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Edited Transcript of ASPU.OQ earnings conference call or presentation 13-Sep-22 8:30pm GMT

·28 min read

Q1 2023 Aspen Group Inc Earnings Call DENVER Sep 14, 2022 (Thomson StreetEvents) -- Edited Transcript of Aspen Group Inc earnings conference call or presentation Tuesday, September 13, 2022 at 8:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Matthew LaVay Aspen Group, Inc. - CFO * Michael D. Mathews Aspen Group, Inc. - Chairman of the Board & CEO ================================================================================ Conference Call Participants ================================================================================ * Eric Martinuzzi Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst * Michael John Grondahl Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research * Rajiv Sharma B. Riley Securities, Inc., Research Division - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon. Welcome to Aspen Group's Fiscal Year 2023 First 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 declines in instructional costs in the second half of fiscal 2023, future tapering of gross margin pressures in late fiscal 2023 and in fiscal 2024, reductions in cash use in operations to position the company to generate positive operating cash flow in the second half of fiscal 2023, our future financing efforts, including closing an accounts receivable facility, future savings from reduced marketing, restructuring savings 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, the fiscal year ended April 30, 2022, form 10-Q we are filing for the quarter ended July 31, 2022, and in the earnings release issued this afternoon. 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 this conference call, the company will discuss EBITDA and adjusted EBITDA, which are non-GAAP financial measures in talking about the company's performance. Reconciliation to the most directly comparable GAAP financial measures are provided in the tables in the earnings release issued by the company today. Please note that the earnings release is available on Aspen Group's website, aspu.com, on the IR calendar page under News and 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 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. -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [2] -------------------------------------------------------------------------------- Good afternoon, and thank you for joining our call today. Revenue for the fiscal year 2023 first quarter, which is typically our seasonally slowest quarter was $18.9 million, a modest year-over-year decrease of 3%, which reflects the enrollment stoppage at our BSN pre-licensure campuses in Arizona and the effect of the $1 million sequential reduction of marketing spend in the prior quarter. AU's revenue decreased by $1.3 million or 10% in Q1 fiscal 2023 compared to Q1 fiscal 2022 with the Phoenix Pre-Licensure program accounting for $800,000 of the decrease, USU's revenue growth of 12%, primarily due to demand for the MSN-FNP program helped to offset the AU decrease. The MSN-FNP program remains the strongest program for Aspen Group from a revenue growth perspective. As we discussed in our last earnings call, in the fourth quarter of 2022, we temporarily decreased our market spend sequentially by $1 million, primarily to ensure sufficient collateral for a surety bond. This quarter's gross margin reflects revenue and marketing spend consistent with third quarter 2022 levels. Another factor affecting the first quarter gross margin was higher instructional costs, which increased by $0.5 million from the prior quarter and $1.2 million year-over-year. Matt will provide more detail on the costs in his comments. [Bill], as a reminder, on our third quarter 2022 conference call, we discussed that instructional costs were increasing due to additional instructors needed to support the ramp of our new pre-licensure campuses and the increase in clinical immersions at additional campuses for the USU MSN-FNP program. We expect instructional costs to begin tailing off in the second half of fiscal '23 and gross margin pressure to taper as new campus locations mature and the core nursing populations in the Phoenix locations decreased as we exit fiscal year '23 and over the course of fiscal year 2024. To offset these cost increases and manage our cash, we recently initiated a restructuring that reduces marketing spend and AGI's total staff by approximately 15%. The staff reductions are focused on G&A areas throughout the company. The restructuring effects are expected to reduce cash used in operations with the effect of these G&A reductions to be reflected in upcoming quarters. With these changes, we believe that we have positioned the company to generate positive operating cash flow in the second half of fiscal 2023. Switching to the first quarter operating metrics. New student enrollments at AU decreased 46% year-over-year and at USU by 34% year-over-year. New student enrollments to AU were primarily impacted by the enrollment stoppage at our Phoenix Pre-Licensure campuses and the overall company reduction in marketing spend by $1 million in Q4 2022 over the prior quarter. AGI's active degree-seeking student body, including AU and USU declined 13% year-over-year from 12,048 students from 13,879 students. AU's total active student body decreased by 16% year-over-year to 9,133 from 10,911. On a year-over-year basis, USU's total active student body decreased by 2% to 2,915 from 2,968. Students seeking nursing degrees were 10,394 or 86% of total active students at both universities. Of the students seeking nursing degrees, 8,910 are RNs studying to earn an advanced degree, including 6,202 at Aspen University and 2,708 at USU. In contrast, the remaining 1,484 nursing students are enrolled in Aspen University's BSN pre-licensure program in the Phoenix, Austin, Tampa, Nashville