A number of hospitals and health systems are trimming their workforces or jobs due to financial and operational challenges.
Below are workforce reduction efforts or job eliminations that were announced within the past year and/or take effect later in 2023.
Editor's Note: This webpage was updated Aug. 17 and will continue to be updated. Stories are listed under the month they were reported on by Becker's.
August
Mechanicsburg, Pa.-based Vibra Healthcare is laying off 76 employees at its specialty hospital in DeSoto, Texas, according to WARN filings from July 27. Layoffs take effect Sept. 29 at the critical access facility.
Burlington, Mass.-based Tufts Medicine is eliminating hundreds of jobs as it outsources its outreach laboratory business and some operating assets to Labcorp, according to Worker Adjustment and Retraining Notification documents filed Aug. 11. However, the health system said it will work with Labcorp to have the majority of affected employees transition to a similar position with Labcorp.
The University of Arkansas for Medical Sciences is laying off 51 workers in support services, administration and service lines. Some previously open positions will also be left vacant, the Little Rock-based institution told the Becker's in a prepared statement. Some job duties will be reassigned.
Springfield, Ill.-based Memorial Health announced layoffs of hundreds of employees, including 20 percent of leadership positions. A statement shared with Becker's indicates the reduction represents 5 percent of Memorial's total salary and benefits.
Boone Health, a county-owned system based in Columbia, Mo., will cut 62 jobs, most of which are unfilled. Fifteen of the 62 positions are held by existing employees.
The in-home care arm of Syracuse, N.Y.-based St. Joseph's Health, part of Livonia, Mich.-based Trinity Health, is closing in October, pending the discharge of all patients. The closure includes the termination of 71 employees. Mark McPherson, president and CEO of Trinity Health At Home, said 63 full and part-time positions are being eliminated, while the remaining eight were contingent positions.
July
Chapel Hill, N.C.-based UNC Health will lay off 246 employees. The reduction will occur after the organization ends services at a behavioral health facility in Raleigh on Sept. 30, according to a WARN notice filed July 21 with the North Carolina Department of Commerce.
Philadelphia-based Jefferson Health is reducing its workforce by about 400 positions. The reduction represents approximately 1 percent of the workforce.
Tupelo-based North Mississippi Health Services is moving forward with layoffs and job reassignments as part of its "redesign" plan to Strengthen the organization's financial picture, according to a message sent to NMHS employees and affiliated providers July 19. NMHS did not provide the number of affected positions or types of positions affected.
Allina Health began layoffs affecting about 350 team members throughout the Minneapolis-based organization. The health system said the layoffs began July 17 and that most of the affected jobs are leadership and non-direct caregiving roles.
Middletown, N.Y.-based Garnet Health laid off 49 employees, including 25 leaders. The reductions represent 1.13 percent of the organization's total workforce.
June
Coral Gables-based Baptist Health South Florida is offering its executives at the director level and above a "one-time opportunity" to apply for voluntary separation, according to a June 29 Miami Herald report. Decisions on buyout applications will be made during the summer.
MultiCare Health System, a 12-hospital organization based in Tacoma, Wash., will lay off 229 employees, or about 1 percent of its 23,000 staff members, including about two dozen leaders, as part of cost-cutting efforts, the health system said June 29. The layoffs primarily affect support departments, such as marketing, IT and finance.
Greensburg, Pa.-based Independence Health System laid off 53 employees and has cut 226 positions — including resignations, retirements and elimination of vacant positions — since January, The Butler Eagle reported June 28. The 226 reductions began at the executive level, with 13 manager positions terminated in March.
Billings (Mont.) Clinic will lay off workers as part of a restructuring plan to address financial and operational headwinds in today's healthcare environment, the organization confirmed. The layoffs are expected to affect approximately 27 or fewer positions.
Melbourne, Fla.-based Health First is eliminating some positions and leaving open ones vacant, Florida Today reported June 21. Seventeen jobs will be cut and 36 will be left unfilled, according to Paula Just, the health system's chief experience officer.
Pittsburgh-based Highmark Health laid off 118 employees on June 21, including two from Allegheny Health Network, a spokesperson for the health system told Becker's. The layoffs follow the health system's cutbacks in March and April, according to the Pittsburgh Business Times. Highmark laid off 141 workers earlier this year.
Vibra Hospital of Western Massachusetts, a long-term-acute care hospital in Springfield, will lay off 87 employees by Aug. 15 ahead of the facility's planned closure. About 30 patients will be relocated to Baystate Health's Valley Springs Behavioral Health Hospital in Holyoke, Mass., which will open in August.
Cortez, Colo.-based Southwest Memorial Hospital laid off nine people to help ensure the hospital is staffed appropriately, and create financial stability for the future, a spokesperson confirmed to Becker's. The spokesperson, Chuck Krupa, said the layoffs occurred June 14 and included administrative workers. No bedside care positions were affected.
Henry Mayo Newhall Hospital in Valencia, Calif., is making "a little over 100" layoffs amid financial challenges, spokesperson Patrick Moody confirmed to Becker's. Mr. Moody said the layoffs affect workers "in a wide range of hospital departments." This includes some management-level employees. The hospital, which has about 1,800 employees total, is not providing specific numbers for specific job titles or departments.
Dartmouth Health is laying off 75 workers and eliminating 100 job vacancies. The layoffs came after the Lebanon, N.H.-based health system implemented a performance improvement plan in November.
Seattle Children's is eliminating 135 leader roles, citing financial challenges. The management restructuring and reduction affects 1.5 percent of employees across the organization.
White Rock (Texas) Medical Center laid off 30 workers across 28 departments. The layoffs include clinical and administrative roles.
Jackson, Miss.-based St. Dominic Health Services is laying off 157 workers and ending behavioral health services. The reduction represents 5.5 percent of the hospital's workforce.
Danville, Pa.-based Geisinger laid off 47 employees from its IT department. The reduction is part of a restructuring plan to offset high labor and supply costs.
Cascade Behavioral Health Hospital in Tukwila, Wash., is winding down operations and laying off 288 employees. The 137-bed psychiatric facility is slated to close by July 31.
Cambridge (Mass.) Health Alliance is laying off 69 employees, reducing the hours of 15 others and eliminating 170 open positions, according to The Boston Globe. The reductions are primarily in management, administrative and support areas, a health system spokesperson told Becker's.
May
Wenatchee, Wash.-based Confluence Health has eliminated its chief operating officer amid restructuring efforts and financial pressures, the health system confirmed to Becker's May 16.
Conemaugh Memorial Medical Center, a Duke LifePoint hospital in Johnstown, Pa., has laid off less than 1 percent of its workforce, the hospital confirmed to Becker's May 15.
Community Health Network, a nonprofit health system based in Indianapolis, plans to cut an unspecified number of jobs as it restructures its workforce and makes organizational changes. The health system confirmed the job cuts in a statement shared with Becker's on May 11. It did not say how many jobs would be cut or which positions would be affected.
