Enrollment numbers

[VU2022]

That's pretty horrible. No reason why you can't get an additional 100 students some way or the other

[vu72]

Who actually owns the university and who would receive its sale proceeds?  Just saying out loud the implication WH is raising.

https://www.valpo.edu/about/leadership/board-of-directors-of-the-lutheran-university-association-inc-dba-valparaiso-university/

[FWalum]

Who actually owns the university and who would receive its sale proceeds?  Just saying out loud the implication WH is raising.

I imagine that it is a very similar arrangement as to what transpired when the Lutheran Hospital here in Fort Wayne was sold, since many of the same people/congregations were involved with setting up the Lutheran University Association. When the hospital was sold the money in essence went back to the founders forming a foundation which is controlled by area congregations. https://thelutheranfoundation.org/about-us/our-history
https://thelutheranfoundation.org/about-us/congregations-and-delegates

[vu84v2]

While the university has financial challenges that need to be urgently addressed - and increasing enrollment is a big part of addressing the financial situation - the university is not going to go under.

[oklahomamick]

With the 30% decline in enrollment, are we the smallest D1 school?

Presbyterian College 1,200 (88mil endowment)
wollford 1,800 (378.8mil endowment)
Saint Francis University 2,000 (60mil endowment)
Davidson 2,000 (1.3 billion endowment)
Wagnor 2,100 (83 million endowment)
Holly Cross with 2950 (1.04 billion endowment) and also called the Crusaders
Valpo 3000 (225mil endowment) used to be called the crusaders
ORU 3,200 (45 mil endowment) lots of new buildings and basketball facilities in the last couple years.
Tulsa University 3,700 (1.36 billion endowment)

[vu72]

With the 30% decline in enrollment, are we the smallest D1 school?

Presbyterian College 1,200 (88mil endowment)
wollford 1,800 (378.8mil endowment)
Saint Francis University 2,000 (60mil endowment)
Davidson 2,000 (1.3 billion endowment)
Wagnor 2,100 (83 million endowment)
Holly Cross with 2950 (1.04 billion endowment) and also called the Crusaders
Valpo 3000 (225mil endowment) used to be called the crusaders
ORU 3,200 (45 mil endowment) lots of new buildings and basketball facilities in the last couple years.
Tulsa University 3,700 (1.36 billion endowment)

Evansville  2526 and an endowment of 93.4 million

[vu84v2]

St. Bonaventure 2600 (undergrad and graduate)
Mt. Saint Mary's 2250 (undergrad and graduate)
Chicago State 2600 (undergrad and graduate)

[crusader05]

Valpo's endowment being large is one way they can learn to perhaps exist as a smaller school.  Valpo's problem is that, even with the downsizing that has occurred, it still has a ton of majors/positions/offices/admins that stretch the budget and not enough students to support it.
I think the unsaid part of all of this is that: Valpo is not going under(but unless it fixes enrollment it cannot stay the same size and institution is currently is).

[valpopal]

Valpo's endowment being large is one way they can learn to perhaps exist as a smaller school.  Valpo's problem is that, even with the downsizing that has occurred, it still has a ton of majors/positions/offices/admins that stretch the budget and not enough students to support it.
I think the unsaid part of all of this is that: Valpo is not going under(but unless it fixes enrollment it cannot stay the same size and institution is currently is).

My understanding is that this general topic was a focus of discussion at last week's Board of Directors meeting.

[crusader05]

Valpopal:

I mean, if we have shown that we do not have the ability to recruit an extra hundred students at, least not quickly, waiting and hoping for enrollment to bounce back is just going to be a slow bleed of death by paper cuts with every attempt to do so fought and every needed investment treated with suspicion.  You can always regrow, but a painful shrinking isn't going to make that easier.

[wh]

Reaching 100 Years In Dallas, Lutheran Church Grapples With COVID And Decline 

https://religionunplugged.com/news/2022/8/2/reaching-100-years-in-dallas-lutheran-church-grapples-with-covid-and-declinenbsp?format=amp

If I'm understanding correctly, it appears that the ELCA will no longer exist by 2050. This can't bode well for Valpo's future identity as a Lutheran University. You can't market something that no one identifies with. That said, take it for what it's worth, which might not be much. I didn't research any of the other Lutheran factions. They could be growing by the millions.

