Q3 2021 Aspen Group Inc Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue the standby. Thank you for your patience.
[music].
Yeah.
Okay.
Good afternoon, welcome to act in the fifth.
Full year 2021 third quarter earnings call. Please note that the company's remarks made during this call, including answers to questions and put forward looking statements, which are subject to various risks and uncertainties. These include statements relating to the anticipated impact on the pre licensure unit, how long of the implement.
Asian of double cohort in the main Phoenix campus and the expansion of the pre licensure program in new Mexico, including future revenue growth and operational scale.
The launch date of the initial core program semester in Nashville.
The timing and geography of further campus expansion of course starts and revenue growth forecast for the fourth fiscal quarter of 2021, our expectations regarding future court start behavior expected operating losses of new campuses and the expected time they will achieve.
The profitability expected increase in gross margin in future quarters revenue estimates on trend G&A trend are estimates concerning bookings LTV, Merck and <unk> are estimates concerning and experience with our accounts receivable our expectations regarding the EPS.
Loss and adjusted EBITDA loss in the fourth fiscal quarter and our liquidity.
Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance.
The discussion of risks and uncertainties related to Aspen group's business is contained in its filings with the securities and Exchange Commission, including the form 10-K for the fiscal year ended April 32020, and the prospectus supplement dated August 31, 2020 and in the press release issued this app.
Afternoon, Aspen group disclaims any obligation to update any forward looking statements as a result of future developments.
Also I'd like to remind you that during the course of this conference call. The company will discuss adjusted net income loss and adjusted EPS loss per share EBITDA and adjusted EBITDA, which are non-GAAP financial measures in talking about the company's performance.
The reconciliation to the most directly comparable GAAP financial measures are provided in the table in the press release issued and the form 10-Q filed by the company today.
There will be a transcript of this conference call available for one year at the Companys website. Please note that the earnings slides are available on Aspen group's website <unk> dot com in the presentations page under company Info now I will turn the call over to Michael Mathews Aspen group's chairman.
And Chief Executive Officer.
Good afternoon today, we delivered a revenue increase of 33% year over year.
In line with our guidance previously shared on our last earnings call.
The bookings increased 24% year over year, we ended the quarter with nursing students, making up 87% of our total active student body up from 84% in the prior year period.
While we delivered strong enrollment growth in every unit of the company the primary growth driver in the quarter with the Aspen University's nursing <unk> other unit led by our doctoral programs.
The United States University or Usu also saw outstanding enrollment growth in the quarter with of 43% increase year over year, primarily from MSN family nurse practitioner or F N P and rents.
Aspen pre licensure BSN unit, our highest LTV nursing licensure degree program.
The benefit from several favorable macro trends as the.
The students are primarily millennials looking to enter the rapidly growing nursing profession.
Demand in Phoenix has exceeded our expectations.
Because we do not want to have a large waiting list. We made a conscious decision of tempur enrolment growth for first year prerequisite students at our Phoenix pre licensure campuses.
Which have a full pipeline of first year students.
This moderated the units enrollment growth in the quarter to 15%.
Looking into the second half of the calendar year. There are two factors that will have a positive impact on the pre licensure unit.
One is the implementation of double cohort at our main Phoenix campus to meet demand for our pre licensure program.
As of the February 2021 semester start Aspen University implemented its first double cohort enrollment.
Given the two cohorts entered the core BSN pre licensure program at the main campus.
And another cohort entered the program at the honor health campus that equates to an increase of over 70% from the prior year period for the Phoenix Metro core program.
Let me provide further detail on the impact of double cohorts.
Aspen University of six semesters start dates per annum at both campuses in Arizona.
With the introduction of double cohorts at its main campus in Phoenix. The University is now on track to annually start over 500 students and an annual rate of approximately $20000 in the final two year core program, which is up 67% from the prior run rate for.
Both students and revenue.
This excludes revenues from over 1500 first year online prerequisite students that are currently enrolled.
The double cohorts for the core BSN pre licensure program in the Phoenix Metro and the subsequent impact on our revenue stream for this profitable high LTV degree program demonstrates the potential scale of our model.
The second factor is the expansion of the pre licensure program of new Metros.
In the second half of 2020, we launched new pre licensure programs in Austin and Tampa.
