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American Public Education, Inc.Third Quarter 2020 ResultsPRESENTED BYAngela SeldenPresident and CEORichard Sunderland, CPAExecutive VP and CFOAmerican Public Education, Inc.
Safe Harbor StatementStatements made in this presentation regarding American Public Education, Inc. (“APEI”), or its subsidiaries, that are not historical facts areforward-looking statements based on current expectations, assumptions, estimates and projections about APEI and the industry. Forwardlooking statements can be identified by words such as “anticipate,” “believe,” “seek,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”“should,” “will” and “would.” These forward-looking statements include, without limitation, statements regarding benefits of the acquisition ofRasmussen University, the timing of the closing of the transaction, expected growth, expected pro forma results, expected registration andenrollments, expected revenues, earnings and expenses, expected financial results for Rasmussen University, and plans with respect torecent, current and future initiatives.Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed orimplied by such statements. Such risks and uncertainties include, among others, risks related to: the satisfaction of closing conditions,including the failure or delay in obtaining required regulatory and accreditor approvals; APEI's ability to obtain financing to fund thetransaction; the significant transaction and integration costs APEI has incurred and expects to incur in connection with the acquisition; theintegration of Rasmussen's business and APEI's ability to realize the expected benefits of the acquisition; incorrect assumptions used for proforma modeling; that Rasmussen may have liabilities that are not known to APEI; other events that could impact the transaction and itsclosing; APEI's dependence on the effectiveness of its ability to attract students who persist in its institutions' programs; impacts of theCOVID-19 pandemic; APEI's ability to effectively market its institutions' programs; adverse effects of changes APEI makes to improve thestudent experience and enhance the ability to identify and enroll students who are likely to succeed; APEI’s ability to maintain strongrelationships with the military and maintain enrollments from military students; APEI’s ability to comply with regulatory and accrediting agencyrequirements and to maintain institutional accreditation; APEI’s reliance on Department of Defense tuition assistance, Title IV programs, andother sources of financial aid; APEI’s dependence on its technology infrastructure; strong competition in the postsecondary education marketand from non-traditional offerings; and the various risks described in the “Risk Factors” section and elsewhere in APEI’s Annual Report onForm 10-K for the year ended December 31, 2019, Quarterly Report on Form 10-Q for the period ended September 30, 2020, and otherfilings with the SEC. You should not place undue reliance on any forward-looking statements. The Company undertakes no obligation toupdate publicly any forward-looking statements for any reason, unless required by law, even if new information becomes available or otherevents occur in the future.American Public Education, Inc.2
THIRD QUARTER 2020 AND RECENT HIGHLIGHTSStrength of APEI Platform Reflected by Fourth Consecutive Quarter of Enrollment Growth at APUS & HCN*APUS Net Course Registrations. New student registrations at APUSincreased 25% yr/yr.Total net course registrationsincreased 18% yr/yr.Operating Margin.Record Enrollment at Hondros. New student enrollment increased 88%and total enrollment increased 38% yr/yr.In the fourth quarter of 2020, totalenrollment increased 34% to 2,139, thehighest in school history.Hondros Returns to Profitability. APEI Segment operating marginincreased to 4.1%, vs. 0.4% in theprior year period. Hondros Segment operating marginincreased to 4.9%, compared to a loss inthe prior year period.Announced Transformational Acquisition toacquire Rasmussen University. Largest educator of ADN nurses.APEI will become #1 educator of pre-licensure nurses(RN and PN) with over 10,000 nursing students.*New and total net course registrations at APUS between 4Q19 and 3Q20 and new student enrollment at HCN between 1Q20 and 4Q20.American Public Education, Inc.3
