Grand Canyon Education, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Enrollment Growth: Online enrollment grew 9.6%, hybrid up 19.3% excluding closed sites, and traditional new starts in high single digits. Reasons include new program rollouts, employer partnerships, strong retention, and tuition pricing.
• Program Diversification: Emphasized diverse programs in education, business, counseling, social work, technology, and engineering. Highlighted uncompetitive nature of licensure programs like counseling/social work due to distance-related challenges.
• Financials and Share Repurchases: Service revenue increased due to higher enrollments. Repurchased 219,369 shares in Q3 2025, with $136.4M remaining under authorization. Discussed balance sheet and cash flows, with CapEx expected to be $30-35M in 2025.

Segment Performance

• Online Campus at Grand Canyon University: New starts in mid-single digits in Q3 2025, total enrollment growth 9.6%. Revenue contribution from online campus is significant due to consistent growth and new program rollouts.
• GCU Ground Campus for Traditional Students: New traditional campus enrollments up in high single digits, but total traditional campus enrollments slightly down year-over-year. Revenue slightly less than expected due to lower revenue per student.
• Hybrid Campus: Enrollment increased 17.4% year-over-year (19.3% excluding closed sites and teach-out). Key drivers include responsive ABSN partners, affordable online prerequisite courses, and high graduation/NCLEX pass rates.
• Center for Workforce Development: Has 4 programs, with a 5th rolling out in fall 2026. Programs like electricians pre-apprenticeship and CNC machinists pathway show growth with partnerships and practical training.
• Financials: Service revenue for Q3 2025 was $261.1M, up 9.6% y-o-y. Operating income was $18M (6.9% margin); adjusted operating income was $58.2M (22.3% margin). Net income was $16.3M, GAAP diluted EPS $0.58, adjusted non-GAAP diluted EPS $1.78.

Guidance

• Updated full-year 2025 guidance includes Q3 results. Reaffirmed fourth quarter range based on enrollment trends. Revenue likely top half of prior fourth quarter guidance but lower due to military tuition assistant students affected by government shutdown (impact of ~$3M). Other pillars (online, ground, hybrid) performing better than expected. Adjusted revenue per student expectations for online and ground campuses.

Risks

• Higher benefit costs impacting EPS by $0.06 in Q3, with trend continuing in Q4. Effective tax rate higher than expected due to tax impact of key TAM settlement. Government shutdown affecting military tuition assistance students, delaying new and continuing students' studies and impacting revenue.

Q: Jeff Silber asked about the size of nursing programs at GCU and the difference between pre- and post-licensure programs, and their growth.

A: Brian Mueller stated health care programs make up ~30% of enrollments, diversified across pre-licensure, post-licensure, and other health-related programs. Daniel Bachus added there are roughly 5,000 hybrid students, a couple hundred GCU pre-licensure students, and the rest are online nursing students including prerequisites.

Q: Steven Pawlak asked about diversified programs beyond nursing and enrollment adviser efficiency.

A: Brian Mueller discussed growth in education (teacher shortage solutions), business, counseling/social work (difficult to compete in distance), technology/engineering, and military contracts. Stated ~33% of starts come from company/organization partnerships, maintaining positive spread between enrollment gains and adviser growth sustainability.