New Orleans-based Ochsner Health eliminated 770 positions, or about 2 percent of its workforce, on May 11. This is the largest layoff to date for the health system.
Cedars-Sinai Medical Center eliminated the positions of 131 employees and cut about two dozen other jobs at related Cedars-Sinai facilities, a spokesperson confirmed via a statement shared with Becker's May 7. The Los Angeles-based organization said reductions represent less than 1 percent of the workforce and apply to management and non-management roles primarily in non-patient care jobs.
Rochester (N.Y.) Regional Health is eliminating about 60 positions. A statement from RRH said the changes affect less than one-half percent of the system population, mostly in nonclinical and management positions.
Memorial Health System laid off fewer than 90 people, or less than 2 percent of its workforce.The Gulfport, Miss.-based health system said May 2 that most of the affected positions are nonclinical or management roles, and the majority do not involve direct patient care.
Monument Health laid off at least 80 employees, or about 2 percent of its workforce. The Rapid City, S.D.-based system said positions are primarily corporate service roles and will not affect patient services. Unfilled corporate service positions were also eliminated.
April
Habersham Medical Center in Demorest, Ga., laid off four executives. The layoffs are part of cost-cutting measures before the hospital joins Gainesville-based Northeast Georgia Health System in July, nowhaberbasham.com reported April 27.
Scripps Health is eliminating 70 administrative roles, according to WARN documents filed by the San Diego-based health system in March. The layoffs take effect May 8 and affect corporate positions in San Diego and La Jolla, Calif.
Trinity Health Mid-Atlantic, part of Livonia, Mich.-based Trinity Health, eliminated fewer than 40 positions, a spokesperson confirmed to Becker's April 24. The layoffs represent 0.5 percent of the health system's approximately 7,000-person workforce.
PeaceHealth eliminated 251 caregiver roles across multiple locations. The Vancouver, Wash.-based health system said affected roles include 121 from Shared Services, which supports its 16,000 caregivers in Washington, Oregon and Alaska.
Toledo, Ohio-based ProMedica plans to lay off 26 skilled nursing support staff. The layoffs, effective in June, affect 20 employees who work remotely across the U.S, and six who work at the ProMedica Summit Center in Toledo, according to a Worker Adjustment and Retraining Notification filed April 18. Most affected positions support sales, marketing and administrative functions for the skilled nursing facilities, Promecia told Becker's.
Northern Inyo Healthcare District, which operates a 25-bed critical access hospital in Bishop, Calif., anticipates eliminating about 15 positions, or less than 4 percent of its 460-member workforce, by April 21, a spokesperson confirmed to Becker's. The layoffs include nonclinical roles within support and administration, according to a news release. No further details were provided about specific positions affected.
West Reading, Pa.-based Tower Health is eliminating 100 full-time equivalent positions. The move will affect 45 individuals, according to an April 13 news release the health system shared with Becker's. The other 55 positions are either recently vacated or involve individuals who plan to retire in the coming weeks and months.
Grand Forks, N.D.-based Altru Health is trimming its executive team as its new hospital project moves forward. The health system is trimming its executive team from nine to six and incentivizing 34 other employees to take early retirement.
Tacoma, Wash.-based Virginia Mason Franciscan Health laid off nearly 400 employees, most of whom are in non-patient-facing roles. The job cuts affected less than 2 percent of the health system's 19,000-plus workforce.
Katherine Shaw Bethea Hospital in Dixon, Ill., will lay off 20 employees, citing financial headwinds affecting health organizations across the U.S. It will also leave other positions unfilled to reduce expenses amid rising labor and supply costs and reductions in payments by insurance plans. Affected employees largely work in administrative support areas and not direct patient care.
Danbury, Conn.-based Nuvance Health will close a 100-bed rehabilitation facility in Rhinebeck, N.Y., resulting in 102 layoffs. The layoffs are effective April 12, according to the Daily Freeman.
March
Charleston, S.C.-based MUSC Health University Medical Center laid off an unspecified number of employees from its Midlands hospitals in the Columbia, S.C. area. Division President Terry Gunn also resigned after the facilities missed budget expectations by $40 million in the first six months of the fiscal year, The Post and Courier reported March 30.
Winston-Salem, N.C.-based Novant Health laid off about 50 workers, including C-level executives, the health system confirmed to Becker's March 29. The layoffs affected Jesse Cureton, the health system's executive vice president and chief consumer officer since 2013; Angela Yochem, its executive vice president and chief transformation and digital officer since 2020; and Paula Dean Kranz, vice president of innovation enablement and executive director of the Novant Health Innovation Labs.
Penn Medicine Lancaster (Pa.) General Health eliminated fewer than 65 jobs, or less than 1 percent of its workforce of about 9,700, the health system confirmed to Becker's March 30. The layoffs include support, administrative and executive roles, and COVID-19-related support staff, spokesperson John Lines said, according to lancasteronline.com. Mr. Lines did not provide a specific number of affected workers.
McLaren St. Luke's Hospital in Maumee, Ohio, will lay off 743 workers, including 239 registered nurses, when it permanently closes this spring. Other affected roles include physical therapists, radiology technicians, respiratory therapists, pharmacists and pharmacy support staff, and nursing assistants. The hospital's COO is also affected, and a spokesperson for McLaren Health Care told Becker's other senior leadership roles are also affected.
Bellevue, Wash.-based Overlake Medical Center and Clinics laid off administrative staff, the health system confirmed to the Puget Sound Business Journal. The layoffs, which occurred earlier this year, included 30 workers across Overlake's human resources, information technology and finance departments, a spokesperson said, according to the publication. This represents about 6 percent of the organization's administrative workforce. Overlake's website says it employs more than 3,000 people total.
Columbia-based University of Missouri Health Care is eliminating five hospital leadership positions across the organization, spokesperson Eric Maze confirmed to Becker's March 20. Mr. Maze did not specify which roles are being eliminated saying that the organization won't address individual personnel actions. According to MU Health Care, the move is a result of restructuring "to better support patients and the future healthcare needs of Missourians."
Greensboro, N.C.-based Cone Health eliminated 68 senior-level jobs. The job eliminations occurred Feb. 21, Cone Health COO Mandy Eaton told The Alamance News. Of the 68 positions eliminated, 21 were filled. Affected employees were offered severance packages.
The newly merged Greensburg, Pa.-based organization made up of Excela Health and Butler Health System eliminated 13 filled managerial jobs. The affected employees and positions are from across both sides of the new organization, Tom Chakurda, spokesperson for the Excela-Butler enterprise, confirmed to Becker's. The positions were in various support functions unrelated to direct patient care.
Crozer Health, a four-hospital system based in Upland, Pa., is laying off roughly 215 employees amid financial challenges. The system announced the layoffs March 15 as part of its "operational restructuring plan" that "focuses on removing duplication in administrative oversight and discontinuing underutilized services." Affected employees represent about 4 percent of the organization's workforce.