and Atlanta metros. The majority of the year-over-year Aspen University nursing student body decrease is a result of the enrollment stoppage in the Phoenix Pre-Licensure program. In conclusion, I want our shareholders to understand that Matt and I are managing Aspen Group's operations with the goal of navigating through this period of declining enrollments due to the Phoenix Pre-Licensure program enrollment stoppage and the related revenue reduction. We have prioritized continued control of our expenses, supporting the success of our high LTV business units, in particular, our MSN-FNP program and our new pre-licensure campuses. As stated on our last earnings call, the company is currently considering various growth and financing alternatives. On August 18, 2022, we entered into an equity distribution agreement that enables us to issue and sell shares of Aspen Group common stock for aggregate gross proceeds of up to $3 million. The facility's primary purpose is to provide additional short-term liquidity while the expected impact of our restructuring program takes effect. In parallel, we have engaged Lampert Capital Advisors to assist with securing an accounts receivable financing agreement. Until we close in AR financing, the company plans to maintain its current marketing maintenance spending plan. I will now hand the call over to Matt to cover the details of our first quarter financial results. Please go ahead, Matt. -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [3] -------------------------------------------------------------------------------- Thank you, Mike, and good afternoon, everyone. In my comments on the quarterly results, I will refer to the first quarter that ended on July 31, 2022. All comparisons are to the prior year's first quarter ended July 31, 2021, unless otherwise stated. I will begin with a review of our financial results for the 2023 fiscal first quarter, including some detailed commentary on P&L items and additional commentary on the restructuring program initiated late in Q1. I'll then conclude with comments on our balance sheet. Financial highlights for the quarter are as follows. First, as expected, we saw a sequential decrease in our active student body, which is consistent with the marketing spend reduction in fiscal Q4 2022. This resulted in a modest quarterly sequential decrease in revenue, primarily in our Aspen University online programs. Our active student body decreased from 13,334 in Q4 2022 to 12,048 in Q1 2023. Second, we temporarily resumed marketing spend at a level consistent with fiscal Q3 2022, which impacted our gross margin and adjusted EBITDA. This $1 million sequential marketing increase accounts for a significant portion of the adjusted EBITDA loss in the first quarter. Third, continued cost controls further reduced G&A costs versus prior year's first quarter and the sequential prior quarter. Now on to the details. Total revenue was $18.9 million versus $19.4 million in the year-ago quarter or a decrease of 3%. This decrease is attributed to the fiscal Q4 2022 sequential decrease in marketing spend and the stop of enrollments in our Phoenix Pre-Licensure locations. Gross profit and gross margin were $8.2 million and 43%, respectively versus $10.4 million and 54%, respectively, for the year-ago quarter. The year-over-year gross margin decline is a function of lower revenue and increased instructional costs and services. Instructional costs for the first quarter were $5.7 million or 30% of revenue, up from $4.5 million or 23% of revenue in the year-ago quarter. The increase in instructional costs as a percentage of revenue was primarily due to the inflationary impact on faculty compensation and the need for more instructors in our pre-licensure program, which is the result of more students entering the core curriculum. The core curriculum requires an increase in the ratio of instructors to students, especially as students enter the clinical portion of the program. The core student population is growing in our Phoenix locations as a result of the progression of double cohorts and in our other new locations as students move into the core portion of the program for the first time. Additionally, higher USU immersion related instructional costs were incurred in the quarter due to the growth in the MSN FNP program. Total marketing and promotional costs for the first quarter were $4.5 million or 24% of total revenue, up from $4.1 million or 21% of revenue. The increase of marketing as a percentage of revenue results from the planned increase in marketing spend across all programs to levels consistent with fiscal Q3 2022. The quarter's general and administrative costs were $10.5 million or 56% of total revenue compared to $10.9 million or 56% of total revenue. The quarterly decrease in G&A spend is due to cost controls designed to reduce G&A spend across all functions, particularly corporate AGI. Total net loss was $3.7 million or $0.15 per basic and diluted share compared to a net loss of $871,000 or $0.03 per basic and diluted share in the prior year quarter. From a unit perspective, Aspen University's net loss for the quarter was $209,000 compared with net income of $2.3 million. USU's net income was $1.4 million versus $1.3 million. Finally, AGI incurred a net loss of $4.9 million compared to a loss of $4.5 million. The increase in the AGI net loss is due to a full quarter of interest expense. Consolidated EBITDA for the quarter was a loss of $2.2 million as compared to positive EBITDA of $92,000 in the prior year period. First quarter EBITDA period-over-period for each of the 3 units was as follows. Aspen University generated $549,000 compared to $3.1 million. USU generated $1.5 million compared to $1.3 million. AGI had an EBITDA loss of $4.2 million compared to an EBITDA loss of $4.4 million. The decline in AU EBITDA is attributed to lower revenue associated with the decreased