American Public Education, Inc. (APEI) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Quarter Four 2014 American Public Education Incorporated Earnings Conference Call. My name is Kathie, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Chris Symanoskie, Vice President of Investor Relations. Please proceed.

Thank you, operator. Good evening, and welcome to American Public Education conference call to discuss financial and operating results for the fourth quarter of 2014. 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 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 anticipate, believe, seek, could, estimate, expect, intend, may, should, will and would. These forward-looking statements include, without limitation, statements regarding expected growth, expected registration and enrollment, expected revenues, 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 risk factors, including those 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 today for questions is Harry Wilkins, our 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. Wally?

Thank you, Chris. Good evening, everyone. I will begin today's call with a summary of our results and provide a brief commentary on the progress we are making with respect to our strategic goals. Then our CFO, Rick Sunderland, will discuss our financial results and provide perspective on our outlook for the first quarter of 2015. In 2014, APEI enjoyed several operational successes in the face of uncertainty and significant industry headwinds. For example, we’ve been exploring new ways to increase student persistence. We have deployed innovative technologies, classroom interventions and other recommendations from academic organizations such John Gardner Institute and the HLC Academy for Student Persistence and Completion. This work has allowed us to identify additional approaches that we intend to implement in the year ahead. I'm pleased by the success of Hondros College of Nursing. In 2014, the college completed a move to a larger more visible and accessible facility in Cleveland, Ohio at a new evening and weekend classes at both its Cleveland and Columbus campuses and prepared for transition to the Sakai Learning Management System which is used at APUS. Last year, APUS added new programs in cyber security, electrical engineering and public policy and in January of 2015 we launched our new dual degree Masters program in homeland security and emergency and disaster management. More importantly we celebrated a record graduating class of more than 10,000 AMU and APU students in 2014, a tremendous accomplishment for these students. The success leads to growing recognition. APUS undergraduate programs were ranked in the top 10% in U.S. News & World Report's 2015 national online rankings advancing seven places over its 2014 ranking to number 27 nationally out of 292 schools. In addition, Military Times Magazine recently ranked AMU number one at serving active-duty military and number nine in serving veterans. Our long-term strategy includes, among other initiatives, plans to increase the percentage of international students at APU. We currently have agreements with three New Horizons franchises that we're in the process of training to help us reach our goals for national students. In addition, we have a new pilot program with several international education agents to help us expand international outreach. Our team is working hard to finalize processes, procedures and materials to attract and serve this potential new student population. Despite increased competition and evolving regulatory landscape, changes in tuition assistance programs and other challenges that continued to confront APEI and the industry, we were able to advance on many important fronts in 2014. While total enrollment at APUS declined 1% year-over-year enrollment in our SIM programs, an area of importance to our nation and to us, increased approximately 10% year-over-year to approximate 13% of total enrollment in 2014. As of December 2014 compared to the prior year, Hondros College of Nursing achieved enrollment growth of 11% and new student enrollment growth of 16%. Moving on to Slide number 4 – fourth quarter highlights. In the fourth quarter of 2014, overall net course registrations at APUS increased 7% year-over-year while net course registrations by new students declined 6% year-over-year. Net course registrations by new and total students using military tuition assistance increased year-over-year by 31% and 38% respectively. You may remember that in the prior year period, net course registrations were adversely impacted by a partial government shutdown that temporarily prevented active-duty military students from using their TA benefits to register for courses in October of 2013. The company previously estimated that 13,100 course registrations were dropped in the fourth quarter of 2013, largely as a result of these events. Thus the company estimates that net course registrations by students using TA may have declined 9% year-over-year absent this factor. Net course registrations by both new and total students using veterans benefits increased approximately 7% year-over-year. We believe this was driven by an increase in the number of service members departing from active duty military and by our reputation for serving military and military affiliated communities. Although net course registrations by students using cash and other sources declined 4% during the quarter, net course registrations by new student using cash and other sources increased 6% year-over-year. We believe the increase is in part attributable to our efforts to build strategic relationships with corporations, associations, and public service organizations. In the fourth quarter of 2014, net course registrations by students using Federal Student Aid decreased 10% year-over-year, driven by a 22% decline in net course registrations by new students using Federal Student Aid. Although we had