Philadelphia-based Penn Medicine is eliminating administrative positions. The change is part of a reorganization plan to save the health system $40 million annually, the Philadelphia Business Journal reported March 13. Kevin Mahoney, CEO of the University of Pennsylvania Health System, told Penn Medicine's 49,000 employees last week that changes include the elimination of a "small number of administrative positions which no longer align with our key objectives," according to the publication. The memo did not indicate the exact number of positions that were eliminated.
Sovah Health, part of Brentwood, Tenn.-based Lifepoint Health, eliminated the COO positions at its Danville and Martinsville, Va., campuses. The responsibilities of both COO roles will now be spread across members of the existing administrative team.
Valley Health, a six-hospital health system based in Winchester, Va., eliminated 31 administrative positions. The job cuts are part of the consolidation of the organization's leadership team and administrative roles.
Marshfield (Wis.) Clinic Health System said it would lay off 346 employees, representing less than 3 percent of its employee base.
February
St. Mark's Medical Center in La Grange, Texas, is cutting nearly 50 percent of its staff and various services amid financial challenges.
Roseville, Calif.-based Adventist Health plans to go from seven networks of care to five systemwide to reduce costs and strengthen operations. The reorganization will result in job cuts, including reducing administration by more than $100 million.
Arcata, Calif.-based Mad River Community Hospital is cutting 27 jobs as it suspends home health services.
Hutchinson (Kan.) Regional Medical Center laid off 85 employees, a move tied to challenges in today's healthcare environment.
January
Oklahoma City-based OU Health eliminated about 100 positions as part of an organizational redesign to complete the integration from its 2021 merger.
Memorial Sloan Kettering Cancer Center announced it would lay off to reduce costs amid widespread hospital financial challenges. The layoffs are spread across 14 sites in New York City, and equate to about 1.8 percent of Memorial Sloan's 22,500 workforce.
St. Louis-based Ascension completed layoffs in Texas, the health system confirmed in January. A statement shared with Becker's says the layoffs primarily affected nonclinical support roles. The health system declined to specify to Becker's the number of employees or positions affected.
Lebanon, N.H.-based Dartmouth Health is freezing hiring and reviewing all vacant jobs at its flagship hospital and clinics in an effort to close a $120 million budget gap.
Chillicothe, Ohio-based Adena Health System announced it would eliminate 69 positions — 1.6 percent of its workforce — and send 340 revenue cycle department employees to Ensemble Health Partners' payroll in a move aimed to help the health system's financial stability.
Ascension St. Vincent's Riverside in Jacksonville, Fla., will end maternity care at the hospital, affecting 68 jobs, according to a Workforce Adjustment and Retraining Notification filed with the state Jan. 17. The move will affect 62 registered nurses as well as six other positions.
Visalia, Calif.-based Kaweah Health said it aimed to eliminate 94 positions as part of a new strategy to reduce labor costs. The job cuts come in addition to previously announced workforce reductions; the health system already eliminated 90 unfilled positions and lowered its workforce by 106 employees.
Oklahoma City-based Integris Health said it would eliminate 200 jobs to curb expenses. The eliminations include 140 caregiver roles and 60 vacant jobs.
Toledo, Ohio-based ProMedica announced plans to lay off 262 employees, a move tied to its exit from a skilled-nursing facility joint venture late last year. The layoffs will take effect between March 10 and April 1.
Employees at Las Vegas-based Desert Springs Hospital Medical Center were notified of layoffs coming to the facility, which will transition to a freestanding emergency department. There are 970 employees affected. Desert Springs is part of the Valley Health System, a system owned and operated by King of Prussia, Pa.-based Universal Health Services.
Philadelphia-based Jefferson Health plans to go from five divisions to three in an effort to flatten management and become more efficient. The reorganization will result in an unspecified number of job cuts, primarily among executives.
December
Pikeville (Ky.) Medical Center said it would lay off 112 employees as it outsources its environmental services department. The 112 layoffs were effective Jan. 1, 2023.
Southern Illinois Healthcare, a four-hospital system based in Carbondale, announced it would eliminate or restructure 76 jobs in management and leadership. The 76 positions fall under senior leadership, management and corporate services. Included in that figure are 33 vacant positions, which will not be filled. No positions in patient care are affected.
Citing a need to further reduce overhead expenses and support additional investments in patient care and wages, Traverse City, Mich.-based Munson Health said it would eliminate 31 positions and leave another 20 jobs unfilled. All affected positions are in corporate services or management. The layoffs represent less than 1 percent of the health system's workforce of nearly 8,000.
November
West Reading, Pa.-based Tower Health on Nov. 16 laid off 52 corporate employees as the health system shrinks from six hospitals to four. The layoffs, which are expected to save $15 million a year, account for 13 percent of Tower Health's corporate management staff.
St. Vincent Charity Medical Center in Cleveland closed its inpatient and emergency room care Nov. 11, four days before originally planned — and laid off 978 workers in doing so. After the transition, the Sisters of Charity Health System will offer outpatient behavioral health, urgent care and primary care.
October
Sioux Falls, S.D.-based Sanford Health announced layoffs affecting an undisclosed number of staff in October, a decision its CEO said was made "to streamline leadership structure and simplify operations" in certain areas. The layoffs primarily affect nonclinical areas.
Molly Gamble contributed to this list.
Confluent Development is expanding its presence in senior living despite persistent headwinds facing new development growth as construction starts remain at historic lows.
The Denver, Colorado-based real estate investment and development firm is gearing up for continued growth with a large pipeline, and recently promoted Matt Derrick to managing director of the firm’s senior living development division.
Since joining in 2016, Derrick has led the development team through the completion of $600 million in senior living projects across 14 projects.
Under Derrick’s leadership, Confluent is now developing a $500 million pipeline for active adult and senior housing projects. The senior living team identified opportunities with lower-acuity projects like IL and active adult.
Amid this year’s tough inflationary climate and tough capital and lending ecosystem, Confluent Development worked with land owners to temporarily postpone land closings on certain sites, while still retaining control of the properties.
Derrick expects those challenges to remain in place for the “rest of 2023 and for at least the first-half of 2024.”
“Sitting on the sidelines is not in our nature, so we are going to be focused on sourcing new, A-plus development sites in great markets. This will put us and our operating partners in a superior position for the anticipated recovery in 2025 and beyond,” Derrick said.
The company has partnered with MoringStar Senior Living and Harbor Retirement Associates (HRA) to handle management of the new communities, having worked with MorningStar on 14 ventures across six states and HRA on nine properties in six states.
“We are currently working with several additional operators in both the senior and active adult spaces and we are excited to share more details on those partnerships and ground breaks in the near future,” Derrick told SHN.
This year, Confluent marked the opening of MorningStar of Mission Viejo in California, HarborChase of Shaker Heights in Ohio and MorningStar at Observatory Park in Colorado, all projects that were started in 2021.