Whereas we did with both of our Phoenix campuses, we experienced startup operating losses as the campus has opened.
As enrollment in these two programs grows we will see the double benefit of higher revenue growth and operational scale.
The most recent expansion in our pre licensure program is the launch of Nashville, Tennessee, where we began marketing the first year of prerequisite students earlier this month.
We're targeting to begin our initial core program semester in Nashville in August 2021, and clinical partnership with North Northwest Medical Center Trust Point Hospital, and Nashville General Hospital.
Following the Nashville open we will have successfully launched five locations in four states since mid 2018.
Aspen group's strategic roadmap targets, having 12 operational BSN pre licensure locations throughout the western and southern United States by 2025.
The majority of Aspen University's pre licensure students are part time or full time, working adults and we strive to cater to their needs.
We offer the majority of our BSN pre licensure program curriculum online.
Gather with an on campus applied learning component, that's offered with both day and night weekend program options.
Which differs from traditional on campus five days of week day program format.
In addition to affordable tuition and flexible payment options the ability to work while attaining the life changing agree makes our program very popular.
As I mentioned earlier of factor in our growth. This quarter was strong enrollment at usu, primarily from S&P students all of whom are registered nurses or our ends.
The FMT enrollment growth is especially notable given the dramatic increase in nurses as workloads due to the acceleration of COVID-19 infection rates throughout the quarter.
That said with Rins currently representing 69% of the company's total student body.
We did see the headwinds the students faced late in 2020 and the first few months of 2021 due to what we call Covid wave two.
Which led to lower of course starts than originally forecasted at both universities in the quarter.
Our BSN pre licensure students of course are not yet nurses and this program was unaffected.
As stated in our last earnings call. We anticipated. This effect would have an impact on class starts within our student body of predominantly working nurses.
We expect that to continue through the balance of this fiscal year.
Given that are predominantly RF student body.
Ben, especially overwhelmed over the past several months, we wanted to understand the reasons for their decisions to reduce their pace of class starts.
And we found that it fell into four categories.
First the students rescheduled upcoming of course registrations to a later date.
Two they made requests for a temporary leave of absence.
Three the requested to delay their placement into their preferred clinical location timed with that facility accepting new in person students again.
And for the main course of our program withdrawal of request due to family emergencies pressures that work or emotional distress or lack of time.
As a result in addition to the typical seasonality in the third quarter, which includes the November and December holiday months, Aspen University saw approximately 4% less of course registrations than expected and our Aspen nursing <unk> other unit the <unk>.
Waits to approximately 110000 of reduced revenue per month relative to the company's historical performance.
Shoes MSN F. N. P program also saw similar of course start decline of approximately 4% in the quarter relative to the company's historical performance, which equates to approximately $60000 of reduced revenue per month.
Covid wave two has continued into the current fourth fiscal quarter ending April 30.
And as a result, we are forecasting a decrease of approximately four 5% for of course starts than seasonally expected and our Aspen nursing <unk> other unit and Usu's MSN F N P program.
Consequently, we anticipate year over year revenue growth to be in the range of 31% to 33% or 18, 4% to $18 $7 million.
This is compared to the company's previous forecast of 36% growth or $19 1 million.
We welcome the news the vaccine should be available to all adults by the end of May assuming the vaccine rollout goes as scheduled.
By the end of our fourth fiscal quarter, we anticipate the core start behavior of our predominantly RN student body to return to historical levels.
Which would be during our first fiscal quarter ending July 31.
Outside of the lower of course start activity due to COVID-19 on enrollments on operating metrics continue to outperform the industry.
Our proprietary Ed Tech platform consistently yield industry, leading marketing metrics.
Our technology is a key differentiator in the for profit education sector and is the cornerstone of our model that enables our low customer acquisition costs, which we referred to as cost per enrollment or CAC.
Our proprietary enrollment CRM is perhaps the most advanced system in the higher education industry.
Using a real time algorithm the <unk>.
System Prioritizes leads in real time for our enrollment advisors and note of notifies them.
Of that individual is in the enrollment process and recommend the next step.
Our enrollment advisors, therefore always have a prioritized database to maximize lead to enrollment conversion rates.
This is one of the key reasons why our cash remains the lowest in the industry.
