A Financial Health and Viability Review forSpring Hill College (AL) May 6, 2025

It is Tuesday, May 6th, 2025. Welcome back everybody to the College Financial Health Show with Matt Hendricks and Gary Stockman. We have Spring Hill College in Alabama.

I'm going to start with, uh, Spring Hill College in Alabama and do the sort of usual, and, and I'll focus in where I can on, um, hints on where they might, you know, right-size expenses or help their rent boost their revenues and things like that. Uh, all right, so Spring Hill College, pull it up on the Advanced Financial Compass. Spring Hill College in Alabama.

Yeah.

All right, and you can see here, I think I got my zoom 125. Yeah. Um, all right, so obviously the story is big net income losses in 2023 and 2024, and these are quite devastating. Remember, this red line is the last year of life were 9, the median for 9 closed schools, and they're like doubling that up, more than doubling that up. Um, so these are pretty massive deficits relative to their revenues. And, um, on top of it, you can see that their endowment is shrinking. So you can probably guess what's causing that is— and this is even more, uh, trouble, trouble thing more troublesome, I guess, is the way to say it, that these deficits are probably being masked a little bit. They're probably bigger even than what we're seeing there because they probably have big appropriations. Let's take a look. And yes, with the exception of 2024, which maybe they've run out of options to pull money out by then.

That's really scary.

Yeah, they had a 15% draw and a 7% draw, which are really truly massive and then had a big one back here as well, 10% draw. So what happens typically in the accounting is that those draws will show up in operating revenue and those draws are not sustainable and shouldn't be happening regularly. So really this number should be much lower, right? If the draw is indeed put in there as operating, it should be worse than it's even showing. Yeah. Yeah. So the actuals is probably— actual is probably quite a bit lower. Uh, so Spring Hill's in serious financial trouble sort of abruptly, right? It looks, it looks as though actually maybe 2022 is when it started, right? We've got a big draw here to prop up the 2022 number. So again, that would be much lower, uh, with a normal draw. And by the way, I just made a post about a school where the board is, is suing the CFO. Essentially saw that part of the complaint is that they didn't— they're claiming, I guess, that they didn't know that the endowment was shrinking and that these big draws were happening. Well, they should know that, right? Um, just part of standard practices of boards, right, to monitor this number as we're doing right here. It's really easy to do, especially now with this Advanced Financial Compass. You can track your endowment relative to the national mean, median, uh, and relative to peers. So you really should be keeping up on that. So Spring Hill's got some serious problems here with the deficit. They have a big revenue problem, as you might guess. Revenue side here, I'll show you their operating revenues. Operating revenues suddenly dropped off. And again, this part of this was— is inflated, right, by that big draw in 2022. But yeah, operating revenues down 31%. And this may be a legit revenue figure there because it looked like the draw was low. So big, big drop in revenues. Let's take a look at net tuition revenue. And this is probably the big problem for them. Yeah, down 33%. Yeah, not ideal.

And show the 4 options you have there, Matt, for new viewers. Show those display mode options.

You can see it in dollar figures. Their revenue is about $12 million. It used to be about $18 million. In 2016. And, you know, if you— this is in, uh, actual dollars, not real dollars, um, so not even adjusting for inflation here. They've got a massive drop in, in, uh, net tuition revenue even without accounting for the, you know, inflation that's occurred over this period. This is per FTE, and this is one of the things I usually check because this is a good proxy for the price that the school is charging. And you can see that their price is quite low, and it has been low, and it's It's even lower in real terms, probably the lowest price they've ever charged in real terms. And despite having this incredibly low price, that's right at the 25th percentile, by the way. I mean, basically that means this is one of the cheapest schools to attend in the country on average for the average kid. Despite that, they're really having troubles with enrollment. I'll show you FTE students. And again, you have the raw values. You used to have about 1,500 students and now they have 972. That's down 33%. Gotcha. So it's all enrollment. It's nothing to do with price. You know, just a policy question and thing to think about if I were them is, you know, they have this sudden— so here we go. 1, 2, 3, 4, 5, 6. 7. Yeah, the enrollment just seems to be in free fall here, despite the fact that their price is incredibly low.

Right, right.

It hasn't, and in real terms has been decreasing. So either you have like really low demand for your school or the price is just not right, right? The price could be higher maybe and still have this same trend for enrollment. I'd be willing to experiment with it if I were them at this point. This seems pretty desperate. Experiment with a higher price and see if that impacts your enrollments. You might find that it doesn't, right? Having a really, really low price like that, it may be that price really isn't the problem. It could be some other thing, right? The quality of the education for one, or it could be other things in your funnel, right?

