Q4 2020 Aspen Group Inc Earnings Call
[music].
Answers to questions.
Forward looking statements, which are subject to break various risks and uncertainties. These include statements relating to the expansion of the highest LTV programs revenue growth estimates and gionee trends timing of new campus openings and accounts receivable improvement expectation actual results may differ.
<unk> relief from the results predicted and reported results should not be considered as an indication future performance a discussion of risks and uncertainties related to Aspen business is contained in the prospectus subs.
And the 10-K filed with the security.
Mission in the press release issued this afternoon.
Been group disclaims any obligation to update any forward looking statements as a result future developments.
Also I'd like to remind you that during the course of this conference call. The company will discuss EBITDA adjusted EBITDA, which are non-GAAP financial measures.
Im talking about the company's performance reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release issued by the company today.
There will be a transcript of this conference call available for one year at the company's website. Please note that earnings slides are available on Aspen groups website, eight S.P. you dot com in the presentation page under company info now we'd like to turn the call over to Michael Matthews I've been groups Chairman and chief.
Executive Officer.
[music] good afternoon, everyone.
I will begin the call today by discussing how the company significantly improved this gross margin on a sequential and year over year basis, while maintaining our strong growth rate of 38% in Q4 and 44% for the full year.
Then I will recap our operating metrics from Q4 and provide an update on our business thus far in Q1.
I'm sure everyone is interested in uptake given the covert 19 crisis.
And the related uncertainty.
Finally, I will provide detailed regulatory and operational updates on our new plan campus openings later this year in Austin and Tampa.
As well as announced that Tele health partnership for U.S. use nurse practitioner program.
Frank in Toronto will then follow with a review of our financial results.
Okay, starting with slide five of our earnings slides.
Revenue for Q4 increased 12% sequentially by over 1.5 million to 14.1 million and on a year over year basis increased 3.9 million or 38%.
During our annual yearend audit, we did record a onetime revenue adjustment a 480000 in the quarter, which we will discuss in more detail later in the call.
For the full fiscal year revenue increased by 15 million to 49.1 million or 44%.
What did that major highlights for the quarter was the fact that our marketing spend only increased on a sequential basis by $200000.
Which translate into our marketing spend as a percentage of revenue dropping from 20% to 19% in Q4, and then for the full year marketing spend as a percentage of revenue dropped from 27% in fiscal year 2019, all the way down to 19% in fiscal year 20.
In addition, instructional cost as a percentage of revenue for the quarter dropped sequentially from 21% to 19% and for the full year remained at 20%.
Consequently, not only have have we seen improvement in our unit economic model as we've grown 44% year over year. In fact, we were able to drop 77% of the revenue increase this year to the gross profit line.
Which translated to a year over year gross margin improvement of 800 basis points.
From 51% to 59%.
In his prepared remarks, Frank will walk you through how this gross profit improvement together with GE in a spend decreasing as a percentage of revenue has led to impressive improvements to our bottom line.
One major highlights I'd like to mention though.
He is the fact that our EBITDA result for the year improved by 5.1 million on a revenue increase of 15 million.
Meaning that 34% other revenue increase this year flow to the EBITDA line.
There's two reasons for this outstanding gross margin improvement.
One we're focusing most of our marketing spend increases on our highest LTV degree programs.
Which is of course are Aspen, P.S. and pre licensure program in Phoenix, and our M.S.N. S&P program at U.S. Yoo.
These two businesses have now grown to 46% of total EG AIE revenues.
Second on slide seven we show that our cost of enrollment in Q4 at both universities compared to last year declined by double digits.
It's been dropped 10% from 14 20 to 1284.
And U.S. Yoo declined 12% from 1600 19 to 1423.
Given our weighted average cost of enrollment in Q4 declined 10% year over year from 14, 62, just 13 15.
That translate into our year over year marketing efficiency ratio armor, improving 38% asking university to 10.9 times.
And a 14% improvement at U.S. Yoo to 12.5 times.
