Earnings Call: Q4 2021

Jul 13, 2021

Good afternoon. Welcome to AgFin Group's Fiscal Year 2021 4th 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, a 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 Affton Group's business is contained in its filings with the Securities and Exchange Commission, including the Form 10 ks for the fiscal year ended April 30, 2021, and in the press release issued this afternoon, asking you to disclaim 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. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables and the press release issued by the company today. Please note that the press release is available on Acton Group's website, aspu.com, on the IR Calendar page under News, Events. There will be a transcript of this conference call available for 1 year on the company's website. Please note that the earnings slides are available on AgFin Group's website, astu.com, on the Presentations page under Company Info. Now, I will turn the call over to Michael Matthews, 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 3 business units to deliver 35% revenue growth year over year in the 4th quarter and 38% for the full year. Additionally, strong enrollment growth lifted bookings in the 4th quarter by 21% year over year. For the full year, bookings came in at 143,000,000 rising 29% from last year. Each of our 3 business units contributed to the 4th quarter and full year revenue growth on a year over year basis. The increase in our 2 highest LTV programs, USU's MSN FNP program and Aspen University BSN pre licensure program were the most significant contributors and reinforces our focused capital allocation strategy. Accent 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 NPP. USU, which is primarily our MSN Family Nurse Practitioner or SMP program, grew 40% in the 4th quarter and was a strong growth driver in fiscal year 2021, delivering a 48% increase. Our 3rd business unit, the BSN pre licensure program for students seeking a bachelor's degree to become an RN, grew 70% in the 4th quarter and delivered 117% growth for the full year. This degree program offers a 3 year hybrid onlinecampus 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 and hospitals and accept physicians in private clinics and physician groups. The BSN pre licensure program also saw great demand as millennials and working adults laid off during COVID saw degrees in professions that brought job security and a path to career advancement. Our Q1 net loss was approximately $2,300,000 and adjusted EBITDA was $600,000 And for the full year, we lost approximately $10,400,000 and produced adjusted EBITDA of $1,300,000 This decrease from the prior year period is 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 BSN pre licensure campuses as they deliver the highest LTV of all of our programs. Let me take a moment to explain Now 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 open for 3 years, which we call our main Phoenix campus And the 2nd smaller campus, which is embedded in the HonorHealth Hospital system, has 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 1st quarter class start last November. Finally, Nashville will have its 1st quarter class start next quarter. There are two elements to the BSN pre licensure business unit operational leverage. 1st, Opening new campuses. Again, 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. 2nd, new campuses turning profitable. After about 6 quarters, a campus 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 the Q4, the BSN III licensure unit generated net income of $800,000 and adjusted EBITDA of $900,000 for a 24% margin. Because of the upfront growth spending to launch 3 new metro locations, aggregate net income for this unit in the 4th quarter remained flat year over year. For the full year, the unit's net income grew 82% to $3,900,000 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 and A. With only 2 profitable campuses and 3 that are still in the early quarters, They're not yet generating sufficient revenues to fully cover their costs. This unit drove net income on an annual basis to the tune of almost $4,000,000 Most of the campus start up costs occur in the 1st three quarters of operations and then decline each quarter until achieving breakeven in the 6th quarter. Based on our forecast, Austin and Tampa are expected to be breakeven in the Q1 of fiscal year 2023 and achieve profitability by mid fiscal 2023. Nashville is anticipated to be breakeven in the Q4 of fiscal year 2023 and achieve profitability in early fiscal 2024. By this time next year, of our existing campuses, 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 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, 2 cohorts enter the core program at the main campus and another cohort enters the program at the HonorHealth 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 1,000, of course, over 2 years. We target to enroll in aggregate of 16.50 1st year prerequisite students, but that's when we consider the pipeline to be full. On average, 2 thirds of our 1st year Students for about 1,000 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 We're expecting to hit the 16 50 1st 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 core students per year. Consequently, we're proactively reducing new student enrollment year over year in the Phoenix Metro from approximately 1600 last year to approximately 1,000 this year. However, It's important to note that the additional flash 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 $18,000,000 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 $10,000,000 At the time, was relatively small and losing money. It is now a valuable, profitable asset. USU, in fact, delivered nearly $20,000,000 of revenues in fiscal 2021. And USHU generated net income of 2 point $9,000,000 and produced $3,600,000 of adjusted EBITDA or 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 Q4, the FNP and pre licensure programs together contributed 51% of revenue, up from 46% in the Q4 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 primarily our fully online RN to BSN and MSM programs, delivers an LTV of $7,350 per enrollment and our cost of enrollment, our COE is projected to be $1400 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 to other higher LTV businesses. Our second business, USU, specifically the F and T program, delivers an LTV of $17,820 per enrollment, and we're projecting a COE this fiscal year of $1500 So for every dollar we spend in advertising for the FNP program, We generated nearly $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 3 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 3 new metros, Austin, Tampa and Nashville. These markets are what we call Tier 2 markets as the metro populations are in the 2000000 to 3000000 range versus Phoenix's $5,000,000 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 the $3,000 COE given an LTV of $30,000 has delivered $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 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 in our AppSpin Legacy business by 1,300,000 while increasing our spend rate at USU by about $900,000 In our DSM pre licensure business, We will reduce spend in the Phoenix Metro to a maintenance spend of approximately $500,000 for the year and direct significant growth spending to the 3 new metros by allocating a budget of 2,400,000 The net effect of all these efficiency decisions results in an advertising spend increase year over year of only $1,600,000 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 3 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 $143,400,000 to 151,300,000 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 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 $5,000,000 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 in a range of $2,000,000 to $4,000,000 Achieving these projections is based upon: number 1, driving maximum efficiency from the 2.0 business plan we just outlined and number 2, opening 1 new campus timed at the end of fiscal year 2022. Specifically, next spring, We are targeting a pre licensure launch in a Tier 1 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 GAAP profitability and positive cash flow in the Q4 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 Olisey 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 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 achieving a year of solid performance. We have built relationships with the departments of education and the boards of registered nurses in 4 rapidly growing states, as well as the largest health care and hospital organizations in some of the fastest growing metros in the country. These relationships are important assets our business. Our proprietary tech stack and CRM system are competitive differentiators that lower our enrollment costs, which we passed 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 a horrible convenient degree program that enable working adults to achieve their career goals. Aspen Group's strategic roadmap targets having 12 operational DSM pre licensure locations throughout the Western and Southern United States by 2025, and we remain committed to this goal. Finally, I couldn't be more excited to announce the company has appointed Matthew LeVay as its Chief Financial Officer effective August 16. 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 field couldn't be a better fit for Aspen Group's strategic roadmap. I'm looking forward to working hand in hand with Mats 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. Thank you, Mike, and good afternoon, everyone. I will begin with a review of our financial results For the 2021 fiscal Q4, I'll add a few balance sheet items and finish with our outlook for fiscal year 2022. In my comments on the quarterly results, I will refer to the quarter that ended on April 30, 2021. All comparisons are to the prior year's 4th quarter ended April 30, 2020, unless otherwise stated. Total revenues were $19,100,000 versus $14,100,000 in the year ago quarter. Revenue from our highest LCD businesses, Aston University's DSNP Licensure Program and USU, primarily the FNP program, accounted for 51% of our consolidated revenue. Aspen University's traditional post licensure online nursing plus other unit, In addition to our growing doctoral programs, contributed the remaining 49% of total company revenue in the quarter. For fiscal year 2021, core revenues increased 38% to $67,800,000 compared to $49,100,000 in the prior year. AU's BSN pre licensure program in USU accounted for 50% of the company's full year consolidated revenues. Revenue growth in the quarter was supported by strong new enrollments growth, which increased overall by 23% to 2,182, reflecting strong enrollment growth in our highest LTV programs. Aston University generated 1593 new student enrollment, up 19% year over year, Boosted by strength in its faculty and nurses with other degree programs, United States University delivered 589 new student enrollments, a 36% increase year over year, primarily from MSN Family