April 29, 2020 - 2:54pm EST by
2020 2021
Price: 8.21 EPS 0 0
Shares Out. (in M): 22 P/E 0 0
Market Cap (in $M): 177 P/FCF 0 0
Net Debt (in $M): -11 EBIT 0 0
TEV ($): 166 TEV/EBIT 0 0

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Introduction -

Aspen Group (ASPU) is a mostly-online higher education company focused on the nursing sector. It is one of the best opportunities in the market today as it is a low risk high reward investment. The name was written before on VIC – last on 5/2018 at a price of $8. The company has significantly de-risked since and created a lot of value which is not reflected in the share price. My price target reflects multiples of today’s price within 3-5 years.

Executive Summary -

ASPU is in the middle of ramping up two new business units. These units are the most profitable the company has ever had. The ramp up began in mid 2017 and is projected to continue at least for the next 5 years. The move from pure online programs to the new programs with offline campuses spooked investors as it required a buildout phase in which the company burned cash and there was significant uncertainty regarding the probability of success and how profitable such success will look like. Management insisted these investments will generate returns in the hundreds of percentages – and so far, has delivered on the promises. The company is growing rapidly with 40-70% topline growth for the past few years and this is expected to continue in the 30-40% range for the next couple of years at least. ASPU is the lowest cost provider by a wide margin which provides for anti-cyclicality. It is also CV-19 proof and per conversations with the CEO, results haven’t been affected by the virus. I will expand on all these points and more below.

Change of Strategy and Share Price Fluctuations -

Up until mid 2017 Aspen focused on creating and then growing its “core” programs. These programs are all 100% online education programs. The vast majority of which is in the nursing sector. The company also instituted a Monthly Payment Program (MPP) in which students are able to pay a monthly fee (~$200) that would usually continue for two years post-graduation – this was very affordable and allowed students to avoid student debt – all students were already employed nurses so the credit risk was minimal. The MPP has SAAS like characteristics and investors were attracted to the model. The ramp succeeded and the company became profitable, which was reflected by the share price that went from $1.75 in July 2016 to $9 in December 2017. The company’s exquisite online-marketing abilities (which I’ll expand on later) were perceived by investors to be a great match to an online business (obviously).
For reasons never disclosed and discussed by management (as far as I know) there was a shift in strategy in mid-2017. My guess is that management realized that the core programs were limited in three regards:
1) Low price tag – these programs generate $7,360 in average revenue per enrollment (ARPU). ARPU is not the face value of the tuition (which is higher) since some students don’t graduate.
2) Low margins – the lower price tag together with competition only allowed for EBITDA margins around 10%-15% as there was also corporate overhead.
3) Limited growth – the potential to grow the core programs was and still is significant but is also limited in that the company already had ~8% market share in a competitive market.
The new strategy was to create and grow additional programs with higher price points and margins. In May 2017 ASPU purchased USU for $9M. USU had several small programs but ASPU had its sights set at the FNP (Family Nurse Practitioner) program which had a higher Price tag with an ARPU of $17,800. This program has an on-campus component for which students had to fly twice during the two years degree to San Diego for an immersion. In July 2017 ASPU announced a new doctoral degree – this degree is entirely online and has an ARPU of $12,600. Finally, in February 2018 the company announced an innovative hybrid (70% online/ 30% on-campus) pre-licensure program with the first campus set to open in Phoenix. Hybrid has an ARPU of $30,000.
Both the hybrid and FNP programs had physical presence (campuses) that required a different skill set than the one needed for the traditional online-only (core) programs – this brought anxiety to investors. Additionally, the company started generating losses and significant negative FCF as it ramped up these two programs. The losses were generated because the hybrid campus in Phoenix had to be paid for (capex) and then generated losses for a year as enrollment ramped up. Also the company made a mistake with the MPP of the FNP programs – offering students payment schedules that were just too generous which also caused a cash flow mismatch (students were able to pay across six years for a program only lasting two and a half years). Investors voted with their feet and the share price declined all the way to ~$3.60 in mid-2019.
As these programs scaled up and the company corrected the mistake with the FNP MPP (more on this below), the company inflected back into FCF positive territory and investors flocked back in primarily since the hybrid model was more de-risked with the Phoenix campus turning profitable. The share price broke new records reaching more than $10 in early 2020. The price had since edged lower because of the CV-19 selloff. I don’t think CV-19 hurts the company at all.

