In this episode of the College Financial Health Show, Gary Stocker and Dr. Matt Hendricks dissect the recent audited financials and operational metrics of Hampden‑Sydney College (VA). They flag several red flags: the college’s audit does not separate operating from non‑operating items, leading to volatile net‑income figures; cash‑flow statements show large negative operating cash and heavy capital‑expenditure (CapEx) outlays funded largely by donor gifts, while enrollment and net tuition revenue have fallen 20‑30% since 2016. Depreciation is far lower than CapEx, indicating aggressive building programs. Debt is rising, and the endowment has grown 70% but may not cover ongoing operating costs. Academic outcomes are mixed – a solid 60% four‑year graduation rate – yet tuition pricing is being squeezed by competition, with unfunded institutional grants held steady, contributing to lower enrollment. Market‑share analysis shows internal concentration in low‑enrollment majors and external dominance by competitors (e.g., Liberty University) in key business fields. The hosts conclude with a set of stakeholder questions about the sustainability of the building program, debt service, endowment support, and strategic positioning, and they promote their analytical products for deeper institutional diagnostics.
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Welcome to the College Financial Health Show with Matt Hendricks and Gary Stocker. Today's college we're going to be reviewing is Hampden-Sydney College. And Dr. Matt Hendricks, what do you have for us?
All right, I'll get right into it. The school's in Virginia and I'll go right into the Private College Financial Compass. All right, let's pull them up. Uh, so you may have seen in previous shows where if net income is like bouncing around a lot, super volatile. It's a decent indication that they're probably not splitting out operating versus non-operating because what creates the volatility is the stock market returns, basically. And so whenever I see that, I'll double-check. And this is one of the challenges with this school is they're not breaking out operating versus non-operating.
Interesting.
I'd recommend that they change their audit, but for now it's really difficult to see what's happening. I have this revenue here, but it includes a lot of non-operating things. What, what normally happens is you have a separate section of non-operating below this. Same with expenses is going to include a lot of non-operating and operating. And then they have change in net assets that's negative $10 million almost. And I will say, even though they're not breaking out operating, non-op, that's not a good sign because 2024 was a good year for the stock market. So, um, it's troubling that their net income is decreasing, or unrestricted net income is decreasing that much, but the restricted net income went up a lot. So hard to say what's happening here.
Yeah.
And then to add also, what I normally do in these cases when they don't break out operating versus non-operating is just go straight to the cash flow statement and look at net cash used in, or generated from operating activities. And this even adds more confusion because you can see they lost $44 million cash from operations in '23, another $7.6 million, yeah, negative, uh, from operating activities in '24. Again, what normally happens when that's the case is you want to double-check that they're not pulling out the endowment draws, in which case usually that ends up in the financing activities and you get big positive numbers here. But you get big negative numbers here. So I just have no idea what's happening with this school. Looks pretty shocking, but I need to learn more about what's happening. But there's something that's really clear is that the cash flow is bizarre, right? So we have negative net cash from operations, negative net cash from investing. So they— where's all this money coming from? Right. So like $26— so this is $33 million that has to come from somewhere other than investments. In operations. And where did it come from? Well, a big chunk of it, $20 million of it, came from some donations, right?
This is a—
this is $16 million cash that's given to them for buildings, right? And another $5 million for the endowment, $50 million the year before. So there's really a lot of money coming in to build buildings, it looks like. And they are right. Look at this CapEx, $25 million, $23 million. That's all money spent on buildings. I'm assuming they're building new buildings or something like that. That's a lot of money.
It'll be interesting to see what their enrollment is looking like. Yeah.
I mean, even depreciation is, well, only $5 million. So this is 4 times depreciation, almost 5 times depreciation. On both of these. So a lot of CapEx money, a lot of money coming in from donors. It looks like must have done some kind of capital campaign and have very serious donor support, not unlike Wabash really, right? So with all that context, let's take a look. It's really hard for me to see what's happening with the finances because the audit's weird and then they've got all this money coming in. Let's take a look at that CapEx number just to show you in perspective what that looks like. This is the depreciate— CapEx to depreciation ratio. A good number is 1, right? And they're at every year above 1, which is indicative of just a lot of building, right? I mean, we're at—
I've never seen that trend before.
No, never seen that. I mean, they're— this is $13 million, $32 million, $24 million, $16 million. This campus is like all new buildings now or something. It looks like on paper.