anticipated the decline in net course registrations by new students using Federal Student Aid, the decline in the fourth quarter was more than originally anticipated. We believe this was a result of increasing competition in higher education as well as a result of moving to a more targeted and narrow geographical approach to marketing discussed in our previous calls, that is designed to attract students with greater college readiness. We continue to develop and refine enhanced analytics and marketing tools that we believe will enable us to focus more on the quality of incoming students and eliminate less successful marketing channels. We also continue the pilot programs in academics and IT that are aimed at improving retention. For example, our investment in Fidelis led to our pilot of ClearPath, a new learning relationship management or LRM system developed by Fidelis with input from us. The results of this pilot which now includes 5000 undergraduate students who volunteered for the program were impressive. We found that ClearPath users completed the enrollment and transfer credit processes at higher rate, had lower course withdrawals and drops, exhibited the higher GPA in their initial courses and registered for subsequent classes earlier than those in the larger student population. Based on these positive results we expect to open ClearPath for all new APUS students by the end of the first quarter of 2015 and transition current and returning students into ClearPath by the end of 2015. We remain focused on improving student persistence through our pilot initiatives in academics, IT and marketing in addition to our ongoing collaborative initiatives with the Gateways to Completion program and the foundations of excellence program of the John N Gardner Institute and the HLC’s Academy for Student Persistence and Completion, all three initiatives aimed at improving quality and exploring new ways to improve retention, particularly in high enrollment Gateway courses. Moving on to Slide number 5 - API long-term strategy. We anticipate continued volatility and softness in enrollment by students using Federal Student Aid and TA in the first quarter of 2015. While the broader economy may be showing signs of improvement, competition for high-quality civilian students in higher education may continue to increase. In addition, sequestration and budgetary matters may adversely impact enrollment. In short, it could be another challenging year for us. However we now have more tools or strategies at our disposal to positively influence our quality mix of students. APUS is playing a tuition increase in the second half of 2015 which will help to support further improvements in the online learning experience and other initiatives aimed at improving student success. We believe that the increase for graduate and undergraduate registrations will be 5% and 8%. To support our active duty military students, APUS will continue providing a tuition grant that will keep the cost of tuition for these students at approximately its current level. In 2016, we will evaluate repositioning select degree programs by implementing differentiated pricing primarily to better align tuition of certain programs with higher market demand. We remain firmly committed, however, to being the champions of affordability. However the way in which we approach the matter may evolve over time. Although we’ve increased our focus on strategic relationships to positively influence our quality mix of students we believe that additional assessments of student readiness will be helpful to this effort. Beginning in the second quarter of 2015 we will require that prospective students complete a free noncredit admission course if they are not active duty military or veteran applicants, graduates from certified federal state and local law enforcement and public safety academies or prospective students with at least nine hours of transfer credit with a grade of C or better for each course from the accredited institutions. These strategic admissions requirements which are formulated based on internal and third-party research give us yet another lever with which to influence our quality mix of students and in turn may allow us greater flexibility with regards to the breadth of our future marketing campaigns. In the fourth quarter of 2015 we plan to change the method by which we disperse Federal Student Aid from a single disbursement method to a multiple disbursement method for first time APUS undergraduate students. While this change may adversely impact enrollment we believe the change has the potential to lower bad debt expense and will reduce the attractiveness of our programs to students who are seeking to take improper advantage of Federal Student Aid programs. We believe our competitive advantage will be strengthened by greater brand differentiation, realized by providing a unique and advanced learning environment for students, on campus and online. In December of 2014, APUS began a course renovation project to enhance the interactivity and appearance of our courses as well as to incorporate new rich media, gamification and simulation. We initially focused on the 50 courses with the highest drop withdrawal, incomplete and failure rates. Over the next 18 months we plan to redesign the remaining 1500 courses to enhance the student experience and further differentiate our courses. This best-in-class university experience is to be a key point of differentiation from our competition. We want to impress our students with high interactivity, collaboration, simulation and gaming technology that is designed for their own personal success and to maximize the student experience. At the same time we plan to enter new fields of study and market segments to diversify and address new opportunities in higher education. At this time, I will turn the call over to our CFO Rick Sunderland to discuss our financial results and first quarter outlook in greater detail. Rick?

