Q4 2021 Aspen Group Inc Earnings Call
Good afternoon, and welcome to Aspen group's fiscal year 2021 fourth quarter earnings call. Please note that the company's remarks made during this call including answers to questions.
Include forward looking statements, which are subject to various risks and uncertainties. These statements include anticipated future revenue from our Phoenix campuses, the timing for new campuses to achieve profitability. The opening of our next new campus and our campus growth by 'twenty.
25, our future growth and growth strategy fiscal 'twenty 'twenty 2 for us <unk> growth.
<unk> revenue from our campuses and usu.
<unk> growth in fiscal 'twenty 'twenty, 2 LTV projected fiscal 2022 advertising spend seasonality, our fiscal 2022 guidance and our liquidity actual results may differ materially from the results predicted and reported results showed non.
Not be considered as an indication of future performance.
A discussion of risks and uncertainties related to Aspen group business is contained in its filings with the Securities and Exchange Commission, including the form 10-K for the fiscal year ended April 32021, and in the press release issued this afternoon.
<unk> disclaims any obligation to update any forward looking statements as a result of future developments.
Also I'd like to remind you that during this conference call. The company will discuss EBITDA and adjusted EBITDA, which are non-GAAP financial measures in talking about the company's performance.
Reconciliation to the most directly comparable GAAP financial measures are provided in the table in the press release issued by the company today.
Note that the press release is available on Aspen group's website <unk> dot com on the IR calendar page 100 news event.
There will be a transcript of this conference call available from 1 year on the company's website. Please note that the earnings slides are available on Aspen group's website <unk> dot com on the presentations page under company Info now I will turn the call over to Michael Mathews Aspen group's chairman.
Armen and Chief Executive Officer.
Good afternoon, and thank you for joining our call today.
After I review, our fiscal 2021 result.
Plan to discuss what we're calling the Aspen too that our business plan.
It is our plan to deliver on the goal of achieving and maintaining profitability starting in Q4 of this fiscal year 2022.
Aspen group back to the fiscal year 2021, with solid momentum in our 3 business units to deliver 35% revenue growth year over year in the fourth quarter and 38% for the full year.
Additionally, strong enrollment growth lifted bookings in the fourth quarter by 21% year over year for.
For the full year bookings came in at 143 million rising 29% from last year.
Each of our 3 business units contributed to the fourth quarter and full year revenue growth on a year over year basis.
The increase in our 2 highest LTV program.
<unk> MSN S&P program.
On Aspen University's BSN pre licensure program, where the most significant contributors and reinforces our focused capital allocation strategy.
Aspen online our post licensure degree programs for registered nurses or Rms.
Looking to earn advanced degrees online.
Saw revenue growth of 22% in the quarter and 16% for the full year.
Okay.
This business unit offers only online programs with the unique option to pay using our monthly payment plan or MTP.
Usu, which is primarily our MSN family nurse practitioner or S&P program grew 40% in the fourth quarter and was a strong growth driver in fiscal year 2021, delivering a 48% increase.
Our third business unit, the BSN pre licensure program for <unk>.
And speaking of bachelors degree to become an RN.
Grew 70% in the fourth quarter and delivered 117% growth for the full year.
This is the Green program is offered as a 3 year hybrid online slash campus based program with an LTV of $30000.
The growth in our S&P and BSN pre licensure program demonstrates why we prioritize investing in these business units.
Strong enrollment at the Usu business unit primary primarily from S&P students, who are our ends.
Was boosted by increased demand for this valuable degree that would allow these newly licensed nurses to change jobs from the Frontlines in hospital, except position in private clinics and physician groups.
The BSN pre licensure program also saw great demand as millennials and working adults laid off during COVID-19 sought degrees it professions.
Job security and a path to career advancement.
Our first quarter net loss was approximately $2.3 million and.
And adjusted EBITDA was <unk> 6 million and for the full year, we lost approximately $10.4 million and produced adjusted EBITDA of $1.3 million.
The decrease from the prior year periods was primarily due to spending related to launching our pre licensure business into 3 new metros throughout the course of the fiscal year.
As I stated previously Aspen group's growth strategy rests primarily on growing our highest LTV degree programs.
The most significant lever of growth in this strategy is opening new <unk>.
Pre licensure campuses as.
As they deliver the highest LTV of all of our programs.
Let me take a moment to explain how the BSN pre licensure business unit with a significant contribution to our top line growth is an enabler of tremendous operating scale over time.
As of next quarter, we will be operating 5 pre licensure campuses.
We have 2 Phoenix campuses, 1 has been opened for 3 years.
Which we call our main Phoenix campus and the second smaller campus, which is embedded in the on our health Hospital system. That's been open for 2 years.
In fiscal 2021, we added a campus in Austin, Texas, which started core classes last September and Tampa, Florida, which had its first core class start last November.
Lee Nashville will have its first core class start next quarter.
There are 2 elements to the BSN pre licensure business units operational leverage.
