Bridgepoint Education Inc Comes Out Ahead, Market Yawns

The classroom size at Bridgepoint and other for-profits have seen better days. Photo: Shaylor, via Flickr

Compared to where it was just five years ago, the for-profit education industry is in critical condition right now. And with the government clamping down on rubber-stamped loans, life support isn't what it used to be. Bridgepoint Education (ZVO), however, has been one of the more upstanding players -- not guilty of the most egregious practices that have forced other educators to close their doors.

Bridgepoint third quarter results: just the numbers

Source: E*Trade, SEC filings

The important thing to note about expectations is that they are on a non-GAAP basis. You might think that if a company reports earnings that roughly double expectations, its stock would blast off the next day. But that wasn't the case with Bridgepoint. In fact, the stock traded down 7% when the market opened last Friday and finished the day up just 2%.

On a non-GAAP basis, the company actually lost $1.37 per share during the quarter. This was almost entirely the result of the company's restructuring efforts, which include the closing of Bridgepoint's physical campus in Iowa.

Compared to the same time last year, earnings were essentially flat, while revenue fell 13%.

What happened with Bridgepoint this quarter?
But there were even more reasons that the market's reaction was likely tepid when it comes to Bridgepoint. Among the other important pieces of information from the company's release:

• Overall student enrollment at all of Bridgepoint's schools was down 16% from the same time last year, and 2% from last quarter, to 49,982 students.
• Overall student retention was 60.1% at the end of the quarter, compared with 65.8% at the same time last year.
• Part of the decline in retention was the result of higher scrutiny on the part of the Department of Defense. The government organization has been more careful with vetting student situations and agreeing to offer tuition assistance.
• Bridgepoint was able to reduce media spend by 20% from the same time last year.
• Most importantly, new student enrollment, "declined in the mid-single digits".

What management had to say
Bridgepoint's management hasn't avoided the elephant in the room. Last quarter, CEO Andrew Clark made it clear that the company was in turnaround mode, and that it might take longer than some have expected for the school to return to the top of the class in the for-profit sector.

He echoed those sentiments again in the company's conference call:

I want to emphasize that our turnaround plan at Bridgepoint Education remains the same despite the soft external environment. As a reminder, we are first and foremost focused on stabilizing and restarting enrollment growth. Second, we are focused on improving admissions and marketing efficiency which we did accomplish in each quarter of 2015. 

Looking forward
One promising program to keep an eye on is the company's Forbes School of Business, which has apparently shown very strong increases in enrollment and interest from a number of companies wishing to partner with Bridgepoint. Clark also said that student inquiries about Bridgepoint were up in the high single digits.

But don't be fooled, none of that will matter as long as the school is bleeding students. By far the most important metric for investors to watch is new student enrollment. It's unfortunate that the company doesn't provide actual numbers for investors, but until "mid-single digit" decreases become actual growth, there's a lot of work to be done.