Even amid the tough climate, Confluent has active projects in the works, including: MorningStar Senior Living at The Canyons, which is under construction and is its first joint venture in Nevada and design and entitlements phase for a Kansas City, Kansas-based project with MorningStar.
With a “robust pipeline of more than $500 million,” Confluent is poised to add to its growing senior living portfolio, Derrick said.
That pipeline includes sites that are “irreplaceable” in high barrier to entry markets, with projects still needing design, entitlements and later construction, something that will take “many years,” he noted, aiming to capitalize on demand for senior living in 2026 and 2027 for the pipeline’s projects to open their doors.
“Our new mantra is: ‘Capital and courage.’ and it is going to take a healthy amount of both to navigate the process,” Derrick said.
With innovation in mind, Confluent Development introduced a “Whole Health Standard” that was implemented at existing communities amid the Covid-19 pandemic, and will guide future development standards as resident safety was considered in greater detail following the pandemic.
That means crafting designs that are sustainable, holistic and incorporates the latest protections for resident health while advancing amenities geared for mental health.
With health of the pipeline top of mind, Derrick said he anticipates the company returning to its aggressive development strategy for the anticipated recovery “in 2025 and beyond.”
But that doesn’t mean the company is resting on its laurels in the meantime waiting for better market conditions.
“We are and will continue to pursue value-add acquisitions to add to our growing portfolio,” Derrick said. “The near term still looks challenging, but we are confident that the industry’s brightest days are right around the corner.”
martin-dm
Readers may find my previous coverage via this link. My previous rating was a buy, as I believed Confluent (NASDAQ:CFLT) would continue to see robust growth momentum, maintained by the ongoing shift towards cloud adoption. As the business continues to show a viable path to generating profits, especially FCF, the stock price should start to move upwards. I am reiterating my buy rating, as I expect CFLT to continue growing at >30% for the foreseeable future, driven by strength in Confluent Cloud. Valuation is also well-supported by the strength in growth and FCF improvements.
CFLT's revenue of $189 million in 2Q23 was well above the $182.4 million that consensus had expected. Subscription Revenue from both Confluent Platform and Confluent Cloud was a major contributor to the revenue growth. In terms of profits, non-GAAP EBIT came in at -$17.3 million, beating consensus estimates of -$29.3 million. At the rate that CFLT is growing revenue and EBIT margin expansion, it should not take the business too longer before it reaches EBIT breakeven. Non-GAAP EBIT margin stepped up from -23.1% in 1Q23 to -9.2% in 2Q23, ~14pts jump. Assume margin expands at half the rate for the coming quarters, CFLT should start generating positive non-GAAP EBIT in 2 quarters time. However, FCF fell short, coming in at -$35.3 million vs. the consensus estimate of -$19.2 million. That said, FCF did Strengthen sequentially from -$82.9 million in 1Q23 and -$36.9 million in 2Q22.
Based on author's own math
Based on my view of the business, CFLT should have no issues continuing to sustain growth of at least 30% over the near term. This is consistent with my previous model, as the 2Q23 results showed evidence that growth is still strong, especially the strength seen in Confluent Cloud. I have increased my valuation multiple assumption from 7.4x to 10x as CFLT has continued to deliver growth, which the market is clearly appreciating given the share price action and rerating of multiples. This multiple compares well to other high-growth infrastructure peers like MongoDB (MDB), Snowflake (SNOW), Cloudflare (NET), Datadog (DDOG), Zscaler (ZS), CrowdStrike (CRWD), HashiCorp (HCP), and SentinelOne (S). Given the similar high-growth nature profile, I believe CFLT should continue to trade in line with these peers (the median forward revenue multiple for peers is 10x).
I believe that the 2Q23 results validate my claim that the market in which Confluent competes, data-in-motion, is gaining prominence as an investment target for IT departments. With subscription revenue up 39% and Confluent Cloud up 79%, it's clear that CFLT is still in its infancy, lending credence to my claim that the company has a long runway for growth, both among its current clientele and in greenfield markets. While there is no virtual way to size the exact TAM expansion driven by the proliferation of generative AI, I would assume the impact to be of sizeable magnitude. One example listed during the call was with Recursion, and CFLT handles more than 23 petabytes (which is a lot of data) of real-time data for Recursion in order to Strengthen the prediction of their models. Management also mentioned that they are seeing more customers come to them to ask about AI-oriented use cases. As such, I believe the TAM has significantly expanded for CFLT, further reinforcing my long-term outlook for the business.
Yes, yes, we've definitely started to see that come up a lot more in our customers, kind of more traditional machine learning was there as one of the driving use cases for a long time. And now, this has become a very significant subject of interest for customers, a lot of experiments happening. So yes, I think that's very promising for us (2Q23 earnings)
The results as a whole are positive, and the key metrics I'm tracking are progressing in the right direction as well. A growth rate of 79% for Confluent Cloud suggests that the platform's cloud users are driving the majority of the company's expansion and adding significantly to its net new ACV. I anticipate that Confluent Cloud will become the largest component of CFLT revenue as cloud adoption continues its rapid ascent. If the trend continues, Confluent Cloud subscriptions will account for well over 50% of total revenue in a couple of quarters. From that point on, I think the market will be convinced that CFLT's growth strength stems from Cloud adoption. The strong growth and expanded profitability trickled down to an improvement in FCF again, which I continue to view as the key catalyst for the stock to soar further. And I think the market is gradually waking up to CFLT's potential upside, as the stock was up more than 10% after the 2Q23 results.
I believe there is also a chance for CFLT to see growth accelerate in FY24 and FY25 when the economy recovers (hopefully). If we look at the current macro environment, it definitely has some sort of impact on CFLT's ability to convert customers (customers delay such activities to save costs) and up-sell (customers scrutinize budgets, leading to a long sales cycle). While we cannot quantify them, these headwinds do exist, as we have heard from other software companies. I see these headwinds as short-term issues, and once the economy recovers, they should ease. In the long run, I believe CFLT is strategically positioned to benefit from high levels of developer confidence, widespread adoption of Apache Kafka within enterprises, and robust secular growth drivers.
Amazon Web Services (AMZN), Google Cloud Platform (GOOG) (GOOGL), and Microsoft Azure (MSFT) are just a few of the major public cloud providers that Confluent competes with in the middleware and data management spaces. The future of Confluent could be jeopardized if competition in the industry increases or if competitors learn how to effectively replicate the company's core competencies. Given these are large players with strong balance sheet and deep technical expertise, this will always be a risk.
In conclusion, my buy recommendation for CFLT remains as the company's growth trajectory persists. The strong revenue performance in 2Q23, notably the Confluent Cloud's 79% growth, underscores CFLT's growth potential. The evolving landscape of AI-driven applications and expanding TAM bolsters its long-term prospects. The market is increasingly recognizing CFLT's potential, as shown by the stock's positive response after 2Q23 results. While short-term challenges exist due to the macro environment, CFLT's strategic position it for sustained growth, making it a compelling long-term investment.
Data streaming company Confluent has billowed new functionalities upwards into its Confluent Cloud platform.