As I previously stated our overall pre licensure enrollment growth was.
Was restrained the 15% due to our decision to flatten first year enrollments in Phoenix.
This in turn moderated our year over year increase in bookings and average revenue per enrollment or ARPA.
As a result bookings rose, 24% to $33 million, while <unk> increased 2% of $15513.
The company's weighted average cash increased 19% on a sequential basis the.
The <unk> hundred $65 as expected given we launched marketing and two new metros and materially increased marketing spending the past two quarters.
And there has historically been of one to two quarter lag effect and increased marketing investment to revenue.
That said the marketing efficient efficiency ratio armor, representing revenue per enrolment over cost per enrollment for both of our universities remained above 11 times.
I'll complete my remarks today by discussing our BSN pre licensure expansion in the short term effect that it had on our EBITDA margin in the quarter.
As we've previously stated our strategic plan is to open two new locations per year, one of the spring one in the fall of last spring, we encountered a delay in the regulatory approval process in Florida related to Covid restrictions.
This delay meant that we launched marketing and began staffing in both the Tampa and Austin Metros within about one month of each other.
Consequently, this was our first full quarter of marketing in both locations with minimal startup revenues. So it caused an aggregate operating loss in those two metros of just over $800000.
As we've previously disclosed each new location experiences operating losses of approximately 750000.
The $1 million in the first calendar year of operation.
So we do anticipate that these new campuses will begin generating profit in year two.
Based on the precedent that was set in Phoenix.
The good news as Rob will discuss momentarily is the.
In fact that our two more mature of pre licensure campuses in Phoenix, which have now been opened for just over two and a half and one five years respectively.
Delivered net income and EBITDA of $1 $8 million or a 52% margin in the quarter the.
Despite the operating losses in Austin, and Tampa, the overall pre licensure business still delivered a 28% EBITDA margin in the quarter.
This again demonstrates the leverage of our pre licensure business and why we prioritize the strategic investments.
Before I complete my remarks, I'd like to thank our former CFO Frank Cotroneo for his hard work and contribution to the Aspen group over the last 15 months.
The company has greatly benefited from Frank building, an outstanding finance and accounting team.
The helping to upgrade the company's financial processes and infrastructure.
The company is fortunate to have Rob of Lee as our Chief Accounting Officer.
Rob is the interim head of our finance team and brings a broad base of experience, including Big four public accounting internal auditing and public company controller ship.
Rob with my oversight is performing the chief financial officer duties, while we conduct the CFO search.
We have interviewed several excellent candidates, thus far and hope to finalize our decision by the end of our fiscal year.
Now I'll turn the call over to Rob to review our financial results for Q3. Please go ahead Rob.
Thank you, Mike and good afternoon, everyone I will begin with review of our financial results for the 2021 fiscal third quarter, followed by our expectations for the upcoming fourth quarter.
Total revenues for the third quarter were $16 6 million up 33% versus a year ago period, our highest LTV businesses.
On the University of pre licensure BSN, the Usu, primarily F&B program now account for 51% of our consolidated revenue.
Aspen University's traditional post licensure online nursing plus other unit, which includes our growing doctoral programs contributed the remaining 49% of total company revenues in the quarter.
As Mike indicated on our revenue growth continues to be driven by new student enrollments in our highest LTV programs, which increased overall by 22% to 2129.
On the University generated 1593, new student enrollments of 16% year over year attributable to strength in his doctoral and nursing plus other degree programs.
On the state University of delivered the 536, new student enrollments, the 43% increase year over year, primarily from MSN family nurse practitioner or S&P enrollments.
<unk> enrollment growth is especially notable given the demands on nursing professionals on the front lines of the pandemic.
As Mike explained earlier, Aspen University intentionally slowed year over year enrollment growth at its Phoenix of pre licensure campuses. These campuses currently have a full pipeline of first year online of prerequisite students. So this decision moderate of pre licensure enrollment growth in the quarter the 15%.
Gross profit and gross margin were $8 7 million, 52%, respectively versus $7 1 million from 57%, respectively in the year ago period.
Overall in the structural costs were $3 9 million or 24 percentage of revenue up from $2 $6 million of 21% of revenue in the year ago period.