Continue we're continuing with operating metrics for Q4 on slide eight.
Note that new student enrollments in the quarter increased 14% year over year to 1776.
Quarterly bookings increased 36% to 20 26.6 million.
And our average revenue per enrollment or ARPU increased 19% to 14973.
For the full year enrollments grew 32% year over year to 7668.
And our full year bookings increased 68% to 111.3 million.
By driving fiscal year, yeah fiscal year over year enrollment growth over 30% and bookings growth of nearly 70%.
We anticipate this to translate into a top line growth rate.
At least 30% or 63.8 million of revenue in this fiscal year 2021.
In terms of an update on the current quarter given the ongoing pandemic.
We indicated in our update last month that we saw a moderate slow down in our Aspen University post licensure online nursing degree program enrollments between mid March and April.
And that we saw a bounce back throughout the month of May.
We're pleased to report today that total enrollments were up year over year by over 40% in the months of May and June.
So we're working on an impressive enrollment results for Q1.
That said last July you May recall, we announced the termination of the 72 months' monthly payment plan for the M.S.N.F. and P. program at U.S. Yoo.
Now, we only offer a hybrid payment plan, where the F and piece to it in pace monthly for 24 months to satisfy the first year liability of $9000.
So now the second year liability of 18000 must be paid through a conventional payment methods.
When we announced that change last year and set an enrollment deadline of July 31st 2019.
For the legacy payment plan, we saw record flow of nearly 250 enrollments at U.S. Yoo in the month of July.
So that of course makes for a challenging year over year comparative of 1929 AG I enrollments last year in Q1.
But given our results in May and June we should safely deliver well over 2000 enrollments for the company this quarter.
This impressive bounce back since April begs the question of whether the covert 19 crisis has in fact provided a tailwind for our business.
And that does now appear to be the case for the following reasons.
If you're in our end than it's been in the front lines that has been asked to work 12 hour days for weeks on end.
You might allow yourself the thought of how nice it would be to become a nurse practitioner and work in a private practice and be able to set your own hours.
We've heard many a prospective students for our U.S.U.M.S.N.F. NP program tell us that this is a goal that they're now looking to achieve.
So as a result, our enrollment growth at U.S. Yoo has been on affected by covert 19, and arguably helped by it.
Second RBS and pre licensure program targets, primarily millennials.
Many of which live with their parents and weren't part time in the services industry.
This demographic was economically hit hard by the pandemic as service industries like restaurants in hotels for example, we're forced to implement broad layoffs and or furloughs.
Consequently, B S and pre licensure enrollments have remained robust in the Phoenix Metro as we've heard a number of these perspective students communicate that this is a good time to begin or continue their dream of becoming in Iran. As many are currently out of work.
So to recap our two highest LTV programs that as of Q4 now represent 46% of total revenue.
Both it felt a tailwind during this difficult time, so we feel fortunate to be one of the minority of companies. It is faring well during this health crisis.
Now for an update on our Phoenix pre licensure business and upcoming campus openings in Austin and Tampa.
In terms of Phoenix, we've received a number of questions from shareholders as to whether we've needed to slow down pre licensure enrollments in our Phoenix Metro given we now have over 1500 active students in the program as a fiscal year end.
The short answer is no.
We have no plans to slow down enrollments given at fiscal year end, we had.
We had approximately 400 active students enrolled in our final two year cornerstone program across both campuses.
With the remaining 1100 plus active students in the first year prerequisite phase of the three year program.
Remember that we offer six semester starts per year in both Phoenix campuses.
Or 12 semester starts per year in the metro.
Which still provides us with the ability to grow the final to your core program student body to approximately double the size of where it was as a fiscal year end.
To date, we have not had to wait wait list any students nor do we expect that to occur in this fiscal year 2021.
Additionally, we have leased in additional suite on the ground floor at our main campus facility in Phoenix by the airport.
To further expand our clinical space in anticipation of future pre licensure student body gross and to begin offering weekend immersions to our MSN SNP students at U.S. Yoo.
