Wabash College (IN): College Financial Health & Viability Review for Colleges & Communities

Welcome to the College Financial Health Show. We're doing this on Tuesday, July 22nd, 2025. Of course, it's the College Financial Health Show with Matt Hendricks and Gary Stocker. Our college, our first college today we're looking at is Wabash College. And Dr. Matt Hendricks, talk to us about Wabash College.

Yeah, this is Wabash College in Indiana. I'm going to get right into it and pull up the Advanced Private College Financial Compass and walk you through what I'm seeing. So let's go right into the key financials here. So Wabash College in Indiana. And so you can see right away, the first thing that I always flag is the net income. And so obviously you don't want negative net income. And what I see here is 3 years out of the last 4 with negative net income margin. And two of these losses are quite large, like 8% net income margin deficit, and then almost 13%. So obviously that's not ideal. On top of it, this bottom graph, we have pretty slow— kind of zoom in for it here— not pretty slow, very slow endowment growth. Their endowment's only grown by 28% since 2016. That's below the 25th percentile. As a reminder what all of these mean, the average school is looking at about 59% growth over that same period. Um, so very slow endowment growth and deficits. Um, not ideal, but I will say before I go into what's causing these things, I don't think this is catastrophic. The school, I'm not worried about their viability, and the reason is that the endowment and unrestricted net assets are huge. Just to show you, they have $400 million in endowment assets. Wonder if I have unrestricted net assets. Yeah, $260 million-ish in unrestricted net assets. There's zero chance this school— I shouldn't say zero, very near zero chance this school have any financial, like, closure issues coming up. They also— I found that they, um, if you look on their audit, I was taking a look and deep dive into their financials. They have, um, I'll just show you, I'll show you what happened here. And I had to do a news search to figure out what happened. Um, if you look at their statement of activities, this is a massive gift we've got $47 million in gift revenue in 2024. Although I was trying to figure out what's happening here because this is almost all restricted compared to the previous year. Their normal gift revenue is about $15 million. It looks like I really hate that when they pull off the side. I don't understand why they do that, but $15.8 million is about normal. And then they got like $48 million in gifts in 2024. It looks— it turns out they got a $40 million gift. I have a news story, I'll give you the link to it when we post the video. But the news story said that it was unrestricted, but here it's accounted for as a restricted gift. So that's a bit confusing. If it's unrestricted, that's unbelievable, but it should be in this column in that case.

Yeah, you wouldn't think so.

Yeah. So long story short, the reason I show you that is later not in any danger of closing or anything like that when you can get a $40 million gift just in any given year.

Many colleges don't even have a $40 million endowment.

Yeah, exactly. There's— in fact, probably most colleges don't have a $40 million endowment, let alone unrestricted gift of that size. So but here, here's what we were seeing before. This is their net— this is the net income deficit. I don't care how much money you are— have you— you have, even if you're Harvard, at the end of the day, you have to run surpluses here, or at least zero in net income. There's a lot of reasons for that. One is, of course, your credit rating depends a lot on this number. So if they ever want to borrow to expand or whatever, buy another college, they're going to need to keep an eye on this and balance this budget. And as I showed, they had this negative for 3 out of the last 4 years. So not ideal. So I will offer some stuff, some guidance on what to check here. Let's just start first by just high level what's going on with revenues and expenses. So it's total operating revenue.

And while you're bringing that up, we see many colleges with strong financials but still have issues balancing operating revenue and operating expenses. That's just a reflection of the market.

Yeah. Yeah. In fact, so I came from a school that had a over $1.5 billion endowment, I believe, at the time, and ran deficits for a long time. It eventually came back to bite us, right? Like credit rating went down. Lots of panic sort of on campus, morale issues. All sorts of things happen when you run deficits that are not great. And so you can see with the sort of the issue here at a high level is their revenues are flat. Right? Since 2024, the revenue has gone up by 0.43%. And that's like— that's even with an endowment draw that's too big. So this is a problem that they'll want to fix as well. Show you endowment appropriations. So the reason their endowment's not growing, not growing very well, is that you have draws here that are quite a bit bigger than normal every single year. Even in 2024, it's too big. I double-checked this on their audit and this is really a board issue. It looks like this spending policy is not normal. They have a 5.5% spending draw for the last 2 years. That's probably better than what they've been doing in over the last like 10 years. Still too high. A normal draw here is either 4.5% to 5%, nothing above 5%. Usually I see here So that's something that should be fixed fast, right? You want to make sure that you protect this big endowment and keep it growing with all of your competitors so that you can stay competitive or have this advantage of having this big endowment. Don't squander it. So that's all to say they have this revenue. So their endowment draws will show up in this operating revenue. So if they had normal draws, this would still be, this would be probably declining operating revenue. Revenues. All right, so that's one issue. Revenue's just not growing. And let's take a look at what that looks like compared to expenses. And this is problematic, right? Their expenses are up 25%, which is actually faster growth than normal, even though their revenues are flat, right? So they have abnormal revenue growth and above-normal expense growth. That's a very bad combination.

