APEI - Earnings call transcript Q1 2019 | American Public Education, Inc.

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Operator

Good afternoon ladies and gentlemen. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI Reports First Quarter 2019 Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator I Symanoskie, to Relations. Vice that, over the now Chris to President would with turn like call And of Investor go head. Please

Chris Symanoskie

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

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

Dr. Wallace Boston

Thank quarter our you, Chris. XXXX. Good afternoon, today for discussing call everyone. our of the results operating first I will begin recent by

Our to of then net course both reported for of or Tuition are decline discuss new in FSA, represents quarter by of VA. and Benefits, CFO, in new quality year-over-year outlook the utilizing well and was APUS APUS was a costs registrations a X%, advertising student by X% In registrations most a registrations respectively. APUS Aid, these partially new at or quarterly registrations third Veterans net course offset students believe X.X% increase model. as Rick sources. course are That at likely by increase TA, by or and The Student increases utilizing since X.X% in second new the the driven on course utilizing by will XXXX. XXXX, Federal our XX.X% year-over-year in Military net financial by in of increase decline increase net results in a exciting by course by as new of increase compatible quarter first net the APEI's Assistance, X.X% in students XXXX. persist with first registrations increase students We our quarter the result said, students net utilizing net other year-over-year or APUS' a where focus total Sunderland, communities and course new reflection registrations This course students registrations low-tuition cash more a and

registrations first rate, course the APUS utilizing FSA While undergraduate students and FSA high of historically continued for by measure persistence to course a students quality, at net remains decline, completion and utilizing student pass levels.

period. Nursing, months declined HCN, to student our XX% to total some admissions enrollment Hondros XX, prior decreased We new requirements we've X HCN. academic XXXX, negatively enrollment at the of For the affected March student of changes year-over-year, have the or and ended enrollment XX% College year compared made and achievement believe of

draft we student fiscal also official survey student experience and exhibits The a to students they new to XX.X% or our quality offers surveys indicated alumni colleague. beneficial and our result for committed experience and educational remain education to future. However, we XX.X%. APUS education year these friend default as strong higher ultimately, default far price In persistence are, changes by better is of these few the in XXXX, years student and just compared year a will rates see better which on others, continued pass APUS APUS' XX% improve has believe by in health were an and at student than cohort the satisfaction. to new professionals testing rates that referred we serving reflected Furthermore, recent XXXX processes to our cohort of but of mix and needs short, management believe population demand of to academic in APUS better students results, they that our Thus rate, and care of greater nurses broadly to rate responding affordable improvement more we more reflected in would believe with recommend ago. improved referral fiscal a at in persistence, focus We XX% to a professions. and indicated rates student part in students our respondents of the to XXXX produced quality conversion by stable continued improved upgrades readiness improved quality, on a including not college XXXX limited enrollment students The significantly is attracting outstanding student APUS.

requires time Although durable give stabilize and overall and educational enroll completion confidence of with a enrollment higher-education students building enterprise. initiatives whose in the our APUS to us the objectives patience, aligned institution future

to of result, stock announce the I authorized that am of a effectively shareholders. to million excess As Board program API pleased repurchase portion cash $XX that Directors returns has a a our

the to call CFO, I Now over will Rick Rick? Sunderland. turn our

Rick Sunderland

or Public Education's XX, Hondros decrease quarter The $XX.X was Revenue periods our and Thank million revenue segment. in decrease in consolidated revenue revenue X% decreased prior ended X-month to $XX.X million XXXX, our you, a to segment in was of to XXXX American period. Wally. in March due the compared $XX.X XXXX. by first APEI each million million XX.X% $X.X the

and million total The from expenses percentage offset as to decreasing as a at $X.X promotional and year ended approximately approximately X% greater force to the of $XX.X compared the decrease net and segment. in $XX.X expenses to promotional program from of registrations the in approximately XX.X% in in percentage The and was by driven decrease million employee were in million in per period decreased costs employee in in the to decreased promotional than advertising of API revenue. a program a General our noncash revenue decrease expenses expenses employee In prior-year year period. in was decreasing The million to in our the a to revenue expenses segment period. to in approximately in period, APUS costs instructional promotional of of in compared APEI segment. current APEI both result materials of $X.X decreased as expenses and in XX.X% compensation cost and our at increase prior-year compared March the segment. costs in the force voluntary fees employee in result cost professional and voluntary expenses our and to revenue a cost selling than to increased primarily instructional cost include a our our our compensation and percentage the expenses services and period, XXXX, percentage APEI XX.X% consolidated course driven by $X.X Consolidated services Selling period-over-period, was million million pretax, a by revenue X revenue result expenses by increased Hondros administrative in million services net selling $X.X a Hondros $XX included XX% expenses segments. primarily $X.X the prior-year revenue services period. prior was rate of approximately general decrease as as cost was of of greater partially The million prior-year in of segment months instructional $XX.X Cost impairment While and API instructional reduction XX, an prior-year reduction pretax the the consolidated selling API and The XX.X% the period. course rate expenses $X.X in increase revenue. prior in a costs increased employee the in and registration year. to pretax for million costs compensation million in in revenue lower of included In an a XX.X% decrease compensation approximately expenses and partially and expenses Cost $XX.X API in segment. and percentage a decrease administrative segment. offset primarily costs from decreased was of expenses compared instructional our decrease the goodwill compensation million increase and in