We expect this additional clinical facility in Phoenix to be open this coming in September.
Moving to our planned openings in Austin and Tampa.
As previously disclosed the regulatory process to open a nursing campus and a new state requires approval from the state boards of education and the state boards of nursing.
Cobot 19 slowed down the regulatory process slightly.
As we weren't able to obtain all approvals in each state by the end of May as we had planned.
In Texas, we have received approval from the Texas higher Education, Coordinating board and the Texas Workforce Commission.
But we're still awaiting approval with the board of nursing.
In Florida, we have approval from the board of nursing, but we're still awaiting approval from the state of Florida Commission for independent education.
Were confirmed to be on the agenda in late July for both of these regulatory bodies. So we're hopeful our approval process in both states will be wrapped up in the next three and a half weeks.
Now we have some good news in Texas to convey.
We struck a deal with National American University or any you.
The occupy approximately 7200 square feet of their campus in a suburb of Georgetown, Texas, which is approximately 10 miles north of aspens future frontier crossing campus in the suburb of round rock.
In exchange Aspen is sub tenant at no additional cost she'll have the right to utilize all of the existing furniture fixtures and equipment owned by any you.
And we will convey all such furniture fixtures and equipment to Aspen viability sale for $10.
As a result asked me University is no targeted to commence its first semester in September 2020, rather than our original plan start date of November.
And we plan to share the campus with any you until January 2021.
When any you will have completed the teach out of the remaining 12 nursing students.
Post January 2021, we will move all of our aspirin campus operations and student body to our new facility in round rock.
So in terms of estimated start dates Tampa is now scheduled to begin in November rather than our original plan of August.
And as I said Austin is now targeted to begin in September rather than our original plan of November.
Our internal revenue forecast for Tampa in Austin for this fiscal year remain the same range given one campus will open a few months earlier than planned and the other will open a few months later than planned.
Again. These plants start dates are contingent on our obtaining final approval and Gulf States, which you're anticipating will be completed at the ended the month.
Finally, we issued a press release earlier today announcing our clinical affiliation partnership with American advanced practice network or APN.
Hey, pianos, a national clinical network in advanced practice nurses that provides comprehensive health care and nursing services at an outpatient centers and clinical facilities throughout the U.S.
The services are delivered through APN care span integrated digital care platform or clinic in the in the cloud as they call it to provide in person and remote patient consultations.
This is a critical tele health partnership for the company.
Because our U.S. Yoo MSN S&P students can now complete their required in person clinical hours.
Within with APN throughout this cobot 19 crisis and thereafter.
And as a consequence, we anticipate a few if any delays in our students plan graduation dates.
Now I'll turn the call over to Frank to review our financial results for Q4. Thank you, Mike and good afternoon, everyone I'm going to begin by reviewing our financial results for the 2024th fourth fiscal quarter, and then make some observations on our financial progress.
To begin as Mike indicated revenue in the fourth quarter increased sequentially by 1.5 millions of $14.1 million.
Q2 in Q4 continue to be our strongest seasonal quarters, given those are aspens post licensure nursing plus other units stronger seasonal quarters.
This unit now represents 54% of the company's revenue.
The remaining 46% of revenues are from our U.S. Yoo subsidiary.
The MSN FNB program accounted for the vast majority of their revenue.
And our Aspen vs and pre licensure program today in Phoenix.
These are highest LPV businesses and today have not showing any seasonality.
These businesses delivered 1.2 million of the 1.5 million sequential growth this past quarter and without question are the main engines of our growth plans for future years.
In fact, we're forecasting these two businesses to account for over 50% of our revenue sometime in the second half of this fiscal year 2021.
Please note that during the company's standard yearend revenue testing procedures. We determined that are earned revenue report aspirin University burden, we wasn't reporting credits this user withdrawn students for certain diminimus technology needs.
