Aspen Group Revenue Growth Rate Accelerates to 70% in the First Quarter of Fiscal 2019

NEW YORK, Sept. 06, 2018 (GLOBE NEWSWIRE) -- Aspen Group, Inc. (NASDAQ:ASPU), an education technology holding company, today announced financial results for its 2019 fiscal first quarter ended July 31, 2018, highlighted by revenue of $7,221,305, an increase of 70% compared to the first quarter of 2018.  This represented an acceleration in revenue growth from 68% growth achieved in the fourth quarter of 2018.

Michael Mathews, Chairman & CEO of Aspen Group, commented, "Our first quarter results reflect significant investment spending to set up the company for continued strong revenue growth. Since February 2018, we've increased our academic and corporate operations personnel by 30 people and increased the size of our enrollment center by over 25%. Additionally, we increased our internet advertising spend at Aspen by approximately $250,000 sequentially. This allowed us to achieve historically strong August enrollments and puts the company in position to deliver significant leverage improvements for the remainder of the fiscal year."

Fiscal Q1 2019 Financial Highlights:*

  • Revenue totaled $7,221,305, an increase of 70% as compared to the prior fiscal year first quarter;
  • Gross Profit totaled $3,309,768, a 40% increase as compared to the prior fiscal year first quarter;
  • Net Loss applicable to shareholders of ($2,837,276), as compared to Net Loss of ($767,079) in the prior fiscal year first quarter; Diluted net loss per share was $(0.15), as compared to a loss of $(0.06) in the prior fiscal year first quarter;
  • EBITDA, a non-GAAP financial measure, totaled a loss of $(2,298,818);
  • Adjusted EBITDA, a non-GAAP financial measure, totaled a loss of $(1,778,348);

In reviewing these comparisons, investors should note Aspen Group acquired United States University (USU) and all its operating expenses on December 1, 2017. For the first quarter, revenues were $7,221,305, an increase of 70% as compared to the prior fiscal year first quarter. USU revenues contributed nearly 18% of the quarterly revenues for the Company, up from nearly 15% the previous quarter.

Gross profit increased to $3,309,768 or 46% gross margin. Aspen University gross profit represented 51% of Aspen University revenues for the first quarter, while USU gross profit equaled 40% of USU revenues during the first quarter. Aspen University instructional costs and services represented 19% of Aspen University revenues for the 2019 first quarter, while USU instructional costs and services equaled 33% of USU revenues during the 2019 first quarter. Aspen University marketing and promotional costs rose to 27% of Aspen University revenues for the 2019 first quarter based on a sequential quarterly increase of internet advertising spend of approximately $250,000, while USU marketing and promotional costs equaled 26% of USU revenues during the 2019 first quarter.

Net loss applicable to shareholders was ($2,837,276) or diluted net loss per share of ($0.15). Aspen University generated $0.2 million of operating income for the first quarter, while USU experienced an operating loss of ($1.1) million during the first quarter. Aspen Group corporate incurred $1.9 million of operating expenses for the first quarter.

EBITDA, a non-GAAP financial measure, was a loss of ($2,298,818) or (32%) as a percentage of revenue. Adjusted EBITDA, a non-GAAP financial measure, was a loss of ($1,778,348) or (25%) as a percentage of revenue. Aspen University generated $0.5 million of Adjusted EBITDA for the first quarter, while USU experienced an Adjusted EBITDA loss of ($0.8) million during the first quarter. Aspen Group corporate contributed $1.5 million toward the ($1,778,348) Adjusted EBITDA loss for the first quarter.

EBITDA and Adjusted EBITDA as a percentage of revenue declined over the past two quarters, primarily as a result of increased spending on marketing and general and administrative expenses.  These upfront expenses were incurred to stimulate and support increased enrollment at both universities, and to launch the Aspen University campus in Phoenix. The company expects this first quarter to be the peak operating loss result, with each subsequent quarter showing improved leverage over the remainder of the fiscal year.
The company's cash loss on an operating basis was $3.4 million primarily due to the operating loss of ($2.8) million. In addition, there's the cash flow lag effect from our monthly payment plan ("MPP") program, particularly at USU given they're ramping their MPP program as 58% of their active students are now on the payment plan. An additional $779,000 net cash was used for capitalized expenses to build out and equip our new campus and for software developed by our technology group in Canada.

August Enrollment Business Update:

The month of August is the start of the seasonal high-point of the enrollment calendar given students' fall start mentality. Aspen University's core business units (Nursing + Other and Doctoral) achieved its strongest enrollment month in history with 476 enrollments, which is over 25% higher than any enrollment month in our core business unit history (comparative does not include enrollments for Aspen's BSN pre-licensure campus, as enrollments for the upcoming BSN pre-licensure November semester will primarily be recorded in October). In August, Aspen's core Nursing + Other unit delivered 417 enrollments, while Aspen's Doctoral unit delivered 59 enrollments, both being monthly enrollment records for each unit.