First opening new campuses.
<unk>. This is our highest LTV degree program as we open new campuses. This high growth lever increases its revenue contribution more rapidly than our other business units.
Second new campuses, turning profitable after about 6 quarters now.
Cancer is typically becomes breakeven covering its cost of operations and begins to contribute to profitability every quarter going forward.
Let's look at this a little more closely in.
In the fourth quarter, the BSN pre licensure unit generated net income of <unk> 8 million and adjusted EBITDA of <unk> 9 million for a 24% margin.
Because of the upfront growth spending to launch 3 new metro locations aggregate net income for this unit in the fourth quarter remained flat year over year.
For the full year the unit net income grew 82% to $3.9 million.
And the unit delivered a 29% adjusted EBITDA margin.
Again this reflects 6 to 9 months of growth spending from increased marketing spend instructional costs and G&A.
With only 2 profitable campuses and 3 that are still on the early quarters that are not yet generating sufficient revenue to fully cover their cost. This unit drove net income on an annual basis to the tune of almost $4 million.
Most of the campus startup costs occur in the first 3 quarters of operations and then decline each quarter until achieving breakeven in the 6 quarter.
Based on our forecast Austin and Tampa are expected to be breakeven in the first quarter of fiscal year 2023.
And achieve profitability by mid fiscal 2023.
Nashville is anticipated to be breakeven in the fourth quarter of fiscal year 2023, and achieve profitability in early fiscal 2024.
By this time next year of our existing campuses we.
We will have 2 that are profitable and 2 that are covering their operating costs.
Only 1 of the current campuses will be still incurring losses, but at a lower level than today.
So thats the profitability perspective for the next year for our pre licensure campuses.
Because of the demand in Phoenix has continued to exceed our expectations in fiscal 2021, we implemented a double cohort at our main Phoenix campus.
So every semester now 2 cohorts enter the core program at the main campus and another cohort enters the program at the honor Health campus.
By implementing double cohorts at our main Phoenix campus the capacity in the Phoenix Metro for our final 2 year core pre licensure program has grown to approximately 500 students per year or a 1000 of course over 2 years.
We target to enroll an aggregate of 1651st year prerequisite students.
That's when we consider the pipeline to be full.
On average 2 thirds of our first year students for about a thousand of the 16.50 are projected to matriculate to the final 2 year core program.
Thereby producing 2 years of final 2 year core students.
We're forecasting to hit the 651st year student count in the coming months.
And plan to stabilize at this level as we currently do not have plans to expand our capacity in Phoenix beyond the 500 course students per year.
Consequently, we are proactively reducing new student enrollments year over year in the Phoenix Metro.
From approximately 600 last year to approximately 1000 this year.
However, it's important to note that the additional class starts from double cohorts will be a significant driver of revenue growth in fiscal 2022.
In fact, we are estimating total revenues in the Phoenix pre licensure metro to rise to approximately $18 million this year.
The Usu business unit, which is primarily the family nurse practitioner FMT degree.
Our other high LTV program.
On an excellent business with fantastic growth and is now significantly profitable.
Our results reflect how prudent we were in and acquiring usu in December of 2017 for less than $10 million.
At the time, it was relatively small and losing money.
It is now a valuable profitable assets.
Usu in fact delivered nearly $20 million of revenues in fiscal 2021.
And usu generated net income of $2.9 million and produced $3.6 million of adjusted EBITDA or net 18% margin in fiscal 2021.
We continued development on this business unit will be a growth driver this year and we anticipate further improvement in profitability.
In the fourth quarter, the S&P and pre licensure programs together contributed 51% of revenue.
Up from 46% in the fourth quarter last year.
As these business units grow their percentage of revenue will continue to grow increasing their contribution to the bottom line as well.
Before I discuss our business plan for fiscal 2022 and introduce guidance for next year.
I'd like to review the marketing efficiency ratios of our businesses to provide insight as to how we develop the business plan.
First our legacy business, what we call Aspen nursing <unk>, other which is primarily our fully online RN to BSN and MSN program <unk>.
Delivers an LTV of $7350 per enrollment and our cost of enrollment or Coa is projected to be $400 in fiscal 2022.
Therefore for every dollar we spend on advertising, we generated just over $5 of revenue.
On an excellent business, but.
<unk> less efficient that are 2 other higher LTV businesses.
Our second business Usu, specifically, the S&P program delivers an LTV of $17820 per enrollment and we're projecting a coa this fiscal year of $2500.
So for every dollar we spend on advertising for the S&P program, we generate nearly $12 of revenue.
So usu is over double the efficiency of our legacy business.
Finally, our BSN pre licensure program in the Phoenix Metro has been the company's superstar from an efficiency standpoint.
Over the past 3 years, our Coa has been no more than $500.
So with an LTV of $30000 that means for every dollar we spend in advertising in the Phoenix Metro we generate an unbelievable $60 of revenue.
