APEI

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI First 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 during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Shannon Devine, Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to American Public Education's conference call to discuss first quarter 2026 results. Joining me on the call today are Angela Selden, President and Chief Executive Officer, Edward Codispoti, Executive Vice President and Chief Financial Officer, and Gary Janson, Chief Strategy and Growth Officer. Materials for today's call, which is being webcast and open to the public, are available in the Events and Presentation section of the APEI website. 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 government shutdowns or changing federal or state government policies, laws, practices, and actions, including impacts on revenue or the timing of receivables and other factors identified in our Form 10-K and Form 10-Q 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 similar or opposite words. Forward-looking statements include without limitation statements regarding expectations for registration and enrollments, revenue, earnings, Adjusted EBITDA, Adjusted EBITDA margin, and other earnings guidance.

Our foundation for growth, strategic investments, capital allocation, and M&A opportunities, operational milestones and timelines, the planned combination of our institutions, including the benefit and timeline thereof, government, governmental, and regulatory actions, their impact and our response to those actions, changing market demands and our ability to satisfy such demands and other company initiatives. As Angela Selden will discuss, beginning with the first quarter of 2026, we are reporting under two new segment structure, Military+ and Health+, following the merger of the legal entities that owned our institutions on March 2nd, 2026. Our Form 10-Q for the first quarter reflects this change. All prior periods comparative figures have been recast to reflect the two segment structure rather than the historical three-segment structure of APUS, Rasmussen University, and Hondros College of Nursing.

The call and the presentation contain reference to non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA margin. A reconciliation between each non-GAAP financial measure we use and the most directly comparable GAAP measure 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 of operations. It should only be considered in addition to, and not 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, Shannon. Good afternoon. Thank you very much to each of you for joining us today. I'm very pleased to share American Public Education's first quarter 2026 results. Total revenue grew 6.2% YoY and at the top end of our guidance range. Notably, when we exclude Graduate School 2025 revenue from the prior year period, the business that we sold in mid-2025, APEI's revenue would have grown 8.7%, which we believe is more indicative of the underlying strength of our business. Beyond revenue, we beat guidance on Adjusted EBITDA, which grew to $29.2 million, which is a 37.5% improvement over 2025.

The prior year period does include $2.2 million of Graduate School losses, and the 2026 period includes a one-time favorable impact from the tax treatment of our stock appreciation. Edward Codispoti, APEI CFO, will discuss the details of these matters shortly. We also beat items on net income per diluted common share, which was $0.94 or 129% over the prior year period. Given the strength of our first quarter results and our visibility into the balance of the year, today we are raising our full year 2026 guidance on both revenue and Adjusted EBITDA. Importantly, we are also raising our full year EPS guidance, which at the midpoint represents an 85% increase over 2025, which is in large part a reflection of the 2025 improvements we made to the balance sheet.

With those headlines, I want to provide some additional details on our two newly constituted reportable segments and an update on our institutional combination. First, as we discussed on the last earnings call on March 2nd, 2026, we combined the legal entities that owned our three institutions into one. Beginning with this quarter, we report under two newly constituted reportable segments: Military+, no longer called APU Global, and Health+, no longer called RU Health+. Prior period results have been recast to reflect these changes. Let's start with Health+. Our Health+ institutions continue to perform very well. Health+ revenue grew 11%, consistent with our four-year plan. This was driven by both 8% enrollment growth, which we shared on the previous earnings call, and a modest price increase, demonstrating the durability of demand for pre-licensure nursing education.

Our campus expansion plans continue with our new Rasmussen Orlando campus now enrolling students and building momentum in its first full quarter of operation. We expect to complete the relocation of the Hondros College of Nursing Cincinnati campus in the back half of 2026 to a more attractive location, and our Hondros College of Nursing new Detroit campus to be ready to enroll students in the first quarter of 2027. As we turn our attention to Q2 2026 Health+ enrollment, we experienced enrollment growth of 7.1%, led by campuses and online health at high single digits. Turning to Military+. Military+ delivered another quarter of revenue growth and exceptional profitability. The 4% registration growth met guidance, highlighted by the continued high teens registration growth for both military families and veterans.