Conference Call:

Aspen Group, Inc. will host a conference call to discuss its fiscal year 2019 first quarter (ending July 31, 2018) financial results and business outlook on Thursday, September 6, 2018, at 4:30 p.m. (ET).   The conference call can be accessed by dialing toll-free (844) 452-6823 (U.S.) or (731) 256-5216 (international), passcode 6397498. Subsequent to the call, a transcript of the audiocast will be available from the Company's website at ir.aspen.edu. There will also be a 7 day dial-in replay which can be accessed by dialing toll-free (855)859-2056 or (404)537-3406 (international), passcode 6397498.

Non-GAAP – Financial Measures:

This press release includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income (loss), operating income (loss), and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of Aspen Group nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

Our management uses and relies on Adjusted EBITDA and EBITDA, each of which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparisons.  Our management recognizes that the non-GAAP financial measures have inherent limitations because of the excluded items described below.

Aspen Group defines Adjusted EBITDA as earnings (or loss) from continuing operations before the items in the table below. Aspen Group excludes these expenses because they are non-cash or non-recurring in nature.

We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measures calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between Aspen Group and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

The following table presents a reconciliation of Adjusted EBITDA to net loss allocable to common shareholders, a GAAP financial measure:

    For the Quarters Ended  
    July 31,  
    2018     2017  
Net income (loss)   $ (2,837,276 )   $ (767,079 )
Interest expense, net of interest income     40,353       (12,581 )
Depreciation & amortization     498,105       138,720  
EBITDA (loss)     (2,298,818 )     (640,940 )
Bad debt expense     121,805       63,000  
Acquisition expense           119,282  
Non-recurring charges     188,689       354,536  
Stock-based compensation     209,976       159,300  
Adjusted EBITDA (Loss)   $ (1,778,348 )   $ 55,178  
                 

About Aspen Group, Inc.:

Aspen Group, Inc. is an education technology holding company that leverages its infrastructure and expertise to allow its two universities, Aspen University and United States University, to deliver on the vision of making college affordable again.

Forward-Looking Statements:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including future strong revenue growth and operating results for the balance of fiscal 2019. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely," "will," "expect" and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Important factors that could cause actual results to differ from those in the forward-looking statements are included in our filings with the SEC including our Form S-3, our Prospectus Supplement filed April 19, 2018 and our Form 10-K for the year ended April 30, 2018. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Company Contact:

Aspen Group, Inc.
Michael Mathews, CEO
914-906-9159

ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

    July 31,     April 30,  
    2018     2018  
    (Unaudited)        
Assets            
             
Current assets:            
Cash   $ 10,423,660     $ 14,612,559  
Restricted cash     190,506       190,506  
Accounts receivable, net of allowance of $571,477 and $468,174, respectively     8,091,147       6,802,723  
Prepaid expenses     420,289       199,406  
Other receivables     11,094       184,569  
Total current assets     19,136,696       21,989,763  
                 
Property and equipment:                
Call center equipment     158,064       140,509  
Computer and office equipment     257,069       230,810  
Furniture and fixtures     1,186,979       932,454  
Software     3,119,642       2,878,753  
      4,721,754       4,182,526  
Less accumulated depreciation and amortization     (1,331,565 )     (1,320,360 )
Total property and equipment, net     3,390,189       2,862,166  
Goodwill     5,011,432       5,011,432  
Intangible assets, net     9,366,667       9,641,667  
Courseware and Accreditation, net     165,705       138,159  
Accounts receivable, secured - net of allowance of $625,963, and $625,963, respectively     45,329       45,329  
Long term contractual accounts receivable     1,497,762       1,315,050  
Other assets and Security Deposits     584,966       584,966  
                 
Total assets   $ 39,198,746     $ 41,588,532  
                 

(Continued)

ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)

    July 31,     April 30,  
    2018     2018  
    (Unaudited)        
Liabilities and Stockholders' Equity                
                 
Current liabilities:                
Accounts payable   $ 1,498,984     $ 2,227,214  
Accrued expenses     669,255       658,854  
Deferred revenue     2,244,151       1,814,136  
Refunds due students     1,118,450       815,841  
Deferred rent, current portion     10,729       8,160  
Convertible notes payable, current portion     1,050,000       1,050,000  
Other current liabilities     230,672       203,371  
Total current liabilities     6,822,241       6,777,576  
                 
Convertible note payable     1,000,000       1,000,000  
Deferred rent     292,229       77,365  
Total liabilities     8,114,470       7,854,941  
                 