[crusadermoe]

Sobering and more dramatic than I knew. But it is not surprising, especially in Texas.  Cue the country song, "If you don't stand for something you will fall for anything." 

Old and aimless in the ELCA.

[covufan]

We need 3300 this fall, if not , over 3000.


Sent from my iPhone using Tapatalk

[valpopal]

Anything can happen in enrollment during the next few months; however, when considering total number of students—combining all colleges, undergraduate and graduate, freshmen and transfers—my best guess is that we should not expect any appreciable difference from last year when fall semester rolls around.

At his annual end of academic year address to the university today Pres. Padilla publicly detailed enrollment numbers, so I can also be more specific now. The enrollment numbers we've seen after the crucial May 1 date indicate fall attendance likely will closely mirror last year's total. The deposit numbers for fall are almost identical to last year in all areas except nursing, which is down a bit but is made up for by increased numbers of grad students, many of whom are international and do not receive any tuition discount. In fact, the projection is that international student numbers will again start rising now that Covid has subsided. (The decrease in enrollment in recent years was partly due to the loss of international student population.)

A big revelation was that the Board of Directors approved a vision of the university official identity going forward as a 3000 (full-time equivalent) student institution. (There could be slightly higher enrollment numbers of individuals since part-time students and grad students are not fte.) Without getting into the weeds, the budget projection and assets numbers do not reflect a disastrous future. Instead, the five-year projections seemed to offer a more heartening tone. I applaud Padilla for the transparency in his presentation.   

[VU2022]

3000 full-time students seems like a reasonable goal. Near the end of my tenure there the number was closer to 2500 due to the small COVID classes. Reaching that goal would mean that enrollment has bounced back and slightly increased

[wh]

Anything can happen in enrollment during the next few months; however, when considering total number of students—combining all colleges, undergraduate and graduate, freshmen and transfers—my best guess is that we should not expect any appreciable difference from last year when fall semester rolls around.

At his annual end of academic year address to the university today Pres. Padilla publicly detailed enrollment numbers, so I can also be more specific now. The enrollment numbers we've seen after the crucial May 1 date indicate fall attendance likely will closely mirror last year's total. The deposit numbers for fall are almost identical to last year in all areas except nursing, which is down a bit but is made up for by increased numbers of grad students, many of whom are international and do not receive any tuition discount. In fact, the projection is that international student numbers will again start rising now that Covid has subsided. (The decrease in enrollment in recent years was partly due to the loss of international student population.)

A big revelation was that the Board of Directors approved a vision of the university official identity going forward as a 3000 (full-time equivalent) student institution. (There could be slightly higher enrollment numbers of individuals since part-time students and grad students are not fte.) Without getting into the weeds, the budget projection and assets numbers do not reflect a disastrous future. Instead, the five-year projections seemed to offer a more heartening tone. I applaud Padilla for the transparency in his presentation.   

Valpo has operated at a $12-15M operating loss for 3 consecutive years (going on 4) at an enrollment level of 3000 students. I'm not sure how consistently under earning and over spending suddenly becomes a vision for future success. There has to be more to it - a lot more.

[crusadermoe]

Yes, I agree WH.

Like you in the business world, I don't need to know what that element is and I respect the board's need for some privilege in their planning and their control of information. 

But on the surface the math certainly doesn't improve at the undergraduate level. In terms of operating income, the new fall 2023 undergraduate FTE number is implied to be well under 3,000 if you read closely.  So, you might have the full tuition money coming from a gain in graduate students, but they don't stay in campus and yield room and board income.

[valpopal]

Anything can happen in enrollment during the next few months; however, when considering total number of students—combining all colleges, undergraduate and graduate, freshmen and transfers—my best guess is that we should not expect any appreciable difference from last year when fall semester rolls around.

At his annual end of academic year address to the university today Pres. Padilla publicly detailed enrollment numbers, so I can also be more specific now. The enrollment numbers we've seen after the crucial May 1 date indicate fall attendance likely will closely mirror last year's total. The deposit numbers for fall are almost identical to last year in all areas except nursing, which is down a bit but is made up for by increased numbers of grad students, many of whom are international and do not receive any tuition discount. In fact, the projection is that international student numbers will again start rising now that Covid has subsided. (The decrease in enrollment in recent years was partly due to the loss of international student population.)