Nurse Practitioner for SMT enrollment. As Mike stated, Aspen University has begun to intentionally slow year over year enrollment growth at its Phoenix prelicer campuses, which has the effect of moderating prelicer enrollment growth in the quarter. These Phoenix campuses currently are nearing a full pipeline of 1st year online prerequisite students. Gross profit and gross margin were $9,900,000 52%, respectively, versus $8,400,000 and 59 percent respectively for the year ago quarter. For fiscal year 2021, Gross profit increased by 28 percent to $36,900,000 or 54% gross margin versus 28,900,000 or 59% gross margin in the prior year. Overall, constructional costs for the quarter were $4,600,000 or 24% of revenue, up $2,700,000 or 19 percent of revenue. For the full year, instructional costs were 15,300,000 23% of revenue, up $9,700,000 or 20% in the prior year. The increase in instructional costs as a percentage of revenue primarily due to the hiring of full time faculty in pre licensure program at the main campus to support double cohorts that began in February, as well as faculty hiring at the new campuses in Tampa, Florida and Austin, Texas. Total marketing and promotional costs for the 4th quarter were $4,100,000 or 22 percent of total revenue, up from $2,700,000 or 19 percent of revenue. Marketing and promotional costs for fiscal year 2021 were $14,200,000 or 21% of total revenues, up from $9,500,000 or 19% in the prior year. The increase in marketing as Percentage of revenue results from the planned increase in ad spend in fiscal year 2021, targeted primarily to our highest LTV programs combined with growth spending in our premium pre licensing metros. The quarter's general and administrative costs were $11,200,000 compared to $7,700,000 during the comparable prior year quarter. Quarterly increase in G and A is primarily due to higher headcount and the related increase in compensation and benefit expense, which includes stock based compensation expense to support the growth of the businesses, the campus expansion cost of approximately $1,000,000 at Aston University and recruiting fees. In connection with the resignation of the former Chief Financial Officer, the company incurred non recurring cash severance costs of $300,000 and accelerated stock based compensation expense of approximately $600,000 related to the accelerated vesting of R and Ds and options. For fiscal year 2021, general and administrative costs were $41,900,000 or 62 percent of revenue compared to $30,300,000 or 62 percent of revenue during fiscal year 2020, an increase of $11,600,000 or 38%. Please note that included in our full year G and A costs are $2,400,000 of non recurring items. Year over year increase is primarily due to the factors described previously in the quarterly increase as well as $1,200,000 of accelerated Non cash stock based compensation and revision expense was $9.10 tranche RSC price vesting. Total net loss was $2,300,000 or net loss per basic and diluted share of $0.09 compared to a loss of $664,294 or net loss per share of $0.03 in the prior year quarter. For the fiscal year 2021, total net loss was $10,400,000 or net loss per basic share of $0.44 versus a loss of $5,700,000 or $0.29 in the prior year period. From a unit perspective, Pasadena University's net income for the quarter was $1,400,000 versus $1,900,000 in the prior year period. USU's net income was $1,000,000 versus net income of $595,000 in the prior year quarter. Finally, AGI issued a net loss of $4,700,000 for the quarter compared to a loss of $3,200,000 in the prior year quarter. For fiscal year 2021, AU generated $7,300,000 of net income and USU generated $2,900,000 BGI Corporate incurred a net loss of $20,700,000 for fiscal year 2021. Consolidated EBITDA for the quarter was negative $1,400,000 as compared to EBITDA of $211,000 in the prior year period. 4th quarter EBITDA period over period, each of the three units was as follows: Aston University, dollars 2,200,000 compared to $2,400,000 USU $1,100,000 compared to $619,000 and AGI Negative $4,700,000 compared to negative $2,800,000 Consolidated EBITDA for fiscal year 2021 was negative $6,000,000 as compared to negative $1,600,000 in the prior year period. AU generated EBITDA of 9,500,000 USG generated EBITDA of $3,100,000 and AGI Corporate incurred EBITDA of negative $18,600,000 in fiscal 2021. Consolidated adjusted EBITDA was 639,152 compared to adjusted EBITDA of $1,400,000 in the prior year quarter. From a unit perspective, Hapson University generated Adjusted EBITDA of $2,600,000 in the 4th quarter with Aspen's BSN pre licensure program contributing adjusted EBITDA of $946,000 as compared to adjusted EBITDA of $3,100,000 with AppSync's pre licensure program contributing adjusted EBITDA of $836,000 in the Q4 of 2020. USCU generated adjusted EBITDA of $1,400,000 compared to $689,000 in the Q4 of 2020. Finally, AGI Corporate incurred an adjusted EBITDA loss of $3,300,000 in the quarter compared to an adjusted EBITDA loss of $2,400,000 in the prior year period. The full fiscal year 2021 consolidated adjusted EBITDA was 1,300,000 compared to $2,700,000 in the prior year. Of the consolidated adjusted EBITDA, AU generated $11,600,000 And USG generated $3,600,000 of adjusted EBITDA, while AGI Corporate incurred an adjusted EBITDA loss of $14,000,000 which includes $2,700,000 of onetime expense items. Moving to the balance sheet. At April 30, 2021, our cash and cash equivalents were $8,500,000 with restricted cash of 5,200,000 compared to cash and cash equivalents