The segment operated at an Adjusted EBITDA margin of approximately 36% in the first quarter. While the EBITDA margin reflected a substantial increase above our long-range targets, a portion of this outperformance was due to shifts in marketing spend between Q1 and Q2, which is also reflected in our Q2 guidance. Growth in our active duty channel in the first quarter was mid-single digits. As we described on our last earnings call, Q1 Coast Guard, the smallest enrollment contributor of the armed services branches we educate, was affected by the then ongoing government shutdown and temporary suspension of the Department of Homeland Security funding. We had estimated that about 1%-2% of total registrations were postponed.

The good news is that DHS and the corresponding education funds are now available as of April 30th. We expect partial recovery in Q2, and we expect recovery of Coast Guard registrations in Q3 and beyond. I was very proud to have participated in American Military University and American Public University's 30th annual commencement on Saturday, May 9th. Over 17,700 students, including 23 doctoral students in our Security and Global Studies program, received diplomas. The oldest graduate is 78 years old and the youngest is 16. Over 92% of our graduates are active duty military, veterans, military spouses, or family members. They represented all 50 states, 30 countries, and six territories. Congratulations to all AMU and APU graduates. As we turn our attention to Military+ registration growth in Q2, we are experiencing growth in Army registrations, our largest enrollment branch.

This momentum is being offset by a slowdown of registrations in Navy, Air Force, and Marines, which we are attributing to the nature of this war in the Middle East, which has deployed and put into combat Navy, Air Force, and Marine service members first. This has been signaled by our internal processes, where our students have a mechanism to request a leave of absence accommodation and the ability to select deployment as the reason. We have seen an uptick in these requests for those three service branches. Offsetting this interruption, our veterans and family segments continue to demonstrate high teens registration growth in Q2 as well. While Navy, Air Force, and Marine registrations are a headwind in the short term, we remain confident in our full year guidance.

Historically, when our active duty students are deployed or preparing to deploy, their educational progression can be delayed, but these students, for the most part, return. With the performance of Army enrollments, we view this as a timing dynamic rather than a structural demand issue. The Q2 Adjusted EBITDA percentage reflects investments in incremental advertising of $2.2 million versus 2025 as we focus on mitigating the near term impact of these deployments. Let me turn to the positive progress on our institutional combination. On April 28th, we received approval from our accreditor, Higher Learning Commission, to consolidate our APUS Rasmussen and Hondros College of Nursing programs, locations, and operations into a single accredited institution operating as the American Public University System, which we will refer to as the System in future communications.

Now, only one step remains with the Department of Education, which is the department's approval of the combination and the completion of the OPEID merger. We are fully engaged with the department and their process steps and continue to target an effective date for confirmation of the combination at the beginning of the third quarter of 2026. Finally, as we turn our attention to full year 2026 performance, given the strength of our first quarter results and our visibility into the balance of the year, today we are raising our full year 2026 guidance on revenue, Adjusted EBITDA, and diluted EPS. I want to reinforce the message I delivered at the end of our last earnings call. The foundation is built, the business is simplified, the balance sheet is strong, and quarter after quarter, we are doing what we said we would do.

Q1 2026 is the first quarter of a four-year execution plan. We remain very confident about the significant runway ahead of us. We are just getting started. With that, I'll turn the call over to Ed to discuss our financial results and our updated 2026 guidance in detail.

Thank you, Angie. I'll begin with our Q1 results, review our balance sheet, share an update on our share repurchase program, and conclude with our updated outlook for the Q2 and full year 2026. Total revenue in the Q1 was $174.7 million, compared to $164.6 million in the prior year period, an increase of $10.2 million or 6.2%. Q1 revenue came in at the high end of our prior guidance range. Excluding $3.7 million of Graduate School USA revenue in the prior year period, revenue would have grown 8.7% YoY. We believe this comparable growth rate is a cleaner read on underlying top-line momentum. Let's break down revenue by segment under our new reportable structure.

