A Financial Health and Viability Review for Rockhurst University (MO) on May 20, 2025

So, Dr. Hendricks, what's the next college we're looking at?

Next one is Rockhurst. And my overall sense on this school is that they just have growing pains. But I'll show you why I believe that's the case. They have a lot going on, a lot of growth and construction and stuff like that, and may have gotten a bit ahead of expenses, sort of grow first over the revenues. But I'll show you net income first for Rockhurst. Is this close to St. Louis, by the way? I don't know.

It's on the western side of the state. It's over by Kansas.

That's not very close. Um, so we had a positive net income, positive, positive. These all look really good. And then, then a negative, small negative net income in 2024. Uh, I did some digging though, and it looks like they have about a $5 million deficit or so. The reason is this is negative here, and it's only Uh, let's go change in net assets from operations. So they lost $500K in 2024. It's not a big deal. Uh, but this result happened when they still were getting some COVID relief, which was the, um, employee retention credit, which was $3 million. They also had a really big endowment draw there. You can see this endowment shrinking dramatically in '23 and '24. So they took some massive amount of money from their endowment, probably for construction and maybe covering that. Yeah, these are huge draws on the endowments, probably to support their construction, but it shows up in their unrestricted operating revenue on their audit. So these aren't normal, right? So again, if you take out— if you have a normal draw, you don't have the retention credit. Looks like back-of-the-envelope kind of calculation, their deficit is about $5 million, which again is unsustainable in 2024. But they have a huge runway too. They have a lot of— yeah, they have a lot of assets. So I can—

like, if it was construction, we'll probably see that in the contractor. Yeah.

Yeah, you'll see it in the contract. So they have $72 million in unrestricted net assets. So that looks good. Really long runway. I'm not worried about this school closing or anything like that. But they do probably have about a $5 million deficit, and that's despite huge growth in revenue. So that's why I think it's sort of a case here where we have growing pains and their revenue is up 36% since 2016. Expenses have grown a little bit more, I believe, but I'll show you that tuition revenue, they're just growing. Uh, tuition revenue. That tuition revenue is among the top 25% of schools in the country, up 33%. It's excellent, right? Uh, per FTE, price is constant. There is growing enrollments. All right, so there's students. FTE enrollments up 32%. That is among the best in the country. Again, 75th percentile is up 20%. 12%, right? They're up 32% almost. So they're growing like crazy. They may have actually acquired another school. This is a big abrupt jump here. I'd be interested to see what happened there.

Well, they just did announce a partnership with a college in Alabama or Arkansas. You and I did that college a couple weeks ago.

Oh, okay. So that might explain this big jump here. Um, but yeah, it looks to me mostly like, uh, growing pains. The school's getting bigger. They're probably trying to fix up buildings and build new buildings, um, which is what you're going to see in the, the contractor. And actually, you know, some growing pains here with the staffing. They're just maybe some understaffing. So, uh, employees— just show you this. They may not know this, but, um, relative to their revenue, their number of employees is pretty small.

Yeah.

And same for FTE.

Really small.

So I just wonder, you worry that, you know, employee morale might get low if the pay isn't up to par, because it certainly looks like there could be on average some understaffing going on at this school, which would be also a sort of key symptom that you usually see with growing pains. At the same time, contracts— and when I first heard that, I was like, wow, contracts are really high all of a sudden. But of course they are. They're building stuff, and I'll show you what they're building. Not what they're building, I'll just show you their vendors down here. Rockhurst. Quick Google search, you could probably figure out what they're building. But, you know, their top contracts, $7 million contract for construction, another one for architecture, construction again. Yeah. And no flags here on any of these contracts. Yeah. Honestly, I think this is a good case. Just a lot of things going on and maybe the timing of revenue and expenses just not working out right. I am worried a bit about that endowment though. That thing looks like it's way down. Yeah, it's not very big to begin with and it shrunk quite a bit. It's a bit of a risk. You know, this, this school is going to be quite tuition dependent going forward. Even more so than they were, probably.

Yeah.