The increase the instructional cost as a percent of revenue was primarily due to the hiring of full time faculty the pre licensure program at the main Phoenix campus to support double cohorts that began in February as well as faculty hiring at the new campuses in Tampa, Florida, and Austin, Texas.
Total marketing and promotional costs for the third quarter, the $3 6 million or 22% of total revenue up from $2 5 million or 20% of revenues in the year ago period the.
The increase of marketing as a percentage of revenues as a result of the planned increase in AD spend in fiscal year 2021 targeted primarily to our highest LTV programs combined with growth spending in two new pre licensure metros.
General and administrative costs of the quarter were $10 $6 million.
Compared to $8 6 million during the comparable prior year quarter, an increase of $2 million or 23%.
Given the revenues increased year over year by $4 1 million.
The G&A increase of $2 million.
The track against our long term goal the G&A will grow at approximately half the rate of revenues.
From a company bottom line perspective, the total net loss for the third quarter was 2 million 815266, net loss per basic and diluted share of <unk> 11.
Compared to a loss of $2 million 281152, net loss per share of <unk> 12 in the prior year quarter.
Adjusted net loss for the third quarter was $2 million 114496 of adjusted net loss per share of nine.
Compared to a loss of 923719, four adjusted net loss per share of <unk> in the prior year quarter.
From a unit perspective, Aspen University's net income for the quarter was $1 4 million.
Versus $1 3 million in the prior year period.
Usu's net income was <unk> 3 million versus net income of less than $1 million in the prior year quarter.
Finally, <unk> incurred a net loss of $4 5 million from the third quarter compared to a loss of $3 6 million in the prior year quarter.
With a net loss of $2 8 million.
Our adjusted EBITDA, including approximately $800000 on growth capital expense related to ramping up the Austin and Tampa campuses with the loss of <unk> $9 million were negative 5% margin in the third quarter as compared to a net loss of $2 3 million.
And adjusted EBITDA of <unk>, 2 million or 2% margin in the prior year quarter.
From a unit perspective, Aspen University generated net income of $1 4 million and adjusted EBITDA of $2 5 million in the third quarter <unk>.
<unk> pre licensure BSN program generated net income of $1 million and an adjusted EBITDA margin of 28% as the units delivered $1 million of the $2 5 billion adjusted EBITDA generated at Aspen University.
The licensure program in Phoenix generated net income and adjusted EBITDA of $1 8 million or <unk>, 52% margin on the two new metros, Austin and Tampa incurred a net loss and adjusted EBITDA loss of $2 8 million for the quarter.
The <unk> generated net income of <unk> 3 million and adjusted EBITDA of <unk>.
$5 million in the third quarter.
Finally, agi corporate incurred a loss of $4 5 million and an adjusted EBITDA loss of $3 8 million in the quarter.
Shifting to our fourth quarter forecast as Mike indicated, we anticipate year over year revenue growth to be in the range of 31% to 33% or $18 4 million to $18 7 million.
This is compared to the company's previous forecast of 36% growth were $19 1 million.
From a bottom line perspective, we expect our net loss per share to be in the range of 11 to 13.
And adjusted EPS loss in the fourth quarter the sequentially improved from nine.
The 4% to <unk>.
Note that the.
The EPS loss of our estimated in Q4 includes approximately <unk> <unk> for the severance and stock compensation expense related to Frank Cotroneo separation agreement.
Now I'd like to provide an update on our accounts receivable and bad debt reserve.
As our shareholders are aware of the increase of the company's accounts receivable over the last several years has predominantly been the result of our groundbreaking multi payment plan or MPP, which we introduced in 2014 of Aspen University and subsequently in 2018 of United States University.
In the history, we've issued approximately $70 million of credits Aspen University MPP students and to date, we've written off of $631000 or approximately 1% of debt accounts receivable.
Bad debt reserve for this <unk> is currently $2 5 million, which we believe is conservative because our current collection history and analysis suggests that we will not ultimately need to write off more than about two 5% of the $70 million were total of $1 8 million, which includes the $631000 written off to date.
Okay.
Now, let's discuss Usu's MPP accounts receivables.
As you likely recall, we offered nurse practitioner students of six year MTP plant over a two year period from 2018 to 2019.
The majority of the company's increase of accounts receivable this fiscal year as it related to that MPP plan.
The specific the company's long term during.
