Aspen Group's (ASPU) CEO Michael Mathews on Q2 2016 Results - Earnings Call Transcript
Dec. 2, 2015 7:06 PM ET | About: Aspen Group Inc. (ASPU)
Aspen Group Inc. (OTCQB:ASPU) Q2 2016 Earnings Conference Call December 2, 2015 5:00 PM ET
Operator
Good day ladies and gentlemen and welcome to the Aspen Group Incorporated’s Fiscal 2016 Second Quarter Earnings Call. At this time all participants are in a listen-only mode, later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder today's conference is being recorded.
I would now like to introduce your host for today’s conference, Miss Janet Gill, Chief Financial Officer. Ma’am, please begin.
Janet Gill - CFO
Okay. Thank you, very much Liz. Good afternoon. Thank you for joining us today for Aspen Group's fiscal year 2016 second 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 include statements relating to expectations from our nursing programs, new student enrolments, increase in marketing spend, and forecasts including growth in revenue, gross margins and adjusted-EBITDA.
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 our business is contained in our filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in our Form 10-K which was filed on July 28, 2015. 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 the course of this conference call, we will discuss adjusted EBITDA and adjusted gross profit, which are non-GAAP measures when talking about 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. There will be a transcript of this conference call available for one year at the company's website.
I will begin today by reviewing our financial results for our fiscal second quarter, then we’ll turn the call over to the Chairman and CEO of Aspen Group, Mr. Michael Mathews. He will provide a business update focusing on our record new student enrolment and revenue growth.
To open, quarterly revenues were $1,913,161, a 58% increase from the comparable prior year period which is an acceleration from 46% year-over-year growth in the previous quarter. Note that the 58% revenue growth increase be our previous 54% revenue grow pre earnings guidance, largely based on the fact that we delivered over 200 new student enrolments in the month of October which was our highest new student enrolment month in our history.
Aspen group’s gross profit for the first quarter increased 40% from the comparable prior year period to $909, 19 or 48% margin. Our adjusted gross profit exclusive of depreciation and amortization increased 35% from the comparable prior year period to $1,45,360 or 55% margin.
On a sequential basis, our gross margins increased modestly by 1 percentage points from 47% to 48%, which was expected as we increased our marketing spend rate by 23% sequentially.
To be more specific, beginning in August the first month of our quarter, we increased our average monthly marketing spend rate by $30,000 per month from $120,000 per month to $150,000 per month.
Given it takes on average 60 to 90 days to generate a new student enrolment once a new lead hits our enrolment centre. The fact that our margins sequentially increase slightly in the quarter rather than declining is a result of the rapid rise and revenues we are currently experiencing. Given we plan to maintain our marketing spend rate at $150,000 per month for the remaining six months of our fiscal year, we expect to see gross margins improve materially in the coming two quarters.
Finally, our adjusted EBITDA resulted in a loss of $279,352 a sequential improvement of 7%. Our net loss applicable to shareholders was $744,420 or a loss per share of $0.01. That’s a sequential decline of 4%.
From a balance sheet perspective, Aspen ended the quarter with a cash balance of approximately $2.1 million, which includes $1,122,485 of restricted cash. Finally, our total stockholders' equity ended at a positive $1,316,961.
Now I’ll turn the call over to Michael Matthews to discuss our business progress, specifically the rapid growth in new student enrolments and revenues.
Michael Mathews - CEO
Thank you, Janet. This past quarter we delivered 557 new student enrolments as compared to 265 a year ago, that’s an improvement of 110%. As mentioned earlier, enrolments accelerated in the last month of the quarter as we enrolled over 200 new students in October which is a monthly record for the University.
As you would expect, Aspen school of nursing is responsible for the lions share of the new student enrolment growth. Specifically Aspen school of nursing is now on pace to grow on an annualized basis by approximately 1500 nursing students net or 125 per month on average. Aspen’s Bachelor Science and Nursing or BSN Program is accounting for 72% of that growth as that program is on pace to increase on an annualized basis by 1080 students net or 90 per month on average.
Based on this accelerated growth in our BSN program, we now expect our total degree seeking student body to grow from 4015 students at quarter end to approximately 5000 students by the end of our fiscal year to April 30, 2016.
That means we are now on pace to increase our degree seeking student body by 2000 students net on an annualized basis versus the previous pace of 1,200 students net on an annualized basis earlier this fiscal year. I’m sure you are interested as to why our BSN new student enrolments accelerated in the past quarter. While there are several reasons, first as we mentioned earlier beginning in August the first month of the quarter we increased our average monthly marketing spend rate by $30,000 from $120,000 per month to $150,000 per month.
Prior to the start of the quarter, we grew our Phoenix based enrolment center to 21 enrolment advisors all of whom are operating in a very high productivity level. Normally when the university increases their marketing spend in a given quarter, enrolment increases can be expected one or two quarters later, not with Aspen University.
We increased our marketing spend by 23% sequentially but delivered 36% more enrolment sequentially. Bottom line, over the past year we’ve now more than doubled our marketing spend rate and more than doubled the size of our enrolment center and we are not seeing degradation in our average cost of enrolment. It’s a very enviable position to be in. Not to be too repetitive for this enviable position we’re in today, is because of last year’s announcement of our debt list education solution. We believe that by advertising to the nursing sector a debt free solution through monthly payment plans we would become the University of Choice for our ends.
Now that we’ve become one of the fastest growing universities in America if not the fastest, it’s clear that we’ve begun the process of ending the long held assumption that nursing students have historically made that they much incur overwhelming debt to obtain a college degree, well that’s not just the case anymore.
I’ll complete my prepared remarks today with some revenue and adjusted EBITDA projections for the remainder of the fiscal year. First, as mentioned earlier we plan to keep our marketing spend rate at approximately $150,000 per month for the remaining six months of our fiscal year which will allow the company to continue its rapid pace of growth while simultaneously reaching the adjusted EBITDA break even range by the end of our current fiscal year.
We currently projecting revenue growth to accelerate again this quarter to over $2.1 million or over 63% growth year-over-year. Therefore our adjusted EBITDA loss this coming quarter is forecasted to decline into the single digits. The following quarter which is our fourth fiscal quarter ending April 30, is the quarter that the company is expecting to be in a breakeven adjusted EBITDA range.
That ends our prepared remarks for this afternoon. Now we’d like to open the call to address any questions.