I would hope so. All right.
So very interesting. It'd be fun to sit down and talk to them about what's happening. There's a lot of money coming in for CapEx, which is property, plant, equipment. Maybe they're building like a huge AI lab. That'd be cool, huh? But anyway, one of the things you worry about when there's all this money coming in for buildings is that Hopefully it's justified, right? And the school can like support all these expenses after the donations leave, right? And which is potentially a question mark, if I remember right. Let's take a look at their enrollments. So this is really interesting to look at their FTE enrollments in the context of how much CapEx has happened. All right. So relative to 2016, their enrollment's down almost 20%. So it's difficult to understand in that context why so much money is going into buildings.
Really, this is kind of a build it and hope they will come kind of model.
Maybe it's possible. Certainly worth a question if the folks at the school, the board members haven't started asking these questions, maybe ask. Right away. I hope maybe they're building another campus in a different market, right, that hasn't come online yet. Maybe that's happening. Not sure. But yeah, that's not encouraging. Let's take a look at net tuition revenue. Maybe, maybe it's justified if the students they're bringing in are just paying a lot more, right? I'm trying to give them the benefit of the doubt here any way I can. Net tuition revenue. Let's take a look. No, it's even worse than the enrollment. So net tuition revenue is down 31% since 2016. So again, really difficult to understand, uh, the CapEx investment with enrollment falling and the, uh, price that students are paying also falling. So net tuition revenue is down a ton. Yeah, so we're at 14-something. This is another school where the price needs to be looked at. They used to have students paying $18,800 now they're paying on average $14,460. So, and in real terms, it's way worse because we have massive inflation over this period. So that's not good. I'm just kind of curious here again, let's make sure that this CapEx spend is going into property. Sure is. Yeah. Their, their physical plant went from $97 million in 2019 to now $218 million.
Goodness gracious.
Just doubled the infrastructure on campus in just a few years. At the same time, enrollment's fallen by 21%. So it's really interesting to see this. I would ask a lot about— oh, and they've taken on a lot of debt to do this as well. Lots of questions.
Are we looking at something that is kind of a new discovery, a college that may be in dire financial straits sometime in short notice?
Yeah, I don't worry about overbuilding. It's happened many, many, many times. We just start building stuff and then at the end of the day, when all the excitement about new buildings goes away, you have to pay for these, right? Occupancy. We just showed that, right? Let's take a look at the occupancy, see if that's showing up yet. Looks flat right now. You just wonder that.
But high.
Yeah, but high. Yeah. Per 1 million. Okay, it's starting to go up relative to their revenue, but some of this stuff is going to lag quite a bit, right? Maybe they're still building these buildings. Depreciation, yeah, that's going up with the new buildings. Yeah, I, I, I, um, I can't give like a definitive assessment here. I can just say that probably one of the most important questions that stakeholders have to ask here is like, what's the plan to fill these buildings? I'm assuming they have that plan and assess whether that's realistic, right? The schools in Virginia, I don't think the demographics are great there. So it makes it even more difficult to fill a bigger campus. But there's a lot we don't know here other than we know there's been a ton of money spent on property, plant, equipment, and enrollment's declining. All right, let's try to, try to put those And the revenue associated— does that make sense, right? Try to figure out how is that going to make sense. Yeah, one thing I didn't check is see the total— again, operating revenue is not going to be legit. It's not— it's got non-operating stuff in it. So debt is also going up. Yeah, it's going to be interesting to see how this all shakes out. But if I were a stakeholder, I'd ask like, what's the plan with all these new buildings? How are we going to pay for these? Do they have endowments that are going to cover the utilities? That kind of stuff. By the way, how is their endowment growing? Excellent. Yeah, up 70%. They have a massive donor base, it appears. So great. Just don't overbuild, right? Be cautious on that part. But I ask a lot of questions if I were a board member or stakeholder in any respect about the client. How do you, how do you sort of align the fact that we have declining enrollment, and a ton of money going to CapEx. All right, I'll pass it back to you, Gary.
