Q3 2022 Aspen Group Inc Earnings Call
Good afternoon.
Welcome to Aspen group's fiscal year, 2022 third quarter earnings call. Please.
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.
These statements include the continuing impact of COVID-19 on our operations and future growth.
Our future growth and growth strategy.
As a percentage of revenue from our BSN pre licensure program and Usu bookings.
Bookings L T V.
<unk>.
Our fiscal 2022 guidance, the effective seasonality campus growth and offsetting gross margin decreases in Q4.
Future GAAP breakeven into our liquidity.
Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance.
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 32021.
<unk> Form 10-Q for the quarter ended January 31 2022.
The earnings release issued this afternoon.
Aspen group disclaims any obligation to update any forward looking statement 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 and speaking about the company's performance.
Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the earnings release issued today by the company.
Please note that the earnings release is available on Aspen group's website a S. P dot com on the IR calendar page under news and events.
There will be a transcript of this conference call available for one year on the company's website.
Please note that the earnings slides are available on Aspen group's website <unk>.
S. P. You dot com on 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, and thank you for joining our call today.
Aspen group delivered a 14% revenue increase year over year for the third quarter of 2022, despite the spike in COVID-19 infection rates driven by the Omnicom variant that caused critical health care staffing shortages and workload overloads for RN students.
And thereby lowered our nursing post licensure class starts sequentially.
Sequentially, our third quarter revenue growth was higher than the prior quarter year over year growth of 12%.
The second quarter is when we began to see the early signs of the omni crown variant affecting our predominantly are in student body.
By our third fiscal quarter, the omni Crown variant was widely prevalent and more problematic for scheduled class starts.
The dramatic Spike in new reported cases of Covid and related hospitalization rates in November December and January coincided with our third fiscal quarter of 2022.
The Spike led to critical nursing staff shortages at hospitals and had a catastrophic effect on the existing staffs workload.
I'm sure that all listening to our call today are aware that this dire situation has led to emotional and physical exhaustion and career burn out for the nurses that bore the brunt of managing unprecedented patient loads.
I referenced this for two reasons first as it relates to our financial performance in the quarter, but also for the longer term implications and opportunities for our nursing schools.
Starting with the implications for this quarter's results.
Nursing students represented 87% of Aspen group's total student body at the end of the third quarter.
Of the 11889 nursing students currently enrolled in our various degree programs.
9612 nursing students are our ends studying to earn a post licensure degree.
Such as the RN to BSN and M. S N and M. S N F N P or DNP degree in.
In total post licensure nursing students represent 70% of the company's total student body and are the population of agi students primarily affected by the pandemic.
The remaining 2277, our BSN pre licensure students located across our four metro locations in Phoenix, Austin, Tampa and Nashville.
To put the full impact of Covid on our results into context, starting in the second half of June 2021, and continuing through January 2020 to.
The company experienced lower course starts than seasonally expected among amongst our end student body for.
For example at Aspen University course starts among our ends during this period increased by approximately 3% year over year.
The comparison over the previous two full fiscal years fiscal year 2021, and fiscal year 2020 of course starts among our ends at Aspen University increased by an average of approximately 10% year over year.
This material slowdown and post licensure has been seen across the nursing school sector during the pandemic.
Importantly, though.
I'm Gonna crime variance subsides, there are clear and prevailing longer term trends in nursing that underpin robust demand for Aspen group's offerings and reinforced our optimism for driving revenue growth and margin improvement.
First the supply demand imbalance of nurses that was evident before the pandemic has been exacerbated over the last two years a recent analyst report on our nursing sector cited that supply side constraints and nursing staffing include burnout dissatisfaction with wages and hours.
Nursing burn out due to due to pandemic induced job fatigue has been the number one driver behind nurses, leaving the profession in 2021.
And they are leaving at record levels in 2022.
Another factor impacting the supply demand imbalances the record number of nurses, leaving the profession as they approach retirement age.
Nurses age 55 and older hit a five year high in 2020 at 42, 5%.
It's estimated that more than half a million rins will retire in 2022.
With just over 3 million Rins in the U S. This is a significant percentage of the nursing population.
When we put this severe supply side and balance together with the rising demand for health care to support an aging and unhealthy U S population.
We see a looming nursing shortage through 2030.
Despite the pandemic registered nursing as one of the highest in demand professions and the American workforce.
Which has led to increased applications at pre licensure programs.