Note that all invoices and credit issue to students were and are correct and their student ledgers were and are accurate. So this earned revenue reporting or has no effect on our student body.
For fiscal 2020, this incorrect earn be calculation amounted to $480000. Consequently revenue for the fourth fiscal quarter is 14.1 million rather than the Preannounced revenue estimate of 14.5 million.
Aspirin groups gross profit in the fourth quarter increased to 8.35 million for a 59% margin, which is up from 56% a year ago for an increase of 300 basis points.
Universities were responsible for this improvement.
Aston and U.S. used gross margin in the quarter was 60% and 63%.
Respectively.
As Mark as Mike indicated earlier, our gross profit for the year increased 11.5 million year over year, while revenue increased 15 million.
Getting 77% of fiscal year revenue increased drop to the gross profit.
As Mike said earlier. This also represents 34% of the revenue increase this year flowing through the EBITDA.
Marketing efficiency was the primary factor responsible for this impressive result.
Our full year marketing expense increased $400000 over the prior year.
While our revenue increased $15 million.
This is the best example, I can give to demonstrate the efficiency of our marketing expense.
As our business mix has changed shifting more focused or higher LTV programs.
Average cost to requires them to these higher LTV programs is inline with our historical average cost to acquire soon.
This marketing efficiency is what primarily responsible for fiscal year gross margin expansion of 800 basis points.
In the quarter total cost of revenue dropped from 42% to 39% to revenue.
Marketing as a percentage of revenue year over year decline from 27% to 19%.
Aspirin universities marketing costs represented 18% of Ashford university's revenue for the quarter, while us use marketing cost dropped down to only 16% of yours U.S revenue for the quarter.
Instructional cost and services as a percentage of revenue remained flat at 20%.
As for University in a structural cost in services represented 18% investment universities revenue for the quarter, while your shoes instructional cost and services equaled 21% of U.S. is revenue for the quarter.
The primary driver of a year over year growth in Gionee headcount and related expenses of 4.1 million.
Managing DNA expense growth continues to be a priority as we invest to support our revenue growth on our path to sustainable profitability.
Recurring gionee costs, which are GSK less nonrecurring items for the quarter, approximately 7.6 million compared to approximately 6.3 million during the comparable period, a year ago, an increase of 1.3 million or 21%.
Note that for the full year recurring gionee increased by 4.5 million or 30% year over year, well revenue increased 15 million were 44%.
Meaning a recurring gionee growth continues to track to 50% of revenue growth.
Moving forward, we expect the growth rate or recurring DNA expenses stayed at or below 50% of the rate of revenue growth, which will be a significant contributor to improving financial performance.
Net loss applicable to shareholders was approximately $700000 for diluted per share of three cents.
For the quarter as compared to a net loss of 1.6 million or nine cents per share for the comparable period, a year ago reduction in the loss of approximately $900000 for 56%.
Ashwin University generated approximately $1.9 million of net income for the quarter and U.S. you experienced net income of approximately $600000, while gionee well AG.
Corporate incurred 3.2 million of expenses on the quarter.
The company reported adjusted EBITDA of $1.4 million per quarter, Aspirin University delivered 3.1 million or 31% adjusted EBITDA margin highlighted by its pre licensure, maybe delivering $800000 or 36% adjusted EBITDA margin.
She was delivered $700000 or 17% adjusted EBITDA margin in the quarter.
With regard to our liquidity position has been group ended the quarter was approximately 17.9 million in cash unrestricted cash.
10 million a year ago.
This was driven by net inflows were financing of 17 million, partially offset by cash used from operations and investing activities of approximately 9 million.
Stepping back from the specific numbers for the fourth quarter led to discuss our focus as a company on our accounts receivable and working capital.
Total accounts receivable medical allowances $21 million increase in total way our reflects our strong revenue growth of 44% combined with certain students paying using the MVP program at both Aspen and USA.
During the fourth quarter, we carefully evaluated our long term MVP accounts receivable and made the decision to write off all pre 2018 MPP receivable for non nursing students.
