A Financial Health and Viability Review for Waynesburg University (PA)

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. Last college today, Matt, is in Pennsylvania. Take us to—

yeah, Waynesburg University in Pennsylvania. Um, and this one was a little bit of a challenge for me to figure out what was happening on the, on the budget end. And I'll break it down for you. So here's Waynesburg, Pennsylvania. All right. So a bit of anomaly. You got big deficits here, net income margin, negative, negative, negative, negative. And then all of a sudden, bam, positive. And it looks curious, right? Almost too positive. Yeah. And then if you look at cash flow, net cash from operating activities or operating cash flow margin, It's always negative. All right. So that's kind of curious. So I again double-checked. I'll spare you. But basically what happens is in their audit, they get a massive contribution like $4 million that's not cash, which is included in this operating revenue, but it's not cash. So it's included here as like a revenue source, but it's a non-cash revenue. So there's still negative on, on cash flow.

They can or cannot spend that $4 million. Yeah, right.

So it's not cash that they can spend. Okay. And then so if you look at their net cash raw value, it's like negative $600K. All right. So what I did for some calculations here to figure out their deficit is so you take this number first, your budget needs to cover depreciation, right? Their depreciation Actually, I didn't write it down, but their depreciation, I think, was about $6 million or so. So actually, combined with this loss and the depreciation expense, which is pulled out of the cash flow, so they're looking at a negative $6 million here. All right. And then another issue they have is that they're not including their endowment draws in their net cash, which is common. It's about half of schools do that. So if you add that back in, you get their actual deficit. So here's the— if you're following me still, Here's one of the problems they have, though. You can't just add their appropriation back in as is. They're drawing a ton on their endowment and it's killing their endowment. So they got to stop that. So to show you their change in endowment value, their endowment's down 18%. They're killing their endowment and their prospects of competing.

And the median was what?

Yeah, the median again is up 57%. So this has to stop like now. Um, and basically what that means is, I believe the number here is they're doing a $3 million draw about on a $36 million endowment, which is incredibly high. Um, they need to have that, right? So really their draw should be about $1.5 million. Um, so with a normal draw of $1.5 million and the negative $6 million that I just backed out for you guys by adding the depreciation into their net cash, so it looks like their deficit is about negative $4.5 million. Not sustainable. They're in rough shape. They need to fix this now. Right. Which is kind of hidden. That's why I had to do this extra work to figure out what's going on. Looks to me, my best estimate is that have about a $4.5 million deficit and I want to try to help them fix that. And again, that involves bringing this down to here. Right. And covering your depreciation expenses with your budget so that that would require an additional $4.5 million per year, about. All right, so let's look at the revenue side strategies, see their net tuition revenue. Net tuition revenue is way down, 35%. So again, we'll look at enrollment and price. So remember that, and down 35%. Students, students are down 18%. So only half of the loss of net tuition revenue looks to be explained by a loss of enrollments. And the enrollment loss appears to have started— yeah, maybe just starting. So this needs to be fixed fast. And again, it's going to take many years probably to get back to this, even if they do everything perfectly.

Right.

Right. So a quick thing to change is notice that this is only down 18%. Net tuition revenue is down 30-some percent. So we have to have a price problem here, um, potentially. So let's look at net tuition revenue per student, and it's just incredibly low. Um, students used to pay $14,500 about to go to this school, and now they're paying $11,000. It's below the 75th percentile. Yeah, it just— that is an extremely low price. And so my advice again is to stop doing this. It, it's probably not price that's your problem, right? You're already probably one of the cheapest schools in the country. Again, this is just my gut based on what my experience with these kinds of things. It was probably a mistake to reduce this price even from $12,000, which makes a huge difference. Even a $1,000 change, you can do the math, it gets to be a big number. Quickly. So I would recommend bringing this price up, all right, and experimenting with a higher price because that's the only way you're going to get net tuition or revenue up quickly. And then of course, figure out why you're losing enrollment. It was probably nothing to do with price, to be honest.