Additionally, the trend for <unk> to move away from the hospital floor has two growth levers for post licensure degree programs.
With nursing schools facing teacher shortages rins are increasingly moving into teaching rolls, which offer better hours and wages.
Similarly, the association of American Medical colleges forecast, the physician shortage in the U S.
Making physician extenders, such as nurse practitioners integral in bridging the growing doctor shortage.
The average nurse practitioner makes a six figure salary working in private clinics and attractive alternative to the overworked, Florida or in a hospital.
These trends will affect both pre licensure and post licensure nursing degree programs for the next decade, meaning demand for nursing education will continue to grow at.
Aspen group's two universities offering a full scope of nursing degrees at affordable tuition rates is well positioned to benefit from these extraordinary long term trends.
I'd like to touch on our <unk> scores in the Arizona Board of nursing.
Aspen's pre licensure program in Phoenix launched nearly three and a half years ago and our initial cohort graduated in 2020 meeting all Arizona State standards.
Subsequently first time pass rates for our BSN pre licensure students, taking the <unk> are in our own test in Arizona fell from 80% in 2020% to 58% in 2021, which is below the minimum 80% standards set by the Arizona Board of nursing.
As a result of the decline in <unk> pass rates and other issues.
And in alignment with the recommendation from the Arizona Board of nursing, we voluntarily suspended BSN pre licensure enrollments and the formation of new cohorts at our at our two Phoenix pre licensure campuses effective February 2022.
We're continuing discussions with the Arizona Board of nursing regarding our future status and until we have a formula agreement in place we won't be publicly commenting on the matter.
Let me shift to another area of concern for our investors liquidity.
I'd like to remind you that a material component of our cash utilization relates to our key mission of Aspen group, which is to provide our students and affordable College education, while minimizing student debt loads.
To meet this goal we developed the monthly payment plan, which allows students to participate in a number of our programs.
A reasonable monthly payment.
Consequence of the monthly payment program is an increase in student accounts receivables during periods of growth, resulting in the use of cash.
In order to allow us to continue our mission to grow our affordable monthly payment plan and to bridge the gap to becoming cash flow positive in fiscal year 2024.
I am today pleased to announce a financing agreement, providing $30 million of available liquidity, including a $10 million convertible note and a $20 million revolving note.
Additionally, we extended the existing $5 million revolving credit facility by one year to November four 2023.
This financing arrangement closed on March 14, and resulted in the addition of $10 million of available cash to our balance sheet.
In terms of guidance.
Given Aspen university's decision to voluntarily suspend enrollments and the formation of new cohorts at its two Phoenix pre licensure campuses effective February 2022.
We've revised our outlook for fiscal year 2022 revenue to a new range of $75 5 million to $77 5 million from the prior range of $77 million to $80 million that we provided in our second quarter fiscal 2022 earnings release on December 14.
2021.
Matt will review the revised outlook in detail.
Insistent with prior years, we anticipate providing guidance for the upcoming fiscal year on the fourth quarter earnings call, which will be held in mid July .
Tying back to my earlier comments on the trends impacting nursing schools and the supply demand imbalance in the nursing sector.
Aspen group's Ed Tech platform, along with our pre and post licensure nursing programs puts us in a solid position to serve this growing market in an affordable way for our students.
The Aspen group model is extremely relevant given the market dynamics in healthcare and nursing and we remain confident that we can deliver on our long term growth initiatives.
At this time I will turn the call over to Matt. Please go ahead, Matt.
Thank you Mike and good afternoon, everyone in my comments on the quarterly results I will refer to the third quarter that ended on January 31 2022.
All comparisons are to the prior year's third quarter ended January 31, 2021, unless otherwise stated.
Before we discuss the numbers I'd like to remind everyone of a couple of key points to consider.
First is the impact of our pre licensure expansion strategy on our operating results.
The expansion of pre licensure campus locations reduces both gross margin and EBITDA during the approximate 18% to 24 month period.
Which the student body ramps to breakeven operating levels. The reduced profitability has purposely been implemented by management in order to ensure successful growth of the company for years to come. It is also a discretionary.
Second is the ongoing impact of Covid on post licensure nursing enrollments, which also impacts our operating results.
We saw a continuing COVID-19 related enrollment impact into fiscal third quarter and while management is optimistic that current trends in the pandemic will continue to improve it is not certain when the effect of this headwind will diminish.
Now on to our key operating metrics.