At Military+, first quarter revenue was $89.4 million, compared to $83.9 million in the prior year period, representing 6.5% growth. The Military+ segment income from operations was $30.7 million, compared with $24.1 million in the first quarter of 2025, an increase of 27%. This segment delivered an Adjusted EBITDA margin of approximately 36% in the quarter, reflecting the cost discipline work we completed during 2025. Net course registrations at Military+ for the quarter were approximately 106,600, compared to 102,500 in the first quarter of 2025. At Health+, first quarter revenue was $85.4 million, compared to $76.9 million on a recast basis in the prior year period, representing 11% growth.

This segment delivered income from operations of $500,000 compared to a loss of $800,000 in the prior year period, reflecting continued enrollment momentum, disciplined cost management, and early benefits from our Fill the Back Row capacity utilization initiative. The 11% revenue growth includes the benefit of a modest tuition increase and continued enrollment momentum. Turning to profitability, first quarter net income available to common stockholders was $17.7 million or $0.94 per diluted share, compared to $7.5 million or $0.41 per diluted share in the prior year period. This represents a 137.6% increase in net income available to common stockholders and a 129.3% increase in diluted EPS.

In addition to expanding operational margins, our below-the-line results were favorably impacted by an 8% effective tax rate during the quarter, driven primarily by higher than expected tax deductions as a result of the increase in our stock price. We expect the income tax rate to normalize in future quarters this year. First quarter Adjusted EBITDA was $29.2 million, up $8 million or 37.5%, compared to $21.2 million in the prior year period. Adjusted EBITDA margin was 16.7%, compared to 12.9% in the first quarter of 2025, representing 381 basis points of margin expansion YoY. This reflects the operating leverage that is beginning to show up in our results.

Please keep in mind that the prior year period included a Graduate School USA loss of approximately $2.2 million in Adjusted EBITDA that did not recur in the current period. We ended the first quarter in a very strong balance sheet position. As of March 31st, 2026, our cash equivalents, and restricted cash totaled $221 million compared to $176.5 million at December 31st, 2025, an increase of $44.5 million or 25% in a single quarter. Total debt under our credit agreement was $90 million compared to $96.4 million at December 31st, 2025. We had excess cash over debt of $131 million, up from $80.1 million at year-end 2025.

As a reminder, in early March, we completed a refinancing of our debt that reduced our borrowing rate by approximately 375 basis points and lowered principal from $96.4 million-$90 million. In connection with that refinancing, we recognized a $1.7 million non-cash write-off of deferred financing costs in the first quarter, consistent with what we previously communicated. For modeling purposes, interest income in 2026 is expected to approximate interest expense given our strong cash balances and improved borrowing rates. In March, our board authorized a $50 million share repurchase program. During the first quarter, we repurchased approximately 17,840 shares of common stock for total consideration of approximately $1 million.

Consistent with the framework we described last quarter, the share repurchase program is being executed primarily to offset dilution from share-based compensation with flexibility to repurchase opportunistically, subject to market conditions and our disciplined approach to capital allocation. Our strong balance sheet and cash generation continue to provide us with significant financial flexibility for organic growth investments, for opportunistic capital returns, and for the tuck-in M&A opportunities that are part of our four-year strategy. I'll now discuss our updated guidance. Based on our first quarter results and our visibility into the second quarter, we are raising our full year 2026 outlook on both revenue and Adjusted EBITDA, and we are initiating second quarter 2026 guidance.

Our guidance for the second quarter of 2026 is as follows. Revenue of $170 million-$172 million, net income available to common stockholders of $6.5 million-$7.5 million, Adjusted EBITDA of $16.5 million-$18 million, and diluted earnings per share of $0.34-$0.39 per share. For the full year 2026, our updated guidance is as follows. Revenue of $686 million-$696 million, compared with our prior range of $685 million-$695 million.

Net income available to common stockholders of $44.9 million-$51.6 million, compared with our prior range of $41.3 million-$47.6 million. Adjusted EBITDA of $93 million-$102 million, compared with our prior range of $91.5 million-$100.5 million. Diluted EPS of $2.33 per share to $2.68 per share, compared with our prior range of $2.15 per share to $2.47 per share, and CapEx of $28 million-$32 million, unchanged.

