Q1 2022 Grand Canyon Education Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to <unk> first quarter 2022 Grand Canyon, Inc. Earnings Conference call. At this time all participants are in 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.
As a reminder, this conference call is being recorded.
I'd now like to turn the conference over to your host Mr. Dan Bachus, Chief Financial Officer.
Joining me on today's call is our chairman and CEO , Brian Mueller. 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-K quarterly reports on Form 10-Q, 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 position in <unk> with that.
I will turn the call over to Brian good.
Good afternoon, and thank you for joining Grand Canyon Education's first quarter 2022 conference call 2021 was a difficult year in higher education.
Canyon education came through the year amazingly, well as compared to the rest of higher Ed.
Most important the overall trends predicted for 2022 and the sector continued downward while Grand Canyon education will resume its consistent upward trend for 2014 years and is positioned to do very well in the next 10 years.
Colby.
Negative short term impact on all three of our pillars. However, long term negative impacts on the rest of the sector and turned into positive just for GCE because of how it is positioned.
Especially the last three years I will explain as I talk about each pillar individually.
First the GCU traditional campus.
Both the number of high school graduates per year and the percentage of them go into college has declined in recent years and that has resulted in lower enrollments at many universities and community colleges.
Also caused some universities to lower their admissions requirements wanted to boost their enrollments and.
In the fall of 2021, Gcu's traditional campus actually saw an increase of six 2% in new students over the prior year, an increase of nine 5% in total enrollment and an increase of 25, 8% in residential enrollment.
Approximately 73% of Gcu's ground traditional students now live on its residential campus.
The momentum continued as spring new enrollments were up 39, 6% over the prior year.
The average incoming GPA of this year's class rose to three 6% in the prestigious honors College grew eight 4% to almost 2800 students with average incoming gpas of $4 one.
These are remarkable results given the overall trends the quality, especially the relevancy of Gcu's academic programs. The low class sizes in support of its factory, who have less than a 5% turnover rate.
Quality of counseling services, a new very modern campus. It is ranked 18th to the country by niche Dot com to 'twenty Advisory Board with over 500 companies represented we're creating internships and employment opportunities for GCU students and Phoenix as a destination city are all contributing factors.
Having a very successful year compared to the majority of this sector. We still however have not reached our full potential in pillar one for the following reasons.
Number one GCU continues to gain visibility across the country. However, it's extremely significant value proposition is still relatively unknown GCU.
<unk> relies heavily on a process called discover GCU, we fly and thousands of students for one or two day campus visit in housing residents all designed for that purpose.
2020 school year because of Covid, we were down 46% from our campus visit goal yet still produced good results.
This year as the countries reopening campus business have already more than doubled over the prior year.
Number two I didn't list as previously in Gcu's list of advantages because I wanted to call. It out separately due to how important it is.
According to research produced by John Marcus and the hacking a report college costs outpaced inflation by 28% at public institutions in 19% at private nonprofit once in a decade preceding the pandemic. According to the National Center for Education Statistics.
But those relentless higher than inflation tuition hikes came to a halt in the fall when the college board reported that tuition rose at less than the consumer price index. However, he finishes a report by listing all the universities, who have already announced tuition room board and fee increases due to inflationary pressures for next year.
In contrast, GCU has already announced that for the 15th straight year. There will be no tuition increase this has resulted in GCU students taking out less debt than the highly subsidized state universities and gcu's parent plus loan amounts being 50% of the three Arizona state universities.
Number three the city of Phoenix, and the state of Arizona is economic.
Outlook is very bright hundreds of companies are moving here, especially from California, and we estimate right now that approximately 80% of Gcu's traditional graduate stay in Arizona post graduation, partly because the career opportunities are so significant.
Number four a growing segment of University enrollments in our country, our first generation College students.
Of the approximately 9000, new students at GCU. This past year, approximately 3600 were first generation students.
The first Gen College students. This year had an average incoming GPA of 355 almost identical to the three six of the overall class.
This year, we expect 4000 or <unk> 10000, new students to be first generation.