Yep.

So clearly they're going to have to do things on both sides. They've got to figure out a way to grow revenue. And you also are going to have to figure out how to bring these costs down below this median. This growth, the growth should have been far less, right? Growth really should have been zero, right? To sort of line up with operating revenues. But it's not.

So for the new viewers, explain that. For the new viewers, explain that red line just real briefly.

Yeah, this red line is schools that have closed already. Some of them. There's 9 schools here, um, so it's sort of like avoid this area, perhaps. Um, okay, so again, I'm not worried about this school closing or anything like that, but, um, definitely not ideal the way that it's running financially right now. Uh, expenses are growing normally, actually faster than normal. Revenues are not growing, um, despite overly large endowment draws. A lot of problems to fix there. It all goes down to basically balancing the budget. So how might they balance their budget? Let's take a look at some stuff they want to look at here at a high level. I can do a much more sophisticated analysis for them if I did a strategic compass, but you can get some insights into where to look here, starting on the revenue side with net tuition revenue. Actually, let me start with enrollment because this is an interesting school. So students. All right, so I don't want to hear anything about this school struggling with enrollment because here's the thing, their enrollment's actually up since 2016. It's actually grown more than normal. All right, um, so it's not really about enrollment for this school, but there could be issues with demand, which is very— it's not necessarily the same as enrollment. So here's what I think is happening. If you took a look at their net tuition revenue, their net tuition revenue is down 25%. So how does that happen when your enrollment's flat?

I know, I know.

It's really simple. Yeah.

What is it? The tuition they're charging is going to be way down.

The price has fallen quite a bit on average. And so you can see that they used to charge It's right here. This is the net tuition revenue per student. The average student used to pay in terms of tuition, taking off the discount, what they'd actually pay is about $17K in 2016. Now the average student at Wabash is paying $12,600. It's a pretty massive— I don't know the exact percent change there, but that's big. That's a huge decrease in the average or net tuition revenue per student, which is really a decent proxy of the price that students are paying. So long story short here, what they need to do is take a deep, deep dive on their pricing strategy and understand why this price is falling. It's entirely possible that there is no connection between demand and the price falling. I've actually seen that before. You need to look at your formula and make sure that it makes sense. Alternatively, there could be softening demand somewhere in their funnel and they're responding by discounting a lot. But, you know, at the end of the day, there could be something really silly to fix with funnel. There's a lot of— it's really different for every school that I look at, but they need to—

And that's where the strategic compass comes in handy. If you're from Wabash College, Reach out, I'll give the connection information on the show notes. Reach out and we'll, we'll give you a private demo what that strategic compass can do for you. But Matt, like you show here, how many times in the last many months have we seen colleges' price per student fallen over the last 8 or 10 years? And that's a big part of that's got to be a market adjustment. But like you've said before, maybe they're lowering the prices when they don't really need to.

Yeah, and I see the opposite a lot too. Actually just did two strategic compasses for small schools that, um, are struggling with enrollment, sort of the opposite case here. And then when I look at their net price, their net price is incredibly high. And I don't think they even knew that. Right. I guess we're going to find out. Right. I have to talk to them and figure out if they knew that. And then it turns out there's competitors like that are just right around this school that they don't really pay attention to what their competitors are doing. Their competitors are cutting their price a lot in this particular school and actually both of these schools. Prices are quite a bit higher, right? And then they wonder why their yield is so low. Like, there's a lot of things going on that can potentially explain the loss of an investment. So I see it both ways. Price can be too high, it can be too low. You have to be very mindful of changes that are happening, especially with your competitors. If they're in the, if they're in the region, pay attention to what they're doing with their prices. That affects your demand as well. Almost, right? Yeah.

And don't just rely on your data, Wabash College. Use these comparisons. Use the comparisons we show on the Advanced Financial Compass, on the Strategic Compass. Don't live in isolation. Don't be so pro quo you're not looking at your competitors. And we can help you provide that comparison.

