Dive Brief:

• Executives at Zovio, which owns Ashford University, said the company is on track to announce plans to either separate or sell the predominately online institution by year-end.
• The forecast, delivered during a call Wednesday to discuss the company's third-quarter earnings, comes as the company continues its pivot from for-profit college operator to education services provider.
• To that end, Zovio is cutting roughly 300 of 1,900 full-time positions in its ongoing restructuring,​ a move that is expected to save it $51 million in 2020 but raises questions about the viability of a spinoff. 

Dive Insight:

A big question lingers: What will happen to Ashford?

If Zovio wants to separate the institution as a standalone nonprofit, it will have to post a $103 million letter of credit with the U.S. Department of Education, which is equivalent to 25% of its Title IV funding for the 2018 fiscal year. But in recent months the company's cash position has tightened. It posted $79.1 million in unrestricted cash at the close of the quarter, down from $166.3 million in December 2018.

Tying up money in the letter of credit could stymie Zovio's attempt to pivot. In its quarterly filing, the company indicated it is "considering various financial and insurance instruments" to keep the cash on its balance sheet unrestricted. It noted that a sale would likely not require a letter of credit.

"[T]here are much stronger signs, including the layoff, that they want or need to sell Ashford instead of just converting it," said Phil Hill, a consultant and market analyst, in an email to Education Dive on Thursday.​

Another way to look at it, he said, is that they may be "restructuring towards fewer, more profitable disciplines and removing faculty (and) staff based on these changes" in light of heightened competition among online programs.

In June, Zovio filed a notice that it planned to lay off 248 employees. The company responded to questions from Education Dive on Thursday asking about the areas of the company affected by the layoffs with the following statement:

"The changes made this week are part of our previously announced actions to ensure Zovio is staffed appropriately for our transformation. The changes made are in line with our focus on becoming more efficient, ensuring excellent outcomes for our clients, as well as strong returns for our shareholders. We are continuing to hire new employees in Chandler, [Ariz.,] like engineers, who will be central to our organization moving forward."

Zovio has emphasized that it hasn't sought out an acquisition but was preparing to separate Ashford as an independent nonprofit institution when it was approached by potential buyers.

"As a publicly traded company, we have a fiduciary responsibility to explore and do due diligence on serious offers," Vickie Schray, Zovio's chief external affairs officer, told Education Dive in an interview last week.

Greg Finkelstein, Zovio's chief operating officer, said initial inquiries for the acquisition of Ashford came from "a pretty broad cross-section of institutions," from private regional colleges to large publics. 

"There's a lot of academic leadership that is beginning to look at broader missions and different ways of getting there where historically that has been a much more organic-or-bust type of mentality," he said in an interview.

Speaking to analysts Wednesday, Zovio CEO Andrew Clark said the company is evaluating a sale as "an alternative" to the original separation plan. 

Either way, Ashford is expected to stay close to Zovio. Were Zovio to sell Ashford, the company would expect to sign on as an education technology services provider. If it spins it off, executives have said they will provide ed tech services to it. Zovio is partnering with other colleges as well.

How Zovio will operate as a services company is becoming clearer after key leadership changes and the acquisitions earlier this year of coding boot camp Fullstack Academy and tutoring platform TutorMe.

With Fullstack, Clark told analysts, it has so far added two of four partnerships anticipated for 2019 — the University of North Florida and the University of San Diego Division of Professional and Continuing Education. TutorMe added nine institutional partnerships in the latest quarter, including a "large contract" with the Colorado Community College Network, Clark said.

Finkelstein said an online program manager remains an acquisition target for Zovio.

On the enrollment side, employer partnerships showed growth amid an overall decline during the quarter. Employer partnerships account for about 30% of Zovio students year-to-date, compared to 22% a year ago, and the segment is growing, according to the company.

Overall enrollment at Ashford was down 8.2% from a year ago to 36,349 students at the close of the period.

"As we have found over the last couple of years, there's been a dramatic increase in the number of employers who are looking at this type of relationship to address some of their issues around attracting and retaining quality employees," Schray said.