Grand Canyon Education Q1 2025 Earnings Report

Grand Canyon Education EPS Results

• Actual EPS: $2.57
• Consensus EPS: $2.51
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $2.35

Grand Canyon Education Revenue Results

• Actual Revenue: $289.31 million
• Expected Revenue: $287.18 million
• Beat/Miss: Beat by +$2.13 million
• YoY Revenue Growth: +5.30%

Grand Canyon Education Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 4:30PM ET

Grand Canyon Education (NASDAQ:LOPE) provides education services to colleges and universities in the United States. It offers technology services, including learning management system, internal administration, infrastructure, and support services; academic services, such as program and curriculum, faculty and related training and development, class scheduling, and skills and simulation lab sites; and counseling services and support services comprising admission, financial aid, and field experience and other counseling services. The company also offers marketing and communication services that include lead acquisition, digital communications strategy, brand identity, media planning and strategy, video, business intelligence and data science, and market research services; and back-office services consisting of finance and accounting, human resources, audit, and procurement services. In addition, it provides education services to 25 university partners. Grand Canyon Education, Inc. was founded in 1949 and is headquartered in Phoenix, Arizona.

Grand Canyon Education Q1 2025 Earnings Call Transcript

Key Takeaways

• Online enrollment growth of 7.9% in Q1 FY25 exceeded long-term objectives, fueled by 48 new programs since January 2023, direct employer partnerships (+18.2% new starts) and strong retention while keeping net tuition rates flat to modestly down.
• Traditional on-campus enrollments were slightly down year-over-year in Q1 but spring new student starts accelerated versus prior year, and fall 2025 registrations remain ahead of last year as GCU pursues a 50,000-student campus goal aided by FAFSA improvements.
• Hybrid/ABSN campus enrollments rose 12.1% (16.5% excluding closed sites) with over 14,000 students enrolled in accelerated online prerequisites to pipeline high-demand nursing programs, achieving ~90% first-time NCLEX pass rates and plans to reach 80 total locations by 2025.
• Q1 financials: service revenue of $289.3 M (+5.3% YoY), operating income $88 M (30.4% margin), net income $71.6 M and adjusted EPS of $2.57, beating consensus by $0.05.
• Updated FY25 guidance anticipates mid-high single-digit online growth, mid-high teens hybrid growth, $30–$40 M in CapEx, continued share repurchases ($209 M remaining) and slight margin headwinds in H1 with expansion expected in H2.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Q1 twenty twenty five Grand Canyon Education Incorporated Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You will

[Operator]

then hear an automated message advising that your hand is raised. To withdraw your question, press 11 again. Please be advised that today's

[Operator]

conference is being recorded. I would now like to hand

[Operator]

the conference over to your first speaker today, Sarah Collins, general counsel.

[Sarah Slocum Collins, General Counsel at Grand Canyon Education]

Joining me on today's call is our Chairman and CEO, Brian Mueller, and our CFO, Dan Backus. Please note that many of our comments today will contain forward looking statements that involve risks and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including our annual report on Form 10 ks, quarterly reports on Form 10 Q, and current reports on Form eight ks.

[Sarah Slocum Collins, General Counsel at Grand Canyon Education]

We undertake no obligation to provide updates with regards to forward looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in GCE. With that, I'll turn the call over

[Sarah Slocum Collins, General Counsel at Grand Canyon Education]

to Brian.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Good afternoon and thank you for joining Grand Canyon Education's first quarter twenty twenty five conference call. GCE had another strong quarter producing online enrollment growth of 7.9% and hybrid growth excluding the closed site and those who teach out of 16.5%. We also continue to produce strong retention rates while at the same time investing heavily initiatives for our university partners. The investments TCE and its 22 partner institutions are making are based on the belief that there's a vast, not untapped potential in today's workforce.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Many of these high school graduates did not go to college this year because of exorbitant tuition rates, potentially exorbitant debt levels, and difficulty managing the FAFSA website. Many working adults who could benefit from higher education are not attending because of the lack of career delivery models and not do not take into account the life situation and the nature of what it is they need to learn. Grand Canyon Education will continue to grow at our stated goals over the long run because we are addressing those challenges in ways that work for students and employees. With that, I would like to review the results of the board delivery platforms at Grand Canyon Education. First, the online campus at Grand Canyon University.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