Yeah. Per FTE, endowment size has gone below the 25th percentile when they used to be fairly close to the median. So I hope they're aware of that. It's going to make you harder— it's more difficult to compete on, on price, right? Because basically the way you're able to give massive discounts is if you have a big endowment. They don't have a big endowment. It's really small now. So something to watch out for. I will flag one thing that could be useful for them. Take a look at their insurance spend. That, that could part— I don't know what's happening there, but they went from $600K to $1.6 million on insurance. Maybe it's part of the acquisition building or something. Yeah, but, you know, even relative to their revenue, that's a really high spend on insurance. And relative to FTE. So I would just shop for insurance policies, check the policy. It might just be out of line with what they actually need for coverage. Um, but there's some actionable insights for them, uh, they might check out and save possibly a million dollars right there.

Let's go ahead and take a look at the 2025 College Viability App for executive analysis, and we'll take a look at Rockhurst University. We'll start with tuition and fees. And so we'll start with 4-year graduation rate. And again, I knew this going in. Rockhurst is a strong, academically strong college. They have graduation rates in excess of 60%, much stronger than most. And unlike what we see many times, Rockhurst has decent financials. Matt, you'll notice on occasion we have colleges with strong graduation rates, they also have weak financials. That's not the case with Rockhurst. They do a much better job, 68% after 4 years. Let's take a look at their 6-year graduation rate. Yeah, look at that, 3 in 4 graduate after 6 years. Really strong numbers on that. Let's take a look at their unfunded institutional grants. And Matt, you and I know that as merit aid, we know that as most scholarships. And Rockhurst, you know, they've had to compete. Their unfunded grants have gone up from, from about $30 million to about $43 million over the last 8 years. It's common, we see that quite often. That colleges have to discount tuition more and more, um, in the form of scholarships or merit aid just to get students in the door. And let's take a quick look then at Rockhurst and its internal market share. This is the 2025 College Majors Completion App, and I've got Rockhurst is again internal market share from 2020 through 2023, and we're looking at again, business is pretty high. Business majors are pretty high. The percentage is pretty high as well, Matt. So I, you know, you've heard me say before, anytime that internal market share gets above 30% for a single major, you kind of run some risk if you lose faculty, if a competitor decides they want to take that market share for some reason, you're at risk there. And like many colleges, almost all colleges that we look at, they've got some majors with real small numbers. And again, you've heard me ask this question before. If you're looking at the data and you need to save money, need to cut expenses, look at this comparison. You know, look at the comparison across the internal market share and then the external market share. And I'll change this from a state we're looking at earlier today to Missouri, and we'll look at internal market share for private colleges in Missouri. Let's take a look at biology. This is an example of internal market share. Rockhurst University has about 5% of the market of private colleges in Missouri for biology. Now, how would you use this if you're a college academic leader? You would look at this to say, hey, where am I strong in terms of market share and where am I weak? And again, this example, you can see all the private colleges, 4-year private colleges in Missouri. You can see the market share break. You can hover over the top to see what those colleges are. Maybe you look at, at a Revenue sharing, maybe you look at cutting a program that has a really low market share. For example, Drury University has 2% of the market share in biology. Maybe they look at merging with other colleges and those programs for biology as well. And, and Matt, before we wrap, Rockhurst University, um, we didn't really talk about the strategic compass for them today, but they would be a very strong candidate to use that strategic compass to drill down. What kind of benefits would they get from that?

Yeah, we showed that their staffing overall looked low. We could, in the Strategic Compass, you can get a pretty detailed view of where exactly they're low on staffing, if it's faculty, if it's full-time staff, part-time staff, and exactly, and then which occupation codes and departments those folks might be located in. We can get a lot of clues on that. And then it's a matter of taking that information getting the institutional data from HR and getting a sense of, okay, what are the numbers in these SOC codes, occupation codes, departments, and where, where do we look lean, leaner than normal, where you can make some investments. Yeah, there's also like academic programs that they might be missing, or, you know, or it could be having academic programs that are just not popular or profitable. Those are the kinds of things that they can see in the strategic compass.