The 70, 601st Gen students at GCU in two years alone as a transformative number and a great reason to invest in GCE and donate to GCU.
The quality and relevance of our programs the quality of Gcu's campus facilities, the intense amount of Fastly and counselling and support the number of campus jobs available to students the percentage of students graduating in three years and especially the low price point all contribute to the success.
Number five <unk> was able and prepared to financially build this campus out to 50000 students creating opportunity for GCE in this pillar for the next 10 years, we are targeting over 10000, new students in 2022 and are making investments now to significantly increase that number in 2023.
Next I would like to discuss GCE second pillar its health care partnerships.
Short term Covid has had a negative impact hospitals were extremely busy and preoccupied with COVID-19 patients and many clinical placement opportunities.
Were cancelled in spite of these very significant challenges many instructional assignments requiring one on one clinical interaction in the hospital, we replaced by Stimulations. Some of our University partners requested that we reduce the cohort sizes for 2022 due to concerns about the lack of clinical capacity and some of the new sites that we hope to open, especially in large market.
<unk> had been pushed back to 2023.
But against this backdrop of both the projected new and total enrollment numbers were met for the first quarter of 2022.
As with Gcu's traditional campus. The long term environment is very positive for these GCE healthcare partnerships for the following reasons number one the country needs one 3 million additional nurses in the next five years alone nursing programs are very expensive to operate and given the financial pressures facing many universities they will be unable to invest in dollars it will take to scale.
Programs.
Two GCE has the capital to invest in the continued build out to eventually 80 locations.
Number three in addition to the runway of 80 locations up from 30 locations currently our enrollment budget for this coming year is only 50% of the actual spots that exist even to date.
The 50% shortfall is due to the lack of efficient and highly supportive prerequisite course environments, which I will speak directly to a later regulatory issues, creating slowdowns in opening plan locations and the lack of clinical placements due to the COVID-19 issues.
<unk> is working hard and investing in new enrollment simulations virtual reality of prerequisite strategies to win the future feel all the spots that are available.
This was a transitional year coming out of Covid for the health care partnerships. However, there was a 10 year runway that is very promising it creates a winning scenario for students that want into a promising career healthcare providers desperately needing professional nurses and universities, who want a low risk way to help solve the nursing sorties, while at the same time, creating additional revenue streams.
As all of this is taking place we will be adding healthcare and non health care programs to some of the existing and future locations.
Pillar three.
Working adult online students.
First hit there was an initial surge of working adult students returning to college as online students or re entering if they were temporarily out.
<unk> online benefited from that search.
As the pandemic progressed, some potential students began questing, the ultimate value and investing in higher education. It was.
Also talk of free community College, and State University education by the New administration.
In addition, many adult students that pursued high volume programs like the RN to BSN program. We're busy at work taking care of COVID-19 patients or uncertainty uncertain about the future and putting off starting school.
2021 definitely saw a downturn in working adults attending University is online and we experienced that as well.
However, this market has become increasingly crowded the last five years, we have invested in <unk> strategies that are well timed for this COVID-19 period.
The supply and demand for educated Labour has flipped we are working on a daily basis with over 21600 industry partners in K 12 education healthcare financial services, Social service agencies technology, and engineering companies military basis et cetera, developing strategies that will help them.
<unk> grow their talent from inside the.
The number of information meetings scheduled in the intended suppose meetings now exceed where we were prior to the pandemic.
However, we are running behind a number of counselors, we have budgeted given the difficulty is currently facing the labor market.
We expect to make gains in that area in the next six months as a result, we believe we are getting back on track and we will see positive enrollment growth.
By the end of the calendar year.
We are also building out state specific programs and certain licensure areas and creating free test prep options that can help employees gain licensure and progressing their organizations.
This is all very innovative and hard work that most universities and <unk> are not capable of providing.
This requires investment during 2022, but will set us up to get back to positive growth towards the end of the year and then sustain it for years to come.
Both COVID-19 and other market forces put some strain on the 2021 results. Following 14 years have incredibly consistent upward performance that said, we still outperformed both the higher Ed and OPM sectors at large in the post Covid era, we are setup for another impressive run because in all three pillars. We are tied very tightly to whether you can.