New starts were up in the low teens in the first quarter of twenty twenty five, which exceeded our expectations, and total enrollment growth was 7.9%, which slightly exceeds our long term objectives. There are many reasons for this, but I wanna highlight four. Number one, we have stayed focused on opportunities that exist in today's labor market and continue to roll out at least 20 new programs per year for our university partners. Since 01/01/2023, GCU has rolled out 48 new programs, emphases, and certificates across the 10 colleges, bringing a total of 353 programs, emphases, and certificates. To the the number of programs they offer.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Two, we continue to work with employers directly to address their workforce shortages. This effort is focused on the industries of education, health care, engineering, technology, manufacturing, public safety, and the military. In the first quarter, new starts from this work increased 18.2% year over year. Three, retention of students in the first quarter increased, which we believe continues to continues because of the relevancy of the programs students are handling and has direct ties to students' career aspirations. Four, GCU has resisted responding to the slower growth in higher education overall by raising tuition significantly, which many institutions have done.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

While a few GCU online delivery programs have gone up approximately 1% per year. Overall, online net tuition rates at GCU have gone down. GCU continues to build technology and deliver other services to its 22 partner institutions, developing efficiencies that address the financial crisis that exist in higher education today with regards to rising tuition and debt levels. Given the tough comps, we are still we are still projecting new start growth will be in the mid to high single digit rates during the rest of 02/2025. Second, the GCU route campus for traditional students.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

As has been previously discussed, newly total traditional campus enrollments were down slightly year over year in the February for the reasons discussed on previous calls. Although the spring intake is much less than the fall, we did see an increase in new students starting at GCU in spring two thousand twenty five as compared to spring two thousand twenty four, which helped offset the increasing number of students that graduated at the end of the fall semester. We believe GCU will reaccelerate growth in the Brown campus because of the significant advantages, including a very low price point, very low average debt levels, percent of students complete in less than four years, and the relevancy of GCU's academic programs. GCU still plans to grow its traditional campus out to 50,000 students. It is our understanding that the Department of Education continues to work on fixes to the FAFSA issues and that the initial results have been positive.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

We believe that this, along with a number of strategy changes to address this specific challenge for twenty twenty five-twenty six that we have made, will help us meet the university's new enrollment growth goals. We remain ahead of last year in new student registrations for the fall of twenty twenty five. So although it is still early in the recruitment cycle, the current trends are positive. Third, Grand Canyon Education's hybrid campus had an increase in enrollment year over year of 12.1% in the first quarter. Excluding the closed sites and those that are on teach out, enrollment increased 16.5% year over year.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

We expected the enrollment of Brakeley to maintain up in the low to mid teens during the the spring summer '2 thousand '20 '5 and the rest of 02/2025. There are two main reasons for this continued growth. One, almost all of our active ABSN partners have responded to the younger students interested in ABSN programs by many advanced standing students or are in the process of making that change. Students with partially completed degrees haven't accumulated a great deal of debt and are very interested in nursing careers, but didn't have an efficient way to earn the prerequisite science coursework. GCU created the science courses and some other gen ed courses so they could be delivered in online in eight weeks.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Students can access these courses from anywhere in the world. There are start up for these almost every week. These courses have been made very affordable, are taught by experienced faculty, and class sizes are low. And there's a tremendous amount of academic support, including an artificial intelligence project, which provides students twenty four access to tutoring. Since implementing these courses, we've already enrolled over 14,000 students.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

We have a waterfall report, which allows us to know how students are progressing through their prereq courses and when they will be able to start one of our ABSN sites. The success rate of students who successfully enter the ABSN programs is in the high 80 range, and the first bypass rate on the exercise exam is approximately ninety percent. We now have an extremely efficient way to get students academically eligible and prepared to enter the program. These positive results we anticipate will continue. There has never been greater interest among potential students for entering the health care professions in Pacifica.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Because of the low unemployment rate, the interest has shifted to these younger students who have accumulated a great deal of debt completing a bachelor's degree in another area and are underemployed. Nearly all our partners have responded positively to the change needed to serve the advanced gaming students. Our goal is to still have 80 locations. Non GCU partners will have approximately 40 of the locations, and GCU will have approximately 40 of the locations. In 2025, we will open a total of five additional sites, including our second location in the Boston area in the fall, another site in New York City, and GCU will open up three new sites in 2025 in Albuquerque, New Mexico, which was opened in the February, Lake Mary, Florida, near Orlando, and in Englewood, Colorado, South Of Denver.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

