Aspen Group Inc

Good afternoon.

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 2025, our future growth and growth strategy, fiscal 2022 USU growth, the percentage of revenue from our campuses and USU, bookings growth in fiscal 2022, 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 should not be considered as an indication of future performance. A 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 30th, 2021, and in the press release issued this afternoon. Aspen Group disclaims any obligation to update any forward-looking statement as a result of future development. 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. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release issued by the company today. Please note that the press release is available on Aspen Group's website, ASPU.com, on the IR calendar page under news 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, aspu.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. After I review our fiscal 2021 results, I plan to discuss what we're calling the Aspen 2.0 business plan, which is our plan to deliver on the goal of achieving and maintaining profitability starting in Q4 of this fiscal year 2022. Aspen Group exited fiscal year 2021 with solid momentum in our three 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 the full year, Bookings came in at 143 million, rising 29% from last year. Each of our three business units contributed to the fourth quarter and full-year revenue growth on a year-over-year basis. The increase in our two high SLPB programs, USU's MSN FNP program and Aspen University's BSN prelicensure program, were the most significant contributors and reinforces our focused capital allocation strategy. Aspen Online, our post-licensure degree programs for registered nurses or RNs looking to earn advanced degrees online saw revenue growth of 22% in the quarter and 16% for the full year. This business unit offers only online programs with the unique option to pay using our monthly payment plan or MPP. USU, which is primarily our MSN Family Nurse Practitioner, or FNP 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 students seeking a bachelor's degree to become an RN, grew 70% in the fourth quarter and delivered 117% growth for the full year. This degree program offers a three-year hybrid online slash campus-based program with an LTV of $30,000. The growth in our FNP and BSN pre-licensure programs demonstrates why we prioritize investing in these business units. Strong enrollment at the USU business unit primarily from FNP students who are RNs, was boosted by increased demand for this valuable degree that would allow these newly licensed nurses to change jobs from the front lines in hospitals and accept positions in private clinics and physician groups. The BSN pre-licensure program also sought great demand as millennials and working adults laid off during COVID sought degrees in professions that brought job security and a path to career advancement. Our first quarter net loss was approximately 2.3 million and adjusted EBITDA was 0.6 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 period is primarily due to spending related to launching our pre-licensure business into three 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 BSN pre-licensure campuses 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 its significant contribution to our top line growth is an enabler of tremendous operating scale over time. As of next quarter, we will be operating five pre-licensure campuses. We have two Phoenix campuses, One has been open for three years, which we call our main Phoenix campus. And the second, smaller campus, which is embedded in the Honor Health Hospital system, has been open for two 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. Finally, Nashville will have its first quarter class start next quarter. There are two elements to the BSN Prelicensure Business Unit's operational leverage. First, opening new campuses. Again, this is our highest LTV degree program. As we open new campuses, this high growth lever increases its revenue contributions more rapidly than our other business units. Second, new campuses turning profitable. After about six quarters, a campus typically becomes break even, 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 the fourth quarter, the BSN Prelicensure Unit generated net income of 0.8 million and adjusted EBITDA of 0.9 million for a 24% margin. Because of the upfront growth spending to launch three new metro locations, aggregate net income for this unit in the fourth quarter remained flat year over year. For the full year, the unit's net income grew 82% to $3.9 million, and the unit delivered a 29% adjusted EBITDA margin. Again, this reflects six to nine months of growth spending from increased marketing spend, instructional costs, and GNA. With only two profitable campuses and three that are still in the early quarters that are not yet generating sufficient revenue to fully cover their costs, 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 three quarters of operations and then decline each quarter until achieving break even in the sixth quarter. Based on our forecast, Austin and Tampa are expected to be break even in the first quarter of fiscal year 2023 and achieve profitability by mid-fiscal 2023. Nashville is anticipated to be break even in the fourth quarter of fiscal year 2023 and achieved profitability in early fiscal 2024. By this time next year of our existing campuses, we will have two that are profitable and two that are covering their operating costs. Only one of the current campuses will be still incurring losses, but at a lower level than today. So that's the profitability perspective for the next year for our pre-licensure campuses. Because 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, two 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 two-year core prelicensure program has grown to approximately 500 students per year, or 1,000, of course, over two years. We target to enroll an aggregate of 1,650 first-year prerequisite students, as that's when we consider the pipeline to be full. On average, two-thirds of our first-year students, or about a thousand of the 1650, are projected to matriculate to the final two-year core program, thereby producing two years of final two-year core students. We're forecasting to hit the 1650 first-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're proactively reducing new student enrollment year over year in the Phoenix Metro from approximately 1,600 last year to approximately 1,000 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're 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 FNP degree, our other high LTV program, has been an excellent business with fantastic growth and is now significantly profitable. Our results reflect how prudent we were in 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 asset. 