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American Public Education, Inc. (NASDAQ:APEI)

Q4 2008 Earnings Call

March 10, 2009 5:00 pm ET

Executives

Christopher L. Symanoskie – Director, Investor Relations

Wallace E. Boston Jr. – Chief Executive Officer

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

Analysts

Jeff Lee - Signal Hill

Jerry Herman - Stifel Nicolaus & Company, Inc.

Kelly Flynn - Credit Suisse

Brandon Dobell - William Blair & Company, LLC

Corey Greendale - First Analysis Corp.

James Bradshaw - Bares Capital Management

James Maher - Thinkequity LLC

Jeffrey Silber - BMO Capital Markets

[Arial Secol] – Wedbush

[Mark Skitos – Erastica]

Operator

Good day ladies and gentlemen and welcome to the fourth quarter 2008 American Public Education, Incorporated earnings conference call. My name is [Luisa] and I’ll be your operator for today. (Operator Instructions)

I would now like to turn the call over to Mr. Chris Symanoskie, Director of Investor Relations. Please proceed.

Christopher L. Symanoskie

Thank you operator. Good evening everyone and welcome to American Public Education’s fourth quarter 2008 earnings release conference call and webcast. Before we begin please note that an electronic copy of the power point presentation that accompanies this conference call is available on the webcast section of our Investor Relations website and is included as an exhibit to our current report on Form 8-K 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 may be identified by words such as anticipate; believe; could; estimate; expect; intend; may; would; should; will; and could.

These forward-looking statements include without limitation statements about the first quarter and the full year 2009 outlook and statements regarding expected growth. 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, also filed with the SEC today. 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.

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

Wallace E. Boston Jr.

Thanks Chris. I’m pleased to report strong results for the fourth quarter and the full year of 2008. This success and our future growth are bolstered by the new accreditations and candidacy we received as a result of our unyielding focus on quality.

If we go to Slide 3, for example in 2008 our School of Business became a candidate for accreditation by the Association of Collegiate Business Schools and Programs, the leading accrediting body for business schools. The Foundation of Higher Education, an organization dedicated to the Emergency Management and Homeland Security profession, granted our Emergency and Disaster Management Programs specialty accreditation. And lastly our Child and Family Development Program received the Certified Family Life Educator Preparation Designation from the National Council on Family Relations.

Additionally we received approval in December to be a Liberal Arts Degree granting institution by the Higher Learning Commission. This formal approval was triggered by the passage of the Higher Education Opportunity Act in August. For profit institutions were given an opportunity to receive Liberal Arts Degree status by their accrediting body as long as they did so before December 31 of 2008. This means that institutions who received approval would be able to offer new Liberal Arts Degrees under Title IV effective July 1, 2010.

Our performance this year was also driven by better than expected growth in the military. This success was reinforced by our acceptance into the Navy College Program Distance Learning partnership. I’m proud to say that our participation in this program has been very effective at expanding our presence in the Navy. Going forward we see additional opportunities to address the unique needs of Navy students as well as service members from other branches.

We have been recognized by the military’s education community as being uniquely suited to address the higher education needs of service members. This year AMU was listed in Military Advanced Education’s Top 20 list of military friendly universities. MAE is a publication and popular resource that links soldiers, sailors, airmen and Marines and their families with military friendly colleges and universities.

While institutional recognition is important, it is equally important to note that many of our management team and faculty are widely known as experts in their fields. For instance, our Vice President of Military Programs, Jim [Sweezer] was elected President of the Council of Colleges and Military Educators. This is a very influential organization with an important mission of helping service members achieve their higher education goals.

These accreditations and forms of recognition are an important part of our increasing influence and success in civilian and military markets. We are truly proud of these accomplishments. Not only are they good goals, but they are an outward sign of our commitment to academic quality and customer service.

Part of this commitment is also illustrated by continuing to enhance our current offerings and launch new programs. Last year we launched Masters of Education Degrees in Administration and Supervision, Guidance and Counseling, and Teaching. We now offer seven concentrations in teaching and a Post Baccalaureate Teacher Preparation Certificate. We also expanded our Associates Degrees offerings from one general studies AA degree to 19 stand alone AA and AS degrees and launched a new Bachelor of Science and Criminal Justice Forensics Degree.

Our plan is to launch several new degree programs and/or specializations each year. During this time of economic recession we see a more immediate opportunity to launch certain new undergraduate and master’s degrees. We believe that Ph.D. programs may be viewed as more of a luxury at this time. Therefore we are temporarily turning our attention towards the launch of undergraduate and master’s degrees to address current market demand. As economic conditions improve, we will seek approval for and launch our doctorate programs, most likely late in the year 2010.

If we flip to Slide 4, being student focused is what ultimately led to our tremendous growth in registrations this year. We now serve over 45,200 students, an increase of 50% over the prior year. Net course registrations for new students increased 49% and net course registrations increased 55% to 147,120 registrations. If you recall we started the year 2008 with an outlook that indicated we expected to achieve net course registrations from new students of 36% or more and net course registrations of 44% or more. So we’re pleased to improve that.

I’m also pleased to report that we achieved our growth targets in the civilian market and exceeded our targets in the military market. Our outperformance in the military caused our actual 2008 registrations to be higher than originally expected and enabled us to increase our outlook during the year.

If we move to Slide 5, while the number of active duty service members using tuition assistance has recently grown between 1 and 5% per year, military leadership has identified online education as uniquely able to address the needs of soldiers. The number of active duty service members using tuition assistance attending online schools increased to 64% in 2008 according to the Council of Colleges and Military Educators. We believe that the percentage of active duty military attending online institutions should continue to increase over the next three years.

In addition, military officials suggested that they believe the overall tuition assistance participation rate will increase as they increase higher education promotional activities within the services. We also see emerging opportunities to address the needs of military spouses and their dependants.

Our referral rate, brand awareness, existing marketing channels, military relationships and programs are already in place to support these opportunities. We expect to benefit from our success and the Navy College Program Distance Learning partnership to continue. In addition to gaining access to Navy military bases and visibility on Navy education websites, we are working with the Navy to develop programs and technologies to address the education needs of service members’ onboard ships. This could further expand the Navy market opportunity for us.