Thank you, Wally. American Public Education’s fourth quarter 2014 consolidated financial results include a 10% increase in revenue to $91.3 million compared to $82.9 million in the prior year period. The increase in revenue was a result of a year-over-year increase in net course registrations at APUS, higher enrollment at Hondros College of Nursing and the inclusion of Hondros for the full quarter in 2014. In the fourth quarter, our API segment revenue increased 5% to $83 million compared to $79.1 million in the prior year period. Hondros segment revenue increased to $8.3 million in the fourth quarter of 2014 compared to $3.8 million in the same period of 2013. Please note that APEI acquired Hondros on November 1, 2013. Therefore Hondros segment revenues are included for the entire quarter in the current year period compared to only two months in the prior year period. On a consolidated basis, APEI costs and expenses increased 6% to $72.7 million compared to $68.4 million in the prior year period. The increase is primarily a result of the inclusion of Hondros for the full quarter in 2014, plus increased costs in our API segment due to higher net course registrations and higher bad debt expense. In the fourth quarter, overall operating margins increased primarily as a result of lower payroll costs, better cost management and total expenses growing at a rate slower than revenue. Please note that the prior year period was adversely impacted by the temporary suspension of TA caused by the partial government shutdown in October of 2013. For the quarter, consolidated instructional costs and services as a percent revenue decreased to 34.6% compared to 35% in the prior year period. The decline is due primarily to lower payroll costs and lower course material costs in our APEI segment, partially offset by the inclusion of our Hondros segment which has a higher IC&S costs as a percent of revenue due to its campus-based model. The cost of course materials incurred by APUS declined year-over-year to approximately $23 per net course registration in the fourth quarter of 2014 from $31 in the fourth quarter of 2013. Selling and promotional expense as a percent of revenue decreased to 18.9% of revenue compared to 20.6% in the prior year period. Quarter-over-quarter selling and promotional cost in our API segment was unchanged. Additionally, S&P cost as a percent of revenue is lower at Hondros. Therefore the quarter-over-quarter increase in revenue and the inclusion of Hondros for a full quarter drove a decline in the reported cost as a percentage of revenue. General and administrative expenses decreased as a percentage of revenue to 21.5% from 22.5% in the prior year period. The decrease is due to general and administrative expenses increasing at a rate less than revenue growth and the inclusion of Hondros for a full quarter as Hondros’ general and administrative expenses as a percent of revenue are lower than our API segment. In the fourth quarter of 2014, consolidated bad debt expense increased to $5 million or 5.5% of revenue compared to $4.1 million or 4.9% of revenue in the prior year period. Income from operations before interest income and income taxes increased 28% to $18.6 million compared to $14.5 million in the prior year period. In the fourth quarter, our effective tax rate decreased to 36.2% compared to 38.6% in the prior year period. This decrease was primarily due to non-recurring adjustments to our deferred tax liability which reduced deferred tax expense. Going forward we would expect an effective tax rate closer to 40%. In the fourth quarter of 2014, net income was $11.8 million or $0.68 per diluted share compared to $9 million or $0.51 per diluted share in the prior year period. Total cash and cash equivalents as of December 31, 2014 was approximately $115.6 million with no long-term debt. In the fourth quarter of 2014, New Horizons repaid its $6 million note that was issued in conjunction with APEI’s equity investment in 2012. For the year ended December 31, 2014, capital expenditures were approximately $24.6 million compared to $20.6 million in the prior year period. Depreciation and amortization was $16.1 million for the 12 months ended December 31, 2014 compared to $13.5 million in 2013. As of December 31, 2014 we had approximately 15 million remaining on our share repurchase authorization. Going to Slide 7. Our outlook for the first quarter of 2015 is as follows: APUS net course registrations by new students in the first quarter of 2015 are expected to decrease between 18% and 13% year-over-year. Total net course registrations are expected to decrease between 7% and 4% year-over-year compared to the prior year period. We believe these declines are a result of marketplace volatility surrounding the administration of military TA programs, our efforts to influence our quality mix of students and increased competition in the market. In the first quarter of 2015 we expect new student enrollment of Hondros College of Nursing to increase by approximately 14% year-over-year. We anticipate consolidated revenues for the first quarter of 2015 to decrease between 5% and 3% year-over-year compared to the prior period of 2014. In the first quarter of 2015 we anticipate total consolidated earnings-per-share to be between $0.46 and $0.50 per diluted share. Our first quarter guidance suggests a decline in operating margins resulting from a decline in revenue and an increase in expenses. Given the initial success of certain pilot programs aimed at increasing student persistence, we plan to continue with a higher level of spending on our outreach initiatives to attract new students with greater college readiness. Moreover we will continue to invest in our information technology to further improve the student experience, drive better persistence and differentiate our learning environment from competitors. The initiatives we have planned for 2015 and beyond are consistent with helping us reach our long-term financial and operational goals. From an enrollment and revenue perspective we believe our planned price increase and possible future differential pricing will aid to revenues and provide resources to support our efforts to advance learning experience, improve student persistence and potentially help our brand positioning. In addition, our plan to implement a non-credit admissions course for certain prospective students will provide another tool to influence our quality mix of students and potentially allow for broader marketing and outreach. From an operating efficiency and student persistence standpoint we believe it is important to expand our successful pilot programs aimed at improving persistence and improve the college readiness of incoming students which may equate to better operational performance in the future. We believe the anticipated change of our FSA disbursement model to multiple disbursements may help us lower bad debt expense. Together these initiatives represent our plan to improve topline and bottom-line performance while simultaneously improving the student experience and creating greater brand differentiation in the marketplace. Now we’d like to take questions from the audience. Operator, please open the line for questions.

