Okay, good afternoon, everyone. Welcome back to Sidoti's May MicroCap Conference. My name is Daniel Harriman, and I'm an analyst here at Sidoti. This afternoon, we're gonna get to hear from American Public Education, ticker APEI. The company's Chief Executive Officer, Angela Selden, is gonna be here going through some slides and, discussing, discussing the company. We're gonna give her about 20 minutes to go through the presentation, after which time I'm gonna open it up for a 10-minute Q&A. If you do have any questions during the presentation, please feel free to type it into the Q&A box, and time permitting, I'll get to as many as I possibly can. With that, please join me in welcoming APEI to Sidoti's MicroCap Conference. And Angela, I'll hand it over to you. Thanks for being here.
Great. Thank you very much, Daniel, and thank you all for your interest in American Public Education. I would like to give you an overview of APEI, and I'll start by describing the four business units that are actually a part of our company. We provide online and campus-based post-secondary education and career learning to 125,000 students each year through four subsidiary institutions. We're excited about the market we serve. It's a $100 billion market presently, and that market is scheduled to grow, forecasted to grow, 10% each year for the next five years. We believe that our long-term strategy is built on a distinction of focus on the nursing and health education sector and the public sector. There are two focus areas in the public sector, including military and veteran education and training in the federal workforce.
One of those two institutions is American Public University System, or APUS, and we're proud to say that APUS is in the top 11% of 4,500 institutions for return on student educational investment. We'll talk a little bit more about APUS in just a moment. The other market, which we have distinction in, is in nursing education, and specifically in pre-licensure or first licensure education, meaning that we educate new nurses. That's an important distinction because the Bureau of Labor Statistics estimates that in the next 10 years, each year, we will have over 250,000 nurse openings, and so we educate new nurses to fill those open positions. What you'll hear today is a little bit about these four institutions, and the first is that we see a very strong contribution financially from American Public University.
We have solid, low double-digit growth, free cash flow, and expanding margins in that business over the last several years. At the same time, our one of our key nursing businesses, Rasmussen University, has turned around and is now on a path to growth and is yielding very positive results in terms of both the top line and bottom line contribution in nursing and some of the other online programs that we offer at Rasmussen. And our other nursing business, Hondros College of Nursing, is delivering mid-teens to mid-twenties quarterly growth and is generating not just high revenue, but also improving margins associated with that business.
We did our earnings call yesterday for our first quarter, and for those of you who were not able to join that call, I'm pleased to report that we exceeded our EBITDA, Adjusted EBITDA guidance for the fifth quarter in a row. We are forecasting 3%-5% revenue growth in this year for 2024, and positive net income. We, for the first time in over a dozen years, last quarter, gave annual guidance and we actually raised our guidance yesterday and are now forecasting Adjusted EBITDA between $60 million and $70 million in 2024. And you'll also see from our financials in our Q that we are a no net debt business that has $153 million of cash on the balance sheet.
So with that, I'd like to advance to the next slide, please. What powers APEI and creates distinction for us is that we believe in the vision of education, which is to allow it to transform lives, advance careers, and improve communities. And our place in that, our mission at APEI, is to power purpose, potential, and prosperity for those students who are in service to others, hence our focus in active duty military, veterans, nurses, other health sciences, and many other in the social services who come to us for higher education to advance their careers. And we are aligned around several values that you see on the screen today, which power the employee base, our faculty and staff at APEI. Next slide, please. Let's talk for a moment about the four institutions that comprise APEI today.
As I mentioned a few minutes ago, we have two main focus areas: the public sector and nursing and healthcare. In the public sector, American Public University System has been part of the APEI family for nearly 35 years. This institution is 100% online education and is the number one educator of active duty military and the number one educator of veterans in the higher education market. Each year, over 90,000 students take classes from APEI, and we educate people in 90 different countries. I mentioned about the return on educational investment, and we're very proud of that statistic. We believe that APUS's value proposition of affordable, high quality, inclusive, and outcomes-focused education is something that creates significant distinction for APUS. The other public sector education unit that we own is Graduate School USA.
It's the number 2 provider of training to the federal workforce, and these training programs are offered in individual or group classes, and it is singularly focused on allowing the federal workforce to advance in the career ladder and progress in their careers. There are over 300 courses offered, and they're primarily short course, as different from our other three institutions who are offering degree-granting credentials. The second focus area that we have is nursing and healthcare, and we spoke a minute ago about Rasmussen, but one of the key important things about Rasmussen is that it does offer an entire ladder of nursing curriculum, along with 15 different health and healthcare allied health programs.
