William Penn University (IA): College Financial Health & Viability Review for Colleges & Communities

Hey, it's the first day of July 2025. Welcome back to the College Financial Health Show. I think it's the only show where we look at the financial health of colleges and even their viability. Hi, my name is Gary Stopp. I'll be joined by Matt Hendricks shortly, who's going to start looking at colleges for us today. And Dr. Hendricks, what's the first college we have on our review list for July 1st.

Yeah, happy new fiscal year. So today we're going to start out with William Penn University in Iowa, and I'll just bring us straight to the numbers, things that look weird, right? Really simple.

Yeah, always.

And, uh, and suggest, uh, that they look closely at those particular things. Um, so Penn University in Iowa All right, and so you can see the screen okay, right, Gary?

Yes.

All right, so right, so they have almost every— they almost have a clean slate here except for this last fiscal year, a tiny net income loss. Um, so I'm not worried about them. Obviously they've had many years of surpluses, so that's great. Um, but I, I will give them some hints, I think, on where to look to close that deficit, a very small deficit here. And by the way, it's not a catastrophic thing. It's really small for one, and their cash flow is still positive. If I look at net cash from operating activities, they still have a really big cash surplus of $3 million. No big deal. But there are some things, of course, that will look odd here. This endowment growth is not that great, which is a bit shocking. Well, a couple of things about the endowment. One is it's not growing very fast, and another is it's really small. It's only $8.8 million. So obviously need this to grow a lot faster than that, especially since it's small. Your contribution should be pretty big relative to the size. So it should be growing even faster than normal, and it's actually growing slower than normal. So let's take a look at a few things here and explain why this is happening. I'm going to start first with appropriations, and this is definitely not a reason why this school's endowment is not growing. They're basically their appropriations are about half what is normal. That's again really shocking, right? You got a small endowment, you're not drawing on it, and this is really not growing very well. So let's take a look at contributions. I want to do it as a percent of the beginning of the year. Oops, contributions as percent of beginning of the year. Contributions look good. So again, why isn't this thing growing very well? In fact, this contribution is quite large. So really, we're down to the last item, last explanatory variable here, which is the investment return. And ouch, that is awful returns. And I would recommend they immediately look at the portfolio for their endowments. This almost looks like it's less volatile, low returns. This looks like they're in like this, like fixed income or something. I don't know what's going on. Yeah, because this is actually better than normal. Yeah, I suspect their investment allocations are not very aggressive, which is not ideal for, for this school.

And then what do those dashed lines and solid lines mean?

Yeah, again, the, that solid line here is the median of all schools. So just an example, one example year they had a 9% growth in 2021, but that's awful because the most schools are above 26%. Growth that year just from investments. Last year they did 5%, and they should have had about 11% just to be in the median, right? So, um, simple advice here: look at your portfolio and adjust it. Become more aggressive. I think they probably just need more. Yes, it's small, but you can still allocate proportionally, right? So you're not even drawing out anyway. You might as well put them all put it in the stock market and let it grow.

I'd be okay with an $8 million endowment in my bank account. Yeah.

Yeah. But they're— yeah, they're treating it very, very gingerly, it appears, which is not good for long-term sustainability. Yeah, it'll bounce around more, but it's going to grow a lot faster over, over this 9-year period. They've given up tons of returns, so should fix it now. Okay, um, low returns. Okay, so I'm going to move into some things also, other stuff to look at. Well, part of it, part of their revenue stream is the endowment draws, and they're just, they're tiny and they're not— their endowment's not growing, so that they need to pick up that part quickly. Uh, but let's take a look at their revenues, operating revenues, and it's really low, $29 million in revenue. How it's changing over time. It's growing normally. Operating revenue is growing normally. That's good. They're up about 15% since 2016. So it's good, normal revenue growth, which is great. This, you know, because this is happening despite the fact that they're in their sort of investment income or endowment draw. Part of their income is not growing, which suggests, I think, that their net tuition revenue and auxiliary revenues must be growing. Um, and yes, so they are at 16% growth in net tuition revenue, which is excellent. Uh, 16. Uh, but I'm gonna flag something here. Uh, so take a look at their per student net tuition revenue. This is incredibly low at $11,000. Yeah, they've increased it from $9,000 to almost $11,000 today. Which is solid growth, by the way. That's, what is that, per student? That's a 22% increase in the sort of average net price. But they're still really low. I suspect they can bring this up quite a bit more than they have already. And if I were, again, if I were them, I would experiment with that because this is just, you don't have an endowment and your net tuition revenue per student is incredibly low. It's just kind of won't be able to break out of this unless you charge a much higher price. Again, this is the 25th percentile right here at $12,600. At least try that as a start.

