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ASPEN GROUP, INC. (ASPU)·Q4 2022 Earnings Summary

Executive Summary

  • Q4 revenue rose to $19.4M (+2% YoY, +3% QoQ), gross margin expanded to 53% driven by a $1.0M sequential cut in marketing spend that also delivered positive Adjusted EBITDA of $0.5M; net loss narrowed to $(2.1)M and EPS to $(0.08) .
  • Segment mix: AU $12.8M (66%) and USU $6.6M (34%); unit gross margins improved to 52% at AU and 61% at USU .
  • Management deferred FY2023 guidance pending financing and growth plan updates; liquidity constrained by an $18.3M Arizona surety bond requiring $5.0M restricted cash and reserving the $20.0M revolver as collateral .
  • USU’s MSN-FNP remained the fastest-growing program and accreditation was reaffirmed for eight years by WSCUC, a positive quality and confidence tailwind .
  • Wall Street consensus (S&P Global) for Q4 2022 EPS and revenue was unavailable; we attempted retrieval but were blocked by a request limit.

What Went Well and What Went Wrong

What Went Well

  • “Judicious control of marketing expenses in the fourth quarter led to a narrower net loss, positive Adjusted EBITDA and reduced our cash burn without compromising our ability to achieve our revenue target” — Michael Mathews, CEO .
  • USU MSN-FNP continued as “our fastest growing program… demonstrating the demand for this high LTV program,” supporting mix and margins .
  • USU accreditation reaffirmed for eight years by WSCUC, citing improved financials and resilience, bolstering program credibility and long-term growth prospects .

What Went Wrong

  • New student enrollments fell 30% YoY in Q4 (total 1,535 vs. 2,182) due to Phoenix pre-licensure enrollment suspension and reduced marketing spend; AU down 37%, USU down 11% .
  • Elevated instructional costs from new pre-licensure campuses and higher USU immersion costs pressured unit economics (instructional costs 27% of revenue in Q4; full-year 25%) .
  • Liquidity constraints: $5.0M restricted cash and full $20.0M revolver reserved as surety bond collateral; management considering financing alternatives and deferred FY2023 guidance .

Financial Results

Quarterly P&L (Sequential)

MetricQ2 2022Q3 2022Q4 2022
Revenue ($USD Millions)$18.9 $18.9 $19.4
Gross Profit ($USD Millions)$9.7 $9.2 $10.3
Gross Margin (%)51% 49% 53%
Net Income (Loss) ($USD Millions)$(2.9) $(3.7) $(2.1)
EPS ($USD)$(0.11) $(0.15) $(0.08)
EBITDA ($USD Millions)$(1.9) $(2.4) $(0.8)
Adjusted EBITDA ($USD Millions)$(0.7) $(1.3) $0.5

Year-over-Year (Q4)

MetricQ4 2021Q4 2022
Revenue ($USD Millions)$19.1 $19.4
Gross Profit ($USD Millions)$9.9 $10.3
Gross Margin (%)52% 53%
Net Income (Loss) ($USD Millions)$(2.3) $(2.1)
EPS ($USD)$(0.09) $(0.08)
EBITDA ($USD Millions)$(1.4) $(0.8)
Adjusted EBITDA ($USD Millions)$0.6 $0.5

Segment Revenue and Margins

MetricQ2 2022Q3 2022Q4 2022
AU Revenue ($USD Millions)$12.8 $13.0 $12.8
USU Revenue ($USD Millions)$6.2 $5.9 $6.6
AU Gross Margin (%)50% 50% 52%
USU Gross Margin (%)58% 52% 61%

Unit Profitability (Q4 2022)

UnitNet Income ($USD Millions)EBITDA ($USD Millions)Adjusted EBITDA ($USD Millions)
AU$1.5 $2.2 $2.5
USU$1.3 $1.5 $1.7
AGI Corporate$(5.0) $(4.5) $(3.7)

KPIs

KPIQ2 2022Q3 2022Q4 2022
New Student Enrollments – AU1,750 1,301 1,010
New Student Enrollments – USU630 481 525
New Student Enrollments – Total2,380 1,782 1,535
KPI (Q4 YoY)Q4 2021Q4 2022
Bookings – AU ($USD Millions)$21.7 $12.4
Bookings – USU ($USD Millions)$10.5 $9.3
Bookings – Total ($USD Millions)$32.2 $21.7
ARPU ($USD)$14,751 $14,145
Active Student Body (Year-over-Year)Prior YearCurrent
Total Active Degree-Seeking Students13,886 13,334
AU Total Active Students11,117 10,225
USU Total Active Students2,769 3,109
Nursing Students (% of total)86% 86%
RN Advanced Degree Students (AU/USU)6,672 / 2,890 6,672 / 2,890
BSN Pre-Licensure Students (Phoenix + other metros)2,382 1,960

