APEI

American Public Education, Inc. (APEI)

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American Public Education, Inc. (APEI)

Q1 2008 Earnings Call

May 2, 2008 8:30 am ET

Executives

Christopher L. Symanoskie – Director Investor Relations

Wallace E. Boston Jr. - President, Chief Executive Officer & Director

Harry T. Wilkins - Chief Financial Officer & Executive Vice President

Analysts

Trace Urdan – Signal Hill

Mark Marostica – Piper Jaffray

Jeff Silber – BMO Capital Markets

Bob Craig – Stifel Nicolaus

Brandon Dobell – William, Blair & Company

Clifford Greenberg – Baron Capital

Corey Greendale – First Analysis Securities

[James Mayor – Bank Tenmore]

Corey Armand – Rice Voelker

Presentation

Operator

Good day ladies and gentlemen and welcome to the first quarter 2008 American Public Education Incorporated earnings conference call. My name is Akeia and I’ll be your operator for today. At this time all participants are in a listen only mode. We will conduct a question and answer session towards the end of the call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call Mr. Chris Symanoskie.

Christopher L. Symanoskie

Good morning everyone and welcome. Before we begin, please note that an electronic copy of the PowerPoint presentation that accompanies this conference call is available in the webcast section of our investor relations website and is included as an exhibit to our current report on Form 8K filed earlier today. Also, please note that statements made in this conference call regarding American Public Education or its subsidiaries that are not historical facts are forward-looking statements based on current expectations, assumptions, estimates and projections about American Public Education and the industry. These forward-looking statements are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Forward-looking statements can be identified by words such as anticipates, believes, could, estimate, expect, intend, may, should, will and would. These forward-looking statements include, without limitation, statements about the second quarter and full year 2008 outlook and statements regarding expected growth.

Actual results could differ materially from those expressed or implied by these forward-looking statements as a results of various factors including the various risks described in the risk factors section and elsewhere in the company’s annual report on Form 10K filed with the SEC. The company undertakes no obligation to update publically any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Today, our speakers are Wally Boston, CEO of American Public Education and Harry Wilkins, Executive Vice President and CFO. Now, at this time I’d like to turn control of the call over to Wally Boston.

Wallace E. Boston Jr.

Good morning everyone. I’m pleased to report another quarter of strong financial and operational performance of American Public Education. During the first quarter of this year our revenues increased 65% to $23.2 million. This growth was driven by continued strong registration growth, improving student retention and increases in the number returning disenrolled students. Our operating margins increased to 23.5% in the first quarter compared to 19.1% in the same quarter of last year. We were able to increase margins despite staffing increases, new public company expenses and the need to expand facilities to accommodate our current and future staffing needs.

In this quarter our net income increased to $3.4 million, a year-over-year increase of 122%. Our reported earnings of $0.18 per diluted shares, $0.04 above the high end of our previously issued earnings guidance range. The earnings upside is mostly attributable to higher than expected revenues. These solid results give us the confidence to raise our full year guidance. Today we announced that we are increasing our full year 2008 earnings outlook to between $0.67 and $0.72 per diluted share.

We are also excited to announce that we have signed a memorandum of understanding or MOU with the Navy effectively completing the process for full acceptance in to the Navy College Partnership Distance Learning Program or NCPDLP. The MOU is simply an agreement that details the requirements for participation in the program. Our membership in the Navy’s program will give us broader access to Navy bases and greater visibility on Navy websites. That opportunity is important to us as the Navy is the second largest branch of the military but ranks fourth as a percent of total [APUS] military enrollment. This development is likely to help us expand our success with Navy students and allow us to increase our market share with the military overall. In the near future we expect to be listed as a member institution on the Navy’s education websites and printed material for service members and in communications to educational service officers. We’ve been told by the Navy that all of these events will happen after each of the new schools accepted into the program sign their MOUs. This process is nearing completion. We have also launched efforts to deepen our relationships with ESO on Navy bases and we have created a custom landing page with our approved programs that will link from the Navy programs website.

With the completion of another quarter of record results behind us and our continued success in expanding in both the civilian and military markets, we have greater visibility and confidence in our expected performance in 2008. Our CFO, Harry Wilkins is here today to tell us more about our recent performance and expectations for the remainder of the year.

Harry T. Wilkins

I’m going to speak to the Slides that are in the PowerPoint presentation. I’m going to start with the fourth Slide which goes over our first quarter financial results. This quarter’s record number of registrations represents the 9th consecutive quarter we’ve had year-over-year growth and that’s because that’s how many quarters we’ve published. It’s actually been more than that but we can’t talk to the things we haven’t published. Net course registrations for the first quarter 2008 increased 59% over the comparable period of the previous year, roughly 33,100 net course registrations for the period. That was driven by stronger than anticipated growth from returning students. We actually had a retention increase, about 4% over the comparable period last year. We had more returning students taking more courses. In addition to that, we had a 34% increase in a number of new course registrations from new students. That ended up increasing our total enrollment to our university to over 33,000 students which is about a 70% increase over the same time last year.

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