Aspen Group, Inc. Price & Performance (ASPU)

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 enrollment and revenue trends, revenue growth, our proposed marketing and other spending trends, Our future growth and growth strategy, the timing concerning completion of the pre licensure teach out, The timing of receipt of funding from the DOE and generation of positive operating cash flow. Actual results may differ materially from the results And uncertainties related to Aspen Group's business is contained in its filings with over the counter markets, including the quarterly report for the 6 months ended October 31, 2023, and in the press release issued this afternoon. Other risks include our reliance on third parties who may have different priorities government spending on health care, which partially to create the demand for nurses and our ability to sublease real estate we lease. AgFin Group disclaims Any obligation to update any forward looking statements as a result of future developments. Also, I'd like to remind you that during this conference call, The company will discuss EBITDA and adjusted EBITDA, which are non GAAP financial measures in talking about of the company's performance.

Reconciliation 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. It also will be available atotcmarkets.com/otcqb. A transcript of this conference call will be available for 1 year on the company's website. Now, I will turn the call over to Mr. Matthews.

Good afternoon, and thank you for joining our earnings conference call for the Q2 of fiscal year 2024. I'm looking forward to sharing some exciting updates and achievements from Aspen Group in terms of our income statement performance, balance sheet improvements and operating results. Let's start with our financial performance. In Q2 fiscal year 'twenty four, we made significant progress in several key areas. We narrowed our net loss year over year by an impressive 30%, helped by our financial Amid the wind down of the Aspen University pre licensure program, I'm delighted to announce that we achieved our 4th Consecutive quarter of positive EBITDA. Additionally, we generated cash from operations during the 2nd fiscal quarter. Enrollments at Aspen University and United States University have been on the rise over the past two quarters, even given our minimal Internet advertising Spend. We attribute this to the robust demand we continue to see in the healthcare industry, especially for postgraduate nursing degrees for registered nurses. Our online postgraduate degrees at Aspen and the highly coveted MSN FNP program at United States University provides students with flexible program and payment options, especially for working RNs to attain advanced degrees and improve their career options.

The enrollment growth not only reflects The value of our programs and our attractive monthly payment plans, but it also reflects the strength of our university brands. We instituted tuition increases effective September 1, 2023, and the sequential bump in Q2 enrollment certainly reflects the pull I'd like to switch now to our academic program achievements. We are proud to report that we are currently graduating our largest cohorts from the Aspen University BSN pre licensure program in Arizona. Notably, the NCLEX first time pass rate in Arizona in the 4th calendar quarter ending December 31, 2023 has increased to an impressive 89%. To be specific, in the 4th calendar quarter, 93 of 105 first time NCLEX takers in Arizona passed the exam. Additionally, in Texas, 8 of 9 first time NCLEX takers passed in the 4th calendar quarter, reflecting an 89% first time pass rate. Finally, in Tennessee, we had our 1st graduate take the NCLEX exam in the final week of the 4th quarter and passed than the first time. Our success in elevating the first time pass rates for NCLEX scores in Arizona and other states underscores our steadfast dedication to enhancing program rigor and refining student test preparation, alongside various other enhancements that positively impact the outcomes of all Pre licensure students at Aspen University.

Finally, we expect to teach out of our pre licensure program to be completed in Arizona this month and in all remaining states by mid-twenty 24. Turning to our financial transparency, we want to assure you that the parent AGI has remained current with the required OTC Markets quarterly financial filings. You can find these filings on our quote page on the OTC Markets website under the disclosures tab. We have fulfilled our stated commitment to deliver positive EBITDA and have achieved this goal for the 4th consecutive quarter. From a liquidity perspective, we have positive news as well. We generated over $400,000 of Cash from operations in the quarter, which is attributed to our reduction of G and A spend and the receipt of 2 financial aid payments from the Department of Education at Aspen University. Prior to the end of January 2024, We are projecting an unrestricted cash balance exceeding $2,000,000 There are two factors contributing to the increase in projected unrestricted cash balance. First, the reduction of our surety bond in Arizona from $5,500,000 to $2,500,000 reduced our restricted cash 2nd, we anticipate we will receive a substantial financial aid payment with the Department of Education of I want to address 2 closely related subjects.

