Adler University (IL) Financial Health & Viability Review for Colleges & Communities

Welcome to the College Financial Health Show for Tuesday, August 12th, 2025. The College Financial Health Show with, of course, Matt Hendricks and Gary Stocker. I think it's the only show that looks at the financial health and even viability of private colleges throughout the United States. And Matt Hendricks, of course, joins me each week. He's the founder Perspective Data Science and the creator of the Private College Advanced Financial Compass, and even more importantly, the Private College Strategic Compass. And Matt will talk about those in his presentation. Dr. Hendricks, who do we have for our first college today?

All right, Adler University in Illinois, and I'll jump right into it. I see lots of evidence of financial stress, and I'll show you that first and then get into what they might do to correct it. And I think it's a pretty interesting story. There's a lot— there's like, I love it when there's multiple pieces of evidence, like all pointing to the same thing. So it just makes it really clear, like what the policy should be, or at least what they should dig into. But let me start into it with Adler first with some of the evidence that, yeah, they have a potential financial crisis on their hands. So first of all, their net income numbers are not quite valid. This is another school that doesn't break out operating versus non-operating revenues. So the best thing to do, and I could show you that on the audit, but I'll save a little bit of time and just take my word for it. The best thing to do in that case is to look at net cash from operating activities. And you can see just from the raw values that they had a negative one. Looks like I'm missing a value, a couple values, but that's not a big problem. You can see they have a negative net cash from operating activities in 2023 and then a almost $1 million loss there and a $500,000 surplus in 2024. That's actually not very good because let me just show you on the audit again, you need your net cash to cover your capital loss or your depreciation expense. In other words, throughout the year, you know, machines get old, you need to replace them, roofs get old, you need to replace them, and so on. So if you look at the net cash, the 2 net cash values I just showed you, plus $400,000 minus $1 million, you should never have a negative here unless you've got some funky accounting that's pulling out a big endowment draw, which is common in some of the big schools. But what I'm looking at here is their depreciation is about $1.4 million. So that means their net cash from operating activities needs to be at least that just to have a balanced budget and cover their expenses, and they're not. They haven't done it the last couple of years here. So that's again a key sign for financial distress. Of course, one having a negative net cash and the other one not covering depreciation. They took out a $1.5 million line of credit in basically to cover that loss, the cash loss in '23, and probably also just doing some minor maintenance on buildings and stuff like that. They needed some cash to do that because it wasn't in their budget, right? Took about $1.5 million out in a line of credit. Again, another indication of financial stress. Usually that's a high-interest debt you don't want to use to pay for things that should be in the budget. They don't have an endowment, so there's no endowment data in my advanced. And so I was like, okay, well, maybe they have some cash, right? Maybe they have like cash and investments and they really don't. They have about $4 million in investments, which is decreasing, also partly suggesting financial stress. Yeah. So this doesn't look good. Not a very long runway. They do have— and again, I could show you all this in the app, but I'm all here already. Here's net assets without restriction. This looks pretty good. $19, $20 million in unrestricted net assets. but really it's all buildings for the most part, which is not great. It's not great for a runway because you need assets that are liquid. And the way that I was able to see that here, if you look at their assets, current— I'm in liabilities, sorry. If you look at their assets, almost all of their assets are— so their net assets in buildings is $31 million. And I'm assuming most of that's unrestricted, right? So almost all of that is Good. Like, what is that? 3/5 of their assets are buildings and the net assets, 19, almost all buildings.

I've seen that a lot with private colleges. A lot of their assets are tied up in buildings.

Yeah. So all that's just to say that this is a school that is running deficits right now and really can't afford to run deficits at all. Right. Like they don't have a runway. Again, unrestricted net assets. I'll just show you just to reinforce how you can see this stuff on the app. Unrestricted net assets is tiny. It's $19 million. Like I said, it's all of the buildings.

Yeah.

And it's—

and talking— you know, go back to that one if you can. We're talking about that red line so folks can have a perspective on what that red line means.

Yeah. This is the— this is a set of schools that have already closed. Yeah. And yeah, unrestricted net assets going down is a key indicator of financial stress. You need that to grow. And in fact, most schools, it is growing.