APUS REGISTRATION GROWTHFour Straight Quarters of Year-Over-Year New Start Growth Driven by Military and Veteran StudentsAPUS Net Course Registrations by New Students16,00012,00030%25%0%13%*8,0003Q20 Enrollment Highlights Registration growth driven by Military/Veteran students New registrations increased 25% to 13,500 One additional week in 3Q20 vs. 3Q19 added 1,000 newregistrations. Normalized growth rate was 16% 3Q20 Total course registrations increased 18% to 90,3004,00001Q 1Q2019 2020in millions2Q 2Q2019 20203Q 3Q2019 20204Q 4Q*2019 20204Q20 Enrollment Outlook Continued Momentum Expected New Registrations expected to increase 11% to 15% Total Registrations expected to increase 5% to 9%APUS Segment Revenue 8015% 70-1%2% 60 5014% 73.5 69.6 66.9 66.5 65.7 67.1 63.4 61.24Q 4Q2018 20191Q 1Q2019 20202Q 2Q2019 20203Q 3Q2019 2020 40* Based on mid-point of APEI’s fourth quarter outlook.Key 2020 Initiatives: Created Freedom Grant to help eliminate out-of-pocketexpenses for active duty military in graduate programs Increased investment in marketing, especially in micro-segmentswhere HEROITM resonates Technology transformation to improve student experience, anddrive increased referral ratesAmerican Public Education, Inc.4
HONDROS DELIVERED RECORD ENROLLMENTStrength in PN and ADN Programs Driving Consistent GrowthHondros New Student 452Q 2Q2019 20203Q 3Q2019 202071052901Q 1Q2019 2020in millions4Q 4Q2019 2020Hondros Segment Revenue 12.0-22% 10.0 8.0 6.0 10.1 4.0 7.9 2.0 0.04Q 4Q2018 2019-3%21% 8.6 7.7 7.5 7.11Q 1Q2019 20202Q 2Q2019 202043%3Q20 Enrollment Highlights Fourth consecutive quarters of start growth New Starts 88% to 649 Total Enrollment 39% to 1,954 Highest PN starts in Hondros history RN Starts returning to near peak levels from 20184Q20 Enrollment Outlook Continued strong demand for nursing education New Starts 34% to 710 – highest in HCN history Total Enrollment 34% to 2,139Attractive options in high demand markets: Nimble and flexible in adapting to current environment Campuses open with virtual course/learning capabilities Flexible schedules Direct entry ADN program 9.5 6.7Improved onboarding processes: Improved conversion driven by Salesforce integration3Q 3Q2019 2020American Public Education, Inc.5
APEI THIRD QUARTER 2020 FINANCIAL SUMMARY16.6% 4.2M40.1% 25.3MConsolidatedRevenueNet IncomeIncreaseCash Flow fromOperationsCash andEquivalents 79.1M 2.6M 44.7M 228.0M Consolidated revenue increased by 16.6% to 79.1 Cash flow from operations increased 40.1% to 44.7million, compared to 67.9 million in the same periodmillion for the nine months ended September 30,of 2019. The increase was primarily driven by2020.increases in enrollment at both APUS and HCN. Net income of 2.6 million, or 0.18 per diluted share,compared to a net loss of 1.6 million, or 0.10 per Total cash and cash equivalents as of September 30,2020 were approximately 228.0 million, comparedto 202.7 million as of December 31, 2019.diluted share, in the prior year period.American Public Education, Inc.6
THIRD QUARTER & YTD 2020 RESULTSAPEI Delivered Yr/Yr Revenue and Adjusted EBITDA growthAPEI Consolidated Revenue 250APEI Adjusted EBITDA11% APUS & HCN enrollmentgrowth drove 11% increasein consolidated revenue forthe first three quarters of2020. 200 150 100 50 235.9 211.917% 67.9 79.1 Despite higher technologyand marketing spend,adjusted EBITDA increasedyear-over-year in both thethird quarter and YTD 2020.6% 35 30 25 20 33.0 34.9 1549% 10 5 7.3 10.8 3Q 3Q2019 2020RevenueY/Y GrowthAdj. EBITDA1Margin3Q 3Q2019 2020YTD YTD2019 2020YTD YTD2019 �20YTD’19YTD’20 73.4-2.0% 14.420% 70.6-3.1% 11.316% 67.9-7.0% 7.311% 74.4-3.3% 13.418% 74.61.6% 8.612% 82.116.4% 15.519% 79.116.6% 10.814% 211.9-4.0 33.016% 235.911.3% 34.915%1. Adjusted EBITDA is a non-GAAP financial measure. See Appendix for reconciliation to GAAP.American Public Education, Inc.7