A big revelation was that the Board of Directors approved a vision of the university official identity going forward as a 3000 (full-time equivalent) student institution. (There could be slightly higher enrollment numbers of individuals since part-time students and grad students are not fte.) Without getting into the weeds, the budget projection and assets numbers do not reflect a disastrous future. Instead, the five-year projections seemed to offer a more heartening tone. I applaud Padilla for the transparency in his presentation.   

Valpo has operated at a $12-15M operating loss for 3 consecutive years (going on 4) at an enrollment level of 3000 students. I'm not sure how consistently under earning and over spending suddenly becomes a vision for future success. There has to be more to it - a lot more.

Pres. Padilla and his staff presented dozens of budget lines detailing revenue, assets, operating costs, endowment income, etc. (As I said, I choose not to get into the weeds.) Much of the operating loss you mention is compensated by the other categories. For example, a routine drawdown from the endowment (which happens every year) of 5% would make up much of operating losses from the endowment, whose directed investments in areas other than stocks are doing surprisingly well during the current market downturn, though admittedly not the 11% obtained in the year before Covid. Your enrollment numbers are inaccurate as well if we regard full-time equivalence. Although total enrollment is reported in the media as about 2900, the university's fte enrollment has been closer to 2500 the past four years. The budget displayed by Padilla actually showed the university experiences budget surpluses once the 3000 student fte number is reached, hopefully by 2026 or soon after. Optimistic, maybe, but hopeful and not disastrous. 

[vu72]

Valpo has operated at a $12-15M operating loss for 3 consecutive years (going on 4) at an enrollment level of 3000 students. I'm not sure how consistently under earning and over spending suddenly becomes a vision for future success. There has to be more to it - a lot more.

I just looked at the 2019 form 990 (didn't take the time to dig for more recent ones!).  In 2019 Valpo had a net loss of +/- 12 million but, that loss was made up of 12 million in Depreciation/Amortization, thus, non-cash expense(s).  As a result, 2019 saw a breakeven cash flow wise.

[wh]

I love a feel-good story as much as the next guy, especially when it comes to the future of a grand university that I care about. I also know how depreciation write-offs can skew financial results. As any honest person would freely admit, Moody's report paints a far more sobering picture. It references repeated annual budget deficits associated with declining enrollment. It warns of serious consequences unless major changes occur. I'm sorry, but that reality doesn't change one iota simply because the university papers over it with feel good charts and graphs that suddenly say we're good to go at 3000. If it's being done so creditors don't panic and support doesn't dry up, fine. But, we're all grown adults here who know more than most. Ask yourself honestly if this makes any sense to you. If it does, do everyone a favor and let Moody's know that they're being overly dramatic and need to correct their reporting.

"RATINGS RATIONALE

The downgrade to Baa2 reflects a large structural budget imbalance, with weak operating performance and debt service coverage likely over the next several years. Liquidity is already very thin, inclusive of draws under a working capital line, and will erode further, with the pace of decline dependent on the ability to successfully implement in a timely way initiatives to realign its program and expense structure with enrollment amid a difficult regional student market. The university generated a nearly 8% operating deficit in fiscal 2022 and the deficit for fiscal 2023 is forecast to be substantially worse, with below 1.0x debt service coverage from regular operations. 

Despite these challenges, Valparaiso University's Baa2 remains supported by its very good total wealth, good levels of spendable cash and investments, and a recognized regional brand bolstering a still good strategic position. Philanthropic support is relatively good with three-year gift revenue averaging over $15 million. Despite a use of some liquid reserves, spendable cash and investments continues to provide solid debt coverage at nearly 1.4x. An operating base of over $112 million provides some expense flexibility and potential for operating performance improvement through expense reductions. Additionally, the university has gained some traction in graduate programs, including nursing and information technology. 