<unk> is going where the huge talent deficits are and can provide relevant efficient and cost effective path for students across the lifespan to get there.
Our first quarter, new and total enrollments were in line with our expectations, New enrollments were down slightly year over year, which is a significant improvement from the past few quarters and March enrollments were actually up year over year.
The activity of our BTB counselors continues to improve and we are optimistic that this trend will continue although it is too early to predict if new starts will return to year over year growth in the second quarter.
But as I said earlier, we are still hopeful that we will see positive growth by the end of the year in this pillar.
Last as you will recall on the last quarter I mentioned that we were working on a new pillar.
We are extremely excited because it is desperately needed in higher Ed to date.
In collaboration with our largest partner GCU, we're developing accelerated certificate programs in the first three will rollout in the next couple of months.
Two of the certificate programs are for students, who want an efficient way to get into nursing school.
We believe there is a big opportunity here getting prepared academically to apply to nursing school can be a daunting and confusing process. The first.
Pre nursing Certificate program will allow recent high school graduates to stay home and take the first 60 credits of their bachelors degree completely online.
<unk> worked with GCE to designed state of the art science courses that will prepare students to apply for a spot and eventually one of Gce's 80 locations.
These courses will be taught mainly by full time faculty with a tremendous amount of academic support for the students.
The second Certificate program is designed for students who have completed a college degreed another academic area or have a partially completed degree the.
Students will take mainly the science courses necessary to apply to one of our partners in one of our 80 locations.
The first certificate, we will have a synchronous component while the second certificate will be taught completely asynchronous Lee.
Given that eventually GCE will have approximately 24000, ABS and slots to our partners across 80 locations.
We'll need more than 24000 students in certificate programs preparing for those opportunities.
The third certificate program, which will begin in September comes out of Gcu's newly formed Institute for workforce development.
This certificate will prepare students for our professional electricians apprenticeship program.
This is a 16 credit one semester program heavily focused on the mathematical concepts necessary to prepare for a career as an electrician.
This program has been designed with a major industry partner, who will offer apprenticeships to the students successfully successfully completing this program.
This partner needs 1000, electricians for their business in Arizona alone.
Partner also indicates that the country is short a minimum of 100000 electricians necessary to complete the building projects currently underway.
With that I would like to turn it over to Dan <unk>, our CFO to give a little more color on our 2022 first quarter talk about changes in the income statement balance sheet and other items as well as to discuss the updated 2022 guidance. Thanks, Brian included in our form 8-K filed with the SEC. We have included non-GAAP net income and non-GAAP diluted in.
<unk> per share for the three months ended March 31, 2022 and 2000.
The non-GAAP amounts exclude the tax affected amount of amortization of intangible assets of $2 1 million in the first quarter is about 22022, and 2021 and the loss on fixed asset disposals of zero point $6 million in the first quarter of 2022, primarily related to the write down of our former learning management system.
We believe the non-GAAP financial information allows investors to develop a more meaningful understanding of the company's performance over time as.
As adjusted non-GAAP diluted income per share for both of the three months ended March 31, 2022, and 'twenty one is a $1 70 to.
Service revenue exceeded our expectations in the first quarter of 2022, primarily due to higher than expected GCU room, and board and ancillary revenues and slightly higher than expected spring semester hybrid revenues enrollments for all three student types were in line with our expectations.
Revenue per student continues to grow on a year over year basis, primarily due to increased room board and other ancillary revenues from GCU students as compared to the prior year period and the growth in the enrollment for hybrid students service revenue per student for hybrid students generates a significantly higher revenue per student than we earn on the other students as agreements Gen.
Provide us with a higher revenue share percentage.
<unk> have higher tuition rates than GCU and the majority of their students take more credits on average per semester as they are an accelerated program.
Our operating margin, excluding the fixed asset disposals was in line with our expectations.