We may see some benefit from a net return of troops from active combat zones as more service members may pursue higher education upon their return to a more normal military life. Despite the high level of active engagement we have over 3,000 students studying in Iraq and Afghanistan. In 2008 we increased our share of the military market from 10% to 12%. We have increased our ranking within each branch of the military.

We now rank number one overall in course registrations. We believe that we can continue to increase our market share and rankings over the next several years. We can do this by continuing our close relationship and dialog with key influencers in the military, by understanding the unique needs of service members, and by delivering a high quality product. Due to our affordability, an active duty service member using the DOD’s tuition assistance program can get a complete undergraduate degree from APUS with minimal out of pocket expense.

If we go to Slide 6, built to succeed in civilian markets, we will continue to increase our focus on the civilian market because of the strong demand for affordable, regionally accredited degrees; our expanding track record with civilians; and our improved knowledge of the marketplace. The message of affordability is resonating with civilians in our target markets. The number of APUS registrations from students using federal student aid or Title IV has increased 101% year-over-year. We enjoyed strong civilian growth in nearly all of our degree programs.

Not only are we strong in the area of Public Safety; National and Homeland Security; and Disaster Management; but we have had very strong growth in other fields such as Psychology; Sports and Health Science; Business and History. Net course registration in all of these segments enjoyed strong growth in the civilian market.

Moving on to Slide 7, we believe that our Liberal Arts programs set us apart from many of our online peers who occasionally de-emphasize the importance of a liberal arts education. We are among the very few online providers that offer degree programs in history, English, political science and other liberal arts subjects. The diverse array of program offerings makes us unique in the online marketplace. Today we have 74 degree programs and 7 schools within AMU and APU and we plan to continue developing new programs as we grow.

The growth in our new School of Education has been proceeding as planned, but I want to make certain investors understand that the ramp up may be slower than some may expect due to the fact that we are launching our marketing efforts first with the geographic focus on Maryland, Virginia and West Virginia. Our efforts have begun and we’ve been developing relationships with key influencers in this area; we’ve been developing a solid track record and referral base; and now we’re going to be expanding outward geographically. This strategy is consistent with our overall relationship approach to advertising and marketing.

Additionally, the admissions requirements to our degree programs in the School of Education include a writing sample; character references; resume; and documentation of experience in addition to other program requirements. This also causes the initial ramp up to be a bit slower than other new degree programs. We continue to be excited about our ability to build out a higher quality education program and a strong referral base with reasonable student acquisition costs.

We continue to expect our targeted approach to advertising that relies heavily on relationship marketing, building referrals and targeted advertising. In 2008 we determined that for the most part lead aggregators do not present a cost effective means for lead generation in our business model. Going forward we plan to focus more of our resources on multi-media advertising campaigns that demonstrate the best return on investment. Our high referral rates also keep the cost of our advertising low relative to the advertising costs of our peers.

We are not a high pressure sales organization, meaning our enrollment advisers take a non-aggressive, consultant approach to enrolling students. They are focused on understanding a student’s needs and learning about their aspirations in order to advise them on the best courses and programs to achieve their goals.

Our referral rate increased in 2008 and is currently over 50%. In addition, our retention rate increased by approximately 0.4%. These improvements speak volumes about our high quality in student satisfaction. We continue to publish our outcome assessments on our website. We are very transparent. We measure our quality against that of many traditional schools. Our seniors continue to test above the national norms on the MAPP tests at the Measurement of Academic Proficiency and Progress, and those tests are administered by ATS. In fact, we really see our competition as being primarily public colleges and universities. Our customer satisfaction surveys indicate that we are doing a great job at addressing our students’ needs.

If we move on to Slide 8, we have volumes of data that support our claims of academic quality and customer satisfaction. The National Survey of Student Engagement at the Student Satisfaction Study with over 800 participating schools, and is administered by the Indiana University Center for Post Secondary Research. This past year’s survey which we participated in indicated that 70% of our students who responded would rate their entire APUS experience as excellent, the highest category offered by the survey question. 75% of respondents also stated that definitely yes they would choose APUS if they had to start their degree again. Strong survey results like these are a tremendous asset and a strong statement about the value of our programs.

If we turn to Slide 9, while we enjoyed strong growth in civilian markets during the year 2008, our better than expected performance in the military market resulted in little change in the mix between civilian versus military students. Today 68% of our students are active duty military; 14% of our students are military affiliated meaning that they’re either civilians who are veterans or National Guard or Reserves; and 18% of our students are civilian with no military affiliation. Approximately 65% of our revenues are derived from tuition assistance and Veterans benefits. About 14% of our revenues are associated with Title IV loans. Approximately 20% of our revenues are from students that use cash and other sources and about 1% of our revenues are related to private loans.

Moving on to Slide 10, other recent successes include the completion of two successful follow on offerings where ABS Capital, one of our early private equity backers, was the primarily selling shareholder and no longer owns shares at American Public Education. Two of our board members are ABS Capital executives and they have been asked to stay on as independent board members.

I’m also excited to welcome Tim Landon to our board of directors. As a former president of Tribune Interactive Inc., Tim brings with him a wealth of experience in and knowledge of interactive media, advertising strategy, technology and operations. We look forward to utilizing his experience and to working with him to guide our institution to fulfill its mission of educating those who serve.

Finally, I am pleased to announce that APEI is now Sarbanes-Oxley compliant. Lastly, to help execute our strategies for expanding in civilian and military markets in 2009, we will focus on increasing student retention; upgrading our information technology systems to allow for tiered pricing; launch new programs; and prepare to enter new market segments. Strong market demand combined with our high quality and affordability give us great confidence that we can achieve our long term, top line growth rate goals over the next 12 to 18 months.

I will now turn the call over to our CFO, Harry Wilkins, for additional details regarding our strong performance this quarter and our outlook for 2009. Harry.

Harry T. Wilkins

Thanks Wally. If you look at Slide 11 you can see that our financial performance in 2008 was marked by a strong top line growth, operating margin improvement and a strong balance sheet with no long term debt. Today we are introducing our first quarter and full year guidance for 2009 and our earnings outlook is consistent with our stated long term goals.

If you look at Slide 12 and now on Slide 13 you can see that we increased our net core registrations by 55% which drove an increase in total revenues of 55%. We did not raise tuition prices during the year and we currently have no plans to increase tuition in 2009. Our registrations and revenues were ahead of expectations as a result of outperformance in the military market and achieving our civilian market targets.

