Grand Canyon Education Q1 Earnings Call Highlights

Key Points

• Enrollment momentum: Online enrollment rose 8.8% and hybrid enrollments grew ~18–20% year-over-year, with employer-driven starts now ~30% (targeting 40% in five years) and hybrid new starts up 20%, though 14 sites are at or near capacity.
• Strong Q1 financials and buybacks: Service revenue was $308.8M (+6.7%), operating income $95.5M, adjusted EPS $2.86 (beat by $0.08), and the company repurchased ~724,408 shares (~$120.4M) with ~$189.7M remaining under authorization.
• Marketing and AI shifts: Management said AI is reducing traditional web leads so marketing spend is being reallocated, while GCE is developing internal AI tools and benefits from a resilient, employer-driven pipeline that cushions competitive pressure.

Grand Canyon Education NASDAQ: LOPE reported what executives described as another strong quarter for the first quarter of 2026, driven by continued online enrollment gains and sustained growth in its hybrid nursing-focused campus network. On the company’s earnings call, management also discussed how changes in student lead-generation behavior and artificial intelligence are influencing the broader higher-education landscape and GCE’s marketing approach.

Enrollment trends: Online growth outpaced long-term targets

Chairman and CEO Brian Mueller said the company delivered online enrollment growth of 8.8% in the quarter. He added that hybrid growth was also strong, with hybrid enrollments up 18.3% year over year, or 20.3% excluding closed sites and those in teach-out.

Mueller said new starts for Grand Canyon University’s online campus were “up in the high single digits” in Q1 2026, slightly above expectations, and noted total online enrollment growth “significantly exceeds GCU’s long-term objectives.” He attributed ongoing online growth to several factors, including the rollout of “20+ new programs on an annual basis,” retention, maintaining competitive tuition, and extensive employer relationships.

Mueller said GCE is now generating “approximately 30% of our new starts” through direct work with employers, describing those students as “purpose-driven” with high retention and graduation rates. He said management’s longer-term goal is to move that figure toward 40% over the next five years.

AI, marketing, and shifting lead generation behavior

Mueller said the “lead generation environment” is being affected by more people using AI tools instead of visiting organizations’ websites for information. In response, he said web leads—historically the company’s “highest converting leads”—have “shrinking in number,” and the company is reallocating spending to other sources to replace those leads.

He also emphasized that GCE faces less pressure than competitors because of its employer-driven pipeline. “For us, there’s a we don’t have as much pressure because… we’re getting 30% of our starts now from the working directly with partners across the country,” Mueller said.

Mueller also discussed GCE and GCU’s internal AI efforts, saying the organizations have “dozens of AI products and products in development” across academic and operational areas. He said outcomes such as student scores on “exit and licensure exams” in fields including healthcare, education, and accounting are “reaching all-time highs while scaling to huge numbers.”

Ground campus: Spring down slightly; focus on fall and Honors College

For GCU’s traditional ground campus, Mueller said total traditional campus enrollments were “down slightly” year over year in spring 2026, which he said was expected. He cited typical seasonality (spring is historically smaller than fall), an increasing number of students graduating in less than four years, and the mix of spring enrollees (often transfers or students who deferred).

Mueller said the company accelerated some marketing and recruitment spending into 2025 and the first half of 2026 and said those changes are “producing positive results” with fall 2026 registrations “ahead of last year.” On the Q&A, he said the company is continuing to invest “to a greater extent than we have in the past” in advertising strategies for the ground campus, noting “re-registrations are up” and “housing numbers are up,” while describing the environment as “extremely competitive.”

Mueller highlighted a recent announcement around GCU’s growing Honors College, saying land developer Mike Ingram made a long-term commitment and that it has been named the Sheila and Mike Ingram Honors College. Mueller said GCU expects “over 3,000 students in the fall” with average weighted incoming GPAs “over 4.1,” and said a 55,000-square-foot building is under construction for the Honors College, expected to open in the fall.

CFO Daniel Bachus added that while ground enrollment was down in the first quarter, company guidance at the midpoint calls for “modest growth” in the summer and fall, and said management is “very excited about the summer trends.”

Hybrid nursing network: Capacity constraints and program expansion

Mueller said hybrid campus new starts in the quarter were up 20% year over year (excluding teach-outs), exceeding expectations. He credited the continued growth in part to changes among ABSN partners to admit “advanced standing” students and GCU’s development of affordable online prerequisite science and general education courses delivered in eight-week formats with frequent start opportunities.

Mueller said that since implementing these prerequisite courses, the platform has already enrolled 23,104 students. He also provided metrics for students progressing into ABSN programs, stating graduation rates for those who enter ABSN are in the “mid-80s,” while first-time NCLEX pass rates are “approximately 90%.”