fiscal Q4 2022 marketing spend and the stop of enrollments in our Phoenix Pre-Licensure locations and increased instructional costs associated with our pre-licensure program. Consolidated adjusted EBITDA was a loss of $1.2 million compared to positive adjusted EBITDA of $506,000 in the prior year quarter. From a unit perspective, Aspen University generated adjusted EBITDA of $826,000 compared to adjusted EBITDA of $3 million. Aspen University's adjusted EBITDA margin was 7% as compared to 22%. USU generated adjusted EBITDA of $1.7 million compared to $1.5 million. USU's adjusted EBITDA margin was steady at 24% for both the current and prior year quarter. Finally, AGI corporate incurred an adjusted EBITDA loss of $3.7 million compared to an adjusted EBITDA loss of $3.9 million. As Mike mentioned, we implemented a restructuring plan late in the first quarter of fiscal 2023, which will result in significant cash benefits for the company starting in the second quarter of fiscal 2023 and continuing for the remainder of the fiscal year. They are 2 key components of the plan. First, in the second quarter, we scaled back marketing ad spend to maintenance spend levels of $150,000 per quarter, which will result in savings of $3.6 million in Q2 and $3.8 million in each of Q3 and Q4. The savings estimates are based on a normalized marketing ad spend run rate of $4.2 million per quarter. Second, the plan resulted in the elimination of approximately 70 positions mostly within our G&A functions at Aspen University and AGI. As a result, additional restructuring savings of $750,000 in Q2 and $1.1 million in each of Q3 and Q4 are expected. Total spend reductions will be $4.4 million in Q2 and $4.9 million in each of Q3 and Q4. In summary, these are significant spend reductions, which we believe will position the company to generate positive operating cash flows in the second half of fiscal 2023. Moving on to the balance sheet. As of July 31, 2022, our unrestricted cash and cash equivalents were $2.4 million and restricted cash was $6.4 million. As of April 30, 2022, our unrestricted cash and cash equivalents were $6.5 million and restricted cash was $6.4 million. Cash used in operations for the quarter was $3.6 million, $2.2 million of the cash used in operations is attributed to our EBITDA loss. The remaining use of operating cash is primarily attributed to an increase in short-term and long-term accounts receivable related to our monthly payment plans. We also had CapEx spend during the quarter of $500,000. As Mike mentioned, the company entered into an equity distribution agreement that enables us to issue and sell Aspen Group common stock shares for aggregate gross proceeds of up to $3 million. The agreement's primary purpose is to provide additional short-term liquidity as needed ahead of the realization of the benefits we expect from our restructuring program. Finally, we engaged Lampert Capital Advisors to assist with securing an AR financing agreement, although we are at an early stage and cannot predict if we will achieve our goal of securing financing. With respect to our share count, the weighted average number of common basic shares outstanding at the end of the quarter was 25,202,278 versus 25,070,072 in the year-long quarter. At this time, we are not providing guidance. If we close and execute an AR financing agreement, we will update our business plan for the remainder of fiscal 2023. In the meantime, we will manage our expenses with an eye on generating positive operating cash flows in the second half of fiscal 2023. That concludes our prepared remarks. I will now turn the call back to the operator for questions. Operator, please open the call for Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question comes from the line of Eric Martinuzzi with Lake Street. -------------------------------------------------------------------------------- Eric Martinuzzi, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [2] -------------------------------------------------------------------------------- Yes. I want to get into the cost reductions. But first, I wanted to step back and look at the scenarios for the Pre-Licensure BSN in Arizona, in 2023. I understand the scores have been improving there in Arizona, but still not at a level that would get you a green light for 2023. So how are you thinking about the Pre-Licensure BSN program for 2023? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [3] -------------------------------------------------------------------------------- Yes. Eric, this is Mike. I'll take the second question, and I'll give Matt the first question about the restructuring detail. So we're in conversations with the Arizona Board of Nursing. And clearly, the Board of Nursing has various options that range from lifting the stay and initiating the revocation to electing to continue to stay for an additional period of time until achievement of the required 80% pass rate is achieved. So at this point, we don't have a final determination, but we're in discussions. And as we get to our next quarter, we'll probably have more information to provide in that area. -------------------------------------------------------------------------------- Eric Martinuzzi, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [4] -------------------------------------------------------------------------------- Okay. And then the restructuring, obviously, you've got G&A as well as a reduction in the spend. Taking back to the number of heads that were eliminated and then the -- compare the prior normalized marketing spend rate with the current? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [5] -------------------------------------------------------------------------------- Yes. So the number of heads that were eliminated was approximately 70. Those heads are in the G&A organization throughout the company. Specifically, there is a concentration in the AU portion of the business and then on the IT side as well. So the idea was, okay, if we're taking marketing spend down a significant amount, we can gain efficiencies with -- related to that decrease in marketing spend. And then on the IT side, the idea is let's save as much cash as we can while preserving our ability to grow in features. So that's -- those are the thoughts. -------------------------------------------------------------------------------- Eric Martinuzzi, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [6] -------------------------------------------------------------------------------- All right. And then the question regarding what was normalized marketing spend if -- go ahead. -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [7] -------------------------------------------------------------------------------- Yes. The normalized marketing spend was about $4.2 million. That's what we're basing the decreases from. So just to repeat, the savings are $3.6 million in Q2 and $3.8 million in each of Q3 and Q4. So what's left is that maintenance level needed to kind of keep our marketing engine prime as well as keep some basic infrastructure in place. -------------------------------------------------------------------------------- Eric Martinuzzi, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [8] -------------------------------------------------------------------------------- All right. And then I know you're not giving guidance, but given that lower level of -- as you put it, a maintenance level spend rate and somewhere at looking at a revenue decline, do you have any sense of the sequential step down that we can anticipate? Is it going to impact both colleges, both universities, both USU and Aspen U, is it just Aspen U? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [9] -------------------------------------------------------------------------------- It's -- the marketing spend is spread throughout the organization with the cut that deep, you're going to impact both USU and AU. Like we said, we're not giving guidance, but I mean, we've given you kind of the high-level way to think about it. So naturally, when there's a decrease in marketing spend, there's a decrease in enrollments, which has an impact on revenue. You saw that this quarter. But the other side of this is we are doing all of this to generate a healthy bottom line with positive cash flow, right? So there's a divergence in kind of what happens on the top line and the bottom line. So you'll expect to see that while we are in this -- the mode that we've talked about. -------------------------------------------------------------------------------- Eric Martinuzzi, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [10] -------------------------------------------------------------------------------- Got it. And then did you sell any shares under the $3 million ATM? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [11] -------------------------------------------------------------------------------- Yes, just a de minimis amount. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- And our next question comes from the line of Raj Sharma with B. Riley. -------------------------------------------------------------------------------- Rajiv Sharma, B. Riley Securities, Inc., Research Division - Analyst [13] -------------------------------------------------------------------------------- I want to follow on with the last speaker. What is this -- what is the high level of thinking in terms of the impact on revenue? So every dollar you reduced in marketing spend, how should we think about -- every dollar reduced in marketing spend reduces revenues by the following. Yes, you're reducing the cash flow, but that's also -- are you pulling from the future, of course? And can you give us some color on that or understanding of how to actually understand the impact on revenues? -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [14] -------------------------------------------------------------------------------- Sure. And obviously, you guys are aware of the material decrease in revenues in our Phoenix Pre-Licensure location. So that will continue to show itself as this next year continues. I guess probably the best way to thinking about it is back of the envelope, we are currently, projecting approximately a 5% reduction in our aggregate student body quarterly while we're in this maintenance spend mode. And of course, once we obtain an AR facility, then we can go back to a more significant spend rate. But for the time being, I would project around a 5% decrease in student body, which the revenues would be probably follow that somewhat. And yes, so that's probably a good way of looking at it. -------------------------------------------------------------------------------- Rajiv Sharma, B. Riley Securities, Inc., Research Division - Analyst [15] -------------------------------------------------------------------------------- Okay. And then -- and the same way -- so the marketing spend reduces by $3.6 million, Q2, $3.8 million, $3.8 million in Q4. The G&A savings of, I think, you said $4.4 million, $4.9 million, $4.9 million, those are in addition. -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [16] -------------------------------------------------------------------------------- Right. So the G&A savings are $750,000 in Q2. And then in each of Q3 and Q4, it's $1.1 million. And those are based on those headcount reductions that we just talked about. -------------------------------------------------------------------------------- Rajiv Sharma, B. Riley Securities, Inc., Research Division - Analyst [17] -------------------------------------------------------------------------------- Right. So $750,000. And so together, combined, the impact is $4.4 million, $4.9 million, $4.9 million, is that