Look at Slide 14 and you can see that in 2008 our operating margins expanded from 21.3% in ’07 to 24% in ’08 as a result of strong revenue growth and leverage of our G&A expenses, as well as some temporary improvements in instructional costs and services and our anticipated increase in selling promotional expenses offset some of our operating margin improvements due to our expanding efforts to promote education degrees and to expand the APU brand. Our ICS costs improved in the fourth quarter due to better utilization of our full time faculty and our salaried faculty. Our selling promotion cost expense during the quarter increased to about 12.6% of revenue. That was a little lower than expected, primarily because revenues were actually higher and advertising expenses – the actual cost of advertising came down in the fourth quarter.

We believe that selling promotion will be approximately 12 to 13% of revenue in the first quarter of ’09 and then we can expect selling promotional expenses to level off to about 12% of revenue for the remaining quarters of 2009. Looking at G&A in the fourth quarter of 2008, G&A expenses decreased as a percentage of revenue to 18.5% compared to 21.5% for the same period of 2007. This reflects the expected leverage we got from higher revenues and the fixed cost included in G&A.

Please note regarding interest income, however, that interest income decreased year-over-year as a percentage of revenue and we expect this trend to continue, despite a significantly larger cash balance. We’ve gotten very conservative. We’re more concerned about return of principal than return on principal. Our board of directors has requested that we keep our cash in more conservative investments and while the broader economy faces such economic uncertainty. We expect our cash to be held in low risk, low interest investments through all of 2009.

If you look at Slide 15, as a result of our net course registrations and revenues beginning to normalize, at a growth rate that’s in the high 30’s to 40% we should begin to see some seasonality in our business. In the past this seasonality has been masked by our extremely high growth rates. Both the civilian and military students tend to seek entry into higher education and to take more classes during the fall and winter than in the summer. We hope that this knowledge will enhance our investors understanding of our seasonality and quarterly guidance.

Look at Slide 16. Given our strong top line growth and slower expense growth our operating income increased 75% in 2008. We are pleased with this outcome, especially as we view our business as being in more of a growth mode.

Turning to Slide 17, looking at our balance sheet in short we are in a very strong financial position right now. We have increased our cash and cash equivalents by $20.7 million during the year to $47.7 million at the end of 2008. We currently have no long term debt. Our capital expenditures were about $10 million. We also had $4.2 million in depreciation and amortization expense in 2008.

Turning to Slide 18, today we introduced our first quarter and full year guidance for ’09. In the first quarter of ’09 we expect growth in net course registrations from new students and net course registrations growth of approximately 40%. We expect the growth in net course registrations from new students, by the way, represents an acceleration of our growth rate over the same period of 2008. We reported 34% in net course registrations from new students in 2008 versus our expectations of 40% growth in 2009.

We expect revenues of between $31.8 and $32.5 million which represents an increase of between 37 and 40% over the same period in 2008. Net income is expected to be between $4.6 and $4.8 million which is an increase of between 35 to 41% over the same period of ’08. In the first quarter of ’09 we expect earnings per share to be between $0.24 and $0.26 per diluted share and that’s based on approximately 19 million shares outstanding.

Turning to Slide 19 for our full year guidance we expect growth in net course registrations from new students of 38% or more and net course registrations overall of 38% or more. Note again that the expected growth rate in net course registrations from new students is higher than our original full year 2008 guidance, which was 36% at the time we introduced it. And we’re introducing guidance at 38% this year. In 2009 we expect total revenues of between $146 million and $150 million which represent an increase of between 36 and 40%.

One thing that is changing is in 2009 we plan to combine our increasingly popular one credit lab courses with their related three credit classes. As our Science classes, many of them are three credit courses and we offer one credit lab. In the past we’ve treated them as two different registrations. So currently our students take a lab and an associated class and it would be counted as two registrations. These labs were launched at the end of 2007 and at the start they weren’t that significant but they’re becoming increasingly popular. We had about 5,000 of these courses last year. By combining these labs and the associated classes into one four credit course means a student that is currently taking one class of lab will be counted in the future as one registration as opposed to two registrations now. This impact will impact the number of course registrations but it will not impact at all revenue or enrollment – overall student enrollment.

Moving forward, we believe that EBIT will increase by between $36.2 to $37 million which is an increase of 41 to 44%. This suggests a slight improvement in our operating margins in 2009. We expect net income to increase between 37 and 41% to between $22.2 million and $22.8 million for 2009. Remember our net income guidance reflects lower than expected interest income and a full year tax rate of about 41% versus 39% in 2008. If you recall, when we went public in the fourth quarter of 2007 we had conservatively estimated our effective tax rate. We adjusted that in the first quarter of 2008 if you recall and that resulted in 2008 having a 39% effective tax rate. We’re looking at a 41% effective tax rate and we’re guiding to that going forward.

Our expected EPS range therefore is between $1.16 and $1.20 per share for the full year of ’09. Depreciation and amortization expense is expected to be between $5.3 and $5.5 million. And CapEx is expected to be $8 to $10 million. Now having said that, there’s a strong possibility that we may have an opportunity to either purchase and/or build a facility in Charles Town in the next 18 to 24 months. That could add up to $10 million of CapEx if we choose to do that. But we’re looking at that possibility now. We need the room for expansion. We need about 10 to 12,000 extra square feet every year.

If you look at Slide 20 in closing we feel confident in our ability to grow. We’re expanding the civilian market. We’re increasing our military share. As Wally previously stated we’re going to launch new programs and prepare to enter new market segments. We continue with our unique and targeted approach to advertising as we grow, keeping our S&P costs low. And our primary focus will be on quality and affordability and increasing access to more and more students.

Now we’d like to take questions from the audience. Chris, do you want to open it up for questions?

Christopher L. Symanoskie

Operator, at this time could you please open the lines for questions?

Question-and-Answer Session

Operator

Sure. (Operator Instructions) Your first question comes from Jeff Lee - Signal Hill.

Jeff Lee - Signal Hill

Instructional costs were down pretty strongly in the quarter. Did the trends from last quarter where you said that your normal full time faculty spent time teaching classes and then you used less adjunct faculty, did that contribute to this quarter also?

Wallace E. Boston Jr.

It does. That’s exactly right.

