Bridgepoint Seeks Path Forward

Bridgepoint Education on Tuesday kept a lid on details of how it hopes to solve its accreditation crisis, but executives at the San Diego for-profit college stressed they would do whatever it takes to fix the problems.

In a conference call to announce second-quarter earnings, Bridgepoint’s Chief Executive Andrew Clark said it was too early to say how accreditation woes might hurt student retention or hamper the company’s recruitment of new students.

Bridgepoint, however, stopped giving investors a financial forecast for coming quarters because of the uncertainties arising from the recent accreditation issues at Bridgepoint’s Ashford University.

Accreditation is vital for Ashford, since it’s required for students to participate in federal Title IV financial aid programs, including Pell Grants.

Bridgepoint received 86 percent of its $933 million in revenue last year from nonmilitary, federal student aid programs.

In addition, more than 18 percent of its students are veterans — some of whom are eligible for education benefits through the GI Bill and other programs.

“Our No. 1 priority is maintaining regional accreditation for Ashford University,” said Clark. “Uninterrupted accreditation is critical to our mission as an organization.”

Bridgepoint’s accreditation issues first surfaced July 9. Up until now, the company has communicated mostly through written statements and federal regulatory filings. Tuesday’s conference call was the first time executives answered questions in public.

Clark said the company is in discussions with accreditation officials and has teams working to address the six deficiencies identified.

Bridgepoint had 92,620 students at the quarter’s end — with nearly all of them taking classes remotely online. That’s up nearly 10 percent from the same quarter last year.

For-profit colleges have come under scrutiny for pocketing big profits while saddling students with debt — particularly those who leave without a degree. A U.S. Senate Committee headed by Iowa Democrat Tom Harkin issued a report last week highly critical of these institutions, citing high default rates on loans, high dropout rates and other problems.

For its second quarter, Bridgepoint reported revenue of $256.3 million and net income of $47.5 million, or 84 cents a share. The results beat Wall Street analysts’ forecast for earnings of 74 cents a share but missed on revenue, which was expected to come in at $260.8 million.

“The healthy earnings-per-share beat was driven by lower spending at the educational services line — not what anyone really wants to see given criticisms of accreditors and Senator Harkin,” said Wells Fargo analyst Trace Urdan in a research note to clients.

Bridgepoint’s problems began when it sought to switch accreditation from the Higher Learning Commission — which certifies colleges in the Midwest, where Iowa-based Ashford University is located — to the Western Association of Schools and Colleges, which accredits schools in California and Hawaii.

WASC denied the request, citing six deficiencies. They included a 53 percent dropout rate over a four-year span and too much spending on student recruitment/marketing (31 percent of Ashford’s spending) relative to what is spent on education.

Bridgepoint is appealing and said it will reapply for WASC accreditation. But now it must satisfy the Higher Learning Commission, which put Ashford on special monitoring status following the WASC denial.

Ashford must prove it meets the Higher Learning Commission’s accreditation standards. The company needs to submit a report this summer and undergo an on-site inspection this fall. The agency will meet in February to determine Ashford’s status.

“The entire accreditation process is a little bit ambiguous,” said Timo Connor, a research analysts with William Blair & Co. “You can never know completely where you stand until the process is done with.”

Asked if he thought Bridgepoint could achieve Higher Learning Commission accreditation, Connor said, “I think they can, provided HLC is willing to work with them.”

Looking ahead, the rate of new students enrolling will likely drop “as the company adopts a more selective admission strategy to improve student outcomes” in hopes of satisfying accreditation agencies, noted Peter Appert, senior analyst with Piper Jaffray.

Bridgepoint’s shares rose 57 cents Tuesday to close at $10.58 on the New York Stock Exchange. The stock is down 51.6 percent so far this year.


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