A Financial Health and Viability Review for Limestone University (SC)

It is Tuesday. It's Tuesday, April 22nd. It's the College Financial Health Show with Matt Hendricks and Gary Stocker. Welcome to those watching live, and welcome to those who'll be watching via the recorded version. Today we are launching our second set of 100 college reviews, and we're doing it with the viewers in mind. Hi, Gary Stocker with College Viability broadcasting live from St. Louis. Also, you'll see Matt Hendricks from Perspective Data Science joins me every week as well. And Matt, of course, is from the great state of Ohio, right, Matt?

Oklahoma.

This is actually a great state of Oklahoma and the city of Tulsa. So from this show forward, we're going to continue doing the live show as always. During the live show, you'll see some minor changes because when we release the edited an enhanced version of the show each week, we're going to be creating separate URLs, separate shows if you will, for each of the colleges that we review. And so that's a minor change that you'll see in the show as we move forward. Of course, those shows are always on the College Viability YouTube channel. Matt, we're doing our second 100. Congratulations, sir.

Yeah, you too.

And, and what's our, what's our first college on the list today?

Limestone University in South Carolina.

Should I get into it? It's all yours.

All right, let's do it. What's the background story on this one? Quick, Gary, they just announced they are not closing, but stopping in-person. They're going to try online only. Is that the press release that came out?

Yeah, right. That was last week.

Yeah. All right, so here's Limestone University. This is the Advanced Financial Compass. And unlike many cases, this actually does look fairly sudden to me.

Yeah, it did.

In, in that we have a very sharp, uh, drop in net income margin here from a positive to a negative. Just, uh, all of a sudden fiscal year 2022, fiscal year 2023 gets a little bit worse. And this is pretty massive net income deficit. Remember, this is the closed set. This is their last year of life for 9 schools here, uh, and they're almost double, uh, the negative net income margin. Um, so a really sudden change in net income margin like this, it's kind of curious because, um, it could, could be something catastrophic on the revenue side, but that usually doesn't happen. It's much smoother on the revenue side usually. But, uh, so I was curious to see this, and I'll show you. It looks like there's some sharp expense increases that might have, uh, hastened this or caused this result, this really sharp drop. But I'll show you. So obviously it's not sustainable. Obviously you want to be positive net income margin every year, and this is what they're up against. Um, how did they fill the gap? I'll show you net cash first. Net cash from operating activities. And obviously had a big net cash, uh, loss here from operations in 2022, negative $26 million, negative $23 million here. Uh, it's pretty significant. And how do they actually pay the bills? You can probably guess if you've watched previous shows, but this is their appropriation out of their endowments. Uh, the— remember things started going south for them? Well, 2021 was interesting in that they're propping it up even while they're getting the COVID relief funds here, which is really interesting. But '22 and '23 is really off the rails, and it's a 19% draw and a 42% draw on the—

and they're still off the rails.

Yeah, it's completely off the rails. I think their, uh, their accounting is a little bit odd that they don't have that um, included clearly in their, their audit. They have a different auditor that I haven't actually not encountered before, I don't believe. But they've basically, um, taken all of their endowment assets at this point. They went from a $32 million endowment to— that dropped $10 million, dropped another $12 million or so. $10 million, they're at $12 million by the end of fiscal year 2023. Curious too, they haven't submitted their 2024 audit that I've seen, which given the track they're on here, their endowment is probably close to zero now. Um, basically have spent it all. Uh, that—

while you're talking about that, there, there— the amount of money they wanted was $6 million. That seemed awfully small to me.

Yeah. Um, Yeah, unless they've done— so there could be some clues here I can show you that they maybe, maybe have done enough to make, make the deficits quite a bit smaller. Yeah, notice their staffing reported on their 990 goes from 844 staff to 330 in one year. So perhaps that is showing up now in this fiscal year 2024-25 budget. So that's a possibility. But yeah, obviously things are off the rails here for this school. Show you kind of what, you know, first thing to check usually is if it's the revenue side or the cost side. It's short answer is both here, but curious about the expense side in particular. I'll show you both of them. So operating revenue since 2016, on the top graph, and on the bottom graph, we'll put expenses.

And as Matt brings that up, we always track in the Private College Advanced Financial Compass the last 8 to 10 years of data. So you're looking at data from 2016, and through most colleges now, it's 2024. That's not the case for Limestone, though.

Yeah, so here's— yeah, you have almost all the 2024. They just haven't turned it in yet. I'm guessing it's pretty bad. So I don't have full information here, but I will say this. It looks really curious to me that revenue is fairly flat. Since 2019. And, you know, remember the big net income nosedive? That appears to be almost entirely driven by a surge of expenses here, going from negative, down 2% on expenses, to all of a sudden up 17% in one year. That's a, a 19% increase in expenses in one year. Um, I have some clues about what that could be. Look like they hired a bunch of contractors, Fiscal year '23 or '22. Yeah, all that's in the app if you want to dig deeper into this and figure out what's going on here. But this looks to me like a pretty clear case of a surge in expenses that didn't bring revenue. All right, so obviously, actually, revenue continued to decline at the same time that these expenses surged here. So hence the result we have right now. Um, they're, um, I mean, if this place is going to survive, which doesn't appear, but that's the plan, um, but their net tuition revenue is down. Let me just do tuition revenue. Net tuition revenue is down 36%. But again, a curious thing here is that's not all driven by enrollments. Their student population is actually only down— well, it's actually— never mind, I'm thinking about a different school. Wow, down 40%. Yeah, 40% drop in enrollments. Uh, yeah, it's pretty harsh. Yeah, not a, not a lot of positive things to take from this case. Um, wonder what they pay. I always check the price too because there can be— interesting thing about this is their net price is constant. Right? Average about $12,000, which is a really low price. So to have that low of a price on average and declining enrollment is pretty, uh, it's pretty tough, right?