Harry T. Wilkins

They take a lot of vacations in the traditional summer months and so we have part of the third quarter and the fourth quarter where they’re catching up on their assigned number of students for the year.

Jeff Lee - Signal Hill

So that’s part of the leverage that we saw in the December quarter?

Wallace E. Boston Jr.

It is and I wouldn’t anticipate that in the early quarters of ’09.

Jeff Lee - Signal Hill

And then can you elaborate a little bit on your geographic marketing strategy for the education programs? I mean, does this mean that you don’t have students from outside those states that you mentioned?

Wallace E. Boston Jr.

Oh no. We actually have a number of students from outside those states, but we get a number of questions at investor conferences as to what our strategies are. And as in any program we’re building it up to build the relationships. But just to give you one example, one of our first students in the education degree programs was a teacher in New Jersey and he happened to tell his sister who was in St. Louis about it. And so we enrolled the sister in St. Louis and then ended up enrolling several teachers in the same school system that the sister in St. Louis was in.

So we’re only focusing on our immediate mid-Atlantic market as far as going to the county and state Teacher’s Associations and having conferences and meetings. And we just have added another person in the field to cover those conferences, but as we continue to grow and get students in some of the other states we will add people in probably the larger geography markets like the state of Florida or the state of Texas or the state of California.

Jeff Lee - Signal Hill

And then just to clarify on the one credit lab courses, did you say that contributed 5,000 new course registrations during 2008?

Harry T. Wilkins

Yes. It may sound confusing, but the lab courses we launched in 2007 as our Science degrees became more popular. They’re the typical lab courses you probably took when you were in college. They are one credit courses. We charge $250 per credit but the way we were set up we treated them as a class, so they counted as a net course registration and it wasn’t really material but as they’re getting more and more popular.

So in 2008 of our 147,000 registrations about 5,000 of them were labs. So because they’re getting so popular we are going to combine them with the three credit course that they’re associated with and beginning sometime in the second quarter or perhaps the third quarter of this year we’re going to launch four credit courses which combine the two. There’s no impact on the enrollment of number of students that are enrolled. There’s no impact on revenue. But it does impact the way we report registrations in the future.

Operator

Your next question comes from Jerry Herman - Stifel Nicolaus & Company, Inc.

Jerry Herman - Stifel Nicolaus & Company, Inc.

I’ve got a couple of volume questions including the follow up to that one that was just discussed. Was it 5,000 labs or was it 5,000 the combination of course and labs? In other words, was it more like 2,500?

Harry T. Wilkins

It was the registration of labs. A little over 5,000 labs.

Jerry Herman - Stifel Nicolaus & Company, Inc.

Just labs. Okay. Okay.

Wallace E. Boston Jr.

That would be students taking a lab.

Jerry Herman - Stifel Nicolaus & Company, Inc.

And then with regard to your volume outlook, registrations, can you talk a little bit or give a little bit more color Wally on the military versus the civilian? I mean the great growth in actually both sides last year, but maybe frame some growth on both sides?

Wallace E. Boston Jr.

Jerry, I mean, essentially we grew our FSA 101% for the year which not all of that is civilian. There are some military students who take advantage of the program, but you know that was a great growth rate on a smaller base. And then we grew our military population. I think we had given guidance at the beginning of the year roughly in the mid-30s and you know we grew it significantly north of that. So that actually, because it was on a higher base even though it wasn’t like the 101% in the FSA market, it did keep our mix relatively the same.

Jerry Herman - Stifel Nicolaus & Company, Inc.

So proportionately those percentages should maybe stay about the same this year versus last?

Wallace E. Boston Jr.

I think they’re almost exactly the same. Just totally coincidentally. I don’t believe it – we may have been at 67% versus 68. Chris is giving me the number. It really hasn’t changed that much.

Jerry Herman - Stifel Nicolaus & Company, Inc.

I meant about ’09 actually.

Wallace E. Boston Jr.

Oh, in ’09. Yes, we expect the civilian population to continue to grow and to be a large portion of our growth going forward. We haven’t broken it out specifically in our guidance but we continue to grow within the military and in our civilian population. We’re hitting our targets and we’re very comfortable with the registration growth that we just outlined overall.

Jerry Herman - Stifel Nicolaus & Company, Inc.

Is there any way you guys could –

Wallace E. Boston Jr.

We’re also finding we can do it without spending you know too much more in marketing which was a big question. And we really experienced strong civilian growth and keeping our marketing costs about 12% of revenue.

Jerry Herman - Stifel Nicolaus & Company, Inc.

Is there any way you guys can quantify the impact of the or the impact or productivity of the new programs, either the number of programs introduced in the last two years that yielded X percentage of students or something to that effect?

Harry T. Wilkins

Well, we could decide whether we do that. We’d obviously do that probably on a future earnings call, but you know off the top of my head we look at different – familiar with how we do this relationship marketing, we start out slow until we build up a nucleus of students and then sort of once you get a good nucleus of students it starts getting at the much higher growth rate which has been typical of our strategy all along.

Historically we haven’t given out specific enrollments by programs purposely. We have some very unique programs and we actually don’t want our competition to know what programs – how popular they are. But our new – for instance our IT programs which we launched in late 2007 have been extremely popular. But then and again some of our history programs have become increasingly popular. So it’s the variety of programs. We have 74 programs online and that’s a lot more than most of our competition. But we like to not really announce specifically which programs are doing what in because we think that gives an advantage to our competitors.

Jerry Herman - Stifel Nicolaus & Company, Inc.

Wally, you perked my ears up when you said the infrastructure to allow tiered pricing. I guess the question is you know the longer term pricing strategy and then I guess as part of that are you guys hearing anything new on the increases in tuition assistance for the military?

Wallace E. Boston Jr.

I’ll answer the first part. We said that we have no intentions to increase our tuition in 2009. And at the same time we’ve said that we will always keep an eye on what happens with DOD. At the CCME conference that we attended in January, we did hear a speaker there say that the DOD was analyzing changing tuition assistance rate. Before it was sort of behind the scenes discussions and now someone said they’re analyzing it. So we’ll see. But we’ve not built an increase into our projections for this year. You know, we haven’t had an increase at the undergraduate level in our tuition since 2000 and we’re just not planning on it. So to the extent that happens that may be great but it’s not in these numbers.

