Dive Brief:

• For-profit college operator National American University Holdings (NAUH) this week reported its revenue for the second quarter, which ended Nov. 30, fell more than 24% year-over-year to $15.2 million, according to a securities filing. At $11.3 million, the company's net loss nearly tripled from a year ago. NAUH ended the period with $530,000 in cash, compared to $5.3 million at the end of its 2018 fiscal year in May, and had a working capital shortfall of $8.7 million.
• While the company expects ongoing cost-cutting efforts to be successful, NAUH added language to the filing acknowledging "substantial doubt" in whether it will have sufficient resources to continue as a going concern over the next year, raising the possibility of bankruptcy or liquidation. 
• NAUH also announced this week that its chief financial officer, David Heflin, resigned effective Feb. 1. CEO Ronald Shape will also serve as interim CFO while the company searches for a replacement.

Dive Insight:

With enrollment declines driving down revenue since 2013, NAUH is closing its ground-based locations to reduce costs and is moving to cut enough staff to save $1.5 million in payroll expenses by the end of the third quarter of its 2019 fiscal year. Though the moves are meant to save money and reduce cash outflow, the operator acknowledged the shift online could hurt its revenue in the immediate future.

The earnings report comes as NAUH starts trading on a penny exchange after leaving the Nasdaq because its market capitalization fell below required levels.

From 2014 to 2018, NAU's revenue dropped nearly 40% to $77.2 million, due mostly to enrollment declines. During that time, the company went from recording an annual profit of $3.5 million to a loss of $12.1 million in 2018, though it has been able to lower costs in recent quarters by consolidating campuses. As it works to cut costs and stem losses, it approaches an $800,000 loan payment due in May.

Online is key to National American University's turnaround strategy. The chain, which is nearly 80 years old, began offering online degrees in 1998. By the end of May 2018, it had 724 students enrolled at physical locations compared to 4,342 in its online programs.

The company is also targeting military students and has expanded its security and intelligence programs through the acquisition of Henley-Putnam University, a deal that closed in March. It says it plans to further expand its online programming around strategic security, counterterrorism and intelligence for the public and private sectors

Along with its financial woes, NAUH also faces legal risks. In December, it was sued by former students in Missouri over allegations that the college misled them about the quality and value of their degrees. In addition, a former executive alleged in a whistleblower lawsuit in 2017 that employees were paid bonuses for recruiting students, and that NAUH hid flaws in programs and misrepresented student aid revenue so it could stay in compliance with federal regulations.