Business Units (Educational Programs) -

There are 5 main programs at Aspen University –
1) Online RN to BSN
2) Online RN to MSN
3) Online Doctoral
4) Hybrid BSN Pre-Licensure
5) MSN to FNP

The online RN-BSN and RN-MSN programs were the first offerings of ASPU and generate an ARPU of $7,360 (the company doesn’t break it down between the two programs). In the US, one does not need a bachelor’s degree to become a Registered Nurse (RN). These programs allow an RN to receive a bachelor’s or master’s degree in nursing.

As these programs began scaling, the company set its eyes on offering and scaling programs with higher price tags. The online doctoral program has an ASPU of $12,600.

The hybrid BSN pre-licensure program, unlike all the other programs, is offered to high-school graduates and not to already employed RNs. This is a $47,000 three-year program with estimated ARPU of $30,000. 69% of the program is done online, which makes it possible to offer it for this price tag. For comparison, the industry average tuition sits at $85,000. The company does not offer a monthly payment option for the pre-licensure program since it is too pricey. I also suspect that as this program scales the dependence on federal loans will somewhat increase. The launch of the Phoenix campus was a huge success – virtually no marketing was needed as the first cohort was oversubscribed after running a $15,000 radio campaign. This caused the company to announce an evening/weekend program that was launched in January 2019 to accommodate the high demand. Following this success, the company launched a second campus in Phoenix (the HonorHealth campus) and guided for two additional campuses per year. Recently, the company announced that in 2020 it will launch campuses in Tampa (August 2020) and Austin (November 2020). This is exciting as the pre-licensure nursing market is huge (~$3B annually).

The FNP program is a two and a half years program that is completed online with only two on-campus immersions. This means that even though the campus is in San Diego only a third of the students are residents of California. This program has an ARPU of $17,800 which makes it another new program with higher price and margins. As the company scaled this program, it initially offered a generous MPP (Monthly Payment Program) that allowed students to pay monthly over six years. This was obviously very popular with students but wasn’t great in terms of FCF for the company and so in mid-2019 the company announced a change to the MPP such that every student in the FNP program will graduate after paying all of her tuition – the cost of the first year of attendance is spread throughout the duration of the program whereas the cost of the second year is paid at the beginning of the second year. This started in August of 2019 which means around August 2020 the company should start generating significant FCF from this shift (as the first cohort pays upfront for the second year). Additionally, the company recently announced that it will start offering immersions (previously only available in San Diego) in every city with a pre-licensure hybrid campus. This means the program will soon transform from one location to four locations, allowing for further scale up – especially considering this program is priced 40% below competition and that market share for ASPU in this program is around 3%.

Nursing Tailwinds -

The IOM (Institute of Medicine) declared a goal of 80% of RNs to have a BSN (bachelors science in nursing) by 2020 as compared to only 50-55% in 2017. The IOM also aims to double the number of nurse PhDs. These goals will not be met, not even close. It seems the IOM will extend the goal to 2025. Additionally, the nursing sector itself is projected to grow more rapidly than the economy and demand for nurses increase as the US population ages. All ASPU’s students (other than the pre-licensure program) are employed nurses who study while working. This is important as it allows the students to afford the program. It also provides for a great ROI for students as a completion of an ASPU’s program usually translates to an immediate salary bump, and many employers (hospitals) even pay for the degree.

Satisfaction and Graduation Rates -

Per the company’s most recent presentation 92% of students felt they achieved the goals they set when they started their program. The RN to BSN also had a 76% graduation rate which is extremely high for an online program. Per the same presentation, in the pre-licensure program, about 2/3 of the first-year pre-requisite students continue to the final two years and 90% of those entering the final two years end up graduating. These are preliminary data points as pre-licensure hasn’t been around enough time for better data.

Strong Balance Sheet -

In January of 2020 the company made a couple of transactions to strengthen its balance sheet. The company raised both $16M of equity and $10M of convertible debt. Cash balance at 1/31/2020 was $21M with the $10M debt maturing during January 2023 (but will probably be converted before maturity). This liquidity is more than enough to allow the company to proceed with its growth plans for the foreseeable future.

Free Cash Flow -

The company’s activities and cash flows can be divided into four parts: Corporate overhead, Core Aspen, USU and pre-licensure.

Corporate Overhead FCF -
Around $2.6M of corporate related expenses were incurred over the recent quarter. This should grow very modestly as the company grows, but generally speaking remain fixed.