The new capabilities are designed to provide confidence that data is trustworthy and can be easily processed and securely shared.
Data Quality Rules, is an expansion of the company’s own Stream Governance suite.
It is designed to enable organisations to resolve data quality issues so data can be relied on for making business-critical decisions.
Also shiny and new are Confluent’s new Custom Connectors, Stream Sharing, the Kora Engine and an early access program for managed Apache Flink, all of which are designed to make it easier for companies to gain insights from their data on one platform.
Did we blink, or did you say Apache Flink?
Yes indeed, Apache Flink, the project (and technology) designed to make stateful computations (where software code is tasked with executing a function that takes the state and value of a given stateful data entity that has the ability to access memory storage and then subsequently returns a value along with a new state) possible over data streams i.e. data that is in motion, streaming, in a data streaming platform, application, software engine or other.
Open source at its core, Apache Flink can be explained as a unified stream processing framework (with batch processing functionality where it is needed) powered by a distributed streaming dataflow engine. Some say data flow, some say data-flow, some say dataflow – either way, Flink is written in Java & Scala and built to execute arbitrary dataflow programs in a data-parallel (across more than one microprocessor) and pipelined manner. Flink’s runtime supports the execution of iterative algorithms natively and the technology ultimately provides a high-throughput, low-latency streaming engine.
Stream processing plays a critical role in data streaming infrastructure by filtering, joining and aggregating data in real-time, enabling downstream applications and systems to deliver instant insights.
Confluent says Customers are turning to Flink to handle large-scale, high throughput and low latency data streams with its advanced stream processing capabilities and developer communities. Following Confluent’s Immerok acquisition, the early access program for managed Apache Flink has opened to select Confluent Cloud customers to try the service and help shape the roadmap by partnering with the company’s product and engineering teams.
Having high-quality data that can be quickly shared between teams, customers and partners helps businesses make decisions faster. However, this is a challenge many companies face when dealing with highly distributed open source infrastructure like Apache Kafka.
According to Confluent’s new 2023 Data Streaming Report, 72% of IT leaders cite the inconsistent use of integration methods and standards as a challenge or major hurdle to their data streaming infrastructure.
“Real-time data is the lifeblood of every organisation, but it’s extremely challenging to manage data coming from different sources in real-time and guarantee that it’s trustworthy,” said Shaun Clowes, chief product officer at Confluent. “As a result, many organisations build a patchwork of solutions plagued with silos and business inefficiencies. Confluent Cloud’s new capabilities fix these issues by providing an easy path to ensuring trusted data can be shared with the right people in the right formats.”
Data contracts are formal agreements between upstream and downstream components around the structure and semantics of data that is in motion. One critical component of enforcing data contracts is rules or policies that ensure data streams are high-quality, fit for consumption and resilient to schema evolution over time.
To address the need for more comprehensive data contracts, Confluent’s Data Quality Rules, a new feature in Stream Governance, enable organisations to deliver trusted, high-quality data streams across the organisation using customisable rules that ensure data integrity and compatibility.
With Data Quality Rules, schemas stored in Schema Registry can now be augmented with several types of rules so teams can:
Many organisations have unique data architectures and need to build their own connectors to integrate their homegrown data systems and custom applications to Apache Kafka. However, these custom-built connectors then need to be self-managed, requiring manual provisioning, upgrading and monitoring, taking away valuable time and resources from other business-critical activities.
By expanding Confluent’s Connector ecosystem, Custom Connectors allow teams to quickly connect to any data system using the team’s own Kafka Connect plugins without code changes; ensure high availability and performance using logs and metrics to monitor the health of team’s connectors and workers; and eliminate the operational burden of provisioning and perpetually managing low-level connector infrastructure.
For businesses doing activities such as inventory management, deliveries and financial trading, they need to constantly exchange real-time data internally and externally across their ecosystem to make informed decisions, build seamless customer experiences and Strengthen operations. Today, many organisations still rely on flat file transmissions or polling APIs for data exchange, resulting in data delays, security risks and extra integration complexities. Confluent’s Stream Sharing provides the easiest and safest alternative to share streaming data across organisations.
Using Stream Sharing, teams can exchange real-time data without delays directly from Confluent to any Kafka client; safely share and protect data with robust authenticated sharing, access management and layered encryption controls; and trust the quality and compatibility of shared data by enforcing consistent schemas across users, teams and organisations.
Confluent’s new Custom Connectors are available on AWS in select regions – and support for additional regions and other cloud providers will be available in the future.
Sakorn Sukkasemsakorn
Confluent (NASDAQ:CFLT) reported its Q2 2023 financial results on August 2, 2023, beating revenue and EPS consensus estimates.
The firm has created a platform providing data infrastructure that speeds data communications across the enterprise.
I previously wrote about Confluent with a Hold outlook.
I remain cautious about the prospect for further stock price appreciation, especially with high and increasing stock-based compensation of $323 million in the past twelve months.
My near-term outlook on CFLT remains Neutral [Hold].
Mountain View, California-based Confluent was founded in 2014 to create a platform enabling companies to easily build and deploy data-driven applications for real-time use.
Management is headed by co-founder and CEO Jay Kreps, who was previously a software architect at LinkedIn and was one of the creators of Apache Kafka, which Confluent uses as the basis for its system.
The company’s primary offerings include:
Confluent Cloud - SaaS platform
Confluent Platform - Self-managed system
Kafka Connect - data hub
The firm pursues relationships primarily with large and medium-sized companies through a direct sales and marketing approach.
Confluent has customers across numerous industries, including financial services, retail and ecommerce, manufacturing, government, gaming, insurance, communications and media & entertainment.
According to a 2022 market research report by Market Research Future, the global market for event stream processing (as a proxy for the larger data streaming market) was an estimated $790 million in 2022 and is forecast to exceed $2.4 billion by 2030.
This represents a forecast CAGR of 12.86% from 2023 to 2030.
The main drivers for this expected growth are a growing demand for real-time analytics, increasing desire by businesses to analyze their data stores, the continued transition of enterprises to cloud applications and the need to drive efficiencies across all aspects of the enterprise.
Also, as companies transition to cloud infrastructures, their systems are becoming more complex and there is a substantial need for vendor reduction to Strengthen integration and lower complexity.
Major competitive or other industry participants include:
IBM
Aiven
Oracle
SAP
StreamSets
Striim
Imply
Coralogix
Ververica
StarTree
Materialize
Crosser
Quix
Lenses
BangDB
Total revenue by quarter has risen markedly; Operating income by quarter has remained heavily negative, as the chart shows below:
Total Revenue and Operating Income (Seeking Alpha)
Gross profit margin by quarter has trended higher in exact quarters; Selling, G&A expenses as a percentage of total revenue by quarter have dropped materially more recently:
Gross Profit Margin and Selling, G&A % Of Revenue (Seeking Alpha)
Earnings per share (Diluted) have remained substantially negative, as the chart shows here:
Earnings Per Share (Seeking Alpha)
(All data in the above charts is GAAP)
In the past 12 months, CFLT’s stock price has risen 9.54% vs. that of the iShares Expanded Technology-Software ETF’s (IGV) rise of 12.53%, as the chart indicates below:
52-Week Stock Price Comparison (Seeking Alpha)
For the balance sheet, the firm ended the quarter with $1.8 billion in cash, equivalents and short-term investments and $1.1 billion in total debt, none of which was categorized as the current portion due within 12 months.