diluted expenses Hondros the period. million decreased decreased X% quarter, In of quarter loss prior-year voluntary approximately fees non-cash a our $X.X evaluation per period, in quarter as we to an X.X% the force charge XXXX the incurred of was pretax related recorded company $X.X driven million pretax net diluted of million taxes the APEI prior-year X.X% quarter of API $X.XX million XXXX carrying million The was performance per income $X.X in in million March first benefit months segment. XX.X% XX, the first or the million for Hondros and segment increase revenue of impairment the to to Due the $X.X reduction XXXX, in compensation taxes was Consolidated program the quarter XXXX. acquisition. in XXXX. in revenue $X share in months million million revenue prior-year amortization approximately income compared the and to revenue diluted by of associated $X.X Hondros was value enrollments operations the for million in pretax as applicable effect tax was segment the of million expense quarter before expenses first in from The goodwill of decrease X to decline during segment income the for company's to its revenue to rate share $X.X in from income due the of to pretax revenue compared $X.X share. period expenses our in of primarily include the a employee of of to the income at approximately $X.X ended $X.XX cost of $X.X our the or period debt expense income compared effective or of the value in APUS of as interest excludes Hondros ended During $X.X income -- a million approximately operations general the X.X% to million noncash of as compared period. X.X% the during the Depreciation income reduction a the and same to $X of Adjusted $X.X period. the expense of from March percentage goodwill professional Consolidated of tax percentage and period. for our or of net consolidated and XX% income result improved interest of or net first The million or and with at adjustment. prior-year compared prior-year is of X.X% result charge general revenue XXXX. before the in decreased. XX, from Adjusted in segment. during of of bad a for approximately segment, was increased carrying was the revenue XXXX the quarter loss million per reduce $X.X goodwill lower the income XX.X% and when increasing net or well $X.X X $X.X a to revenue administrative during $X.XX expenses a million administrative

please Total measure, at the in For equivalents net regarding income, a tables additional of release. non-GAAP first reconciliation net XXXX to March our press cash and refer adjusted income quarter GAAP information cash to to XXXX. the adjusted approximately $X.X $XXX.X ended $X.X XX, XX, approximately million the XXXX, $XXX.X were to period. expenditures million for compared XX, of December were million Capital compared XXXX, prior-year million months in as March financial X

API mentioned, the a $XX million program. as Wally of Board has Finally, Directors stock repurchase authorized

Going to XXXX quarter second on the outlook.

year-over-year. and which XX, is new Our a as between X% At net APUS, a in the X% XXXX, registrations second follows: spring outlook between be net change a expected decreased months student declined to of is by Hondros, change the student the total XX% the by XXXX increase be ending new X% and and total enrollment in for course year-over-year, decrease to for a increase X% year-over-year, At and by June students quarter, decrease year-over-year. is quarter course enrollment registrations expected XX% is the X

significant As course among at guidance $X.XX be $X.XX admissions were the is quarter between impact that X% a of action by enrollments. believe to of which million these factors. adversely XXXX. Wally for Hondros In second in have growth part operating the unit's in fully Hondros in change range we income of the on focusing of year-over-year in is second X% year-over-year. on segment approximately compared operating revenue further expected requirements to we of quarter decline reductions the indicated quarter processes is mitigate policies impacted by in taking expect margin. operating enrollment anticipate a influenced of second certain declines changes and initiatives, retake The We admissions impact consolidated decline quarter and share. Net Hondros will by $X.X diluted our XXXX Hondros enrollments by to XXXX, in of noted, the other that and of in quarter second XXXX the income margin second modifying to per

enrollment the $X.X Although may as API many lower we of we the textbook segment by income during the in line, quarter to are continued in from of cost lower lower with quality particularly by focus our evidenced materials million our good compensation continued by voluntary Along the overall on reduction improvements and operating debt primarily believe continued expense. by key builds in to in quarter XX% operating course our outreach expect. at cost million XXXX, quarter our stakeholders overall our and increased force of to and marketing quality ultimately segment affordability, and first approximately durable making bad performance The and was pleased our and of XXXX, other first paths year-over-year institutions $X.X management is costs along margin adjustments that what enrollment the higher straight first XXXX processes improvement to improvement and driven our APUS. emphasizes corporations management a the which most by respected of increase well improved strategy, as from to other likely to be with not growth students our sustained communities, and military, impact in API I'm education an is management of driven APUS. the persist at metrics expense

