Rider University (NJ) 'Quick Clip' from the October 1, 2024 'The College Financial Health Show'

Let's take a look at Rider, Rider University in New Jersey. And you can see a similar situation here. Really big negative income, net income losses, 13.8%. Now, what's that?

What's that red line for?

Yeah, this red line once again is schools that recently closed. I pulled out a bunch of schools that closed in either 2023 or 2024. And that list is here. And so it's just basically benchmarking against, you know, schools that actually did close. What does that look like? And you can see they're slightly better than the schools that closed in 2023, but they're actually worse than 2021. And their net tuition revenue is down 28%.

Again, similar to Lion, Lion College there, and similar to the colleges that have closed.

Yeah, exactly. And another thing there, I'll show you the unrestricted net assets went negative. They're negative unrestricted. This is the ratio of unrestricted net assets to expenses. Expenses are negative, never negative. So this is only possible if unrestricted net assets went negative. And that's what happened again, way worse than the schools that closed. This looks similar to Drew. Remember, Drew is fairly close to this university. Unrestricted, negative unrestricted net assets. Again, what does that mean? I think what it means, what it should mean if the accounting is done correctly, is that if they sold everything on campus, they still wouldn't be able to pay back their creditors with unrestricted funds. They would have to use restricted funds. And I think legally it's yet to be settled whether that's going to be an option. There's actually legal cases ongoing where borrowing from the restricted funds is questioned, let alone actually using the restricted funds to cover liabilities. It's very different. Okay, so how did they pay their bills? They had a big loss. I can show you that here again. Operating cash flow, big negative, negative cash flow from operating activities. I can pull up their audit here for you. That's Lion College again, Ryder. Um, so they lost $17.7 million in 2023 and negative cash, negative $21.8 million. All right, so how are they covering that? Well, one thing to note is they don't need to cover this full $21.8 million. All right, some of this is stuff they don't necessarily have to pay for today, but it is an expense accrued this period. So depreciation is one example. Your equipment gets older, wears out, but maybe it still works, right? You don't necessarily have to replace it yet. So that's that cost. And they're clearly not going to cover that this fiscal year. So what they actually do is they draw $8.5 million on a line of credit and they draw down their cash reserves. And I'll show you both of those. You can see both. So there's not much going on in investing activities. They sold a little bit, like almost $2 million or so, $4 million or so in investments. Not serious. They got most of their money from financing activities. This is coming from their line of credit, $8.5 million line of credit. And then they drew down their cash reserves, almost $6 million from $13 to $8. Okay. So that's how they covered 2023. All right. So another thing I noticed on their audit is their auditor notes quote, a substantial doubt about the university's ability to continue as a going concern. And if you're— oh, if you, um, read audits like Gary and I do, most audits say nothing at all, even in really severe cases. And, and for an auditor to say that in the audit, it's pretty significant, right? I know that's a little subjective, but, uh, whenever an auditor goes that far in an audit, I take note. So that, that's something that's on page 28 of their 2023 audit if you want to check that out. Okay. So they clearly have massive deficits in 2023. Question is how they're going to deal going forward. And let me show you their plan going forward. I found this in their disclosure to their bondholders. And so basically they're telling their bondholders everything's going to be okay eventually, right? We've lost— they gave them this projection I believe in February 2024, which they should have had their FY 2023 results long before that, but for some reason they didn't. Um, could be another question to ask. Why didn't they have their FY 2023 results in February of 2024? Anyway, they're pretty accurate. They actually lost $17 here, not $16, but their projection going forward is to cut that in half and then go balanced within 2 years. And this is what they're giving again to their bondholders.

Is that delusional, Matt?