Yeah. And one thing we can do for you is request your National Student Clearinghouse data. It's like be your agent to request that data and find your cross competitors. I see a lot of schools do this, but they don't do it correctly, really, in my view. They just look at, okay, of all the apps we had last year, where did they all apply? And they don't account for how big those schools are, right? Like almost everybody in Minnesota is going to apply to the University of Minnesota, right? It doesn't necessarily mean that if you're Bemidji State or if you're like a small school in regional or like rural Minnesota, that your competitor, your biggest competitor is the University of Minnesota. It's probably not true. I do some other adjustments and turns out one of the schools I did a strategic compass for, they had a school there, 20% of the kids that enrolled at that school applied to my client's school. So I was like, oh, and they didn't know that this was like their big competitor apparently. So these are the kinds of really important insights that you can get from that Clearinghouse data and then use that set to look at your pricing strategy. Okay, that's a lot, a lot of detail there, but there's a lot of really cool stuff we can do with this data far beyond what we have on this app. So revenue side, yeah, we've got to look very closely at the price relative to those cross-app competitors, not the big state schools really. This is going to be small privates where 20% of those kids didn't come to your school and they went to some other school. Why did they do that? Right? On the expense side, there's a lot of work that can be done. Of course, expenses are growing and they shouldn't be. So let's take a look at first staffing. Oops, employees. All right, so total employees. Actually, I think this looks fine. Yeah, you see this all the time, different things. This looks fine. Staffing looks okay at this school. And the reason I say that is for their revenue, their number of staff, looks normal. Uh, for FTE, it's not, but they again have this big operating revenue coming from the endowment. If I did adjust this operating revenue for a normal endowment draw, there's a possibility this would shoot up above normal. And then I'm curious what '24 will look like as well, because they had another deficit in '24. So it's possible that this number goes back up here once I have that.

Yeah.

Um, so always pay attention to, to the staffing, but doesn't look like the major smoking gun in this case. What does look like more of a smoking gun is the vendor spend. So I have contracts over $100K, and this is quite high even for the revenue. They just have a lot of contracts over $100,000. And as you know, Gary, on this app, we can dig into actual contracts and see what might be causing the high spend on vendors. Actually, I didn't show that yet, but there is a high vendor spend that I get from the 990, but I'll show you.

Again, while Matt brings up Wabash College on this, this vendor comparison table is available with the Private College Advanced Financial Compass. It's included, and the value of this alone is worth the price of the Compass.

Yeah, yeah. So here we have a couple things to flag here. One that's flagged with this color code means this price for the food service contracts this cost is high relative to the size of the school. So per FTE basis is pretty high. It's like in this range here of a quarter to a half standard deviation above normal. Not overly— not high for their revenue. Again, their revenue is quite high. But I would look at this, right? This could be an easy way to save $500K to $1 million, right? If I shop the food service contract, The one that is poking out to me that but has not been color-coded is because I'm not sure what this contract is. This says Campus Services. It's Sodexo. I'm assuming this is maintenance. And if it were maintenance, I believe this number is high. All right. So I would look very closely at this contract as well, even though it's not color-coded here. So there's a couple of things to check. Let me go back to expenses. And just in general, they should check all these contracts, right? They have 26 of them above $100K. They probably have double that total, right? Go through all of them and throw out the ones you don't need. Try to balance this budget. Um, all right, so let's— some of the other spending categories that looked high, let's take a look at occupancy. Now this one is quite high, um, even for their revenue. And of course for FTE, it's incredibly high. They're paying like $11,000 per student per occupancy. So what the heck is occupancy? And this is— I pulled up the— this is the instruction from the 990. So there's a lot of stuff in here. Um, rent— if they're renting facilities, that could be something to look at. There's a way to reduce the rent cost. There's heat, there's like utilities. I don't know what kind of— I mean, they're just running the AC all day with the doors. I mean, this is the kind of stuff that need to look into the— or it's possible that they just filled out the 990 incorrectly as well. So all of this needs to be checked. I would check very closely the property insurance that's part of this. That could be a big one because I did notice also they have other insurance costs that are high, and I'll show you that. So it could be the insurance policies. So these other insurance costs which I'm assuming would be like liability kind of insurance, stuff like that. Um, maybe— no, I don't think it would be like health insurance, anything like that. But, um, yeah, I'll check these. This, this is high, uh, again, per student. You're paying $1,000 per student on insurance, and that's not normal. Uh, normal's $400 per student. So that's another thing to check. Could be half half off there, right? So the insurance, all the insurance policies, and then check anything else that would be rental costs or anything like that, that would be falling in, um, um, the occupancy. I'll show you one more just because, uh, there's a bunch of other things here, but I'll show you fees for services. Again, this is another piece of evidence showing that the contractor spend is this high And in fact, the best year they've had was the only year in the last 4 years that they had a positive net income. So I'm guessing this might have gotten back up again. So they need to bring this sort of vendor spend down. It's really high. And, you know, again, they're spending $5,700 per student on vendors. That's higher than normal.