[Operator Instructions] It comes from the line of Adrienne Colby of Deutsche Bank.

Hi, thanks for taking my questions. In terms of the new enrollment trends, can you just talk about what you're seeing by degree level, bachelors versus masters?

Well, I can tell you what we saw in ‘14 versus ‘13 because it’s really too soon to make a comparison for ’15. But in in 2014 our Masters degrees declined from 18% of our students in ‘13 to 17%, so a 1% decline. Our bachelors degrees increased 3% from 58% of our students to 61% and our associates students declined from 24% to 23%.

And just in terms of your assumptions for new enrollment growth for the first quarter, can you talk about what trends you’re anticipating in Title IV students and tuition assistance versus the fourth quarter?

Yes. We’re looking at a 39% change from the fourth quarter; that’s a decrease in FSA students through the first quarter and we’re looking at an estimated 15% decrease in TA students from quarter four to the first quarter. Those are our two big categories with the other slightly positive. I would tell you that we look at the first quarter of 2014 compared to the fourth quarter of ‘13 and the FSA decline that year was about 36%. So we typically see a seasonal decline in FSA students from the fourth quarter to the first quarter.

So these were total enrollment numbers?

Those are new student enrollment numbers.

And can you just speak about how many students you anticipate will have to go through the noncredit course that you’re rolling out?

We really don't know but I mean all of our TA students will be exempt because of the admission standards for the military. Our veterans will be exempt because of the military admission standards. We have approximately, I think it’s 14 partnerships with police academies, maybe a few more than that and so all of their graduates where we recognize graduates for some academic credit will be exempt and then anyone who transfers credit will be – of nine credit hours or more will be exempt. So I would say that just an approximation somewhere between 15% and 30% of the new students will have to take this free course.

Thank you. Your next question comes from Jason Anderson of Stifel.

Just a bit more on the 1Q starts and there was a sequential change I think just alluded to but from a year-over-year perspective, is FSA – is that situation getting – it feels like it’s getting worse or more difficult in that obviously you’ve got a lot of things going on there. But maybe you could speak to those, is the change from – is the situation getting more challenging in FSA and in TA?

Well, our year-over-year numbers for new FSA students, that’s about a 26% decline year-over-year for FSA. But a year ago we weren’t implementing our geographical targeting for new FSA students, in both our advertising and radio and TV as well as coordinating that with our keyword internet ads through Google and other services. So that was fully implemented in the third quarter of this year. So when you do the year-over-year comparison, we’re seeing a period where we didn't have the geographical targeting implemented. I would tell you that while the numbers are down with our geographical targeting, we’re seeing improved quality mix of FSA students coming in and that’s our goal. Our goal is to get a better student and so where it settles out I don't know yet but we want better students and we can improve in retention and looking at our overall persistence rates. The TA by the way year-over-year is about a 15% decline and that’s just continued volatility. When we look at our three months of the first quarter, January and March which -- we don't have March drops yet but the January was a decline over what we estimated and March is projected to be a decline but February was great. It’s volatile, it’s based on funding, it’s base by base, we can’t predict it very well. So as long as the sequester is in place, we’re predicting a continued volatility.