Core Aspen FCF -
This includes the online-only programs the company offers. This part of the company is already generating positive earnings. The most recent quarter generated ~$1M of net income from these programs. The programs here are still scaling and additional leverage should be demonstrated – especially considering the high price point of the doctorate program.
An interesting quote from the CFO during Q4 2019 earnings call is:
“We strongly believe that these other businesses have higher long-term returns (referring to pre-licensure and FNP), but that does not mean that the returns for AU Online are low or that our growth opportunities are limited. Quite the contrary, AU produced a 16% operating margin in the fourth quarter, and we believe that is capable of consistently producing 20%-plus operating margins in the near future. We also think there's ample room for continued growth in this area”.
My conclusion from this quote is that though the potential margins for core are satisfactory (will reach 20%). However, the margins from the new programs are significantly higher.

USU which was acquired in 2017, and today the FNP program is the vast majority of this part of the business. In the most recent quarter USU generated $160k of EBITDA (5% margin). Since the acquisition of USU in 2017, the FNP program scaled from 100 students to 1,759 students. ARPU for this program is $17,800 over a 2 years mostly-online program. Growth in this vertical just keeps on coming as it is priced extremely competitive (40% under competition).
Though the growth in FNP enrollments has been massive, the segment has only stopped losing money in the last two quarters. Per the CFO in the Q4 2019 earnings call:
“When we acquired USU at the end of 2017, it was losing a significant amount of money in the range of $1 million a quarter. To build it to a financially successful operation has taken us several quarters with our strategy being to drive most of the growth in the high expected margin FNP program.
First few quarters showed revenue growth, but not much improvement in operating loss. However, the past couple of quarters have shown that our strategy is working and we've posted very strong operating leverage at USU. We expect this trend to continue”.
USU achieved 60% in operational leverage over the recent quarter.
So why did it take so long for the financials to turn even though enrollments were off the charts? Back in 2017 Management decided to launch a monthly payment plan (MPP) for the FNP program. The characteristics of the MPP were such that an average student that graduates in 2 years will pay a monthly fee over 6 years and so from a cash flow point of view it would take a few long years for profitability to arise. That said, as of August 1st 2019 students enrolling in FNP will have paid all of their tuition by graduation. This will hit the books around August 2020 and will have a sizeable positive effect on cash flow.

Pre-licensure (Hybrid) FCF –
This is a new vertical for the company and could potentially be FCF negative due to growth capex. Management explained that a typical campus should cost about $1M in Capex and then another $0.5M in operational losses over its first year of operations until reaching profitability.
The first campus recently reached profitability after about a year and lost about $0.5M during that year so in line with guidance. Management is guiding to two new campuses every year so that is $2M in capex plus $1M in operational losses from the campuses opened in the previous year. Some investors may worry about cash burn here. Others that I spoke with mentioned this is so new that it can’t be modeled and thus deserves no value. I think differently. I think we have reached a point where enough data is available to assign a value for this segment.
From all the comments made by management it seems this business should be high margin. I decided to crunch some numbers and verify this. I put together an income statement for a representative single campus. (Unfortunately, no graphics are allowed by VIC so I’ll do my best without it). The assumptions I used were:
- Revenues of $14M after 4 years per company’s guidance.
- Marketing spend at 3% of revenues (even though the first campus only required 1.6%)
- Enrollment Advisors at 3% of revenues. Again, the first campus only required 1.6% of revenues because of high demand.
- Instructional costs – though management is guiding for 17% of revenues in its presentation. I thought this was a bit optimistic, So I used 25%.
- Depreciation - $1M in capex over 7 years.
- Rent of $800k is based on the annual rent of the first campus disclosed in the 2019 10-K.
- Campus management – $500k – my own estimate.
- Cleaning and maintenance of $250k – my own estimate.
- Academic advisors of $150k – my own estimate.
Even after all these expenses I seem to reach a 56% operational margin after 4 years. This is significantly higher than management’s guidance of 30% EBITDA margins for this business. I suspect true margins are much higher than 30% - in the most recent quarter (3rd quarter ending January 31st 2020) pre-licensure generated $553k EBITDA out of $1.78M of revenues. This adds up to a 31% EBITDA margin. To put this in perspective, at quarter’s end (1/31/2020) the company had two campuses generating revenues. The first campus in Phoenix is operational for ~18 months and the second campus in Phoenix (HonorHealth) was only launched during September 2019 and probably isn’t profitable yet. These two campuses generate $1.78M of revenues during the quarter which is $7M annually, but these two campuses combined should generate $28M in revenues after 4 years. Surely, if revenues increase 4x there should be some margin expansion. There are some fixed costs and provided that 70% of the curriculum is done online there must be significant operational leverage, but margins already reached 31%. I think run rate margins of over 40% are more than likely. Also if you take 35% margins of $14M this comes up to ~$5M. This will be generated on capex of $1M and additional operational losses of $0.5M – talk about a good investment, this is a 200% ROI.