Yeah. Okay.

On the expense side, so you have the price strategy and checking the enrollment funnel. Again, you need a strategic compass or something similar to figure out what's happening with enrollments. Really dig into what, what's happening at every level, right? Are you admitting— this should be admitting 100% of students. They should be matching the price of their competitors, not way below it. That's just inefficient, right? And, and just go that way through it. On the expense side, there's some issues to flag here. So we have employees per FTE. That's high. It's high relative to their, um, enroll— their revenue as well. So employees per operating revenue.

And that median that you see that Matt shows, that median that Matt shows in all the charts is for some 1,300 private colleges. So it's a large sample set.

Oh yeah, I'm mistaken. This is high, but, um, keep in mind there is this non-, um, remember, non-cash gift here that's inflating the revenue to make it look like the revenue is higher. But it looks like they have a bit of overstaffing here potentially. And again, a strategic compass can show exactly where they are. It could be non-faculty, it could be faculty, it could be part-time. It's pretty common to see a part-time staffing just way out of whack. It could be a lot of different things, and we can narrow it down to the exact— not exact, but areas in terms of occupation codes where you need to dig deeper, and I can help you with that. Contractors looks to be a big problem. This would probably be number 1 priority for me if I were working here on the side. Yeah, this, this is just a huge surge in contractors from 9 to 25, over $100K, right? So there's probably a lot of other contracts that are below $100K that have jumped in here as well. That, that's out of line with the size of the school and out of line with their revenues. That needs to be looked at quickly. So I was going to show you contracts paid over $100K relative to revenue, just way above the 75%. I saw— so every contract should be gone through. Throw out all of the contracts you can live without is my advice there. And I could help you with that. Happy to do that. Do that a lot of the clients I work with. Let's look at specific contracts. Waynesburg. And again, I'm looking for color here, but this food service contract, which is a little bit shocking because I've seen Aladdin's contracts usually reasonable. This is pretty high, um, and it just— it appears to me that the contract's not shrinking with enrollment. In fact, it's gotten higher, which is odd. Um, so I would look closely at that. There's probably some, uh, ways to optimize this food service contract to at least get it back to $1,600 per FTE or somewhere closer. Um, But you would need to dig into that, get other estimates, and have a discussion with Aladdin and other vendors on this issue. But again, this is—

So that color is not good, correct? On this?

Yeah, you're about to— this is as much as a standard deviation above the median for contracts in 2024. All right? And same with this one in 2023. You're about a standard deviation high. Even relatively—

The darker the color, the more of an outlier you are for specific vendors and different types of Super.

Yeah. And remember, if you've seen previous shows, $1,600 is about normal, $1,500 per student per FTE. But, you know, it's going to vary a lot based on your mix of grad students, undergrads, that kind of stuff. But it's generally the rule of thumb. I'll pass it back to you, Gary.

So, so before I show my stuff for Waynesburg, we've seen the pattern before where colleges have their tuition pricing mat go down. And I just wonder, are they succumbing to the perception of tuition discounting is needed to enroll students?

Yeah.

There's no logical reason for that.

Right. I mean, the admissions teams are usually going to say, hey, it's not our fault. We're losing students. Our price is too high. Right. So it's hard to argue that an $11,000 price is too high. It's in fact lower than 75% of schools, quite a bit lower. And again, you shouldn't be necessarily comparing your price to other, like, state schools, right? You should compare your price to other private schools that are similar to you in your region, right? And they're charging a lot more than $11,000, right? So you have some value above what the, you know, private college really—

that's a good point. So a private college really could never successfully compete on tuition pricing with publics.