In addition to GCU's three new site openings, we'll bring its ABSN total locations up to 11. We will also expand our programmatic offerings with our hybrid partners by adding a graduate nursing program with seven specializations with Northeastern University, including master's and doctoral level degrees starting this summer at several East Coast locations. A hybrid occupational therapy bridge to master's program through our already successful St. Kate's occupational therapy assisted hybrid program. An online health science degree with Utica University, and GCU will launch a bachelor of science in occupational therapy assistance program and a speech language pathology program, pathology program in 2025 at our West Valley, Phoenix location.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Adding additional programs at our high grade location is an important component of our plan. Four, center for workforce development at Grand Canyon University. In the 02/2223 school year, we started 80 students in GCU's electricians pre apprenticeship program in partnership with companies that are experiencing labor shortages in that area and are excited about hiring GCU's graduates. The program consists of four core credit courses in one semester. 212 students successfully completed the program in two thousand twenty four twenty five, including 11 in Austin, Texas.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

In fall two thousand twenty three, we started GCU's manufacturing CNC and CHIUS pathway in partnership with companies that are experiencing labor shortages in that area and are excited about hiring GCU grads. Program consists of four and four credit courses and runs one semester. 33 students completed this program in 02/2425 fiscal year. These students attend school for twenty hours a week and had to work in a facility with paid employee for twenty hours. At the end of the semester, they received certificate for being eligible for employment, Arizona's fast forward manufacturing industry.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Students in GCU's growing engineering college are gaining experience in this manufacturing facility, which is adding to their engineering education. Recently, the manufacturing company owned and operated by a recent GSQ graduate bought an additional manufacturing company, which has more than doubled its capacity and has the opportunity to significantly grow the number of students involved in this program. I started out talking about the relevant programs and creative delivery models that GCE has implemented with 22 partner institutions. In the six plus years since GCE has become a service provider, it has helped its partners accomplish the bottom. In that time, she's EDSL Grand Canyon University graduate 189,107 students.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

50 one thousand three hundred and 80 one in education, including 24,247 time teachers at a time when teacher shortage teacher shortages had created a national crisis. 50,615 in nursing and health care professions, including 2,836 prelicensure nurses at a time when there is a huge shortage of nurses. Thirty eight thousand five hundred and eighty six in the College of Humanities and Social Sciences, including thousands in counseling and social work, where there are also huge shortages. College of business could become one of the largest business schools in America and has produced 32,900 graduates. College of science, engineering, and technology has grown by 217% and provided 7,806 graduates.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

The doctoral college, honors college, and college of theology also continue to grow. In addition, GCES Healthy's other partners graduated 18,472 prelicensure nurses and occupational therapist assistants. The numbers that I just cited have all happened in the past six plus years since the GCU GCE transaction and since GCE has become an education services provider. Service revenue was $289,300,000 for the first quarter of twenty twenty five, an increase of 14,600,000.0 or 5.3% as compared to 274,700,000.0 for the first quarter of twenty twenty four. The increase year over year in service revenue was primarily due to an increase in partner enrollments of 5.8%, including an increase in GCU online enrollments of 7.9% and university partner enrollments at our off campus classroom and laboratory sites of 12.1%, partially offset offset by a decrease in revenue per student year over year primarily due to last year being a leap year in previously discussed contract mapping qualifications.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Operating income and operating margin for the three months ended 03/31/2025 was 88,000,000 and thirty point four percent respectively as compared to 84,500,000.0 and 30 point 8% respectively for the same period 02/2024. Net income increased 5.3% to 71,600,000.0 for the first quarter of twenty twenty five compared to 68,000,000 for the same quarter of 2024. GAAP diluted income per share for the three months ended 03/31/2025, was $2.52 As adjusted non GAAP diluted income per share for the three months ended 03/31/2025 is $2.57 which is 5¢ above consensus estimates. With that I'd like to turn it over to Dan Bachus our CFO to give a little more color on twenty twenty five first quarter, talk about changes in the income statement, balance sheet, and other items, as well as to discuss the 2025 guidance.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

