Good afternoon, ladies and gentlemen. And welcome to the Q2, 2017 American Public Education Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session. And instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host Chris Symanoskie, Vice President of Investor Relations. You may proceed.

Thank you, operator. Good evening and welcome to the American Public Education earnings conference call for the second quarter of 2017. 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 registrations and enrollments, expected revenues and expected earnings and plans with respect to recent and future initiatives, 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, quarterly report on Form 10-Q 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, unless required by law 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. Now at this time, I’ll turn the call over to Dr. Boston.

Thanks, Chris and good evening, everyone. Starting with Slide 2, although we continue to experience year-over-year declines in net course registrations at APUS, we are pleased that the rate of decline lessened in the second quarter of 2017, compared to the first quarter and prior year period. In the second quarter, total net course registration at APUS declined 6% compared to the prior year period. Although net course registrations by new students declined 9% year-over-year. Net course registrations by returning students decreased 6% compared to the prior year period. We believe there is a difference in the rate of decline of registrations by new students and that of returning students relate at least in part to improvement and persistent and the quality mix of students. The decline in net course registrations by new students to APUS was largely driven by a 29% year-over-year decline in net course registrations by new students utilizing Federal Student Aid or FSA. This decline was partially offset by 2% year-over-year increase in net course registrations by new students utilizing cash and other sources. We believe that this change was a result of increased activity by students from our strategic and corporate partners. In addition, net course registrations by new students utilizing military tuition assistance or TA and veteran benefits or VA were approximately flat year-over-year. Our focus on academic quality and our progress in attracting students with greater college readiness is evidenced by the continued improvement and persistent for APUS. For the three months ending May 31, 2017 the most recent available information, a first course path and completion rate of undergraduate students using Federal Student Aid or FSA of US increased approximately 19% compared to the same period last year. We are pleased that many of the course and retention in this year we've…

Thank you Wallace. Going on to Slide 4. American Public Education's second quarter 2017 consolidated financial results include a 5.9% decline in revenue to $72.2 million, compared to $76.7 million in the prior year period. The decrease during the period is attributable to 7.5% decrease in revenue in our APEI segment, partially offset by 9.4% increase in revenue in our Hondros segment when compared to the prior year. In the second quarter, our APEI segment revenue decreased to $64.3 million compared to $69.5 million in the prior year period. Decline in APEI segment revenue is primarily attributable to a decrease in net course registrations. Hondros segment revenue increased to $7.9 million in the second quarter, compared to $7.2 million in the same period of 2016. The increase in Hondros segment revenue was primarily due to an increase in revenue per student that resulted from a change in program mix and the impact of the Toledo campus opening where new students are primarily first time students who are not eligible for the alumni achievement grant which is the equivalent of up to 6% of total tuition in the ADN program. On a consolidated basis, cost and expenses decreased 0.3% to $65.9 million compared to $66.1 million in the prior year period. For the second quarter, consolidated instructional costs and services expense or ICS as a percentage of revenue increased to 41.3% compared to 37.7% in the prior year. Our ICS expenses for the three months ended June 30, 2017, were $29.8 million representing an increase of 3.2% from $28.9 million for the three months ended June 30, 2016. The increase is a primarily result of increases in employee compensation expenses and classroom subscription services expense, partially offset by decreases in instructional material expense in our APEI segment, as well as increases…

[Operator Instructions] Your first question comes from the line of Corey Greendale from First Analysis. Your line is open.

Hi, good afternoon. First question just the last comment Rick about the $1 million in marketing expense. Can you help us the implications for that for modeling, does that suggest like you don't see traditional seasonal pattern so the dollars, marketing dollars are more like Q2 in Q3 or help us there.

Yes, Corey, the way I would look at that is, we typically report in a fairly tight quarter related to S&P as a percent of revenue. So I don't know which you are modeling currently but what we are saying at essentially $1 million to that we've decided up the spend because we see some traction in certain channels and so we are going to pressure test those to see what kind results we get.

Okay. And then just looking at kind of the different factors here particularly on the TA side. Does the reset of fiscal year, the government fiscal year, is that help or hurt or remains to be seen? So like Q2 -- is there a reason to think things are getting better in Q4?

Corey, this is Wallace. I think it just depends on how they allocate their budgets. We've had years where by August certain basis they've run out their allocation TA funds and so it increases the demand in October. We've had years where there have been plenty of funds, they are making announcement, people register through September and then they delay the allocation of funds in October. So delays are starts in October, so typically September and October are two most volatile and unpredictable months for TA but not so much for the other payer categories.

Okay. And one other modeling question which is given the enrollment guidance you provided to get to the revenue guidance, you need to assume pretty significant either even more significant increase in revenue per student at Hondros that we've been seeing or higher revenue per student at APUS. Can you just help with assumptions on that variable?

So, right so Corey that's going to come back to us reporting registration versus normalized registrations which is how we recognize revenue. And you see some variability when you are looking at the registration numbers versus the revenue. So for example, going from 1Q to 2Q and you just due to division on registrations, the revenue per registration went from 785 to 836. But on a normalized basis it went from 817 to 813. So I haven't extended that math out to the third quarter but likely what you are seeing is simply the impact of -- when I say the relationship between those two or the lack of relationship between those two. I wouldn't -- my point is I wouldn't to anything from it in terms of significant movement in revenue per registration, at APUS we are not seeing that.

You will see that in the first quarter of 2018 because of doctoral programs where we charge higher amount per credit hour. But you are not going to see it that we know of unless there are just some add change in mix of we are not aware of.

Well, so the mix change does affect it because there is a military grant back to these military students. So the non military rate is 6% higher or 8% higher than the military rate. So you've been studying our mix change over time, the mix change away from FSA to TA and VA would have the effect of reducing our revenue per registration over time on a normalized basis.

And I am showing no further questions at this time. I'd now like to turn the conference back to Mr. Chris Symanoskie for closing comments.

Great. Thank you. That will conclude our call for today. We wish to thank you for listening and for your interest in American Public Education. Have a great evening.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all now disconnect.