Q1 2021 Grand Canyon Education Inc Earnings Call
Ladies and gentlemen, please standby.
Conference will begin momentarily again, please standby your conference will begin momentarily. Thank you.
[music].
Good day, and thank you for standing by welcome to day quarter, One 2021 Grand Canyon Education incorporated earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance.
During the conference. Please press Star then zero on your Touchtone telephone and this call is being recorded I would now like to turn the conference over to your host Mr. John <unk> Chief Financial Officer. Please go ahead Sir.
Thank you joining me on today's call is our chairman and CEO, Brian Mueller. Please note that many of the 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-K quarterly reports on form 10-Q and a.
And current reports on form 8-K, we undertake no obligation to provide updates with regard to the forward looking statements made during this call and we recommend that all investors review. These reports thoroughly before taking a financial position and GC and with that I'll turn the call over to Brian.
Good afternoon, and welcome to Grand Canyon, Education's first quarter fiscal year 2021 conference call GCE had another successful quarter and a long term future is very bright and we are experiencing some short term issues due to the pandemic, which will explain in a minute.
However, long term we are building three unique and differentiated platforms that will provide significant and impactful growth.
The pandemic has been a serious challenge for universities and many are experiencing financial issues. In addition, many recent college graduates who are new to the job market are having a difficult time, many have degrees that arent serving them well in the current economy.
It has been gce's goal to create educational models and address the real issues within higher education I believe those issues continue to be one the out of control rising costs and the University education and the early 19 eighties Tuesday, 2000 late 2000, tens and the price of college increased eight times the increase in wages.
Two the increasing student debt levels that will seriously hindered graduates as they begin their adult lives three as tuition levels go up.
Diversity and college campuses go down.
And for Bachelors degree should not take four to six years to complete.
<unk> programs and delivery models lack the creativity and flexibility necessary to address critical shortages in some industries six there are inadequate counseling and support services, especially for first generation students or those studying at a distance share.
And then three fifths of college graduates would change their majors, if they were starting over.
Eight <unk>.
Higher to the pandemic, 43% of college graduates were under employed in their first job. Two thirds remained in jobs that don't require a college degrees five years later.
Grand Canyon Education is a large organization over 4600 staff is and a very strong financial position and can invest and educational infrastructure to help institutions address some significant opportunities and the employment marketplace. One of our partner institutions now derives 13% of their total revenues from GCE Orbis Health care program.
And they want to do more the combination of institutions looking for additional revenue streams and our ability to help them launch programs locally.
Prepare students for in demand and occupations is creating rapid partnership growth.
It makes Blaine how GCE is in a great position to support the three main pillars or platforms of our business.
The first pillar Grand Canyon University online.
Past 91334 students as of March 31, 2021, and in the quarter just completed new students grew on a comparable start basis and the high single digits. While total students grew seven 2% year over year.
GCU has historically put a priority.
And new program development that help students gain employment and build careers and the modern economy and is also focused on programs leading to professional licensure with most of those being at the graduate level.
When the pandemic hit last March we saw and unprecedented surge in new enrollment in the months of April May and June.
New enrollments continue to grow above our stated objectives. The next nine months and total enrollments grew above expectations because of a very high retention and reentry rates.
We knew the second quarter of this year would be challenging because of the very high comps, but we're also running into three additional challenges.
New starts did not meet expectations. This April and we will not meet expectations and may.
Mainly because schools hospitals counseling and centers Havent opened up the way, we expected them to and our access to the employees hasn't returned to normal.
In addition, because of higher retention rates and number of graduates are exceeding our expectations and our reentry pool right up.
12 months ago, when the pandemic hit and people were sent home as we said before there was a surge and new enrollment as people were looking to do something productive with their time one year later as the country is beginning to open up people are adjusting to the new reality.
But what going back to work means for them and what are their children will be and school or not and so there was some indecision at the end of April and some students decided not to start.
However, we believe that we will begin to rebound in the third and fourth quarters as schools reopen and as hospitals counseling and centers and businesses resume more normal operations.