And then I guess regarding the TA, kind of a market question there. I was trying to look through some of the information out of DOD on their enrollment in ’14. And it looked like maybe just on active duty, maybe they were down about 15%, if I am looking at that correctly. And then I guess I am wondering – and you just kind of answered it a little bit but if you could elaborate some more. Is there a point where it bottoms out or can they still continue to press down? I mean I guess at some point, I would have thought maybe this would stabilize and maybe when you talk about it, we’d also talk about, I don’t know if I look at this correctly either but it looked like maybe 20% of the institutions dropped out of going with maybe signing the new MoU, I don’t know if that’s an accurate read or not. But how do you look at that and maybe picking up market share?

Well, I think the new MOU is very difficult to comply with. So if you don't have much of a market share, I imagine institutions that serve, less than 50 students probably dropped out.

Well this also requires schools to eventually be able to offer Title IV. So if you don’t offer Title IV, don’t have a prospect for that, you’re going to dropout?

So that’s one of the reasons. I think that if you look at your FY ‘14 military numbers, they clearly were impacted by that October government shutdown. So I wouldn't – if I just take October, it’s one month out of 12, that won’t be 14% but from what we understand the restrictions that were put in place because of the sequester, where for example, in some branches your first enlistment, you're not eligible anymore; other branches look at restricting to one degree versus a degree of each type. We used to be able to do one Associates, one Bachelors and one Masters, now it’s just one degree. So certain restrictions that were put in place clearly have shrunk the number of students who are taking advantage of military tuition assistance. I think as long as the sequester in place, we’re going to see volatility. I won’t say that -- I can't predict it but we’re going to see volatility primarily because the service chiefs are looking at funding people to be soldiers or airmen as well as funding equipment. And so even though education has always had a strong place in recruiting soldiers, when you have to choose between how many bodies you need on the ground to meet the deployment need versus how many pieces of equipment you need to be replaced, it’s a small number. So we'll see.

And then I just have one more. So seeing how the 1Q guidance is on new students and then some of the initiatives you talked about, whether it be the free, the new required free course later in the year and then the disbursement change, even the very back end, I mean – and I know you don’t give full year start guidance but is it unreasonable for us to think of potentially starts -- new student -- new registrations being down double digits all year?

I haven’t actually tried to quantify that but we did give you guidance on the fact that in the first quarter the shrinkage in FSA is due to the fact that our geographical targeting wasn't in place a year ago. It really started to be in place in the third quarter. So ideally and we did talk about this in the script that once those other things are in place such as our admission policies, we could actually be much more creative with our marketing than we are now. So I would say it’d be tough to predict it throughout the year.

The next question comes from Trace Urdan of Wells Fargo.

These changes taking place in the second half or are you -- and I guess in particular the price increase which maybe gives you a little bit more flexibility, I am wondering if there will be -- if we could expect sort of a marketing campaign to coincide with those changes? Or will you wait to see kind of how they play out before you try to change up your messages in the market?

We’re always marketing, Trace. So I think we also look at how enrollments are trending and we’re pretty flexible about matching our expenses with our revenues and if we think we need to spend a little bit on marketing, we will do that. We don't have anything specific planned for that. At the same time we stated that that increase does not apply to active duty military. We’re going to keep them at the same level through a grant -- tuition grant. So when you look at our tuition where it compares now with the state institutions, even with a 5% to 8% increase depending on whether it’s undergrad or grad, will still be below most of the public rates. So I think that – I mean we -- the more strategic thing which we talked about in the call was in 2016, once our computer programming is done, we will look at differentiated pricing where degrees that are much more in demand may be priced differently than the degrees that are much more of a commodity. And we’re in the midst of a big pricing study because of having that capability a year from now. So I would think that depending on what we know in the third quarter when we do our tuition increase, we may or may not do a marketing push.

I guess I was – try to rephrase this a little bit, it feels like with the changing admissions requirements and the price increase in particular, that there is – and I would say also just within the context of comments that you made on past calls, it feels like you’re moving in the direction of maybe sort of repositioning how people think about American Public and deemphasizing price and instead focusing on some other strengths of the University; is that a fair characterization or am I overstating kind of what’s going on here?

