Stabilize, Improve and Divest: There’s a Lot That Went Right with Zovio

Change management at any organization is a complicated business at the best of times. But if it’s in the middle of a turnaround with the threat of bankruptcy looming over head, it’s even more fraught. When in late 2021 Randy Hendricks was brought in to save failing education services company Zovio, he faced just such a conundrum. How he handled it is a good case study in what to do when all the chips are on the table, and it doesn’t look like there’s anything else left in your stack.

Zovio was a publicly-held for-profit education services company that at its height under its previous trading name, had over 4,500 employees and income exceeding $1 billion. After one false start in a transformation attempt designed to turn the company into an EdTech services provider, Randy Hendricks was brought on in late 2021.

Hendricks’ track record included extensive time at heavy hitters like IBM, Unisys and two decades at Accenture, as well as heading the education and government division of Workday. In addition, he had chaired or was the member of numerous tech company boards, and was a managing director of Huron Consulting Group.

It was with those decades of deep transformation and management experience that Randy Hendricks realized that a turnaround at Zovio was not possible. But that was not the end of the road.

Around the time Hendricks arrived at the company, media reports on Zovio were filled with allegations of mismanagement that had taken place prior to his arrival. The company had spent nearly $300 million working to divest some businesses and acquire others. By early 2022 enter 2022 the understanding was that Zovio was on the brink of insolvency, with the board actively discussing whether or not a bankruptcy would be a good solution for the problem at hand.

For Randy Hendricks, the priorities were clear

“Number one was to avoid a bankruptcy proceeding. Because, when I took over the company, the company was insolvent,” Henricks said in an interview. “I have sat on the board of tech companies that have been faced with things that look kind of similar, but everything’s a unique circumstance. And so, all of my experience and training is to avoid bankruptcy.”

Turning the keys over to a trustee in the courts and filing for bankruptcy, “to me was giving up,” said Hendricks.

Time has proven Hendricks’ arrival as a line of demarcation in Zovio’s history. On his arrival, and throughout 2022, he went about a process of stabilizing, improving, and divesting Zovio’s most valuable assets.

Stabilize, Improve and Divest

For Randy Hendricks, stabilizing the business meant curbing spend and directing efforts away from bankruptcy.

“The company was transitioning itself with a really good strategic plan, but they just had a lot of missteps on spending,” said Henricks, explaining that prior to his arrival Zovio was offloading its for-profit universities to avoid the politically-charged yet profitable sector. “They were moving into the business of being a service provider, providing tutoring services, tech bootcamp, IT outsourcing for universities. But in that transition, they just spent a lot of money to move to something where they were going, and they just didn't get the move done [before] they were out of money.”

Hendricks stabilized costs as much as possible to avoid a bankruptcy which he viewed as not just damaging for Zovio’s good businesses and employees, but also its end customers, who were principally students and children.

Why bankruptcy was a no-go for Randy Henricks

When a company like Hertz or RadioShack go bankrupt, consumers can rent cars from other companies or buy their batteries elsewhere. But a bankruptcy of Zovio would have stranded tens of thousands of students – a fourth-grader using online tutoring services through Zovio’s TutorMe, computer programming students from the 20 universities that partnered with Zovio’s Fullstack Academy to offer coding courses via distance education, college kids relying on Zovio’s Online Program Management platform to take their courses.

“It would've been terrible. Jobs would've been lost. In the market, they would've had to say, ‘I'm sorry, we're shutting down the tutoring services for these K-12 institutions because the company that owns us filed for bankruptcy, chapter seven,’” said Randy Hendricks.

When Hendricks took over, Zovio had around 1,500 people on the payroll across the three companies.

In early 2022, Randy Hendricks immediately identified TutorMe as an attractive candidate for sale to a good home. At the time, in the middle of a pandemic and an education crisis, the government was providing funds money to K-12 institutions for online tutoring services.

“Online tutoring services were doing really well during the pandemic because they're offering tutoring services. Zovio happened to own one of those called TutorMe,” said Hendricks. “So, it was the first business that I focused on trying to get it ready for sale, because it's providing such a valuable service of tutoring to K-12 students and college students. Somebody would want to own it.”

TutorMe, which Zovio had bought for $6 million, went for $55 million and is still running to this day, providing remote tutoring in a wide range of subject areas.

How Randy Henricks kept focus on what mattered

Randy Henricks then used Fullstack Academy to secure bridging loans for Zovio, and was later able to sell it for $31 million – without any disruption of services to its thousands of programming bootcamp students.

The Zovio-branded Online Program Management platform was sold to the University of Arizona Global Campus, which not only provided continuity of service but also enabled OPM staff to become university employees.

“They took aboard 815 employees that are happy to be university employees. So, it's such a feel-good story,” said Randy Henricks of the sale to Zovio’s largest customer. “They got computer systems. They got a thousand online courses. They got everything that took years to build.”

Jobs saved, education services for students continued undisrupted, and bankruptcy was avoided.

“We saved [them] by the plan we executed – 1,400 – because those companies, all three of them, were bought by somebody who wanted to take care of the company and the employees,” said Hendricks. “They bought the businesses, but when you're buying the businesses, you're buying the employees.”

The result of Hendricks’ leadership is a tale of triumph in the difficult situation that was handed to him. Around 1,400 jobs saved in 2022. No services disrupted to clients and students. Good homes for the three businesses he wanted to sell, and a winddown of the parent – without a bankruptcy. On reflection, there’s a lot that went right with Zovio – in the end.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.