general compensation course further three performance primarily compared Educations' implemented lower expense in bad our pursuing. acquisition or segment $X.X expenses employees as of XXXX expense approximately compared X.X% the as our decrease to a the and compensation bad that million our increases was in X.X% stock-based debt general administrative debt increase an is APEI X.X% compensation APUS Revenue the prior a as XX, a of $X.X and to offset revenue and X.X% in cost result. Consolidated in period. million is in or primarily prior marketing General longer revenue from segment, a Hondros period. course to our by by increase the compensation and first fees million expenses or expense offset to administrative year segment, compensation ended to XXXX segment. experience. X.X% has the and ended of in with expenses or in for quarter Depreciation and to in

the tax to rate Our XX.X% the prior period. effective of rate. tax our corporate effective the compared rate to XX% XXXX third in year approximately in during was The is in the reduction quarter primarily federal due decrease tax

$X.X decline impacted and DoD approximately and amortization negatively by activities education in for XX, Our to Capital year ended to and hardware ended period. million software. payment as Net XXXX. or of receivable per $X.X benefits. operating compared to XX compared income the processing accounts the million in and million months compared $X.X diluted The were and $XXX.X a assistance of $XX.X was $X.XX primarily prior million operating million $X.X to the provided expenditures increase the the to at net was tuition $XXX.X months September investments period. cash and million or $XX.X income respectively. nine to million computer approximately delays XX, XXXX, period cash ended due the for compared activities XXXX was during million diluted $XX.X net by in in December by XXXX were September prior and related $X.XX equivalents for quarter Cash provided $X.X XXXX was months nine XXXX, Total share $XX.X prior for was VA by the year million Depreciation period. cash nine XX, share year the September million September XX, lower in per million

follows change change between a our to be is in of in APUS The net fourth X% to by be outlook on decrease and a course flat negative Page course as for new at our of decline expected a quarter X% expected year-over-year. net is X% X, registrations Moving fourth between outlook, total quarter XXXX and year-over-year. the registrations to increase the students of is

enrollment For year small student year-over-year. three ending is new approximately total the at student December term, by decreased which Hondros enrollment months X% last to was the while XX, XXXX, flat

new we to $X.XX core XXXX focusing have In with acquired and third to for in term, expect we an be of of XXXX As and between is would October consolidated Program pleased quarter as its results healthcare well student announced, previously discontinued coming year-over-year X% organic us year-over-year. third XXXX, Hondros as this will by veteran investing in RN-to-BSN military, fully and the factor. in believe the workforce months per education new revenues that our and in X% estimated decrease starting declined the markets quarter also absent expected enrollments range to of of the income and $X.XX X.X% enrollment the diluted share. with serve well on fourth and Net the we closing, corporate in serving are In quarter growth the years. strengths

Now audience. please the the we open questions. would like to Operator, take line for questions from

Operator

you. Thank

line from with of question first Jeff Capital. Silber comes BMO the Our

line is open. now Your

Jeff Silber

I remember like correctly. been first as on if delay, I Thank you about much. may as And so APUS, some if did you'd remind I Air what in Like the not it thought? focus you last potential remember was just happened it bad us expected to you quarter Can there TA, correctly, you so Force, think on have processing there? as looks talked

Wallace Boston

Yes.

since we registrations out, not really earnings, and the that it were had forecast, finally as period back. those pretty Force from So, our third for our September that then so close the period would down system or and the lost the announced predict turns we whether period, we Air the when week Force take couldn't TA back a and they during approximately was fixed was in we to we August in any couldn't we exceeded system, much when come they registration three-week when Air Well, it we particularly three quarter. registrations students came

Jeff Silber

it drove wasn't difference that's really in what the Air any of the that Force? So was service in the mostly branches,

Wallace Boston

Yes. in Air Mostly Force. the

Jeff Silber

remarks, of a quickly. you going exactly expected through in prepared volatility on? Can Wally, pretty went of talked back; about kind give great. little more bit that Hondros, in you you us your what's on color some just Okay, step the

Wallace Boston

the the Sure. provide ADN out a other programs; very we where is by they step of up number schools ourselves Ohio Hondros what those schools went and rates, which program and gap program, the pass certificate the had low to in for happened nursing, at new performing went We both primarily we practical do good had to were once which and pass put needed licensure and and curriculum Ohio companies they has That for NCLEX and rates already to a a NCLEX and to operated. we nursing in pass has had when PN standard get up and nationally a and we really two is program degree We nurses NCLEX can a found an looked below rates rates of factors. so a owned pass ADN the the at be program the so program. of in is pass registered was a where program NCLEX between ADN what it very closer the program business, lot into rates longer programs. rates no

at the really going minimum predicts which on clinical NCLEX, course as for the tweaking entry program. the component. as are for for some are the our tested succeed as in which curriculum well we for it retakes, how results heavily well of lab And exam, pass to the people HC of courses, the had wasn't much some as was looking So it policies IN scores test

of increasing certainly So or by our and requirements, looking the as we volatility months a factors, for requirements students cycle those increased we expect next number so. take the XX at some we through

Jeff Silber

already And done most prior recent this to semester? that was

Wallace Boston

done higher changes, we standards for No, retake the had not we policy, new course admissions. -- put the put we had the but we curriculum in had put had in in

Richard Sunderland

Right.