That's nearly 12 times more efficient in our legacy business.
As mentioned the Phoenix Metro is nearing capacity today, so we will reduce spending in that metro and focused growth spending 2 or 3 new metros, Austin Tampa and Nashville.
These markets are what we call tier 2 markets as the metro populations or in the $2 million to $3 million range versus Phoenix is $5 million.
Consequently, we are projecting our Coa in these markets to be on a 3000 dollar range for fiscal 2022, and perhaps over time decrease into the $2000 range.
Even at a $3000 Coa given an LTV of $30000 that delivered $10 of revenue for every dollar spent and advertising, which is similar efficiency as the usu FMT business.
With that as a backdrop, we are introducing today a business plan that we're calling aspen to that at all.
Aspen <unk> is designed to deliver maximum efficiency with the goal of generating profitability and positive cash flow by Q4 of fiscal 2022.
To deliver on this goal, we will focus our growth spending against our highest efficiency businesses and for the first time decreased spending in our lowest efficiency unit.
To be specific we plan to reduce our year over year advertising spend rate and our Aspen legacy business by $1.3 million.
While increasing our spend rate at usu by about $900000.
And our BSN pre licensure business, we will reduce spend in the Phoenix Metro to a maintenance spend of approximately a half a million dollars for the year and direct significant growth spending to the 3 new metros I allocating a budget of $2.4 million.
The net effect of all these efficiency decisions resulted in an advertising spend increase year over year on only 1.6 million or only 13%.
Which will translate to our advertising spend declining to approximately 17% of revenue in fiscal 2022, which is down from 19% in fiscal 2021.
Since much of the increase growth spending is in the 3 new <unk>, new pre licensure metros with higher Coa.
That will translate to overall enrollments for the company to be relatively flat year over year.
But because these enrollments are in the highest LTV businesses. It will translate to an increase the bookings year over year of 6%.
$143.4 million to $151.3 million.
In other words this business plan continues to set up the company for consistent sustained growth in the coming years.
As stated in the press release earlier today, we introduced fiscal 2022 guidance for revenue GAAP EPS net income or loss.
EBITDA and adjusted EBITDA.
We anticipate that revenue growth rate for fiscal 2022 to be in a range of 25% to 29% year over year.
Which will deliver significant improvement on both GAAP EPS and EBITDA.
In fact, we are forecasting and over $5 million or over 90% improvement year over year on the EBITDA line.
Which at the midpoint of our revenue guidance would deliver leverage of nearly 30% for the year.
In addition, we are forecasting full year adjusted EBITDA for fiscal 2022, and a range of $2 million to $4 million.
Achieving these projections based upon number 1 driving maximum efficiency from the Aspen <unk> business plan, we just outlined.
And number 2 opening 1 new campus timing at the end of fiscal year 2022.
Specifically next spring, we are targeting a pre licensure launch in a tier 1 metro market.
On market, which is larger than the Phoenix Metro area.
And as mentioned earlier, the Aspen too that our business plan gives us a clear line of sight to GAAP profitability and positive cash flow in the fourth quarter of this fiscal year 2022.
We anticipate the typical seasonal cadence to our business with Q2, and Q4 are our strongest seasonal quarters, and Q1 and Q3 seasonally slower quarters.
Rob on the C will provide a detailed review of the fiscal 2022 guidance in his section to follow.
This plan gives us a clear line of sight to profitability.
Our cash burn and gets us to positive cash flow by fiscal year end, while continuing to enjoy growth rate significantly above our industry peers.
It also assures that we have sufficient liquidity to achieve our expansion goals.
This year, we look forward to continued success in growing each of our 3 business units.
With our 3 new pre licensure locations off to a great start and the launch of double cohorts in Phoenix.
We look forward to.
Before rapidly growing space.
As well as the largest health care and hospital organizations and some of the fastest growing metros in the country.
These relationships are important assets to our business.
Our proprietary tech stacks and CRM system, our competitive differentiators that lower our enrollment costs, which we passed on to our students in lower tuition rate.
And flexible payment options.
These features in addition to the ability to work while attaining a life changing degree makes us very popular with students.
These are all valuable assets to our long term growth plan to become an industry, leading nursing school with affordable convenient degree programs that enable working adults to achieve their career goals.
Aspen group's strategic roadmap target, having 12 operational BSN pre licensure locations throughout the western and southern United States by 2025 and.
And we remain committed to this goal.
Finally, I couldnt be more excited to announce the company has appointed Matthew levee as its chief Financial Officer effective August 16.
The company conducted an extensive search and match frankly was well above and beyond any candidate we interviewed.
His career as a series of growth successes, both on the public and private side.
And his experience in the education financial services and technology feel couldnt be a better fit for Aspen group's strategic roadmap.
I'm looking forward to working hand in hand, with Matt and the coming years, and we have a lot to accomplish in much shareholder value to drive.
The profit the probability of achieving our long term goal has no doubt improve with Matt taking the helm as CFO.