GAAP Revenues vs Bookings –

When the company enrolls a student it already knows the amount of revenues this student will generate on average throughout the program she enrolled in – this is the famous ARPU figure. However, this is not what is recognized as GAAP revenues. GAAP revenues only includes tuition of courses this student will enroll in this year plus tuition for students that enrolled in previous years and are taking courses this year. The company is growing massively, both in terms of number of students who enroll and in terms of ARPU as these students enroll more and more in higher priced programs. This growth creates a lag -between GAAP revenues and “real” revenues (bookings) – GAAP revenues include students who enrolled in previous years at cheaper programs. Bookings on the other hand is the revenue that will be generated by students enrolled in a particular quarter or year. If the company can sustain the number of students enrolling over a couple of years than GAAP sales will catch up with bookings. Will management be able to sustain the number of student enrollments? This is the money-making question and my answer is simple – ABSOLUTELY YES – not only will it sustain enrollment it should be able to grow enrollments significantly. I really don’t see anything stopping the company.
In the recent quarter, enrollment increased 28% and ARPU increased 34% bringing bookings growth to 72%. GAAP sales for the quarter were $12.5M while bookings were $26.5 assuming no additional growth in about two years GAAP sales should catch up with bookings which implies 46% of GAAP CAGR over the next couple of years (this is assuming no additional growth which is obviously significantly undershooting).

Marketing –

One of the company’s edges is that it is more an EdTech than your regular online university. To understand this I need to provide some background into the company’s founder and CEO, Mike Matthews. Mike had little to no background in education prior to Aspen. Instead, his background is in online marketing where he successfully built Interclick into a leading online advertising network that was acquired by Yahoo for $270m in 2011. Unlike all other online education companies, ASPU doesn’t hire 3rd party marketing companies to generate student leads. The company does its marketing in-house which they can do much more efficiently. While competitors report 3-4x return on marketing investment over the course of a degree, ASPU’s returns are 7-8x. This allows the company to charge less for their degrees which makes them the low-cost provider.

Technology –

Another unique aspect of the company is its technology. In Q1 2019 the CEO provided the following interesting information during the CC (a little long but worth the read):
“" ----- Quote Begins ----- ""
What hasn't been discussed until today is the technical infrastructure we put into place to date, and the innovative CRM will have completed by the end of this fiscal year, which when we're done, we believe will be the most advanced EdTech infrastructure in the higher education industry, and that includes both higher education institutions as well as the OPM industry. Traditionally, a university or OPM offering online, offering online education has three core systems that serve as the backbone of their technology stack. First is a CRM system used by the enrollment team to manage prospective students?
Second is the Student Information System or SIS that the university uses to manage its student body. And third, a Learning Management System or LMS, which serves as the online classroom. In each of these categories, there are sophisticated software or SaaS companies that offer solutions for higher education. Salesforce, Campus View and Blackboard are generally considered to be the market leaders in each of these three categories. Most universities or OPM's will license one or all of these systems. In our experience, these systems are designed to be a one-size-fits-all.

Once you step outside of the one-size-fits-all model to be looking at expensive consulting fees and pricey modules from each of these providers, we started to ask ourselves questions like how could the SIS tell an academic advisor which of their students were struggling in real time? Anyway what we learned is that there is no reasonable way to have these three separately licensed systems fluently talk with each other. So several years ago, we started by building an in-house student information system and connected it to our LMS B-12.

This allows us to take traditionally manual processes and automate them, but more importantly we can track student and instructor activity across all courses in real time, hand-in-hand with our student information system. Now our academic advisors know the name of each student who is falling behind, and work with those students to help them persist. I'm now going to explain the in-house CRM we're building and the functionality that it will deliver which simply couldn't be done if we had licensed all of our systems.