And at the graduate level what we’ve said is that our computer system had been set up way, way back to model one rate for grad degrees and one rate for undergrad degrees. And as we’ve become regionally accredited and grown as an institution we’ve realized that most schools price their graduate degrees by the program. So if you take a school like Columbia University, for example, their Sociology Master’s Degree’s going to be priced a lot differently than their MBA degree, than their Masters Degree in Education. And so we wanted to have our computer system set up to be able to do that at the Masters level.

And meanwhile our marketing department while the computer department’s working on that in 2009, the marketing department’s looking to see if there may be markets where actually our pricing may hurt us from the impression of the quality of the program. So that said, there is no plan for a graduate tuition increase but there is plans to study the issue at the graduate level and there are plans to make sure that we’re capable of being able to do that should we decide to do so later in the year.

Harry T. Wilkins

Yes, I mean it’s ironic, Jerry, I’ve been in this business a long time, but we’re in a unique position and we’re starting to get pressure to raise our tuition as opposed to most of the other competition is being pressured to lower theirs.

Operator

Your next question comes from Kelly Flynn - Credit Suisse.

Kelly Flynn - Credit Suisse

A couple questions, first on retention. Can you speak to what’s been going on with that and whether or not you know it’s been negatively impacted by the economy, which I doubt, but just any color on that. And then also kind of revenue per registration, if you will. The guidance range I guess contemplates revenue being – growing slower than registrations. Is there any implication there for students taking courses at a slower pace or anything else that would be moving that line item? Thanks.

Harry T. Wilkins

Yes, I’ll answer the question about the revenue per student. Again the increase in popularity of our lab courses, they’re only $250 per course. It’s a one credit course. We didn’t even have any in the beginning of 2007. We had an insignificant amount in 2007. In 2008 they became very popular. Now there’s about 5,000 of them. So I think that could be impacting the average revenue per student if you’re using our net registration as a base.

The other thing is the mix has changed a little bit. We’re finding and not just with us but throughout the industry that the percentage of students who are taking graduate courses has actually come down a little bit. We had 26% of our students were in the graduate program in 2007. It’s down to about 24% in 2008. So while civilians seem to be taking the same number of graduate courses but the military seems to be taking fewer graduate courses. And I don’t know if that’s a long term trend or just a short term trend. But I think the combination of the mix change with the graduate students and then the popularity of these lab courses that are only $250 a course, I think those two things combined to lower our average revenue per student.

As far as retention goes, Wally gave the retention number. It increased slightly during the year. But our retention remains about the same or a little bit better than it’s ever been. We certainly have had no negative impact on retention as a result of the economy. And again the affordability of our tuition and the fact that about two-thirds of our students have their tuition fully funded by the federal government would tend to make us less impacted by that in most schools.

Wallace E. Boston Jr.

Yes, I would add on the retention issue that we disclosed that we went up 40 basis points. And any open enrollment institution from community colleges to any of the for profits that are open enrollment will have first year degradation. So we measure that number based upon the first year rate and it went up 40 basis points over last year while we had an incredible year growth wise. So I would say we did a great job.

Kelly Flynn - Credit Suisse

Just following up from the first one on the revenue per students, why do you think the military students are mix shifting away from grad courses?

Harry T. Wilkins

I’m not saying they’re – what’s happening is the graduates aren’t growing as fast as the undergrads. We’ve had dramatic growth in the military enrollment. But most of that growth has been at the undergraduate level. There seems to be a lot more interest in the enlisted soldiers taking courses than percentage increase in the officers. Our number of students has increased but not as great a percentage as at the undergraduate level if you follow. So the growth that we experienced, the mix is more towards the undergraduate level.

Wallace E. Boston Jr.

And I think that sort of mirrors what we’re seeing nationwide with Title IV numbers, too. So it’s not just a trend with us, but it’s a trend outside of our institution.

Kelly Flynn - Credit Suisse

And then finally, can you talk about what incremental benefits if any your guidance assumes for the GI Bill, return of troops and any other – the potential positives that you’ve mentioned?

Wallace E. Boston Jr.

We’ve not built anything into our guidance for either one of those. I think the new GI Bill first of all isn’t effective until August 1 and that assumes that all of the procedures can be put in place to manage the program, because it’s quite a different change. We’re pleased that the service members are able to gain access to this program, but I think it’s going to be a challenge managing it initially.

What we like about the program, though, is that it offers the service member the ability to transfer the benefit to their spouse or their dependent. And from our perspective it could very well influence utilization of tuition assistance. But since the program is not available until August the first, we just can’t make any forecast based on it so we’ve not included that in any of our guidance. And I would say that because the spouse and dependent transfer requires so many years of service and I don’t remember the exact number of years specifically, but if it leads to ten years of service I think, that it may be a while after August 1 before anyone whether it’s us or anyone else that serves that market sees some of the impact of that.

Operator

Your next question comes from Brandon Dobell - William Blair & Company, LLC

Brandon Dobell - William Blair & Company, LLC

Going back to one of your comments, I think it was Wally, about the increasing participation of tuition assistance in the military, maybe some color behind kind of your confidence around that assumption or what do you see from a policy perspective? Or just within your own student base that suggests that you’re going to get those trends to continue at a pace that they’ve continued historically. Or [should] an acceleration? Just trying to get some color around that issue.

Wallace E. Boston Jr.

Well, I mean, you’ve got BRAC which continues to consolidate military bases. For example, Maryland’s going to be – Maryland and Virginia are going to benefit from some BRAC closings. And whenever the military members are moved, whether it’s moved due to deployments in war time or moved due to base closure or just moved because it’s time in their career to move, online has become a much more recognized and accepted form of education. And one of their biggest issues is convenience as well as the transfer of credits. And if they don’t have to switch institutions they’re more able to get the degree that they want. They can do it via distance and they don’t have to risk losing credits when they transfer.

So we think that trend’s going to continue and we believe that that’s the feeling of those who participate in military voluntary education.

Brandon Dobell - William Blair & Company, LLC

From a education and promotion perspective, anything that’s changed? You know, are there more levels in the military that require a higher degree or is there a bigger push in the military to have more either graduate education or bachelor’s degrees for particular pay grades? Or is it just the same thing as usual? It’s just now more people realize they need to have that degree to – it’s better than to not go that extra –

Wallace E. Boston Jr.