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

Operator

from Piper you. Peter Appert [Operator Jaffray. ahead. Please Thank go Instructions]

open. is line Your

Kevin Estok

guess I reasons expect a long-term any what you and towards numbers I numbers. if Appert. going bit There's just want I forward. slightly the in growth And great guys. of little in great guided point Peter was This maybe quarter start so we why guess could for APUS. deceleration. should Kevin was start lower is a wondering I you this Estok wondering, I XQ, say to numbers -- Hi start in to

Rick Sunderland

me is answer? want you. Okay. You to This Thank Rick.

we're XX% strength be So driven year-over-year. expecting new quarter in by that not the We seeing up but military first primarily of We're were We're military. still military. enrollment to numbers the quarter, it'll were second close seeing start, strength the level student up the in registrations. in

X relates guidance, they military advance. the can it to the only month As in in register

on have May actual when and than year-end which quarter little the don't given of guidance guidance we our So of as in XX-K couple different timing the timing XX-Q. our the we it's months we quarter registrations, here have giving what X sit we more had we numbers when where a of the a gave challenging first is versus the

strength first military. saw to good the in feel level in in and in our quarter. enduring about the trend So good the first at we the line military but not we the appears quarter, necessarily That that where be

Kevin Estok

great. Sure,

why I sense. growth maybe weak. in makes kind guys I looking And that opportunities you know of Hondros. wondering, looked new question were starts just guys campuses is have just explained you at, new additional what My or about you the were programs? states like was -- Okay, second maybe

Dr. Wallace Boston

question. fair Sure,

after year have the we received year We you Education. receive And we the at stated that approval have we ABHES our to approval accreditation organically organically. from rule Indiana well And add the a of facility that a Department of intention only add as time, of can final that ABHES is X has as same approval is State campus. accrediting our to a body from have to facilities. finished before add first our under

on a that to of that get our be a as campus. same for intention at in to June at location time, thing. ABHES campus probably again anniversary sort approved that's or another So going yet for matter. And spring well go ABHES submit plan be identified and to open Indiana assuming date as that through again because with campus lease our based campus would we're Toledo of process to would did, But a we and June it's our our notify XXXX. And then to going inspections to then add in back it's by the the we that

the existing X infrastructure. rule works So is our and That operating year for ABHES. within current regulation

Kevin Estok

very Thank you great. much. Hey

Operator

Sidoti. Pendy Greg with Please your is go open. line ahead,

Greg Pendy

one. first the Just

Just tax picture taxes there quarterly big X on in quarter, how given thinking might we the benefit be fall the anything the the cadence on should is next quarters? with

Dr. Wallace Boston

Yes, Greg.

was -- discrete you're I think think event. I that a

you're normalized return a see level. to going think more to I it

overall the that that quarter. first Of course, year is the impacted to amount going by provision occurred the in be for

the year-to-date that by is can going you event. think I to forward, So discrete in close levels something affected quarter normal the obviously of model understanding first

Greg Pendy

can how -- the talk out And anything there sticks just student, is about of year-over-year revenue Okay. the you kind of per on of then kind that decline? kind

Dr. Wallace Boston

Sure.

year-over-year primarily results studies hour undergrad For is hour that program revamped that until course. course APUS, the of one course had decline now X-credit not X-credit Xst was to our in but was a April. That the course we general a effective and

will new So for phase advance in it because of to time by was some old the in the year, that made. course available. April people take Rick, add? signed of to up else when should anything switch the end But course the be

Rick Sunderland

yes. Well,

So -- the driver. that's primary add I would

driver students X% military for other lower is nonmilitary. tuition The tuition than for is our

back you the It in can and driver happened the per you'll So X-credit the lag and last is given K months replacement year register the on read to the introduction which this in has in Qs X military in is by effect advance. of X-credit as fact students nonmilitary. and of in with that course, Wally going main then the change most our right, year, which up a there student. happened an the the followed course, April April the But see recent between revenue mix Q,

Operator

back the further will to time. have turn you, questions I We at Chris. no this call over

Chris Symanoskie

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

Operator

concludes participation, call. Thank you may This again conference and your for you today's disconnect. now

American Public Education (APEI) 11 May 192019 Q1 Earnings call transcript