APEI - NASDAQ

Thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the APEI 4Q 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Shannon Devine, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss fourth quarter and full year 2025 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 are available in the Events and Presentations section of APEI's 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, such as those identified in our Form 10-K under the heading Risk Factors, including those related to potential impacts from government shutdowns or changing federal or state government policies, practices and laws, including impacts on revenues or the timing of receivables. Forward-looking statements may sometimes be identified by words like anticipate, believe, seek, could, estimate, expect, can, may, plan, potentially, project, should, will, would and similar or opposite words. Forward-looking statements include, without limitation, statements regarding expectations for registration and enrollments, revenue, earnings and adjusted EBITDA and other earnings guidance, our foundation for growth, the planned combination of our institutions, government, governmental and regulatory actions, their impacts and our response to those actions, changing market demands and our ability to satisfy such demands and other company initiatives. The call and the presentation contain references to non-GAAP financial information. A reconciliation between each non-GAAP financial measure we use and the most directly comparable GAAP measure is located in the appendix in 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 and 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, and good afternoon, and thank you all for joining today's call about American Public Education's Fourth Quarter and Full Year 2025 performance. At the beginning of 2025, we set out to simplify and strengthen APEI. Today, I am very pleased to share the following results and highlight how our 2025 achievements create a strong jumping off point for our 4-year growth strategy, which we introduced at our recent Investor Day. First, APUS delivered full year 2025 revenue growth, even with the fourth quarter registration interruption. APUS' student base, including veterans, extended military families and military service members across all branches demonstrated demand in line with our expectations. The underlying business is strong and the numbers reflect that. Second, our nursing and health care institutions both had outstanding years. Rasmussen's full year 2025 revenue increased 14% and Hondros' full year revenue increased 11%. Third, APEI's full year consolidated revenue grew 4% to $649 million versus 2024. That growth was achieved even with the midyear sale of Graduate School USA, the announced closure of 2 Rasmussen campuses in Wisconsin and a registration interruption at APUS in the fourth quarter that affected TA registrations for 43 days. For context, by excluding Graduate School from both 2024 and 2025, consolidated revenue would have increased about 7% when compared to the prior year. These results reinforce the strength of our diversified portfolio. Fourth, APEI's full year adjusted EBITDA reached $85.7 million, up 19% as compared to 2024, beating not only our revised guidance, but also beating the top end of our initial 2025 guidance. We trimmed costs across the enterprise, specifically at APUS and in APEI Technology, and these savings have reset the cost baseline for 2026 and beyond. Finally, we did what we said we were going to do. At the beginning of 2025, we committed to redeeming our preferred equity, selling some corporate buildings and having the Department of Education lift the $25 million letter of credit and lift the 6 years of growth restrictions that prevented new campuses and new programs at Rasmussen before APEI's acquisition. Achievement of these commitments has simplified and strengthened our business for 2026 and beyond. And we delivered on these commitments while simultaneously growing enrollment, expanding margins and strengthening our balance sheet. Our teams demonstrated resilience, tenacity and confidence in overcoming obstacles and delivering remarkable results. So now let's turn our attention to APEI's fourth quarter 2025 consolidated revenue. We delivered $158.3 million, and we exceeded our most recently stated guidance across all key financial metrics, including revenue, net income available to common stockholders, EPS and adjusted EBITDA. Our nursing and health care institutions demonstrated significant strength during 4Q '25. Rasmussen grew 16% and enrollments increased 9% year-over-year to approximately 15,900 students, representing our sixth consecutive quarter of year-over-year enrollment growth. What's particularly exciting is that our Fill the Back Row strategy of maximizing capacity utilization is working. Our nursing programs continue to show broad-based strength with particularly strong performance in our nursing programs. Our allied health programs, including surgical tech and radiological tech are also performing well. The most are at capacity, which creates opportunities