During the first nine months of this fiscal increased from $6 7 million.
Of the $9 9 million with Usu accounted for 83% of net increase.
The company's short term of accounts receivable during the nine months period of this fiscal year increased from $16 1 million, the $18 8 million with usu accounting for 70% of debt increase.
Here's the important fact to be aware of as I. Just stated of the majority of the accounts receivable increase for the company in the past year plus has been through issuing credit to nurse practitioner of students at Usu. The collection history of these F&B students is tracking materially better than our collection history of Aspen University.
The MPP students.
Let me explain.
2018 to 2019, we issued approximately $17 million of credits for Usu F&B students on the six year payment plan.
We've collected to date, the $3 million of about $17 million.
So the remaining accounts receivable is approximately $8 7 million.
The total student count that makes up the $8 $7 million of MPP F&B student accounts receivable was approximately 800 students.
44% of those 800 students have graduated while 50% remain active students today and the University.
And the remaining 6% are no longer enrolled.
Of those eight hundreds of students. We only have 43 students that have not made of recent monthly payment, which accounts for total accounts receivable of $205 of one 2% of the total credit issued to date.
In other words, we're <unk>.
Estimating the six year MTP accounts receivable performed materially better and aspens history, which as I just indicated has performed well to date.
As we look back on the six year payment plan with the opportunistic practitioner of students at Usu.
It shouldnt come into the surprise that the quality of the credit we issued the so strong as becoming a nurse practitioner is a life changing event for the students. The income averages over six figures once they are employed as the nurse practitioner, which can be up to double the average income of registered nurses in the U S.
Moving to our liquidity position.
Cash used from operations for the quarter was approximately $3 2 million.
Versus $1 8 million in the year ago period.
For the nine months period, our cash use in operations is $5 3 million.
We're on average of $1 $8 million per quarter.
As you know our cash use from operations on a given quarter can be materially affected based on the timing and size of our semester starts.
Aspen group ended the quarter with approximately $10 million on unrestricted cash together with our unused revolver of $5 million.
We ended the quarter with approximately $15 million of liquidity resources.
Additionally, we have $1 3 million of other current assets on the balance sheet, which represents our tenant improvement allowance that will be reimbursed upon the completion of the campus build out.
We expect the $1 3 million to be reimbursed either by the end of this fiscal quarter or next which will increase our liquidity by the $1 3 million.
With respect to our share count the weighted average number of common basic shares outstanding at the end of the quarter. The 24 million of 144334 versus $19 million 420 <unk>.
987% from a year ago quarter.
That concludes our prepared remarks, I will now turn the call back to the operator for questions.
Thank you.
The ask a question you would need the press Star then one on your telephone to withdraw your question. Please press the pound key again that of Star then one if you would like to ask the question.
Our first question comes from the line of Darren <unk> with Roth Capital Partners. Your line is now open.
Hey, guys. Good afternoon, Thanks, taking my question.
A couple of if I may.
First of Mike your comments about.
Of course starts sort of normalizing beyond April.
Sort of curious what gives you confidence that's going to be the case.
Good afternoon Darren.
So Mike we.
We have seen an improvement.
So far in the month of February and in the first half of March So assuming that improvement continues we expect that our fourth quarter, sorry, our first fiscal quarter, we'll come back to a level of normalcy for registered nurses as everyone knows it.
It looks like.
Most of the delta of of the ability to be vaccinated by the end of May and so.
That's kind of right right during the beginning of our of our first quarter.
Got it fair enough.
Our pre licensure EBITDA margins, 52%.
Exceptionally strong I'm curious.
As we think about one that's obviously not including double cohort so with several cohorts like Where's the theoretical ceiling there.
And then as we think about.
Other.
Thiago of fees.
It probably shouldn't be thinking about the business with that higher margins or am I mistaken on that.
I think youre right Darren.
We're at 52% margin, but we of the advantage of course of having two campuses opened in Phoenix currently.
Now we of course are coming into a double cohort for this first this quarter that we're in now.
It's certainly possible that the margin could end up in the mid to upper fifties as possible.
I don't expect that margin to be the same in our new markets.
We think that the margin will.
Should be able to the definitely in the high <unk> if not in the <unk> in our other markets.
Got it and then last one from me the service center in Tampa is that still on track.