The Miss and enrollment at the end of the second quarter will be mostly at the graduate level, we haven't pivoted to recruiting more adult undergraduate students in the short term.
Cause Gpus high quality student body produces very good metrics, including high graduation rates low cohort default rates, 72% on a 90 10 percentage and low student debt amounts as compared to state and private universities. We consider this enrollment challenge to be short term only.
We are already seeing things begin to open up in May and we don't want to change your very successful 13 year strategy as a result.
The second pillar of our platform to our business as the GCU traditional campus as many of you know we began the fall semester with 22000 and 363 ground campus students of whom approximately 5000 traditional campus students stayed at home and took their classes online.
And the spring 2021 semester, we started with 19721 ground campus students of whom approximately 3500 traditional campus students stayed home and took their classes online.
This resulted in approximately 3000 and fewer students paying room board and other fees related to be being and on campus students.
However, this was partially offset because GCU actually had an increase of 11, 5% in ground traditional students excluding professional studies.
GCU recently put a message out stating that the campus and tends to be fully up and running and the traditional manner in the fall semester of 2012 of the 'twenty one 'twenty two academic year.
We are still trending to meet our established enrollment goals.
Gcu's traditional campus is and a very strong position is becoming a bigger part of the strategy every day.
<unk> goal is now to have 40000 students on a traditional campus and west Phoenix. The pandemic has made it abundantly clear that 18 year old students desire to have a campus experience as much now as they ever have it just needs to be affordable the combination of GCU and GCE and building our traditional campus has many strategic advantage.
And this one Phoenix as a destination city and Arizona is a destination state to GCU has invested $1 $5 billion and educational infrastructure and the campus. Currently campus is currently ranked 19th and the country.
<unk> has a great number three GCU hasn't raised tuition and 12 years and their students take out less debt and the average state University students. In addition, the Wall Street Journal recently released average parent plus debt amounts.
<unk> parents take out approximately 50 per cent of the debt amount taken out by the three heavily subsidized state universities in Arizona.
For GCU and now has nine colleges that have over 209 academic programs emphasis and certificates five GCU has added more than 20, new programs per year targeted at growing occupational areas.
The University will invest 500 million additional dollars in the next four years, what's the plan to grow at its campus to accommodate and 40000 students.
And the universities and a strong financial position and the aftermath of it split from GCE to become a nonprofit institution.
And as financing all its current Capex and is $325 million and cash as of March 31 2021.
Those debt predicted the transaction would produce financial ruin to the University, where very very wrong.
Seven GCE GCE is almost 200 people involved and the recruiting process eight GCE has a state of the art marketing and advertising agency to develop efficient and productive campaigns nine GCE has invested heavily and building out virtual tours of campus life classroom demos to expose current high school students to GCU.
During the pandemic when travel is limited and.
10, Gcu's Christian and free market positioning makes it attractive to a large national audience with very few affordable scalable options.
The third pillar of our platform and the business is Grand Canyon Education Slash Orbis.
Our goal is to continue the rapid expansion of partners some of which want to provide both health care and non health care programs.
GCE bought Orbis 26 months ago since that time, we have expanded to 26 partners. We opened eight new off campus classroom and laboratory sites in the past nine months, partially offset by the planned non renewal of the contract with a university partner with two sites and the first quarter of 2021.
<unk> and an increase of these sites to 29 as compared to 23 at March 31 2020.
We have signed a contract with a new partner and the southern California market and we are close to signing a contract with a new partner and the New York City market. We will open medical lab science programs with two new partners in the fall we are working very hard and a number of locations in the west to implement Gcu's nursing and other health care programs.
The goal is to have over 40 locations by the end of 2022.
And 50 locations by the end of 2023, and eventually to grow to 80 locations. This is a huge national platform in which to enroll students and produce graduates GCE now has not only the largest partner and the OPM space GCU. It is also rapidly adding partners.