First, the Distance Education Accrediting Commission, or DIACC, Show cause directive that was issued to Aspen University this past February. We underwent a Special visit by a team of DIACC evaluators in October, which was implemented as part of the show cause directive as well as our 2023 Reaccreditation requirement. We anticipate receiving the commission show cause and reaccreditation decision in approximately the next 60 days. Regarding Aspen University's heightened cash management 2 or HCM2 status, Recall that the U. S. Department of Education placed the university on this federal financial aid status in February immediately following the D Act show cause directive. Under HCM2, we successfully received 4 reimbursements thus far. And as previously noted, we anticipate receiving the 5th HCM2 reimbursement of $3,900,000 by the end of January 2024. In conclusion, the Q2 of fiscal year 2024 has been marked by financial stability, improved academic performance with regards to our Aspen University NCLEX first time pass rates and progress with our DX show cause and reaccreditation process and the Department of Education There is one final legal item to note regarding the class complaint in Arizona regarding the pre licensure program. On January 9, 2024, A final settlement was approved by the Superior Court Judge in Arizona, whereby Aspen University agreed to pay $550,000 in exchange for release of all claims of the settlement class, inclusive of attorneys' fees and costs. $500,000 of the payment is covered by Aspen's E and O insurance policy and the remaining $50,000 will be paid by Aspen University.

Thank you for your continued support and confidence in Aspen Group. I will now hand the call over to Matt In my comments on the quarterly results, I will refer to the Q2 that ended on October 31, 2023. Unless otherwise stated, all comparisons are to the prior year's Q2 ended October 31, 2022. As Mike mentioned in his remarks, we had a strong financial quarter highlighted by 2 key factors. First, although our marketing spend was reduced to maintenance levels late in fiscal Q1 2023, Enrollments at both universities increased this quarter. Total enrollments for AGI increased 5% from Q2 fiscal 'twenty three and 34% sequentially. Excluding the impact of the reduction of pre licensure revenue from the teach out, 2nd, we continue to benefit from cost controls implemented with the 2 restructurings in fiscal Q2 2023 and fiscal Q4 2023. Our year over year G and A expense is down 23% and we generated positive operating cash flow in the quarter. Financial highlights for the quarter are as follows: Total revenue was $13,800,000 versus $17,100,000 or a decrease of 19%. $2,300,000 of the decrease is attributed to the teach out of the pre licensure program, and the remainder of the decrease resulted from lower post licensure enrollments from Q3 fiscal 2023 through Q1 fiscal 2024 due to the effect of the decreased marketing spend.

Gross profit and gross margin were $8,700,000 63%, respectively, versus $10,200,000 60%, respectively. The year over year gross margin improvement is primarily a function of lower marketing spend and lower instructional costs and services associated with the enrollment stoppage in the pre licensure program. Instructional costs for the quarter were $4,200,000 or 31 percent of revenue, down from $5,500,000 or 32 percent of revenue. The decrease in instructional costs as a percentage of revenue was primarily due to the decrease in students in the pre licensure Core curriculum as a result of the teach out. The core curriculum of the pre licensure program requires an increase in the ratio of instructors to Fewer students in the program disproportionately decreased overall instructional costs. Total marketing and promotional costs for the Q2 were $348,000 or less than 3% of total revenue as compared to $824,000 or about 5% of revenue. The decrease in marketing in fiscal year 2024 to a quarterly targeted spend rate of $500,000 This level of spend is expected to the enrollments needed to resume growth of the student body in fiscal 2025 while allowing for the generation of positive operating cash The quarter's general and administrative costs were $8,400,000 or 61 percent of total revenue compared to $10,900,000 or 64 percent of total revenue.