As I discussed on last quarter's earnings call, we have restarted to hiring and which head count has mostly been flat since March 2020 for our expected future growth, which is driving increased compensation cost and technology and academic services and counseling services and support costs. We plan for a significant increase year over year in travel and employee benefit as those amounts were significant.
Lower than pre COVID-19 levels in the prior year.
We also plan for increased clinical costs at off campus classroom and laboratory sites due to the nursing shortage and a year over year difference in the timing of new site openings all new sites. In 2021 were opened in the first half of the year, whereas nearly all new sites opened in 2022 will be in the second half is having a negative impact on both revenue and expense.
Generally expenses were in line with our expectations, although travel and benefit costs were higher than we expected in the first quarter of 2022 and head count was below our expectations.
Included in both our 8-K and the 10-Q filed today is a detailed explanation of the actual and anticipated impact of COVID-19 on all our University partners.
Our effective tax rate for the first quarter 2022 was 25, 2% compared to 24% in the first quarter of 2021, and our guidance of 25, 3% in the first quarter of 2021, the effective tax rate was significantly impacted by excess tax benefits of $4 4 million as a result of.
<unk> of the remaining stock options held by employees prior to their exploration excess tax benefits total OLED $0 1 million in the first quarter of 2022, and the first quarter 2022, our first quarter tax rate was favorably impacted by an increase in the state income tax rate.
We repurchased $4 million 575048 shares of our common stock in the first quarter of 2022 at a cost of approximately $394 9 million and another 1 million 6964 shares at cost of $99 8 million subsequent to March 31 2020.
We have a $100 $7 million remaining available as of today under the previously approved share repurchase plan.
We estimate that we will spend at least $52 million on share repurchases over the rest of 2022.
Turning to the balance sheet and cash flows total unrestricted cash and short term investments at March 31, 2022, or $264 3 million GCE Capex in the first quarter of 2022, including Capex for new off campus classroom and laboratory sites was approximately $6 8 million or two 8% of service revenue. We continue to expect Capex for 2000.
2022 will be between 30% and $35 million next.
Next I would like to provide color on the updated guidance. We have provided in our 8-K filed today.
The guidance that we have provided continues to be non-GAAP as adjusted net income and as adjusted diluted income per share as we have excluded amortization of acquired intangible assets and the fixed asset disposals.
Last quarter, we provided ranges for revenue operating margin and earnings per share for each of the four quarters in 2022, we do this because our financial results are seasonal.
We have raised the revenue and operating margin guidance for the year for our revenue and operating income beat in the first quarter, but have not adjusted the guidance for the remainder of the year as the majority of the beat in the first quarter was related to higher revenue generated at Gcu's traditional campus in the spring semester that ended in mid April .
The summer and fall GCU ground enrollments continued to trend such that they should meet or exceed expectations.
As you recall the difference between the high end and low end of our range.
Ranges was primarily due to deferring enrollment assumptions for GCU online and hybrid enrollment.
Hybrid enrollment was in line with our expectations in the spring semester and demand is strong, but the clinical capacity issues at both new and existing sites as a result of the nursing shortages and the prerequisite challenges Brian discussed earlier, we will continue to pressure our cohort sizes for the foreseeable future.
The high end of our revenue guidance also assumed GCU online, we'd return to new enrollment growth in the second quarter of 2000 and.
2022, whereas a low end assume new starts will be down in the mid single digits in the quarter as Brian mentioned earlier, the <unk> reps activity continues to improve which is which gives us confidence that new online enrollments will return to Europe over year growth. However to consistently grow new enrollments are head count needs to continue to grow at a certain level.
And although we are adding head count, we're not where we plan to be due to the labor situation. Thus based on these factors. It is likely that we will be at or near the midpoint of our range in the second quarter.
We have adjusted the effective tax rate for the last three quarters of 2022 slightly to 24, 9% 24, 9% and 24, 5%.
Effective tax rate continues to be higher in 2022, then into 2021 as revenues continue to grow at the off campus classroom and laboratory sites outside of Arizona and the majority of these states have higher state income tax rates in Arizona.
