Research disclosures and potential conflicts of interest, please go to our website at williamblair.com. It's great to have the APEI team back at our conference again this year, and from the company today, we have CEO Angela Selden, who's up here on stage with me. We've got CFO Rick Sunderland, who's out down in front here. We also have SVP of Strategy and Corporate Development, Steve Summers. The company's been executing really well in recent quarters. It's driven a significant recovery in the stock, year to date, which is great to see. So yeah, with that, I'm gonna turn it over to Angela.
Great. Thank you so much, Steven. We so appreciate being here today. Thank you. I'm Angie Selden, great to spend time with you, and thank you for your interest in APEI. We'll just jump in and get started. Let me tell you a little bit about who we are and, more importantly, the market that we serve, the sector that we're in, and the value proposition we're creating for our students and our customers. APEI today is a portfolio of four institutions. We'll talk about them in just a moment. We educate students online and in campuses on post-secondary education and in training, and last year, we educated over 125,000 adult learners.
The market we play in is the higher education space, and we see that as a very attractive and growing market, where we have over $100 million-$100 billion, excuse me, of market it today, and it's focused to grow at least 10%, over the next several years. We see our strategy really around two different distinctive markets, and those both we have a moat around each. First, we are the number one educator of active duty military and the number one educator of veterans, and because of that distinction, 40% of the students that we educate at APUS today come to us through referral.
We are the number one educator by 2x our next closest competitor, and because of the way that we have purpose-built the processes and the systems that we use to enroll and to educate active duty military and veterans, we have built a moat around that business that has not been able to be touched by most of our competitors in the online education space. The second business of distinction that we have is in nursing and healthcare education. For those of you who are unfamiliar with nursing and healthcare education, there really are two different sectors of education: those that create new nurses and those that upskill and educate existing nurses.
We primarily create new nurses, and the reason why that's very important is because in the healthcare economy today, each year for the next 10 years, there will be 250,000 new nurse openings. It's due to retirement, it's due to nurses exiting post-COVID, and so consequently, there's a huge supply and demand gap that exists in the market, and we are primarily creating new nurses to fill that gap. However, our nursing graduates today will only fill about 5% of that supply-demand gap. So there's an enormous tailwind that exists in nursing education, and we believe we're uniquely poised to be able to address that supply-demand gap. We'll talk a little bit more about that in just a second.
When we talk about financial results, and I'm very grateful, Steven, for the shout-out on what we've done over the last 5 quarters, we have delivered our financial projections over the last 5 quarters. In Q1 of 2024, we announced annual earnings guidance for the first time in 14 years, and so we've now been able to give investors a much longer line of sight to our financial performance than what we have done in previous years, where it's only been on a quarter-by-quarter basis. We've seen solid growth, positive margin, and a great free cash flow story at APUS. For those of you who've followed us over the years, APUS continues to produce in a very high-quality way.
We will talk in a minute about the turnaround at Rasmussen and the important enrollment momentum and positive EBITDA contributions we anticipate by the back half of 2024. Hondros continues to deliver new nursing enrollments at a mid-teens double-digit growth rate each quarter for the last two years. Overall, we have exceeded our financial guidance for the last 5 quarters. We're forecasting 3%-5% growth in 2024 in revenue and positive net income, and we have increased just in since we did our first annual guidance, we increased our adjusted EBITDA guidance to $60 million-$70 million, and we have a very strong balance sheet at $153 million of cash and no net debt.
Just as a reminder, what unifies our four education units that we own today is our mission of powering purpose, potential, and prosperity for students who are in service to others. The unifying theme of our active duty military, our training company, Graduate School, who educates the federal workforce, and our nursing businesses, are all united by this common mission. So let's talk about those four businesses in a little more detail. As I mentioned, we really have organized them in two focus areas. The first is our public sector-focused, which is American Public University System and Graduate School USA. The second is our nursing and healthcare portfolio, which includes Rasmussen University and Hondros College of Nursing. There is distinction, so it's important to understand some of those differences. American Public University System is 100% online.
We educate, as I mentioned, active duty military and veterans. We measure enrollment momentum based on registrations and not based on students, and you may say, "Why is that?" For all of you who had a traditional undergraduate educational experience, you start as a student, you take three or four classes every semester, and you graduate in four or five years. All right? That is not APUS. APUS sells one class at a time. They all lead to a degree, but it was purpose-built to educate the active duty military who cannot take three or four classes at a time. They're deployed, they're working, and so we built this university 30 years ago to sell courses one at a time.
