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Ashford Accreditation Is Also a Win for the Region

Bridgepoint Education’s gaining accreditation for its Ashford University subsidiary was good news for the for-profit, online business, its staff and students, but it was also a relief to the San Diego region.

Denied accreditation from one accrediting agency a year ago, Ashford’s initial accreditor, called the Higher Learning Commission, pressured the company to comply with requirements to maintain a substantial presence within the group’s 19-state Midwest jurisdiction.

San Diego-Centric

While Ashford’s campus is located in Clinton, Iowa, most of the school’s operations and staff are in San Diego.

Had the Western Association of Schools and Colleges denied Ashford the accreditation, the school planned to relocate a big part of Bridgepoint’s offices, personnel, and operations to the Midwest, according to the company’s plans revealed in securities filings.

Bridgepoint’s presence in San Diego is considerable. It had about 3,900 employees locally and a total payroll of $227.5 million at the end of 2011, according to a study done for the San Diego Economic Development Corp. by the London Group. Using a multiplier formula that counted direct, indirect and induced employment effects, the report pegged Bridgepoint’s total economic impact to the region at $1.08 billion.

The firm also occupies about 700,000 square feet of office space in four buildings, including one in Kearny Mesa that had to be “shaved” because it violated height restrictions due to its proximity to Montgomery Field.

Ashford’s potential loss of accreditation would have been the death-knell for the company because it would prevent its students from obtaining federal financial aid, the company said in its filings.

Bridgepoint said in its first quarter 10-Q report filed with the federal Securities and Exchange Commission that losing accreditation would “have a material adverse effect on enrollments, revenues, financial condition, cash flows and results of operations.”

The company also said if Ashford University has to comply with HLC’s jurisdictional requirements, it will implement a plan to consolidate a significant portion of its operations “in the north central region.”

Andrew Clark, Bridgepoint’s chief executive, quoted the WASC report “that the team found an institution that has been fundamentally transformed and whose culture has been changed in significant ways…”

A year earlier, WASC told Bridgepoint it had serious problems, specifically with Ashford’s student retention and graduation rates, inadequate number of full-time faculty, and its overemphasis on marketing spending.

A Model for the Industry

Clark said in a conference call with stock analysts that in response to WASC’s denial, the university implemented a number of best practices that could serve as a model for the online higher education industry serving nontraditional students.

Bridgepoint now intends to obtain approval from the U.S. Department of Education to transfer its accreditation from HLC to WASC, a process that Clark said shouldn’t take long.

Continuing Its Cost Reductions

The company’s overhaul to win accreditation resulted in the slashing of about 500 jobs and the reassignment of 200 other employees.

The company declines to break out where the job cuts were applied, but in his call with analysts, Clark said Bridgepoint shrank its marketing personnel from a peak of about 2,100 to 900.

Bridgepoint said that it will continue to make cost reductions through the remainder of 2013 in response to its reduced student enrollment.

From about 92,000 students at the end of March 2012, Bridgepoint reported first quarter enrollment this year of nearly 79,000 at its two universities (the other is University of the Rockies in Colorado).

Clark said when Bridgepoint reports its second quarter results Aug. 6 total enrollment will likely fall to between 71,000 and 72,000.

Revenue Drops

Revenue for the most recent quarter will come in a range of $195.5 million to $199.5 million, while diluted earnings per share are expected at 16 to 20 cents, Clark said.

The revenue numbers are well below what Bridgepoint generated before. For the second quarter of 2012, it did $256 million in revenue; for 2011’s second, it did $240 million.

Brandon Dobell, an analyst with William Blair & Co. said the extremely thorough report from WASC was in contrast to the agency’s “very negative review” last year, “and should give investors increased confidence in the value proposition of both an Ashford degree and for-profit degrees in general.”

The market also responded positively to the news and pushed up shares of Bridgepoint by nearly 20 percent initially to about $16. As of July 17, the stock, traded on the New York Exchange under BPI, was at $15.85, or about 1 point below its 52-week high. That gave it a market capitalization of $858 million.

Dobell, who rates BPI as a hold, estimated this year’s earnings per share at $1.06, and total revenue of $780 million.

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