On the site footprint, Mueller said the company and partners had built 47 hybrid campuses as of Dec. 31, 2025. He said GCE opened five new sites in the year ended Dec. 31, 2025, closed two sites where recruiting stopped in 2024, and merged two sites in the same market. He said the company plans to open “one-two additional sites” in the second half of 2026, and also said one partner mutually agreed to stop recruiting new students and begin teach-out at three sites during the first quarter of 2026. Mueller added that some locations planned for fall 2026 are now more likely to open in early 2027, and said the company is being “more selective on new site openings” with a focus on market scalability.

Mueller said adding programs at hybrid locations remains a key part of the business plan, citing:

• A graduate nursing program with seven specializations with Northeastern University that began in the fall
• A hybrid occupational therapy bridge-to-master’s program at St. Kate’s expected to begin in fall 2026
• An online health science degree with Utica University
• New programs launched at GCU’s Phoenix West Valley location in 2025, including a BS in occupational therapy assistance and a speech-language pathology program
• Plans to add a Bachelor of Science in Medical Lab Sciences program in 2026

While Mueller said he expects momentum to continue, he also anticipates hybrid enrollment growth will “slow a bit” as openings slow and more locations reach capacity, while profitability for that pillar “will continue to improve.” Bachus similarly said hybrid growth is being impacted by capacity constraints, noting the company has 14 locations “at or near capacity.”

Financial results, share repurchases, and updated guidance

For Q1 2026, Mueller reported service revenue of $308.8 million, up $19.5 million, or 6.7%, from $289.3 million a year earlier. He said the increase was primarily due to higher partner enrollments, including GCU online growth and hybrid growth, and also referenced a $1 million revenue shift into the quarter from the calendar timing of the spring start date. He said revenue per student declined slightly year over year due in part to contract modifications with some partners that reduced revenue share percentages in exchange for GCE no longer reimbursing certain faculty costs, as well as a mix shift to online students with slightly lower net tuition rates.

Operating income was $95.5 million with an operating margin of 30.9%, compared with $88.0 million and 30.4% a year earlier. Net income was $75.3 million. GAAP diluted EPS was $2.80, while adjusted non-GAAP diluted EPS was $2.86, which Mueller said was $0.08 above consensus estimates. Bachus said service revenue was higher than expectations, driven by higher enrollments and slightly higher revenue per student, and said the operating margin benefit primarily came from the revenue beat rather than expense timing shifts.

Bachus said the effective tax rate was 23.5% for Q1 2026, versus 21.6% in Q1 2025 and the company’s guidance of 23.4%, primarily due to state income taxes and lower excess tax benefits. He also said the company repurchased 724,408 shares in Q1 for approximately $120.4 million, and repurchased an additional 202,010 shares after quarter-end. Bachus said $189.7 million remained under the repurchase authorization and that the company intends to continue using a significant portion of operating cash flows for buybacks.

As of March 31, 2026, unrestricted cash and investments totaled $251.7 million. Capital expenditures were about $8.1 million in Q1 (2.6% of service revenue), and Bachus said the company expects 2026 CapEx of $30 million to $35 million.

On outlook, Bachus said the company updated full-year 2026 guidance to reflect the first-quarter revenue and earnings beats, while reaffirming revenue and operating income guidance for the remainder of 2026. He noted interest income expectations were slightly reduced and weighted-average share count lowered due to more aggressive buybacks. He also reiterated that revenue in 2026 is being “slightly impacted” by a partner contract modification and a teach-out at three locations, estimating a $4.2 million revenue reduction in 2026 from those changes, which he characterized as long-term positives that should help margins.

In Q&A, Bachus also said the company saw a “re-acceleration” in RN-to-BSN rates, calling it a “really good quarter.” He said post-licensure nursing had been growing at a low single-digit rate due to market competitiveness, but said that growth has “accelerated of late,” while Mueller said the company has made adjustments in “product,” “pricing,” and “placement” and expects to be “very successful” in that area over the next several years.

About Grand Canyon Education NASDAQ: LOPE

Grand Canyon Education, Inc provides a suite of higher‐education services through a long-term agreement with Grand Canyon University (GCU), one of the nation's largest private Christian universities. The company's offerings encompass a full range of academic and operational support functions, including enrollment management, student recruitment, curriculum development, instructional delivery, and technology infrastructure. Through its online program management capabilities, Grand Canyon Education helps design, market and deliver undergraduate, graduate and certificate programs to meet the needs of both traditional and non‐traditional learners.

Core services include digital marketing, admissions support, student success coaching, learning management systems and faculty recruitment.

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