for our planned expansion initiatives. By maximizing capacity utilization at our existing campuses, we are driving significant operating leverage and demonstrating impressive margin expansion. Hondros continues to deliver strong results with fourth quarter 2025 enrollment of 4,000 students, a nearly 10% year-over-year revenue increase and 9% year-over-year enrollment growth. This performance demonstrates the durability of demand for pre-licensure nursing and our ability to effectively reach students in our local markets. In fourth quarter 2025, APUS successfully navigated the 43-day federal government shutdown, which created an active duty military student registration interruption. As we have previously shared, it has been 12 years since the Defense Appropriations Bill, which funds Military Tuition Assistance, or TA, had remained unsigned by October 1, the beginning of the federal government's fiscal year. With the Defense Appropriations bill still unsigned by our November start, all 4 major military branches began utilizing their portion of the $100 million of tuition assistance funds authorized under the One Big Beautiful Bill Act to enable active duty military students to continue their education. Importantly, once the government reopened in December, we saw a 41% increase in TA registrations as compared to December 2024, which demonstrates resiliency in demand for education from our military students even in the face of funding disruptions. Because most APUS students take one course at a time, this simply delayed their progression rather than stopping their progression entirely. Additionally, an important bright spot in APUS' fourth quarter performance was the continued momentum in both our veteran and military families channels, where we continue to see high-teen registration growth. Now let's turn our attention towards 2026. I want to highlight 2 key first half 2026 developments. First, we are making important progress on our institutional combination. In late February, the Higher Learning Commission approved a key step in our institutional combination. And on March 2, we combined the 3 institutions legal entities into one. Now we are working with the Department of Education and HLC to complete the remaining steps to combine our 3 institutions into one system with one OPE ID. We are targeting an expected effective date in the beginning of the third quarter of 2026 to become effective for the 2026 financial aid award year. In addition, today, we are formally announcing that we have 2 reporting segments, APUS Global and RU Health+ for fiscal year 2026 and beyond. Second, we are launching 2 campuses in 2026, Rasmussen campus in Orlando, which is already enrolling students for 2Q '26 and Hondros campus in Detroit, which we anticipate will be prepared to enroll students in Q1 '27. Both represent important expansion into markets that have already demonstrated strong demand for our programs. In our next earnings call, we'll provide more details and progress on these first half '26 developments. As we look to 2026 overall, we believe we have clear visibility into our revenue growth and our margin expansion drivers, including continued enrollment momentum at Rasmussen and Hondros to build on 2025 strong performance and our Fill the Back Row and leverage the ladder initiatives. We anticipate revenue synergies we gain from the Rasmussen and Hondros integration process. We plan for growth acceleration at APUS as government funding normalizes and marketing flexibility increases for military and veteran enrollment post combination. And we believe we will anticipate and experience improved profitability and cash flow due to the new refinancing of our debt and the cost savings associated with that. In view of these and other factors, we are providing full year 2026 guidance as follows: APEI 2026 revenue will be between $685 million and $695 million. Adjusted EBITDA will be between $91.5 million and $100.5 million. And as for Q1 '26 guidance, because of where we are in the quarter this year, the timing of this earnings call gives us full visibility to all university enrollments. As a result, APEI revenue will be between $173 million and $175 million, and please note that the 1Q '25 comparable period includes $3.7 million of Graduate School revenue, which obviously is not included in 2026 due to its sale in July of 2025. And adjusted EBITDA will be $25.5 million to $27.0 million. Ed Codispoti, our CFO, will provide more details in his remarks, including Q1 enrollment and registration results, the refinancing of our debt and authorization of a new $50 million share repurchase program. We are very clear about what the next 4 years require. It is all about execution. The foundation is built, our business is simplified, and we are operating with a strong balance sheet. We've developed a strategy, we are strengthening the team. And now it's about doing what we say we're going to do quarter after quarter. That's what you experienced in 2025, and that's what you should expect going forward. With that, I'll turn the call over to Ed to discuss our financial results and 2026 guidance in detail.