Thanks, Brian.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

Included in our Form eight ks filed with the SEC, we have included non GAAP net income and non GAAP diluted income per share for the three months ended 03/31/2524. The non GAAP amounts exclude the tax affected amount of the amortization of intangible assets of 2,100,000.0 in the first quarters of both twenty twenty five and 2024. We believe the non GAAP financial information allows investors to develop a more meaningful understanding of the company's performance over time. As adjusted, non GAAP diluted income per share for the three months ended March 2524 is $2.57 and $2.35, respectively. Service revenue was higher than our expectations in the February, primarily due to higher than expected enrollments.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

As we expected, revenue per student decreased slightly between years, primarily due to the additional day for leap year in 02/2024, which added additional service revenue of 1,500,000.0 as compared to the current year and contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing the partner for certain faculty costs, both of which had the effect of reducing revenue per student. This is partially offset by the service revenue per student for ABSN students at off campus classroom and laboratory sites, generating a significantly higher revenue per student than we earn under our agreement with GCU. As these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU, and the majority of our partners students take more credits on average per semester. The first quarter operating margin was negatively impacted on a year over year basis as we expected due to the leap year impact, additional spend for twenty twenty five partners initiatives, but also due to significantly higher than expected benefit costs as a result of an increase in the number of high cost claims. Our effective tax rate for the first quarter of twenty twenty five was 21.6% compared to 22.9% in the February and our guidance of 22.2%.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

The effective tax rate decreased year over year primarily due to an increase in excess tax benefits of 2,700,000.0 as compared to 1,500,000.0 in the three months ended 03/31/2025 and 02/2024 respectively, partially offset by higher state income tax. We anticipate this trend of higher state income taxes will continue. We repurchased 3,395,426 shares of our common stock in the February at a cost of approximately 68,400,000.0 and another 125,780 shares were purchased since 03/31/2025. We have 209,400,000.0 remaining available as of today under our share repurchase authorization. The Board and the company intend to continue using a significant portion of its cash flows from operations to repurchases its shares and we anticipate daily purchases will continue during 2025.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

Turning to the balance sheet and cash flows. Total unrestricted cash and cash equivalents and investments as of 03/31/2025 was 304,700,000.0. GC CapEx in the February, including CapEx for new off campus classroom and laboratory site, was approximately 8,900,000.0 or 3.1% of service revenue. We anticipate CapEx for 2,025 will remain comparable with prior year at between 30,000,000 and $40,000,000 Last, I would like to provide color on the updated guidance we have provided in our eight ks filed today. As a reminder, the guidance that we have provided in the outlook section of our eight ks filed today is GAAP net income and diluted income per share with the components to adjust the GAAP amounts to non GAAP as adjusted net income and non GAAP as adjusted diluted.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

We have updated full year 2025 guidance to include the first quarter revenue and earnings beats, have increased the second quarter revenue and earnings projections by increasing both the low end and the high end of our previously provided guidance due to the higher than expected enrollments at March 31. We continue to anticipate that new enrollments will be up year over year in the mid to high single digits in each quarter during 2025, and that total online enrollments will remain in the mid to high single digits over the prior year throughout 2025. Total online enrollments will continue to be pressured by increasing graduation and a continued decline in reentries, students returning to school after a break due to high retention rates. There could be some upside to our second half projections given the strong trends. But given the tough comps, we believe these estimates are appropriate.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

We continue to anticipate new and total student growth rate in the hybrid pillar to be in the mid to high teens with the revenue growth rate for the hybrid pillar as a result of the enrollment growth continue to continue to be partially offset by changes made to the contracts for the university partners that are no longer being reimbursed for faculty. All ground traditional enrollment expectations remain the same as what was provided last quarter. On the expense side, as you'll recall, after a pause on certain investments, primarily in headcount in the first nine months of two thousand twenty four, we ramped up hiring other spend in the February and anticipate this continued investment this continued investment to continue in the second quarter to meet the growth goals of our partners. We also continue to absorb significant increases in both benefit costs and technology services, with benefit costs significantly exceeding our expectations in the first quarter and during the month of April. As it relates to the hybrid pillar, we will continue to incur additional costs for the new hybrid locations that have opened in the last six months or will open in 2425.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