These estimates also do not assume a contribution Louis state income taxes of one has made that will increased G&A expense in the third quarter and decreased the effective tax rate in the second half of the year.
We have increased our weighted average share count for the last three quarters. The board remains committed to purchasing the same dollar amount of stock as previously discussed, but given the increase in the stock price. The number of shares that we purchase will most likely be less.
As was discussed last quarter. The primary reason the board has been so aggressive in our stock buyback activity is that it believes the stock was considerably undervalued, even with the increase in stock price. The board still is of that opinion.
A couple of the key metrics the board looks at to make this determination as the ratio of enterprise value to adjusted EBITDA and free cash flow yield rather than the multiples of other education companies as although we can be viewed as being in the same sector. There are few if any appropriate comps.
On an enterprise value to adjusted EBITDA basis. The stock is currently trading at roughly nine eight which is significantly less than the recent S&P average of $16 five the average free cash flow yield for the S&P 500 remains below 2%, whereas the company's free cash flow yield is approximately eight 4%.
I will now turn the call over to the moderator so that we can answer questions.
Ladies and gentlemen, if you have a question at this time. Please press star and then the number one key on your telephone.
That is star one on your Touchtone telephone.
Yeah.
Your first question is from Jeff Silber from BMO capital markets. Your line is open.
Thanks, so much for taking my question.
Just wanted to clarify one of the statements I think Brian you made in your opening remarks, I think you were talking about enrollments at Grand Canyon online.
Looking for growth by year end or are you talking about new enrollments total enrollments. If you could just clarify that that'd be great.
New enrollments.
If we get if we get new enrollment growth.
Towards the end of the year.
Three to four percentage points.
Over prior year that will be the thing that will obviously accelerate and eventually resulted in total enrollment growth.
Okay. That's helpful.
Some of the others.
Jeff sorry, please.
Just to clarify from a guidance perspective again, our guidance assumes that total enrollment at the high end of the guidance assumes that total enrollment will grow.
And each of that.
Second third and fourth quarter.
The bottom end of the range assumes that we will still be down mid single digits second third fourth quarter. We're hopeful that we'll be able to grow new enrollment before the end of the year, but to be conservative given the head count things and the other things we're talking about I think that's where Brian commentary.
Commentary is that's a conservative assumption.
Okay I appreciate the explanation on that Dan.
Moving onto a different topic there've been some others in this space that have talked about students being maybe less rigorous in terms of their coursework given the job markets maybe.
Taking fewer classes are not enrolling at all is that something you are seeing in any of your institutions.
Well at our ground campus at GCU absolutely not.
The trend is.
Actually the opposite.
Students are coming in number one enrolling in.
Our very rigorous academic programs I mean 65 plus percent of our students are are in stem areas.
The natural Sciences engineering.
Computer Science information technology.
Those areas are really growing so.
Students are choosing rigorous academic areas and secondly.
They are very.
Intent I'm, graduating at three years of three and a half years.
And so they are taking full loads and some.
Im even stay in the summer because.
Our partner and we have 8000 high school partnerships and so many of our students are coming with GCU students are coming with 2030 College credits already earned that they can actually double major and do other kinds of things and graduate in three years and in many states and do a Bachelor degree programs. So we're not no we are not seeing that.
And online are you seeing that at all.
No.
And I think the reason we're not is because if you look at our major players online.
One thing the one way that we're really different is that we've got a lot more programs.
And.
Our students tend to come in and 50% of our students are studying at the graduate level. So they are not people that are just coming to complete a degree just to say they've completed a degree.
They really have more specific objectives that they're trying to achieve.
And so our retention numbers are strong and we're not seeing any reduction in revenue per student on an annual basis as a result of taking of them taking fewer classes.
Okay. That's great if I could just sneak in one more really intrigued about the accelerated certificate program that youre talking about I know, it's still kind of in the launch phase, but can you talk about maybe the economics of that how it compares to some of the other programs you have.
Yes, I am excited about it too and I am trying to downplay it because we've got to prove it obviously, but the more you get into this nursing thing the more.
Get frustrated by it but you also see the opportunity.