RASMUSSEN OVERVIEWLeader in Nursing with a Strong Regulatory Track Record and Attractive Financial ProfilePROFILEENROLLMENT PROFILE 120 Year History – Founded in 1900 as a business skills schoolfor women #1 provider of RN programs Accredited by The Higher Learning Commission (HLC) Nursing programs accredited by ACEN and CCNE Strong regulatory track record: 76.4% 90/10 ratio 9.4% Cohort Default Rate (CDR) 18,200 student enrollment 7 Schools: Nursing, Health Sciences, Business, Education,Design, Technology and Justice Studies 45% Nursing, 55% non-Nursing 24 Campuses in six states online 5th Largest in competency-based education (CBE) 2,000 students across 17 programsNURSING PROGRAMMATIC SUITEPracticing licenseFINANCIAL PROFILE (FYE 9/30/20)LicensureDNP (Jan. ‘21) 30018% 250 256 16% 242 22814% 203 200MSNRNRN to BSN (BSN)Accelerated BSN (A-BSN)Associate Degree Nurse (ADN)12%PostLicensurePreLicensure 150Practical Nursing Diploma (PN)10%8%8%6% 17 28 28 404%2% -0%2017LPN12%12% 100 5016%Revenue (MM)20182019Adjusted EBITDA (MM)2020MarginAmerican Public Education, Inc.8
#1 EDUCATOR OF PRE-LICENSURE NURSES (ADN/PN) IN A GROWING MARKETRasmussen‘s ADN (RN) is its largest degree program and has shown strong historical growthCritical Need: Nursing RN’sAddressing the Need10,000 RN is a Top Growing Job Through sen69006200201820192020Hondros175,000 annuallyRN job vacancies expected in the US, including increasing demandand expected retirementsAPEI will educate 10,000 Nurses with Rasmussen and Hondros.APEI will be the #1 Educator in pre-licensure nursing education(ADN/RN and PN/LPN)1Bureau of Labor Statistics’ Employment Projections 2019-2029.American Public Education, Inc.9
COMBINED 165 MILLION IN NURSINGREVENUE CREATES POWERHOUSEEnhances competitive market position across severalmarkets with large projected nursing shortagesRasmussen will add 24 Campuses Across Seven States andOnline, Including Blended Learning and Competency-BasedEducation (CBE) CampusesNursing Revenue2020 PowerhouseNursing Platform24630 129M 36M 165M19%34%22%HondrosRasmussenEnrollment Growth2020Current CampusesFuture Rasmussen CampusAmerican Public Education, Inc.10
SIGNIFICANT GROWTH OPPORTUNITIES IN NON-NURSINGCBE and Differentiated Pricing Address Changing Market Demands, Supports HEROI Growth Opportunities:Rasmussen University’sTotal Enrollment by Program: Grow clinical-based health-sciences programs by leveragingRasmussen’s 26 campus platform18,000 Learners (as of 18% Reduce time to degree completion through generous transferpolicies and credit for prior learning Expand CBE Learning – Rasmussen is 5th Largest CBEProvider 17 programs, 2000 students Accelerate employer-centric program/curricular developmentEnabled through: Lower annual tuition for fully online, general educationundergraduate programs approx. 11,000 on average Competitive annual tuition for differentiated, healthcarefocused undergraduate programs approx. 17,000 on average Low-cost course materials ( 15/course) vs. national averageof 200 per course11. U.S. PIRG, Fixing The Broken Textbook Market, June 2020American Public Education, Inc.11
A STRONG FINANCIAL RECORD FOR GROWTH& PROFITABILITYRasmussen financials driven largely by market demand for nursing and focus on operating efficiencyTotal EnrollmentTotal RevenuesNet Income/Adjusted EBITDAIn millionsIn millions 30020,00016,60315,00017,19618,197 25015,488 2036,2205,276 228 242 2566,8978,219 15010,000 4018% 30 200 77 40 98 117 28 2816% 12914% 2013% 1712% 1005,00010,21210,38310,2999,978 50010% 126 129 125 127 201720182019Non-Nursing2020Nursing 109% djusted EBITDA (MM)2020MarginAdjusted EBITDA is a non-GAAP financial measure.See Appendix for reconciliation to GAAP.Financial results are FYE 9/30/20American Public Education, Inc.12