Thank you, Angie. I'll begin with our fourth quarter results, then review our full year 2025 performance and conclude with our outlook for the first quarter and full year 2026. Total revenue in the fourth quarter was $158.3 million, down $5.8 million or 3.5% compared to $164.1 million in the prior year period. Despite the federal government shutdown impact at APUS, we exceeded our most recently stated guidance. Now let's break down revenue by segment. At APUS, fourth quarter revenue was $71 million, down 13.8% compared to $82.4 million in the prior year period. The decline reflects the impact of the federal government shutdown during October and November. Net course registrations for the quarter were 82,200, down 15.3% year-over-year. However, the underlying business fundamentals remain strong. At Rasmussen, fourth quarter revenue was $66.6 million, up 15.9% compared to $57.5 million in the fourth quarter of the prior year. This strong performance was driven by 8.9% enrollment growth, bringing total students to 15,900. At Hondros College of Nursing, fourth quarter revenue was $20.7 million, up 9.2% compared to $18.9 million in the prior year period. This reflects continued enrollment momentum with 4,000 students, an increase of 8.1% year-over-year. Now turning to profitability for the quarter. Fourth quarter net income available to common stockholders was $12.6 million or $0.67 per diluted share compared to $11.5 million or $0.63 per diluted share in the prior year period. This represents a 9.6% increase in net income and a 6.3% increase in diluted EPS. Fourth quarter adjusted EBITDA was $28.7 million compared to $31.4 million in the prior year period, representing an adjusted EBITDA margin of 18.1%. While down year-over-year due to the APUS shutdown impact, we exceeded our most recently stated guidance, demonstrating strong operational execution. Turning now to our full year results. For full year 2025, consolidated revenue was $648.9 million, representing 3.9% growth over 2024 despite the federal government shutdown impact and the sale of Graduate School USA. Excluding Graduate School USA, revenue from -- if you exclude that revenue from both periods, revenue growth would have been approximately 7% APUS revenue was $319.8 million, up 0.9% year-over-year. Rasmussen revenue was $246.2 million, up 13.9% year-over-year. This growth was driven by sustained enrollment momentum and our successful Fill the Back Row growth strategy. Importantly, Rasmussen delivered segment income from operations of $4.1 million compared to a loss of $21.8 million in 2024. This represents a swing of nearly $26 million, demonstrating strong enrollment growth and significant margin expansion. Hondros revenue was $75 million, up 11.4% year-over-year, reflecting continued demand for pre-licensure nursing education. Full year adjusted EBITDA reached $85.7 million, an increase of $13.4 million or 18.6% compared to $72.3 million in 2024. This represents a significant accomplishment and demonstrates the strength of our business model as our adjusted EBITDA margin expanded 164 basis points to 13.2% in 2025. Net income available to common stockholders for the full year was $25.3 million or $1.36 per diluted share compared to $10.1 million or $0.55 per diluted share in 2024. This 152% increase in net income reflects our operational execution, the absence of preferred dividends following our second quarter redemption and margin expansion. We also ended 2025 with a very strong balance sheet. As of December 31, 2025, our cash, cash equivalents and restricted cash totaled $176.5 million compared to $158.9 million at December 31, 2024, an increase of $17.6 million or 11%. Total debt was $96.4 million, and our net cash position was $80.1 million. We further strengthened our balance sheet and liquidity position last Monday, March 9, when we refinanced our debt. Through the refinancing, we reduced our borrowing rate by approximately 375 basis points at current leverage levels and lowered our principal balance from $96.4 million to $90 million. The lower borrowing rate, combined with the reduction in principal is expected to generate $3.7 million in annual interest expense savings, excluding the amortization of debt issuance costs. For modeling purposes, you should expect our interest income to be roughly equivalent to our interest expense in 2026, given our strong cash balances and improved borrowing rate. Also, we will recognize a noncash write-off of approximately $1.6 million related to deferred financing costs associated with our previous loan. Our strong balance sheet and cash generation provide us with significant financial flexibility for growth investments. This liquidity position was also a key factor in our ability to navigate the government shutdown without operational disruption. In addition, this week, our Board of Directors authorized a $50 million share repurchase program. We expect the program to be used primarily to offset dilution from share-based compensation while also providing flexibility to opportunistically repurchase shares depending on market conditions and other factors. The authorization reflects the Board's confidence in the company's long-term strategy, our strong cash flow profile and our commitment to disciplined capital allocation. Repurchases may be made from time to time through open market transactions or other permitted methods and the timing and amount of any repurchases will depend on market conditions, share price and alternative uses of capital. I'll now discuss our guidance for first quarter and full year 2026. Our guidance for first quarter 2026 is as follows: revenue between $173 million and $175 million, net income available to common stockholders between $11.1 million and $12.2 million, adjusted EBITDA between $25.5 million and $27 million and diluted earnings per share between $0.58 per share and $0.64 per share. When considering this guidance, keep in mind that our results are subject to seasonality. The first quarter is typically our second strongest quarter of the year. For full year 2026, our guidance is as follows: revenue between $685 million and $695 million, net income available to common stockholders between $41.3 million and $47.6 million, adjusted EBITDA between $91.5 million and $100.5 million, diluted earnings per share between $2.15 per share and $2.47 per share and CapEx between $28 million and $32 million. In summary, 2025 was an excellent year for APEI. We exceeded our guidance despite external challenges, strengthened our balance sheet and positioned the company for accelerated growth in 2026. Our 2026 guidance reflects continued enrollment growth, improving margins and the benefits of our strengthened balance sheet, and we believe we are well positioned to achieve these targets. With that, I'll turn it back to Angie for closing remarks.