Let's go ahead and jump right into the 2025 College Viability App and take a look at a couple items for Hampden-Sydney College in Virginia. Let's go ahead and start with 4-year graduation rates. So I take that back, that is a pretty good number, around 60% at the 4-year graduation mark. And how many times, Matt, have we had 2 or 3 colleges on the show and none of them were doing— yeah, 50% or later? Now we 50% or better. And now we've got 2 with really strong graduation rates. So credit to them. But again, I haven't said this for a while, but we've talked about it before, and that is we have colleges doing well in terms of graduating their students, and yet they face financial challenges. Now, they're unique financial challenges at Hampden-Sydney, and some of those may be being hidden by the use of non— combination of operating and non-operating revenue. But colleges, whether they're graduating students or not, they tend to be lowering that tuition that they're charging in the face of intense competition from their competitors. And of course, as we've said many times, that's good for the students, not necessarily so good for the colleges themselves. And here we're looking at the admissions yield and it's gone up. The yield is going up, but the enrollment is going down. Matt, what does that tell you?
Issues with the front end of the enrollment funnel, probably.
And let's take a look— I'm going to take a look at something we haven't looked at recently, and that's institutional grants unfunded. This is kind of an inside baseball term. Unfunded institutional grants are what most of us know as merit aid and most scholarships. And what we're looking at for Hampden-Sydney College is it was about $18 million in 2016, is still about the same number, $17.5. So they have tried to keep those unfunded grants in, in, in check. But we saw that reflected in what? We saw that reflected in both lower enrollment and then lower net tuition revenue. So clearly they're trying to manage their tuition by keeping the, the unfunded grants— there's no dollars behind those— in check, but they're paying the price, particularly in lower enrollment, and even then with lower net tuition revenue as well on that. And let's take a look then at the internal market share for Hampden-Sydney. They got some strong business and managerial numbers. We look to make sure a number here is not above 30%, and we can see back in 2020 that the internal market share for business is a little high. And of course, the reason we would have concerns on that, if most of your majors are in a certain area, you'd have to be concerned about losing students to a competitor who says, you know what, I want some of those business students, and they, they provide tuition incentives another incentive for those students to go there. And we can see a fair number of low enrollment majors— chemistry, philosophy, math. Again, I will— for those watching from Hampton-Symony College, why are you in those businesses? Why are you in those majors if you don't have any significant enrollment growth? Why are you in those businesses? And if you've got low numbers, take a look at whether you need to be in that major business or not. And on the external market share, let's take a look at Virginia privates. So we're looking at external majors for all the nonprofit colleges, 4-year nonprofit colleges in the state of Virginia. And let's just take a look at one major. Let's go ahead and grab accounting, right? I'm going to zoom in so I can see a little bit easier here. And look at this, there is one dominant player. Interesting. In accounting-related services in the Virginia private college market, Liberty University owns 60% of the market math. That's a big number. I don't know once that we've seen that on any individual major before. And there are other reasonable players, um, University of Richmond at 13%, and Washington and Lee at 11%. But look at all these bit players, these, these organizations, these colleges who have such a small market share. You have to ask yourself, if you're a student or a parent, or even in these colleges, why are you in a business where you have such a slow market share? And Matt, you and I know that that still generates tuition revenue. I understand that. But you got to wonder how much stronger Liberty University is in accounting-related services with this substantial margin then our colleges like Marymount University with not even 1%, then Hampton University, then Ferrum College. It's just— and you can look at this across all the majors. We're just showing the example here. You could look at this across any major that you wanted and do that external market share comparison. And what would be a common one here? Let's look at marketing. That'd be common. Again, we can see— look at that, Liberty must be doing well. Liberty College dominating with marketing as well. So what we're looking at for all the colleges in this— in the, the show today is on Hampton-Sydney University in Virginia. And, and Dr. Hendricks, many times, all the time, you hear me saying it's the comparisons that matter. If you're at Hampton-Sydney College, Hampton-Sydney College, and you're just looking at your internal data, you're making a mistake. You really need to do the comparisons, Matt. You need to compare yourself both internally and externally to other colleges. And you also need to look at the comparisons not just on the Advanced Financial Compass that Matt showed you earlier, but even the, the, the more sophisticated in-depth study for an individual college called the Strategic Compass. If you're interested in a private demo of any of the products that you've seen today, drop me a note. I'll leave that contact information in the show notes and we'll make sure to reach out and schedule a time from either Matt and/or myself to show you those products. So thanks for making time to watch the College Financial Health Show with Matt Hendricks and Gary Stocker. We'll be back next time with more Collegeist Review on the next episode of The College Show.