And while we're talking about that, again, we have tools. We're just kind of showing you the highlights of the tools for the colleges today, but there's something called the Strategic Compass, and it's a tool that Matt has developed that actually looks at tuition pricing. And Matt, I know you and I have seen on regular occasion where the Strategic Compass has value in showing colleges where their pricing needs to be relative to their computers. And for those watching the show, drop me a note, I'll give you the contact information and we'll set up a demo to show you how that strategic compass could work for you.

Yeah, notice too how it's flattened off here. That's clearly a case where they've gotten to new steady state, right? Remember, these dynamic systems take 5 years to get to their new steady state. So it could have been one thing that happened back here in 2016, 2017 that finally has worked its way to its new, equilibrium. Um, we talk about that a lot. If you haven't seen previous shows, definitely check that out. This is a dynamic system that has what we call a steady state. Any change today will affect enrollments for the next 4 or 5 years, right? That's how the whole system moves, and until you get to a new steady state. Um, so I would look for something that happened back here, and it's probably not have anything— doesn't have anything to do with price. I would imagine this price is very low. On average, but there could be some quirky things like we mentioned on the strategic compass. We can see weird pricing strategies by income levels, and I'm learning, I'm getting more and more information about merit-based offerings as well. So there could be something there. I think I'll pass it back to you, Gary, to do your revenue or your graduation stuff.

So let's briefly look at Limestone University. This is 2025 College Viability App. I'm only going to show graduation rates, but there are dozens and dozens and dozens of reports, as you can see as I scroll through, everything from Pell Grants, percent admitted, unfunded institutional grants, and much, much more. But for your graduation rates, Limestone University, this is embarrassing. They haven't even hit— they hit 30% once in the last 8 reported years. And Matt, you know, for— since I've shared this so many times, that the, the bare minimum is 50% of your students should graduate in 4 years, and that's being generous. Not even close. And not only do they have issues with finances, they have issues with systems and processes to graduate students. This is not a good situation. And then also we want to take a look at the majors. We've got Limestone University. This is the internal market share. Interestingly, They have some decent numbers, limestone, yeah, down below. But look for each of those majors, say from human resources and down, marketing, all the way down. Look at the trend, Matt. It's going down, I think, for every one of them. If I looked in— well, maybe not every one of them, but psychology has stayed pretty flat. But that's another indication. It's not just the financial piece, it's not just the graduation rate piece. You can look at where they're strong and see where they're growing. And then of course, look at where they're weak and have to ask, why are they in chemistry? Why are they in math? Why are they in fine arts studios? They've got next to nobody growing, nobody graduating in those areas. And then of course, the more importantly is the market share. This is for all South Carolina privates. I've got criminal justice just showing you functionality. We can see which colleges have strong market share domination. This is external market share. Columbia, Benedict, Claflin, Charleston Southern, Limestone University. You can see where they are. Of course, we have pretty pictures for you. You can roll over the top here and see what the market share is. We even made a pretty picture for you here to take a bigger look at that to see which colleges are doing well. And, you know, clicking on this one, Allen University has 2% of the market share in criminal justice. That's an opportunity for us, some colleges, for some other colleges to say, hey, maybe there's some course sharing, some major sharing opportunities on this kind of stuff. And we can also look at the trends. And again, this one is for criminal justice. and there are dozens of others. We've got 60-some-odd programs in here. We can see what colleges are going down. So it looks like Columbia College is down from 94 to 40. Again, if I'm at Columbia College, I'm asking, what the heck is going on, Matt, that this dropped so much? But again, this is just the tool that we look at. You know, again, we're just dangling the capabilities here. If you're looking at this, if you're interested in this, drop me a note. We'll set up a demo. On how to do these kind of things. But Matt, Limestone University, sustainable, unsustainable, what's your rating?

Obviously unsustainable and probably about to close given their own announcement. That's not necessarily my assessment, but yeah, they certainly look in bad shape.

Right, okay. So Matt, I want to wrap up today's show with a story. Last week I had an alumni from a struggling private college reach out to me and say, we're so worried about our alma mater, can you help us? Now, you know, on occasion we have faculty reach out to us, and on occasion I have alumni reach out to me. I don't know about you. And it was sad in some respects because the data I shared with this person was not good. This college is highly unlikely to survive, kind of like the limestone university that we saw today. And here's why I bring this up. It's not that hard. The data is available. Matt Hendricks has tools. Gary Stocker has tools. It doesn't matter if you're a college president, College Board member, member of the executive team, faculty, staff, community leader, student, family member, parent. The data is there. You can make this— you know, we kind of tease about our products are kind of the same as the old Kelley Blue Book, Matt. Kelley Blue Book kicks the tires on cars. The data apps that Matt Hendricks creates, the data apps that Gary Stocker creates, kicks the data, kicks the financial data on colleges, both public and private, across the country. Use it, don't use it, but the data is there to compare colleges just like it is to compare cars and many, many, many other products and services. We're there for you. Drop me a note if you want a demo of some of these products. I'll be glad to set that up. Let's call this show a wrap for Dr. Matt Hendricks in Tulsa, Oklahoma, and Gary Stocker broadcasting live out of St. Louis. We'll be back next week with 3 more colleges.

We'll see you then.