Our updated guidance reflects our confidence in the trajectory of the business, continued enrollment momentum at Health+, expanded margins across both segments, and notable progress on each element of the strategic framework we outlined at Investor Day. In summary, the first quarter of 2026 was a very strong quarter for APEI. We exceeded our guidance, raised our outlook for the balance of the year, meaningfully strengthened the balance sheet, and began returning capital to shareholders, all while continuing to execute 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. In closing, the first quarter was a very strong start to 2026. An early proof that the simplification and strengthening work we completed in 2025 is translating into top-line revenue growth, margin expansion, and EPS growth. Our Health+ segment continues to demonstrate consistent enrollment and revenue growth, expanding margins, and the durability of demand for nursing and healthcare education. Our Military+ segment continues to deliver strong margins and growth even as we work through temporary active duty headwinds that we believe are event-related rather than structural.

At our November 2025 Investor Day, we laid out a multi-year framework with nine value creation initiatives, five at Military+ and four at Health+. Targeting organic revenue of $890 million-$925 million by 2029, representing an 8%-9% revenue CAGR with Adjusted EBITDA margins of 20%-21%. With strategic investments in new campuses and potential tuck-in acquisitions, we see a potential path to $1 billion in revenue by 2029. That framework is intact. Our trailblazer new campus opening initiatives are on schedule. Our balance sheet is stronger than it has ever been, and we are only one quarter into a four-year plan. There is meaningful runway ahead of us, and we are as optimistic today as we have ever been about APEI's long-term potential.

Our organization is purpose-built to deliver affordable and accessible educational opportunities in fields which are in high demand and resilient to disruption. Nursing education prioritizes in-person bedside care, and our military service members continue to be critical to U.S. defense strategies. We continue to believe that our education supports careers that require human judgment and are AI resilient. Our platform and sector tailwinds position APEI to accelerate growth and bring more educational opportunities to a greater audience. Before we move to questions, I want to thank our investors and analysts for the dialogue and engagement we've had over the past quarter. I also want to thank our entire APEI team for their commitment to continued student engagement, persistence, and success. With that, I would now like to hand the call back to the operator to begin our question-and-answer session.

Thank you. If you've dialed in and would like to ask a question please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute. Again, it is star one to join the queue. And our first question comes from the line of Tom White with D.A. Davidson. Your line is open.

Great. Good evening. Thanks for taking my questions. Two, if I could. I guess on the planned institutional combination, nice to see the HLC finally sign off on that. Can you kind of update us on how we should expect kind of the benefits of that to work their way through your financial model over the coming quarters? Is it sort of a situation where, you know, maybe we see it in kind of operating expense efficiencies first as you can maybe centralize certain functions, and then maybe followed by revenue synergies? Maybe just sort of an update on the model impact. Then just any early comments on the Orlando campus for Raz.

I realize it's very early still, but just curious, like, how it's tracking versus, say, other, kind of campus expansions that you guys have done over the years at this point. Thanks.

Great. Thanks very much, Tom, for the questions. First on the combination. In the back half of 2026, we don't expect significant financial improvements. That's largely because we currently already operate in a shared services structure where we've got marketing, IT, legal, HR, finance, all shared and providing services to each of the education units today. Our main enthusiasm for the combination is both our revenue synergies, which we expect to start seeing in 2027, by bringing Rasmussen's expanded program offerings to Hondros' campuses, and also cross-pollinating more Rasmussen programs to their existing campuses. We also anticipate that as the combination moves forward and we see success in your second question, which is, our campus openings.

We have the opportunity through the combination to accelerate investments in campus openings, once we see, you know, that we are proving out the model of investment in and return on those campuses. For the Orlando 2 campus progress, I'm gonna turn it over to Gary so he can give you a quick update on that.

Yeah. I think we're pretty happy with how Orlando 2 opened. I would say that we were a little late in the game, so we only got about a half of a quarter of enrollment, yet I think we hit our start targets for that campus. I think Q2 will be a pretty good indication of what the ramp rate will be. So far so good, and we're on track. One thing to note, I think that campus introduced practical nursing to the markets in Orlando, which we hadn't offered before, and offered it in a nights-and-weekends mode, which we also had not offered before. It's great to see it up and running, and I think we'll see good progress in the enrollments in our third quarter.

