Dive Brief:
- Zovio, an educational services provider whose biggest client is the University of Arizona Global Campus, is continuing to explore selling all three parts of its business, company leaders said on a recent call discussing 2022 first quarter earnings.
- Those segments include Zovio's contract with UAGC, which receives services such as marketing and recruitment from the company in exchange for a portion of its tuition revenue. Zovio also owns two growth businesses, boot camp provider Fullstack Academy and online tutoring provider TutorMe, which together saw revenue reach $9.3 million, a 29.5% year-over-year increase.
- However, the company's total revenue fell to $61.6 million in the first quarter, down 19.8% from $76.9 million during the same period last year. Officials said the decrease is primarily due to enrollment challenges at UAGC.
Dive Insight:
Zovio officials first announced they were exploring selling the company's three businesses in April, following a tough year for the company. Randy Hendricks, the company's CEO, gave an update on those efforts during a call Tuesday.
"I'm pleased with the interest being shown and the progress we're making," Hendricks said, adding that he would share details in the future.
At the same time the company is considering a sale, it's also hoping to improve enrollment at UAGC and continue to grow Fullstack Academy and TutorMe, Hendricks said.
Zovio used to own Ashford University, but sold the for-profit institution to the University of Arizona in late 2020 and turned itself into a company that provides educational services. The public university transformed the for-profit institution into UAGC and entered into a 15-year services agreement with Zovio.
The deal has faced ongoing criticism from University of Arizona faculty members, who are worried about reputational damage. California's attorney general filed a lawsuit against Ashford University in 2017 accusing the institution of misleading students, and a judge sided with the state earlier this year. The court ordered Zovio to pay $22.4 million in fines as a result.
The company has filed a notice of intention for a new trial and to vacate the judgment, Hendricks said. A hearing for the motion is scheduled for Friday.
UAGC has struggled with enrollment, as declines that started before its sale continue and affect revenue Zovio draws from the 15-year agreement. Despite those ongoing issues, company leaders struck an optimistic tone about enrollment and touted an uptick from January to March.
Hendricks chalked up those improvements to recent changes the company made. In January, Zovio downsized the management team that serves UAGC to be "more nimble and agile" and responsive to the university, he said. It also combined two roles, enrollment advisors and enrollment coaches, so students would be passed between fewer people during their time at UAGC.
New enrollment was "slower than a year ago," Kevin Royal, Zovio's chief financial officer, said during the call. But the company has seen improvements in retention and expects new student enrollment will see year-over-year gains in the second quarter.
Zovio and UAGC did not immediately provide the university's current enrollment figures Wednesday.
While Hendricks declined to answer on the call whether UAGC has been cutting expenses, he said UAGC CEO and President Paul Pastorek "has a really good handle" on keeping university costs in line with tuition revenue.
Meanwhile, Zovio has recently taken measures to reduce its costs, Hendricks said. Overall costs and expenses fell to $68.9 million in the first quarter, down 20.1% from a year ago.
Zovio's net loss shrank from $9.5 million in the first quarter of 2021 to $7.4 million in 2022.
"We're going to carefully manage our expenses until the company is once again profitable," Hendricks said.