They're only charging $12,000 and only collecting $5,000.

The price is way low, right? Remember? So that's the— issue with their math here on their budgeting. I mean, and they can afford to do a lot more than normal, again, because they have a $400 million endowment. They need to get the draw normal, but, um, you know, this is relatively easy compared to a school that doesn't have an endowment to sort of get this back to normal, right? Um, but those are some things they can look at. I'd be happy to take a really deep dive for them and go into the pricing strategy and all of that, but, um, I think you get the idea of what we can do.

And again, you know, week after week, almost every time, Matt, we have colleges where they're just— they just appear to be lowering their tuition collected just to, just to compete. And while that's certainly good for the students, we see even a college that's moderately wealthy, if not really wealthy, struggling on the revenue and expense balance because they can't drive enough tuition revenue and keep students in the door. And that concerns me for the market in general, for higher education in general, and not just individual colleges. Hey, Let's take a minute and take a look at some other stuff. Let's take a look at the College Viability App for 2025. And I have, um, Wabash College to start where we always start. Matt, what do we— where should we start out here?

Graduation rates. Is that where you're going?

Because isn't that what colleges are paid to do? Graduate students. And well, good news here. Look at Wabash College. Nice star in there, Matt. That's one of the higher graduation rates we've seen in a long time. And not only is it high, look, it's gone up 12 percentage points over the last 6— over the last 8 reported years. So congratulations to the good folks at, at Wabash College. Just take a quick look at the 6-year rate. I bet it's gonna be a really good number. Look at that, 8 out of 10. More than 8 out of 10 students graduated in 6 years at Wabash. And Matt, we rarely see that. We rarely see that. Let's take a look at their admission yield to see what kind of trends they're looking at. Wabash College trending down. That's interesting, Matt, because their tuition is also trending down and they're not getting as many students as you would expect, right? With a lower, with a decreasing tuition. And then let's take a look at tuition and fees. This kind of mimics what you talked about in Wabash College. You know, they're down $4 million, $4.5 million over the last 8 years. That's, you know, that's not a good trend. And we see that regularly, regularly. And before we go away on Wabash College and close out on that, let's take a look at Wabash on the 2025 College Majors Completion Map. And we can see that Wabash College, this is internal market share, and we can see the majors that they have that are doing well. Political science, that's interesting. Economics, that's one of Matt's favorite topics, of course. And we can also see, of course, areas that are not doing so well. Not bad here, just a couple with really small numbers, humanities and music. And again, you've heard me say, Matt, many times, colleges look at this 2025 Majors Completion app to see which of the programs you have low internal market share on. So let's take a look at the external market share for Wabash College. And what we're looking at here is for, and by major. And let's go ahead and select just one major. I always like accounting and accounting related services. And what we have here is an external market share. Let me zoom in it for you. Zoom in on it, and we can see the market share for all the private nonprofit colleges in Indiana for accounting and accounting-related services. And we can see some major players, which is Notre Dame. Okay, we can also see Indiana Wesleyan with, with 50% of the market share. We can also see a lot of bit players. The reason, Matt, that we take time to show this is many colleges, most colleges, don't have any idea how they compare with their competitors on individual majors. So this 2025 College Majors Completion app provides both internal market share, in this case for Wabash College, and of course external market share for any combination of public and private colleges in your region. So in, as in the era that we're in, Matt, with colleges cutting back stuff regularly, I, I would encourage all of them not to just do it by looking at their own data, but by comparing to see not only where there's opportunities, Matt, to cut programs, to cut majors, but also where there's opportunities to add majors where maybe that market that you're looking at doesn't, doesn't have a lot of majors offered in those areas. And Matt, to wrap up the presentation on Wabash College in Indiana, like we shared earlier, it's the comparisons that matter. And Matt did a particularly good job of showing some of the areas where Wabash, while they're never going to close in any time, probably never, because they've got a nice financial base, they have opportunities to do even better with their finances on an operating basis. So it's the comparisons that matter, Dr. Hendricks, And for those, for those at Wabash College, if you'd like some more information, I'll leave some contact information in the show notes and we'll be happy to set up a private demo of any and all of these applications for you and your organization. So for Matt Hendricks, I'm Gary Stocker. Thanks for watching. We'll be back next week with more colleges on the College Financial Health Show with Matt Hendricks and Gary Stocker.