Over the trailing twelve months, free cash used was $179.1 million, during which capital expenditures were only $3.4 million. The company paid a whopping $322.9 million in stock-based compensation in the last four quarters, the highest trailing twelve-month figure in the past eleven quarters.
Below is a table of relevant capitalization and valuation figures for the company:
|
Measure [TTM] |
Amount |
|
Enterprise Value / Sales |
14.2 |
|
Enterprise Value / EBITDA |
NM |
|
Price / Sales |
14.7 |
|
Revenue Growth Rate |
40.2% |
|
Net Income Margin |
-69.9% |
|
EBITDA % |
-69.2% |
|
Net Debt To Annual EBITDA |
1.6 |
|
Market Capitalization |
$10,460,000,000 |
|
Enterprise Value |
$9,730,000,000 |
|
Operating Cash Flow |
-$175,660,000 |
|
Earnings Per Share (Fully Diluted) |
-$1.65 |
(Source - Seeking Alpha)
The Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.
CFLT’s most exact unadjusted Rule of 40 calculation worsened to negative (29.0%) as of Q2 2023’s results, so the firm has performed poorly in this regard, per the table below:
|
Rule of 40 Performance (Unadjusted) |
Q4 2022 |
Q2 2023 |
|
Revenue Growth % |
51.1% |
40.2% |
|
EBITDA % |
-77.5% |
-69.2% |
|
Total |
-26.4% |
-29.0% |
(Source - Seeking Alpha)
In its last earnings call (Source - Seeking Alpha), covering Q2 2023’s results, management highlighted the continued development of its ecosystem for data streaming, which includes five areas of functionality:
Stream
Connect
Govern
Process
Share
The company’s total net revenue retention rate was 130%, indicating very strong product/market fit and good sales & marketing efficiency.
Total revenue for Q2 2023 rose 35.8% YoY and gross profit margin increased 5.1%.
Selling, G&A expenses as a percentage of revenue dropped an impressive 15.9% year-over-year, while operating losses grew by 0.9%.
The company's financial position is moderate, with plenty of liquidity but material long-term debt and substantial free cash used in the past twelve months.
CFLT’s Rule of 40 performance has been highly negative and worsening over time due to operating losses and moderating revenue growth.
Looking ahead, consensus revenues are expected to grow by 31.6% year-over-year.
If achieved, this would represent a sharp drop in revenue growth versus 2022’s growth rate of 88.5% over 2021, indicating a declining revenue growth rate.
From management’s most exact earnings call, I prepared a chart showing the frequency of key terms mentioned (or not) in the call, as shown below:
Earnings Transcript Key Terms Frequency (Seeking Alpha)
I’m most interested in the frequency of potentially negative terms, so management or analyst questions cited ‘Recession’ once, ‘Challeng[es][ing]’ two times, and ‘Macro’ eight times.
Analysts questioned company leadership about customer consumption trends. Management responded that they saw strong overconsumption by larger customers.
Also, separately, the firm produced strong growth in new large customers, despite a ‘choppy environment’ that management sees continuing throughout the remainder of 2023.
Regarding valuation, in the past twelve months, the firm's EV/Sales valuation multiple has fallen about 18.4%, as the chart from Seeking Alpha shows below:
EV/Sales Multiple History (Seeking Alpha)
A potential upside catalyst to the stock could include continued strong growth in larger deals, defined as greater than $100K in annual recurring revenue, as well as overconsumption trends continuing.
The company is also pursuing further build-out of its partner channel, which is now ‘performing above plan’ and could be a tailwind over time.
The question for investors interested in Confluent is whether its current valuation multiple is a bargain, considering a slowing topline revenue growth rate but continued high operating losses.
I remain cautious about the prospect for further stock price appreciation, especially with high and increasing stock-based compensation of $323 million in the past twelve months.
My near-term outlook on CFLT remains Neutral [Hold].
August 23, 2023 - As part of the law licensure process, bar applicants must respond to questions which are considered relevant to one's "character and fitness" to practice law.
Such questions may ask about prior convictions or involvement with the legal system, being subject to disciplinary proceedings at school, work, or as a professional, financial irregularities, and in many states, whether the applicant has a "mental, emotional, or nervous disorder or condition."
Mental health questions vary in breadth and often ask about the existence, diagnosis, and/or treatment of a mental health condition, all within certain time frames that differ by state.
The questions are intended to weed out applicants who do not possess good moral character or are perceived as otherwise inadequate in terms of the qualities necessary to practice law. But is there in fact a connection between misconduct and mental illness? Or do such questions merely reflect and promote mental health stigma?
According to a July 6, 2023, ABA publication, only 21 states do not consider mental health status and history when evaluating fitness to practice law.
The American Psychological Association's (APA) Council of Representatives, which has been exploring changes to the questioning in bar applications, passed a resolution on Aug. 2, 2023, pledging to work toward elimination of mental health questions on state bar applications, because "[s]tatistical data reveal that there is no connection between bar application questions about mental health and attorney misconduct and that such questions have not been empirically shown to work as a successful screening tool for who can and cannot practice law in a competent manner." See, "Stop asking aspiring lawyers about their mental health, psychology group says," Reuters Legal News, Aug. 9, 2023.
This issue is already being addressed by the American Bar Association (ABA), which also opposes mental health questions being included as part of the bar application process because many are considered to be in violation of the Americans with Disabilities Act (ADA).
According to the ABA:
"Mental health questions typically fall into three categories: (1) diagnosis or existence of a mental health condition that could affect an applicant's ability to practice law; (2) treatment, in-patient or out-patient, of the aforementioned condition; and (3) whether the applicant has ever been party to conservatorship or court-appointed guardianship proceedings. Many of these questions are similar but have different time frames and standards."
When considering potential sources of mental health stigma in the legal profession, state bar application mental health questions are a potent "risk factor."
Tying mental health de facto to fitness to practice law reflects stigmatizing beliefs around mental health issues and their relationship to competence.
While removal of mental health questions from state bar character and fitness evaluations is an important step in protecting the rights of bar applicants, it is also a critical step toward reducing and eventually eliminating mental health stigma within the profession.
Mental health stigma is wrapped in a cloak of suggestion that mental health issues reflect weakness, laziness, or even worse, moral or character failings, or a lack of competence.
Mental health, just like physical health, can be thought of as a continuum which varies by person over time, reflecting anything from experiencing normal transient fluctuations in mood, anxiety, and stress, to more formal mental health diagnoses.