So in a future slide, you'll see that we measure our enrollment momentum, not based on students, but based on what we call net course registrations or the number of registrations we've sold in any given quarter. The other thing we're really proud about is the value proposition of all of our institutions led by APUS. Third-party study done by Georgetown Workforce and Education, two times now has cited APUS for its incredible return on educational investment. That's measured both by the price point, and it's measured by the value of the degrees that we offer to our students. So we were in the top 11% of 4,500 institutions at APUS for return on educational investment. Another fact that I think will, surprise many of you, and we see raised eyebrows with this one: 70% of APUS students graduate with zero student debt.
And the reason for that is because we do not charge active duty military at the undergraduate level, either bachelor's degree or associate's degree, beyond what the federal government will reimburse them for their tuition. We don't charge them for, for books and materials. We don't charge them extra fees, and so consequently, a service member for the U.S. military can graduate from our institution and pay no out-of-pocket cost. Let's talk about Rasmussen and Hondros for a moment as we pivot to our nursing and healthcare focus segment. As I mentioned, the supply-demand for nurses is extraordinary. We will educate only 5% of that gap in any given year. We'll start with Hondros because Hondros is a very easy-to-understand business.
So in contrast, APUS, where we're counting each course as a registration, at Hondros we're counting students, because when you choose to go to Hondros, you're picking from only two things: Am I gonna be an LPN, or am I gonna be an RN? I get to make one of those two choices, and then you're slotted into that curriculum, and you move with your cohort through that, the progression of that education. So we measure Hondros' momentum based on students. All right? Hondros offers two degrees across eight campuses, and I'm very pleased to say that Hondros has been growing organically, both by increasing student enrollments in its existing campuses, but we've opened three campuses in the last four years as well. Excuse me.
We've added 2 states to the portfolio, Indiana and Michigan, in addition to the now 6 campuses that we have in Ohio. The curriculum at Hondros is what we call laddered curriculum. That means that if you take an LPN degree, you can take those credits, those courses, and jumpstart your ADN degree. So you don't have to start again. You'll have a jumpstart to getting your associate's degree. ADN leads to an RN license. At Rasmussen, we have 21 campuses. We are in 6 states. None of those states overlap with Hondros today, so they're in the upper Midwest, so Wisconsin, Minnesota, Illinois, North Dakota. We have campuses in Kansas, and we have 5 campuses in Florida as well.
Rasmussen offers more programs than Hondros does, so not only does it offer the LPN and the RN degrees, but it also offers allied health, so medical technology, surgical technology, and some other healthcare-related programs on its campuses. In addition, half of Rasmussen's revenue comes from online degrees, so much like what is offered at APUS: business, technology, et cetera. So Rasmussen is really the intersection between APUS and Hondros, which are both operating as pure in their own business models. So between Rasmussen and Hondros, we today are the number one educator of LPNs, and we are the number one educator of the two-year or ADN, RN degrees. Both the ADN and the BSN, which is the bachelor's degree, sit for the same RN NCLEX exam.
But in all cases, what unifies Rasmussen and Hondros is we are creating new nurses, not upskilling existing nurses. It is something we offer. It is not our focus. Our focus is to, is to really focus on closing this supply-demand gap. And then finally, back to Graduate School, it is a business we purchased to diversify away from Federal Student Aid, or FSA, and Department of Ed, financial, opportunities for students. But we liked Graduate School and still like it, number one, because it's training, and number two, because it's a population we understand, which is educating the federal workforce. In the case of Graduate School, we are allowing students to take training on our platform to move up in the, federal ladder of, career development.
We have owned Graduate School for about the same amount of time as we've owned Rasmussen. The unifying theme of all of these, though, is that each delivers high-quality education, not measured by us, but measured by accreditors and measured by our students, in an affordable manner that is inclusive, meaning we have very limited numbers of requirements to be able to begin your educational journey with us. But in each case, we are very focused on career outcomes and ensuring that a student gets a great ROI in terms of earning potential in their future career as a result of the education they obtain with us. Okay, so just from a relative size perspective, APUS is about half of our revenue today, and Graduate School, a small, modest, incremental amount of our basically our public sector.
And then the remaining, about the other half of our revenue, is coming from our nursing and health sciences-focused businesses. You can see on the right-hand side how the measure of momentum is different between Rasmussen and Hondros, measuring students, and APUS measuring registrations. We want to draw your attention to questions that we've received, you know, certainly over the last couple of years and some of the things that Steven was referencing when he did his opening remarks. We acquired Rasmussen. We announced the acquisition in October of 2020, and we closed in September of 2021. During that period of time, there were some consequences associated with COVID that created a drawdown of enrollment at Rasmussen, and it's been well documented in our earnings calls. But simply put, Hondros and the dean and the State of Ohio declared nursing education an essential business.