Rasmussen has both online courses and 21 campuses in six states, and those 21 campuses are predominantly used for our new nurse education, as well as some of our allied health, education programs, those programs that need a campus to be able to deliver a portion of that training. Rasmussen educates 13,600 students each year, and it's roughly split half and half between our nursing and allied health campus-based education and our online education. Finally, at Hondros, Hondros offers fewer programs than Rasmussen, namely two today, an LPN degree and an ADN-RN degree, or a two-year registered nurse degree. Hondros offers all of those degrees on eight campuses in the states of Ohio, Michigan, and Indiana, and today, Michigan and Indiana offer the PN program only and are working towards being able to offer the ADN-RN programs as well.
Hondros educates about 3,300 nursing students each year and has 65% of those students pursuing an LPN degree. What's unique about Hondros's curriculum is that the LPN to RN curriculum is stackable, which means that as soon as someone finishes their LPN degree, they can move right into a swift completion of their ADN-RN degree. As I mentioned about APUS, but we believe it underpins all of our institutions, is that we have purpose-built our educational offerings to allow students to progress in their profession and in their careers, because our offerings are affordable, they are high quality, inclusive, and outcomes focused. Next slide, please. We believe these markets are important, and the distinction that we've created in these markets, I'd like to share some statistics with you.
As I mentioned in the opening, the U.S. higher education market is expected to grow from about $95 billion and up to about $173 billion in the next 7-10 years. And the online education market, obviously fueled and powered by COVID, is expected to reach 12.6 million students by 2029. As we look at the registered nurse workforce, there's 3,100,000 registered nurses today, which will grow each year by about 200,000-250,000 nurses, and at Hondros and Rasmussen combined, we're educating only about 10,000 a year. So there's significant tailwinds for new nurses. We are educating less than 5% of the open positions that exist in the workforce today.
The backbone of our American Public University System market and the distinction we have there is about 850,000 military veterans who receive $10 billion in education benefits through the GI Bill, and about $750 million in tuition assistance for those who are still serving as service members in the armed forces, who are receiving as a benefit of their contribution to our armed forces, they receive their education for free. And one of the things I do wanna point out about American Public University System specifically is that we have purpose-built our education offering for APUS such that students are able to graduate with no student debt, and so we can't be more excited about the value proposition for our American Public University students, both active duty military and veterans. Let's move to the next slide. Thanks.
And so today, if you were to look at the public sector focus and our health education focus, about half of our revenue comes from each of those sectors, and you can see American Public University System today is about half the revenue, and you can see the resulting mix from Rasmussen, Hondros, and Graduate School USA. One of the things you'll notice on the right is that we describe American Public University System in the context of registrations, and the reason we do that is because students are able to take one course at a time.
Those courses build to a degree program, but unlike Hondros and Rasmussen, which are on a quarter-based system, and students join cohorts and advance in their education on a quarterly basis, American Public University, 35 years ago, was built to allow the active duty military to take one course at a time, so that they can eventually complete their degrees, but still be in service to our country. Next. We are very proud of the enrollment momentum that we are seeing across our education units. If you look at American Public University System on the bottom left, you can see that each year, for the last three years now, into 2024 as well, that on a quarterly basis, we are growing those registrations.
You can see also that we describe and show the American Public University System momentum on a quarterly basis because of seasonality. The registration numbers each quarter are not consistently the same. And so you can see on a comparative basis, that the momentum is growing across the quarters and the years. If you look to the top right side, which is the Hondros enrollment momentum, you can see mid-teens to mid-twenties growth, and we have been able to achieve record enrollments in 2024, in both first and second quarter. And then, as it relates to the bottom, we've discussed in our earnings calls in the last five quarters, the turnaround and return to growth that we are seeing at Rasmussen.
You can see that occurring in the charts below, where we have progressively increased the change in enrollment to the point where we are now just 2% below quarterly comparisons from the prior year period in terms of total enrollments at Rasmussen. Now if we turn our attention to our first quarter results that we just shared with the street yesterday. In the first quarter, American Public Education delivered $154 million worth of revenue. We exceeded the high end of our first quarter guidance, and it was the third consecutive quarter of year-over-year growth. We delivered a net loss of $1 million and an EPS of -$0.06, compared to the guidance of $3 million and -$0.17.