Thank you, Ed. In closing, we have spent the past year setting ambitious yet achievable financial and operating goals. Our RU Health+ segment comprised of Rasmussen University and Hondros College of Nursing are delivering consistent positive enrollment growth and improving profitability. Our APUS Global segment, with the exception of temporary enrollment disruptions from the federal government shutdown continues to deliver growth and strong margins. I want to reinforce the multiyear growth framework we outlined at our November 2025 Investor Day. At that event, we introduced our vision through 2029 with 5 key value creation initiatives at APUS Global and 4 at our RU Health+ Healthcare division. Those growth drivers remain fully intact. These value creation initiatives build on each other and create a foundation for sustained growth. Our multiyear growth framework projected organic revenue of $890 million to $925 million by 2029, representing an 8% to 9% revenue CAGR with adjusted EBITDA margins at 20% to 21%. With strategic investments in new campuses and potential tuck-in acquisitions, we see a potential path to $1 billion in revenue by 2029. Our APEI organization is purpose-built to deliver affordable and accessible education 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, especially in these heightened times in the Middle East and Latin America. We believe that careers that require judgment are AI resilient and will continue to need humans to operate. Our platform and sector tailwinds position APEI to accelerate growth and bring more educational opportunities to a greater audience. We are as optimistic today as we have ever been about the long-term potential of our company. Before we move to questions, I want to acknowledge the valuable feedback we've received from many of you. In our ongoing effort to continue to be more transparent with our investor community, we are committed to providing you with clear insights into our performance, our strategic initiatives and the long-term value creation opportunities ahead of us. Importantly, I also want to take a moment to honor Sergeant First Class, Nicole M. Amor, a Rasmussen University graduate who is 1 of 6 killed in Kuwait on March 1, while serving her country. Nicole embodies everything we believe in at APEI, and we are deeply grateful for her service and sacrifice. Our thoughts are with her family and fellow military service members. With that, I would now like to hand the call back to the operator to begin our question-and-answer session.

