Good day, ladies and gentlemen, and welcome to the Second Quarter 2015 American Public Education, Inc. Earnings Conference Call. My name is Josh [ph] and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I will now like to turn the conference over to, your host for today, Chris Symanoskie, Vice President of Investor Relations. Please proceed.

Thank you, operator. Good evening, and welcome to the American Public Education conference call to discuss financial and operating results for the second quarter of 2015. Presentation materials for today's call are available in the Webcast section of our Investor Relations website and are included as an exhibit to our current report on Form 8-K filed earlier today. 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 upon 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 results or events to differ materially from such statements. Forward-looking statements can be identified by words such as anticipate, believe, seek, could, estimate, expect, intend, may, should, will and would. These forward-looking statements include, without limitations, statements regarding expected growth, expected registration and enrollments, expected revenues, and expected earnings and plans with respect to recent and future investments and partnerships. Actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described in the Risk Factors section and elsewhere in the company's annual report on Form 10-K filed with the SEC and the company's other SEC filings. The company undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. This evening, it's my pleasure to introduce Dr. Wallace Boston, our President and CEO; and Rick Sunderland, our Executive Vice President and Chief Financial Officer. Also available for questions today is Harry Wilkins, Executive Vice President, Chief Development Officer and CEO of Hondros College of Nursing. Now at this time, I'll turn the call over to Dr. Boston.

Thank you, Chris. Good evening, everyone. I will begin today's call with a summary of our recent operational results and provide a brief commentary on the progress we’re making with respect to our strategic priorities. Then our CFO, Rick Sunderland, will discuss our financial results and provide perspective on the company’s outlook for the third quarter of 2015. Starting off with slide number 3, as expected, overall net course registrations at APUS decreased 7% year-over-year and net course registrations by new students declined 19% year-over-year in the second quarter of 2015. These results were mainly due to the decline in net course registrations by students using Federal Student Aid and students using military tuition assistance. Net course registrations by new and total students using military tuition assistance decreased year-over-year by 13% and 10%, respectively. We believe the decline is primarily a result of the decline in utilization of military tuition assistance benefits by active duty military professionals. Net course registrations by new and total students using Federal Student Aid decreased year-over-year by 32% and 16%, respectively. We believe this decline is a result of our various efforts to influence our quality mix of students and implement new admissions processes as well as a result of increased competition in the marketplace. Although APUS continued to experience year-over-year declines in net course registrations by students using Federal Student Aid and tuition assistance, net course registrations by new and total students using veterans benefit increased year-over-year by 2% and 7% respectively. We attribute this increase to AMU’s strong reputation among military affiliated communities and increased retention of students using GI [indiscernible] benefits. Net course registrations by students using cash and other sources were approximately flat year-over-year. However, net course registrations by new students using cash and other sources increased by approximately 5%, compared…

Thank you, Wally. Going onto Slide 7, American Public Education’s second quarter 2015 consolidated financial results include a 6.1% decline in revenue to $80.3 million, compared to $85.5 million in the prior-year period. The decrease in revenue was a result of a year-over-year decrease in net course registrations at APUS, which is partially offset by higher enrolment and tuition in Hondros College of Nursing. In the second quarter, our API segment revenue decreased 7.3% to $72.6 million, compared to $78.3 million in the prior-year period. Hondros segment revenue increased 6.9% to $7.7 million in the second quarter of 2015, compared to $7.2 million in the same period of 2014. On a consolidated basis, costs and expenses decreased 1.3% to $68.7 million, compared to $69.6 million in the prior-year period. The decrease was primarily due to lower instructional costs in our API segment, resulting from lower net course registrations, lower advertising costs, and lower bad debt expense. On a consolidated basis, operating margins decreased to 14.4% in the second quarter of 2015 as compared to 18.6% in the prior-year period. The year-over-year decline in API segment revenue is the primary cause of the decline in consolidated operating margins. For the second quarter, consolidated instructional costs and services expense for ICS as a percent of revenue increased to 37%, compared to 35.3% in the prior-year period. The increase is due to our API segment’s ICS expenses declining at a rate less than a decline in revenue. At APUS, the cost of course materials continued to decline year-over-year to approximately $25 per net course registration in the second quarter of 2015, compared to approximately $28 per net course registration in the second quarter of 2014. Selling and promotional expenses or S&P as a percent of revenue increased to 20.1% of revenue compared to…

[Operator Instructions] The first question comes from the line of Corey Greendale with First Analysis. Please proceed.