RASMUSSEN UNIVERSITY ACCELERATES APEI’S VALUE CREATION STRATEGYAcquisition of Nursing Platform Amplifies Our Mission in Helping Learners Maximize HEROI TMRasmussen Hondros 165M Powerhouse inNursing EducationBusiness in a GrowingMarketOffers Programmatic,CBE and Shared ServicesExpansion Opportunitiesto APUSAPEI Resulting Mix will be:Positions APEI Profile toGrowth, Scale and HEROITMOne-Third Military/VetsOne-Third Nursing/HealthOne-Third OnlineOffers Post-LicensureProgrammatic Expansionto Hondros Students#1 in Educator inADN/RN and PN/LPN Nursing#1 in Military and VeteransAdds 24 On-GroundLocations which can beLeveraged to AccelerateOther OfferingsAmerican Public Education, Inc.13
ENTERPRISE INITIATIVESSynergies and New Capabilities Poised to Amplify APEI Mission of HEROITM Focus on integration of Rasmussen Implement shared services at Hondros and leverage new shared services through Rasmussen Unlock 5M- 10M in potential synergies in each of the first three years Facilitate best practices across the enterprise to drive student outcomes Focus on high return allocation of capital, both organically and inorganically Continue Technology Initiatives and improve student experienceOpportunity to restore ADN(RN) enrollmentExpand new programs to existingcampuses Leverage strength in military New campuses Geographic expansion Improve student retention Improve margins through scale and Focus on CBEefficiency Target non-nursing enrollment growthAmerican Public Education, Inc.14
APEI OUTLOOKFourth Quarter 2020Approximate Y/Y ChangeAPUS Net course registrations1 by new studentsAPUS Net course registrations1HCN New student enrollment2HCN Student enrollment2 11% to 15% 6% to 10%These statements arebased on currentexpectations. 34% 34%APEI Consolidated revenue 10% to 14%APEI Consolidated net income per share* 0.41 to 0.46These statements areforward-looking andactual results may differmaterially.1. APUS Net course registrations represent the approximate aggregate number of courses for whichstudents remain enrolled after the date by which they may drop a course without financial penalty.2. HCN Student enrollment represents the total number of students enrolled in a course after the dateby which students may drop a course without financial penalty.American Public Education, Inc.15
Thank YouAmerican Public Education, Inc.16
APPENDIXThree Months EndedSeptember 30,20202019Instructional costs and services39.3%40.2%Selling and promotional23.4%23.4%General and 8%104.3%COSTS AND EXPENSESLoss on disposals of long-lived assetsImpairment of goodwillDepreciation and amortizationTotal costs and expensesAmerican Public Education, Inc.17
APPENDIX: ABOUT THE TRANSACTIONTransactionStructureConsideration APEI acquires 100% ownership of Rasmussen University Purchase price is 329 million- consisting of 300 million in cash plus 29 million in preferred shares APEI may substitute cash for preferred shares at the time of closing 175 million of committed financing 125 million of cash on hand, excluding transaction costs 29 million non-voting, redeemable preferred sharesSynergies Annual synergies expected to be approximately 5 million in the first year after closingand to grow to more than 10 million in each of the following 2 yearsAccretion Expected to be accretive to earnings per share in FY2022; earnings per share accretion inFY2021 dependent on timing of transaction closeValuation Represents a 7.5x multiple to Rasmussen’s FY20 Adjusted EBITDA of 40 millionTax Benefits Estimated Present Value of Expected Cash Tax Benefits: 29MM Year 1 Cash tax benefit of approximately 6MMManagement Rasmussen University will continue to operate as separate institution Leverage APEI’s shared services modelAmerican Public Education, Inc.18