Is it really a crazy situation.
We need one 3 million additional nurses and there are unbelievable numbers of people out there that want to be a nurse and yet we have the shortage.
And so there are there are bottlenecks in this thing that.
Our incredibly frustrating we've talked a lot about the <unk>.
Clinical placements and what we're doing to replace some clinical placements with with simulations.
And other instructional activities and we're also.
Rectifying that to some extent by having 80 locations in work. So we're not having to double enough out of clinical placements in any single marketplace. We just need a few more in 80 marketplaces and we can produce a lot more nurses.
But then the other bottleneck that is very became very clear to me.
Is the one about preparing in the first two years.
It's a crazy thing.
Thousands of kids attend universities all over the country are hoping to be a nurse.
And literally thousands pile into universities, and then five or 10% of them get a shot at becoming getting into the nursing College as a junior.
And the specific requirements to get in essence, theyre not theyre not.
They're not the same requirements. They change based upon the luck of the draw in terms of the strength of this.
The applicant in that particular year and so it's really a.
Exasperating experience for students and families.
What we wanted to do is is really give stu.
Students the chance.
Very high end.
Way to prepare and those pre nursing years for nursing College.
There are students.
Are in high school that have very good grades.
But can't afford to live on a college campus for four years, especially given the uncertainty of cannot get in as a junior and so we want to give them the opportunity to stay home and study online in a very rigorous academic settings. We're really good at teaching science that GCU.
On our campus and we're going to be.
The goal is to be the best in the world at doing it online.
And so there'll be an opportunity for people to get involved in that curriculum perform at a very high level keeps their costs to a minimum.
And then have lots of potential places to go.
As they near the first ended the first two years. So Thats one group. The other group is if you've completed an academic degree.
Another field or Youre, partially completed you have 60 credit College credits. For example, then you're going to go into a second certificate program or can go into a second program is just based on.
Mainly science courses.
And that will be a little bit different than the full time online students, who will have a synchronous component decided one will be completely asynchronous, but there'll be tons of students support but the idea is.
To get people into.
The courses within a month of them looking into it not having to wait two semesters or three semesters.
Nevertheless community cause might be happening to offer those courses, but be able to get into it almost immediately be able to finish the six or seven or eight courses they need in order to apply to a nursing school.
And then have a lot of different.
Potential landing points when they when they performed very successfully in the classroom.
Yes.
Model has a lot of promise the one.
Downside to it is that we have 31 locations. Currently eventually we will have 80, but but some students will have to move once they finish their work online in order to get into a 14 to 16 months accelerated program, but we've already proven that students are willing to do it.
And so we will work with them hard as they move through the Prereq courses noted into terminal would be the best landing spot for them.
Given their individual circumstances, but I think when you think about eventually 80 locations with an average of 300 <unk> students per location Thats 24000 slots, which means we would have the opportunity to teach at the same price per credit.
Students for basically a year.
And so the financial.
All of that for GCE is going to look very similar to.
<unk> for example, putting a student into an RN to BSN program.
And so when you think of the thousands of students that could benefit from this.
A significant potential player for GCE, what's the financial risk.
Our results to be very similar to.
A lot of our students.
Okay. Thanks, so much for the color.
Yes.
Your next question is from Jeff Mueller from Baird. Your line is open.
Just.
And with it for me the.
So what are you telling the students like what's the transferability of credit to the Orbitz partner network and since Youre talking about the concern of going through.
Couple of years of Undergrad, and then not getting into a nursing degree what are you planning on telling the candidates for the certificate nursing program.
Well the courses that we've developed have been approved by our partners.
Now every partner has a different set of course. There is also slightly different set of courses that are necessary to get into their program and so the students have to pick the courses and the GCU Prereq program that are required for those.
Potential partners that Theyre targeting.
Obviously can't guarantee and three.
There are no guarantees of entering anywhere in the country to date.
But what we can tell them is that currently we have doubled the number of slots available than we're currently filling.
And we're going to add eight to 10 locations or I should say.
Say four to eight locations on an annual basis and so the number that we're at currently we're only 50% filling and the.
