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Bridgepoint May Find Itself at a Crossroads

BRIDGEPOINT EDUCATION

CEO: Andrew Clark.

Revenue: $933 million in 2011; $713 million in 2010.

Net income: $172.7 million in 2011;

$127.6 million in 2010.

No. of local employees: 5,000.

Headquarters: Sabre Springs.

Year founded: 2004.

Stock symbol and exchange: BPI on the New York Stock Exchange.

Company description: A for-profit provider of postsecondary education mainly through its online channel, and two subsidiary colleges in Colorado and Iowa.

Bridgepoint Education, one of San Diego’s fastest-growing companies that now has about 5,000 employees here, could move a substantial part of its local operations outside the state to retain its current accreditation.

The changes were suggested by a Wall Street analyst in the wake of a denial of accreditation to Ashford University, one of two colleges Bridgepoint owns, by the Western Association of Schools and Colleges. That body, one of seven regional accrediting commissions, denied Ashford the designation that permits enrolled students to obtain federal financial aid, citing several areas where the college failed to meet WASC standards.

The news caused Bridgepoint’s stock, traded on the New York Stock Exchange under BPI, to fall by 39 percent over the next two days to close at $13.01, a new 52-week low.

Brandon Dobell of William Blair & Co. said in a report that while the WASC decision could be resolved in a few years, Ashford’s current accrediting agency, the Higher Learning Commission of the North Central Region (HLC), notified the company that it needs to be in compliance with “the substantial presence rule,” or maintaining a large, but undefined part of its operations within HLC’s 19-state area.

Dobell said Bridgepoint/Ashford can easily fix the issue by moving a majority of its operations to a state in HLC’s territory, which includes Colorado, Arizona and Iowa, where the Ashford campus is.

Bridgepoint, founded in 2004, acquired Ashford in 2005. As of the end of March, Bridgepoint had about 85,000 student enrolled, nearly all of whom take classes online.

Bridgepoint has been shifting some of its pieces around in recent years. It increased its presence in both its Denver and Phoenix locations. The company’s other college, University of the Rockies, is based in Colorado Springs, Colo.

In the past few years, Bridgepoint relocated “several hundred” employees from San Diego to Denver when the company moved the University of the Rockies service center there, and leased about 260,000 square feet of space for about 1,000 employees, said spokeswoman Marianne Perez.

A Large San Diego Workforce

In an economic analysis done for the San Diego Regional Economic Development Corp., a nonprofit business retention and attraction organization, by the London Group, Bridgepoint’s San Diego employment was pegged at 3,900, and a total payroll at $227.5 million at the end of 2011.

Using direct and indirect employment along with a multiplier formula, Bridgepoint’s total economic impact here was estimated at more than $1 billion.

Sharie Rodriguez, a Bridgepoint spokeswoman, said Bridgepoint’s total employment was 9,000 nationally, and about 5,000 in the county in four locations. The EDC report stated Bridgepoint occupies nearly 700,000 square feet of space in four buildings, with the largest at 150,000 square feet in the Sunroad Centrum building in Kearny Mesa.

Rodriguez said WASC’s denial of accreditation doesn’t mean Bridgepoint’s colleges lost accreditation. “We are accredited by HLC through 2014-15, and we are appealing the WASC decision,” she said.

In addition, Bridgepoint is reapplying for initial accreditation from WASC in a parallel process intended to save time in the event the appeal is denied, she said.

WASC Lays Out Opinion

The company decided to seek accreditation from WASC because most of its operations are in San Diego, Rodriguez said. WASC has jurisdiction over schools in California, Hawaii and the Pacific Islands.

Among the reasons for denial provided by WASC in its report were low student retention and graduation rates, insufficient faculty, and the emphasis placed on marketing.

A large portion of Ashford students exit within a short period, the WASC report said. “Nearly 128,000 students have withdrawn in the last five years, during which time 240,000 new students were enrolled,” said WASC President Ralph Wolfe in his report. “This level of attrition, on its face, is not acceptable.”

Bridgepoint has already taken steps to improve certain parts of Ashford’s operations, but it’s “not close to being accredited by WASC, and even if it reapplies for 2013, it may not show sufficient, quantifiable progress,” Dobell said.

In the meantime, HLC, Ashford’s current accrediting body, will review the college’s status starting Dec. 1, which will likely cause the company to begin moving some people, Dobell says in his report.

“We believe Ashford would need to move its senior leadership (academic and business) and a healthy portion of middle management into HLC territories (Denver and Iowa) but we are not sure about enrollment and financial aid advisers. This would obviously disrupt enrollments and operations and costs a material amount of money, but it is not insurmountable challenge and thus we are not concerned that Bridgepoint/Ashford will lose HLC accreditation around this issue,” said Dobell, who cut his rating on BPI to market perform from outperform.

Rodriguez said she was unaware of any plans to relocate any San Diego employees. The company is taking all the steps necessary to obtain accreditation through WASC while it works with HLC to satisfy its requirements, she said.

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