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY2022$85.0–$88.0 $77.0–$80.0 Lowered
Net Income (Loss) ($USD Millions)FY2022$(4.5)–$(3.0) $(9.0)–$(7.0) Lowered
GAAP EPS ($USD)FY2022$(0.18)–$(0.12) $(0.38)–$(0.29) Lowered
EBITDA ($USD Millions)FY2022$(1.6)–$0.4 $(5.0)–$(3.0) Lowered
Adjusted EBITDA ($USD Millions)FY2022$2.0–$4.0 $(2.0)–$0.0 Lowered
Revenue ($USD Millions)FY2022 (update Mar)$77.0–$80.0 $75.5–$77.5 Lowered
Net Income (Loss) ($USD Millions)FY2022 (update Mar)$(9.0)–$(7.0) $(11.5)–$(10.5) Lowered
GAAP EPS ($USD)FY2022 (update Mar)$(0.38)–$(0.29) $(0.46)–$(0.42) Lowered
EBITDA ($USD Millions)FY2022 (update Mar)$(5.0)–$(3.0) $(7.5)–$(6.5) Lowered
Adjusted EBITDA ($USD Millions)FY2022 (update Mar)$(2.0)–$0.0 $(3.5)–$(2.5) Lowered
FY2023 GuidanceFY2023N/AGuidance deferred; update planned for September call Deferred

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Marketing spend disciplineAspen 2.0 plan to prioritize high-LTV programs; Q3 noted spending pullback in Phoenix and Nursing+Other units $1.0M sequential reduction to collateralize AZ surety bond; drove margin expansion and positive Adjusted EBITDA Increased focus on profitability over growth
Regulatory/legal (Arizona NCLEX)Q3: Phoenix enrollments reduced; investigation risks flagged AZ Board required $18.3M surety bond; enrollment suspension in Phoenix; four consecutive 80% NCLEX quarters needed to restart cohorts Heightened compliance and liquidity impacts
Program performance (USU MSN-FNP)Growth driver; USU revenue mix rising Fastest-growing program; strong unit economics and accreditation reaffirmed Strength sustained
Nurse attrition/workload headwindsRN course starts below historic norms (Omicron/Delta effects) Continued RN graduate program attrition/withdrawals; efforts to re-engage via promotions Gradual normalization expected
Campus expansion (Atlanta, Tier 2 metros)Q3: approval to open Atlanta Early Atlanta enrollments (~80 in first 120 days); breakeven timelines: Austin FY2024 late; Tampa/Nashville FY2025; Atlanta FY2025 Ramp progressing; breakeven path clarified
Financing/liquidityQ3: announced $10M converts and $20M revolver $5M converts restricted; $20M revolver committed as collateral; considering AR financing; share authorization increased to 60M Liquidity tight; exploring alternatives

Management Commentary

  • “Judicious control of marketing expenses… led to a narrower net loss, positive Adjusted EBITDA and reduced our cash burn without compromising our ability to achieve our revenue target” — Michael Mathews, CEO .
  • “Our USU MSN-FNP program was our fastest growing program in the quarter, demonstrating the demand for this high LTV program” — Michael Mathews .
  • “With Aspen 2.0, we achieved optimal cash management… focusing marketing on new pre-licensure campuses and high LTV programs while keeping corporate G&A flat YoY” — Michael Mathews .
  • “USU’s accreditation… has been reaffirmed for eight years… citing improved financial situation and institutional resilience” — Michael Mathews .
  • “Whatever plan we put into place will ensure adequate cash to get us to our breakeven point and sustain us for the future” — Matt LaVay, CFO .

Q&A Highlights

  • USU bookings/ARPU: Management indicated no ARPU degradation; lower enrollments due to reduced spend; cost per enrollment ~$1,900 remained consistent .
  • NCLEX pass-rate remediation: Curriculum changes, coaching, Kaplan test prep, and higher GPA/HESI A2 standards at new metros; Phoenix cohorts require four consecutive 80% quarters to restart .
  • Marketing normalization and enrollment trajectory: Spend snapped back in Q1 to Q3 levels; expect normalization by fiscal Q2 given lead maturation lag and typical seasonal weakness in Q1 .
  • Campus breakeven timelines: Austin late FY2024; Tampa/Nashville FY2025; Atlanta FY2025; Atlanta ramp stronger than Tier 2 metros .
  • Liquidity and profitability focus: Pulling spend levers to ensure cash sufficiency to breakeven; financing alternatives under evaluation .

Estimates Context

  • We attempted to retrieve S&P Global consensus EPS and revenue estimates for ASPU Q4 2022 and FY2022, but the request was blocked by a daily limit; therefore consensus figures were unavailable at the time of this analysis. Estimates are expected to adjust to reflect Q4’s revenue/margin resilience amid reduced marketing, regulatory constraints in Arizona, and deferred FY2023 guidance.

Key Takeaways for Investors

  • Margin over growth near term: The $1.0M marketing cut expanded gross margin to 53% and generated positive Adjusted EBITDA; expect profit-first posture until liquidity improves .
  • Quality tailwinds at USU: Accreditation reaffirmation and durable demand for MSN-FNP support mix and unit profitability; USU gross margin rose to 61% .
  • Regulatory/liquidity overhang: Arizona surety bond materially constrains liquidity (restricted cash and revolver collateral), and Phoenix pre-licensure suspension weighs on enrollments and bookings .
  • Sequential recovery likely lagged by lead maturation: Marketing spend restored post-Q4, but enrollment normalization expected in fiscal Q2 given typical lag and Q1 seasonality .
  • Campus ramp path defined: Breakeven timelines (Austin FY2024 late; Tampa/Nashville FY2025; Atlanta FY2025) frame medium-term cash needs and growth visibility .
  • Watch guidance reset: No FY2023 guidance provided; September update is a key catalyst to reframe expectations and financing strategy .
  • KPI pressures: Enrollments and bookings contracted YoY with Phoenix suspension; monitor ARPU stability and the balance between marketing efficiency and student pipeline .