In the third quarter of fiscal 2020 to Agi's overall active degree seeking students body, which includes both Aspen University and Usu grew by 2% year over year to 13724 from 13407.
Students seeking nursing degrees were 11889 or 87% of total active students at both universities.
Of the 11889 students seeking nursing degrees 9612 are our ends steadying to earn an advanced degree, including 6839 at Aspen University and 2773 at Usu.
The remaining 2277 nursing students are enrolled in Aspen University's BSN pre licensure program in the Phoenix, Austin, Tampa and Nashville Metros.
We define active students as those enrolled in the course at the end of the third quarter of fiscal year 2022 or registered for an upcoming course.
Total enrollments in the third quarter were 1782.
As compared to 2129 in the same quarter last year.
New student enrollments at <unk> decreased year over year by 18%.
Due to our planned reduction of BSN pre licensure enrollments in the Phoenix Metro year over year and the impact of COVID-19, specifically the effect. The omicron variant surge has had among prospective RN students starting in November 2021.
New student enrollments at Usu decreased by 10% year over year.
And student enrollments at Usu were similarly impacted by COVID-19.
Let me provide some context on the third quarter enrollment results.
On a companywide basis, new student enrollments were down 16% year over year, primarily as a result of three factors.
First as we have stated before Aspen University reduced advertising spend in the Phoenix Metro for the BSN pre licensure program down to a maintenance spend through January 2022, causing enrollments in that metric to drop 51% year over year.
The quarter was not affected by the temporary suspension of advertising in enrollments of new pre licensure students in the Phoenix Metro, which happened after the quarter close.
Second enrollments at <unk> were down 10% year over year, given the impact of the ongoing COVID-19 pandemic as prospective student post licensure students continue to delay their education goals on a short term basis.
They continue to care for Covid patients.
Third in addition to Aspen University's also seeing a COVID-19 effect among prospective nursing post licensure students.
Aspen to point out a business plan called for a $1 3 million annual reduction of AD spend in fiscal 2022 in Aspen's post licensure nursing plus other unit.
In the third quarter this equated to a 14% drop in AD spend year over year.
Consequently, given the drop in AD spend and the Covid effect enrollments.
Enrolment in the Aspen nursing <unk> other unit dropped by 18% year over year.
In summary, excluding the 51% drop in enrollments in the Phoenix Metro BSN pre licensure program and the 18% drop in enrollments and Aspen University nursing plus other units total enrollments for the company would have been down by only 1% year over year.
Moving onto our financial results.
Total revenues were $18 9 million versus $16 6 million in the year ago quarter.
<unk> revenue for the quarter, which includes the high LTV MSN S&P program.
Counted for 31% or $5 9 million versus 29% or $4 8 million.
<unk> revenue for the quarter, which includes the high LTV BSN pre licensure program.
Accounted for 69% or $13 million versus 71% or $11 9 million.
GAAP gross profit increased six 2% to $9 2 million for fiscal Q3 2022.
Compared to $8 7 million for fiscal Q3 2021.
Gross margin was 51% for fiscal Q3 2022 compared to 54, 5% for fiscal Q3 2021.
Gross margin in fiscal Q3, 2022 was impacted by higher instructional costs related to the opening of new campus locations and the au pre licensure program higher emerging costs related to growth in our U S. U S N P program and.
And seasonally higher marketing costs over the Q3 holiday period.
<unk> gross margin was 52, 8% for fiscal Q3 2022.
<unk> 57, 4%.
Usu gross margin was 52, 6% for fiscal Q3 2022 versus 52, 7%.
We do not expect our gross margin dollars and gross margin as a percentage of revenue to materially change for the remainder of fiscal 2022.
Q4 seasonal strength in our post licensure programs and growth in our Austin, Nashville, and Tampa pre licensure locations are expected to offset the decrease in gross margin due to the suspension of enrollment in the Phoenix pre licensure locations.
As stated before we continue to be uncertain as to when we will see improvements in our gross margin related to a decrease in the COVID-19 impact to post licensure enrollments.
Overall instructional costs for the quarter were $4 9 billion or 26% of revenue up from $3 9 million or 24% of revenue the.
The increase in instructional cost as a percentage of revenue was primarily due to the hiring of full time faculty for the pre licensure program at the new campus locations in Nashville, Tampa and Austin.
Additionally, higher usu immersion costs were incurred as the S&P program continues to grow resulting in more immersion at more locations.