Based on our review of accounts receivable overall revenue growth trends and changes in our mix of business, we evaluated our reserve methodology and increased our reserve for Aspen by $720000 and by $60000 for US you also in the fourth quarter of 2020.
Note that the bad debt allowance balance started the year at 1.25 million and ended the year at 1.75.
On a going forward basis as you know our two highest lifetime value programs are aspens vs and pre licensure and U.S. Yoo MSN family nurse practitioner programs.
These programs, our fastest growing programs and now represent 46% of fourth quarter revenue and 40% of total revenue for the fiscal year.
We expect the revenue from these programs to continue to grow as a percentage of our total revenue as we continue to expand our campus footprint from two to 10 plus campuses over the next three to four years.
This change our business mix will have a meaningful change in our accounts receivable and our allowance for doubtful accounts.
The vs and pre licensure program and the second academic year of the MSM family nurse practitioner program required payment prior to the start of each term.
This means that later this fiscal year approximately 90% of all revenue from these two programs will be paid in advance.
Meaningfully, reducing our accounts receivable and the allowance for doubtful accounts as a percentage of our total revenue.
As revenue from these programs continued to grow as a percentage of overall revenue, we will see a corresponding increase in our cash flow from operations that will allow AG to turn cash flow positive and generate positive free cash flow over time.
In summary, we saw a reduction of our net income loss year over year of approximately 3.6 million and our cash used from operations improved year over year from 10.2 million in 2019 to 5.7 million in 2020.
Foreign improvement or 4.5 million.
We expect that our year over year pace of improvement to continue or potentially accelerate this fiscal year and look forward to providing our shareholders updates as this fiscal year unfolds.
This concludes our prepared remarks, I'll now turn the call back to the operator for questions.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your touched on telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound key our first question comes from the line up there enough to eat from Roth Capital Partners. Your question. Please.
Hey, guys. Thanks for taking my questions I hope, you're well I'm sure if I may.
First.
So the marketing spend.
The revenue dramatically.
The decrease year on year.
Who knows to that show inefficiency in the operating leverage I'm, just kind of curious if we give us thoughts.
We gave his thoughts on revenue, but thoughts on kind of marketing spend as a percentage of revenue in 2021 and.
And then my second question just high level.
No.
Cobot, making the ability to kind of track companies a lot more difficult office in the tailwind because you're sort of an online business first.
Mike I'm curious with this clinic in the cloud and care.
Stand partnership.
Does that make you rethink the number of private pretty license or campuses, you would need long term and whether you'd want to actually own the technology like this longer term and is there a kind of a cost benefit analysis that goes with that thanks.
Thanks, Darren it's Mike Matthews.
So what I would say to you is that you know we.
We're pleasantly you know.
We're pleasantly surprised at our ability to reduce our our lead costs throughout the year as well as you know the cost of enrollment for our pre licensure program. Those are two of the main variables or components that allowed us to only spent 19%.
Marketing or $400000 increase year over year.
And obviously achieve a 15 million dollar revenue increase so so that that that percentage at 19%.
It's not something we anticipate maintaining that amazing results.
We are going into a couple new metro markets. This year of course.
And so.
We don't expect it to cost for enrollment is going to be as low as it's been in Phoenix.
So I would say to you that we'll probably end up in kind of in the in between.
Percentage wise, a year ago fiscal year 19 were at 27%. This year course, 19%, we'll probably end up somewhere in the middle.
In that range, so low low 20 low to mid Twentys.
In the second question you asked is an interesting one I mean.
You, obviously, none of US know how long this pandemic is going to last and I think all nursing schools across the country, both nonprofits as well as the for profit community.
Have been really pleasantly surprised by how.
Flexible the boards of nursing event in the states that we work in allowing us to do all of our Clinicals and simulation activities virtually.
This is this is a critical partnership for US just to repeat what we said in our earnings remarks.
There is theres a requirement for nurse practitioners to have a certain minimum number of hours that are done.