The most important thing we shared yesterday was that our adjusted EBITDA increased 143% year-over-year to $17.1 million, and we exceeded the high end of our guidance by $10 million. We have a very strong liquidity position, and our cash and cash equivalents are $153 million. As I noted at the beginning of our time together here today, we increased our full year guidance, and we just gave guidance for the first time just one quarter ago. You can see the guidance is now $60 million-$70 million on adjusted EBITDA, on a base of revenue of $620 million-$630 million. Here, you'll see the breakdown by education unit of the contribution of EBITDA and margin for each of the education units.
And you can see that even though we offer very affordable education offering at APUS, the margin expansion continues there, where one year ago, in Q1 of 2023, our EBITDA margin was about 25%, and now here today, one year later, we've now expanded that to 30%. So APUS, on a quarterly basis, is generating in fiscal year 2023, over $90 million of adjusted EBITDA and is on pace with the first quarter, having beat Q1 of 2023 by about almost $6 million in adjusted EBITDA. At Rasmussen, you can see the turnaround story, where we've had margin declines in the first, second, and third quarter of 2023.
We were able to be margin positive in the fourth quarter, and you can see that we're on a path to improvement by having a -5% as compared to -8% in the first quarter of 2024, as compared with 2023. And so Rasmussen continues to stabilize enrollment and its cost focus, and we really see in the back half of 2024, the ability for Rasmussen to have positive enrollment growth and positive EBITDA contribution. At Hondros, there continues to be top-line revenue growth, and we were able to achieve positive EBITDA contributions in the fourth quarter of 2023, and we expect that Hondros will continue on that trajectory in 2024 as well. And graduate school is another of our businesses that's quite seasonal, so you can see in the first quarter of 2023 and in 2024, a EBITDA decline.
However, what we are also just coming out of with graduate school is some effect from the continuing resolution or the government not having approved its financial contribution. And so as a result, those in the federal workforce were not able to begin their training until that federal funding had passed. And so now that that is in place, we expect to have graduate school work to close the gap on its 2024 financial plan as a result. So overall, at APEI, you can see that we had $600 million of revenue in 2023, and the consolidated Adjusted EBITDA of nearly $60 million, or 10% EBITDA margin in 2023, and we are on pace already in 2024 to be ahead of that margin.
So in summary, what I'd like to just recap for you is that we believe strongly in the value proposition and investibility behind American Public Education. As we mentioned, there's a very large addressable market that's expected to grow greater than 10% over the next five years to over $100 billion. At APEI, our long-term strategy is to build distinction in markets that have consistently stable long-term demand, and that includes the military and veterans market, and the nursing and health education markets. We described the unique position APUS achieves, which is the top 11% in return on educational investment for students, and that supply-demand gap that continues to exist for the next 10 years in the market in the United States alone, needing new nurses.
We, again, wanna reiterate the operating performance and the great contribution that APUS continues to make, the turnaround at Rasmussen that is showing and proving to be on a track for positive revenue, enrollment, and EBITDA results in the back half of 2024. And Hondros continuing to deliver significant enrollment growth and improving margins in 2024 as well. And finally, as I mentioned, we have $60 million-$70 million of Adjusted EBITDA guidance for 2024 on revenues of $620 million-$630 million, and a very strong balance sheet with no net debt. So with that, Daniel, I'll turn it over to you and see if there are any questions.
Wonderful, Angela, thank you so much for going through that presentation and sharing the story, and congrats on the wonderful results. As a reminder, if you do have any questions, please feel free to type them into the box, and I'll get to them, time permitting. Angela, the first one comes in, and it obviously has to do with the stock price and how wonderful things have been for you over the last six months. But... And I know that you touched on this a little bit, but your valuation has had an incredible run since the end of last year, and what do you think are the major catalysts that have contributed to heightened? And then, what do you think are the major drivers moving forward to main-
Daniel? Daniel, you've just cut out for me. Oh, can you—you said—
Oh, my goodness. I'm so sorry.
Yeah, you said heightened, and then, I missed the rest of the question.
I'm so sorry, Angela.
That's fine.
Just heightened investor interest, and what do you think the major drivers are there, and what are the drivers moving forward to continue that valuation increase?
Sure. So thanks for the question. What I would first say is that we set about in 2022 to really invest behind the nursing and health sciences sector, and in doing so, acquired Rasmussen University. After the acquisition, we really focused on strengthening the leadership and reducing the cost structure in order to be able to demonstrate enrollment momentum and positive EBITDA contributions. And so during that time of the transition and the turnaround at Rasmussen, we did see some effects on the stock price, which we now believe have been rectified. And as I mentioned in my remarks a few minutes ago, the back half of 2024 is anticipated to be able to deliver that positive enrollment momentum year-over-year, as well as the positive EBITDA contribution. APUS has seen margin expansion very significantly.