Total marketing and promotional costs for the third quarter were $4 4 million or 23% of total revenue up from $3 6 million or 22% of revenue.
A significant portion of the increase relates to marketing and do your pre licensure locations with the remainder due to seasonally higher spend during the third quarter.
As we stated on earlier calls we have shifted our marketing spend towards our highest LTV programs to improve the efficiency of our marketing spend.
The quarters general and administrative costs were $11 8 million or 62% of revenue compared to $10 6 million or 64% of total revenue.
The quarterly increase in G&A spend is partly related to year over year growth in our pre licensure and usu S&P programs.
Which is comprised of additional head count and the related increase in compensation and benefits expense.
And increased facilities costs.
As a percentage of revenue G&A decreased 2%, which is attributable to cost controls implemented by management and corporate G&A sequentially.
Sequentially, the quarter's G&A cost compared to $11 6 million or 61% of revenue in Q2 of fiscal 'twenty two.
The sequential growth in G&A is attributable to growth in our pre licensure program.
Corporate G&A costs were flat sequentially.
Net loss and net loss per share were $3 7 million and 15, respectively for fiscal Q3, 2022 compared to losses of $2 8 million and 11 in the year ago quarter.
From a subsidiary perspective, Aspen University's net income for the quarter was approximately 900000 down from $1 4 million to.
The decrease in <unk> net income is attributable to the new campus openings in our pre licensure program.
Usu's net income was approximately 300000 for both the current and prior year periods.
Finally, agi incurred a net loss of $5 million for the quarter compared to a net loss of $4 5 million.
<unk> and Agi quarterly loss as interest expense related to the $5 million revolving credit facility.
Consolidated EBITDA for the quarter was a loss of $2 4 million as compared to a loss of $2 2 million.
Third quarter EBITDA for each of the three subsidiaries was as follows.
Aspen University generated $1 9 million in Q3 of both fiscal 'twenty, two and fiscal 'twenty one.
<unk> generated approximately 400000 in Q3 of both fiscal 'twenty two in fiscal 'twenty one.
Agi incurred an EBITDA loss of $4 8 million compared to an EBITDA loss of $4 5 million.
Consolidated adjusted EBITDA was a loss of $1 3 million compared to a loss of approximately 900000 in the year ago quarter.
From a subsidiary perspective, Aspen University generated adjusted EBITDA of $2 2 million in the third quarter as compared to $2 5 million.
<unk> generated adjusted EBITDA of approximately 600000 compared to approximately 500000.
Finally, agi corporate incurred an adjusted EBITDA loss of $4 1 million compared to an adjusted EBITDA loss of $3 8 million.
Aspen University's adjusted EBITDA margin was 16, 8% compared to 28% a year ago.
<unk> adjusted EBITDA margin was 10, 1% as compared to nine 6% a year ago.
Moving on to the balance sheet.
At January 31, 2022, our unrestricted cash and cash equivalents were $6 million and restricted cash was $1 4 million.
This compares to unrestricted cash and cash equivalents of $12 5 million and restricted cash of $1 2 million as of April 32021.
Earlier today, we announced financing agreements providing for $30 million of available liquidity.
<unk>, a 10 million convertible note and a $20 million revolving credit facility.
We drew down $10 million upon the close of the convertible note and.
The amount is now in our bank account as unrestricted cash.
We also extended our existing 5 million revolving credit facility by one year to November 4th 2023.
Our current cash flow outlook reflects conservative assumptions, including the continued impact on enrollments from Covid and the voluntary suspension of new pre licensure cohorts in Phoenix based.
Based on this outlook. We believe this financing will sufficiently bridge our liquidity needs until our business is cash flow positive, which we expect to achieve in fiscal year 2024.
With respect to our share count the weighted average number of basic common shares outstanding at the end of the quarter was $25 million 41733.
Versus $24 million 544334 in the prior year period.
Today in the earnings release issued after the market close we introduced revised guidance for fiscal year 2022.
Do you do Aspen university's decision to voluntarily suspend enrollments and the formation of new cohorts.
Thats two Phoenix pre licensure campuses effective February 2022, we have revised our outlook for fiscal year 2022 revenue to a range of $75 5 million to $77 5 million from the prior range of 77 million to $80 million.
The new range for GAAP loss per share is 46 cent loss versus 42 cent loss versus the prior guidance of 38 cent loss to 29 cent loss.
EBITDA for the full year is now anticipated to be in the range of $7 5 million loss to $6 5 million loss.