For those of you who are operating in states where things were shut down, an essential business meant you could reopen your physical locations. Hondros went back on ground one quarter after the COVID pandemic started to hit in April of 2020. So they were back on ground in July of 2020. Rasmussen, in contrast, was operating its nursing business online for nine quarters, and so we saw a surge. So before we completed the acquisition, there was a surge in enrollment. Lots of people had access to the nursing campus education because it was now online, and some of those students didn't necessarily have the, I would say, the tenacity to actually complete the degree program when we had to return those students back to on campus.
So we saw a dip in enrollment, and now we are seeing the return to enrollment momentum as we have established the standards of excellence and success of what we expect from an NCLEX pass rate perspective at Rasmussen and really believe by the end of 2024, we have line of sight to positive enrollment growth and positive EBITDA contribution. So you will see in the stock price changes over the last several years, there was a significant decline in investor confidence in APEI as a result of specifically of Rasmussen. And I'm here to tell you today that those choppy waters are behind us, and we see a bright future for Rasmussen and its nursing business in our portfolio going forward.
You can see in the case of Hondros, which is up on the top, they're delivering mid- to mid-teens- to twenties enrollment momentum on a quarterly comparative basis. I will tell you, one of the key differences is that when we acquired Rasmussen and closed on that acquisition in September of 2021, the Department of Education imposed growth restrictions on AP, on APEI, meaning that Rasmussen could not open campuses or add programs and had a cap on total student enrollment. Those growth restrictions are to be removed at the end of 2024. So Rasmussen has not opened a new campus in five years. Where, in contrast, I just shared with you a few minutes ago that Hondros has opened three campuses in the last four years.
So the combination of new campuses and new programs at Rasmussen, along with the stabilization and the return to positive operating momentum, is something that we believe puts a lot of confidence and wind in the sails of Rasmussen and APEI overall going into the future. So I just wanted to, in summary, give you an overview of why should you care about investing in APEI. And some of you may have said, "Shoot, maybe we should have invested a quarter or two before this." But nevertheless, I'm here to tell you that there's still plenty of opportunity, all right? Maybe we can start on the right-hand side, which is that while we are trading at about 4.5x, the industry that we operate in, which is for-profit education, is really operating in a multiple that's more 7-10x.
So even though we've seen significant stock momentum in the last two quarters, we still believe that we are significantly undervalued. So we continue to build distinction in the markets that we serve, namely this moat that we have around the active duty military and the veterans, where we have yet to find a competitor who's able to create the value proposition for the student that we can, and the cost-effective way in which we deliver that education because of the distinct purpose-built processes, tools, systems that we've developed to be able to deliver that seamless experience for those students from beginning to end. And this moat that we have around campuses. It's quite difficult for nursing education; it's quite difficult to enter a state and be able to get state board of nursing approval. Takes years to do that.
But once you're in the state, you can land and expand. Given the fact that we're in 8 states today and have the opportunity to expand in all of those markets, gives us a point of distinction that allows us now with the lifting of those growth restrictions at Rasmussen and the ability to open more campuses, we see line of sight to organic growth in both of those businesses. We also will continue to deliver on low single-digit growth at APUS, and we see 10%-20% growth in both of Hondros and Rasmussen in the future years. We believe because Hondros has been opening a number of campuses, that has suppressed the margin at Hondros, and as those campuses fully enroll, we will see the bottom line contribution as those campuses ramp to full operating potential.
So overall, as I said at the beginning of my remarks today, 3%-5% revenue growth in 2024, $60 million-$70 million of adjusted EBITDA, free cash flow of 50%, excuse me, 50% growth to $46 million, which if... We've had a few opportunities to meet with folks this morning, and people say: "What's the thing that's most misunderstood or overlooked at APEI?" And we say the free cash flow contribution that this business generates is something that many investors don't pay careful attention to, and it's a really strong part of our overall value proposition, and the very strong balance sheet of $153 million of cash and no net debt. So with that, I know I still have 8 minutes to spare.
You got 8 minutes, so maybe, maybe we'll do a couple questions here, and then we'll, we'll move it to the breakout. But I'll start with one, which is, you know, it seems like, you know, over the last couple of years, there, there have been some enrollment challenges. Seems like things are maybe gonna be on the upswing here, as we look forward over the next couple of years. I think you guys have also focused a lot on operational efficiency thinking about how you're marketing, thinking about how you're operating, building out shared services. Maybe talk about what you guys have done on the operational side to maybe. Because I'm thinking incremental margins here could be pretty high as-
Yeah
Enrollments recover because some of the changes you've made. So maybe talk about that.
