Why Shares of Bridgepoint Education Inc. Fell

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Bridgepoint Education Inc  (NYSE: BPI  ) were getting held back today, falling as much as 15% and finishing down 9% after issuing poor preliminary results from its first quarter. 

So what: The for-profit educator missed estimates on both the top and bottom lines, posting a a per-share loss of $0.10 against estimates of a penny loss, while revenue fell 28% to $160.5 million, missing expectations of $170.4 million. Also concerning was the company's notice that it will be unable to file its 10-Q report on time because of an earlier comment from the SEC about Bridgepoint's revenue recognition and bad debt allowance accounting policies. Bridgepoint said that for the quarter past, using the SEC's method would result in a decrease in revenue of $0.7 million and a decrease in bad debt expense of $0.2 million, so the difference does not seem material.

Now what: Returning to the company's operations, the poor results were primarily a consequence of enrollment falling 16.5% from a year ago at its two universities, Ashford and University of the Rockies. Despite the decline, CEO Andrew Clark noted a sequential increase in enrollments and student retention because of a "substantial investment in student outcomes." Declining enrollment has been a problem across the industry and seems to be the principal obstacle for Bridgepoint going forward as the accounting issue seems easily corrected, provided there aren't other questionable statements yet to come out.

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