As compared to the prior range of a $5 million loss to $3 million loss.
Lastly, we now expect adjusted EBITDA to be in a range of $3 5 million loss to $2 5 million loss versus the prior range of $2 million loss to breakeven.
That concludes our prepared remarks, I will now turn the call back to the operator for questions operator.
Operator, please open the call for Q&A.
Thank you and to ask a question simply press star one on your telephone to withdraw the question press the pound or husky.
And that is star one to ask a question one moment please.
We have a question from the line of Eric <unk> with Lake Street. Please go ahead.
Yeah, I wanted to first touch on the <unk>.
Covid trends you talked about through January the negative trends, what can you tell us about.
The same omicron impact in February as well as the.
Month to date with March.
Yes, good afternoon, Eric It's Mike Matthews.
Haven't seen any material changes.
In terms of our class starts.
Within our Aspen University online nursing programs since students student body behavior.
So, yes, so thus far theres no material change intra quarter so far.
Okay, and then I know you have to be guarded and what you can say about your ongoing discussions with the Arizona State Board of nursing, but you made.
K filing you talked about Youre in clicks trends this quarter trends, which were pretty encouraging that.
<unk> talked about through February 10th of 2022 that you are calendar year I'm correct scores were trending at around 85%.
Can you tell us where those are trending year to date.
Yes, Eric.
Important to note in our earnings remarks today, we indicated that until such time as we.
We complete our agreement with the board of nursing.
We've agreed to not make any further public comments related to <unk>.
Where we are with the negotiations as well as any intra quarter <unk> scores.
Okay, I understand I'll pass the microphone. Thank you.
Thank you. Our next question comes from Austin <unk> with Canaccord. Your line is open.
Hi, Thanks for taking my questions just a couple.
More qualitative questions.
Have other state nursing boards reached out to you as a result of what's happened in Arizona.
They have not to date now.
Okay.
Even though you've closed off enrollments.
Sort of curious about changes you've seen at the very top of the funnel are you still seeing inbound organic interest or has that tapered.
Are you talking with regard to our pre licensure program or our traditional online post licensure students.
Pre licensure.
Yeah.
The assumption is youre talking about our other locations not Phoenix because in Phoenix of course, we shutdown marketing full stop beginning with the the early February .
So at that point, our new new inquiries.
Essentially.
Dropped off materially.
Okay, and one last sort of philosophical question.
With the recent.
The recent developments call into question, how much of a nursing curriculum can actually be delivered online do you see that online and offline mix changing in the future.
Yes, that's a good question, what I would say to you is that.
As part of the process of working with the board of nursing one of the requests that they made of US was to hire an independent consultant.
And we are actually in the process of hiring such person and.
We think it will be very important to listen to an independent third party expert look at our curriculum do an analysis and we will certainly be opened.
Any potential improvements that they recommend.
Okay. Thanks very much.
Thank you.
Thank you. Your next question comes from Raj Sharma with B Riley Your line is open.
Yes. Thank you.
I had a question so it is.
Is the new credit facility and extension of the old credit facility was absolutely separately.
Yes, good question so.
It is a separate facility. So the company. Currently then has three forms of debt. The first is our original $5 million line of credit.
Which we have now extended the.
Maturity date for one year to November of 2023, and the interest rate on that is now 14%.
Secondly of course, we did this convertible note that we executed yesterday for $10 million.
And then finally, there is a third.
A piece of that it's a revolving line of credit for $20 million.
Which we don't have any.
Any.
It does.
At this point any.
Expectations to utilize that line.
Great and can you comment on whether the lenders are common to the old credit facility or just.
New set of lenders.
Yes.
Yes.
Investors in these in these debt facilities are asked to remain private so that's that's what we're doing.
Got it.
And then my other question was.
No.
You had you guys had put out an 8-K.
Sort of kind of a projection of growth for fiscal 'twenty three.
Are you still maintaining that projection you have taken the growth down.
Are you still maintaining that projection for fiscal 'twenty, three or would you reserved to talk about it with you.
Given the full year guidance.
Yes. This is a this is Matt levee.
Yes, we're going to we're going to provide more color regarding next year, when we provide our guidance along with the Q4 earnings call.
And at that point, we'll have more clarity regarding.
The situation with the resumption of cohorts in Arizona.
Arizona Phoenix PL locations. So I think thats, the time to where you should really focus on getting the cleared guidance from next year.
Got it and then just my last question on <unk>.