In person.
And the Tele health partnership is considered to be partly it's considered to be an in person.
Clinical so.
That that was that there was a major major component for us to ensure that RF and piece students don't have graduation delays and if theres. A graduation delay of course, we would have a revenue delay and because of this partnership we look to be in good shape.
There's no question that everything's changed from.
From a an.
And online education perspective that all universities, both for profit a nonprofit.
Our looking to the long term for how do we create a scenario where.
We can maintain 100% online curriculum for all programs and so yes, we would absolutely look at potential.
Opportunities for not just partnership it potentially acquisitions.
In some of these software fields and some of these services fields.
On a go forward basis, so you're anticipating something that we're actually thinking about yes.
Great. Thanks, guys good job.
Thank you. Our next question comes on line of Arc.
Sorry, Eric marked Oh I see from.
Lake Street your question please.
Yes.
I wanted to find out little bit more about the the revenue issue.
Just wanted to make sure we've kind of got it ring fenced here to fiscal Twentytwenty.
First of all it just a fiscal 2020 issue and that is there a potential issue here with.
Internal controls that we need to be prepared for when the K comes out.
Yes, no problem in fact, we did file the K this half hour so.
So yes, so you know as we as we mentioned our earnings remarks in in the press release.
I want to start first start off by saying that approximately a year ago. We began the process of completely restructuring, our finance and accounting Department.
Now headed by Frank and trying to yours are great CFO.
And quite honestly, the fact that they caught this these diminimus credits and technology fees.
During our you know our annual.
No revenue sampling process.
Let me incredible comfort that if they can find something this small.
That theres nothing more significant beyond that so.
You know we absolutely caught caught this reporting air that was in our accounting system.
It's fixed we don't anticipate any issues going forward.
And.
From a Q1 perspective.
We there should be approximately a 300000 dollar other expense number that will that will hit us in Q1, and net and at that.
Okay. It was just contained within fiscal 21 say it caught it before.
We've put the cake together.
Exactly yes.
Okay, All right and then you talked about the coming year, a comfort level with 63 point 63.8 million in revenues for fiscal 21.
Given the the wavy.
Enrollments were impacted by.
By co bid.
Because I know the enrollments were pretty steady for you as you and for.
Pre licensure BSN, but.
How is the seasonality of the are impacted I understand your comfort with the fiscal year revenue estimate 63.8, but how is it.
Quarter by quarter that it might have been otherwise.
Yeah now that's a great question I appreciate that Eric So the company because now 46% of our revenues are with the FMT program of U.S. Yoo and of course the.
The pre licensure business in Phoenix.
Those two businesses are not seasonal at all they're structured programs, where unless you do a leave of absence you have to continue honored from term to term and semester to semester. So.
As you guys Im sure well know Q1, historically, particularly in the last two fiscal years has been relatively flat.
We do not anticipate our revenues in Q1 to be flat as a consequence of these two programs to becoming a much bigger part of our overall business and the fact that.
We were very surprised and pleasantly surprised that our enrollments in the last two months the months of May and June are up over 40% year over year. So that will help our revenue as well in Q1, we're not giving guidance for.
For Q1, we typically only provide guidance on revenue on a year over year basis, which we just did.
But we do not anticipate the revenue to be flat as we have in the past two years. So that's the good news.
I understand thanks for taking my questions.
Thank you Eric.
Thank you. Our next question comes from the line of Germany Hamblin from Craig Hallum. Your question. Please.
Thanks, guys and congrats on the momentum in the business.
I wanted to just come back to understanding how them models transforming here from a margin perspective.
And reconcile the commentary around your sales and marketing costs.
With your adjusted EBITDA numbers so.
I think you noted that by the second half of this year.
Your pre licensure program, plus FSP is going to be more than 50% of all enrollment for the back half.
It looks like your margins.
Our.
Thirtys.
Since your program and high teens.
The S&P side of your program.
In terms of putting that together to think about the picture of how this transform it seems that.