The first phase of the CRM is designed for the enrollment department and has been launched at USU's enrollment center, and will be rolled out at Aspen's enrollment center later this quarter. This month September CRM release includes an algorithm that recommends to enrollment advisors in priority order what follow-up calls should be made in a given day to complete the enrollment process for prospective students in that given EAs database. The algorithm was created by studying the daily habits and activities of the three most productive EAs in Aspen's history.
This recommendation engine then automatically updates in real time after each follow-up or action is conducted by an EA. To our knowledge, these advanced features are not offered by any CRM software company in the industry. We believe this recommendation engine will boost our lead conversion rates even higher than our existing industry-leading double-digit conversion rates. That's just phase one of our in-house CRM. The true breakthrough technology is targeted in Phase 2. Phase 2 is designed to achieve materially higher persistent rates amongst our student body, and is targeted to be launched by the end of our current fiscal year which is April 30th, 2019.

We believe the biggest persistence challenge amongst the growing population of fully online students in the US is the lack of timely student support, specifically students struggle in many different ways during their academic career. And those ways are academic in nature, financial, personal issues, time management just to name a few. And institutions at OPM lack the ability to obtain timely information on how students are performing, and the struggles that they are experiencing across all of these areas. And then provide timely student support to overcome these issues.

Phase 2 of our proprietary CRM will allow us to have real-time data on every aspect of a student's career, whether it be academic in nature or personal, financial or other behavioral issues. Approximately, 30 business events have been determined that we call at risk events, which are likely to cause angst amongst a given student, and without intervention could lead to a subsequent voluntary course or worse a program withdrawal.
Our CRM is intended to turn our Student Services Department into a proactive student support group versus traditional student services departments that simply react to student issues in a defensive manner, and often times when it's too late. Our CRM when completed will alert an academic advisor when an at-risk event occurs in real time, so the advisor can contact the students to discuss ways to mitigate or solve the issue. Specifically, when our academic advisors log into their CRM, they will have a recommendation engine telling them in priority order which students to contact in the at-risk event that was tripped.

Our in-house CRM when completed does not exist in the higher education market, and we believe it will drive industry-leading persistence rates and therefore higher LTVs over time. More importantly, this holds promise to deliver better student outcomes meaning higher graduation rates, and therefore higher returns on our students educational investments.
“" ----- Quote Ends ----- ""

Moats –

I already mentioned all of these, but I think it is important to repeat and summarize the moats of this business in an orderly fashion:
1) Low cost provider – ASPU is by far the low-cost provider, offering programs for 40%-50% cheaper than competition. In a recessionary environment this will be important.
2) MPP (monthly payment program) – this is an additional layer of affordability for students which makes them choose ASPU. Some may say this program is easy to imitate, but I will claim it’s not. A company that wants to implement this instead of charging upfront for a semester will take a big hit to its FCF – this is hardly easy to do.
3) Marketing – the company does its marketing internally and can attract students much more efficiently than competitors.
4) Tech – the company developed its own software systems instead of relying a one-size-fit-all shelf offering. This allows for better graduation rates and enrollment rates.

Covid-19 –

ASPU should be a haven investment during and after the CV-19 outbreak for the following reasons:
1) Healthcare – the current crisis only underlines the importance and shortage of nurses. Even if this crisis persists, nursing schools will keep educating.
2) Online – the company’s programs are mostly online. Pre-licensure is 30% on-campus and FNP has a couple of immersions throughout the 2.5 years program. During the quarterly CC on march 10th, the CEO explained that there are several telehealth solutions that can replace the on-campus portion of pre-licensure. Regarding the FNP program, the CEO mentioned that if a certain area is closed, immersions could be held in a different campus at a different state. Additionally, there’s the option to use telehealth in FNP as well.
3) The strength of the balance sheet prevents any need for capital in the foreseeable future.

My initial concern was that due to extensive overtime for nurses, they won’t have the time to attend their courses. However, I think that other than a few locations across the US (think NYC) nurses weren’t that swamped. In fact, many hospital departments saw a decrease in activity as elective procedures were canceled and patients were afraid to go to hospitals.
An 8-K was filed by the company on April 1st explaining why CV-19 shouldn’t affect the FNP and pre-licensure programs. The filing mentioned that Q1 which ends July 31st is usually the seasonal low for the core programs as nurses go on vacation during the summer, and that if nurses remain in the all-hands on deck situation during the summer there could be more adverse seasonality during that quarter.
On April 7th during a conversation with the CEO, he mentioned the virus had no effect on Q4, which ends on April 30th.
My take is that there was no effect so far. I would even consider that Q1 can be better than usual since I don’t think nurses will work that much OT, but I also expect that nurses will reduce their vacation time as travel won’t be popular in the next several months, allowing more time for their online courses.

Valuation –

I will attempt to establish a value for the business in 4 years. I’ll value each program separately.

