Friday, March 25, 2022

Online Program Manager for University of Arizona Global Campus Facing Financial Collapse

Zovio (ZVO), the for-profit online program manager for University of Arizona Global Campus (UAGC)*, is facing a financial collapse.

With three consecutive years of financial losses, Zovio (formerly known as Bridgepoint Education) lost a record $61 million in 2020.  Over the trailing 12 months (ttm) the company has lost $76 million.  Cash assets have decreased from $357 million in 2016 to $33 million in 2021.  

Zovio's cash runway (a key indicator of financial health) is now less than a year from zero, with revenues amounting to a fraction that they once were.  Liabilities are also greater than all assets.  

Zovio is working with a new CEO, Randy Hendricks, who has limited management experience, and the company has already been pared down to about 1500 full-time employees.  

Insiders tell the Higher Education Inquirer that the deal between Zovio and University of Arizona was a deal between people of low integrity and a lack of imagination.  

According to the Department of Education's College Navigator, University of Arizona Global Campus has just 194 full-time instructors for about 35,000 students, and many of those full-time instructors are also tasked with management roles: the tell-tale traits of a subprime robocollege.  

To make matters worse, ZVO, which was already financially unstable, was recently ordered to pay $22 million in compensation to California students who were defrauded.  

While Zovio's 2021 Annual Earnings will not be presented until Tuesday, March 29, 2022, there are strong indications that ZVO has reached a point of no return in its balance sheet.

Zovio's Assets (2009-2021) Source:

Zovio's Annual Report is coming out weeks late, just before the Securities and Exchange Commission deadline, and ZVO has not presented any revenue numbers to relieve shareholder anxiety.

Since March 18, ZVO shares have been below the $1 per share threshold to remain on the NASDAQ. Thirty consecutive trading days below $1 will trigger the first stages of a delisting from the stock market.

Zovio Share Price, March 3-March 28, 2022 (Source: Seeking Alpha)

What we are seeing looks very much like Corinthian Colleges and ITT Education before they collapsed. Each day, ZVO is getting closer to being delisted from NASDAQ and they are quickly running out of cash.

But what happens to federal government funding and oversight if Zovio collapses?  And how about UAGC--will it end up costing Arizona taxpayers?  

With UAGC, only a handful of edtech companies could handle such a large transition.  Experts we have contacted do not agree on potential surrogates for the online university or whether a surrogate is even necessary.  

Will the US Department of Education (ED) try to get another company to take over the business? In the Corinthian Colleges collapse, ED was able to get ECMC to take over operations. 

Will the US Department of Education require a special monitor, as they did with Corinthian Colleges?

University of Arizona could hire key executives and personnel, but that could cost the State of Arizona to hire those folks as state employees. 

These are issues that need to be addressed by the Department of Education and the State of Arizona now, to avoid another student loan train wreck.  

[Post script:  On Monday, March 28, 2022, Zovio announced that their 2021 Annual Earnings would be delayed.  No new date was reported.]  

*University of Arizona Global Campus was previously known as Ashford University.   According to the US Department of Education's College Scorecard, Ashford University has a 22 percent 8-year graduation rate. The College Scorecard reported that of student debtors two years into repayment, 32 percent were in forbearance, 28 percent were not making progress, 13 percent defaulted, 12 percent were in deferment, 7 percent were delinquent, 5 percent were making progress, 2 percent were paid in full, and 2 percent were discharged.

Related link: Verdict Against Zovio Adds to Peril for Arizona Global Campus (David Halperin, Republic Report)