Hi, good afternoon. Thanks for taking my question. First of all, I apologize. I missed the change in new student registrations in the TA market. Can you give me that again?

New students in TA were down 13%.

Okay. Thank you. And then the next question is talking about the FSA market, if you look broadly across at least the public companies which is what we can see pretty well, obviously times are tough but I would say that for the schools that – I am trying to think about a nice way to put this, for the schools that have a clear kind of lower cost value proposition, those are doing relatively well. It seems like in some sense you are an outlier in terms of the negative 32% on FSA. Can you just address a little bit more? What do you think is driving that specifically for you? And have you sort of left the change in the geographically targeted marketing? Do you think that gets closer to flat?

Yes. I think we do, Corey. We talked about this for several quarters that approximately last August we began targeting using demographic and geographical analytics a better student. We looked at the students that, the profile of the students that we had who were successful and passing their first courses and continuing on to graduate and decided that we would rather spend money both through our internet marketing as well as through radio and TV, specifically in markets that had a profile of the student to match that, and not market at all in markets where the results had not been good for us. So it was not a black and white overnight process, we continue to tune that process through the end of 2014 but nonetheless we’ve been working on that process since August a year ago and I think that’s driving most of it. There may be some competition in there and there also maybe the fact that there were some good students, but a small percentage of good students who are in markets that we just seize marketing in.

Yeah. So it sounds like I know you are not getting your guidance beyond Q2, but it sounds like as if anniversaries decline. It just start to get better in Q4, maybe more meaningfully into 2016 as that anniversaries. Is that fair?

That’s what we are hoping. We believe that September will be the first full month that will have month-over-month comparatives and obviously we didn’t give guidance specifically for September but that’s our first month and we think we’ll see positive year-over-year comparisons.

Okay. And then one of your competitors in talking about the TA market said that, they were seeing specifically in the Navy and Coastguard kind of funds running out and that affecting enrollment in those branches. Is that something you’re seeing and do you expect that maybe TA gets better as the federal fiscal year begins in Q4?

I would tell you that as long as the sequester is in place which it still is that I think we’re going to see turmoil and the Department of Defense budgets overall and TA is a component in that. The Coastguard explanation really, the dip there, they change their reimbursement from 100% at rates to 75% of rates and that obviously impacted some people who didn’t want to pay the out of pocket amount. And as far as the navy goes, I would say that the navy has issued several public statement saying that they had money for all their funding. At the same time, they don’t tell what their money is but we haven’t seen any noticeable hiccups with the navy.

Okay. And a question on the cost side, it sounds like you expect trends to improve beyond this quarter but I don’t think at least you haven’t announced any sort of larger cost efficiency initiatives, are you looking at doing anything to reduce the cost base given the recent enrollment trends.

I think we always are mindful of that and have a pretty good process for managing our cost. At the same time, we did talk in this call about the fact that - we are looking at the fact that we may have to do more handholding and more personal intervention with civilian students than we’re used to where they are much more automated registrations for military to active duty military students. So we will continue to be mindful of it, but if we see a positive return by perhaps some more personal intervention then we will do that.

Okay. And just one last quick one from me, then I’ll turn it over. With the price increase going into effect in July, any industrial returns on student or perspective student reaction to that?

None. I probably can’t say that zero but very negligible. I think I only heard of one or two. When we announced it, we basically gave everyone information on all the technology expenditures we have done over the past three years and that we anticipate to do for the next two years, and they are seeing some of the benefits of that particularly with our native app that we’ve implemented this past year. Just this past week, we were priced that we hit a record number of page views in a day, I think 200,000.