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 for an 18% margin in fiscal 2021. The continued development of this business unit will be a growth driver this year, and we anticipate further improvement in profitability. In the fourth quarter, the FNP 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 Plus Other, which is primarily our fully online RN to BSN and MSN programs. delivers an LTV of $7,350 per enrollment, and our cost of enrollment, our COE, is projected to be $1,400 in fiscal 2022. Therefore, for every dollar we spend in advertising, we generate just over $5 of revenue. That's an excellent business, but significantly less efficient than our two other and the entire LTV businesses. Our second business, USU, specifically the FNP program, delivers an LTV of $17,820 per enrollment, and we're projecting a COE this fiscal year of $1,500. So for every dollar we spend in advertising for the FNP program, we generate yearly $12 of revenue. So USU is over double the efficiency of our legacy business. Finally, our BS Entry Licensure Program in the Phoenix Metro has been the company's superstar from an efficiency standpoint. Over the past three years, our COE has been no more than $500. So with an LTV of $30,000, 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 than our legacy business. As mentioned, the Phoenix metro is nearing capacity today. So we will reduce spending in that metro and focus growth spending to our three new metros, Austin, Tampa, and Nashville. These markets are what we call Tier 2 markets. as the metro populations are in the 2 to 3 million range versus Phoenix's 5 million. Consequently, we're projecting our COE in these markets to be in the $3,000 range for fiscal 2022 and perhaps over time decrease into the $2,000 COE range. Even at a $3,000 COE, given an LTB of $30,000, that delivers $10 of revenue for every dollar spent in advertising, which is similar efficiency as the USU FNP business. With that as a backdrop, we are introducing today a business plan that we're calling Aspen 2.0. Aspen 2.0 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, decrease spending in our lowest efficiency units. To be specific, we plan to reduce our year-over-year advertising spend rate in our Aspen legacy business by 1.3 million. while increasing our spend rate at USU by about $900,000. In our BSN prelicensure 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 three new metros by allocating a budget of 2.4 million. The net effect of all these efficiency decisions results in an advertising spending increase year over year of 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 increased growth spending is in the three new pre-licensure metros with higher COEs, 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 of bookings year-over-year of 6%. From 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, gap EPS, net income or loss, EBITDA, and adjusted EBITDA. We anticipate the revenue growth rate for fiscal 2022 to be in a range of 25% to 29% year over year, which will deliver significant improvement in both GAAP EPS and EBITDA. In fact, we are forecasting an over $5 million or over 90% improvement year over year on the EBITDA line which at the midpoint of our revenue guidance would deliver a leverage of nearly 30% for the year. In addition, we are forecasting full year adjusted EBITDA for fiscal 2022 in a range of $2 to $4 million. Achieving these projections is based upon number one, driving maximum efficiency from the Aspen 2.0 business plan we just outlined. and number two, opening one new campus timed at the end of fiscal year 2022. Specifically next spring, we are targeting a pre-licensure launch in a tier one metro market, a market which is larger than the Phoenix metro area. And as mentioned earlier, the Aspen 2.0 business plan gives us a clear line of sight to get profitability and positive cash flow in the fourth quarter of this fiscal year 2022. We anticipate a typical seasonal cadence to our business, with Q2 and Q4 our strongest seasonal quarters and Q1 and Q3 seasonally slower quarters. Rob Alisi 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, reduces our cash burn and gets us to positive cash flow by fiscal year end while continuing to enjoy growth rates 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 three business units. With our three new pre-licensure locations off to a great start, and the launch of double cohorts in Phoenix, we look forward to achieving a year of solid performance. We have built relationships with the departments of education and the boards of registered nurses in four rapidly growing states, as well as the largest healthcare and hospital organizations and some of the fastest growing metros in the country. These relationships are important assets to our business. Our proprietary tech stack and CRM system are competitive differentiators that lower our enrollment costs, which we pass on to our students in lower tuition rates 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 targets having 12 operational ESN pre-licensure locations throughout the western and southern United States by 2025, and we remain committed to this goal. I couldn't be more excited to announce the company has appointed Matthew LaVay as its Chief Financial Officer, effective August 16th. The company conducted an extensive search, and Matt, frankly, was well above and beyond any candidate we interviewed. His career is a series of growth successes, both on the public and private side, and his experience in the education, financial services, and technology fields couldn't be a better fit for Aspen Group's strategic roadmap. I'm looking forward to working hand in hand with Matt in the coming years, and we have a lot to accomplish and much shareholder value to drive. The probability of achieving our long-term goals has no doubt improved 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.