This is happening because first many quality universities are experiencing financial stress and looking for options to increase their revenues second there are important health care and other technology careers that are experiencing serious shortages third universities don't have the resources to scale many of those programs.
And fourth GCE has the capital and they know how to scale those programs and create opportunities for thousands of underemployed young adults, while keeping universities, while helping universities create important additional revenue streams.
Most locations start with the Absa and program, but most have the ability and desire to scale up to as many as 10 additional programs.
Rates will eventually accommodate between 250 and 1000 students in multiple programs.
Programs will cost between 30 and $60000 take between 12, and 24 months and lead to jobs paying between 50 and $100000.
Most of the students and those programs will have already completed a bachelor's degree but consider themselves underemployed.
GCU will fill many of the sites and the west and we will continue to expand into additional health care and non health care academic areas.
<unk> is pleased to announce that is signed an agreement with Hardie and University, which will include multiple orbis sites as well as a fully developed model for some of their masters degree programs.
This is the first more comprehensive contract and may be replicated once it become successful.
Grand Canyon Education has three large well financed highly professional platform to grow with and the next five years. Each platform is addressing real needs and the market and is producing high quality outcomes for our partners and the economy I've never been more excited about the future of GCE.
And the previous conference call I outlined the GCE and GCU five point plan designed to transform and inner city neighborhood. We are very proud of the ongoing efforts that are producing real results.
In addition, GCU slash GCE recently opened up and vaccination center on campus to serve our neighborhood that center provided a total of 116000 and vaccinations and a 12 week timeframe.
And that very important work was provided by 4380 volunteers, who worked 31000 and 463 volunteer hours, resulting in no cost to the taxpayer and <unk>.
Project was assisted by partnerships with Chicago's Paula Costa and our local Mexican embassy and provided a much needed service to our very vulnerable population.
With that I would like to turn it over to Dan back as our CFO to give a little more color on our 2021 first quarter talk about changes and the income statement balance sheet and other items as well as to provide 2000 and 'twenty one guidance. Thanks, Brian and included in it and our form 8-K filed with the SEC. We have included non-GAAP net income and non-GAAP diluted income per share for.
The three months ended March 31, 2021, and 2020 and non-GAAP amounts exclude the tax affected amount of the amortization of intangible assets.
And <unk> <unk>.
<unk> intangible assets acquired and the Orbis acquisition totaled $210 3 million and amortization expense and the first quarter of 2021, and 2020 was $2 1 million.
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 31, 2021, 2020, and $1 72, and $1 53, respectively.
Service revenue exceeded our expectations and the first quarter of 2021, primarily due to higher than expected revenue per student due to higher ancillary revenues than expected and strong retention at GCU, which increased our average daily revenue per student as.
As expected revenue per student declined year over year, primarily due to approximately 3500 gcu's traditional campus students electing to attend the spring semester entirely and the online modality due to COVID-19 concerns.
As a result spring semester fees room, and board and other ancillary revenues for the first quarter of 2021 at GCU were lower than in the comparable period and the prior year, which result reduced the service revenue we earn.
This is partially offset by a revenue growing faster at our other University partners and at GCU, and we generally generate a higher revenue per student on those service agreements and R&R service agreement with GCU as these agreements generally provide us a higher revenue share percentage the partners have higher tuition rates and GCU and the majority of their students take on average more.
<unk> per semester as they are and accelerated programs.
As Brian mentioned, new online enrollments at <unk> increased and the high single digits, but this was offset by a higher number of graduates at our University partners and expected <unk>.
<unk> had a 19% increase and working adult graduations graduates year over year, which was higher than expected and our occupational therapy University partner had significantly more graduate and than anticipated and in the first quarter as.
As a reminder, the reported other University partner enrollments at March 31, 2021, do not include the off campus GCU ABS and students and the reported year over year growth is being negatively impacted by the non renewal of a service agreement with a former university partner and the larger than expected number of OTI graduate and.
Alluding the March 31, 2020 enrollments from the former University partner off campus ABN student ABS and students grew 18, 6% between years.