Core (including doctoral) generated $29M of annualized GAAP revenues during the recent quarter. This business unit should be able to achieve a 10% CAGR over the next 4 years bringing sales to $42M in revenues. Assuming a 20% EBITDA margin EBITDA should total $8.5M and using a 10x multiple brings this unit’s value to $85M.

The FNP program generated $3.4M in the most recent quarter but since it is growing so rapidly had bookings of $6.7M in the same quarter. Enrollments have grown at a 54% CAGR for the last couple of years. I will assume a more modest 35% growth for the next couple of years followed by a 25% growth for the remaining two years (which I think makes a lot of sense given the low price of the program and the fact they currently only have ~3% market share). This brings revenues in 4 years to ~$76M (6.7 x 4 x 1.35^2 x 1.25^2). Assuming a 25% EBITDA margin (CEO guidance), EBITDA will reach $19M and a 12x multiple is conservative for a business growing at >25% annually. Value of $228M should be conservative.

Pre-licensure (hybrid) is expected to have 12 campuses by 2024 (2 operational now and 2 more expected to be operational during H2 2020). Each campus should reach full capacity after 4 years and generate $14M of revenues. Thus, the 4 campuses that will be operational by the end of the year should generate $14M each in sales within 4 years. I will assume the two 2021 campuses will generate 10M in revenues each, the two 2022 campuses $8M each, the two 2023 campuses $4M each, and that the 2024 campuses won’t generate any revenues. This totals to $100M and using a 35% EBITDA margin (which I believe will be conservative) I arrive at a $35M EBITDA. If my assumptions are correct than sales for hybrid should grow from $13.7M today (annualized recent quarter) to $100M in 4 years – a 64% CAGR – which should more than justify a 15x multiple. Thus, the value of this program should reach $525M (35 x 15).

Corporate overhead was $2.3M over the recent quarter (subtracting interest paynents). I assume this grows to $4M in 4 years and should earn a lower 8x multiple as much of this could be removed in an acquisition. Negative $128M of value (4 x 4 x 8).

Adding it all together brings the total value of the company in 4 years to $710M.

The company has 21.7M shares outstanding and the $10M convertible should convert to additional 1.4M shares. The company also has 0.5M outstanding warrants. Fully diluted, the company has about 23.6M shares. The company may need approx. $15M more for its growth initiatives – these are additional 1.5M shares at $10 a share, but let’s be conservative and assume the company issues 5M more shares in the next 4 years. So, the total share count will be 28.6M. This will bring us to a share price of $25 (710 / 28.6), compared to today’s $7.15 that’s a 250% increase or a 37% CAGR.

Risks -
Credit risk – the company is leveraging its MPP to attract students. However, this payment plan allows students to pay for their degrees as far as a couple of years after graduation (in core programs). There is the possibility that these ASPU graduates stop paying. I would claim this is extremely unlikely since all the students utilizing MPP are already employed nurses BEFORE they enrolled in the company’s programs. The tailwinds in the nursing sector make it very unlikely that there are massive layoffs in this sector. Further, pre-licensure, the only program that has students that are not employed – does not offer an MPP.
Hybrid test results – it is my understanding that in order to ramp-up a pre-licensure campus, the company needs to demonstrate that the students educated in the campus passed the relevant nursing exams. The results for the Phoenix campus are due in August and if those are positive this will de-risk the story even further. ASPU has been educating nurses for a while now and has a great regulatory track record. I will be very surprised if the students fail to meet the minimum bar required.
Regulatory - some countries provide free or very subsidized higher education systems. If the US does a 180 reform and such a program is instituted on a large scale it will hurt ASPU and the rest of the for-profit education sector. I see this as a very improbable, Armageddon-like scenario. I don’t think this is on the agenda of leading politicians. Alternatively, a more likely scenario will be providing more attractive terms for student debt – such a move will benefit ASPU.
Competition – the company may face competition as it tries to scale its programs. However, such competition is not currently in sight – management mentioned that some universities started offering 10% discounts but ASPU programs are a lot cheaper than that. Also, most competitors can attract many students at significantly higher tuition, and they have no motivation to lower prices and compete with ASPU. Demand for nursing education is so high that each year there are many prospective students that meet enrollment criteria but existing universities just don’t have the capacity for them. Longer term, it would probably be less expensive for a competitor to buy ASPU than to compete on price.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


- Continued Execution by the company.
- FNP program reaches the point where students start paying cash in advance in August 2020 - making a significant impact on FCF.

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