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Bridgepoint Is on Both Defense and Offense

In 2010, for-profit Bridgepoint Education moved to a prominent downtown San Diego high-rise. Its name and logo affixed outside the top floors of 600 B Street symbolized the company’s rapid rise.

So the sign being removed from the skyline last year due to an office relocation could be read as a bad omen for the company.

Declining enrollment, pressure to improve dropout rates and legal scrutiny have taken a toll on once high-flying Bridgepoint, which operates

online schools Ashford University and the University of the Rockies.

Revenue of the San Diego-based company went from a high of $968.1 million in 2012 to $527.1 million last year.

On the flip side, Bridgepoint believes a turnaround is on the horizon, citing strengthened bonds with employers and a new marketing strategy driven by analytics and behavioral factors. Also, although the company has shrunk, it maintains a healthy balance sheet with ample cash.

California Lawsuit

But recently challenges have mounted. In late November, California’s attorney general sued Bridgepoint and Ashford, alleging false promises to dupe would-be students. Separately, the Department of Veterans Affairs announced it would suspend Ashford’s GI Bill tuition payments within 60 days unless there’s “corrective action” related to state approval.

At Ashford, veterans make up 10 percent of total enrollment, estimated to account for 7 percent of revenue during 2017. But the ramifications go deeper.

Without funding from veterans benefits, the company said in a 2016 federal securities form it would be more difficult to comply with the 90/10 rule, which prohibits for-profit colleges from getting more than 90 percent of their operating revenue from federally backed student loans and grants.

Bridgepoint filed a federal petition to overturn the VA’s action, and said it will vigorously defend the California lawsuit.

The company, which declined an interview request, provided a statement in response to San Diego Business Journal questions.

“In the coming weeks and months, we will be telling our story, highlighting facts, and spotlighting success stories of our students and our school, so everyone can see, first-hand, the great work we are doing. We are staying focused, remaining positive, and continuing to put our students first,” Bridgepoint said.

Still, the legal wrangling will likely hit Ashford’s enrollment figures, said education financial analyst Trace Urdan.

“Because of all this publicity, because of the scandals in the sector, because of the attention from Washington, that’s come to mean in the public mind that not-for-profit is good, and for-profit is bad, whether right or wrong,” he said. “When you layer on something like a lawsuit from the California attorney general, that’s going to have a particularly damaging effect on Ashford.”

The state complaint alleges that Ashford’s sales staff inflated how much financial aid students would receive, as well as the school’s ability to prepare them for careers in fields like social work, nursing, medical billing and teaching.

Similar arguments were laid out in state and federal actions against Santa Ana-based Corinthian Colleges, a for-profit educational institution that shuttered in 2015 not long after receiving a $30 million fine from the U.S. Department of Education for misrepresenting job placement rates.

No Long-Term Debt

Urdan said unlike Corinthian, Bridgepoint could absorb such a fine, if it comes to that. Indeed, Bridgepoint had $381.8 million in cash and no long-term debt in 2016.

“The big difference there is the strength of the balance sheet,” he said.

Bridgepoint rose to prominence amid post-recession demand for higher education. Enrollment surged from 12,623 students in 2007 to a peak of 86,642 in 2012.

But five years ago, concerns over high dropout rates and students saddled with debt put Bridgepoint under the legal microscope. Responding to pressure, Ashford revised marketing and has sought to attract students who have a higher probability of being successful academically.

Marketing Analytics

It has done so recently by combining “a sophisticated student behavioral model with marketing analytics,” Bridgepoint said.

“As a result, our student inquiries were down 42 percent and yet new enrollments declined by just 11 percent. The improved efficiency of this strategy can also be found in the decline in advertising spend of 14.5 percent and a 26 percent decline in admissions labor,” the company’s statement said.

In addition, Bridgepoint has sought to partner with big companies. In this vein, the company saw a 75 percent year-over-year enrollment increase in a program in which Ashford and partner employers shoulder the cost of employees’ education.

This allows students to get a debt-free degree, while helping employers retain and develop employees, the company said.

Bridgepoint Pushing Back

On the public relations front, Urdan said Bridgepoint increasingly is pushing back against critics, a strategy atypical to publicly traded companies. That includes the Bridgepoint posting a line-by-line rebuttal to a Nov. 10 Chronicle of Higher Education investigative article on veteran education benefits flowing to the company.

“I’ve seen this in some cases. At some point, the companies start to get genuinely resentful. Instead of trying to make it go away quietly, they want their day in court, or they want to try and fight in press releases, statements and so forth,” Urdan said.

The approach was on display in a strongly worded Nov. 12 statement on Bridgepoint’s website, a response to the VA threatening to pull Bridgepoint’s access to funding for GI Bill benefits. The federal agency said Ashford is out of compliance because regulators in Arizona didn’t have the authority to approve its online programs.

Although challenging the decision, Ashford in the meantime temporarily suspended new enrollment of veterans who receive the GI bill benefits.

Bridgepoint’s Nov. 12 statement called the VA decision a “bait and switch by an official, held over from the previous administration, with a clear agenda and a longstanding animosity toward institutions like Ashford.”

The statement went on: “This collusion is evident in hundreds of public records Ashford obtained as part of an ongoing legal proceeding, and it now also includes apparent coordination with activist groups and press.”

Urdan said Bridgepoint could be deemed paranoid, but at the same time, for-profit colleges were under siege in the Obama administration. He added the Trump administration has eased regulations intended to root out bad actors, yet industry enrollment continues to fall, in part due to competition from nonprofit schools with online degrees.

Key to a Bridgepoint rebound is whether new offerings in STEM (science, technology, engineering and math) fly. So said Bridgepoint analyst Peter Appert with Piper Jaffray in a research note Oct. 25.

“While the rollout will impact marketing costs, given fixed cost reductions over the past two years, upside in margins from current depressed levels could be meaningful if the company can return to sustained positive enrollment growth,” Appert wrote.

San Diego Impact

Bridgepoint’s performance has a declining — albeit still large — bearing on San Diego.

During Bridgepoint boom times in 2011, it generated more than $1 billion in business output for the region’s economy, and represented San Diego’s ninth largest employer with 3,900 employees, according to a report commissioned by the San Diego Regional Economic Development Corp.

Another economic impact study hasn’t been conducted, but with a 44 percent drop in revenue since then, it’s safe to say that Bridgepoint’s local economic footprint is a good deal smaller.

“A 30 to 50 percent decline in regional contribution would be my guess,” said real estate consultant Gary London, who led the 2011 study. He added: “Even so they’re a big player.”

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