We estimate the reduction and service revenue attributable to reduced tuition fees and ancillary revenue of our University partners, resulting from COVID-19 was $4 5 million and the first quarter of 2021.
Included in both our 8-K and the 10-Q filed today is a detailed explanation of the actual impacts on all of our University partners for the spring 2021 semester and our projected impacts for the summer 2021.
Our effective tax rate for the first quarter of 2021 was 24% compared to 24, 2% and the first quarter of 2020, and our guidance of 21, 7%.
The lower than expected effective tax rate was primarily due to higher than expected excess tax benefits as a result of a higher stock price at the time of the restricted stock vesting and stock option exercises we.
We estimate that the lower effective tax rate increased our earnings per share by <unk> <unk>.
We repurchased 567255 shares of our common stock and the first quarter of 2021 at a cost of approximately $56 3 million and another 87000 and 474 shares at a cost of $11 6 million subsequent to March 31 2021.
As of today, we have $184 million available under our share repurchase authorization and.
In March 2021, we entered into an accelerated repurchase plan with Morgan Stanley, resulting in a payment for $35 million with initial common shares delivered a 275889 shares approximately 80% of those shares based on the fair market value of these shares and $28 million and the payments are included in our <unk>.
First quarter share totals and available authorization and balance the remaining $7 million is included and the subsequent share repurchase as settlement with Morgan Stanley occurred on May four 2021.
Turning to the balance sheet and cash flows total unrestricted cash and short term investments at March 31, 2021 were $262 3 million or credit facility has and available line of credit of $150 million as of March 31 2021.
GCE capex in the first quarter of 2021, including Capex for new off campus classroom and laboratory sites was approximately $8 9 million or three 8% of net revenue. We continue to anticipate capex for 2021 will be between 30% and $35 million.
It is our understanding that GCU continues to explore options to refinance part or all of the note outstanding based on conversations with the University at the University does complete a refinancing of the note.
And most likely not be completed until the fourth quarter of 2021 again, there is no assurance that refinance will occur in 2021 University Hasnt informed us that they will again request to borrow money near the end of the second quarter of 2021 for short term cash flow needs and that the amount will borrowed will be repaid in July 2020.
Yeah.
Last I would like to provide color on the guidance, we have provided for the rest of 2021.
The guidance that we have provided continues to be non-GAAP as adjusted net income and as adjusted diluted income per share as we exclude the amortization of acquired intangibles as.
As Brian discussed earlier, and we have discussed previously the last nine five months of 2020 was a perfect storm for GCU online driven by the COVID-19, pandemic and the significant operational and technology advantages that GC believes it has against the competition as well as a growing GCU brand and affordable price point GCU online enrollments at <unk>.
Significantly exceeded our expectations.
The higher than expected enrollments were due partially to a surge and new enrollments, especially in the second quarter of last year. When we saw year over year increase of almost 20%.
And this higher than expected new enrollment growth continued through March of 2021, one year after the acceleration began.
And as Brian mentioned, New online starts were up and the high single digits and the first quarter on a year over year basis, which continued to be higher than our long term target.
In addition, during the past 12 months, we have seen a significant reduction and students taking time off which has resulted in a higher revenue per student and higher total enrollment. Although all of this is extremely positive. It made forecasting this year very difficult and.
<unk> online enrollments and revenue have been very fairly predictable, which has helped us and being able to beat and raise for 13 straight years.
We have historical experience that helps us predict the number of students that will start each month. The number of students that will graduate based on their current progression and the number of students and length of time on average that students will take time off and then restart their programs and the significant changes that occurred and the last 12 months along with the unpredictable timing of the reopening of schools hospitals and businesses May <unk>.
Casting this year harder than any other year.
And our guidance for this year, we had projected an increase and graduations and a decrease and reinsurers, which as students return to class after taking a break as a percentage of total enrollment on a year over year basis due to the trends I just mentioned, but actual graduations are exceeding our re forecast and re enters our trending much less and our re forecast right and then our forecast.