Even with strength departure.
Yes. It is in fact.
Probably see our chief accounting officer, and interim CFO is currently in the process of relocating of Tampa and we've made two recent hires in Tampa as well. So we are.
Moving full bore with having our corporate center based in Tampa.
Great. Thanks, guys.
Thanks Darrin.
Thank you. Our next question comes from the line of Austin model.
Canaccord Your line of your line is now open.
Hi, Thanks for taking my questions.
Can you talk about the cost per enrollment youre seeing at the new Metros and can you also speak to the competitive landscape you're seeing these days.
Sure good afternoon.
So I mean, one thing to be aware of is that when we when we launched Phoenix two and a half years ago. We delivered approximately 500 enrollments in that first year in Phoenix, which.
It was probably double or approximately double our internal forecast the second year in Phoenix really exploded as we delivered over 500 enrollments in our second year of operations in the Phoenix Metro which of course was across two campuses at that point.
Austin, which we began about a month before of Tampa is tracking at this point to do approximately 250 enrollments in year one.
Which is right on our internal forecast given austin's, we considered to be of tier two size market versus Phoenix as a tier one.
We have every expectation of Tampa will perform similar to Austin and its first year of operations as well.
By the way, we just launched marketing of Nashville, a few weeks ago and surprisingly we drove 80 leads in our first few days and we of nearly 200 leads in our first 10 days. So Nashville is off to a phenomenal start.
So on.
Our cost per enrollment in our pre licensure program historically in Phoenix as a consequence of the explanation.
Explanation of enrollments I just gave you is been in that sub $500 range.
In our other markets I would probably guesstimate that will be more closer to more of a $1000.
In our other markets I don't think will be as successful as we were in Phoenix.
Which is in that 500 range.
Got it thanks for that.
Would you be able to give an update on your enrollment advisor count and your expectations for investment there.
Yes.
We increased our enrollment center at Usu and in our traditional Aspen nursing <unk> other unit at the beginning of the fiscal year and those those groups have remained flat for the last six to nine months.
The only increase in enrollment advisers has been in our pre licensure side, where we've of course allocated new enrollment advisers to our three new metro markets. So the increase has been modest.
No more than 10% over the course of the year.
Got it and last question here is.
Can you give a little update on your new of a weekend of immersion locations for usu.
Yes.
So we we have a plan by the spring to summer at we're going to have our students have the ability to conduct their immersion in three locations.
One of course is our San Diego base, which is where all of emergence have been done in history. We have completed the build out and our Phoenix, New Phoenix location for weekend immersion is now open.
And we will be conducting our first weekend immersion in the coming weeks and then finally, we.
Very very close to having our immersion set up in Tampa.
We're getting close to that.
At location being finished and in fact, Rob just explained that that build out is almost done and as it's done we're actually going to get the $1 $3 million back again.
For the for the tenant improvement.
Great. Thanks, very much for taking my questions.
Thank you.
Thank you. Our next question comes from the line of Raj Sharma with B Riley. Your line is now open.
Hi, good afternoon, thanks for taking my questions.
I just wanted to.
One some clarification on the startup costs, you said for this quarter of what about 800000 from the two new campuses.
And you expect around the same for the next quarter.
And I think you also.
And Rob you alluded debt.
They are in line the startup costs are in line with what your earlier estimates of.
The three quarters on millions of $1 million in the first year. So can you clarify that there is 800 this quarter and then the 800 in the coming quarter.
And does that.
Is that on the startup cost from the two campuses.
Well, okay. So first of all Raj we've said many times that it takes the full 12 months for a new location to breakeven okay.
On the operating losses for a brand new campus are very heavily weighted towards the first six months and then the losses declined quite quickly from there on out.
So understand that this quarter, we had a cost basis of $800000.
Was only Austin and Tampa.
We're now going to start spending we have started spending a few weeks ago in Nashville. So now we have three locations that are in that first six month startup mode. So that is why we believe we will lose about another 800000 this quarter because again, we have three campuses that are all sort of in the immature startup.
The phase, but we will start earning some material revenues in our first two markets, which will offset the cost of the third campus opening of Nashville.
In the next quarter Youll start, earning on Austin and Tampa, Yeah. So, we're earning revenues in Austin and Tampa in this current quarter, we have begun enrollment and first year students have already begun in both locations.