I'm going to look at the admissions yield here in a minute.

Yeah, it could be the, could be just like, I've seen schools like this where they have essays for some reason and application fees and that really just kill in the top of their funnel and they don't really realize it. They assume that it's a price issue and it's maybe not, maybe it's not a price issue at all. Maybe the price is actually too low. So I would experiment with that if I were them, if they haven't already. So that's my advice on the revenue side. And of course, check the funnel everywhere. They got to figure out if the apps are normal, all of that stuff. And we can do that for them too in the strategic compass. So expense side, Yeah, I mean, they, they've got to right-size their finances for the size that they are right now. And as you might imagine, since their revenue has fallen off sharply, they've got a lot of expense side things they can right-size to sort of extend their life and actually become sustainable at 972 students, possibly. So the first thing I flagged here is I went through all of these and there's quite a bit here, but one was occupancy costs. All right. These are— these have always been high even when they're at 1,500 students, but it's very high relative to their revenue and relative to their student body. All right.

Highest got to be the 98th, 99th percentile.

Yeah, they may be actually. That's probably one of the highest in here. So what this says is they're spending 31% of their budget on what's called occupancy. And if they've done the accounting correctly, I'll just remind you what's an occupancy. These are things that you might not think about. So if they're renting buildings, maybe they can negotiate lower rents, or since the school is so much smaller, maybe they can rent something that's smaller if that's the case. Heat, power, all the lighting— I mean, one thing that I know firsthand is you can reduce that. You can change the thermostats, maybe negotiate better rates. All of those things are possibilities. Check the insurance policy. Maybe you can close down some buildings or maybe just get a better insurance policy. Real estate taxes, I'm not sure if you can do much about that. Maybe it's time to sell real estate, but you got to get realistic about, you know, are we going to operate as a 1,500-student school or a 900-student school? Right. It seems now is maybe the time to think about being a 900-student school.

It might be past the time to think about.

Yeah. So it's all things to think about that. Are data-driven. Um, another thing here, sort of similar line, is office expense. Whoops, office expenses. And these are things that typically we don't see, right? Usually when I see cost side issues, it's staffing, but this school is a little different. Got these other expenses like occupancy, and you know, this is stuff like telephones, um, printing costs, Delivery costs, equipment rental, banking fees, stuff like that. Look into that in great detail and figure out what can be cut or reduced or right-sized. There's lots of stuff in here. I've got so many flags. Fundraising costs looks fine on raw values, but again, this school is smaller than normal, very low revenue. So their fundraising expenses seem high for their size, which may be in a reaction to try to save the school, right? Yeah, their contracts. So I'll go in some of the usual cases now. Travel, food service, see food service contracts per revenue relative to their revenues, very high relative to their FTE, very high. Again, renegotiate the food service contracts, make sure it's right size, get other bids, simple things to do there. Payroll expenses, uh, very high. I, I can pull it from the endowment. Oh, that looks about the median. Let me pull the 990 value. So I have multiple values for some of these. So we've got, uh, compensation of officers and directors. That's near the 75th percentile, so I'd look at that. Uh, Yeah, generally staffing stuff to check. Food service contracts, travel expenses. I have travel in here too. I'll show you that and I'll just, I'll leave it at that. There's just a, in general, a lot of stuff on this expense side to check here. Again, they'll need to come to terms with the fact that they're probably not going to get to 1,500 students again anytime soon. Yeah. So we need to right-size everything for a 900-student school about. Which is totally doable. But here's the travel expense. Um, I don't know if they have a ton of athletic teams or what's going on here, but I would double-check all of that.

Again, the important part here, this is, this is comparisons to others. Yeah, comparisons to about 1,300 other private colleges. And those lines you see on the chart are the 25th, 50th, and 75th percentile. And Spring Hill is way above the highest too many times.

Yeah. And so here's, here's where we're flagging a lot of these. So again, the— this could be part of the occupancy cost, just the maintenance cost. Contract looks quite high. It's high relative to their FTE and very high relative to their revenue. Same with the food service contracts, quite high. Again, $1,500 per FTE is about normal here.

Dark colors are not good, right?

No, you don't want color. And then they've got all of these. I'm not sure what's going on with these education. I wonder if these are like online education things. Double-check those as well.

Yeah.