I will now hand, the call over to Rob to cover the details of our financial results and fiscal 2022 guidance. Please go ahead Rob.
Thank you, Mike and good afternoon, everyone I will begin with a review of our financial results for the 2021 fiscal fourth quarter highlight a few balance sheet items and finish with our outlook for fiscal year 2022.
From my comments on the quarterly results I will refer to the quarter that ended on April 32021, and.
All comparisons are to the prior year fourth quarter ended April 32020, unless otherwise stated.
Total revenues were $19.1 million.
This was $14.1 million from a year ago quarter.
Revenue from our highest LTV businesses, asking universities BSN pre licensure program. The new issue, primarily the S&P program accounted for 51% of our consolidated revenue.
The university's traditional post licensure online nursing for Southern unit. In addition to our growing doctoral programs contributed the remaining 49% of total company revenue in the quarter.
For fiscal year, 2021, total revenues increased 38% to $67.8 million from.
Paired with <unk> 49 per $1 million in the prior year.
They've used BSN pre licensure program and usu accounted for 50% of the Companys full year consolidated revenues.
Revenue growth in the quarter was supported by strong new enrollment growth, which increased overall by 23% to 2180 to.
Reflecting strong enrollment growth in our highest LTV program.
Aspen University generated 1.
593, new student enrollment.
Up 19% year over year.
Boosted by strength of his thoughtful and nursing plus other degree programs.
The state's University delivered 589, new student enrollments, a 36% increase year over year, primarily from MSN family nurse practitioner or FMC enrollment.
As Mike stated Aspen University has begun to intentionally slow year over year enrollment growth at its Phoenix pre licensure campuses.
Which has the effect of moderating pre licensure enrollment growth in the quarter.
These Phoenix campus is currently are nearing a full pipeline of first year online prerequisite students.
Gross profit and gross margin were $90.9 million and 52%, respectively versus $8.4 million, 59%, respectively for the year ago quarter.
For fiscal year 2021, gross profit increased by 28% to $36.9 million or 54% gross margin.
It was $28.9 million or 59% gross margin in the prior year.
Overall construction cost for the quarter were $4.6 million or 24% of revenue up $2.7 million or 19% of revenue.
For the full year and structural costs were $15.3 million or 23 percentage of revenue.
Up from $9.7 million or 20% in the prior year.
The increase in structural cost as a percentage of revenue primarily due to the hiring of full time faculty with pre licensure program at the main Phoenix campus to support double cohort that began in February as well as faculty hiring after new campuses in Tampa, Florida, and Austin, Texas.
Total marketing and promotional costs for the fourth quarter were $4.1 million or 22% of total revenue up from $2.7 million or 19% of revenue.
Marketing and promotional costs for fiscal year, 2021 were $14.2 million or 21 percentage of total revenues up from $9.5 million or 19% in the prior year.
The increase of marketing as a percentage of revenue results from the planned increase in AD spend from fiscal year 2021.
Targeted primarily to our highest LTV programs combined with growth spending in a free new pre licensure metros.
The quarter's general and administrative costs were $11.2 million compared to $7.7 million during the comparable prior year quarter.
The quarterly increase in G&A is primarily due to higher head count and the related increase in compensation and benefits expense, which includes stock based compensation expense to support the growth of the businesses.
New campus expansion costs of approximately $1 million at Aspen University and recruiting fees.
In connection with the resignation of the former Chief Financial Officer, the company incurred non recurring cash severance cost of <unk> 3 million and.
On the accelerated stock based compensation expense of approximately $6 million related to the accelerated investing of Rfps and options.
For fiscal year, 2021, general and administrative costs were $41.9 million or <unk>, 62% of revenue compared to $30.3 million or 62% of revenue for fiscal year 2020 and.
An increase of $11.6 million or 38%.
Please note that included in our full year G&A costs are $2.4 million.
Of nonrecurring items.
Year over year increase was primarily due to the factors described previously in the quarterly increase as well as $1.2 million of accelerated non cash stock based compensation amortization expense for the $9 from $10 tranche origin price testing.
Total net loss was $2.3 million or net loss per basic and diluted share of 9%.
Compared to a loss of 664294, 4 net loss per share of <unk> <unk> in the prior year quarter.
For fiscal year 2021, total net loss was $10.4 million.
Our net loss per basic share of <unk> 44.
Versus the loss of $5.7 million or 29 from the prior year period.
From a unit perspective after the university's net income for the quarter was $1.4 million versus $1.9 million from the prior year period.
Net income was $1 million versus net income of 595000 in the prior year quarter.
Finally, <unk> incurred a net loss of $4.7 million for the quarter compared to a loss of $3.2 million in the prior year quarter.
For fiscal year, 2021 day, you generated $7.3 million of net income and new issue generated $2.9 million.
Agi corporate incurred a net loss of $20.7 million for fiscal year 2021.
Fourth quarter EBITDA period over period each of the 3 units was as follows.