This was made up by the continued higher revenue per student and better than expected enrollments and the first quarter.
Since we know we are now over 12 months since those these trends began and we believe there is limited ability to make up for higher than expected graduations and lower re enters as these current trends continue with higher than forecasted starts and revenue per student, especially given the fact that a lot of major markets schools hospitals and businesses.
<unk> just starting to return to pre COVID-19 normal much later than we had hoped.
And we had planned on new starts being down and the second quarter as the second quarter is typically not a back to school time for adult students except for last year, but we are concerned that new starts will be down on a year over year basis greater than we expect and the second quarter. We are still hopeful that things will return to our long term target growth rate and the third quarter for the reasons Brian cited earlier.
And we do not believe this is a long term fundamental change and our business, but rather a short term year over year issue with difficult comps impacted by COVID-19 that will eventually smoothed out.
The ground enrollment growth rate continues to be pressured by a significant decline year over year and professional study students working adults that take courses on ground primarily of Gcu's traditional campus as we have not had entry points for these potential students due to COVID-19, and most of these students have now graduated out of their programs.
And we're hopeful that new professional studies cohorts will start again, beginning this fall.
And as it relates to GCE Orbis, one new off campus classroom and laboratory site opened and the spring two additional sites will open in the summer of 2021, and we are hopeful to open three additional new sites and the second half of 2021.
Two sites that we thought could potentially be opened and the fall 2021 are more likely to open and spring 2022.
On the expense side, we have not changed our expectations for the first nine months of 2021 for.
And for the last nine months of 2020, I'm sorry, we are now starting to see the acceleration and expenses, we anticipated work would occur as travel and medical benefits have begun to return to normal. These.
And these expenses have been down significantly and comparison to historical amounts beginning near the end of the first quarter of 2020.
We have slightly adjusted our expected effective tax rate excluding potential contributions made in lieu of state income taxes to 23, 7% and Q2, 24, 7% and Q3 and 24.0% and Q4.
All remaining stock options were exercised during the first quarter of 2021, and the majority of the outstanding restricted stock vests, and the first quarter of each year and therefore, it that will not be any excess tax benefits. The rest of the year. We have adjusted the weighted average shares outstanding amount to take into account our best estimate of the stock that will.
The repurchase but does not take into account any shares that we'd be repurchased on a refinanced by GCU.
I'll now turn the call over to the moderator so that we can answer questions.
And as a reminder to ask a question. Please press the star and then the number one key on your Touchtone telephone is your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Yeah.
Your first question comes from the line of Jeff Mueller from Baird. Your line is open.
Yes. Thank you.
And so on.
I guess, the weaker trends from a total enrollment and new enrollment perspective in Q2.
Any quantification you can help us with and I ask from the standpoint that the way you're describing the situation it sounds fairly material, but then when I look at the revised 2021 guidance I.
Recognize theres a reduction but.
The magnitude of the change and and revenue doesn't seem all that material to me. So just any help you can provide there.
Oh, yes, there is offsetting factors that we need to be considering.
No.
It is not hugely material, but obviously, we take very seriously the guidance, we gave and in our 13 years I can't recall, a single time, we've added lower revenue so.
It isn't material, but it is lowering and and so.
I think all three things that we talked about the new starts.
And the reinsurers and the graduates are all.
Slightly great new starts or are we expected them to be down and the second quarter, but the magnitude of the down is slightly worse than we thought.
Re enters.
Is.
Opportunity.
Going forward is less and we thought and the and the graduations and as you said is as we talked about is we knew graduations, we're going to be up year over year, we knew reenter as we're going to be down given the what we talked about but each are trending.
A little worse than we expected, but it's pretty.
Pretty impressive given.
The year with that we've come off of.
So I don't know, Brian anything to add to that.
No more hey, Jeff It sounds like Brian Good question.
Yeah, So I guess on the.
The return to more normal growth at least from a new starts perspective, and the back half of the year I guess, what gives you confidence and <unk> and I think you said that you're already starting to see some reopening.