Got it got it thanks and then on.
On the double cohort from Phoenix.
Can you clarify of the sequential quarter on quarter improvement in revenues from.
Doing now now having double double cohorts of Phoenix.
Yeah. So.
There is of three it's the three semester system for any given student.
And the students.
On the <unk>.
Due to the cost of attendance for given the student over a period of the year is as.
As $20 per annum over the two year period.
So you basically would take $20 divided by three for each semester.
We are in that first cohort as we've announced it was approximately an additional 30 students in the second cohort so that would be the math.
Alright, 30030 times, the 20000 debate about suite.
Moving to MS correct, Yes, yes got it okay.
That's it. Thank you I'll take thank you Raj I'll go offline. Thank you so much.
Thank you. Our next question comes from the line of Mike Grondahl of Northland Securities. Your line is now open.
Hi, This is Michael on for Mike Thanks for taking the questions maybe.
Maybe first off just on the Phoenix the.
The campuses.
Do you continue to see the strong demand maybe with the first year students are there any plans like from the route.
To expand.
The there so you can kind of more kind of through the funnel.
Well I mean, we currently have approximately 1500 first year prerequisite students.
And we based on.
Completion rate of somewhere in the vicinity of two thirds of those students will finish all 41 credits go ahead and pass the Hess the eight two entrance exam.
So our math tells us that we currently have close to two years worth of potential.
Potential core of course students at this point in the University. So thats why about three four months ago, we started to slowdown our marketing dollars in the Phoenix Metro in order to slowdown the first year enrollments.
We.
We would have to open a third location in Phoenix in order for it to be in order for that pipeline to get even wider.
And it's something we potentially could do in the future, but it's not on our short term plan at this point.
Got it but just on Nashville sort of any differences to call out in that market.
Besides the competition sort of students of economics.
Yes, I mean, Nashville is a lot like Austin neither location neither metro.
Has any significant competition from a for profit point of view.
So those are those are two markets that thus.
Thus far off to a very very strong start.
Tampa is a little more competitive.
So we're spending more dollars there to achieve the same number of leads.
But again every market is a little different and Nashville. The first couple of weeks of Nashville is extremely promising.
Got it thanks.
Thank you. Our next question comes from the line of Jacob Staffing with Lake Street Capital markets. Your line is now open.
Hi, Thanks for taking my questions.
So on the Nashville campus.
You guys are working with more than just one.
One partner one clinical partner can.
Can you explain a little bit more on isn't going to be of bigger campus.
The more capacity.
All of our campuses are pretty much similar size, we look for a location that has somewhere between 15018 thousand square feet and that gives us the ability to build the core program.
That's in that kind of 500 student range now again in terms of.
Our main Phoenix campus, we have of larger location than that so that's why we're able to go to double cohorts.
So so so I would say Nashville, and Tampa and Austin, they're all going to be similar size markets and similar sized programs.
Okay.
And then as far as the.
Where do you guys have room to expand the usu in the S&P program in Nashville.
At this point, because we're going to have four locations opened in the coming months San Diego Phoenix.
Tampa and Austin, we don't have any weekend immersion plans at this point for our F&B program at Usu.
We could do we could.
Allocate some space to that if we'd like to in the future of but we felt like we're covering each of each part of the country at this point pretty pretty.
Pretty successfully.
Okay.
So just back to the Capex a little bit.
800 wells in this coming quarter.
<unk>.
So just on <unk> just in terms of the natural campus is that more of.
The 1.750 million to $1 million.
Annualized run rate right and again, so that's not that wouldn't be capex. So that would be those are operating expenses.
Debt, we're expecting too.
The losses that we're expecting to have with each of these new markets collectively.
All opening and.
In a immature.
Status at this point.
Okay, great. Thanks, I'll hop back on line here.
Thank you.
Thank you. Our next question will come from the line of Jeremy Hamblin with Craig Hallum Capital. Your line is now open.
Thanks for taking the question I wanted to just follow up a little bit.
On the question around investments in new campuses.
Obviously looking to drive your revenue base here, but in terms of thinking about the plan to expand the couple of campuses of year for the next several years and thinking ahead to fiscal 'twenty two.