From universities, $2.2 million compared to $2.4 million.
Usu, $1.1 million compared to $619000 and Agi negative $4.7 million compared to negative $2.8 million.
Consolidated EBITDA for fiscal year, 2021 was negative $6 million.
<unk> to negative $1.6 million from the prior year period.
You generated EBITDA of $9.5 million you wish you generate the EBITDA of $3.1 million.
Corporate incurred EBITDA of negative $18.6 million in fiscal 2021.
Consolidated adjusted EBITDA was 639152 compared to adjusted EBITDA of $1.4 million in the prior year quarter.
From a unit perspective, Aspen University generated adjusted EBITDA of $2.6 million from the fourth quarter with Aspen BSN pre licensure program contributing adjusted EBITDA from $946000.
As compared to adjusted EBITDA of $3.1 million with Aspen pre licensure program contributing adjusted EBITDA of $836000 from the fourth quarter of 2020.
Usu generated adjusted EBITDA of $1.4 million compared with 689000 from the fourth quarter of 2020.
Finally, agi corporate incurred an adjusted EBITDA loss of $3.3 million in the quarter comparison, adjusted EBITDA loss of $2.4 million in the prior year period.
For the full fiscal year 2021, consolidated adjusted EBITDA was $1.3 million compared to $2.7 million in the prior year.
The consolidated adjusted EBITDA, you generated $11.6 million.
The new issue generated $3.6 million of adjusted EBITDA, while hei corporate incurred an adjusted EBITDA loss of $14 million, which includes $2.7 million of onetime expense items.
Moving to the balance sheet at April 32021, our cash and cash equivalents were $8.5 million.
With restricted cash of $5.2 million.
Compared to cash on cash equivalents of $14.4 million with restricted cash of $3.6 million at April 32020.
Together with our unused $5 million revolving line of credit we ended the quarter with approximately $13.5 million of liquidity resources.
Additionally, the given period liquidity can be materially affected based on the timing and size of our semester starts.
With respect to our share count the weighted average number of common basic shares outstanding at the end of the quarter was $25 million 342.
It was $21 million 739300 from a year ago quarter.
Today in the earnings release issued after the market close we introduced the following guidance for fiscal year 2022.
We anticipate revenue in a range of $85 million to $88 million reps.
Representing an increase of $18.7 million or 27% year over year from the midpoint of the guidance range and GAAP earnings per share of negative <unk> 18 to net.
<unk> <unk>.
For an improvement of $20 million or 66% year over year from the midpoint.
EBITDA for the full year is anticipated to be in the range of negative $1.6 million to $4 million, an increase of $5.4 million, 90% from the midpoint.
Lastly, we expect adjusted EBITDA in a range of 2 million to $4 million, increasing year over year by $1.7 million or 137% from the midpoint of the range.
That concludes our prepared remarks, I will now turn the call back to the operator for questions.
As a reminder, that Jay question, you will need to press star 1 on your telephone.
So on your question Crystal balance Q.
Please standby, while we compile the Q&A roster.
Our first question comes from Jeremy Hamblin with Craig Hallum. You May proceed with your question.
Hey, guys. This is Ryan on for Jeremy Great job.
Good afternoon, Brian.
Good afternoon first I wanted to start out can you give us.
A sense of how those new campuses are performing individually, obviously, we know Austin has done quite well to start off but how Tampa and Nashville performed relatively speaking.
Yes sure so the.
First year of enrollments in our Phoenix Metro I'm going back obviously 3 years now.
We generated approximately 500 enrollments in that first first calendar year. After we began marketing in Phoenix.
Austin, We began marketing first and we're tracking at this point to somewhere in the vicinity of 250 enrollments in the first calendar year of activity.
It's running about half the size of Phoenix.
So we're very pleased with with how often has gone thus far.
It's not going to be the same size as Phoenix simply.
Simply because these other 3 markets that we've launched into the our tier 2 markets.
The size of those metros is between 2 and $3 million versus obviously, Phoenix, which is 5%.
Nashville is a market that we just launched in 3.4 months ago. So it's kind of early but Nashville, thus far appears to be tracking exactly like Austin.
So it's going very well.
Tampa has been it's been a little bit of a struggle for us out of the 3.
Probably tracking to I'd say 125 enrollments in that first year. So it's probably running about half the size of Nashville and Austin.
So again each market is very different in terms of.
In terms of competition in terms of size et cetera. So so hopefully that gives you some indication.
Yes fair enough great that helps and then staying on the same subject. So given the comments you guys made on the new campus in a tier 1 cities and the early success of those double cohort cohorts at the main Phoenix campus.
Net changed your view on the size of the new campuses you on target down the road.
No I don't think so.
Our plan has always been to have.
12 campuses open over the next handful of years.
2025, specifically.
And of course, we're Phi we are 5 now and we will open another 7 over the next 4 years.