Just an extension of do you believe.
There would be could you give any color on sort of the impact on brand or impact on.
Enrollments led you could possibly see the other pre licensure campuses all your online business or do you think the changes that you've implemented so far would end up affecting them positively.
Yes, I mean, what I would say Raj is that.
We launched marketing in Atlanta.
I guess, a little over a month ago now.
And.
It's so far it's been outstanding.
The number of inquiries the number of.
Applications that we've already that have been submitted to us in a very short period of time, it's behaving a lot like the early days of Phoenix. So I don't think there is a damage to the brand.
Please understand that.
There hasn't been any formal action from the board of nursing in Arizona, Yes.
We're in the process of getting working with them and once once that consent agreement is completed of course.
Some public information at that point.
Thanks for that Michael and do you expect or is it a certain timeline, but would you expect a resolution.
On the consent agreement.
Yeah, I'd, rather not comment on the timing of this we are working closely with the board of nursing currently and.
I don't want to guess guesstimate as to when that's going to be completed at this point.
Got it and then my last question on is the registered nurse enrollment.
I wanted to understand the impact.
I do believe the rest of the industry.
Been impacted similarly, but outside of the Aspen to Oh.
Hum.
Proactive caught in advertising dollars and outside of the us stopping the enrollment of the Phoenix location.
Is the impact on enrollment year on year.
Is that the down 1% is that the way to look at it or.
Yes, no you hit it exactly correct.
As we outlined in our earnings release today as well as in our remarks.
If you take out the 51% decrease in Phoenix year over year combined with our decrease of our spend rate by 14% in Aspen nursing <unk> other unit.
Which caused an 18% decrease in enrollments in that unit, we were down 1%. So it's relatively flat.
Yes.
Got it thank you and congratulations on getting a new financing.
My questions offline. Thank you thanks Raj.
Okay.
Thank you. Our next question comes from Mike Grondahl with Northland Capital markets. Your line is open.
Hi, This is Michael on for Mike. Thanks for taking my questions maybe.
Maybe first just on some of the newer.
Cities campuses can you just give.
A little more color on all of it.
Cohorts are doing there I know, it's a kind of a noisy quarter with COVID-19 and whatnot, but give us any update there additional details.
Sure.
And our first year of our second Phoenix campus, our honor health campus.
We we saw revenues in that first 12 month period of somewhere in the vicinity of between $1 million and $1 million and $5 of revenue.
And Austin is our most mature campus that we've expanded to over the last year and a half.
And Austin track to about a $750000 revenue level for that first year.
So so Austin has been been very successful for us because again, its a smaller market versus the tier one markets such as Phoenix or in Atlanta that we just off.
And Tampa and Nashville are kind of attract into that kind of a half a million dollar range in that first year, so theres, a little bit smaller than Austin.
So and I've indicated previously that from an enrollment perspective, the first 12 months in Phoenix, We had about 500 enrollments Austin did about 300 and then the other two locations did a couple of hundred respectively.
Been kind of the the relative sizing of each of the various markets in terms of expansion.
Got it and then just.
One more one on the Phoenix as you buy those enrollments could you just talk about that.
That's kind of a fixed versus variable costs. There do you save some of that your timeframe.
Yeah can you repeat the question because you kind of broke up during your during your AR.
Your voice broke up.
Sure just on the Phoenix pause.
Do you see a decent amount from variable cost there is a lot of that is fixed on the enrollment side.
Well it depends on the program certainly.
In terms of our first year of prerequisite students. Those students primarily are taught by adjuncts. So that would be that is a variable cost but in Phoenix. Most of the professors are full time professors. So those are more those are more fixed cost.
And just to add to that there is definitely a reduction in marketing spend so we've taken that out for the Phoenix pre licensure business, if you will and Theres also.
Out of G&A costs. So we can redeploy to other locations within the P&L program like enrollment advisers those types of people. So there is some we will achieve savings there and just to kind of take that to the next level. When you think about we've talked before about G&A being something that we're trying to manage going forward.
We expect to fully take advantage of G&A reductions in Phoenix combined with.
Maintaining the line not increasing G&A on the corporate side.
To really hold the line on G&A going going forward like we have before so you can think about.
That kind of spend the way we've described it before.
Got it thanks.
Your next question comes from Jeremy Hamblin with Craig Hallum. Your line is open.
Thanks.
So I wanted to just take a step back and look at where.
The run rates are versus where.