of $14,400,000 with restricted cash of $3,600,000 at April 30, 2020. Together with our unused $5,000,000 revolving line of credit, we ended the quarter with approximately $13,500,000 of liquidity resources. Additionally, in a 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 25,342 versus $21,739,300 in the year ago quarter. Today, in the earnings release issued after the market closed, we introduced the following guidance for fiscal year 2022. We anticipate revenue in the range of $85,000,000 to $88,000,000 representing an increase of $18,700,000 or 27% year over year in the midpoint of the guidance range and GAAP earnings per share of negative $0.18 to negative 0 point 12 dollars for an improvement of $0.29 or 66% year over year in the midpoint. EBITDA for the full year is anticipated to be in the range of negative 1,600,000 to $400,000 an increase of $5,400,000 or 90% in the midpoint. Lastly, We expect adjusted EBITDA in a range of $2,000,000 to $4,000,000 increasing year over year by 1,700,000 137% in the midpoint of the range. That concludes our prepared remarks. I will now turn the call back to the operator for questions. Thank you. 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, Ryan. Good afternoon. First, I wanted to start off, 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? Phil performed relatively speaking. Yes, sure. So the 1st year of enrollment in our Phoenix Metro, I'm going back Obviously, 3 years now. We generated approximately 500 enrollments in that 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 1st calendar year of activity. So it's running about half the size of Phoenix. So we're very pleased with how Austin has gone thus far. It's not going to be the same size as Phoenix, simply because these other three markets that we've launched into, they are Tier 2 markets and the size of those metros is between $2,000,000 $3,000,000 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 a little bit of a struggle for us out of the 3. We're probably Acting to, I'd say, 125 enrollments in that 1st year. So it's probably running about half the size of, say, Nashville Phil and Austin. So again, it's each market is very different in In terms of competition, in terms of size, etcetera. 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 one city and the early success of those double Cohorts at the main Phoenix campus, has that changed your view on the size of the new campuses you want to target down the road? No, I don't think so. So I think our plan has always been to have 12 campuses open over the next handful of years, 2025 specifically. And of course, we're 5 we have 5 now and we'll open another 7 over the next 4 years. We've always planned to as a mixture of Tier 1s and Tier 2s. We think that these 3 Tier 2s we've opened in are going to be very profitable businesses. As we Discussed earlier, even on a worst case scenario, if the cost is $3,000 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, dollars 1 spent in 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 or enrollments yet. We think it will trickle down to the 2,000 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 1 in the next two fiscal years. You may sprinkle in 1 or 2 Tier 2s. Okay, great. Congrats again, guys. I'll hop back in queue. Thank you, Ryan. Thank you. Our next question comes from Eric Martinuzzi with Lake Street. You may proceed with your Yes. I had a question about the Aspen 2.0, kind of the new business plan. To me, you've always been kind of a marketing efficiency oriented company. So I'm wondering What is 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 Forward level discussion that resulted in SM2.0. Yes. Good afternoon, Eric. Great question. We did in fact Have some really healthy debate, both in the executive staff as well as, of course, the Board. And we made a determination that If you really think about what has been the Aspen Group 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 the highest LTV businesses And our traditional Aspen Nursing Plus Other business, which is a good business, it's a 1:5 ratio, We're going to drop spending and take those dollars and direct them toward our doctoral business, toward our FNP business And of course, the new markets. And so the consequence of those decisions allows us to continue to have Growth, we're projecting obviously mid to high 20s for the year, but 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 this fiscal year. And I assume that, that plan that you put forth here for FY 'twenty two assumes You're self funding, there's not any other capital required besides what's on the balance sheet to hit that plan? Yes. I'm glad you asked that question, Eric, because if you look at our EBITDA Year over year, we're projecting at our midpoint, we're projecting an improvement of EBITDA of $5,400,000 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 6,000,000 And our cash burn was approximately $5,800,000 for the full year. So I hope everybody picked up on the fact that We no longer burn more cash than we do our EBITDA results. The monthly payment plan over the years has caused us to have a Higher cash burn than our EBITDA result. This is the 1st year where EBITDA now is essentially equaling our cash results. So if we're projecting EBITDA this year and our forecast is to be in the vicinity of breakeven for the year, that Cash 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 amount. So this is this business plan has allowed us to become a self funded company on a go forward basis. Okay. And then