Acceleration on margin should continue.
Building momentum.
21.
If youre kind of suggesting you're marketing and promotional I think you said it was going to be in the.
Kind of 20, 20% to 23% range.
In terms of how we should think about modeling.
Can you just provide help me reconcile those two items a little bit.
Yes, so I mean, yes, we mentioned earlier in the queue in a that we're looking at our marketing as a percentage of revenue to be in the low twentys. This year.
So.
Tell me weeks in your question again.
Yeah, just in terms of putting together the the EBITDA margins you yeah around your pre licensure and S&P programs.
Pre licensure and the mid Thirtys.
EBITDA margin U.S. you in the high teens.
Seem to imply I'm, assuming you're instructional costs kind of stay in that 20% range, but it would seem to imply.
Maybe more operating leverage.
On profitability then.
And would be underlying.
Twentys is there just something else I'm missing.
Either.
On your marketing investment that you're making or is it just that you'll see maybe even more leverage on gionee.
Then the 900 basis points are so that you've got.
In 2000 fiscal 2000.
Well I mean, we're not really prepared to give fiscal year guidance on EBITDA, but I would say that you know as you can see we had a pretty significant improvement year over year of our EBITDA result of just over 5 million dollar improvement year over year and at the end of the day.
You know our EBITDA loss was relatively narrow so there's no question, we're going to turn EBITDA positive for the full year.
And bad this at this point, we're not prepared to give you know exact you know guidance in terms of how much EBITDA will produce.
We've definitely turned the corner and as Frank mentioned, our recurring DNA is expected to continue to be.
At half the rate of of revenue growth. So those things combined again will take us into a positive EBITDA for the full year.
And.
We're hopeful to produce positive net income late this fiscal year.
Okay. That's helpful. Let me then just ask a question about the.
Some of the partnerships you had.
This new deal in Phoenix to to lease them, some new space, what does that give you in terms of capacity.
Potential for that for your program here.
21 in terms of just the numbers that you could potentially have enrolled.
In those two campuses.
Well today today, we have approximately 400 students in our final to your core program across both both campuses and what I was implying that my earnings remarks earlier is that we have capacity currently to.
Pretty pretty comfortably double the size of our core program over the next couple of years.
That would make from an incredibly large program obviously in a given metro if we end up with round about 800 core core students.
If you run the math on that that that implies you know round about.
North of $15 million just in one metro.
So I would say that at this point you know, we're comfortable indicating that a we're prepared to grow. The you know the core side of the of the of that Metro to 800, plus and then overtime.
We'll give you guys updates as we.
As we make decisions on what the ultimate growth of the of that particular metro will be.
Okay, great. Thanks for the color guys. Good luck.
Thank you.
Thank you. Our next question comes from a line of Austin multi <unk> from Canaccord. Your question. Please.
Hi, Thanks for your questions.
I wanted to ask about the runway you have left on cost per enrollment continuing to go down on the on a like for like basis can can you go through some of the factors that can can continue to keep those rates low and.
Maybe some potential factors that would push that up.
Yes, sure a good afternoon Austin so.
At the end of the day the most critical factor for US is to a number one have enough publishers.
That have enough inventory for us to purchase at at a relatively you know acceptable cost per clicks for us.
So so that you know so so it's it's how many publishers do we have what's their inventory what's the cost per click and then of course ultimately once they hit our landing page what becomes our at our weighted average cost per lead.
So those are all the variables that go into cost of and run then of course, the most critical piece wants to lead hits, our call Center and hits, our CRM, what's our conversion rate on all of our leads and historically, it's it's grown into that 12% range and it remains in that range.
So what would what would make that cost of enrollment go up or down a one would be of course, we're moving into new Metro's this year moving into Austin in Tampa and again, it's to be determined what the cost per lead for that's going to be.
We're going to use the same media approach that we've used historically, where we use both internet advertising in a metro as well as radio to augment.
So so yes, so it would basically be are ultimately our cost per lead and ultimately.