That's great. Maybe just one quick follow-up if I could. Just Angie, I think you used the word sort of accelerated openings. I mean, if Orlando goes well, and I think you guys have talked about kind of like two, new campuses kind of a year is in the plan. Is it safe to assume that you guys could kind of accelerate that pace, maybe not this year, but, you know, maybe next year, depending on how the rest of this year goes? Thanks.

We really are going to pay careful attention to what we call our trailblazer initiative, which is the campus openings. We see that the main obstacle, Tom, that might prevent us from going faster is whether we are expanding outside of the states where we already operate. Inside the states where we operate, we typically have already overcome the obstacles from a regulatory perspective. As we start to branch out to our adjacent states, there is a journey, state by state on that regulatory process. Once we get our toehold in a new state, the expansion then accelerates again. We are very confident we are on track right now, and we do hope that the early results will allow us to accelerate.

Thank you very much.

Thanks.

Our next question comes from the line of Griffin Boss with B. Riley Securities. Your line is open.

Hi, good evening. Thanks for taking my question. Just really one primary one for me. Would like to kind of expand upon what was just talked about. I do wanna just make sure that I call out the $63 million of cash flow from operations in the quarter was stellar. That's great to see. Kind of on that front, can you just maybe provide a little bit more color on your thought process around future strategic initiatives and investments? I mean, you've talked about obviously the campus relocations and, you know, you just talked about the Trailblazer initiative. Just curious kind of where you're primarily focused on deploying, you know, the cash and, you know, using your strong balance sheet.

Is it, you know, is it gonna be tucking in acquisitions? Is it gonna be more so focused on, you know, further campus initiative expansion initiatives? Excuse me. Any added color would be helpful.

Yeah, great question, Griffin. Thank you. First, we are making sure that we are spending into the growth in each one of our currently owned businesses, right? You heard us investing more in marketing inside of APUS or the Military+ division. That's, you know, somewhat to offset the near-term headwind from the war in the Middle East. Beyond that, we are absolutely investing in our tech platform. One of the things we have underway is the combination of our nursing schools, consequently we're moving on to a single tech platform. We're going to talk a little bit more about that in next quarter's call, what we're doing to innovate around that. We're excited about that initiative.

It does have some, largely 2027 impact, but perhaps late 2026 as well. Certainly our main focus are new campuses, and our main focus is tuck-in acquisitions. We're actively working on that. It's one of Gary's top priorities. You know, it is a good time to be considering those possibilities, and we look forward to sharing any updates we have in future conversations.

Great. Well, thanks for that color, Angie. That's it for me. Again, great to see the progress. Thank you for taking that question.

Thanks, Griffin. Appreciate it.

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

Hey, thanks, congrats to the team on the results. First one here on the updated 2026 guidance. I'm roughly estimating that it implies about 3% top-line growth in the back half of the year if we adjusted for the estimated government shutdown drag in late 2025. Seems like that'd be more like 8% in the first half, excluding Graduate School USA. Is that mostly reflecting the slowdown in the certain military buckets you mentioned, the Navy, Air Force and Marines, and anything else to call out there beyond normal conservatism?

Stephen, thanks very much for the question. Are you specifically looking at the Military+ division or are you talking about overall guidance?

No, just total company revenue guidance.

Total company revenue guidance. Gary, do you wanna take that?

Yeah. I mean, I'll have to look at the details, but I don't think we're looking at 3%. I don't think we've given the second half the details of each quarter in the second half. Don't forget, we again had the shutdown. Are you seeing 3% excluding normalizing for the shutdown in the prior year?

If we added back the estimated drag from the shutdown in February 4th 2025 and then taking out, you know, Graduate School USA in the first half of this year, so trying to compare it on a, you know, a pure basis.

I think it should be a little bit higher than that. I would say, listen, our current revenue guidance right now is focused on the first half and the second half. We're being a little bit more conservative about the second half of what it should be. You're right to say that the Military+ segment is not showing what I'll call it the 7% growth that we were seeing previous to that, because we're trying to meter the impact of the deployments and see how that plays out. Our guidance does imply continued growth within the Health+ division, which we're seeing progressing at the rates we were talking about in the first half.

We're still moderating in the second half and then seeing what the impact is of the deployments and then also trying to understand what, you know, what the YoY comp would be absent the shutdown from last year.