All right.

So take my word for it. You can see all the evidence there. They have financial problems. So what we usually do now is move into what the revenues look like, think a little bit about policy and what might be working on both the expense side and the revenue side and things that they can sort of deal with and adjust through policy. So first thing, one thing to look at is the price, right? And that's a huge, huge issue. A lot of schools really just sort of lose handle on their price. And this is very interesting. So the price, the net tuition revenue per student, they may not know this, but $25,000 average net tuition revenue is very high. It's near the 75th percentile. So with a school that's struggling financially, I guess you would just assume that, you know, kids don't want to go there and they don't pay and all that. But it doesn't look like that's the case here. You have kids paying $25K on average, which is very, very high. So there could be a lot of explanations for that, or it could just be too high, right? And that could be causing what their big problem is here. Let me just show you their trend on net tuition revenue. Net tuition revenue has started to decline. And this is really scary looking at this from my standpoint because usually what happens when you start this kind of movement is it continues for 4 years, right? This is moving to a new state, which, you know, if I'm right, basically what's happening here is this freshman class that came in in this fiscal year is tiny. So is this one. And if the next 2 are the same, you're still looking at— or even if the next 2 are the same size as those 2 freshman classes you just brought in, you're still going to have a decrease here in that tuition revenue. The reason is your graduates are bigger, graduating classes are bigger than the freshman class. And that happens if that goes on for straight years. This is what you get. My dog just barges in.

He's got to play. He's got to participate in the show then if he barges in.

Yeah. So I guess the thing I would look at here, and they could do this in a strategic compass, they can do it on their own, although you have less context to do it and a lot more work. Look at this, you need to look at your price. The price looks quite high potentially, which could be creating problems for their enrollment. And I'll just show you the enrollment part. So in here it's FTE students. And yeah, it's problematic, right? When you see the fiscal year 2022 after that just falling off. And again, this builds momentum, right? If there was some kind of shock here, if the price is just too high relative to some competitors and you need to figure this out, right? You don't, you need to figure out out who your cross apps are, where are these kids going? If they're not coming to your school, where are they going, right? If they're going to some other competitor that has lower price, that would be a key piece of evidence that you need to fix what's happening on the enrollment side, but you need to do more digging. And again, I'm happy to help you do that through the Strategic Compass and other custom analyses that we do for clients. So that's the revenue side. Look really closely at the price. Expense side, there's a really interesting story that emerges on the expense side, and I hope it unravels the same way it unraveled for me when I was doing this a bit ago. Um, so their per-student expenses are low. They just don't have a lot of revenues other than from their net tuition revenue, so, um, that's to be expected. They don't have an endowment. Um, so yeah, um, but let's take a look at some of the individual expenses here.

I'll start—

I'll try to unravel this story first by just looking at staffing. All right. So I'm going to rely heavily on the 990s here, which they haven't— another red flag potentially that they're behind potentially on submitting their 990s unless it's the IRS's fault. Totally possible. But we don't have the 2024, but we can learn a lot from the 2023. So total employees looks actually low overall. So remember that total number of employees looks low, but when you look at employees paid over $100K, It's high, right? Quite high relative to their revenue.

All right.

It's about the 75th percentile. So right away, they've got to look at not just number of employees overall, just really focus in on the number of employees that are paid over $100K. It's very high for their revenue and size. And remember that piece of information. We're going to confirm that with another thing here right now. This is the compensation going to administrators, right? This is the directors, officers of the University. Notice the sharp increase here, and it's just way out of line for their revenue and size. Okay, so you have 2 pieces of information again confirming that you really need to look at the top end of your staffing, right? Administrators, anybody that makes over $100K, those numbers are not normal. And perhaps also the compensation's not normal, or, you know, could have both. And again, here's another one. This is just the total amount of spending on, on officers and directors' compensation is just not normal for their size and revenue. Got to look at that. Another thing, they're going to have two pieces of information confirming this as well. Look at the benefits package. All right. So we need to look at the benefits package, which would include health insurance, other types of life insurance. What else goes in there? Retirement contributions, right? All of that stuff. Take a look, a deep dive on that. It looks like it could be overly generous. It could also be related to the fact that you have really like top-heavy potentially staffing where you have a lot of people making over $100K, a lot of officers, that kind of thing. But yeah, this is the— this is indication. Just need to look at the benefits package. What's the contribution to retirement? What are we paying paying for health insurance for our employees, that kind of stuff. And remember, it's going to be confirmed here in a moment by another piece of information. All right, so I'm going to move into contractors now, and this is where it will be confirmed. But there's some more stuff to look at. Contractors over $100K. Again, it's all the usual suspects here, right?