last question for me. You've given us an outlook for the year. I'm looking for a little bit more color. I know Q1 is typically your most challenging. Right now, there's a consensus estimate of about 19 point $3,000,000 which would be roughly flat with where you finished Q4. What's your comfort level with the Q1 revenue? Yes. And so what I know 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 in particular taking vacations, of course, now that COVID is thankfully, it started to quiet down. So we expect revenues to rise modestly. Probably, we'll 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 2.0 in FY 2022. Thanks, Derek. Thank you. Our next question comes from Darren Aftahi with ROTH Capital Partners. You may proceed with your Hey, this is Dylan on for Darren. Thanks for taking my questions. First one, 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 given those are Tier 2, I think you mentioned they're at least so far tracking about half the rate of Phoenix, but also have a little bit higher cost of enrollment. So I mean like how comfortable are you with that 6th quarter to breakeven, I guess, sort of timeline? Yes, we're pretty comfortable. I mean, if you guys remember back in history, We broke even after 12 months of operations in our First Phoenix campus, And we had an exactly similar situation happen in our HonorHealth campus. And HonorHealth campus is A smaller business than our main Phoenix campus. So HonorHealth in many ways is very similar to what we're going to have with Our new Tier 2 markets in terms of its maturation timeframe. So I would say that, yes, our original campus was 4 quarters. HonorHealth was somewhere between 5 6 quarters. And I would say these 3 new locations are probably looking, yes, right around the 6 quarters before it breaks even. Great. Thank you. And as a follow-up, Is there sort of, I mean, anything other than any specific reason for delaying That the new Tier 1 campus into, I guess, technically it's fiscal year 'twenty three. Is that because it gets you an extra quarter to get profitable in 4Q and stay profitable? Or is there something else with potential lease or getting the right setup cost there? No. I mean, we just made a decision that we wanted to maximize our 4th quarter net income result and positive cash flow. That was really the reason. And so we'll start marketing into this new Tier 1 market right at the end of the quarter 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 cash generation quarter in Q4, so that everyone can see The potential of this company in future years. Got it. So is that 4Q outlook Like a baseline or that's a this is like we set Aspen 2.0 and we're 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 As being the quarter that turns positive, materially speaking. Okay, got it. Thank you. And by the way, just one final point to give you kind of an indication of our breakeven point. It's in the vicinity of about $23,000,000 For a quarter, that would be our breakeven point. So obviously, if we produce $24,000,000 $25,000,000 it becomes a Great. Thank you. Thank you. Our next question comes from Austin Moldow with Canaccord. You may Hi, thanks for taking my questions. You mentioned reducing spend in the Aspen, Nursing and other segments for the first time. So can you give Any color on your expectation for what enrollment and revenue growth will do in response to that reduction? And can you also give A quick update about the competitive intensity for that solely online segment? Yes. I have to say that Our legacy segment, which is primarily our RN to BSN program and our MSN program at Aspen Those are of course all fully online programs. We're seeing no change in demand. In fact, Our marketing team has been telling me that our cost per lead in that business is the best it's ever been. So there is not a competitive issue. There's no degradation on our side. We are Planning to spend $1,300,000 less year over year. And again, we're going to direct that spending into the higher LTV business. 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, dollars 1400 or so, The $1,300,000 will cause our enrollments in that business to drop by around about 1,000 enrollments year over year. Got it. You said that your new metro populations are about half the size of Phoenix, but the projected marketing efficiency is, I think, dollars 10 for $60 if I called it correctly. Why is that bigger disparity in the marketing efficiency? Are there any other major differentiating factors there that causes that? No, in fact, I hope that there's a lot of respect to 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 you're a new brand and you go into a market for the first time, It takes time to get 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're always going to see artificially high 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 $2,000 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 Mike on for Mike. Thanks for taking my questions. Maybe first off just on enrollment advisors. Should we think about that as relatively flat for this upcoming year Or just kind of reallocating between the different segments? Yes, exactly. What we'll do is we in total today, we have Somewhere in the vicinity of about 130 enrollment advisors 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 a number of Advisors from our nursing plus other group to our doctoral and to our USU FNP units. Our pre licensure business today is pretty much already staffed and we'll keep that flat We're staffed well for each of our five locations. Got