Those <unk> are going to keep growing and so.
Obviously, you can't guarantee anybody anything, but we're going to get a lot closer to that than they are guaranteed anything today.
And in a lot more efficient we believe cost effective manner.
So.
Does that help.
Yeah.
And then for GCU online new enrollment trends is it basically that the digital channel trends are stable and the overall improvement is coming from the normalization of the partner channel and then to drive the growth once that normalizes, that's where you need the head count growth.
Hey, Kurt.
Yes, yes.
We really have normalized in terms of.
The advertising campaign in the inside counselors.
We just don't want to grow that significantly because we think.
The big opportunity to work with companies directly.
To provide.
Their employees the chance to move up within their organizations, which is a big emphasis.
<unk> is a better way to do this long term.
And that's the place that we're behind.
Geographic.
We're behind in those areas of the country, where.
It's tougher to find people given the cost of living.
California, New York.
Places like that.
We are.
To speed in places like Tennessee.
But in those other places where the cost of living is really high.
We're a little behind it.
Sure.
And then on Orbis I get that Youre, saying that the new and total enrollment was in line with your expectations.
It was lower than I would've guessed and it decelerated to a pretty low level. So.
US out with the leading indicators for that business in terms of either like student level lead Gen or where you are with working through the process for regulatory approvals for new sites or resolving some of the.
Clinical capacity constraints, either in the more traditional way or with some of the alternatives that you've been coming up with just so we can kind of monitor when that business should turn.
Yes, so the total enrollment number and this is why we sometimes don't love, giving out enrollment, even though I know, it's something important but I think it's very misleading in terms of how that business is really growing number one you've got the huge tail a headwind.
Occupational therapy, which is down roughly 30% year.
Year over year.
They weren't allowed we werent allowed to recruit any new students into that program for a very long time. So the graduations are we're now recruiting students, but the graduation still continue to outpace the new enrollments allowed into that program. So that's that's hurting the overall enrollment on the on the pre licensure nursing.
At.
<unk>.
Just looking at pre licensure nursing.
It's misleading for two reasons, one we really don't have any new locations that we opened one new location between the spring of last year in the spring of this year, we opened a location in Dallas in the spring of this year, but there was nothing opened in the summer or fall of last year.
So you don't have any growth coming from new locations.
And there are some existing locations that had been at capacity for a number of years that have as we've talked about before have taken a step back and their total enrollment because of the clinical challenges in prereqs challenges et cetera.
And so.
All you have from really a growth rate standpoint, as those locations that have opened in the last few years that werent at capacity that continue to grow.
And so it looks like that business is not really growing again, I think thats very misleading.
Very excited about.
Getting a number of locations opened here in the second half of the year.
Loss Vegas will open.
At Lake City will open we're optimistic about.
A couple of sites.
Sites first MLS sites opening there is a outside chance that some of those other locations.
Like Seattle.
Might open but those could be in 2023. So the pipeline is really good for new locations.
And new partners.
And.
<unk>.
To get back to the 20% growth rate that we want for that business, we have to get those existing.
Mature campuses back to full capacity, which is where they've been up until.
The last six months.
Alright, Brian to add to that.
Only that the just to reiterate what we've already been talking about which is.
The bigger.
Orbis Scott.
The more it became clear that there were two major.
Our hurdles one was on clinical placements, but at the other one was this prereq thing.
The cultures were very frustrated when they had somebody that really wanted to be a nurse.
They needed 30 or 40 additional credits and they would say go to a community college well.
They might not even be the courses you needed are available for two semesters I mean, youre talking about a year to two years before you have a chance to do anything.
That bottleneck has to be fixed.
For us to reach.
Full capacity and I think we have a plan that can bring a drastic change to that improvement to that that's what we're hoping.
Got it thank you.
We have reached the end of our first quarter conference call. We appreciate your time and interest in Grand Canyon Education. If you still questions. Please contact myself, Dan Bachus. Thank you very much.
Ladies and gentlemen, this does conclude today's conference. Thank you for participating you may now disconnect.
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