- Attorney General/Job Placement: We recommend an immediate evaluation of a possible sale of Wyotech, and/or any other non-core assets in
order to free up enough cash to provide us vital breathing room to survive this most recent crisis. We believe the company has fallen into an
increasingly dangerous position and the company is at crossroads. Regarding job placement, we urge you to establish a team to evaluate the
quality of all existing employer relationships as well as secure more significant employer relationships/partnerships by degree/diploma. We
must have higher quality employer relationships than peers to provide our students the greatest job placement edge in the for-profit education
space. If we can secure relationships with employers who request specific training, then our students will have careers waiting for them
immediately upon graduation. This type of relationship would boost enrolments, improve job placement, and eliminate some of the damaging
political onslaught such as the recent one.
- A Plan to Increase Campus Capacity Utilization: Establish a team to identify and enroll the 800,000 Latin American students in California
who have tried to attend Community College, but cannot find a seat due to overcrowding. Another area with great potential includes socially
responsible/green diploma programs to fill classrooms, provide students with job training for the 21st century, and to gain the respect and
admiration of some of our biggest political adversaries. One such example includes Natural Gas engine certificate programs which is gaining a
significant presence throughout the U.S., however it is mainly taught at Community Colleges. Additionally, conduct a study on the relevancy of
all existing diploma and degree programs to find which programs are most relevant and which ones are falling out of favor among students.
- Student/Employee Ratio: Immediate 10% headcount reduction with internal plans for additional 5-10% in second half of 2014. 100
employees for 530 students are just outrageously high.
- Through Review of Online Segment: Immediate in-depth review of the online segment beyond administrative level to address student
aptitude and ability to succeed in our current online platform. Additionally, the review should identify and provide programs that are relevant in
todays World.
- Reduce Marketing Spend: Immediate reduction in traditional marketing spending by 40-50% along with in-depth review of our target
markets. Cessation of all television, radio and newspaper advertising in California with the exception of Hispanic television, radio and
newspapers. Appoint an in-house online & social media team to unlock highly effective and inexpensive methods of reaching out to our target
students. A restructuring of the team may be necessary as our online and social media presence is significantly lagging peers.
- Board Size: Use the Dell model if truly possible. We would benefit immensely from the addition of creative/innovative leaders with an
entrepreneurial and problem solving spirit as directors.
- Opportunistic Equity Buyback: As soon as Corinthian is cleared from the Financial Responsibility Composite Score, we highly urge the
company to issue a repurchase of 10% of the outstanding shares over the course of calendar year 2014 to help instill investment community
confidence. This timely buyback is also quite beneficial to the long-term shareholders like Shah Capital as it is taking place at very depressed
prices.
- Hire of a Financial Advisor: We strongly urge the Board to hire an advisor to unlock the true value of the Corinthian franchise through M&A
unless we are right on our above listed 1 through 5 suggestions.
We highly recommend the management team to use the First Quarter 2014 Earnings Conference Call on November 5th 2013 as a platform to
announce the company will be conducting a comprehensive strategic review of its entire operation.
We must bring back an entrepreneurial and start-up culture throughout the organization to rejuvenate this venerable organization for the 21st
century!
We have decided not to make this letter public at this juncture or start a conversation with other large (suffering) shareholders as we respect the
management team and believe you will do what is right for the company, its students, and all shareholders. We look forward to a constructive
conversation soon.
Very sincerely,
Sd
Himanshu H. Shah
CIO & Managing Partner