Yeah.

Contracts. You got to make sure these are right. You're paying $100K at least per contract. You have to have the right number. For one, you got to make sure this, this, the amount paid for each of them also makes sense. This is something needs to be, you do a deep dive on and we do this a lot with our clients and find crazy stuff that maybe that's too strong language, but stuff that people just didn't expect to see, right? So the number of contracts is high for their size and revenue and a couple of spending items. And again, there's going to be more doubling up here. Let's take a look at advertising spend. Now this is just like out of the stratosphere advertising spend for their revenue and size. Remember that advertising and benefits, right? Those are the two things that pop out of the 990s. There's other stuff too. I think there's IT. Let's take a look at that information technology. It's a bit high. Yeah, it's above the 75th percentile spending, you know, per student spending almost $1,000 on IT. It's not as bad as the other things that we flag there, but it's definitely worth a look. All right, so here's the interesting part. Remember benefits and marketing were the two big flags outside of employees and just number of contracts. If we dig into the actual contracts of Adler University, What do we see? First contract here is health insurance contracts, really high for how big the school is and how much revenue it has. This needs to be looked at. I've had clients that just looked at their, you know, got shopped around for health insurance and found much better deals, saved millions. Right. And perhaps that's the case here. And so that lines up with what we saw with the benefits spend being high. And then what do you see here? Two advertising contracts that are both very high. These are just clicks, right? This is Google. It appears to be— I don't know exactly what this is, but this is probably just paying for clicks on Google Ads. Same thing with Meta. This is Facebook clicks. That's $3 million on just clicks. It's not probably the most efficient way to spend your marketing budget. It's probably too much money, right? It's just way— $3 million for a school that— what is their revenue again? It's not very high. I mean, then Yeah, it's just too high, probably not getting a solid ROI on that. Yeah, these colors indicate it's high for their revenue and high for their size.

And you know, Matt, we see this vendor table almost every week, and most colleges have some high numbers, but look how many of those vendor contracts are outside of the normal for Adler. I don't know that I've seen that before.

Even this maintenance contract is high for their size. I mean, all of that needs to be dug into, all the contracts, really best advice I can give them, go through all the contracts, throw out anything that is not absolutely essential. Look into a marketing vendor that will package all of the Google clicks and meta, all this stuff, make it more efficient for you. You could probably for $3 million, under $3 million, get an entire marketing agency to do your stuff for you. Including making the ads and all that. They may have that right now, it's not showing up. I don't know. That's a lot to spend for clicks. I haven't seen that very often, especially for a school. What is their revenue again? Remember, they're spending, they're spending, their revenue is $44 million and they spend $3 million just on Facebook and Google. Advertising. That's a lot. 10% just on the clicks, if that's what it is. It seems really out of line. Um, so yeah, a lot of stuff lining up here. Um, so I think it's really a clean case. A lot of stuff to look at. Um, should I recap it again? It's employee numbers, especially the ones over $100K, number of contracts, go through all of them, especially the Facebook, Google contract, The healthcare contract, insurance doesn't look right either. Shop around for different health benefits or just redo the package. Maybe it's just overly generous. All of that needs to be looked at.

And Matt, I'll wrap up this week's show with something we always talk about, and that is comparisons. And you did that a little bit earlier. It is the comparisons that matter. You can't in this day and age as a college leader, whether you're on the public side or the private side, just rely on your own data. You've got to see how you compete with others. Every other industry that I can think of compares themselves to others, and colleges need to do a much better job of doing that. So for Matt Hendricks, I'm Gary Stocker. Thanks for making time to watch the show. We'll be back next week with two more colleges on the College Financial Health Show.