Those don't look normal. Yeah, just a lot to check. There's a bunch of contracts to check. I mean, just double-check how many contracts they have above $100K. Yeah. So here's the raw value. They went from 5 to 14 in one year. That's a big jump. So chances are a lot of those contracts might not have been necessary, right? Or advisable given the budget constraints they're facing. So I go through all of them, including the ones under $100K that I don't see here. But yeah, just trying to help them out as much as possible. The first, the way to start is what we're doing right here is just finding all the places you look weird and then dig into those and try to understand what's going on and if there are any policy opportunities in there, which there usually are. So be open-minded. I'll pass it back to you, Gary.

And as always, if you're from Spring Hill in any form or function and want a custom review, custom demo of this, drop me a note. I'll have the contact information in the show notes. We'll be happy to do that. And there's another product that Matt hasn't mentioned yet today called the Strategic Compass, and that is a product where we can drill down by one college and do all these comparisons across many different kinds of peer sets. And again, I can demo that for you. Reach out to me via email. I'm going to talk about Spring Hill before I show my stuff. And a couple of weeks ago, I think we had Rockhurst University in Kansas City on the show. And in about that same time frame, Rockhurst and Spring Hill announced kind of a low-level course-sharing program. Again, Rockhurst is in Kansas City area, Spring Hill is in Alabama. Matt, Rockhurst, as I recall, did— was okay on the finances. For Spring Hill, that's not— that low-level program sharing is not going to do much for them, is it?

Yeah. And so the thing that's concerning is on the strategic compass, you can see one of the states that's growing in enrollment is in general a lot of states in the South, right? It's like Tennessee down, they're growing. So it's very a bit shocking to see their enrollment shrinking so much. That means that they're not only they're losing, they're losing students of course, but they're losing probably a tremendous amount of market share to other schools. So Strategic Compass would be really insightful for them to figure out who they're losing their students to and what they're doing that's different. Um, so it's a bit concerning to see an Alabama school losing. They're probably losing to a lot of the, maybe the University of Alabama or something. But, um, you know, there may be some other privates in near Alabama or in Alabama that are getting some of their students.

Okay. Yeah, clearly. So today to start off with the 2025 College Viability App, and you can see I've got our 3 colleges. We're doing 1 college per show, but you can see for each of the 3, this is a 4-year graduation rate. And I started off with the charts today because I always forget to do that. And we can see that Wayland Baptist— excuse me, that Spring Hill has graduation rates around 50%. Okay, there's the charts. That's cute pictures. It's available in the app. Let's look at the data. And Spring Hill, you know, averages about 50% 4-year graduation rates. That's being nice. They're probably not quite at 50%. And of course, Matt, you've heard me say many times that that 50% graduation rate is a minimum target. And I want to look at the admissions yield because you showed some data there Let's look at the admissions yield for Spring Hill. You know, not great, but at least it's maintaining. That's interesting. I would have expected that yield to go down, Matt.

Yeah. Do you have apps? I wonder if they're just really low on apps.

Um, yeah, we could see, could be higher up in the funnel. Yeah, we could see that in the Strategic Compass for sure.

Mm-hmm.

Interesting. All right. And then we, the other app that we show on the, do on the show is a college majors completion, and I've selected bachelor's degrees. For all of our colleges, and Spring Hill is the first one. And this is interesting because their highest volume program, this is internal market share from 2020 through 2023, and the percent of courses offered of the 64 in the app. So interesting, look at the percentage for business administration. Look at the raw numbers from 80 down to 60 over the last 4 years. That's a 25% drop even though the market share hasn't dropped as much. And look at these programs up here, Matt. You hear me talk about this all the time. Why is a college in financial trouble trying to be everything to everybody? These are the kind of data points, these are the kind of programs, Matt, that these folks should be looking at at Spring Hill and saying, why are we in the chemistry business? Why are we in the religion business? Why are we in the fine arts business? Because as we'll see in market share here in a second, that there are other colleges probably doing a much better job because they have a larger volume for those kind of items. And even down here in 2022, 2020. That's almost 50% of all of their students were in business. That's a dangerously high percentage. And the last thing we look at is market share. And I've got bachelor's set up, I've got accounting set up, and these are for private colleges in the state of Alabama. And Spring Hill doesn't even have the accounting one. Let's find a different one here. Let's take a look at biology. And Spring Hill has, you know, decent market share, 10%. This is the graphic that we use down here. This is external market share. So for all the private 4-year colleges in Alabama, I could add publics if I wanted to. That's the market share that Spring Hill has. Let's do one more. Let's go down. Let's look at social work. And again, you can see market share. We can look at Spring Hill again, about not quite 10% of the market share. And as I pointed out before, Matt, you know, look at these small percentage colleges. We can make it bigger if you want. Look at these small percentage colleges and what is Mobile, University of Mobile doing in the biology business? They have such a small program. What is— well, Birmingham Southern closed, so they don't— that's interesting. Birmingham Southern has, has almost 10% of the business and they closed last year. So again, just tools to make more informed decisions about how the data works. And so, Matt, with that, um, how about an assessment for Spring Hill? Sustainable, unsustainable? What's your thoughts?