RATING OUTLOOK

The outlook is currently stable incorporating the university's identified budget initiatives, which have some prospects for success on both the revenue and expense side.  The stable outlook also incorporates broader wealth levels that provide some financial flexibility to implement plans. The university's management team is relatively new without a yet established track record of reversing the university's multi-year enrollment and financial challenges. Inability to make clear progress in fiscal 2024, including meeting enrollment targets in Fall 2023 would have either rating or outlook implications.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- Notable strengthening of brand and strategic position, reflected in growing enrollment and net tuition revenue and further growth in philanthropy

- Significant improvement in annual operating performance driven by net tuition revenue growth and expense reductions
- Material growth in total wealth and financial reserves with significantly stronger liquidity
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- Failure to make progress towards stabilizing enrollment in fall 2023 with growth in net student revenue

- Inability to make substantial progress towards narrowing operating imbalances in fiscal 2024 and beyond, with consistent debt service coverage above 1.2x.
- Further reduction in unrestricted liquidity or broader wealth levels
LEGAL SECURITY

Outstanding debt is all unsecured general obligations of the university.  The J.P. Morgan Chase line of credit includes a financial covenant that unrestricted cash and investments to debt be at least 1.0x. The covenanted ratio stood at 1.5x in fiscal 2022. There are no debt reserve fund requirements."

[valpopal]

I love a feel-good story as much as the next guy, especially when it comes to the future of a grand university that I care about. I also know how depreciation write-offs can skew financial results. As any honest person would freely admit, Moody's report paints a far more sobering picture. It references repeated annual budget deficits associated with declining enrollment. It warns of serious consequences unless major changes occur. I'm sorry, but that reality doesn't change one iota simply because the university papers over it with feel good charts and graphs that suddenly say we're good to go at 3000. If it's being done so creditors don't panic and support doesn't dry up, fine. But, we're all grown adults here who know more than most. Ask yourself honestly if this makes any sense to you. If it does, do everyone a favor and let Moody's know that they're being overly dramatic and need to correct their reporting.

The analysis, conclusions, and recommendations are not results of a feel-good promotion by the university. As you know from my past positions on issues, I would naturally be the first one skeptical of such a purely in-house presentation. The figures today represented the reported findings by an objective outside consulting firm from comprehensive studies done during the past year of all aspects relating to enrollment and financial stability. According to Pres. Padilla (who referenced the Moody's evaluation in his remarks) and his staff, the report considered multiple perspectives and substantial data gathered by the firm, including the recent ratings summaries. I credit Padilla with a balanced and transparent overview.

[crusadermoe]

Padilla seems like the right guy at the right time for tough and firm direction.  I can't judge the numbers you heard ValpoPal, but the approach is indeed reassuring. He gets credit for transparency and for addressing Moody's head on! 

Wise men use consultants to bear bad news.   

[wh]

Nothing is more important than hope, and it sounds like President Padilla provided it. Here's to a long, prosperous future for Valparaiso University.

[vu84v2]

To the posts previously raised on enrollment and the financial situation:
-First, there are posts that state a $12M annual deficit and posts that indicate most or all of this is covered in some way. What I have never seen in any report is whether annual distributions from the endowment (and that is a primary purpose of an endowment) are included in these figures and how much the distributions are (I am sure that they vary by year).
-In regards to targeting enrollment at 3000....this is far easier said than done. When any organization tries to "right size" itself, it needs to determine the number and types of employees that can be supported by the estimated revenue. Good organizations do things that are good for employees like retrain them, along with necessary steps like managed attrition and (unfortunately) layoffs. But universities have severe limitations in employee mobility. The stated "3000" number is likely comprised of targeted enrollment numbers in each of the colleges and there is likely an imbalance where the professional colleges don't have enough faculty for their part of the 3000 or will not be allowed to replace faculty who leave (for retirement, a position at a different university, etc.). My fear is that Valpo, from what it is doing, will expect colleges like engineering, nursing, business - colleges with the greatest demand - to "get by" with less (e.g., teach larger/more classes, continuously hiring adjuncts - both of which risk losing accreditation) with faculty being paid under the market rate for their specific discipline. That scenario creates risks for these colleges to be sustainable in the long term and risks being able to achieve the revised enrollment target.

I do think President Padilla has the right motivation and also think that the transparency that he exhibits is critical to moving forward. But I do feel that he will need to make further difficult choices associated with how resources associated with "3000" will be distributed across the colleges.

[crusadermoe]

I would bet you $100 to your $10 that endowment distribution is part of the income they balance against expense.  And still come up short.

Another point about Endowment. People always act like endowment is absolutely guaranteed revenue year to year. That is certainly true if the market doesn't plummet. I think that somehow you are locked out of spending any of it if the value drops to a certain point in value. I don't know what this is.