I think if you look at the military’s objectives with the 21st Century Soldier, it’s a more technology oriented military and the training, whether it’s with fighter jets, airplanes, drones, technical equipment, the soldiers and sailors and airmen really need to have an ability to think on their feet more and embracing institutions that provide that level of education and training at those secondary levels is pretty important.

So it’s been a push. I think there have been some recruiting disappointments due to the length of time that we’ve been engaged in Iraq with the number of high school graduates and above who have come into the military. Obviously if there’s a pullback they should theoretically be able to bring a higher educated recruit. And they think they’re going to continue to push higher education because it really benefits their ability to fight a war technologically induced conflict.

Brandon Dobell - William Blair & Company, LLC

To that point, I think I saw some stats that the mix of new recruits was kind of more in favor of those with less education. So even those kids without a high school diploma than have been in recent years just given a lot of factors. A, is that the case? And B, do you think that a mixed shift away from people without high school diplomas, does that impact what you think is the addressable market for you guys? Because those students would have to get a GED or something before they can enroll with you guys. Or does it not make that much difference for you?

Wallace E. Boston Jr.

I think if you look at the same literature that I’ve seen, that impact was primarily in the Army. The Marines say they haven’t been impacted at all in their recruiting; that they still are able to get high school graduates. The Army has actually implemented a very successful GED program at a base in South Carolina. I can’t for sure tell you what the name is, but they’ve got some good publicity on just taking recruits that need a GED, sending them to that base and getting them the GED in a specific amount of time.

But I think with our economy that a stable job in the military is going to be a good thing. And we’re not seeing President Obama proposing reducing the military size. In fact, I believe his speech said he was going to increase the military slightly. So if you look at good job opportunities, there’s probably people who have high school degrees that say, “Gee, this is a better opportunity than what I have outside and plus they’ll pay for my college degree.” So I expect that trend that we only saw in the Army to probably change with the economy and with the pullback in Iraq.

Brandon Dobell - William Blair & Company, LLC

Final question for you, Wally, in terms of the timing of the Ph.D. program, not if this going to be a big impact to registrations this year and next, but I guess I want to get a better feel for the thought process behind delaying the rollout. Is it more of just kind of a gut feel based on is it kind of anecdotal evidence? Or did you do some real market research and figure out that people are just going to push back on the higher priced programs? I guess I want to see kind of how confident are you that it’s the right decision and not just going to be reaction to the overall affordability issue.

Wallace E. Boston Jr.

Sure. You know, we took a look at some of the data that was out there and Eduventures publishes some good data looking at students in online degree programs. And it’s everybody’s online degree programs, the for profits, the nonprofits, and in their year end 2008 report they reported that about 28% of all online students were in master’s degrees and only about 3% of students were in doctoral programs.

And so when we were looking at the trends that we were seeing with greater enrollments in undergraduate programs and we currently don’t have the doctoral programs, we felt that it was much more important for this year to focus.

Since we were only planning on launching two doctoral degrees, and the economy was down, and our perception was that the cost of a doctoral degree and the fact that you had to have a masters degree to go into that market that from our perspective we thought we’d be much better off for meeting the needs of our students and potential students to focus on masters degrees and undergraduate degrees. But at the same time we are still committed to becoming a doctoral degree granting institution. We just think that growing at the rates that we’re growing that we’d rather not have distractions and we’d rather focus on the things that have gotten us to where we are now.

Brandon Dobell - William Blair & Company, LLC

And final question for you, Harry, I just want to make sure on this lab registration issue, when you guys report the first quarter number will that have the like the one credit lab separate or will it be combined into that four credit registration number?

Harry T. Wilkins

Yes, it’s about 3% of our registration. And we’re going to start reporting that number separately because it has become a big number. And we will start reporting that in 2009 as a separate number. Until we combine it, somewhere in the second of third quarter we’re going to combine the labs with the three credit course and get a four credit course.

Operator

Your next question comes from Corey Greendale - First Analysis Corp.

Corey Greendale - First Analysis Corp.

A couple questions on the cost actually. I think, Harry I don’t want to misquote you, but I think last quarter you’d said that the benefit to gross margin from the better faculty – full time faculty utilization wasn’t going to recur and it looks like it did. So can you just speak to that and do you think that can continue to be a source of margin improvement in ’09?

Harry T. Wilkins

As a matter of fact, one of the things is ICS – we call ICS, Instructional Costs and Services, it isn’t all just faculty either. A portion of that cost which is fixed and that’s for things like the registrar’s office, student services, student advisors, and that portion is more like a step function. It doesn’t increase as variably with a new student and extra new students wouldn’t increase our costs in that. But it does increase each year. So we can get some margin improvement from - and the fixed portion of our ICS cost is about 15 to 20% of the total cost. But with the faculty we really won’t get much margin improvement with our faculty costs I don’t believe in 2009. So I don’t know if that answers your question, but that’s where we are.

Corey Greendale - First Analysis Corp.

And Wally can you just elaborate? I think you said something about deciding not to go with lead aggregators next year and using the multi-media campaigns that are most effective. Can you just elaborate on what you mean by that and what the shift is?

Wallace E. Boston Jr.

Well, you know, we have piloted – I mean lead aggregation works for some institutions models, but based upon our own research and utilization in several significant pilots in 2008, we felt that the cost to obtain a student didn’t work for us given the fact that our tuition is in some cases half of what some of the people who usually aggregators charge. So we are committed to lower and affordable tuition. We think as part of our mission we think we do well, and it makes us attractive to the student segments that we serve.

And based on that, since we couldn’t get any better cost perspective on lead aggregation than what the other for profits were getting, so we said, “You know what? This is a model that we’ll go back. We’ve tried it and we’ll go back and continue to use Internet marketing as a supplement to our referral base marketing.” And that’s what we’re going to do.

When we say multi-media, I mean we do have in selected areas, we do have some radio and we do have some TV. But those are in high military public service concentration areas. And we do have some print advertising for brand awareness. But the next largest segment after the 50 some percent that come through referrals are the like roughly 32% that come through Internet marketing and we’ll continue to focus on doing that ourselves and not outsourcing it and not having somebody else do it and charge us a lot of money for a low return.

Corey Greendale - First Analysis Corp.