Commitments and contingencies            
                 
Stockholders' equity:                
Preferred stock, $0.001 par value; 10,000,000 shares authorized,            
0 issued and outstanding at July 31, 2018 and April 30, 2018                
Common stock, $0.001 par value; 250,000,000 shares authorized,                
18,341,440 issued and 18,324,773 outstanding at July 31, 2018                
18,333,521 issued and 18,316,854 outstanding at April 30, 2018     18,341       18,334  
Additional paid-in capital     66,744,959       66,557,005  
Treasury stock (16,667 shares)     (70,000 )     (70,000 )
Accumulated deficit     (35,609,024 )     (32,771,748 )
Total stockholders' equity     31,084,276       33,733,591  
                 
Total liabilities and stockholders' equity   $ 39,198,746     $ 41,588,532  
                 

ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

    For the  
    Three Months Ended  
    July 31,  
    2018     2017  
             
Revenues   $ 7,221,305     $ 4,242,886  
                 
Operating expenses                
Cost of revenues (exclusive of depreciation and amortization shown separately below)     3,752,392       1,752,491  
General and administrative     5,824,132       3,131,335  
Depreciation and amortization     498,105       138,720  
Total operating expenses     10,074,629       5,022,546  
                 
Operating loss     (2,853,324 )     (779,660 )
                 
Other income (expense):                
Other income     56,401       18,778  
Interest expense     (40,353 )     (6,197 )
Total other income, net     16,048       12,581  
                 
Loss before income taxes     (2,837,276 )     (767,079 )
                 
Income tax expense (benefit)            
                 
Net loss   $ (2,837,276 )   $ (767,079 )
                 
Net loss per share allocable to common stockholders – basic and diluted   $ (0.15 )   $ (0.06 )
                 
Weighted average number of common shares outstanding: basic and diluted     18,317,830       13,526,374  
                 

ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 31, 2018
(Unaudited)

                                  Total  
                Additional                 Stockholders'  
    Common Stock     Paid-In     Treasury     Accumulated     Equity  
    Shares     Amount     Capital     Stock     Deficit        
Balance at April 30, 2018     18,333,521     $ 18,334     $ 66,557,005     $ (70,000 )   $ (32,771,748 )   $ 33,733,591  
                                                 
Stock-based compensation                 209,976                   209,976  
Common stock issued for cashless stock options exercised     5,230       5       (5 )                  
Common stock issued for stock options exercised for cash     2,689       2       7,815                   7,817  
Purchase of treasury stock                       (7,370,000 )           (7,370,000 )
Resale of treasury stock                       7,370,000             7,370,000  
Fees associated with equity raise                 (29,832 )                 (29,832 )
Net loss, for the three months ended July 31, 2018                             (2,837,276 )     (2,837,276 )
Balance at July 31, 2018     18,341,440     $ 18,341     $ 66,744,959     $ (70,000 )   $ (35,609,024 )   $ 31,084,276  
                                                 


ASPEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

    For the  
    Three months ended  
    July 31,  
    2018     2017  
Cash flows from operating activities:            
Net loss   $ (2,837,276 )   $ (767,079 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Bad debt expense     121,805       63,000  
Depreciation and amortization     498,105       138,720  
Stock-based compensation     209,976       159,300  
Amortization of prepaid shares for services     8,285        
Changes in operating assets and liabilities:                
Accounts receivable     (1,592,941 )     (699,020 )
Prepaid expenses     (229,168 )     (48,902 )
Accrued interest receivable           (18,400 )
Other receivables     173,475       (138,966 )
Accounts payable     (728,230 )     215,431  
Accrued expenses     10,401       (54,827 )
Deferred rent     217,433       (3,683 )
Refunds due students     302,609       80,324  
Deferred revenue     430,015       50,017  
Other liabilities     27,301        
Net cash used in operating activities     (3,388,210 )     (1,024,085 )
                 
Cash flows from investing activities:                
Purchases of courseware and accreditation     (42,917 )     (19,000 )
Purchases of property and equipment     (735,757 )     (261,409 )
Net cash used in investing activities     (778,674 )     (280,409 )
                 
Cash flows from financing activities:                
Disbursements for equity offering costs     (29,832 )     (4,707 )
Proceeds of warrant exercise     7,817       33,876  
Purchase of treasury stock     (7,370,000 )      
Resale of treasury stock     7,370,000        
Offering costs paid on debt financing           (267,323 )
Senior secured loan           5,000,000  
Net cash (used in) provided by financing activities     (22,015 )     4,761,846  
                 
Net (decrease) increase in cash and restricted cash     (4,188,899 )     3,457,352  
                 
Cash and restricted cash at beginning of period     14,803,065       2,756,217  
                 
Cash and restricted cash at end of period   $ 10,614,166     $ 6,213,569  
                 
Supplemental disclosure of cash flow information:                
Cash paid for interest   $     $ 3,346  
Cash paid for income taxes   $     $  
                 
Supplemental disclosure of non-cash investing and financing activities                
Warrants issued as part of senior secured loan   $     $ 478,428  
                 

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