[Operator Instructions] Your first question comes from the line of Griffin Boss with B. Riley Securities.

Spectacular results amid what was a tough macro with the government shutdown in the fourth quarter. So I just want to start off on the CapEx cadence and step-up given these new campus openings. So is that going to be linear throughout the year? Or is that going to ramp towards the back half of the year as that Hondros campus gets ready to start enrollment?

Griffin, we would -- we expect on the campus openings that most of the CapEx related to the new campuses would be in the fourth quarter, maybe a little bit in the third quarter. But a good question. It will be mostly in the second half of the year.

Okay. Great. And then just on that note, too, can you just remind us -- I know you spoke about it on your Investor Day, but it would be helpful, I think, here to remind all of us about the economics of these new campuses. What's the expected revenue per new campus once it's ramped, margin expectations and when you expect to be cash flow breakeven? And I apologize. I don't know if there's background noise on my end. I'm hearing a little bit of that, but I could repeat the question if you could.

You're good. Yes.

We don't hear that. So I think as we said, our campuses are relatively CapEx light. We expect them to be -- cost about $3.5 million to open, take about 18 months before we turn cash flow positive. And I think the economics we said at scale, we would expect the campus to do about $12 million in revenue and have about a 35% EBITDA margin.

I was just going to say, and we're still on a pace to open 2 campuses per year. That's the current plan that was baked into the 4-year plan we shared at Investor Day.

Right. Yes. And so I guess before I get to my last one, just to follow up on that. So we could expect kind of a heightened level of CapEx, at least above the '25 levels going forward beyond '26. I know you're not guiding to that, but is that a reasonable expectation?

Yes. I think what Ed guided to in his comments for the full year this year is kind of our standard number we would use, which includes about $7 million for new campus openings. Is that fair?

Fair -- the range between $28 million and $32 million. So $7 million of that would be for campus openings.

Sure. Okay. Makes sense. And then just last one before I hand it off, hop back in the queue. I understand going forward, there's just going to be 2 operating segments. But is there any chance you could break out kind of the expectation for the first quarter for Rasmussen and Hondros for us before we start to model just kind of 2 divisions going forward?

We are moving towards this 2-segment combination. And as a result, we won't be breaking it out for the investor community going forward, no.

Your next question comes from the line of Luke Horton with Northland Securities.

Congratulations on a very nice quarter here. I guess I kind of want to dive into the marketing strategy and how this sort of shifts after the institution combination kind of takes effect. Could you just kind of talk through kind of marketing strategy there?

Yes. Great question, Luke. Let me start by saying Rasmussen's brand and Hondros' brand will continue to be present in their local markets. And so the marketing strategy will continue to attract students to those campuses with those brand names. So -- but what we are doing is we are bringing the better practices from each of the 3 education units to each other. So the best practices from APUS' online to Rasmussen Online, the best practices from Rasmussen campuses to Hondros and vice versa. So we are continuing to optimize our marketing spend. The difference between what we do digitally, primarily for online students and what we do in a more scrappy on-the-ground fashion for our campuses but we will continue to be enrolling students in each of those brands for 2026.

Okay. Great. That's helpful. And then lastly, just on the course registrations at APUS. I think you said it was up like 41% in the month of December year-over-year. I guess was there like when the government was shut down and the funding was paused, was there like a wait list where students could like sign up to for course registration once funding was returned? Or I guess what was kind of the leader of the big bump in course registrations for December?

Yes, great question. I'll have Gary answer that question. Go ahead.

Yes, I was going to say, I think we were pleasantly surprised. We didn't know how much we would bounce back or whether it would just be a permanent kind of loss, but we saw that significant bounce back from the military students, I think that indicates that there was good demand and without the ability to have the funding in place, they were just sitting on the sidelines. So it was a combination of new students and continuing students came back, which we didn't have a good indicator there. So that was a nice surprise for us in December. And obviously, that helped to start the year off as well.

So keep in mind that those 20,600 TA registrations in October and November ended up getting dropped. So those were students that were already enrolled in class, and we had to drop them for nonpayment. So when you say, was there a waitlist or what have you, they had already intended to take their courses in October and November. So when funding became available again, they jumped right back in, and we were really pleased. And we were pleased that December, which is of the quarter, the lighter of the enrollment month just because it's the holidays, et cetera, didn't seem to slow them down and wanting to jump back in and take their courses.

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

Yes. I also wanted to dive in on the enrollments at APUS, but more focused on the non-TA side. seeing Q4 up 11% for the non-TA. I was just curious, could you remind me how did that compare with the first 9 months of the year? Was that an acceleration?

Great question. I'm going to let Eric turn that over to Gary for him to answer.