Good question, Stephen. Thank you very much. So a few things that we will share. First, when we acquired Rasmussen, there were two things that we attacked in order to be able to improve the overall operating financial contribution of that business. The first was that we split the business from an operating perspective into the campus-based business and the online business, and in doing so, we created much more transparency around the profit picture of both, number one, and then number two, we drove significant cost reduction. Last year, Rasmussen alone saved $10 million in operating costs as a result of simplifying and providing clarity around the operation of the business.
The second thing that happened at Rasmussen is that they had, in their prior private equity ownership, the private equity firm, to monetize the asset, lifted IT and marketing out of Rasmussen and created a third-party service organization called Collegis. That, because they were owned by the private equity firm who owned Rasmussen, there was, significant disadvantage, disadvantageous contractual terms. And so, in the case of marketing, which we actually brought from Collegis back in-house, last year, we have seen significant, to the tune of $7 million of savings,
in terms of the spend that we have foregone. We don't have to spend that money. Most of that was margin to the third-party servicer, and now we will finish the IT transition back into APEI by the third quarter of 2024, and we're anticipating the same or greater cost savings with that IT transition occurring in the back half of 2024 and beyond.
That's helpful. Maybe we'll open up to one in the audience. Yeah, go ahead.
Can you introduce yourself? Do you mind?
My name is Martin.
Great.
I wonder if you can talk more exactly what classes is that no one will pay us to raise ACU?
Yeah, great question. So APUS offers associate's degrees, bachelor's degrees, master's degrees, and doctoral degrees. And the total program offering is about 230 different program choices. Many of those programs have been purpose-built to serve the interests of the U.S. military, so that includes the fact that we have the number one Space Studies program in the world. We have the number one Environmental Science program in the United States. We have cybersecurity, data analytics, logistics, and supply chain excellence, all things that you think about when you think about the skills and the tools that the military may be looking for but have deep applicability to the general population. So we're not just educating those military to serve in the military, we're also educating them to serve corporations in life with all of those skills that we're offering them.
Go ahead.
Oh, sorry, your second question was: Who pays? So when we talk about Tuition Assistance, which we call TA or VA, Veterans Assistance, which is also the GI Bill, which is in the United States, when you volunteer to serve our country in the armed forces, in exchange for that volunteer service, you receive an education benefit. That education benefit is capped at $750 per course, and we do not charge our active duty military above the $750 per course for an undergraduate degree. So consequently, the Department of Defense is paying us to educate these students, and we are choosing not to charge them more than the federal government reimbursement level. And the vast majority, if not all, of our competitors are charging more than that reimbursement level, and it's that formula that allows our APUS students to graduate without student debt. You're welcome.
Got one more here.
Yes.
Balance
You got to introduce yourself first.
Oh, sorry. Michael McCormick. With the balance, thank you very. You expect about that?
Great, great question, and a common one, as you can imagine. So one of the things that we all have the good fortune of experiencing and dealing with the Department of Education is there's what's called a financial responsibility score. All right? And its intention is to make sure that all, and this is for-profit, not-for-profit, every institution that takes on student loans has to meet a financial responsibility score, sometimes called the composite score. Being above a threshold makes a big deal, it makes a big difference. And so two years ago, we. One of the benefits you have as a public company is you have the ability to raise equity in order to be able to make sure you're achieving above that financial responsibility score.
So it is for that reason only that we raised the preferred to allow us to be sure that we were above the threshold. That preferred is coming due in the middle of next year, and we are already under discussions with the two preferred holders about basically relieving those obligations. And so that is something that we are keenly focused on, on working on in the next several quarters. So another somewhat unfamiliar topic for people not familiar with higher education and this Composite Score is that we can't spend every dollar of that cash because some of that cash is an obligation, a minimum obligation, to meet that financial responsibility score. So we have some that is restricted, not available for us to use. But for the vast majority of that, which is greater than $100 million, we have the preferred we're going to deal with.
We have the debt, which comes due mid-2027, Rick, I think, right? And so we're working on servicing the debt. And we've already executed, in the last 12 months, stock buyback of about 10% of our shares because we believed we were trading well below where we deserve to be trading. And we're proud to say that we took out 10% of the float in the market and did so at about an average price of $7. So we feel like that was a very good investment for us to make, to bet on ourselves during that period of time. So we do pay a lot of attention to capital allocation and the balance sheet, and we are really turning our attention to that, you know, in the coming quarters.
I think we probably need to end it there. Angie, thank you so much for being here. That was great. The breakout will be upstairs in Burnham B, if people want to attend that.
Great.
Thank you so much.
Nice to meet all of you. Thanks for the questions, and we are really happy that you're interested in APEI, so thanks for your interest today.