it. Then maybe on the sort of conversion rate between 1st year students and then getting into the sort of core student class and then once go on to complete all credits, is there many levers pulled there Did I improve that? I think it's like roughly 2 thirds, but can you talk about that a little bit? Yes. No, actually, I would say that There is very few levers to pull there. I mean, we've got roundabout 3 years of history now. And When a 1st year online student comes in, these are what we call PPN students, these are pre professional nursing students that This is essentially a sophisticated gauntlet of courses you have to go through, math and science courses to prove that you can ultimately become a registered nurse and effectively complete the 2 year core program. So we To date, we're our matriculation rate of that of those types of students is roundabout 60%. And I don't think it's going to change significantly in either direction. So hopefully that answers the question. Yes. Thank you. Our next question comes from Raj Sharma with B. Riley. You may proceed with your question. Hi, good afternoon. Congratulations on your new plan. If you could talk I know on the fiscal 'twenty two guidance, Advertising spend is going down a few notches. How should we think about the instructional costs as Percentage of sales and also marketing and promotional in total and then also G and A. I'm just trying to make sense The fact that your advertising costs are going down and how does the rest of the expense structure change or should it Stay the same. Hello, Raj. It's Mike Matthews. So number 1, as we announced our plan today, assuming we hit the middle point of our range of revenue, that will dictate the fact that our advertising spend as a percentage of revenue year over year will improve or drop from 19% to 17%. So that's the first advantage. Now again, let me be clear, we're not decreasing our overall Spend rate advertising spend rate for the company is 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 $150,000,000 this year, which puts us in Great position to continue to have substantial growth in future years. Instructional costs, We believe we'll be primarily flat year over year or perhaps go down slightly. The big difference is going to be G and A. We're going to try really hard this year to keep G and A at a single digit growth rate year over year, which will provide us with that substantial leverage that we talked earlier. One thing that I do want to point out, Raj, that we didn't mention 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 $2,800,000 of non recurring expenses. Our adjusted EBITDA 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 non recurring expenses of $2,800,000 and this year we're projecting An immaterial amount of non recurring expenses. We don't believe we're going to have very little to none, okay. Secondly, bad debt. Year over year, we're projecting that bad debt will go down year over year by about $1,300,000 So the difference between adjusted EBITDA And our EBITDA guidance, I want everyone to understand that there's about a $3,700,000 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 fiscal year, you got to take that $3,700,000 which is not going to repeat again this year into consideration for your updated report. Got it. And then Diverting advertising spend doesn't impact your core your Aspen Online BSN, MSN growth rate, As you just pointed out, but the new advertising spend on the pre licensure and the family nurse practitioner, that should keep enrollments. What I'm trying to get to is these changes don't impact your growth rates going forward. No, not at all. Not at all. Again, you have to realize that there's a couple of fundamental changes that are taking place, one of which is a proactive decision by the company and the other is kind of like a situation that we just had to deal with, right? So we were dropping Nursing plus other enrollments proactively by about 1,000 enrollments year over year, okay. And secondly, our Phoenix A prerequisite, our 1st year Phoenix student, the pipeline is nearing capacity. Our The analysis is $16.50 for 1st year students. And if you said to me, 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. But so just starting off from an enrollment point of view, We're minus 1,000 Aspen Plus Other and minus 600 in the Phoenix Metro. And 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're projecting 800 enrollments in the 3 new markets this year. We're going to increase our FNP enrollments by approximately 600 year over year and we're also looking to substantially grow our doctoral enrollment by 500 or 600. The net effect is about a 1% increase in enrollments year over year and as I said earlier, 6% increase in bookings. Got it. And then lastly, one last I know that you just mentioned $23,000,000 $22,000,000 $23,000,000 is your breakeven. The following year, 2023, if and beyond, if you see So 25% plus revenue growth rates with obviously, the quarterly rate is going to be Higher significantly higher than $23,000,000 Does that sort of all then mostly fall down to the bottom line? Yes, a lot of it will, correct. We're expecting a substantial EBITDA result next the following fiscal year fiscal 'twenty 3. 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 4th quarter earnings call. And of course, Our Q1 earnings call is in a very quick turnaround 2 months from now in 2nd week of September, and I'm looking forward to Everyone attending that as well. 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.