Yes. I think we are very pleased with the nonmilitary segments. And we saw -- I think Drew mentioned it, that we saw high teens in both the veterans and the extended family markets. Our -- the other category was a little bit lighter, but the combination of the non-military active duty segment was about 11% growth combined.

Okay. And then for the first quarter, that 4% year-on-year that you saw, was that -- did you see that sustain in the first quarter?

Yes, we'll probably give more color on that in our next call. But yes, we did see that same trend continue, which we're very pleased with. And then we think there's good momentum there, which is what we were hoping to see and certainly very pleased with the outcomes. The team has worked really hard to build the extended families and the veterans as they take more courses on average and have a little bit higher tuition rate. So it's pacing out nicely despite a little bit of a softness in the active duty due to a partial shutdown in Q1.

Got it. And then my last question has to do with the use of cash, the priorities here. You've obviously come out with the new repurchase plan, the $50 million. You talked about sort of absorbing stock-based comp, the dilution from that. Just what is the priority? Is it anything beyond that, we're going to focus on debt paydown? Or is the current stock price appetizing to you guys? What's the focus?

Yes. Great question, Eric. I'm going to turn it over to Ed for him to answer that.

Yes. Look, from a priority standpoint, we're always going to focus initially on organic growth. That's going to be our #1 priority. And we want to do so while we maintain a conservative balance sheet. M&A is something that will continue to look at. It has to be opportunistic in nature. There are reasons why we might want to expand geographically a deal that might make sense in terms of its footprint. And when all of that is said and done, then we turn to the return of capital to shareholders. In the case of this $50 million authorization, as you said, we're very focused on the dilution of stock-based comp and mitigating that. And then in the event that there are market events or changes in stock price that would make sense for us to be opportunistic to repurchase more, then we'd execute from that perspective as well.

Your next question comes from the line of Jasper Bibb with Truist Securities.

Maybe following up on an earlier question. I wanted to ask what your '26 guidance envisions as far as on-ground health care growth or maybe any additional detail on what you're seeing in health care student demand this year would be great.

Jasper, thanks very much for the question. I'll start by saying we continue to see strong interest in our campus programs and specifically our nursing -- pre-licensure nursing campus programs. I'll turn it over to Gary, and he'll give you a little bit more detail on that.

Yes. I think we said we would see somewhat linear growth in relation to our longer-term strategic plan. So I think we're targeting, call it, high single-digit growth in our health care platform entirely. And obviously, we intend to grow -- not obviously, but we intend to grow our campuses at a slightly faster rate than the online in the Healthcare division. So that is our target rate. And then obviously, getting APUS to be growing at a similar rate, maybe lower -- slightly lower than the health care platform.

And then it's probably too early to say, but could you frame for us on whether the Iran war is having an impact on the behavior of your active duty students at APUS or maybe historically, how that part of your student population behaves when military activity picks up?

Great question, Jasper. -- great question. So Yes. Presently, we don't know what the exact troop count is. But primarily, those being deployed are in the Navy, the Air Force, cyber and some regional base personnel. And so our largest enrollment population is the Army and the boots-on-the-ground deployment hasn't happened yet. With the March start, which was a really important checkpoint for us to see what kind of impact, if any, we would experience, we had really no difference in our start rate for March, even with the Middle East war. And we don't anticipate a significantly positive or a significantly negative registration impact just based on what we've seen over the years with military deployments. So sometimes people suspend their education because they're deployed and aren't sure they will have access to a computer. And we see others ramping up their education because they are deployed but are -- have a free time and connection to the Internet and a computer, and so they decide to take courses. So it all kind of balances out in the end. So right now, we don't think there will be any impact in a meaningful way at APUS on registrations in 2026. But we'll certainly keep you posted as we learn more.

Your next question comes from the line of Rajiv Sharma with Texas Capital.

And great results and solid guidance. This has been a pleasure to -- I had a couple of questions. How do you specifically plan to fill in the back seats? Any -- I know you had talked at the Analyst Day. Can you numerate certain specific tactics?