And that's below the 25th percentile.

Yeah, well below.

We, yeah, we have seen this from, from way too many collars in the last, last few shows. They're way below the median, and as in the case here, below the 25th percentile. I'm guessing they're, they're succumbing to the tuition discount disease.

Yeah, so the price is coming up. It's, I don't know, it could be really conservative kind of financial aid packaging. I'm not sure. But again, they should be experimenting with a much higher price. My guess is that they can increase this price significantly and not see any change to their freshman class whatsoever, which they would never know that unless they started doing some experiments. And that's—

man, if I'm at William Penn, you've got a product called the Strategic Compass. How might the Strategic Compass help them get that price up.

Yeah, I was working with a client yesterday and, you know, there's just a lot of— it's sort of difficult to sort out what the net price is at a school, but the strategic compass kind of laid out really clearly what your average net price is for different types of students. And the school, this particular school, I won't mention the name, but I don't think they had a real idea that their net price might be actually really high. And they at the same time have a really low yield rate. Was like, well, honestly, like one of the main causes for a low yield rate is the high net price. So there you go. They're going to be off and running and probably fixing that over the next months. But that's how it might help in this case to sort of help them raise the price to more where the market is. Yeah. At least be confident that you can increase your net price and not price yourself out of the market. They're probably well, well below all of their cross-apps in terms of average price. So you can probably increase it significantly and not really lose anybody. You're still going to be be the cheapest. That's basically the idea. So that's the, that's my advice there. So again, it's counterintuitive because their enrollment is, I believe, shrinking. Let's take a look here. So percent change. Actually not. So that's down a little bit. These students pretty flat. Oh, actually, no, it is down 5%. I was looking at that. I thought that was like the zero line. Now they're down 5%. So again, So here's the interesting part, and they can see what's happening. They've been gradually sort of on average increasing their price over this period and notice that their enrollment is also increasing at the same time. So the takeaway here, and I've seen this a bunch of times already, is it doesn't necessarily mean if your price is really low compared to your competitors, you can probably have a gap I don't know what to call it, like a gray zone where you can increase your net price and not really impact your enrollment at all because you're already the cheapest, right? You just take that gap out and really you just lost profits that are happening there in net income. So yeah, again, my advice is to— you've got evidence here that you've been increasing your price and enrollment's going up.

Yeah, great point.

Be more aggressive in that direction. And and of course also work on the endowment growth. That has to be a part of the plan. You can't compete with other schools that have endowments, especially when your endowment's tiny and it's not growing. You're going to just be more and more tuition dependent going forward, relative to your competitors. Okay. So let's take a look at, okay. So there's a couple of things on the expense side. So since this school doesn't have a lot of revenue, and they have nearly balanced budget. They don't have a lot of red flags showing up here. I mean, they really just can't afford to pay a lot of employees, right? So their employee count per FTE is low. Actually, the— this is a bit high, isn't it?

It is interesting.

$1 million. So yeah, staffing. Did I flag that? Yeah, I didn't actually flag that earlier. So yeah, they have what appears to be some staffing overstaffing relative to their revenues here.

Relative to revenue. Yeah.

But yeah. And so either, either you bring your revenue up like I'm talking about or you got to right-size your staff. Right. So you can probably do both, to be honest, in both directions. Contractor numbers. Let's take a look at that. Contractors. I think this looked okay. Per FTE, per revenue, that looks normal. But again, they're not normal. Their revenues are quite low for their size. So this is probably again not sustainable to be normal on contractor numbers. And then there are some specific pieces of advice. So again, I'd look at those contracts, look at employment. You just can't be normal on contracts if you're not going to have a normal revenue per student. So there are some specific contracts to look at here for William Penn. All right, so first one, which appears to be a complete train wreck, is the food service contracts. Second one is facilities, which is even worse. And the reason I'm saying that is these are actually— sorry, the food service is worse. This is like 2 standard deviations above normal per their revenue. All right, so again, they have low revenue, but even it's even high relative to their FTE. So again, you can't have You can't have a really expensive food service contract, not going to charge, you know, have like a normal revenue per student. So that's something that needs to be looked at. This facilities contract is also really big for both their size and FTE and their revenue. So both—

and it's the same vendor for both.

Yeah, that's interesting, right? Yeah, might be time to look beyond Sodexo. All right. Plenty of other competitors out there. Shop around. Talk to FedEx and say, hey, can you guys match this other offer? Really simple stuff that we do with our clients. I mean, stuff you do with your own house maintenance, right? Like everybody does this on a daily basis or at least a monthly basis if you're keeping track. So really simple stuff to check there. I think they— I hope they take advantage, but I'll leave it at that and pass it back to you, Gary.