Well, clearly unsustainable. And I just pulled up something just because I was curious. Um, here are two schools in Alabama. The blue school is Samford. Their enrollment's up 12% at the same time that Spring Hill's is down 33%. So clearly, uh, Samford's doing something much better than Spring Hill. Maybe that's not a fair comparison, but, um, you know, a lot of people, a lot of administrators say, oh, it's just, you know, demographics, this and that, and not— it's not that. Um, they're just— they're losing market share. Fast, right?

It may not be demographics, but it sure as heck is finances. And we're not seeing a particularly good scenario for Spring Hill. Picture items that I wanted to talk about today, and, and that we've talked about, um, as we wrap up the show, is we talked— you talked earlier about boards really needing to monitor the costs, the financial statements. And I, I get that, that fiduciary responsibility is part of a board's responsibility. I will grant you that. What about faculty? Because we saw with Limestone University, they didn't let their president and board attend the graduation because they said they didn't tell them what was going on, but the data shows they could have found out. Is it fair to hold faculty responsible for that?

Fair criticism. Yeah, the faculty— clearly the board has a legal responsibility to do this stuff. The faculty is not necessarily legal, but they do have a shared governance responsibility that they need to take seriously. They need to at least ask the right questions. It's really hard to ask those questions if you don't have the data, right? If you're just going to— and the same for the board, right? Again, I brought up that example of Averitt. I think you—

yeah, yeah.

And then basically the board is suing the former CFO for something they should have known just based on standard best practices of boards when you— they have a responsibility to sign off on the audit, right? Study the audit and use it to set the new budget, right? And so they should be benchmarking all these things over time, including the endowment draw. And so it's just pretty shocking that they didn't realize— it appears, right? I don't want to mischaracterize it, but it appears the board didn't know that their endowment had basically shrunk to zero, which is like, I have no idea how that's possible. But It was all clearly laid out in their audits. So really easy to catch this stuff if you just follow best practices.

Yeah. And essentially, the business— this business that you and I have is all the data we use is publicly available. We have added our value by making it easy to compare. That's a gross generalization, but that's what it is. And so if you're faculty, if you're staff, if you're community leaders, if you're students and families, you know, the stuff that we have out there makes it easy to compare. And so if the leadership at your college, public or private, is not sharing this information, well, that's their decision. But just like there is a Blue Book for cars, there is Consumer Reports for everything God ever created. Matt and I have done the same thing for colleges. We don't kick the tires on cars, but we kick the tires on finances for you. We make it easy for you to compare both public and private colleges across— it's not countless, but really, really large numbers of reports. And then one other thing we've talked about before that I want to use as we wrap up this show is that 4 years. You saw some bad data for 2 of the 3 colleges in today's show, although they'll be published as separate shows. It takes at least 4 years to recover from a single bad year. Matt, expand on that for me.

Yeah, I think, uh, a lot of folks, you know, on the boards don't understand the dynamics necessarily of how the business works in higher ed. It's not like you can just turn your revenues around, you know, in 1 year. The reason is that really each year you're only influencing about a quarter of your enrollment or less with your new freshman class coming in. So realistically, it will take a minimum of 4 years to rebuild enrollment unless you somehow can enroll a freshman class that's 4 times bigger than the normal freshman class. Right. Which is, is really unrealistic. So you need to plan for that. And what it means is there's momentum, right? When you're losing students, it's probably going to continue for 4 years, and then turning it around is going to take another 4 years, right? So you should plan on fitting your expenses in that new budget for at least the next 4 years. Otherwise, you're, you're making more problems for yourself.

So the 3 colleges we looked at today, um, even though they'll be published as separate shows on the edited enhanced version of the show, If you have questions, if you have comments, whether it's for the 3 shows we've done today or any other college we've already done shows on or you want us to do shows on, drop me a note. I'll make sure to add the contact information in the show notes. We can get your college on the show. It'll be a couple weeks out because the list is long, but we can also make some time to set some private time aside to show you what these apps look like for your college. So as always, for Matt Hendricks, I'm Gary Stocker. Thanks for making time to watch the show. We'll be back next week with 3 more colleges. We'll talk then.