The year over year decrease in G and A spend is due to both the impact of the 2 restructurings initiated in fiscal 2023 and cost controls designed to reduce G and A spend across all functions, mainly corporate HEI. Total net loss was 1,600,000 or a loss of $0.06 per basic and diluted share compared to a net loss of $2,300,000 or a loss of $0.09 per basic and diluted share. From a unit perspective, Aspen University's net income for the quarter was $582,000 compared with $1,100,000 USU's net income was $1,600,000 versus $1,800,000 Finally, AGI incurred a net loss of $3,800,000 compared to a net loss of $5,200,000 Included in the AGI loss is interest expense of $1,000,000 compared to $710,000 After the repayment of the $1,500,000 of principal on our senior secured loan, our quarterly cash interest payments will be approximately 700 and Turning to non GAAP financial measures. Please see the reconciliation to GAAP contained in our press release issued today. Consolidated EBITDA for the quarter was positive $419,000 as compared to an EBITDA loss of $603,000 Again, strong post licensure revenue, Reduced marketing spend and G and A cost control measures drove the improvement in EBITDA.

As Mike We achieved our 4th consecutive quarter of positive EBITDA and cumulative positive EBITDA over the past 4 quarters is approximately 2,700,000 2nd quarter EBITDA compared to the prior year quarter for each of the three units was as follows: Aspen University generated $1,300,000 compared to $1,900,000 USU generated $1,800,000 compared to 1,900,000 AGI had an EBITDA loss of $2,700,000 compared to an EBITDA loss of 4,400,000 Consolidated adjusted EBITDA was $1,100,000 compared to $537,000 From a unit perspective, Aspen University generated adjusted EBITDA of $1,600,000 compared to adjusted EBITDA of $2,100,000 And adjusted EBITDA margin was 22% as compared to 20%. USU generated adjusted EBITDA of $2,000,000 compared to adjusted EBITDA of $2,100,000 and adjusted EBITDA margin of 30% as compared to 32%. Finally, AGI Corporate incurred an adjusted EBITDA loss of $2,500,000 compared to an adjusted EBITDA loss of 3.7 Moving to the balance sheet. As of October 31, 2023, our unrestricted cash and cash equivalents were $1,900,000 and restricted cash was $4,100,000 compared to a balance of $1,400,000 and $4,400,000 respectively at April 30, 2023. Included in the unrestricted cash balance is the release of $1,500,000 associated with the second amendment to the 15% debentures. The 15% debentures Originally required the company to maintain $2,000,000 of restricted cash and the second amendment decreased the requirement to $500,000 We plan to repay the $1,500,000 as a reduction of principal prior to the end of January 2024, And we issued JGB penny warrants equal to 4% of the outstanding stock of HEI.

Subsequent to the closing of the quarter, we received $1,000,000 from the reduction of the surety bond required by the State of Arizona. Additionally, as Mike mentioned, we anticipate the receipt of a $3,900,000 reimbursement from the Department of Education for student financial aid prior to the end of January 2024. After the receipt of the Department of Education payment, The company's unrestricted cash balance is projected to exceed 2,000,000 Cash used in operations for the 1st 6 months of fiscal 2024 was $4,200,000 Importantly, though, cash generated from operations for the 2nd quarter was positive $409,000 In the Q1, we used $4,600,000 of cash in operations due to delays in receiving government student financial aid payments After our placement on the HCM2 payment method and due to increased student AR as strong enrollments increased Use of the monthly payment plan. In the second quarter, we generated $409,000 of cash from operations due to the processing of 2 HCM2 payments totaling $4,800,000 and the impact of ongoing cost savings, which were offset by an increase in student accounts receivable due to continued strong enrollments. We had CapEx spend during the 1st 6 months $600,000 primarily related to capitalized software. Cash generated from financing activities for 6 months was $5,200,000 due to cash provided by the 15% debentures, offset by the repayment of outstanding borrowings under the $5,000,000 credit facility, repayment of a portion of the outstanding 15% debentures and Expenses associated with the debenture offering.

With respect to our share count, the weighted average number of Common basic shares outstanding at the end of the quarter was 25,548,046 versus $25,305,363 in the year ago quarter. We are not providing guidance at this time. That concludes our prepared remarks. I will now turn the call back to the Operator, please open the call for Q and A.

Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer There are no questions in the queue at this time. I'd like to hand it back To management for closing remarks.

Thank you, everyone, for joining our Q2 fiscal 'twenty four earnings call. Look forward Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.