Given that youre going to open those two campuses per year.
And the upstart costs associated with that.
It seems like maybe our expectations around adjusted EBITDA growth should probably be curbed.
Simply because of that upfront investment costs.
That you're going to incur which is going to.
<unk> pull through of instructional cost as well as your marketing and promotional line items is.
Is that a fair assumption.
Well I mean, what I would say is that look at the result of the pre licensure unit.
Italic <unk> for the quarter.
The the Phoenix operations delivered net income of $1 $8 million or the 52% margin. We were talking about so we were able to overcome.
The $800000 of operating expenses in the two new markets and still deliver of net net income of $1 million, which is a pretty respectable 28% EBITDA margin.
So I think the only reason why there was of the losses were a little bit heavier.
Than our original plan is simply because Florida was slightly delayed in terms of the regulatory approval last this past year and as a result of those two campuses are kind of layered on top of each other which is not what we plan to do in future years. So this is the kind of a short term blip debt.
I think we have a good plan, we're going to try to open a new location every spring every fall and Thats a good day.
That's a good approach for us to be able to not suffer.
<unk> operating losses as this has this great business is growing.
Right, but I guess on the company wide basis, if I look at adjusted EBITDA in the quarter.
The $65000 loss or <unk>.
$900000 rounded loss.
Adjusted EBITDA I guess my point of my question is debt.
Our assumption I guess shouldn't be you've made pretty significant expansion on EBITDA, let's say in Q4 of the fiscal 'twenty in Q1 of this current fiscal year you're in.
But obviously, we've kind of backed up as you've opened these campuses, but youre going to continue opening campuses. So I.
Guess, what I'm, just getting out of it I think it's probably a fair assumption that.
The EBITDA growth is not going to.
Leveraging the way that it might as you get down the road in your.
Your total number of campuses, which has really gone from.
<unk>.
Four.
<unk>, just starting up here pretty quickly.
As you get closer to nine or 10, then you'd probably start to see that leverage really flow through but in the near term I guess from my.
<unk> would be that youre going to continue to have more investment cost with year on year, one or two of these programs.
Yes, what I would say the Jeremy is that.
This is this is a bit of a blip from an adjusted EBITDA point of view to go negative we've been positive in previous quarters and.
And I would say to you that we're going to be back to the breakeven level. In this current fourth quarter. So I would not expect us.
As you're as you're forecasting the company's results in future quarters, I would not forecast negative adjusted EBITDA now.
Okay, Yes, I wasn't saying negative, but just just okay.
Okay.
The significant growth, Okay, and then I just I did want to come back to your two newer markets, Florida and Texas.
You noted that.
The Florida in particular ease of more competitive market I wanted to just get some color on.
Whether or not you've seen competitors adjust their pricing models as you've moved into the market.
You know clearly as the leader on price.
And whether or not you've seen them react to.
Your entry into those markets.
No no no what I would say the is it again, it's really important debt.
Each market has kind of analyze.
On its own because there's a whole bunch of variables involved there is the size of the market.
There is the clinical partners and our relationship with them.
Who the who the the.
The traditional public universities are as well as of course the for profit.
And Florida is kind of a unique marketplace in that if you look at the <unk> scores and we're the <unk>.
Yes.
Examples are taken there primarily taken by associate level students.
So there is many more.
The two year associate level programs ADN programs that students in Florida are graduating from and then taking the <unk> to become an RN.
That's a it's a kind of an unusual market in that way. So we've entered the market with eight of course of BSN and.
Are the cost of of BSN for us.
As similar to what the student would pay for a two year associate degree.
Our challenge as we're marketing into this unique market is to state of someone don't go to that traditional two year program that you were planning to go to come to Aspen and Youll get your bachelors, rather than associates, which of course will allow you to make higher income when you become an RM. So the Florida again as of <unk>.
A unique market.
Because there are so many students that are that have historically entered nursing programs that are only two year programs.
Great got it alright, thanks for taking the questions. Good luck.
Alright, Thank you Jeremy.
Thank you.
There are no part of the questions I'll now turn the call back the chairman and CEO, Mike Matthews for closing remarks.
Thank you everyone for attending Aspen group's third quarter earnings call. Today, we look forward to speaking with you very soon have a good afternoon.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
[music].