Okay. Got it. Yeah, I can, I can dig in more because offline. Following up, I, you know, this is probably more from an industry perspective, but I guess have you noticed any changes in the type of applicants that are pursuing nursing pathways in the Health+, on the health side, especially on pre-licensure nursing? The reason I'm asking that, you know, there's a lot of increasing uncertainty in other fields around how AI may negatively impact employment levels down the road. That doesn't seem to be much of a perceived risk in healthcare, including nursing, which, and with a lot of obviously favorable secular trends there, that could make it a very attractive pathway to employment. Just curious if you're seeing any changes in the profile of applicants kind of given those dynamics.

We continue to see enthusiasm for the nursing programs. We, as you know, because we offer three ways to become a nurse, an LPN, a two-year degree RN, or the bachelor's degree, which is 3.5-year program, it gives many different types of students with different levels of preparedness the opportunity to become a nurse. We haven't seen a slowdown. We've seen a lot of continued interest. As I mentioned, our, you know, our nursing enrollments are growing at high single digits. We're very happy with the continued progress we're seeing in our nursing programs.

Good to hear. Thank you.

Thanks very much.

our next question- Our next question comes from the line of Luke Horton with Northland Securities. Your line is open.

Hey, guys. Thanks for taking the questions, and congrats on the quarter. Just wanted to circle back on the strategic investments. Just wondering if you could kind of outline what sort of criteria you would be looking for for a potential acquisition, whether that would you be looking at any smaller two to four campuses, or would you wait for a larger kind of needle mover acquisition? Just any sort of criteria that you guys are evaluating there.

This is Gary. I think our primary criteria is going into states in which we're not currently operating. If we can find And we're trying to stay, I think we said this before, trying to stay within the Midwest and the East Coast for right now. We're looking at states where we currently don't have a license. We're looking at states that are generally contiguous to where we're you know, operating. We're looking at locations where we believe that there's a good supply-demand imbalance in that state, and if we can accelerate our entry into that market by making an acquisition. Those are the primary criteria. If we have a single campus, you know, that's certainly something we'll look at.

If it has multiple campuses and we can get lucky enough to hit, you know, several of those opportunities and one fails too, we would certainly be interested in that as well. We're not ruling out anything that fits within those, the larger criteria of, A, the state that we're interested in and the supply-demand imbalance in healthcare are the two primary criteria.

Okay. Great. That makes sense. Second one just on the Military+ with the kind of deployments across Navy, Air Force, Marines. I guess historically, have you guys tracked, like, what sort of percentage of students that get deployed actually return and re-enroll? And also I guess within your, within your guidance, I guess, what are you assuming for either a rebound or timing for those sort of enrollments?

Hi, Luke. Thanks for the question. I don't know that we have tracked in the past the return of those who have flagged themselves as asking for an accommodation for deployment. We will try and run that down and see if we can get more detail on that. This is, you know, this is a different circumstance. Typically the wars begin with Army moving first, deploying, setting up base camps, and then basically waiting. This was a war that was different than what we've experienced in the last several years, where it was a air and sea war immediately. When Navy, Marines, and Air Force deployed, they were in combat right away.

We saw more people requesting that accommodation for deployment, and not taking education while, you know, overseas than what we had experienced in past situations. We'll try and run that down and see if we can get a stat for you on how many return after deployment. Good question.

Got it. Great. Thanks, Angie, and thanks, guys.

Thanks very much.

Thank you.

Our next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets. Your line is open.

Yeah, I also wanted to follow up on the military enrollments. Just, obviously the conflict started at the end of February. Was your first evidence of the kind of the, you know, the active duty headwinds, was that with your May starts or with your April starts, and did you see a difference between the two?

Yeah, great question, Eric. Our March start was very early in the quarter, and so at that point in time, we saw very few drops because you're right, the war did begin technically and effectively on February 28th. We started to see the accommodation request coming in for our April start and now for our May start. It didn't have as much of an effect in March, but we certainly started to see it happening as we headed into the completion of the April and May starts. Gary, do you want to add to that?