We're all we've always planned to have a mixture of tier ones and tier twos. We think that these 3 tier twos, we've opened and are going to be very profitable businesses as we discussed earlier.
Even on a worst case scenario, if it costs us $3000 for enrollment which of course is a very good cost of enrollment relative to the rest of the industry. We're looking at a 1 to 10 ratio $1 spent on advertising to $10 of revenue.
That's a darn good business.
And we believe that the cost of enrollment while it's very early days and we don't get any organic leads enrollments yet we think it will trickle down to the 2000 range over the next year.
So again these are very good businesses.
And yes to answer your question, specifically, we have a number of tier 1 markets that we're going to launch into over the next couple of years. So we're going to focus primarily on tier ones in the next 2 fiscal years, we may strength within 1 or 2 tier twos.
Okay, Great. Congrats again, guys I'll hop back in queue.
Thank you Ryan.
Thank you. Our next question comes from Aaron Martin <unk> with Lake Street.
Please proceed with your question.
Yes, good question about the Aspen 2 <unk>.
Kind of the new business plan.
To me, you've always been kind of a marketing efficiency oriented company. So I'm wondering what's what is the.
The new wrinkle here at Aspen is it really the push more towards the cash flow positive and less towards the growth. What's the board level discussion that resulted in Aspen 2 data.
Yes, good afternoon, Eric Great question.
We did in fact have some really healthy debates both in the executive staff as well as of course the board.
And we made a determination debt if you really think about what has been the Aspen group's strategy since 2014, and it's been for us to grow as quickly as possible in all of our business segments.
And this is a change for us where we're basically saying look we're going to focus our growth spending on our highest LTV businesses and our traditional <unk>.
Aspen nursing <unk> other business, which is a good business, it's a 1% to 5 ratio.
We're going to drop spending and take debt those dollars and direct them toward our doctoral business toward our FMT business and of course, the new markets.
And so the consequence of those decisions allows us to continue to have excellent growth. We're projecting obviously mid to high <unk> for the year and it allows us to start generating cash.
As we hit the late part of this fiscal year. So we think that we have developed a plan, which is the optimal approach, which is consistent growth, 25% plus for multiple years and generating material amounts of cash starting in Q4 of this fiscal year.
And I assume that debt plan that you've put forth here for FY 'twenty 2 assumes here yourself funding there isn't that.
There's not any other capital required besides what's on the balance sheet day at that plant.
Yes, I'm glad you asked that question Eric because.
If you look at our our EBITDA.
Year over year, we're projecting and at our midpoint, we are projecting an improvement of EBITDA of $5.4 million year over year.
And that's obviously would be a 90% improvement now if you look at our cash burn for the fiscal year that just ended.
We had an EBITDA result of negative $6 million and our cash burn was approximately $5.8 million for the full year. So I hope everybody has picked up on the fact that we no longer burn more cash than we do our.
Our EBITDA results the monthly payment plan over the years has caused us to have a higher cash burn that our EBITDA result. This is the first year, where EBIT net EBITDA now is essentially equaling our cash.
Our cash result.
If we're projecting EBITDA this year and our forecast is to be in the vicinity of breakeven for the year that obviously means that our cash burn is going to quiet down for the full year to a very minimal amounts. So this is on.
This business plan has allowed us to become a self funded company on a go forward basis.
Okay and then last question from me, you've given us on outlook for the year I'm looking for a little bit more color. I know Q1 is typically your most challenging right. Now there is a consensus estimate of about $19.3 million, which would be roughly flat with where you finished Q4 whats your comfort level with the Q1 revenue.
<unk>.
Yes.
Of course, everyone knows that Q1 is our slowest seasonal quarter because it runs during the summer months and our nurses tend to take vacations and in particular, taking vacations and of course now that Covid is thankfully has started to quiet down.
So we expect revenues to rise modestly probably will end up in the range of about 19, 1% to $19.5.
For the quarter and as a result of that modest revenue improvement.
You should expect a similar modest improvement on the bottom line as well.
Got it.
Well good luck on Aspen to that or in FY 2022.
Thanks, Eric.
Thank you. Our next question comes from Darren <unk> with Roth Capital Partners. You May proceed with your question.
Hi, This is Dylan on for Darren Thanks for taking my questions.
The first 1.
Could you sort of walk us through some of the puts and takes on your projections to be.
Breakeven on the new campuses in 6 quarters, just just given those are tier 2 I think you mentioned.
There.
So far tracking about half the rate of Phoenix, but also has a little bit higher.
Cost of enrollment.
So I mean like how comfortable are you with debt 6 quarter to breakeven I.
I guess sort of timeline.
Yes, we're pretty comfortable.
You guys can remember back in history, we broke even after 12 months of operations in our first Phoenix campus and we had on exactly similar situation happened in our honor health campus and on our on our House campus is Ah.
A smaller business than our main Phoenix campus. So on our health in many ways is very similar to what we're going to have with.
Our new tier 2 markets in terms of.