But we are experiencing increased site level profitability due to the increase in enrollments. Last, we continue to anticipate an increase in legal fees again in 2025 over 2024 as we have a couple of lawsuits filed in prior years that are expected to go into the discovery phase and or into trial during 2025. So to summarize, we continue to believe we will see a slight decline in margins in the second quarter as we did in the first due to the investments and other items noted, but are optimistic that margins will expand in the second half as long as we see year over year growth in the traditional campus enrollments. We are estimating that interest income will continue to be down year over year due to the declining cash balances due to more aggressive stock buybacks and a declining interest rate environment. We have lowered interest income slightly for the rest of the calendar year due to the greater than expected stock buybacks during the first quarter while decreasing the number of weighted average shares outstanding.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

We still believe the effective tax rate for the last three quarters of twenty twenty five will be 24.9%, twenty four point nine %, and 24.1% with a full year tax rate now of 23.7%. The effective tax rate continues to rise due to higher state taxes as we continue to add new sites and states outside of Arizona, which have higher state tax rates and other factors. These estimates do not assume a contribution in lieu of state income taxes, but if one is made that will increase g and a expense in the third quarter and decrease the effective tax rate in the second half year. As mentioned earlier, our weighted average shares guidance has decreased slightly for each of the three remaining quarters due to the greater than expected purchases in the first quarter. The board continues to authorize the repurchase of shares as it believes the stock remains undervalued based on the metrics it uses to evaluate including the ratio of enterprise value to adjusted EBITDA and the free cash flow yield rather than multiples of other education companies as although we can be viewed as being in the same sector there are few if any appropriate numbers.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

I will now turn the call over the moderator so that we can answer questions.

[Operator]

Thank you. At this time, we will conduct a question and answer session. Please stand by while we compile the Q and A roster. Our first question comes from the line of Jeff Silber from BMO Capital Markets. Your line is now open.

[Jeffrey Silber, Senior Analyst at BMO Capital Markets]

Thank you so much. In your prepared remarks, you mentioned a few times about the better than expected enrollment in the first quarter. I was wondering if we can get a little bit of color where that came from. Is there any specific programs, etcetera? Anything would be great.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Yeah. It's two things. One, lead flow and the interest in what we're doing here is continues to grow. I think a lot of that lead flow increase is because of new programs we're in. Most of our competition can't compete with the number of programmatic offerings.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

And students increasingly, when they're going out and looking for academic programs as working adults are not trying to complete just a degree. They're looking for a specific area. And so that's one of the reasons. The second reason is we continue to sign contracts with school districts, hospitals, military bases just signed with three large school districts in Florida, including Ivy Day. He just signed a contract with a major military base in Missouri.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

So the work that we're doing directly with corporations, school districts, hospitals, military bases, engineering firms, others are creating a lot of opportunities for working adults to go back to school. So it's a combination of those two things that increased the online enrollments. Those things we believe will continue to experience those things.

[Jeffrey Silber, Senior Analyst at BMO Capital Markets]

That's very helpful. My follow-up question, I know there's been a lot of noise in the media about fears of potential funding cuts coming out of Washington. From a student perspective, I'm just curious, are you seeing students or parents worried about that? And I'm specifically interested in your fall enrollment at the ground campus if you might think that might have an impact.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

You know, I have been a part of some of those discussions in Washington. I won't get real specific about that, but most of the talk is around dollars that would go directly to states in the form of block grants. And so I don't believe that there is going to be less funding for higher education. I think the funding will remain the same, might even increase. Some of it might be returned to the States.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Some of the things that people are seeing now in the news have to do with research grants, more so with research grants, and they have to do with either program levels or loan levels, those kind of things. And so there are some universities that are very concerned about that. We're not in that, not, we don't play it in that area a lot. We do significant levels of research, especially at the graduate level, but most of it's in direct relationship with companies that we're working And we're not relying on a lot of grant funding from the federal government. And so I think some universities have reasons to be nervous about some of that, the grant money, the research grant money, I'm not hearing anything in terms of Title IV programs.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

In fact, what I'm hearing is that the Title IV program, even though the Department of Ed has been cut back significantly, will probably stay with the people operating at the department event. So I I I don't think any of that's gonna impact us at all.

[Jeffrey Silber, Senior Analyst at BMO Capital Markets]

Alright. That's great to hear. Thanks so much.