No, I think that's right. I mean, we saw the uptick in deployment numbers. We saw that the branches. We were like, "Okay, what's going on? Why is that happening?" We went back and looked. As Angie pointed out, Army looks, you know, a little bit light, but not compared to what we've seen. We've seen good growth rates. We saw the, you know, the numbers that were lower than what we expected coming in from the branches that were, you know, on the front lines of the deployment.

Okay. The second part is that the outlook, does it anticipate status quo? Does it anticipate a recovery at any point?

I would say Q2 we would expect to be impacted a little bit more than in Q1 by the deployments. We did, as Angie pointed out, we did deploy marketing that we think will help to offset that. We believe that towards the end of the quarter, namely the last month of the quarter in June, we'll see some recovery, and then we believe we'll see additional recovery going into Q3, and then we'll just have to see how much we have to manage the deployments going forward. It's, you know, it's unknown what happens from here, I don't want to get too far ahead of ourselves not knowing what will or will not happen with the current situation over there.

We do believe that the strength that we're seeing in veterans and military families gives us a very good foundation for us to invest behind. Those are high teens growth rates in the second quarter, as we've been sharing for the last several quarters. We're gonna invest behind those two segments and really try and offset any of the short-term impact we might get from the three branches who are active and deployed right now.

Got it. Makes sense. Thanks for taking my questions.

Thank you.

Our next question comes from the line of Raj Sharma with Texas Capital Bank. Your line is open.

Hello. Thank you for taking my questions. Can I try not to beat a dead horse and go back to the military deployments? You know, historically, there's been a certain number of deployments for every, you know, a certain number of deployments have resulted in the certain decrease in registrations. I think, if I recall, like, 50,000 deployed got you 1,500 registrations less. I mean, how do you, and I know you've talked about this, and how do you see this? Can you provide some color there in the sense of, you know, how do you see this particular deployment impacting the registration? Also, I have a question on, I mean, how would you allocate the marketing dollars to offset this impact?

Is that related to the margin? I have a follow-on question on the margins in Military+. Sorry. Too many questions rolled into one.

Let me start. Of course. Thanks, Raj, for the great question. 50,000 deployed active duty, we know that about 10% use their education benefit at any given time, so that gives us 5,000 of those people are somewhere in their educational journey. We know that we educate 30% of all active duty who are taking classes. That math that you laid out, absolutely 1,500, 1,500 students, right? Typically, our students in any given quarter are taking about two registrations, one to two registrations.

Right.

You'd have to multiply that by, say, 1.5, 1.6, right? I think that that then really points to, you know, the difference between mid to high single-digit registrations and mid single-digit registrations. You know, we're kind of triangulating this on several different measures, and that's another measure that I appreciate your bringing up. Yes, we really believe that when we can redirect the marketing dollars that we talked about, $2.2 million of incremental spend in Q2 beyond what we had originally planned, towards veterans and families, we will be able to drive more momentum in those segments. We also know, as you are all aware, well aware, that our active duty come to us from referral at about a 40% rate.

It does cost us a little bit more to get our veterans and our family members than it would cost us if we were investing that $2.2 million in our active duty. But we believe it's a very well-timed investment because we really are trying to be sure that we are continuing to deliver on the enrollment targets that we set out for APUS. You can see our confidence in the business by the virtue of the fact that we raised guidance on the revenue and the Adjusted EBITDA for the full year. We believe that we've got the mitigation strategies well in hand for APUS.

Got it. Thanks. That's super helpful. I have a related question on, you know, if you look at the margin, your margin slide sheet Military+, there's a solid margin increase, 32%-36%. You're saying that I think you commented there was that perhaps that goes back down to 32 the end of the year because you allocate more advertising and marketing costs.

That's correct, Raj. Right. Great margin improvement, but we don't expect to sustain that throughout the year. you know, part of the reason is that incremental $2.2 million. Having said that, we're still guiding for the full year in the neighborhood of that 15% EBITDA margin, which would be an improvement over last year's 13.2%.

Perfect. Perfect. Just following through to the nursing, there's an improvement in the margins there, but sequentially, you know, there's a drop sequentially from Q4. Wanted to understand, is that because nursing is kind of close to breakeven, so it's tough to kind of figure out how to scale that up quarter to quarter and get a consistent margin increase?