My last question was just when you talk about emphasizing bachelors and masters programs this year, I know you said you don’t want to get too specific for competitive reasons, but are you looking at anything resembling the education degrees where you’d go into a new vertical? Or is it more new specializations within existing areas?

Wallace E. Boston Jr.

I really can’t get that specific, so stay tuned.

Operator

Your next question comes from James Bradshaw - Bares Capital Management.

James Bradshaw - Bares Capital Management

My questions have to do with kind of pushing forward the expenses from ’09 to ’10 with the Ph.D. program and do you kind of have a number for that? And then also would you kind of reallocate that towards the new programs that you talked about?

Harry T. Wilkins

Yes. Our program development costs for the most part are capitalized. And we are going to launch those Ph.D. programs although we’re not going to spend as much time early in 2009 working on them as we thought. So to the extent we incur costs and that, they will be capitalized and expensed when we launch the programs. You know, between three and seven years is how we’ve amortized our academic offerings as everybody else in the industry does. So there won’t really be much of an impact.

If there is an impact actually it would be a little bit higher cost because some of the faculty that are going to work on that are now going to be teaching courses instead of working on developing the new programs. So there won’t be any significant costs one way or the other in 2009 as a result of postponing that.

Operator

Your next question comes from James Maher - Thinkequity LLC.

James Maher - Thinkequity LLC

I think you’ve hit most of my questions at this point. I was wondering if you could elaborate perhaps on your referral rate, specifically within the civilian portion, the American Public University. I know you’ve talked before about how they tend to take more classes. And what I’m really getting at is being able to preserve your 12% of revenue on selling and promotional activity. Are you seeing trends in the civilian portion of the student base that suggests that your referral rates are within that or as strong as in the military, or at least trending up?

Wallace E. Boston Jr.

We don’t break out our referral rate between the civilians and the military but we can track it. Our referral rate for 2008 was 55% overall, so that was up from 54% last year. But what we have said is that as you might be able to imagine, that’s an overall average and the military referral rate is higher than that average. And the civilian referral rate is a little lower. But we do have a focus on doing referral based marketing, so we work really, really hard as in the education market in setting up our program to build referrals because we think that’s the best way to keep our tuition affordable over the long run.

Harry T. Wilkins

Yes, and last year as we said we grew our Title IV students who are mostly civilian, we grew them by 101%. And we spent less than 12% of revenue on marketing. So we really do believe we can continue to expand our civilian market and do the advertising we need to drive our growth in that market and keep our advertising costs around 12, maybe 13% in certain quarters, of revenue.

Operator

Your next question comes from Jeffrey Silber - BMO Capital Markets.

Jeffrey Silber - BMO Capital Markets

Wally, in your prepared remarks you talked about the competitive environment in terms of your competition being mostly traditional schools. Given what’s going on in the economy these days, I was wondering if you can just comment on what’s happening from a competitive landscape perspective. Are you seeing those folks shying away from this market because it’s a lower priced product for them? If you can just give us a thought, I’d appreciate it.

Wallace E. Boston Jr.

Well, I think there are some traditional schools that focus on the military markets, so we haven’t seen any of them shying away. But if you look at the literature with what’s going on with real estate taxes and income taxes in many states, and how that’s translating into pressures at state universities - there’s a great blog out there that if you haven’t seen it yet, Jeff, called New Realities in Education where a professor emeritus of the University of Illinois basically does an email every day with national news from some state or the other where basically colleges – public institutions for the most part are being forced to cut their costs.

I saw one yesterday where the president of the University of Nevada or the chancellor there said that even if he closed his dental school and his law school and cut off all the athletic teams, he still wouldn’t be able to hit the number that the governor has asked him to hit. But I think there’s a little bit of a fight between the governor and the chancellor there. But nonetheless these schools are under a lot of pressure, but now’s the wrong time because they’ve already got students enrolled for the spring semester.

I think where we’re going to see pressure, some schools are just – community colleges for example are probably going to fill up and for every additional student they take that requires a subsidy from the state. And if their subsidies have been capped, you’re going to see pressures on students to go elsewhere, to go to affordable options and that should happen in the fall. It really shouldn’t happen right now because they’re already enrolled. So we’re observing the overall market for signs of weakness and we’d like to position ourselves to be an affordable online option should students not be able to afford their other options.

Jeffrey Silber - BMO Capital Markets

I don’t have the slides in front of me, so forgive me if this is on there, but did you give guidance for stock-based compensation for 2009?

Wallace E. Boston Jr.

I think we did in the release.

Harry T. Wilkins

We did give guidance for stock-based compensation for the full year of $2.2 million. That’s pretax. And for the first quarter it was $525 thousand.

Operator

Your next question comes from [Arial Secol] – Wedbush.

Arial Secol – Wedbush

I just was curious to find out how starts trended throughout the quarter. Was it in a typically seasonal fashion? And the reason why I’m asking I’m trying to determine if there was an uplift as the economy deteriorated, either with the military or civilian segment.

Wallace E. Boston Jr.

Yes. We are seasonal. For some reason February doesn’t seem to be a month when a lot of new students like to take classes. So yes, it was kind of back end weighted in the quarter, our new student growth. I don’t have any idea if that’s related to the economy or what, but we’ve experienced that in previous years, too. Seems like new students are okay in January, for some reason February is not a popular month to start taking classes but then in March we had good new student growth again. So there was some fluctuation in the quarter. And that’s why we threw that chart in there about the seasonality of our growth.

Arial Secol – Wedbush

And to the extent though that the military students are concerned with obviously challenging economy, just to what extent do you think that would benefit enrollments between now and the rest of 2009?

Wallace E. Boston Jr.

One good thing about our company is it really isn’t impacted as much as other businesses by the economy because two-thirds of our students are getting their tuition costs, including books, fully paid for already. So you’re right. I think people getting out of the military are more concerned about their career choices and those are the students we seem to do a very good job of serving. I don’t think that’s going to be less of an interest. I think that’s another reason why more and more people in the military are opting to take advantage of tuition assistance.

But I don’t think there’s any trends that would hurt us. Any trends like that would be positive for us. But we really are pretty steady, both in good time and in bad times because of the fact that two-thirds of our students are in the military. And that really hasn’t changed as a result of the economy all that much.

Arial Secol – Wedbush

With respect to the civilian students, could you just elaborate or comment on what kind of interest level was being given by those seeking potentially education degrees or others?