Yes. Great question, Raj, and thanks for the compliments. So we are really honing in on our marketing strategies that are attracting the students to the programs that have the -- not just the biggest supply-demand gap, but also the biggest employment demands in the local markets. And so we are refining our marketing approaches. And in some markets, we are actually investing more marketing dollars than we had originally planned because we're seeing great yield and great results. So we're looking at being thoughtful, but also being aggressive about how we take EBITDA outperformance at Rasmussen in particular, and investing some of those dollars into the marketing so we can continue to grow and Fill the Back Row growth. So we are just going to continue to do what we did in 2025, which delivered great results. I'll turn it over to Gary for more commentary.

I'd also say that we plan to -- at campuses, cross-pollinate programs. So we have a nice portfolio. Not every campus has the same programs in nursing and allied health. So part of the strategy, by example, in the new campus in Orlando, we're offering an LPN program in that market that we didn't have before. And that becomes another opportunity for us as we look at campuses. So it's a combination of just continuing the marketing, but also creating -- using the campuses and expanding programs that they may not have in their portfolio. And we've got a very detailed plan campus by campus on what programs we plan to roll out over the next 4 years.

Got it. That's very helpful. And then you've guided fiscal '26 to top line revenue of a little over 6%. I think in your remarks, you just said -- is it right to assume that nursing and Hondros are going to be high single digits then through the year growth and...

I'm sorry, I mean to cut you off. Sorry, finish your question, Raj, sorry.

No. Just that you break out the nursing and the APU. Is it that high single digit and low single digit?

Yes. I do want to just first remind all who are looking at comparative year-over-year results that we do have Graduate School revenue in the first half of 2025. So we put on the Q1 guidance page, the fact that the Q1 revenue includes $3.7 million of Graduate School. We did -- I can see now we did not put the total Graduate School revenue to be able to deduct from the 2025 as a year-over-year comparison. So that, if you were to do an apples-to-apples comparison, our growth rate is approaching 8% at the midpoint. And then certainly, when you get to full year, you will also have the opportunity to see that we would likely be able to recover the enrollment that we had to forgo in October and November as a result of the government shutdown. And so we think that there are some puts and takes in those numbers that would signal that the midpoint of our full year is probably closer to 8% with -- yes, with APUS, as you were calling out in the mid-single digits and our health care schools in the high single to low double digits, yes.

That's really helpful. And then just following on that last question. With the increase in the revenues at Rasmussen and Hondros, you've achieved incremental margins, right? I think last year, fiscal '24 and '25 was greater than 50%. And this year, it seems to be implied with fiscal '26 guidance, the incremental profit margins are implied at 25%. Do you expect healthier incremental profit margins than the guidance would indicate?

So obviously -- this is Gary. I think we are obviously tracking to that. We are making some strategic investments to make sure that we can hit those numbers, as Angie mentioned in some marketing. Last year, we saw -- I think it was 75% flow-through margins at Rasmussen is what we ended up doing full year. We'll continue to monitor that, but -- and it will progress throughout the year. I think we're right now making sure that we stay focused on a healthy top line growth to Fill the Back Row, and that may mean some additional S&M spend and some faculty ahead of that. And don't forget the campuses as we go, they will suppress the margins a bit, not as much in 2026, but in out-years.

The new campuses.

New campuses, sorry.

Which we didn't have. Yes, in the Rasmussen numbers in '25.

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

You have Matt Filek on for Stephen Sheldon. Congrats on a strong finish to the year. I wanted to start with a quick follow-up on filling the back row. I think you have previously said that nursing campus utilization is currently around 60%, but your target is closer to 90%. And I was wondering if you can share anything on the rough time line and cadence to getting to that 90% target level across your nursing campuses.

Yes. Matt, great question. It's our favorite topic. So we signaled when we did Investor Day that we would be approaching that 90% when we get to year 4. And we also signaled that we expect a rather smooth progression over the 4 years. So we think that, that's just going to be basically consuming capacity and adding students on a rather smooth trajectory over the next 4 years.