I think we still have a mission and a passion for affordability but I think at the same time we recognize that -- I mean if you think of degrees or courses as commodities, particularly when they’re offered through the Internet, the marginal price is zero and we don't want to go to zero. So I think that we are going to focus more on differentiation and value and to the extent that there are programs that we offer that we don't believe price sensitivity is important, once we have the capability to do that, we plan to price them differently. But to the extent that we think that price is important we will look at that as well. But yes, you can't be -- the way I look at it Trace, we haven't had a price increase at our undergraduate level in nearly 14 years and the market is starting to change pretty dramatically, a lot of people were in it, a lot of people were in that don’t know what they are doing and I think that we need to not just differentiate ourselves on content but we need to differentiate ourselves on price where price is important or where it’s not. We want to show people we’re investing in quality.

The next question comes from Peter Appert of Piper Jaffray.

Yes, you’ve got John Crowther on for Peter. First question, it was very helpful where you kind of walked through on a question, the exposure in terms of students to the extra course, free course that you’re going to have to take. And I was trying to go back through your comments on pricing. Maybe you could kind of walk through that again, because it sounded like the pricing increases would only be applicable to a certain percentage of your current enrollment.

Yes. I think the pricing increases will be applicable to everyone other than military. Right, Rick?

That’s correct.

So active-duty military using tuition assistance. So if we’re -- I think we finished the year our TA percentage was -- in 2014 was about 35%. So our price increase would be applicable to roughly – if the mix doesn’t change approximate 65% and it would be second half of the year price increase. And right now we haven't settled on the final number but it's going to be somewhere between 5% and 8%.

And then just -- the next question, just on Hondros, wondering if you could have any update there on potential expansion of that program. It seems like demand within your current state seems pretty steady and healthy. Just wondering if you have any updates on potential expanding that program to a broader audience.

Harry can chime in if he wants to on this. I think that we always admired Hondros’ position in Ohio with their four separate locations and thought that over time, we could add locations both in Ohio and elsewhere. But we’re still waiting for our final change in ownership approval and until we get that we’ve got our provisionals, so we’ve been operating it but until we get the final we really can't put in a request to add additional locations.

Yes, I will say that the evening program in Columbus and Cleveland that we launched this fall has been very well received and the students seem to be doing quite well. We plan to open up evening program in [Devon] and Cincinnati later this year. We also have seen growth in our BSN program and we think there is a big market for that, are in the BSN program. So we’re optimistic with Hondros, of course we love to be able to open up more campuses and we plan to do that, demand is definitely there. We have a good reputation in Ohio but we need to get the department to approve our change of ownership.

The next question comes from Corey Greendale of First Analysis.

Hey guys, this is [Tom Becks] on for Corey. Could you just comment on the relative performance of the employer channel?

The relative performance of what, Tom?

I'm sorry, the employer channel.

It's an unpredictable channel. We probably add in every quarter anywhere between 10 and 20 employers. We have stated repeatedly that with the exception of our arrangement with the Walmart we don't have exclusives. That’s just the market where the HR departments really want multiple institutions to have relationships with. We try to find employers though who are attracted to some of our niche programs, thinking that it would attract more employees to it not as much price sensitivity as you would think, although our prices fit in nicely with the IRS -- the current IRS limits for reimbursable tuition. And it varies for example, I think cash, we stated in the call that our cash was down slightly in the quarter but new students were up. So there are lot of different companies we have relationships with but no one with significant volume to change that one way or the other than perhaps Walmart.

One other quick one, it looks like S&P dropped sequentially and historically it’s been up in Q4. Could you just give some color around that?

I think part of that was Hondros but Rick, is that the quick answer or is it something different than that?

I think it was pretty flat quarter over quarter and they were spending to the market -- I don't know if any particular change in how they were doing it.

I think you are right that typically we will spend a little more in the fourth quarter to stimulate first quarter registrations since we know that there's usually a decrease from quarter four to quarter one. But I think that with this geographically targeted marketing, I think we're pretty flat from quarter three to quarter four.

And I think if you look at the second and third quarter that we actually had a jump in the third quarter as we were headed towards the end of the year. So if it was flat or slightly down in the fourth quarter, it was due to the comparison in the third quarter. End of Q&A

Thank you for your question. I would now like to turn the call over to Chris Symanoskie for closing remarks.

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.