No, you shouldn't be trying to compete with Penn State, right? And it happens a lot with, I mean, you'll go out of business if you compete with Penn State, let's be honest, right? Or even any other probably state school in Pennsylvania. You're a private school. You offer a unique experience and a small class size. Your price should be higher, quite a bit higher. In fact, also, you have, you should be drawing a lot of out-of-state students, right? And your out-of-state price is really the price or the, the out-of-state price for Penn State is really the price maybe you should be looking at. But I wouldn't even look at them at all, right? Just look at other private schools that you're cross-listed against that are similar to you and across apps and your peers, other similar schools, and, and try to price right at that level or just below to attract those students.

Okay, let me briefly show the graduation rate and college majors completion. So Waynesburg University, all right, you know, slightly above that 50%. So again, this is a college that we don't see that often that is at least mat graduating students and substantively above 50%, and yet they still have financial issues. And again, that's one of the reasons I asked that question about are they trying to price their tuition compared to publics or privates. This is a college that I would consider sending my children to 'cause they at least graduate more than half their students. And yet we see this not every single week, but more weeks than not, where a college with successful graduation rates greater than 50% over 4 years still has financial troubles. And Matt, you've heard me say before, that is very, very troubling to me that colleges that can graduate folks still in this day and age have financial issues. That's not a good comment. It's a fine comment for the college, it's not a good comment on the industry. And look at the mix, you know, even looking at the mix of majors offered from Waynesburg. And again, this is 64, a diverse set of 64. You can see they offer a diverse mix. You can see this internal market share where they are strong. You can see this internal market share where you got to wonder why they're even playing in some of these areas. And then we look at, they are in Massachusetts, so change the state, and Pennsylvania, excuse me. So Waynesburg is in Pennsylvania. So let's look at Pennsylvania market shares. Well, briefly, and again, we're just showing functionality, and I'll just leave— do I have accounting set up? What's my major? I got more than one. Let's just look at accounting. So again, as you expect, a lot of colleges— a lot, first of all, a lot of colleges in Pennsylvania. Let's just go private only. Let's look at the sector, private only. Let's, let's just choose a small set of colleges. So I'm just going to grab a couple colleges on the top here. And again, this gives you a feel for market share. This is accounting. All I have is accounting. We can grab something on the bottom of the list. Let's look at sports kinesiology. And again, if you're looking at cutting programs, don't do it, Matt, by just looking at your own data. Use data from the College Majors Completion app or other sources if you have them and say, hey, where are there opportunities? Is it in this major accounting, religious services? Is it sports kinesiology? Where is it? Don't just rely on your internal data. There may be some opportunities because maybe other colleges, Matt, are having issues with enrollment in those majors as well. It's the data that matters, Dr. Hendricks, all the time. What's your assessment of Bay Path? What's your assessment of Waynesburg?

Yeah, yeah, unsustainable. Like I said, my best guess is, uh, best based on the educated guess based on what I see in their audit, which is a little bit quirky, is a $4.5 million deficit that needs to be closed. Again, that includes Depreciation is really important. That needs to be included, right? So we've talked about that many times. Needs to be in the budget, right? It's not a fake, not some imaginary expense. It's a real expense. And I offered some advice on the revenue side. I think the net tuition revenue per student is just extremely low, and they may not know it. They need to look really closely at their financial aid package, compare their offers to other competing private schools that are similar to them. Not to cross apps that are, you know, Penn State. I just, that's not useful. Look at their staffing, appears a bit high. And again, a strategic compass-like tool, my tool can do it. I can have, I'm happy to dig even deeper into your institutional data and help you do that. The vendors need to be checked as well. Contracts exploded, right? You saw that graph. Highest they've ever had on an absolute basis. And of course, by FTE, it's far higher than the median. And I think it was above the 75th percentile quite a bit. So double-check all those contracts, even the ones under $100K. Can make a committee go through, do we need it? Yes or no? Get rid of it, right? Your goal is to get $4.5 million back in your budget, right? Net somehow.

And so that probably means reducing the vendors So Matt, I wanna 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, 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, our products are the kind of 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 to demo 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 Stonker broadcasting live out of St. Louis, we'll be back next week with 3 more colleges.

We'll see you then.