right? -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [18] -------------------------------------------------------------------------------- You're correct. -------------------------------------------------------------------------------- Rajiv Sharma, B. Riley Securities, Inc., Research Division - Analyst [19] -------------------------------------------------------------------------------- Okay. And then the enrollment, the enrollment, could you give some color on enrollment and how do we sort of see that in the next few quarters? USU was down because of -- pre-licensure was down largely because of Phoenix and did enrollment increase in the other -- and can you talk about the enrollment in the other ones? And then what happened with USU, USU enrollment decreased significantly, and that is your big driver of growth? Like, can you help us understand? -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [20] -------------------------------------------------------------------------------- Yes. So again, the reason why we had a decrease in enrollments in each of our units is primarily a result of us spending $1 million less from -- in Q4, right, versus the previous Q3. So this is kind of an expected result for us, given the significantly decrease of spend in Q4. I think, again, if you're modeling the results in coming quarters, I would expect us to have a modest decrease in enrollments sequentially versus the quarter that just ended. -------------------------------------------------------------------------------- Rajiv Sharma, B. Riley Securities, Inc., Research Division - Analyst [21] -------------------------------------------------------------------------------- Right. Is that mid-single digits? Is that low double digits is… -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [22] -------------------------------------------------------------------------------- What do you mean sequentially or year-over-year? -------------------------------------------------------------------------------- Rajiv Sharma, B. Riley Securities, Inc., Research Division - Analyst [23] -------------------------------------------------------------------------------- Yes, sequentially is like what sort of level of a decrease in enrollment is that? -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [24] -------------------------------------------------------------------------------- Yes, it's going to probably be similar to the revenue. It should be mid-single digits. -------------------------------------------------------------------------------- Rajiv Sharma, B. Riley Securities, Inc., Research Division - Analyst [25] -------------------------------------------------------------------------------- Got it. Mid-single digits, got it. And then the last question I have is on the AR financing. Do we know -- can you talk about where we are? What is the sort of process? And when do you think we should be able to get this and the impact that you would have -- and that's when you lift the maintenance plan on marketing, right, and you come back to sort of the $4.2 million level of marketing spend? -------------------------------------------------------------------------------- Matthew LaVay, Aspen Group, Inc. - CFO [26] -------------------------------------------------------------------------------- Well, so -- so to answer to your question, yes, when we -- when and if we are able to secure an AR facility, we would then increase our marketing spend. We have yet to develop that plan. It will be based on the level of the financing that we're able to secure. So -- but yes, the idea is we would get out of the maintenance mode and get back into more of a growth mode from there. As far as the process, it's a multi-step process. So I'd say we're still kind of at the beginning stages. There's a marketing stage, and then there's a diligence stage, and then there's kind of a closing stage. So we're still in that first phase of the process. Because we're early on, it's really difficult to say how long it's going to take to close. And as you guys know, we've had some false starts with this before. So we're not going to get very specific about that time line, but we're in that first step, and we continue to march along the process. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group. -------------------------------------------------------------------------------- Unidentified Analyst, [28] -------------------------------------------------------------------------------- This is [Jack Cole] on for Jeremy. I wanted to touch on the increase in instructional costs. You guys noted seeing the effects of wage inflation, having to hire more instructors. Are you guys having difficulty hiring and retaining instructors at these higher wages? And kind of related, how do you think about the overall effects on enrollment as nurses are probably going to be able to earn higher wages with their current education levels? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [29] -------------------------------------------------------------------------------- Yes. This is Mike Mathews. I'll answer the second question first. So we've not seen a decrease in demand thus far in terms of nurses looking to achieve advanced degrees, and we certainly haven't seen any trouble as it relates to pre-licensure. Do you want to go ahead and repeat the first question again? I apologize. -------------------------------------------------------------------------------- Unidentified Analyst, [30] -------------------------------------------------------------------------------- Yes. Just if you wanted to expand a little bit more on the increase in instructional costs? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [31] -------------------------------------------------------------------------------- Yes, there's a couple of different factors that are going on, which we've kind of talked about previously. The first is in our Phoenix operation about a year ago, we began implementing double cohorts. And when you have these double cohorts, of course, you have essentially doubled the instructional cost per cohort. So that's the one major reason why. The other reason, of course, is the increase of student body over the past year at USU, particularly with our FNP program and the weekend immersions that requires, of course, faculty for that. So those are the 2 major factors for the increase. And to answer your other part of your question, no, we haven't had any difficulty with hiring faculty necessary to handle our business. -------------------------------------------------------------------------------- Unidentified Analyst, [32] -------------------------------------------------------------------------------- Awesome. And then a follow-up question, a little different. How is your Atlanta campus tracking so far? Like what could we see what kind of the ramp rate is so far and if the enrollment is tracking more in line with, say, the Nashville campus or the Tampa campus? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [33] -------------------------------------------------------------------------------- Yes. No. I mean, Atlanta is tracking sort of between the highest level that we've ever seen, which is Phoenix Metro versus the Austin Metro. So those are the top 2 metros in history enrollment-wise. And Atlanta is tracking similar to, I'd say, Austin at this point. So it's going quite well. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- And our next question comes from the line of Mike Grondahl with Northland Securities. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [35] -------------------------------------------------------------------------------- Yes. 2 questions, guys. Michael, any thoughts when Austin, Tampa, Nashville and Atlanta can reach breakeven on a cash flow basis? Any kind of updated projections there? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [36] -------------------------------------------------------------------------------- Yes. I mean I think we've often said publicly that we need to have revenues of -- on a run rate of approximately $1.5 million in order to break even. And Austin is tracking to that soon. The other locations, you're looking at fiscal '24 and '25, respectively, depending on the maturity of the location. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [37] -------------------------------------------------------------------------------- Got it. And I mean, put it this way, are you committed to all of those locations? Or as you went through this restructuring, I don't know, were any of those location's kind of on the map? Or are they still part of the plan? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [38] -------------------------------------------------------------------------------- Yes. We haven't made any business decisions to remove ourselves from a given market or what's called a teach-out at this point. As we've often said, Tampa has been our most difficult market to date. And so thus far, what we've done is just chosen to shift the marketing spend to higher levels in our 3 best markets -- or sorry, 2 best markets, which is Austin and Atlanta, and we've decreased spend somewhat in Nashville and significantly in Tampa. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [39] -------------------------------------------------------------------------------- Got it. And then you had kind of said earlier, demand from nurses remains robust. I'm trying to reconcile that robust demand. It seems like you're losing a little bit of market share. Do you think the overall market and enrollment has softened a little bit? Or are you guys just losing a little bit of share? -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [40] -------------------------------------------------------------------------------- Well, yes, I don't -- I wouldn't necessarily conclude that we're losing market share. I think we've now -- in our fiscal Q4, we dropped our spend rate by $1 million, right? And then we did bring it up again in Q1, and now we're back down to a maintenance spend again. So we've been kind of lumpy in terms of our spend rate as well as the leads that we're driving and therefore, enrollment. So I think it's more a function of us deciding that for the short term, we needed to shift our business plan and focus on generating cash. We've been in business now for over 10 years, and we burned cash throughout through this wonderful growth model. And I think we're making a clear statement to all of our shareholders today that we made the moves necessary to restructure the company and to ensure that we don't burn cash on a go-forward basis. And frankly, I've heard from all of our major shareholders that said, Mike, this is the time to do it. And so we made the moves, and this is our plan. -------------------------------------------------------------------------------- Michael John Grondahl, Northland Capital Markets, Research Division - Senior Research Analyst & Head of Equity Research [41] -------------------------------------------------------------------------------- Got it. I think sort of the restructuring, the reset, it makes a lot of sense and good luck in the back half of the year. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- And we have reached the end of the question-and-answer session. I will now turn the call back over to Michael Mathews for closing remarks. -------------------------------------------------------------------------------- Michael D. Mathews, Aspen Group, Inc. - Chairman of the Board & CEO [43] -------------------------------------------------------------------------------- Thank you again for participating in today's call, everyone. We look forward to speaking with you again on our next earnings call in December. Thank you. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- And this concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.