Got it. Yes. That makes a ton of sense. And then just had a quick one on teacher capacity. How do you feel about your current teacher capacity across educational units? And are there any areas where you may be slightly over understaffed?

Great question. I think if you remember at the Investor Day meeting, we talked a little bit about making sure we're not just enrolling students, but we're also making -- managing those constraints, right, and making sure that we have all the necessary resources in place, which includes faculty, availability of clinicals, et cetera, right? So the good news is since we are far past COVID now, the availability of faculty has really not been a constraint in our markets of late, which is really good news because that is certainly one of the things that makes it difficult for you to enroll at the paces that we were enrolling at. So we don't have any campuses right now where we have a faculty shortage. And in fact, we have all of our Dean positions filled at all of our Rasmussen and Hondros campuses. So we really feel like we're in very strong shape from a talent and faculty perspective going into '26.

Your next question comes from the line of Alex Paris with Barrington Research.

I'll add my congratulations on the strong finish to the year. A couple of dogs and cats here. On the government shutdown impact on revenue in the fourth quarter, I think you had sort of guided that the impact would be between $20 million and $24 million. Can you quantify the actual impact on Q4?

We think that after having gone through Q4 and December was better than we expected, we ended up probably $12 million to $15 million short from the government impact.

This is below what you had said, Alex.

Yes, $20 million to $24 million is what you signaled on the Q3 call, I think. Correct.

That's right.

But you said a really strong December.

Well, it was -- yes, it's certainly the strong December, both, as we mentioned in the materials that we saw a rebound of our October and November active duty enrolling in TA classes in December. And -- and we also had stronger than we had seen in prior quarters momentum from our veterans and our military families. So that's a segment that's growing and gaining momentum. So December was a very strong quarter -- December was a very strong month in that quarter for us.

Great. And then I think Gary said in response to a previous question that there was some impact from the partial shutdown here in Q1. Can you expand on that?

Yes, I'll start. So for those of you who follow, and I know, Alex, you do, the Department of Homeland Security is where the Coast Guard gets their TA funding. And the Department of Homeland Security is still not funded. And so consequently, some of the Coast Guard, which is the smallest by far of all of our branches, students are still waiting for their funding. They have been using some of the One Big Beautiful Bill Act funds to allow those students to take courses. So that was one very small blip, but that's factored into the numbers we shared with you because our Q1 for APUS is an actual, which is unusual. It's just because of where the call landed on the calendar that we have all of Q1 for APUS in. And then the second small blip was during that very small period of time when they were not funded, the Army reservists who were not deployed on military activities were also not funded. So these are very, very small populations of students. So we didn't make a big point of calling them out. But it was -- it did have about a 1% to 1.5% impact on APUS' potential registration actuals for Q1, had everyone been able to fully enroll.

That's very helpful. And then just to be clear on segment reporting going forward, this was the fourth quarter, so you reported APUS, RU and Hondros. The guidance just gives APUS Global and then RU Health+. So that's going to be the way it's going forward. This is the last of the 3 segments being reported specifically.

That's right. And we will -- as we move into that new rhythm, we'll certainly be showing you the comparison by combining Rasmussen and Hondros, right, into the RU Health+ segment. That's really the only thing that's changing other than in the first half of '26, as I mentioned, a few folks before you. The first half of '26 still includes revenue from Graduate School. So we'll do a better job of explaining how to think about what that baseline comparison for 2025 should be in the first half of '25 versus the first half of '26 because obviously, we don't have access to that revenue any longer.

Got you. And you did say what the Q1 of '25 revenue was for.

We did. Yes. I -- when I was looking at the PowerPoint, I realized we didn't give that equivalent number for the full year. So that was -- yes, it was $3.7 million of Graduate School revenue that one would deduct from the $164.6 million in order to create more of an apples-to-apples comparison.

Got you. Helpful. And then lastly and related, once you do complete the combination of the institutions in OPE ID number, you'll still be reporting the 2 segments though, because that's the way you look at it.

Yes, we absolutely will. Yes. That concludes our question-and-answer session.