With GMAT Test-Taking Down, GMAC Reports Its Third Loss In Four Years

For the third time in four years, the Graduate Management Admission Council has fallen into the red, reporting record a loss of $6.6 million in 2022. The deficit occurred in a year in which GMAT test-taking volume fell to a historic low.

The losses come after GMAC had moved solidly into the black a year earlier with income of $9.9 million after losing a total of $9.1 million in 2020 and 2019. GMAC reported losses of $3.4 million in 2020 and $5.7 million in 2019. It’s a dramatic fall from the days when the GMAT test had effective profit margins that exceeded Apple’s iPhone and the organization reached income of $22.4 million ten years ago in 2012.

The losses result from the pandemic which caused many business schools to go either test-optional or more generously grant standardized test waivers to more applicants. New program launches in business master’s and online degrees, moreover, rarely require the submission of a standardized test. Yet another factor in the decline is competition. In recent years, the Educational Testing Service’s Graduate Record Exam (GRE) has consistently taken market share from GMAT in the business education space.

OVERALL REVENUE AT GMAC PLUNGED NEARLY 16% IN 2022

The $6.6 million loss recorded in 2022 is the largest deficit ever experienced by GMAC which reported on its 2022 calendar year results in an IRS filing on Nov. 15 of last year. With the need to redesign the GMAT into a much shorter version and launch it in 2023, it’s not clear whether GMAC was able to reverse its fortunes last year.

GMAC hopes that the new test will lead to substantially better results in the current year, but the organization is also competing against a new and shorter GRE test that was launched before the new GMAT came to market. "The GMAT exam continues to rebound post-pandemic and remains the best indicator of candidate preparedness for graduate business programs, as highlighted by the strong engagement we had in our recent launch of the Focus edition," says Joy Jones, CEO of GMAC in a statement prepared for Poets&Quants. "At the same time, our expanded portfolio ensures we are supporting a diverse mix of GME programs.  We expect that our efforts will reflect positively not only in our long-term financial performance but also in the continued success of the greater business education community."

The 2022 loss occurred in a year that saw GMAC’s gross revenues plunge by 15.7% to $53.2 million from $63.1 million in 2021. It’s a far cry from the $94.0 million in revenue reported by GMAC only six years earlier in 2016, in all likelihood the organization’s peak (see chart below).

GMAC’S BUSINESSBECAUSE WEBSITE LOST MONEY FOR THE SECOND TIME IN THREE YEARS

GMAC’s investment portfolio experienced a deep decline during the year, falling to $134.7 million by year-end 2022, compared to $166.7 million a year earlier. The organization’s asset value also fell to $191.3 million from $230.2 million.

And several of its acquired entities also suffered losses. BusinessBecause, a UK-based website for prospective students, fell into the red for the second time in the past three years, losing $42,739 in 2022 and $311.038 in 2020. GMAC’s estimate of the website’s asset value plunged by 75% to $466,136 from $1.8 million in 2019.

The NMAT test in India, also an acquisition by GMAC, lost $1.7 million in 2022,  after losing $1.4 million a year earlier, according to the filing.

Despite the overall 2022 loss, GMAC reported that its employee count rose by 21% to 169 staffers from 140 in 2021.

DON'T MISS: MEET GMAC’s NEW CEO: JOY JONES’ BIG BET ON A NEW GMAT or TEST TAKERS RUSH TO THAKE THE OLD GMAT THAT SUNSETS ON JAN. 31