[Operator]

Thank you. Our next question comes from the line of Alex Parr from Barrington Research. Your line is now open.

[Alexander Paris, President & Senior MD at Barrington Research Associates]

Thank you and congrats on the strong start to the New Year. I couple of follow-up questions, primarily on all the enrollment, which was sort of above target and representing acceleration from the fourth quarter. You in your prepared comments, you talk about above the long term target. And so, I thought maybe now would be a good time to get an update on long term targets by line item, maybe total partner enrollment, GCU online, GCU ground, Orbis. I'm looking for kind of longer term targets for each of those pillars.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Well, we don't break them out typically, but our long term enrollment goal is 7%. And so we're slightly above that at 7.9%. That's a combination of online enrollments, ground enrollments, some hybrid enrollments, and then we're starting to factor in our workforce development area. I can tell you that we're laying ahead in terms of new enrollments on the online side. We are running ahead in terms of hybrid enrollments.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Both are very strong and we're running ahead of registration on ramp. Now the majority of that obviously doesn't start until September, late August, early September. So we won't know ultimately whether we're ahead or behind until we get through August or September, but we've our low guidance there and our high guidance, there's a pretty big gap there. And right now, online is doing so well that if we do well from a browser standpoint, things are going be very good. If we don't do quite as well, they're still going to be good because the two, the other two areas are very strong and the ground enrollment we have a lot of confidence in.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

There's been, as you know, high school graduates, number of high school graduates on annual basis is going down. The percent of them that are going to college is going down. So you're absolutely seeing a mix shift in terms of selections people are making. The areas that are growing are mid tier public universities. More students are staying closer to home and going to mid tier institutions that have lower tuition.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

And so those institutions are gaining. And then an institution like ours, we still have students from all 50 states and students that want to travel will come to a destination city and state like Phoenix, Arizona, when you have the twenty first ranked campus in the country and we haven't raised tuition in sixteen years, and our average student takes out less debt than the average state university student. And so people are making different choices in terms of 18 year olds and how they can best prepare for life and work. But we are in the sweet spot of that. We're definitely in the sweet spot of that.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

So we believe that it's a little bit of two year pullback that even we experienced a little bit is going be reversed this year because of the value proposition that we represent. Does that help with that, Simon?

[Alexander Paris, President & Senior MD at Barrington Research Associates]

Absolutely. Thank you. I appreciate the additional color. Then of the same question, looking for

[Alexander Paris, President & Senior MD at Barrington Research Associates]

an update

[Alexander Paris, President & Senior MD at Barrington Research Associates]

on expectations for this year from an enrollment perspective. I had kind of a bad connection for the prepared comments. So, if you talked about this, I apologize. But you had said with regard to GCU Online starts in the mid to high single digits every quarter of 2024. Orbus upload

[Alexander Paris, President & Senior MD at Barrington Research Associates]

in

[Alexander Paris, President & Senior MD at Barrington Research Associates]

mid teens, rest of 2025. Do those still stand?

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Yes. Yes. Yeah.

[Alexander Paris, President & Senior MD at Barrington Research Associates]

Great. And then last question, a question I haven't asked in a while, maybe because it's not particularly relevant, but I'll ask anyway. Thoughts on M and A. Grand Canyon Education has made acquisitions in the past, obviously, the hybrid line. Wondering what your thoughts are with regard to M and A.

[Alexander Paris, President & Senior MD at Barrington Research Associates]

Do you look at them? Is there anything that you'd like to acquire, particularly with a new administration and different rules being proposed in Washington, DC?

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

No, it's a good question, but we continue to prefer building. Know, we did make an acquisition with Orbis and we liked very much the market that they were addressing. They had a little bit of a head start. They missed on some things and we've corrected those things and now we're in a very good position as a result of that acquisition. But for the most part, we're addressing what we see as a real potential in higher ed by building things.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

And that's that's that you know, there's very little chance at this point that we'll be purchasing anything, but we will be continuing to spend that CapEx to build this. What we're doing in workforce development is a very good example of that. I do believe that manufacturing is coming back to this country. I don't believe it'll come back the same way it came back after World War II because I think AI and robotics is going to have a big impact. But the reason we're working with this manufacturing facility is that we're trying to find the right intersection between engineering, technology, and manufacturing.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

Arizona is blowing up with these major Taiwanese chip manufacturing companies that are coming here. And the their need for skilled labor anywhere from electrical engineering students down to entry level technicians everything in between, including manufacturing specialists is huge. And we're gonna be a big part of that. We don't see anything out there that can accelerate that for us. We think we can move faster by by working directly with companies and building things, and we'll we'll continue to spend most of our time building things versus money.

