Clarification on Ashford University and U Arizona Global Campus Potential for Excess Income

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  1. Ariel Sokol
    Ariel Sokol says:

    Phil:

    I really enjoyed the conversation with you and the work that you do in general in your blog. I also appreciate you updating your website reflecting my perspective.

    Look, I have no idea how profitable Ashford is, but the data out there and the presumed due diligence conducted by the University of Arizona suggests at the current price point with the current cost structure today Ashford likely is profitable. Why wouldn’t it be? Its a close to $400 million revenue generating online school with a primarily adjunct faculty. If it wasn’t profitable there would be ways to introduce efficiencies to get it to profitability – I can say this based on my experience both as an operator and a Wall Street sell-side analyst. The University of Arizona brand alone would allow the school to reduce marketing spend.

    Like we discussed, the concern I address regarding future profitability of the deal is tuition level and instructional spend. SNHU for a bachelors degree cost a consumer $320/credit hour. The good folks at the new UAGC will have to make a business decision to increase tuition with the new premium brand, keep it as is at $510/credit hour, or attempt to become competitive with SNHU. Remember that enrollments have declined for close to a decade, and tuition could have played a major part in that decline. The other issue is increasing instructional spend to improve efficacy. Decreasing tuition reduces the minimum profit guarantee of the deal on a dollar-per-dollar basis (per the contract it, hopefully I am representing this correctly) and I have no sense of how UAGC would increase instruction per the contract given provisions on increases in operating spend.

    This potentially could be an unbelievably profitable deal or it may prove to be economically challenging given the way that the contract was structured. But I think that relates more to key business decisions affecting the future rather than the state of Ashford today.

    As to the deal itself, whether its good or bad, I have my own thoughts that I may yet try to share in a public format.

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