So that dry XXXX. and retake course change January went in goes admission into the of

Jeff Silber

helpful. that's great, Okay,

Just what forecasting your at sorry, are revenue per -- guidance, student revenue the for course registration net do for questions, and APUS Hondros? you per a model, you what numbers few I'm at within

Richard Sunderland

Right.

we've said seen out for net reasons we numbers, at the script. in don't those Wally per revenue So typically declines in course the APUS give registrations

to credit two think this system point. it that's that normalized relates I course, As probably the into at

going not number and you're stable. So I company Hondros, has terms think I has static. guess pretty with my been seat, to but see this in is that continued declines the necessarily which you model, large putting from fairly out been that of trend

Jeff Silber

Okay, on the are rate for? looking the then that's share excuse adjusted, fine. me, EPS what And line, on count tax and you

Richard Sunderland

XX.X tax believe. XX.XX reported I I is rate that -- think share just we of million, $XX.X in

Jeff Silber

incorporated I'm looking quarter Yes, fourth your I'm for, guidance? for sorry, guidance, in what's

Richard Sunderland

year, We doesn't issued when materially you quarter. move so incentive the early get in into fourth it the shares

Jeff Silber

that's The XX.X%, you're was quarter? in tax fourth the what said expecting rate you

Richard Sunderland

XX.XX%.

Jeff Silber

Thank so you XX.XX%. much for the color.

Operator

and Appert the you Piper Thank from Peter Jaffray. of next with question comes our line

Your is line now open.

Peter Appert

Thanks.

that? in might in still you Is I focus, in spending. a a color guess year had about ago. to bit Wally, what some revisit step up just about more you're talked hoping terms You there? the experimented thinking cards, I'm the in perhaps, of So give with some you that marketing evolution

Wallace Boston

Yes, Peter.

of a in scenarios, expenses experimented certain geographical in markets. pilot number added tweaking have We

as higher script the specific where may keywords, as you we and don't in a well success have rates, where referred that for can we we during enrollment lead experimenting degree as think spend greater recall think completion markets at as well certain all. that my we make student difference I aggregators we use with programs, to as

building is landing use combinations organic around for that media building we're are social to internally a search going still engine the as even So blogs looking content hits to pages paying that better of certain pilot improved class. bringing we optimization retention I those spread I and for well students class generation to But we there, improvement own our students in mode. point as just actually including think APUS and in are part combinations our of the when things the that retention in think isn't attention better can that has but the one they the and it's to

Peter Appert

on enrollments? driver Got of Wally, it. new as commentary, potential Any potential offerings program a

Wallace Boston

we that the at Yes, time. look all

some that's pretty continue certification a a the the had I one that that but deal of success think fact we've able subjects currently think the that's But the NSA look between a from that to and a get we've healthcare cybersecurity lot from a STEM, and while, our is other we ones program academic there. June outcomes your because we've build students. differentiated program differentiates in the STEM big general, experiencing labs been at for and received out offerings for we in as we university and good to

have up able Bachelor we electrical For to for degree Science example, a were BSEE. BSEE and our of the six when because online was the set courses math program; we we believe engineering, had fully to calculus first we which build

were well math add courses to way our the of lot time. we enough having So development having without for a to on

a program have very also studies. space in We unique

be course they it. we're ready keeping Department is make on and should Defense a to firm for new doing space an this So hope that what of program announcement for on the eye

Peter Appert

corporate in Wally, of for the big pricing can you corporate know, special you maybe offer you, and or I ? programmatic market of the percent offerings remind percent then, do revenues, And is it's -- special don't any market how me enrollments

Wallace Boston

as corporate a a I low for in brings down. of higher the outliers than do got because usually to say discount would cost as typical X% it's tuition a is a our is schools. that that couple already discount that, marketing exclusive typically compared relationship Well, the program We we've is. that discount have market, fairly because that non-profit offer but have it the low a lot of we a

are we XX% cash cash estimate reimbursed as number to in people the and by market who of be of two-thirds that the for payments the that getting number companies quarter, roughly for we that of number. think between of students as our half can anywhere paid their that I had much

Peter Appert

Sure quarter, XXXX and you ? transaction Wally, should be anything report front, anticipating away M&A obviously, then we new were to at looking moved the from you in the thing, on last something last

Wallace Boston

never to predict. but looking write agreement we Well, are one Unfortunately, we had that That for reaching you that off. about were should to have we thought shy we right when can the not on, we opportunity was saying we close been find one.

So we were in and we also pleased to workforce we've healthcare and that acquisition are development with our continue arena, said Hondros we the the so in look looking area.

