APEI (APEI) Q3 2025: Nursing Enrollment Jumps 18% as Segment Mix Shifts Toward Healthcare

November 10, 2025 | By EarningsIQ Research

APEI’s third quarter was defined by surging healthcare enrollments, accelerated margin expansion, and a decisive pivot away from non-core assets. The company’s degree-granting institutions—especially nursing—drove top-line and EBITDA outperformance, while the sale of Graduate School USA and capital structure actions improved financial flexibility. Management’s outlook balances near-term disruption from government funding uncertainty with clear momentum in healthcare, setting up a sharper strategic focus heading into 2026.

Summary

• Nursing and Healthcare Momentum: Student growth at Rasmussen and Hondros outpaced expectations, solidifying healthcare as APEI’s largest growth engine.
• Operational Streamlining: Divestiture of Graduate School USA and preferred equity redemption strengthen balance sheet and simplify the business.
• Resilient Model Amid Policy Volatility: Military enrollment softness is offset by diversified segment strength and permanent cost reductions.

Performance Analysis

APEI delivered robust revenue and margin gains, led by double-digit enrollment growth in its healthcare segments. Rasmussen’s 10% enrollment increase and Hondros’ 18% surge were pivotal, with both segments now carrying significant momentum into 2026. APUS, the military-focused online university, posted 8% net course registration growth in Q3, though Q4 guidance reflects a temporary pullback due to government funding disruptions. Excluding the divested Graduate School USA, consolidated revenue growth would have reached 12% year-over-year. Adjusted EBITDA margin expanded by over 400 basis points, reflecting both operational leverage from higher enrollments and ongoing cost discipline.

APEI’s balance sheet saw marked improvement: unrestricted cash increased to $193 million, aided by the release of a $24.5 million letter of credit and the elimination of $28 million in lease liabilities. The redemption of preferred equity and sale of non-core assets are projected to boost annual pre-tax cash flow by $10 million, directly supporting net income and EPS growth. Free cash flow nearly doubled year-to-date, and net cash stands at $96.7 million after debt.

• Healthcare Enrollment Acceleration: Rasmussen and Hondros together now represent the fastest-growing share of revenue and margin contribution.
• Margin Expansion: Adjusted EBITDA margin reached 13%, up from 8% in the prior year, as operating leverage from higher enrollments flowed through.
• Cash Flow Strength: Free cash flow for the first nine months hit $45 million, nearly double the prior year, reflecting both margin gains and capital discipline.

While APUS faces near-term turbulence from military funding delays, APEI’s diversified model and cost actions provide a buffer, positioning the company for continued margin expansion as healthcare scales.

Executive Commentary

Strategic Positioning

1. Healthcare as the Core Growth Engine

APEI’s pivot toward healthcare education is now the company’s primary value driver. Rasmussen and Hondros’ enrollment surges demonstrate strong demand for first-licensure nursing programs, with attractive compensation and limited AI disruption risk supporting continued growth. Management’s “filling the back row” strategy—maximizing existing campus capacity—has unlocked operating leverage and set the stage for further scaling without major incremental investment.

2. Streamlined Portfolio and Capital Structure

The sale of Graduate School USA and redemption of preferred equity reflect a decisive move to focus on degree-granting institutions and reduce financial drag. These steps removed $28 million in lease liabilities and $6 million in annual cash dividend payments, freeing up resources for core growth initiatives and bolstering unrestricted cash reserves.

3. Operational Simplification and Permanent Cost Actions

APEI has implemented permanent reductions in non-student-facing functions and variable marketing spend, particularly in military segments affected by funding uncertainty. Management emphasized that these actions are designed to preserve revenue momentum while structurally lowering the cost base, with further details on operational leverage to be shared at the upcoming Investor Day.

4. Regulatory Navigation and Institutional Combination

While the timeline for combining APEI’s three institutions has shifted due to procedural changes at the Department of Education, management remains confident in achieving integration by Q3 2026. The company is already moving ahead with cross-program initiatives and campus footprint expansion, aiming to realize both revenue and cost synergies regardless of regulatory delays.