Harry T. Wilkins

We did see an increase in our student growth in 2008. Our education degrees ramped up from nothing to I think our slide shows 1% of our overall enrollments. And we’re seeing increased activity as we continue to basically roll them out through referral efforts, and getting people through the paperwork process since if you’re going to certify people for degrees there’s a lot of information you have to collect, including some test results which we don’t traditionally do. But you know that’s just one part of our civilian sector. We’ve seen increased activity in masters degrees in history, for example. We’ve seen increased activity in sports management degrees and a number of other degrees in our sector like Homeland Security.

I think the 101% increase in FSA is a pretty good indicator, although I did say that not 100% of those students are civilians. There are some military folks in there but we continue to see interest in our APU brand as we continue to spend additional marketing dollars just on the branding portion of that.

Christopher L. Symanoskie

Operator, we have time for one more question.

Operator

Sure. Your next question comes from [Mark Skitos – Erastica]

Mark Skitos – Erastica

Specifically on the military, your rankings that you announced with the Army and Navy, I’m just curious what these rankings imply in terms of your penetration of each branch’s total active personnel and how that’s trended on a year-over-year basis?

Wallace E. Boston Jr.

We didn’t give them in terms of total active personnel because that’s not the way they were given to us. So at the CCME conference, DOD coordinated with each of the branches so that for the first time they gave their list of top ten or top 20 schools. And they gave it in terms of tuition as well as enrollments which are registrations. So we know what we are in terms of registrations. As far as what was paid in tuition assistance for the students who use tuition assistance, but we don’t know what it is based upon active duty personnel overall.

Mark Skitos – Erastica

Do you have a hunch as to the sort of the progress you’ve made? I mean I don’t need specific numbers but just generally speaking, within the Army are you sort of at a level where you shouldn’t expect to see much more penetration there? Or I mean is there market share gains that you see more so in Navy? I mean, can you speak to maybe both those branches?

Wallace E. Boston Jr.

Well, I think what we’ve said is we think that we can continue to grow as long as online enrollments are growing inside the military. The Navy gave us it’s biggest opportunity. A year ago we were not even on the top ten list inside the Navy. We really weren’t sure where we were market share, so we’ve gone from not being in the top ten to being number four or five. I don’t have the sheet in front of me. We expect to see continued improvement in the Navy.

We actually – you know, the Army was number one for us prior to the Iraq invasion in 2003. But the Army is the largest in terms of the number of soldiers. So if there’s a net pullback from Iraq because there are some soldiers that are going to Afghanistan, but if there’s a net pullback we expect that there’ll be more soldiers from the Army enrolling in college. So we expect to see an increase there as well. So you know we don’t – we’re not shy about this. We don’t foresee not continuing to grow in the military. We just don’t want to give out specific market share numbers.

Harry T. Wilkins

It seems like the bigger we get the more referrals we get. So remember our referral percentage in the military is much higher than the 55% overall referral rate.

Mark Skitos – Erastica

On the DOD tuition assistance topic, I’m just curious what’s sort of the driving force behind this? You know, the increase itself? And where is the push back and what type of Congressional support does this potentially have?

Wallace E. Boston Jr.

Well, we don’t work for DOD so I can’t – I can only give you speculation, but I guess the good news was last summer we heard whispers that they were considering it, and then at this conference in January we heard they were looking at it. I think the push is that there hasn’t been an increase since roughly ’99 or 2000 as far as the rate per credit hour. There was an increase I think back in 2002 from 75% reimbursement to 100% reimbursement, but the rates had not changed prior to that.

I think traditional schools, if you look at most higher education institutions their tuition increases have exceeded the CPI year after year, and this coming year particularly with the public institutions it’s going to exceed the CPI big time. And so they’re asking and the DOD is considering.

But I think that the push back on the other side, which is why we haven’t built anything into our plans, is that there are an awful lot of community colleges out there whose tuition is still reasonable, even with some of the increases that they have to put through due to the state tax decreases. So I would at the end of the day, who knows? I mean, they may decide to do something and they may not but all the numbers that we’ve given you we’ve not built anything into that assumption. We’re just doing our job of fully disclosing that someone actually gave a speech and talked about it. So rather than waiting for somebody to call us, we’ll announce it.

Harry T. Wilkins

And there is some pressure there because of the large increase in education benefits for veterans, the new GI Bill. So those education benefits greatly increased but only if you get out of the military. So the people that work for the Department of Defense want you to stay in the military. So if they’re increasing the benefits for people who get out, they pretty much logically ought to increase the benefits for people who opt to stay in. And that’s where I think a lot of groundswell is coming from also. But again we don’t know of anything that’s in the hopper at this point.

Mark Skitos – Erastica

Relating to the seasonality commentary, I’m just curious. Is it – does that imply a higher concentration of net registrations in Q4 this year versus last?

Wallace E. Boston Jr.

Well, I don’t know about versus but what it implies is that we’ve always had seasonality. It’s been masked by our high growth rate, but yes we definitely have a much more percentage of our business is done in the fourth quarter. And it’s more traditional, I guess. As we get more and more civilians, I think our enrollment trends are going to become more and more traditional which means a lot of students in the fall, a lot sign up. New Year’s resolutions in January but maybe not as many in the second and third quarter.

Mark Skitos – Erastica

But this quarter you had roughly 28 – it looks like about 28% or so in the fourth quarter, net registration. I’m just curious. Is that – what you’re saying is you don’t necessarily expect to see that climb in all? It likely could stay flat or around that range.

Wallace E. Boston Jr.

I think our registrations will be weighted more toward the first and fourth quarters in ’09 and as other schools are. I mean we’re not – it’s certainly not unique to us. It’s pretty consistent in the industry. The only thing that’s a little unique to us is the VA funding. The VA funding, it seems like the students – the federal government’s fiscal year ends September 30 and a lot of students want to make sure they take advantage of those funds so they’ll sign up for a lot of classes in September if they haven’t used their full allotment yet. And so usually within the military that works that way.

Christopher L. Symanoskie

Well, that will conclude our conference call for today. We appreciate the great questions and thank you for your interest in American Public Education. Have a great evening.

Operator

Thank you for your participation in today’s conference. This now concludes the presentation. You may now disconnect and have a great day.

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Source: American Public Education, Inc. Q4 2008 Earnings Call Transcript
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