Peter Appert

I one be into to an BSN that more, think or the expanding market Have just sorry. have acquisition? would thought about you through Hondros

Wallace Boston

so APUS an system Hondros to hour and semester on APUS But was to for BSN online BSN. had the lower quota had RN a RN approved also the system. and was more price online was is the APUS slightly Hondros because offered they frequent BSN, an RN online and Actually, starts on to BSN with

online So say who if we'll APUS at the Hondros cost that I and structure. a efficient would the do it BSN ground much operates more leave again, probably on to offers

Operator

Thank line Analysis. Greendale Corey of And question from First the our next comes you. with

now is line open. Your

Corey Greendale

Good afternoon.

cash VA's problems they some impact leading issue side, to issues impact there I mentioned on you any So you was payments, in IT you about force enrollment ? that on flow, IT I publicized the there updated on the think the air were were of -- had talked delays the VA know

Wallace Boston

not got we our payment students from that complaints mainly the enrollment. believe about We and related about

Richard Sunderland

we to my is Yeah, processing the Corey, not in student's experienced significant of VA, which affecting the abilities knowledge, delay that's there at a enroll. but payments end to backlog at September,

Corey Greendale

Rick, -- payments? -- that have hate to we or what ongoing is, talk, but you still is to so you see that is that understand I make is And started those

Richard Sunderland

of DoD the VA, ongoing, at know but payments the delay Q, similar a at we've there's we So careful to I be don't where in assistance at December. from gotten that the were going were we to end not on tuition the it's

the like a I'd but think was going it's that it's to itself, I repeat that VA So delay, don't ongoing. that temporary to on know side not

Corey Greendale

so, that two the insofar so And Okay. I pointed is In while. side still you in best I think questions, in enrollments it's FSA a as, so new is it the out on decline guess Wally, the negative. far been

I you know and is in think And looking at a positive the to the there's us but you look territory issues, why negative. that double see think you new thoughts still but then turn in we cautious can digit forward, been as just very slightly statements I you've sort forward-looking know whether overall do potential of update students any it XXXX? on FSA

Wallace Boston

proof the actual a requirement that Well, school quarter it primarily I still be we're place think it to we reason drivers number for put that the that certainly diploma. in hoping of form that for a last for and August negative was of transcript third Predicting high FSA inflection point. or exactly see will has tough either wanted licenses, graduation to students. for we And about that the but at the XX% do thing was was with real in actually put that in we big last

was serious. weren't has that putting and of So the third students, who that gotten clearly the of middle in place quarter in rid

system it's as think were was serious good impossible by FSA the as impossible down pool by script comment there -- reflected more in students third the rate I and chasers authentic it's potential pass the have to fraud that side, students much we again bottom these of up necessarily, is But in of advantage are quarter. the putting good identification, our the on that it for my them, in again. students first-time have line ratcheted requirements a who rate tag news pelt taking chasers, we or but course pass

Richard Sunderland

Right.

been persistence So But higher that's Corey, success right, student is lot for of and really we've and the the the that now. much and you is a is reporting the and can that total, lifetime new quarters value see what is the a between important. that relationship means numerous that, better, what means

Corey Greendale

key then isn't you of the lag lower light number, can probably there you us persistence? why on gave CDR and public light CDR on the but it the actually is help I a -- -- isn't before, but you the you in perspective in quality and that lower can in know and or update you've things new saw And been doing this is point, of gave I

Wallace Boston

Well, takes unfortunately, so lag four-year CDR goes Corey, that -- it's XXXX/XXXX. to a it's rate back a into

Richard Sunderland

It's of in the Corey, repayment XXXX, end tail which students entering XXXX, was, it's that.

forward about high, predictions, We've that do XX% students of talked stipend making the a chasers. going numerator is our which numerator, the and have now, visibility right. denominator some without why that we portion know significant the in calculation, that's were and reason driving any So the you the

we're the my So but going to view next seeing to is year. likely that Corey my on number is be prediction downside, the start with going

Operator

line Greg Thank our the question you next comes and with from of Pendy Sidoti.

Your open. now line is

Gregory Pendy

question. taking for thanks guys, Hi, my

a was? Just one of quick one, last what the percentage on I think you the real you us call gave the us remind Force, can that for impact Air

Wallace Boston

Greg, none that. recall us of we're our head, all shaking

that get that on You transcript one. on can the

Richard Sunderland

-- the of I is Force total registration percentage of memory. so might our think you we TA -- XX% registrations have Air given in the

fairly week had a So so it's three clearly in disruption largest sizable that impact. and our branch, roughly enrollment

good we recover turned guidance. guidance end news leaving the and up some out earlier, of Wally able that said and registration on we have so starts, portion to it As our as is our monthly were

Operator

at time. this Symanoskie like Chris remarks. they turn I back show would over the further to Thank no for closing you. to questions call And

Chris Symanoskie

great Public today. That for We to you, conclude Thank a Education. operator. interest your will thank call wish listening you Great. for for in evening. and American our Have

Operator

may and and conference. day. This Everyone does in Ladies a for disconnect. today's program thank all have you participating conclude great gentlemen, you today's

American Public Education (APEI) 10 Nov 182018 Q3 Earnings call transcript