That a specific reference to your recruiters being back in those environments or was that just a more general I guess macro comment on the economy more broadly reopening.
No.
I think you know we spend a lot less money on advertising and a lot of our competition does general media advertising traditional media advertising.
We have a relationship.
With over 8000 high schools for example in the country incur.
Including 4000, private and about 4000 public and.
And those relationships produce a lot of win win situations and so a lot of what we do with schools with hospitals with accounts and centers with businesses is built on.
Relationships that provide win win kind of scenarios and and.
And those things haven't been as open to us.
But we didnt change our strategy knowing that this pandemic what kept going it kept going and it kept going and we were worried at some point that it would negatively impact us, but we didn't change our strategy and by a lot of.
Leads and recruit some.
Questionable students because we're very concerned about the quality of both our students on ground and online.
And ground.
And this fall we're extremely excited.
The average incoming gpas of this next class will be almost three six our honors college has grown to 2500 students 2700 students with average incoming gpas over 4.0 and our online.
Students body is approximately 50% graduate students and it was those students who are earning license yours, and education and counseling and nursing.
Some and technology those are the ones that we didn't have as much access to and those are the ones that are now returning to work and they are there.
They are adjusting again.
Their life is changing and I'm wondering what's going to happen with their kids are they going to be and school or not and so it was it was.
It was that strategy and that made us a little bit more vulnerable than people, who rely totally on advertising and generating leads but we.
We didn't want to pivot out of that strategy, because we're very proud of the quality of our students and the quality of the outcomes that we're producing and.
For example, one of the things that made us vulnerable and April was a higher than expected graduation numbers.
We had incredible.
Month over month.
Quarter over quarter retention numbers.
And those are good things and those are good day, if you're if your enrollment is down because students are dropping and then you have a real issue.
But we've got really high quality programs that are leading to really good occupational.
Career opportunities and so that's why we believe that this is a temporary thing and long term single turnaround. Okay makes sense and then last on hurting University you kind of went through it quick so is it a signed contract or a letter of intent and on the masters aspect of.
It is that broader than like health care, and then <unk> scale ambition and potential you can relay in terms of number of.
Programs and number of students you'd hope to get to over intermediate term basis.
Yeah.
We're excited about the Hardie and thing because number one and it is a signed contract number two it is for a number of us orbis sites.
And but also yes, we are we are helping them with some of our master's programs outside of the health care area.
And we're helping and convert them. So they can be delivered online.
But we're really excited because they are very excited.
And.
They have a lot of ambition in this area and they are very very willing partners and so as a result of that we're not.
And not only going to do something with them from and Orbis standpoint, but we're going to do some other things that day that they want to do.
And so yes, it's a signed contract and we are moving.
Got it thank you.
Yes.
And your next question comes from the line of Brett Maas.
Ross.
From Baird capital Your line is open.
Thanks for taking my question.
The Orbis when I look at it.
And other enrollment that growth was a bit lower than historical is that largely due to.
The one university that terminated and a couple of those locations or is there anything else and that.
No. It's a couple of things one is that when you are looking if you're looking at the enrollment number there are a couple of things you got to remember one is.
Debt GC use offsite locations are not in that other partner number and and that's where.
And that's fairly significant amount of their growth is coming from GCU opened to offsite locations.
Through the Orbis relationship and and those are those are being included and the GCU enrollment number.
Number two is as you suggest.
The non renewal of the contract and thus the enrollments are not in there for the next year.
For the.
The current year, but where they were and the previous year.
And then lastly, they have one partner for occupational therapy.
And there were significant number of occupational therapy students that graduate at.
And at <unk>.
During the first quarter of 2021, and so we actually saw a slight decline and the overall occupational therapy enrollment number there.
Not necessarily because the new starts were below their expectation and that program.
But at the graduates outnumbered the number of new starts and.
And part of that I think had had to do with COVID-19.
Type of thing so.