You know the the you know the number of different markets that we go into and whether that makes our weighted average overall goes up or down based on how we how we do and our new markets.
That's helpful. Thanks.
Are you finding.
Because of the pandemic and advertisers and other industries pulling back that you're actually experiencing.
More attractive.
Ctcs or anything like that.
No not really I mean, where we compete in a very kind of narrow niche right. So primarily looking we have two targets right we have.
Students that are today registered nurses or of course and the pre less licensure side. These are prospective students that are looking to complete a BSN in order to take the bank likes to becoming our and so.
We we are we really haven't seen much of a change in our cost per lead.
Throughout these the covert 19 pandemic.
But we you know we did see for about a six week period, a slowdown in enrollments simply because our friends were obviously terribly preoccupied during that especially during that first six week period from mid March through the end of April.
Got it and my last question is on.
Partnerships, but on the other side on the inbound side can you give an update on where some of those hospital system partnership sarin and how they are contributing to your enrollments.
Hey, sorry, Austin, you're talking about our current locations in Phoenix framing our new markets.
Current locations.
Yeah, I mean, we so we continue to work with all of our major players.
On our health banner Health Maricopa integrated health system.
And you know their courses Ben during the pandemic.
All of our students have have gone on line, they're all virtual for their simulation and clinical activities does that answer the question.
I was kind of curious about.
What the volume as all of those partnerships I mean are the nurses that are part of those hospital systems you know after the pandemic.
Coming to you more frequently.
Through through that channel rather than through the radio tier landing page et cetera.
No I wouldn't say so.
No I mean to again, we haven't we haven't seen a slowdown in prospective demand for our pre licensure program and you.
You know, we we have sort of if you look at it we have basically three major lead channels, we have internet advertising, we have radio and we have our partners and we're pretty consistently driving enrollments in all three areas and there hasn't been during the pandemic there hasn't been one channel that's been sort of straw stronger.
A weaker than the others.
Got it thanks very much for answering the questions. Thanks Austin.
Thank you. Our next question comes from line of Lee Cooperman from will make a family your question. Please.
Hi, I'm you may not want to answer the question I'm curious on the 30% revenue.
Increase the you're projecting for the current fiscal year would you expect your margins to rise or fall and do you expect to generate free cash flow in between the Kishore you generate into a current balance sheet cash.
Do you feel comfortable that you could basically avoid any additional financing.
[noise] yeah, good afternoon, Mr. create berman.
For for first things first we expect our gross margins to remain in that kind of high Fiftys range as it was this year.
We are as I mentioned indicated earlier, we have an internal target of and we're very hopeful that will move to net income positive late this fiscal year, which would also allow us to become free cash flow positive.
So that's our target.
And Ah, yes so.
Oh, the rest speaks for itself congratulate you, having a very fine job. Thank you.
Thank you Sir.
Thank you. Our next question comes from wind up Micron del from Northland Capital. Your question. Please.
Thanks, Michael on for Mike Grondahl.
Most of ours been answered, but maybe just quickly on the new partnership.
Is there any.
Capacity constraints for like the number.
For student or is it pretty much as many of you have come through that program. It's good to go.
Yeah, I mean, so we don't have any capacity constraints at this point with our nurse practitioner program.
We have an office a field experience that.
Places these nurse practitioners into their clinicals.
And that departments getting bad gotten big we built it to over a dozen people now and that's all they do for Libbeys insurer. These these great nurse nursing students are placed just in time into their clinicals and as a consequence of this tele health partnership we announced this morning, it's going to make our lives quite a bit.
As year to ensure that those clinicals are available and we can continue growing without any clinical capacity constraints.
Got to that's helpful.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to management for any further remarks.
Thank you everyone FERC coming today, we appreciate your time and look forward to speaking with you next next earnings call. Thank you very much of a good afternoon.
Thank you, ladies and gentlemen, if your participation in todays conference. This does conclude the program you may now disconnect good day.
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