[Alexander Paris, President & Senior MD at Barrington Research Associates]

Fair enough. I appreciate the color. I'll get back in the queue.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Steven Pollak of Baird. Your line is now open.

[Steven Pawlak, Equity Research Analyst at Baird]

Yeah, thank you. Just wanted to ask on the process for converting the students that are in the prerequisite program into the hybrid ABSN programs. And like I said, the question is that it's like there's 14,000 students that you've enrolled in the prerequisite program, but the ABSN enrollment's sort of in that mid teens or mid single digit thousands. So just kind of what's the process for converting the 14,000 into the 5,000?

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Most students that are interested in nursing career are people that have They're 19, 20, 20 one years old. They've gone to a community college. They are attempting to try and get into a nursing program, but they can see that it's a really, really long route. Know, biology is offered this semester at this time, but not next semester at this time.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

Most of them are working part time. They haven't accumulated a lot of debt. And so even though our courses are accelerated, there was us anywhere between, six months and up to between twelve and eighteen months before they finish that coursework and are eligible to get into an ABSN program. And so with 24,000 when we get to 81 way to think about it is this, I think. When we get to 20 80 locations, we want approximately 300 APSA students per location.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

So that's 24,000 slots. Eventually, we're gonna have to have more than 24,000 students taking prerequisites in order to get those 24,000 slots filled, or we could have more than 24,000 students taking prerequisites in order to get those 24,000 slots filled. We think this is going to be the absolute predominant way to get prepared to get into one of those programs. Many of our partners do have prereq programs on their campuses, but they're semester long courses and they're $800 per credit hour and to expect people to borrow that money and to borrow the money, it's unrealistic. And so gradually, even our non GCU partners are sending their students into these prereq courses in order to get qualified to be in.

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

So we have a waterfall, and we can see which students are progressing and which ones are likely to be eligible because it's not 100%. The courses are difficult, but we need to build that number even above 14,000 to eventually build 24,000 slots. Does that make sense?

[Steven Pawlak, Equity Research Analyst at Baird]

No, it makes perfect sense. And then on the non ABSN hybrid program that you referenced, how quickly can you scale those and to the point where they're contributing to the financial performance?

[Brian Mueller, President , CEO & Director at Grand Canyon Education]

It's it's it's gonna go a little quicker than than maybe we even thought six months ago because what's going on at places like Northeastern and what's going on at places like the GCU locations is having an impact on the thinking of our less our more conservative partners. Those that are a little slower to respond, I believe, are gonna are going to respond more quickly in the future because the financial pressures they're under with their normal business is not getting better. And these programs can be so profitable for them and have such an impact on their bottom line that especially those smaller schools are going to be a lot more open to take a little risk and start these other programs before I think in the past they would want to so we've got a lot of movement just in the last couple of months and so I think that things will accelerate over the next couple of years.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

Thing I would like to add to that, and I know Brian talked about this in his prepared remarks, but we're unbelievably excited about the startup of some of these additional programs with some of our other non GCU partners.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

This is something we've been talking about for a few years and it's coming to fruition this year. And so I think right to Brian's point, I think these partners are seeing the success that we're having with GCU and some of our other partners and are asking for additional programs. And some of those programs are actually starting up in 2025, which is really exciting.

[Steven Pawlak, Equity Research Analyst at Baird]

Thank you very much.

[Daniel Bachus, Chief Financial Officer at Grand Canyon Education]

We've reached the end of our first quarter conference call. We appreciate your time and interest in Grand Canyon Education. If you have still have questions, please contact myself, Dan Bachus. Thank you very much for your time.

Participants

Executives

• Sarah Slocum Collins, General Counsel
• Brian Mueller, President , CEO & Director
• Daniel Bachus, Chief Financial Officer

Analysts

• Jeffrey Silber, Senior Analyst at BMO Capital Markets
• Alexander Paris, President & Senior MD at Barrington Research Associates
• Steven Pawlak, Equity Research Analyst at Baird