In the absence of a mental illness, life events and circumstances can impact your overall mental health and well-being. And as with physical health, if you recognize and address your symptoms early, a crisis can often be averted. Importantly, most mental illnesses, just like physical illnesses, can be managed effectively with treatment.
State bar application mental health questions began appearing in the 1970s. The new questions were added in response to instances of misconduct by lawyers who also had mental health or substance use issues, in addition to the enactment of a provision in the then-ABA Code of Professional Responsibility which went into effect in 1970, providing that bar applicants may be found to be unqualified to practice law due to "mental or emotional instability". (See the Bauer, J. article and Michael J. Place & Susan L. Bloom, Mental Fitness Requirements for the Practice of Law, 23 Buff. L. Rev. 579 (1974).
Over the past three decades, since the enactment of the ADA, advocates for the removal of mental health-related character and fitness questions, including pioneering advocate Professor Jon Bauer at the University of Connecticut School of Law (UCLA Law Review, 2001), have argued mental health-related questions on bar applications are a violation of the ADA.
The United States Department of Justice has also taken the position that utilizing questions about mental health to evaluate character and fitness risks violate the ADA (see, Settlement Agreement Between the United States of America and the Louisiana Supreme Court Under the Americans with Disabilities Act, 2014).
Advocates, including the ABA, and Bauer—who first filed a lawsuit against the Connecticut Bar Examining Committee in the 1990s, shortly after passage of the ADA—assert that mental health questions on the bar application violate the ADA by discriminating against bar applicants with a current or past history of a mental health diagnosis or treatment. The questions themselves are considered problematic, as are resulting requirements imposed upon bar applicants, and resulting discriminatory admissions recommendations, which often follow applicants' affirmative responses to the questions.
Over the course of 25 years, Bauer was successful in advocating for gradual narrowing of the mental health questions asked of Connecticut bar applicants, and eventually, in 2019, all references to mental health were removed. Similar action is being taken in states across the country, with varying degrees of change.
According to the ABA, outside of the 21 states that do not ask mental health questions on bar applications, 10 states have adopted model questions drafted by the National Conference of Bar Examiners (NCBE) for evaluation of character and fitness, and an additional five states ask at least one of the NCBE mental health questions. Fourteen states have drafted and adopted their own mental health questions.
Although strides have been made since 2020 in terms of bringing mental health to the forefront of our awareness, mental health issues of varying severity continue to be stigmatized in the legal profession and in the population at large.
Stigma and biases, while problematic, result from our brains' adaptive efforts to organize and make sense of large amounts of information. There is an automatic tendency to sort information into categories, which facilitates information processing. These cognitive processes, however, can also lead to bias and discrimination and serve to isolate and estrange people with mental illnesses.
For law students whose symptoms fall on the mental health continuum anywhere from transient distress to more serious mental illness, bar admission concerns and stigma itself are strong deterrents to seeking assistance from a mental health provider. Yet, without professional intervention even minor issues can snowball into more serious concerns, which if not adequately addressed, may in fact impact functioning and performance.
There are potential longer-term consequences as well; the influence of stigma can be carried forward into legal practice, thus further perpetuating the problem. An ingrained belief that emotions represent weakness, combined with bar application confluence of mental health and competence, together reinforce lawyer aversion to vulnerability and may later discourage practicing attorneys from engaging in or supporting help-seeking and well-being initiatives. In a profession defined by the adversarial process, sharing emotions or embracing self-care may be perceived as too risky, potentially suggesting one is "soft," weak, deficient, or incompetent.
In the extreme, perceptions of failure or inadequacy and an inability to seek help have tragically left too many lawyers feeling hopeless and as though suicide was the only option for resolution or relief.
Rather than suggesting weakness, seeking help in fact reflects internal strength and a willingness to face your fears and unique challenges. Consider seeking assistance if you are experiencing internal distress or worries that do not resolve quickly, if you find yourself chronically irritable or explosive, if you or others have concerns about your substance use, or if you are having difficulty getting your work done or done well. Therapy does not have to be long-term; a few sessions are sufficient for many people. Just think of it as a "tune-up."
Bar application character and fitness questions both reflect stigma as well as perpetuate it. By stigmatizing and discouraging early help-seeking, bar application questions related to mental health can create a barrier to treatment and set up law students and lawyers for bigger mental health issues down the road.
The efforts of the ABA and APA to eliminate mental health questions from all state bar applications represent positive change when it comes to addressing stigma and promoting mental health and wellbeing in the legal profession. These initiatives provide hope for a healthier future for the profession, one in which mental health promotion and interventions for mental illness are encouraged and supported across the board.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.
Gold Price (XAU/USD) remains on the back foot at the lowest level in five months as market players seek solace in the US Dollar amid uncertainty ahead of this week’s top-tier data/events. Also exerting downside pressure on the XAU/USD could be the pessimism surrounding one of the world’s biggest commodity users, namely China.
Although China announced a slew of measures to restore investor confidence, the Gold Price fails to pick up bids as concerns about the dragon nation’s economic health remain dicey. Also, looming geopolitical woes and trade war fears join the People’s Bank of China’s (PBoC) no change in five-year Loan Prime Rates (LPRs), despite cutting the one-year LPRs by 10 basis points (bps), exert downside pressure on the Gold Price. Furthermore, upbeat US Treasury bond yields and cautious mood keeps the XAU/USD sellers hopeful.
However, the indecision about the Fed Chair Jerome Powell’s monetary policy bias and the market’s wait for this week’s August month Purchasing Managers Indexes (PMIs), US Durable Goods Orders and the top-tier central bankers’ speeches at the annual Jackson Hole Symposium event puts a floor under the Gold Price.
Also read: Gold Price Forecast: XAU/USD eyes a firm rebound to 200 DMA again
As per our Technical Confluence indicator, the Gold Price stays well beneath the $1,898 resistance confluence comprising Fibonacci 38.2% in one week, 100-SMA on one-hour and the previous daily high.
Adding strength to the downside bias is the XAU/USD’s sustained trading below $1,892 immediate hurdle including the Fibonacci 61.8% on one-day and the middle band of the Bollinger on the hourly play.
It’s worth noting that the convergence of the 10-DMA and Pivot Point one-week R1, close to $1,910, acts as the final defense of the Gold bears, a break of which could convince the buyers to return to the table.
Alternatively, the previous weekly low and Pivot Point one-day S1 puts a floor under the Gold Price near $1,885.
Following that, the $1,878 becomes a crucial support as it comprises the lower band of the Bollinger on the daily chart, as well as the Pivot Point one-week S1.
In a case where the Gold Price remains bearish past $1,878, the $1,865 support confluence, encompassing Pivot Point one-month S2, will be in the spotlight.
The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Leaders of Butler County Community College and Pennsylvania State University at Shenango are considering moving one of the community college’s campuses to the university as a cost-saving measure after steep enrollment declines at both institutions.