5. Diversification Mitigates Policy Risk

APEI’s multi-segment model—military, veteran, and healthcare—reduces dependence on any single funding stream. This diversification is proving critical as APUS weathers temporary government shutdown effects, with healthcare now offsetting volatility in military enrollments.

Key Considerations

This quarter marks a clear inflection in APEI’s business mix and strategic focus, with healthcare education now driving both growth and profitability. Investors should weigh the durability of nursing demand, the impact of cost actions, and the resilience of the military segment against ongoing policy risks.

Key Considerations:

• Healthcare Scaling: Sustained double-digit enrollment growth at Rasmussen and Hondros is driving margin gains and revenue mix shift.
• Margin Structure: Operating leverage from higher enrollments and cost actions is expanding EBITDA margins, with further improvement expected as capacity utilization rises.
• Balance Sheet Flexibility: Cash position and reduced liabilities enable continued investment in core programs and provide a buffer against external shocks.
• Regulatory and Policy Exposure: Military segment remains exposed to government funding cycles, but diversification and cost discipline mitigate risk.
• Integration Synergies: Cross-program and campus expansion initiatives are underway, with full combination targeted for 2026 but early benefits already being realized.

Risks

APEI remains exposed to U.S. government funding volatility, particularly in its military-focused APUS segment, where shutdowns can sharply curtail registrations and delay receivables. While management has implemented permanent cost reductions and diversified the business mix, future policy changes, regulatory hurdles for institutional integration, and potential softening in healthcare job markets could impact growth and margin trajectories. Investors should also monitor the pace and sustainability of the current enrollment surge in nursing, as well as execution risk around operational simplification and integration.

Forward Outlook

For Q4 2025, APEI guided to:

• Consolidated revenue of $150 million to $153.5 million, impacted by government shutdown effects on APUS.
• Net income of $5.9 million to $8.3 million, with adjusted EBITDA between $18.5 million and $22 million.

For full-year 2025, management lowered guidance to:

• Revenue of $640 million to $644 million (reflecting shutdown and divestiture effects).
• Net income of $17.2 million to $19.6 million and adjusted EBITDA of $75 million to $79 million.
• Free cash flow of $58 million to $64 million after capex.

Management cited ongoing cost discipline, healthcare enrollment momentum, and a rebound in military registrations post-shutdown as key factors influencing the outlook. The upcoming Investor Day will provide detail on multi-year growth strategies, capacity utilization, and integration synergies.

• Healthcare is expected to remain the primary growth engine into 2026.
• Cost actions are designed to be durable, supporting margin expansion regardless of segment volatility.

Takeaways

APEI is executing a decisive portfolio shift toward healthcare, with margin and cash flow benefits already materializing.

• Healthcare Outperformance: Rasmussen and Hondros’ enrollment growth is now the primary driver of margin expansion and revenue visibility, reducing dependence on the volatile military segment.
• Strategic Simplification: The sale of non-core assets and elimination of preferred equity streamline the business and free up capital for growth and resilience.
• Forward Watch: Investors should track the pace of healthcare enrollment, the sustainability of cost reductions, and the timing of regulatory approvals for full institutional integration as key levers for 2026 and beyond.

Conclusion

APEI’s Q3 2025 results mark a turning point, with healthcare education now firmly established as the company’s growth and margin engine. While military segment volatility persists, operational and capital discipline, coupled with a clear strategic focus, position APEI to drive sustained value creation as it heads into 2026.

Industry Read-Through

APEI’s results signal a broadening tailwind for healthcare education providers, as persistent nursing shortages and strong ROI for first-licensure programs drive enrollment gains across the sector. The shift toward maximizing campus utilization and cross-program synergies is likely to be echoed by other for-profit and non-profit educators seeking scale without heavy capex. The quarter also highlights the ongoing vulnerability of military-focused institutions to federal policy swings, underscoring the value of diversified revenue streams and permanent cost actions. For the broader education industry, APEI’s experience suggests that operational simplification and capital structure optimization are critical levers for navigating a landscape marked by both regulatory uncertainty and secular demand in healthcare fields.

APEI Consumer Discretionary Education Healthcare Nursing Military Enrollment Portfolio Simplification