Bridgepoint Education Annual Report 2014

Letter to Shareholders

Dear Shareholder:

Over the past several years, Bridgepoint’s principal institution, Ashford University, implemented numerous initiatives to raise academic quality, enhance student outcomes, and communicate Ashford’s brand identity as the preferred means of attracting qualified students. While we remain confident that these steps are in the best long-term interests of students and shareholders alike, these initiatives, implemented during a difficult period in the industry, produced a decline in enrollments and financial performance over the past several years, including 2014.

As measured by quality, Ashford’s initiatives have been extraordinarily successful, and that success has been acknowledged by Ashford’s accreditor, the Western Association of Schools and Colleges Senior College and University Commission (WSCUC). In its 2013 letter approving Ashford’s accreditation, WSCUC stressed the importance of the university’s continued focus on retention improvement efforts and included positive comments from the WSCUC visiting team acknowledging the educational quality Ashford offers. Among many positives, of particular note was the visiting team’s comment that Ashford had established a number of "best practices" and had created "… what can become a model for online higher education for a non-traditional student population."

Importantly, in 2014 we saw concrete evidence that our strategies, hard work and investments are paying off for students. Our efforts to improve student and educational quality have produced measurable results, and surveys have shown that our brand-building efforts have improved brand recognition and reputation. We associate both of these improvements with higher quality students and increasing new enrollments at Ashford, which have been up for four out of the past five quarters as measured on a comparable basis.

Progress at our institutions is notable given the headwinds faced by higher education over the past several years, particularly in the private sector space. Significant new regulations have added burdensome costs and operational complexity. At the same time, some institutions have cited rising student debt levels and a weak market for well-paying jobs as factors reducing student demand. All of these forces have led to substantially reduced enrollments at many institutions. While our institutions have not been unaffected by these factors, we believe we are positioned for growth in the metrics that matter to students and shareholders alike.

Communicating Our Brand Identity Has Lasting Benefits

During 2014, we expanded our branding and web-based search initiatives as a preferred means of attracting high quality students to our institutions. Higher quality students have already had a positive impact on retention, which is a key measure of our institutions’ success at delivering value to students.

"Looking back just one year, organic applications in 2014 were up one-third from their level in 2013, and they are continuing to expand."

From the first quarter of 2012 through the end of 2014, applications from these branding-related "organic" channels have doubled as a percentage of total applications, and they now represent more than half of all of our applications, and effectively all of our new enrollments. Looking back just one year, organic applications in 2014 were up one-third from their level in 2013, and they are continuing to expand. In addition, our ongoing shift toward organic inquiries has allowed us to reduce our admissions workforce significantly. This point is very important: despite a decrease in our admissions workforce, Ashford experienced a year-over-year increase in new enrollments in 2014. This means that the differentiated branding we have established with prospective students is leading to higher admissions advisor productivity, a higher success rate of applicants becoming students, and our ultimate objective of higher student retention and better student outcomes.

The Story Behind the Brand

Our institutions have always offered a compelling value proposition to students – one that is grounded in affordability, access, quality, and student success. The growth in our application, enrollment and retention statistics demonstrates a favorable consumer response to our efforts to communicate this brand identity and differentiated positioning in the market for postsecondary education.

One example of this positioning is our launch of the Forbes School of Business® at Ashford University, which is helping to distinguish the business school and attract high quality students. The Forbes relationship delivers current, insightful and valuable business content, and in so doing, it is creating value for Ashford’s students while simultaneously differentiating the Forbes School. And it shows in enrollments: while new enrollment growth for Ashford overall was in the mid-single digits percentage-wise in 2014, we saw double digit percentage growth in new enrollments at Ashford’s Forbes School of Business, with MBA applications growing at an even faster rate. In addition, total enrollments in the business school declined at a slower rate than total enrollments at Ashford overall. We are pleased that our relationship with Forbes is off to such a positive start.

Other new policies being implemented at Ashford are admitting students with a higher likelihood of completing their educational objectives and providing all students with enhanced levels of support. At the end of 2014, the 12-month retention for all students who were active on the last day of 2013 was 65.1%, which is 3.3 percentage points higher than the 61.8% retention statistic for the prior year. We view these positive results as evidence that the numerous quality and process improvements we have put in place are producing a more committed and better prepared student body with better learning outcomes.

Ashford Compares Favorably to Well-Known Institutions

As successful as these statistics show we have been, and as gratifying as WSCUC's comments were during our accreditation transfer, perhaps the best judges of our performance are our students.

"Despite a decrease in our admissions workforce, Ashford experienced a year-over-year increase in new enrollments in 2014."