In terms of its maturation timeframe. So I would say that yes. Our original campus was was for was 4 quarters on our health was somewhere between 5 and 6 quarters and I would say these 3 new locations are probably looking yes, right around the 6 quarters before it breakeven.
Great. Thank you.
As a follow up.
Is there.
Sort of.
Anything other.
Other than any specific reason for delaying that.
<unk> tier 1 campus.
I guess technically fiscal year 'twenty 3.
Is that because it gets you an extra quarter to.
Net profitable in <unk> and stay profitable on or is there or is there something else with potential lease or are getting the right setup cost there.
No I mean, we just made a decision that we wanted to maximize our fourth quarter net income results and and positive cash flow that was really the reason and so we will start marketing.
Into this new tier 1 market right at the end of the quarter, so that it doesn't affect our results.
It's very important to the company and to the board that we present to our great shareholders a substantial.
On cash generation quarter in Q4, so that everyone can see the potential of this company in future years.
Got it so is that for Q <unk>.
Outlook.
This line or that's a.
This is low.
Like we said from 2.1.
Doing it but then you still have to go spend on these new campuses.
Yes, so what we're saying is.
Based on the business plan that we just publicly announced along with the guidance.
We're looking at Q4 this fiscal year has been the quarter that turns positive.
Materially speaking.
Okay got it thank you.
By the way just 1 final point to give you a kind of an indication of our breakeven point.
In the vicinity of about $23 million for a quarter that would be our breakeven point. So obviously, if we produce $24.25 million it becomes a substantial material.
Profit and cash and cash.
Net cash flow.
Great. Thank you.
Thank you. Our next question comes from Austin <unk> with Canaccord you May proceed with your question.
Hi, Thanks for taking my questions, you mentioned on reducing spend and the Aspen nursing and other segments on the first time. So can you give any color on your expectations on what.
Enrollment and revenue growth will do in response to that reduction and can you also give a quick update about the competitive intensity that's fully on line segment.
Yes, I have to say that.
That our legacy segment, which is primarily RN to BSN program and our MSN program at Aspen University visit growth from those are of course, all fully online programs, we're seeing no change in demand.
Fact, our marketing team.
Has been telling me that our cost per lead and that business is the best it's ever been so there is not a competitive issue. There is no degradation on our side.
We are planning to spend $1.3 million less year over year, and again, we're going to direct debt spending into the higher LTV businesses. So this is a proactive decision that we've made to maximize efficiency with our business.
And it's going to get this company profitable.
Later in the fiscal year, and we will sustain that profitability from there on out.
That business unit.
Given that our cost of enrollment is projected to be about I think $1400 or so.
The $1.3 million it will cause our enrollments in that business to drop by round about 1000 enrollments year over year.
Got it.
You you said that your new Metro populations are about half the size of Phoenix.
Projected marketing efficiency.
$10 for 16, I caught it correctly why is a bigger disparity and the marketing this session standard or any other major differentiating factors there that causes.
No in fact, I hope that there is a lot of respect from the fact that we're going out today, and we're giving a very conservative cost of enrollment number for these markets because it's such early days and I'm sure you guys respect the fact that when Youre on a new brand and you go into a market for the first time it takes time.
Net name recognition and to ultimately get what we call organic leads.
Which is what brings the cost of enrollment down. So in the early days you are always going to see artificially high cost cost of enrollment and then it trickles down over time. So obviously, it's too early for us to know where that will ultimately arrive at but if I was a betting man I'd say, we'll end up in that 2000.
Range or perhaps less than that over time.
Okay. Thanks very much.
Thank you.
Thank you. Our next question comes from Mike Grondahl with Northland Capital markets. You May proceed with your question.
Hi, This is Michael on for Mike. Thanks for taking my questions. Maybe first off just on enrollment advisors should we think about that is relatively flat for this upcoming year or just kind of reallocating between the different segments.
Yes.
<unk>, what we'll do is we in total today, we have somewhere in the vicinity of about 130 enrollment advisers across all of our units.
And.
We have a plan to primarily keep that flat for the year and it's a reallocation process, we'll reallocate our number of advisors from our nursing plus other groups to our doctoral and 2 R. R. R.
<unk> units are pre licensure business today is pretty much already.
Staffed and we'll keep that flat now where we're staffed well for each of our 5 locations.
Got it and then maybe on the sort of conversion rate between first year students and then get into the sort of core student glass and then want to go on to complete all credits.
Because there are many levers to pull there to improve that I think it's like roughly 2 thirds, but can you talk about that a little bit.
Yeah, no actually I would say that.
There is very few levers to pull there I mean, we've got round about 3 years of history now.
When a when a first year online student comes in these are these are what we call ppm students either pre professional nursing students debt.
This is essentially a sophisticated gauntlet of of course is you have to go through math and science courses to prove that you can ultimately.
Become a registered nurse then effectively complete the 2 year core program.
So to date, we're our matriculation rate of that of that of those types of students is roundabout 60%.