No, that's.

Or other things that-

No. I mean, it's a good question. If you recall last year, you know, when Q1, we had timing between Q1 and Q2 of instructional materials. There's roughly $2.8 million of instructional materials last year that didn't exist as we rolled out new materials and that modified the margin in Q2. It's really just the timing. It's just really the differences YoY of that $2.8 million that didn't exist, so we literally had no instructional materials due to the way the contract was written with our vendor at the time.

Then there's some additional other items, a little bit more marketing spend, but that's really what drove the margin difference between I mean, you're right, the margin was very low in Q1 from where we had expected to be, and we would expect to see the flow through margins, much better in Q2 through Q4 for the remainder of the year.

That's a one-time, contract matter, Raj. I think we talked about it last year in Q2, which, the contract gave us a quarter for free, basically. We did not have.

Right

instructional material costs in Q1 of 2025.

Got it. Just if I can ask one last question. Just can you comment on the sensitivity of the Department of Education, you know, their sensitivity to the cohort default rates? I presume that you are better positioned with a huge military focus to this issue, but so how are you thinking about the upcoming CDR disclosures? Are you well-positioned here in this regard?

I mean, I'll answer it. I think the answer is we're monitoring it. Certainly with the military, we have a lower borrowing rate, but that's not how it's measured. It's the students that did borrow, how many of them are repaying the loans. One of the biggest concerns is what is the behavior and pattern of people that haven't been repaying. We feel we're in good shape based on our third party that helps us out with these things.

We're keeping an eye on it because, you know, students that were asked not to pay their loans for a long period of time, all of a sudden are being asked and changing that behavior, you know, I think will take some time to instill in the students that are in repayment. The answer is we feel good about where we're at, but it's something we're gonna have to be on top of as students go into repayment for the first time in a long time.

Awesome. Thank you so much, and congratulations again on

Great

consistent results. Thank you.

Great. Thank you, Raj. Thank you.

Thank you.

Our final question comes from the line of Jasper Bibb with Truist Securities. Your line is open.

Good afternoon.

Hi, everyone. I'll just keep it to one. I was hoping you could talk about how you're approaching student acquisition. I guess some of your competitors talked about search algo changes or the shift to answer engines potentially impacting the top of the funnel a bit. As I, you know, I think you mentioned earlier on the call, your referral rate is super high, so maybe you'd be dealing with less of that than some of your peers, but just wanted to hear about your experience there and how you're managing some of these kind of changing consumer behaviors.

Yeah. Great question, Jasper. Thanks for the question, and I'll start and turn over to Gary as well. You're absolutely right. At APUS, because we have such a significant amount of our new students coming from referral, that we aren't seeing really any meaningful change to our acquisition cost or the momentum behind acquisitions, setting aside, you know, the three branches of the military. We're very positive about the continued momentum at APUS. We have not seen a slowdown in our acquisition of new nursing students. I'll turn it over to Gary because he's been working closely with the marketing team and the enrollment team based on exactly what you've been hearing in the market, which is other people pointing to this particular topic.

Yeah. I will say that, as Angie pointed out, a small portion of our business, we've seen some of that same behavior, right? Which is the non-healthcare portion of our online at the Health+ division and a small portion of our health online that we've seen that the algorithms that use AI are picking up ways to prioritize the keywords in the algorithms. We're aware of it, and we're responding to it. We've put deployed resources similar to others. We haven't seen a material impact because the other portions of our business are growing, not, you know, as we would expect.

It's something that we do, you know, we have to address just like everyone else is and feel comfortable we understand what the root causes are and what we need to do to, you know, bring the algorithms back in line.

Appreciate the detail there. Thank you for taking the questions.

Great. Thanks very much, Jasper.

That concludes our question and answer session. I will now turn the conference back over to Angie for closing remarks.

Thank you very much for all who have participated today. We remain very enthusiastic about 2026 and our four-year plan. We have built the foundation for the next several quarters of success, and we see in front of us significant momentum both in top-line revenue and expanding margins and also an expansion of our EPS contribution. Thank you to each of you for joining us today, and we look forward to connecting with you all very soon.

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.