Yeah, that's what I was going to get to. It's like, I mean, I want to give them the benefit of the doubt, but take a look at how they're expecting to achieve this. A lot of it's coming from a $4 million growth in net tuition revenue. And I'll show you the trends on that. And we'll talk a little bit about what would have to happen for that to be true. The thing that's— so you can see a little bit more of what they're expecting to happen. They're expecting enrollment to be pretty steady, it looks like. They did increase their sticker price a little bit, so you'd expect this to go up even with constant enrollment. But the thing that concerns me is I don't see a lot of cases where schools are reducing the financial aid package for current students. And they're talking about a substantial reduction in financial aid here in '24, over $4 million or almost $4 million. So question is, is that only going to be on freshmen? It's not clear to me. I mean, again, if I were a bondholder, I'd want to ask a lot of questions about exactly where they're getting these numbers because, you know, these are projections. I don't know how they make the projections, if they're actually basing it on real enrollment numbers and what the students are actually paying. I suspect it's not, and I'll show you why in a second. But notice what they're expecting by fiscal year 2026. We're going to get to $90 million. In net tuition revenue somehow, and $162 million from just the sticker. Severe, like serious reductions in the discount rate is what they're planning here, and then some continued cuts. But I want to focus on this. Let me just show you what we know about their enrollments and show you basically, I suspect their projection of growing net tuition revenue is a little bit overly optimistic. At least not at this rate. And I'll show you why. Okay, so let's take a look. Actually, before I do that, let me, let me show you this. I found this. This is their fall 2023 incoming class, right? So they had 804 freshmen and 219 transfer students come in. And they, they, the article is basically saying this is an amazing number, right? It's 27% higher than fall of 2021. And the president says they're excited to witness such incredible growth, right? So this would be comforting to a bondholder. And when I read this, I was like, oh, that's great. Let's take a look. Let's take a look at— put this in context of where they need to be to meet those targets and in their historical context. So first of all, let's take a look at that freshman class. By the way, before I drop out of this, this is their FTE enrollment over the last 12 years or so. No sign of this turning around, right? It has flattened a bit, so maybe they are doing some things correctly here at the end. But let me show you their freshman class and their transfers. Oops, this is on my paid, um, app that I make, and I do report as well. But, uh, new first-time students, here we go. Okay, so what did they say? 200 Or 800, right? 804. Was that what I had? 804, I think, is right. So, so it is better than their previous two freshman classes, right? 779 in 2023. The problem with it is basically 2022 is a complete disaster. Only 632 freshmen. But here's the thing that, again, I want to hammer this home. 804 freshmen would put you here, right? While that's better than your previous two freshman classes, the school is going to shrink. Why do I know that, Gary? The class that's graduating had 863 students, right? So they lost a class that had 863, and they're bringing in a class of 804. So the school is going to continue to shrink, right? That's how this dynamics works, right? Again, it's And this freshman class is going to be here for the next 3 years, right? This class is not going to get bigger. So they have that problem to overcome. And so an 804 freshman class, while the article, you know, the president says this is great, that's fine, that's their job. But I hope in private this president understands that 804 is a complete miss, right? They're not going to make their projection. On that budget, if they do that for the next 4 years, the school will shrink. All right. And I'll show you that on the simulator here in a second and show you what they actually need to do to get to their projections. But, um, they're currently not, no sign that they're going to get there. Uh, let's take a look at that transfer ins. Transfer is also a complete mess, right? What did they say? 200 and some transfers. That's just a normal transfer in. Number for them. It's not something to put in a news article and it's not, it's not big. So again, that's, that's the problem. So let me show you. So I have a page on the dashboard that helps people make these projections going forward because the math is a little tricky, right? You lose a class that came in 4 years ago, you gain another class. You also have attrition. You also have transfers in. You also have, you know, people graduating at different times. There's a lot of things to put together. And so I created a model that accounts for all of that. And what the model says is the red line, right? And you see it's backtested. All these red numbers are calculated based on the retention rate, their applications, their yield rate, graduation rates, and so on. And it's completely separate from what actually happened. So the model is pretty accurate here, especially in these more recent years. So it's backtested. We call it backtesting. So what's going to happen if they continue to do what they just did and fiscal year 2023 is they're going to shrink, right? They're going to shrink, and, um, it's not good, right? They're going to continue to shrink. They'll have a slight bump here. Why do you suppose that happens, Gary, in 2026?

Because those freshmen go away and they've got a new class coming in.

That tiny freshman class graduates finally, right? And they get a bump here just because the new freshman class is about 800, right? So this is the dynamics they're dealing with, and you can see the problem they have here. It's all about their yield rate. It's completely Terrible. All right. I don't know. 9.9% yield is very, very, very low. The average of their peer set is something like 15 or 16%, and that's still a bit low. All right. So the only way they get back to where they need to be is to get their yield rate up to about 14%. You see what I did there? 15% yield rate. That's a normal yield rate for them, by the way, and totally doable if they do, if they are effective, right? But notice, even if they do that, they have to do that for 5 consecutive years, right? Every year bring in about 1,000 freshmen, right, with a nice yield rate. And if they are successful and do that for 5 consecutive years, only by 2027 or 2028 does their enrollment get back to, you know, where it used to be. Okay, so why am I bringing this up? I think the reason is their current trajectory, even giving that, you know, the '24 fall, '23 fiscal year '24 freshman class a little bit bigger than the previous one, but not nearly big enough to give you these numbers. You're not going to have a 14% increase in net tuition revenue by 2026 unless you make massive changes to that freshman class and do it consecutive years. All right, so that's the point I want to make. I don't think they, I don't think they, when we see the fiscal year '24 budget, that this is going to be accurate. I bet their net tuition revenue actually was flat or went down in '24, and certainly again, not on track to meet these two. So, yeah, I like this case because you can see the plan and you can see the potential they're making projecting forward. And also you see a bit of the spin, you know. I hope, at least I hope it's been. I mean, I, I, I really would be concerned if the president really indeed thought that this was a good number because it's not enough.

Interesting.

Okay, so, um, yeah, this school's in rough shape. Again, looking at $17 million per year in losses. Uh, what do you suppose Middle States Commission on Higher Education thinks about their Operation?

I'm thinking crickets, Matt.

Yeah, same. It's same. We always see they, they visit the place, they ask for more information, visit, ask for more information, and all the while not doing any kind of formal sanctioning or anything like that to make people aware of what's happening. So again, I would be, if I were a bondholder, I'd start asking a lot more questions about those projected enrollments and net tuition revenues. And, uh, see exactly where those numbers are coming from.