Administrators at both institutions are conducting a feasibility study to assess the idea, which they expect to finish by the end of December, according to a news release from Butler County Community College, known as BC3. Community college students at the LindenPointe campus would take classes in Penn State Shenango buildings, but the two institutions would remain academically separate. The LindenPointe campus would be sold, The Pittsburgh Post-Gazette reported.
“These are two strong institutions that are looking into joining forces to sustain the delivery of affordable and accessible higher education in the Shenango Valley,” Nick Neupauer, president of BC3, said in the release. “That’s incredibly important. In this day and age, it is not about being in silos. It’s about the synergy involved with collaborations and partnerships.”
Jo Anne Carrick, Penn State Shenango’s campus director, said if the two institutions move forward with the plan, community college students could potentially take advantage of campus resources, such as the dining hall, labs for health and science courses, and academic counseling. She added that, if community college students are already on campus, they might transfer to Penn State Shenango at higher rates and help shore up enrollment.
Enrollment at both campuses, located within five miles of each other in Mercer County, has significantly declined over the last decade, the release notes. Penn State Shenango expects to enroll about 325 students this fall, compared to about 570 students a decade ago. Shenango is the second-smallest campus, in terms of student head count, among the 19 undergraduate Pennsylvania State University Commonwealth Campuses, according to the system’s fall 2022 enrollment data. LindenPointe administrators project the college, the smallest of BC3's six campuses, will have about 55 students this term, down from about 270 students a decade ago.
Meanwhile, the number of traditional college-age residents in nearby counties is expected to drop precipitously. Almost 45,000 students attended public K-12 schools in Crawford, Lawrence and Mercer Counties in the 2004–05 academic year, according to data from the Pennsylvania Department of Education. That number is expected to decrease to roughly 28,500 students by 2032–33, a nearly 37 percent plunge.
William Foley, coordinator of news and media content at BC3, said in an email that the goal of the feasibility study is to “consider opportunities that exist to both grow enrollments and to meet the state’s workforce needs in the region.”
“Among advantages envisioned by the institutions could be sharing student support resources, instructional resources and space; strengthening curricular and co-curricular opportunities for students; building pathways for the seamless transfer of BC3 credits toward bachelor’s degrees at select Penn State campuses; developing academic programs to benefit local workforce needs and studying degree offerings to avoid duplication,” he wrote. “Challenges, if any, would be identified at the conclusion of the feasibility study.”
Carrick said there are a wide range of questions to consider, including what resources make sense to share and to what degree community college students would be included in university programming, such as alternative spring break trips.
“Right now … it’s just a frame,” she said of the colocation idea. “We’re building the foundation, and we haven’t put the drywall yet. We haven’t said what color will we paint that room.” But the feasibility study will help the institutions hash out the details and uncover potential obstacles and solutions.
“Is it a template for transition?” Carrick said. “I don’t know that. Could it be? Possibly. But we want to deliver it a try. We want to look at it and see what can be done.”
The two campuses aren’t alone in their struggles to stay viable. The state’s nearly 250 higher education institutions are facing a confluence of headwinds: a rapidly approaching demographic cliff and an overabundance of institutions vying for the same shrinking pool of prospective students. Pennsylvania has the fourth most colleges and universities of any state, after California, Texas and New York.
The state is “saturated with higher education institutions,” said Brian Prescott, president of the National Center for Higher Education Management Systems, a higher education consulting organization. “The demographic outlook for traditionally college-aged students is not great. Two-year sectors in most places … have suffered some particularly stark enrollment declines in exact years, even extending before the pandemic. I think it’s natural for folks to be looking for creative ways to reduce the overhead costs of operating these institutions.”
State lawmakers have taken notice of the challenges too. Pennsylvania governor Josh Shapiro said in his 2023 budget address in March that higher education in the state needs a revamp and that a “comprehensive and meaningful reform plan” for higher ed would be forthcoming.
“It’s on us to rethink our system of higher education—because what we’re doing isn’t working,” he said then. “Colleges competing with one another for a limited dollar—duplicating degree programs, driving up costs and actually reducing access. As enrollment declines and questions about the value of a college degree persist, it’s on us to once and for all have an honest dialogue about higher education in Pennsylvania.”
Carrick said Shapiro’s stated concerns are partly why the two institutions are mulling over the colocation idea.
“Our governor is asking us to think differently,” she said.
Foley noted that the partnership would be the first time a Penn State University Commonwealth campus housed a community college.
BC3 and Penn State Shenango wouldn’t be the first higher ed institutions in the state to restructure in response to enrollment woes and budgetary constraints. Pennsylvania’s State System of Higher Education, or PASSHE, merged six of its universities into two multicampus regional institutions last summer. The system’s student head count was 84,567 in fall 2022, down from 114,690 in fall 2012, according to system enrollment data.
Kevin Hensil, a spokesperson for PASSHE, said in an email that the integrated campuses now offer students a wider variety of academic programs. He added that system administrators continue to address some of the state’s challenges by freezing tuition for a sixth consecutive year and focusing on aligning programs to local employers’ needs, which has led to an increase in students earning degrees in high-demand fields over the last decade, including health care, STEM, education and business, despite enrollment declines.
PASSHE hired the National Center for Higher Education Management Systems to review its resources, access to students and affordability six years ago. Prescott said the system was responding to some similar questions as BC3 and Penn State Shenango and institutions in other states, including what to do with underutilized campus spaces.
He cited Vermont State University, a public university formed by the merger of three financially strained public colleges and universities, as another example of how higher ed leaders have embraced innovative restructuring to fend off closures. The university’s new model focuses on offering a mix of in-person, hybrid and virtual courses so students across the state can enroll.
Prescott said discussions of mergers are on the rise.
“And I do think that we are headed into a phase where colocation and other kinds of collaboration across institutional boundaries is going to be a necessity … This seems like an obvious solution.”
Michael B. Horn, co-founder of the Clayton Christensen Institute for Disruptive Innovation, a nonpartisan think tank, agreed the plan BC3 and Penn State Shenango are considering could be a “case study” for higher ed leaders across Pennsylvania, and the broader Northeast and Midwest, as populations change in these regions.
“College presidents and the associated systems around them are waking up at least to the reality that things are not going to go back to the way they were,” Horn said. He noted that colleges and universities are not only competing with each other for scant students in places like Pennsylvania but also with nonacademic providers, such as boot camps, that increasingly offer workforce training.
These various pressure points are forcing college leaders to think outside traditional boxes.
“I think it’s the sort of creativity that colleges and universities need to have right now, to be able to rethink the use of resources, how they collaborate, sharing and so forth,” he said. “I guess the question is, will it be enough, given just how far enrollment has fallen at these two campuses?”
He said all higher ed institutions teetering on the edge of demographic cliffs will have to consider this question.
“Do we need to see a lot more urgency, and should we have been seeing it sooner?” he said. “Or, given that the big decline starts in a couple more years, writ large, if we see a bunch of presidents and campuses really acting this year, maybe that’ll be enough time.”