In one week, it was over 1 million page views.

Yes. So we are pleased that that’s being positively received and I think when you haven’t increased your tuition at the undergraduate level for 14 years and people are seeing a positive turnaround with technology investments, it went over okay.

Great. Thanks for taking my question.

The next question comes from the line of Jeff Silber with BMO. Please proceed.

Hi. Good afternoon. It’s Henry Schein on for Jeff. I just had a question around some of the comments you had around. You mentioned you had an increase in enquiries, I am just wondering what is driving or what are some of the issues that are leading to some of these increase not being converted into starts and are you planning to change your admission process or increase your number of admission personnel or anything of that sort? Thanks.

Right now, we don’t believe that the conversion is a people problem. We talked about the fact that beginning last August we really tried to take our data and deliberately go after a much higher student success profile and I think that, that much higher student success profile is a profile that’s very attractive to the non-profit public and private institutions. So at the same time, we just believe that overtime a better student profile will give us better retention as well as better outcomes and ultimately better graduation rate. So we will continue to look at our data, try to improve the ratio of applications from leads generated, but while we’ve increased the number to 38% I think we said our app volume was down 16%. And so we look at this data daily and you just have to refine where you’re targeting and what your message is to the group that you’re trying to attract.

Got it. And can you talk a little bit about, are you seeing any traction on the corporate partnership front?

I think it’s up slightly in the quarter, maybe 5% and so we’re – the messages we’ve been giving on corporations is, we can work the partnerships and we can become a partner, but generally it’s very rare if you get an exclusive and you’re the only partner. And so then you’re competing with hopefully just a handful of other educational partners and different corporations have different messages and different needs for institutions to match up with their employee. So the good news is, it’s up and we continue to pursue it. Hope our cash is flat in most of our corporate revenues in the cash category. I think it’s up a percent year-over-year from 12% to 13% but we announced a couple new partnerships but they take time to implement and take time to expand the number of students.

Got it. Okay. Alright. Thanks so much.

[Operator Instructions] The next question comes from the line of Adrienne Colby with Deutsche Bank. Please proceed.

Hi, thanks for taking my question. Second quarter results and third quarter guidance seem to imply some slower growth at Hondros. I was wondering if you could talk a little bit about what’s showing down there.

Yes. It’s more seasonal than APUS business because it’s more traditional. The students register in the fall and January being our best terms but the spring and summer did slow somewhat year-over-year. We still have positive growth. Most of the slowness is really in our RN program, our associate degree in nursing. We actually had fairly good growth in our license pack on those program, which is the first program in our stake and BSN program was a little less than anticipated but still overall our BSN program total enrollment is going fine. I can’t explain – it’s a little too soon to explain the change in the RN registrations. It’s a combination of things I’m sure. Part of it is we don’t have evening classes yet for the RN program. The evening classes are proving to be very popular for the LPN program. Part of it is I think the economies of students are entering into the work point. They can get a job as a licensed practical nurse. Perhaps more students are opting to enter the work force more quickly and part of it is that we’ve got a little tougher on admissions for our ADN program because we want to make sure we have – we meet our pass rate results that we need to make for exams for our graduates to get license. So the combination of those things I think is affecting the ADN program a little more than it had last year, and that’s where the majority of the weakness is, but overall we are pleased with the way our enrollment is growing.

And as a follow-up to that, have you - any more details about when the final approval from the department will be coming through?

We love to give you an update on that, but unfortunately the department has still not responded to our application for change of ownership. We are still waiting their approval. It’s been since November 01 of 2013. We should get it any day. We’ve contacted them, they’re working on it and that’s all we know right now.

Thank you.

At this time, there are no further questions in queue.

Great. Thank you, operator. That will conclude our call for today. We wish to thank all of today’s callers for participating and for your interest in American Public Education. Thank you and have a great evening.