As I mentioned in my comments, we've gone from 24% margin to now over 30% margin, and again, that's driven by a handful of things. Mainly, being able to optimize our marketing spend to reduce our cost to deliver, and still at the same time, be able to drive that top-line revenue growth. And so because of those those investments, as well as those belt-tightening cost measures, we've really seen the investor community respond very favorably to those actions in the last five quarters.
Perfect. Thank you so much. Another question came in about advertising... and it says, "How much do you typically spend on advertising per year, and is it mostly online advertising? And then what drove the reduction in advertising costs that you reported yesterday for Q1, and is that sustainable moving forward?
Mm-hmm. Oh, that's a robust question packed into several, so let me try and unpack that. First, yes, we believe it's sustainable. What we have done is we have A/B tested all of our different marketing campaigns to make sure that the cost reductions are sustainable and allow us to drive the top-line growth in each of our education units. Second, the marketing strategy is different for online institutions than it is for campus-based institutions. If you just think about it, practically speaking, a campus-based institution requires students to be able to get to the campus within 30, maybe 45 minutes' drive time from their home location. And so consequently, local market marketing for campus-based institutions is far more important than online marketing.
In contrast, our online businesses, American Public University System, and the online degrees that are offered at Rasmussen, are almost exclusively marketing to students through online channels. So we actually have a capability inside of our APEI marketing department that allows us to really maximize and optimize for both.
Perfect, thank you so much for unpacking that for us.
Sure.
And then, another one came in about tuition and fees, and it says, "What type of tuition and fee increase did you have in 2023, and what does your 2024 revenue guidance imply in terms of tuition increases?
Mm-hmm, great question. One of the value propositions that you heard me speak about, specifically related to American Public University System, is affordability, and that affordability starts with the tuition that we charge to active-duty military and veterans. We pride ourselves on what we say as no out-of-pocket cost for those populations, and what that means is that the reimbursable amount coming from the Department of Defense is the cap at which we structure our pricing for some of our programs. In addition, our tuition. Also, we also do not charge for books and materials at APUS as well, and so consequently, 71% of our American Public University System students do not pay any out-of-pocket costs for their education, and as a result, graduate with zero student debt.
In the other institutions where we have nursing degrees, again, we pride ourselves on offering affordable nursing degrees, and we are among the most affordable for the RN and the LPN degrees across the different choices students might have. We have seen modest price increases at both Hondros and at Rasmussen for our nursing degrees, namely because the competition for finding faculty has increased post-COVID. You saw the number of open nursing positions, so you can imagine that healthcare systems are raising salaries to attract nurses back into those open positions, and that has had an effect on the salary that we can pay our nursing faculty.
So as a result, we have had to do some very small, single-digit tuition increases in our nursing programs in order to be able to be sure that we have the faculty necessary to teach those students.
Perfect. I'm gonna try to squeeze one more in before we run up on the time. And then it's: "Do you plan to open additional campuses, and if so, how much CapEx is typically spent on average, and what does the payback period look like on those investments?
Mm-hmm, great question. Hondros is opening campuses and has been for the last several years. So the newest campuses are the fifth and sixth campuses in Ohio, Akron and Toledo, and new markets, where we opened a campus in Indianapolis, and also just last year, opened a campus in Detroit, Michigan. On average, those campuses cost between $1.5 million-$2 million, and depending upon the enrollment momentum, in fact, in Detroit, we've seen a payback of less than one year, in terms of that campus opening. So we certainly are striving to open more campuses at Hondros in 2024 and beyond. At Rasmussen, after we purchased Rasmussen, which that transaction closed in 2021, the Department of Education imposes growth restrictions, they wanna make sure that-
Oh
... the new owner is managing the financial aid for the students in a high-quality way. And so Rasmussen is now just coming out from underneath those growth restrictions, and we expect, at the end of 2024, to be able to, for the first time now, since we've owned Rasmussen, be able to open campuses, and continue the, the growth, the organic growth at Rasmussen as well.
Perfect. Well, Angela, on behalf of Sidoti and those of us in the audience, thank you so much for sharing APEI's story, going through the presentation, and thank you for your willingness to answer questions. For those of you in the audience, thank you for joining us today, and we hope everybody has a wonderful rest of the day. Again, Angela, thank you, thank you so much for being here.
Daniel, it's my pleasure, and I really appreciate and thank all of you who have interest in American Public Education.
Bye, everyone.