You have looked at them in July so.
From a full year standpoint, your guide is down about 12% from.
Mid July when you.
Laid out guidance and but when you look at the April quarter, it's down somewhere between 20 and 25% depending on how it is.
It finishes out as we look forward.
You know historically there isn't.
A lot of sequential growth from the April quarter to the July quarter, and obviously theres a lot of variables that.
Unknown because of.
<unk>.
The factors that you laid out in.
In terms of what's causing an enrollment to be lower than previously expected.
But.
As we look forward to next year and think about typical seasonality I guess the first question is would you expect those seasonal trends to hold true and then the second question is related to your G&A structure.
Given that you've built to have.
But a larger organization.
And youre not getting.
The revenue run rates that you would've expected a year ago certainly.
Is there some thought to whether or not you need to take a little bit out of your your G&A structure on a go forward basis. Thanks.
Oh.
Yes. This is Matt I can I can answer these questions.
So we've kind of talked about this before when you take away the impact of what's going on in Phoenix pre licensure and just look at the business and how it how it how it kind of functions throughout the year those seasonal trends will be expected to maintain themselves through the next fiscal year now, albeit at a lower kind of.
Starting point because of the Covid pullback and in general when we provided guidance for Q4, and just kind of look forward.
We're not assuming any COVID-19 .
NASDAQ. So you can think about kind of run in results forward from this lower COVID-19 impacted plays and factoring in those same seasonal trends and so of course Q4 coming up as a higher <unk>.
Seasonally active quarter, and so that offset some of the pullback in the Phoenix.
PL location results in so that kind of.
Those kind of factors tend to net out.
So then.
Related to G&A.
So like I was saying before.
We will get some pullback in G&A spend related to the reduction of operations in Phoenix.
For the time being.
And then on the corporate side, Yes, we are holding the line, but on top of that we've actually gone through our corporate infrastructure and we've looked for places to save and we've actually pulled some costs out of our existing infrastructure to kind of rightsize ourselves to where we are today.
Now there is more we can do.
We're not going to get ahead of ourselves we're going to see what the results are with the negotiations with the Arizona Board of nursing and at that time, if we need to pull back more spend we will pullback more spend and it's not just in G&A, where this is applicable. This is also applicable in marketing spend in and even in the instructional area if need be so we've got levers that we can pull to kind of adapt to bid.
And as to the new reality of whats coming coming up with the board of nursing so.
And then the last point I'll make regarding all of that says when we say, we're still looking to get to cash flow positive we still.
In light of Covid, and what's going on going on in Phoenix pre licensure, we still are looking to get cash flow positive at the end of 'twenty four like we said because we can pull these levers if we need to and so this financing is meant to get us there.
So that's how to think about those.
Those items going forward does it if that makes sense.
Sure sure.
And then my other question really has to do with your <unk> per student.
So you had this really nice progression through.
You know kind of the middle of FY 'twenty one.
Where you had grown <unk> almost $16000 about 15 eight.
And you've seen a regression.
In that that figure and actually a pretty significant step down.
Here in Q3.
Can you.
Describe why you think that might be is it.
A slight reduction in the percentage of <unk>.
Pre licensure students is also reflective of perhaps more competitive pressures out there that while.
While we have a lot of inflation around us.
It doesn't appear to be an area where necessarily we're driving.
Higher.
Revenue generation per student.
Any color you can share on that.
Yeah, no actually it's a relatively straightforward answer so.
<unk> is a function of the number of enrollments that we achieved for each of our units times the lifetime value of those specific students.
From an enrollment perspective, and pre licensure as you guys know is estimated.
And LTV of $30000 per student.
Our traditional programs are less than 10000, LTV and of course Usu's <unk> program is in the 18000 range. So.
So if usu was down 10%.
This quarter in enrollments than Youre going to have an <unk> hit but more importantly, when we when you have a significant decrease in Phoenix pre licensure enrollments of 51% year over year, you can't help it have an <unk> decrease obviously given that each of those enrollments is valued at 30000.
LTV, so thats the simple math.
Right, Okay got it best wishes guys. Good luck.
Thank you.
Thank you and with that we close the Q&A session and I will pass the call back to Michael Matthews for closing comments.
Thanks to everyone for joining our third quarter fiscal 2022 call today and look forward to.
Having our next call in mid July for our fourth quarter earnings and have a good day. Thank you.
Thank you ladies and gentlemen, you may now disconnect.
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