And I don't think its going to change significantly in either direction. So hopefully that answers the question.
Yes. Thank you.
Thank you and as a reminder to ask a question you will need to press star 1 on your telephone. Our next question comes from Raj Sharma with B. Riley you May proceed with your question.
Hi, good afternoon, congratulations on.
On your new plan.
If you could talk on the fiscal 'twenty 2 guidance advertising spend is going down a few notches.
How should we think about being structural cost as a percentage of sales and also on marketing and promotional in total and then also G&A.
Im just trying to make sense of the snap that your advertising cost are going down and how do you how.
How does the rest of the expense structure change or should I should say.
Stayed the same.
Hello Raj.
Hello, Roger Matthews so.
Sure.
Number 1.
<unk> announced our plans today, assuming we hit the middle point of our range of revenue that will dictate the fact that our.
Our advertising spend as a percentage of revenue year over year will improve our drop from 19% to 17%.
So that's the first advantage now again, let me be clear, we're not decreasing our overall burn rate advertising spend rates from the company, it's actually going to go up by about 13%, which will deliver around about 6% increase in bookings.
So we're still looking to book over $150 million this year, which puts us.
And Ah.
A great position to continue to have substantial growth in future years.
Instructional costs.
Believable.
We'll be primarily flat year over year or perhaps go down slightly.
The big difference is going to be G&A, we're going to try really hard this year to keep G&A ad.
At a.
Single digit growth rate year over year.
Which will provide us with debt substantial leverage that we talked about earlier 1.
1 thing that I do want to point out Raj that we Didnt mentioned in our earnings remarks, that's very important is the fact that if you look at adjusted EBITDA for the past for this last fiscal year, our adjusted EBITDA had $2.8 million of nonrecurring expenses.
Our adjusted EBIT Formula as I think you guys know.
Includes non recurring expenses bad debt and stock based comp.
So our adjusted EBITDA for the past year again had nonrecurring expenses of $2.8 million.
And this year, we're projecting an immaterial amount of nonrecurring expenses. We don't believe we're going to have very little to none okay. Secondly, bad debt.
Year over year, we're projecting debt add debt will go down year over year by about $1.3 million.
So the difference between adjusted EBITDA, and our EBITDA guidance I want everyone to understand that theres about a $3.7 million difference on the adjusted EBITDA range.
That is not going to be repeated this year. So.
When you guys do your adjusted EBITDA analysis for this.
For this fiscal year, you've got to take that $3.7 million, which is not going to repeat again this year into consideration for your for your updated reported.
Got it and then and then.
Diverting advertising spend doesn't impact your.
Core your.
Aspen online BSM MSR growth rate as you would just.
Pointed out, but the new advertising spend on the pre licensure and the family nurse practitioner that should keep the enrollments.
So what I'm trying to get to us.
These changes don't impact your growth rates going forward.
No not at all not at all.
Again, you have to realize that.
Yes.
A couple of fundamental changes that are taking place 1 of which is a proactive decision by the company and the other is kind of like a situation that we just have to deal with right. So we are dropping aspen nursing <unk> other enrollments proactively by about 1000 enrollments year over year Okay.
And secondly, our Phoenix.
Prerequisite or first year Phoenix student.
<unk> is nearing capacity on.
Our capacity analysis is 1650 for first year students.
And where.
If you said, Hey, Mike where are you right now we're around about $13.50. So we only have like 300 that we can still bring in and of course, we have to replace the big cohorts that start every 2 months.
So just starting off from an enrollment point of view, we're -1000, Aspen plus other and -600 in the Phoenix Metro.
And so youll flow. So what we're doing is we're basically taking that 1600 enrollments and we're shifting them to these other 3 units right. We're just shifting it to the 3 new markets.
We are projecting 800 enrollments in the 3 new markets. This year, we're going to increase our FMT enrollments by approximately 600 year over year.
And we're also looking to substantially grow our doctoral enrollment by 5 or 600 net.
The net effect is about a 1% increase in enrollments year over year and as I said earlier, a 6% increase in bookings.
Got it and then lastly, 1 last I know that you just mentioned $23 million in 'twenty 2 'twenty 3 moving your breakeven.
The following year.
<unk> to me.
And beyond if you see 25% plus.
The revenue growth rates.
With the obviously the quarterly rate is going to be higher significantly higher than 23 million.
Does that sort of all then mostly holds on to the bottom line.
Yes, a lot of it will correct.
We're expecting a substantial EBITDA result, net debt following fiscal year fiscal 'twenty 3.
Got it.
Thank you so much from France from our questions I'll take it offline. Thanks, Thank you Raj.
Yeah.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Mike Matthews for any further remarks.
I want to thank everyone today for attending our fourth quarter earnings call and of course are our first quarter earnings call is in a very quick turnaround 2 months from now on second week in September and I'm looking forward to.
Everyone attending that as well and have a good day good afternoon.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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