Well, let's take a look. It's an observation. I'm going to go back to that low price. And again, we've talked on the show before that there are what appears to be increasing number of colleges who just look at discount rate and not really the market price comparison. Again, you and I talk all the time, Matt, about it's the comparisons that matter and it's the trends that matter. So for those colleges, those leaders, anybody watching this show, the tools that we have available for you let you compare and let you look at trends. Don't just look at your own stuff. The folks at William Penn University, Clearly you've got some opportunity to raise revenues. Take a look at what you can do. Reach out, I'll give you contact information in the show notes, and we'll be glad to help you. Let me share just a couple other things on William Penn, and we're going to use the 2025 College Viability App to do that. And let's start with graduation rates and William Penn. Um, well, Matt's watching this number saying, what's Gary going to do now? Because look how low those 4-year graduation rates are. Not even 30% of William Penn students graduate after 30 years. Call it a financial issue, call it an academic issue, call it anything that you want, but that's not a good number. Let's even look at the 6-year graduation rate. And Matt, I don't recall that I looked at this. I bet it's below 50%. Yeah. And the 6-year graduation rate at William Penn University is below 40% for the last 8 reported years. Let's put that, you know, for those that didn't pay attention in math class, for every 100 students that started at William Penn 4 years ago, not even 40 graduated from William Penn 4 years later. Do that math when you're thinking about colleges, no matter what their financial health. Colleges are paid to graduate students, not just to look at enrollment, and too many colleges focus on enrollment. William Penn University, in terms of institutional grants— and this is the discount and probably one of the things, Matt, that led to them having a low tuition— they have increased the unfunded tuition discounts from about $14 million to not quite $20 million, so in about $6 million over the last many years, which suggests they are, you know, struck by that discounting disease, Matt. They're continuing to discount revenue. Envision if they could correct that and have $6 million additional dollars.

That's interesting that they must have increased their sticker price a lot then because their net price per student is way up, right? So super counterintuitive. This whole pricing thing is a mess in higher ed, to be honest.

So it really is. And even to look at the main source of revenue, Matt talked about this a little bit, for these folks at William Penn University is, you know, Matt had it flat, and that's about what I have too, up a little bit, up not quite $1 million, but that's over 8 years, Matt. And that's, you divide $1 million by 8 years, that's $1,100,000 and change per year if I'm doing the math right. That's just not a good scenario. Let's also take a look at the majors that William Penn offers. This is the 2025 College Majors Completion App. And this is internal market share. And what we look at here is both the high end, those programs that dominate at William Penn, again, internal market share. And interestingly, sports kinesiology is part of it. Business management we see all the time. Psychology we see regularly. We look at too much dependence and really nothing grabs me here in 2020, 2021. The sports kinesiology number's a little bit high, but nothing of concern. But again, we're gonna look at the low volumes. What is William Penn doing with fine arts and music Political Science and Applied Mathematics. Really low numbers. What are they doing in that business? Let's look at this market share. And we are in Iowa, we are in Iowa, and we're going to call this Matt Hendricks Economics Day. We're going to get economics only, and we can see the external market share. And William Penn doesn't even have that, doesn't matter. This is the market share for, for bachelor degrees in economics in Iowa for private and public colleges. We can make it bigger. And again, I don't know, Matt, that anybody provides this kind of external market share comparisons. We can see who dominates in economics, University of Iowa, and we can see bit players in economics by hovering over the top of those. And again, I would ask, for example, St. Ambrose University, they had 2 economics majors in 2024, whatever that time frame was. What are they doing in that business? What are they doing in that business? So William Penn University, Iowa. Matt, sustainable, unsustainable? What's your assessment?

Yeah, I mean, they're, they're in decent shape, but, uh, again, there's some optimizations. Um, I was just looking really quick at their portfolio in the audit. There are some breakouts of the investments, and it looks like they have $5 million in equity mutual funds. I wonder what those equities are, because again, the returns are really low. Yeah, these are so I might just look at that and maybe put a higher percentage into equities. Looks like they have some other, like, in real estate and stuff like that. Money market accounts, it's not going to be helpful, especially over the time period that we looked at. It was like no interest, that's a negative return, right? So yeah, I'd look really closely at that.

And so for Matt Hendricks, I'm Gary Stocker. Thanks for watching. We'll be back next week with more shows on the College Financial Health Show.