For newly enrolled students, student satisfaction results were reflected in a major survey of students during their first year in college. Ashford participated in the Higher Education Research Institute at UCLA's national survey, called "Your First College Year," which asks new students about their college experiences. In the latest survey for which we have comparative data, completed in the 3rd quarter of 2013, thousands of students at approximately 60 traditional, 4-year, non-profit, public and private colleges and universities were surveyed. You would recognize the names of many of the schools, such as Fordham University, Ithaca College, Babson College, Pepperdine University, Mills College, UC San Diego, Case Western Reserve, and many others. I’m both pleased and proud to share the following survey results with you:

  • When new students were asked if they could choose their current college again if given the chance, 42% of national survey respondents said "Definitely Yes" while 66% of Ashford respondents said "Definitely Yes."
  • 80% of national survey respondents agreed or strongly agreed that admissions or recruitment materials portrayed the campus accurately, while 91% of Ashford respondents agreed or strongly agreed.
  • When asking new students whether their courses inspired them to think in new ways, 41% of national survey respondents said "frequently," while 61% of Ashford respondents said "frequently."
  • Finally, 59% of national survey respondents were satisfied or very satisfied with the relevance of their coursework to everyday life, while 80% of Ashford respondents were satisfied or very satisfied.

"We saw double digit percentage growth in new enrollments at Ashford’s Forbes School of Business..."

We believe these survey results affirm the relevance and value of our degree programs, even in comparison to some well-known and established traditional institutions.

New Programs Target Key Educational Needs

While these survey results are impressive, we are not standing still. Both of our institutions -- Ashford University and University of the Rockies -- continue to develop new programs to increase offerings in critical areas of need. In 2014, Ashford launched its first new program since moving to WSCUC accreditation, offering a Bachelor of Science in Health Information Management, a field that we believe will see increased demand in future years. Ashford also received approval from WSCUC to offer three new master’s degree programs – Master of Accountancy, Master of Arts in Psychology, and Master of Science in Criminal Justice. University of the Rockies launched three new programs: a Master of Arts in Education, a PhD in Education, and a PhD in Human Services. Because we believe that new program offerings create value and opportunity for our students and prospective students, we are continuing to develop new programs at both institutions.

Progress at University of the Rockies

In addition to launching new programs, University of the Rockies also made important progress in 2014, allowing the institution to evolve, improve, and better serve the needs of its students. Major milestones and accomplishments in 2014 include:

  • Preparation for the Higher Learning Commission comprehensive visit, which resulted in continued accreditation of University of the Rockies, with the next Reaffirmation of Accreditation in 2024-2025 (announced in early 2015).
  • Continued work on University of the Rockies’ transition from Colorado Springs to Denver, with the first phases being completed on time, on budget, and with no interruption in the university’s ability to deliver high quality education and world class service to its valued students.

In addition to the new programs I mentioned above, University of the Rockies continually improved existing offerings with the goal of providing students with value as well as long-term support for their individual goals and professional objectives.

Finally, University of the Rockies embraced and applied the principles of its newly launched, five year strategic plan to focus on the key strategic objectives of growth, prosperity, and accreditation.

Bridgepoint's Future

Despite the headwinds faced by the industry and our company in 2014, I am pleased that our institutions continued to demonstrate increasing demand for our educational programs through higher new enrollment growth. The Forbes School of Business at Ashford University continues to grow at a more rapid rate than Ashford overall, and is distinguishing and differentiating Ashford from other brands in the marketplace. Reflecting the quality of our academics and our student-centered focus, Ashford’s 12-month cohort retention increased meaningfully during 2014. At the Bridgepoint level, we demonstrated our commitment to our shareholders by better aligning expenses with the size of the company, positioning Bridgepoint for improved financial results going forward.

"We expect an improvement of our margins in 2015, and currently view 2014 as the trough in new enrollments and profitability."

Collectively, these results and trends provide us with confidence that both of our institutions are well positioned for growth over the next several years. As we have demonstrated repeatedly, we remain committed to a student-centered focus that leads to improved outcomes for students and all stakeholders. For all of these reasons, we anticipate new enrollments will show positive growth in 2015 and total enrollment at the end of the year will be approximately the same as at the end of 2014. With increasingly positive student retention, growth in new enrollments, and a continued focus on operational efficiencies, we expect an improvement of our margins in 2015, and currently view 2014 as the trough in new enrollments and profitability. Our principal corporate objectives for 2015 are the restoration of growth in our academic institutions and in our financial performance, and our continued evaluation of opportunities for the prudent deployment of our substantial cash balances to maximize shareholder value.

We remain grateful for your support as shareholders and for the diligent efforts of our employees as we work to deliver value to students and shareholders alike.

Andrew S. Clark
President and Chief Executive Officer
March 2015

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Numbers denoted in thousands
except enrollments and EPS

Highlights Highlights Total Enrollment EPS Diluted

Additional Information:

ANNUAL REPORT ON FORM 10K FOR THE YEAR ENDED DECEMBER 31, 2014 (PDF) » Corporate Information » Corporate Site » Forward-Looking Statements »