APPENDIX: DISCLOSURES Forward looking revenue statements are presented on an annual pro forma basis, assuming that the acquisition waseffective as of January 1, 2021 Nursing market data based on IPEDS and APEI AnalysisAmerican Public Education is presenting adjusted EBITDA in connection with its GAAP results and urges investors to review thereconciliation of adjusted net income to the comparable GAAP financial measures that is included in the table below (under the caption“GAAP to Adjusted EBITDA”) and not to rely on any single financial measure to evaluate its business.2021Pro FormaMillions2021 Annual Pro Forma Basis (1)Net incomeIncome taxesInterest expenseDepreciation and amortization 31121533EBITDAStock compensation 919Adjusted EBITDA 100(1) This represents the pro forma financial results of the new entity formed byAPEI's acquisition of Rasmussen assuming that the transaction was completed onJanuary 1, 2021. There are many assumptions embedded in this calculation with respect tothe underlying financial performance of the entitles, the purchase price accounting,the appropriate depreciation and amortization methods, the effective tax rate, futureinterest rates, etc.American Public Education, Inc.19
APPENDIX: DISCLOSURES (CONTINUED)American Public Education is presenting adjusted EBITDA in connection with its GAAP results and urges investors to review thereconciliation of adjusted net income to the comparable GAAP financial measures that is included in the table below (under thecaption “GAAP to Adjusted EBITDA”) and not to rely on any single financial measure to evaluate its business.(in Millions, unaudited)Rasmussen University (1)Reconcilliation from Net Income to Adjusted EBITDA:Net IncomeIncome TaxesInterest expenseDepreciation and amortizationEBITDAPro Forma AdjustmentsAdjusted EBITDA9/30/2017 10For Twelve Months Ending9/30/20189/30/20199/30/2020 18 12 19- 616117 62442831328- 28 42043(3)40(2)12/31/2021 7 2152044 44(1) The attached table provides a reconciliation from Net income to Adjusted EBITDA for Rasmussen University. The Pro-Formaadjustments are a combination of non-cash expenses, transaction expenses and expenses that will not continue after the change inownership.(2) This represents the pro forma financial results of the Rasmussen University assuming that the transaction was completed onJanuary 1, 2021. There are many assumptions embedded in this calculation with respect to the underlying financial performance, thepurchase accounting, the appropriate depreciation and amortization methods, the effective tax rate, future interest rates, etc.American Public Education, Inc.20
APPENDIX: DISCLOSURES (CONTINUED)American Public Education is presenting adjusted EBITDA in connection with its GAAP results and urges investors to review thereconciliation of adjusted net income to the comparable GAAP financial measures that is included in the table below (under thecaption “GAAP to Adjusted EBITDA”) and not to rely on any single financial measure to evaluate its business.ConsolidatedNet income to EBITDANet income (loss)Income tax (benefit)Interest incomeEquity investment loss (income)Depreciation and amortizationEBITDAStock CompensationLoss on disposals of long-lived assetsGoodwill impairmentCompensation expense adjustmentM&A-related professional feesAdjusted EBITDAQ1 2019 Q2 2019Q3 2019 1,011 (63)(1,053)1,4874,0515,433 4,921 1,898(1,135)(6)3,9439,621 1,6891265,8551,32114,4241,63042911,284 Q4 2019(1,638) (239)(1,019)(17)3,764851 1,7123941,4812,81467,258 Q1 2020Q2 2020Q3 20205,719 3,591(701)3,83812,447 2,420 974(702)13,3386,031 6,689 2,532(179)(1)3,39112,432 929321713,4251,7501666578,6041,5731581,29515,458 2,642785(121)23,2266,5341,9
Nov 11, 2020 · RN to BSN (BSN) Accelerated BSN (A-BSN) Associate Degree Nurse (ADN) Practical Nursing Diploma (PN) RN LPN Post-Licensure Pre-Licensure RASMUSSEN OVERVIEW Leader in Nursing with a Strong Regulatory Track Record and Attractive Financial Profile 18,200 student enrollment