In total when you and I mentioned this in my prepared remarks, but when you.
Strip out.
The when.
You add and backup and affect Gcu's Orbis students and you strip out the contract.
Was terminated their growth was was in line with what we thought it would be.
Four.
Okay.
That was a long answer to your question, but.
I was delaying as I was trying to find that exact number.
18 point.
18, 6%.
Year over year growth.
And our Orbis ABS and are off cash.
Right.
A BSN students.
Understood and then maybe just one follow up on.
The new contract with hard and University.
And I guess going into I haven't heard of the University before clicked and golf search and 5000 students and middle of Arkansas and zinc.
Walk through what.
And I guess, what determine why you guys chose them why you think thats a good fit how quickly would these needed master programs ramp and maybe the timing of when you would expect that and start to flow through and our readiness.
I think there's two things there.
One.
When we 26 months ago, we said, we we thought about 70 locations 70 markets 70 locations, but then we started to look at places like Arkansas.
And there are there are cities within Arkansas that are not large cities, but the greater and metro area is significant and could.
Could provide enough to have these orbis locations and so Hardy Hardy and is very willing to do things.
At a distance they are very excited about these programs and the quality of their programs and converting them into this accelerated format and so that allowed us to move our our location number from 70 to 80 and it possibly could be more so we're really excited about the experimentation with that side of it.
And then there are masters degree program and the other masters degree programs.
The interesting thing about Hardie and is that it is a religious institution. It has a denomination that is a pretty extensive denomination and they have a network as a result of that.
A little bit similar to.
And to Liberty.
Liberty has a little bit of and advantage and the size of the southern Baptist Convention.
And that being tied to their institution well, that's a true to some extent with Harding and so it's going to be a very interesting.
Experiment on both of those levels and like I said before they are all very willing partner and so we're anxious to see what we can make of that.
And as we do we'll learn things.
And what will be very valuable as we keep moving forward.
Understood. Thank you.
Right.
And our last question comes from the line of Greg <unk> from <unk>.
Sidoti Your line is open.
Hey, guys. Thanks for taking my questions.
Just I guess in light of the guidance and I know it was.
Just kind of modestly.
Brought that on a forward basis, but.
And regards to the new students starts were hearing from a lot of the schools I think in this space debt do depend on the advertising and buying leads model that it seems like things are getting more aggressive out there. So I understand and you've got to have more of a different model for attracting students, but is that potentially something that could be impacting you.
And on a go forward basis, and how has it happened.
Have you operated in times, when you've seen some of that.
Some of the other.
Competitors and the space that do depend on sort of the.
Buying leads model and when they get more aggressive is it a risk to you or is it something that.
Has been you've been relatively immune to.
Well no.
Have been saying for seven or eight years.
The online conversion of of campus based programs to and online format, when they're the kind of generic programs.
And very competitive business and it's the easiest business to get into.
Because you convert some curriculum and U.
And you put some advertising now you collect some lease and you convert those leads.
That's the easy way to do this.
But it's very competitive.
And when you go all the way back to what the conversion rates on those leads used to be to compared to what they are today.
And the efficiency, it's still efficient, but it has not near the efficiency that it has.
10 years ago 12 years ago.
And so we still do some of that but.
Sort of what we do is more from a branding perspective, and then we rely on a lot of the relationships that we have to produce students and we've just found debt.
The quality of students that we produce because we have these partnerships is much higher.
Which is why we have good graduation rates low cohort default rates. Our average student debt amounts are are very are under the state universities and so.
Is it.
Crowded market yes.
More people entering that advertising market, yes, but we have a very very efficient model.
And that combines both that with this partnership model and so we're not concerned that we can't continue to grow the way we have.
Got it that's helpful. Thanks.
We have reached the end of our first quarter conference call. We appreciate your time and interest and Grand Canyon Education. If you still have questions. Please contact myself Dan bachus. Thank you very much.
And this concludes today's conference. Thank you for your participation you may now disconnect.
Alright.
[music].
Okay.
And.