Q3 2022 Grand Canyon Education Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good afternoon, and thank you for standing by and welcome to the Grand Canyon Education's third quarter earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one that is star one one on your telephone you will then hear an automated message advising that you your hand is raised.
Please be advised that today's conference is being recorded and I would now like to hand, the conference over to your first speaker today, Dan Backus, Chief Financial Officer at Grand Canyon Education go ahead Dan.
Good afternoon, 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 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 four.
Our 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 financial position in GCE and with that I will turn the call over to Brian.
Good afternoon, and thank you for joining Grand Canyon, Education's third quarter fiscal year 2022 conference call GCE had a very good quarter exceeding enrollment expectations exceeding revenue guidance at midpoint by $420000 and producing a 15 cent beat on its adjusted diluted earnings per share guidance at <unk>.
Point.
Given how most of higher education is coming out of the Covid years. These are excellent results.
Most importantly, GCU online produced new enrollment growth in the mid teens.
Over third quarter prior year and that momentum is expected to continue in the fourth quarter.
I want to begin by taking a step back to explain why this is happening and briefly review what has happened since the GCE GCU transaction transaction took place four years ago.
I have often said that in the past small and ALLETE has won the day in higher education, especially in areas like U S News and World report rankings, but.
But in the future it will be large scalable flexible offering education across the adult lifespan and using technology to build as many delivery models as is necessary given the nature of the content and skills that need to be learned.
GCE has invested approximately $300 million producing its own learning management and administrative system that allows it and its partners to manage over 5600 full time and adjunct faculty 116000 students and over 300 academic programs emphasis and certificates across four delivery platforms.
This system has automated processes, including admissions transcript collection and evaluation schedule building financial aid processing factory recruitment factory assignment in payroll content acquisition assessing learning outcomes teacher placement counseling.
And social work internships and the list goes on.
The administrative capability of this system allows faculty and students to focus on the learning which is still in a small group instructor led process. It is highly interpersonal collaborative.
Our focus on writing critical thinking and problem solving and produces outstanding outcomes.
GCE currently employs over 5300 professionals as it continues to build out its capabilities to grow faculty students programs and delivery platform Sports University partners.
Leveraging this infrastructure has allowed gce's partners to expand programs that are critical to the economy maintained tuition levels in a period of rapid tuition increases across the country and make access to higher education affordable to all socioeconomic classes of Americans without any burden on the taxpayer.
In the four years since GCE has become a service provider. It has helped US partners accomplish the following.
And that time GCE has helped Grand Canyon University graduate 118565 students.
32287 in education, including.
14629, first time teachers at a time when teacher shortages have created a national crisis.
34755 students in nursing and health care professionals, including 1500, 50 pre licensure nurses at a time when there is a huge shortage of nurses.
22000, and 435, and the college of Humanities, and social sciences, including thousands and counseling and social work, where there are also huge shortages.
The college of business has become one of the largest business schools in America and has produced 20207 graduates.
Our college of Science Engineering, and technology has grown by 200% and provided 4118 graduates. The doctoral College honors College and college of Theology also continue to grow.
The numbers that I have just cited have all happened in the last four years since GCU has become a nonprofit institution and GCE has become an education services provider.
Our partnership with GCU has given it the ability to invest almost 500 million additional dollars in academic and residential life infrastructure for its ground traditional campus, bringing the total investment to almost $2 billion Curran.
Currently this campus has ranked 17th in the country by niche Dot com very.
Very importantly, GCE has assisted GCU and opening of 135, new academic programs embassies and certificates during the last four years, 13.7% of the new students enrolled in the third quarter enrolled in these new programs.
During this time GCU has not raised tuition on its ground traditional campus with only nominal increases in certain programs online.
As a result, GCU students take out less debt than the average state University students.
GCU students take out only 50% in parent loan amounts compared to the students at our three state universities.
GCU students have at 1.5% cohort default rate on student loans compared to the most recently released national average of two 3% and a 90 10 calculation of 66, 2%.
In addition, GCU has accumulated $620 million in cash reserves, while going through with annual salary increases every year for all faculty and staff.
Compared to the declining enrollments and negative financial trends and higher read across the country that accelerated during Covid. This model has produced significant results for GCU the state of Arizona in the country.
I'm also pleased to announce that Grand Canyon University was ranked as the third best employer in Arizona.
In the 2022, Forbes America's best employers by State report.
During this time period G. C. S established 26 additional university partnerships. These partnerships along with our partnership with GCU have created 35 locations to produce health care professionals, especially baccalaureate prepared nurses.
This is extremely important works as the country is expected to need one 3 million additional nurses in the next five years alone.
The number of existing and new partners will eventually lead to 80 locations across the country.
During the past four years 9000 and.
44 students have graduated from our other University partners, a b S. N R O T a programs.
I wanted to include this brief summary, because there is currently a lot of discussion about the future of higher education.
Regardless of political or ideological positions the discussion should focus on where the economy is going and where the new jobs and careers are going to be models that can scale and offer opportunities for access to all socioeconomic classes of Americans at no expense to taxpayers should be supported.
<unk> point to the revenue share model is bad for universities. The past two years have proven them wrong and we expect in the next year this will become even more apparent.
And inflationary periods like the one we are currently experiencing or wind demand declines as it has GCE as a service provider absorbs the majority of the financial risk and our expertise technology and processes have allowed our university partners to continue to benefit during these challenging times.
Now I want to review the four pillars, our delivery platforms of Grand Canyon Education.
First gcu's traditional campus saw an increase of eight 9% in new students in the fall of 2022 over prior year and.
An increase of 8% in total ground traditional enrollment and an increase of 10, 5% in residential enrollment.
Approximately 70% of ground traditional students now live on campus.
The average incoming gpas of the 2022 23 class rose to 3.6, and the prestige signers colleges ground eight 3% year over year with average incoming gpas of 4.1.
The retention of returning students. This fall was better than expected with a larger percentage of those students choosing to remain on campus, resulting in the university, having to turn away at least 200, new students due to lack of beds.
This in spite of the fact that the University built two new residence halls, and repurpose. The residence Hall that was used to house prospective students. So in essence added three residence halls.
A remarkable result, given the fact that undergraduate enrollment declined by four 2% nationally between the fall of 2020 in the fall of 2022 were during this same period gcu's ground traditional enrollment increased by 18, 3%.
Quality and the relevancy of Gcu's academic programs, the low class sizes in support of its faculty that has less than a 5% turnover rate the quality of counseling services that 'twenty advisory boards with over 500 companies.
Represented who are creating internship chips and employment opportunities for GCU students and they're very affordable tuition, which hasn't been raised in 15 years are all important contributing factors.
I also want to mention unlike the national trend over 2600 of the 9300 fall 2022, new students. This year will be first Gen College students. The average incoming gpas of these first gen. Students is 3.55 are almost identical to the incoming class overall.
These students are largely from the lower socioeconomic strata, but their enrollment at the university because of the very affordable tuition rate is going directly against the national trend and has a very positive part of the GCU GCE story.
It is also important to note that GCU is not lowering its admissions requirements in order to increase its student body.
Pillar number two working adult students attending GCU online as with traditional students attending universities across the country 2022 saw a downturn in working adult students attending online.
Unlike with traditional students attending Gcu's campus, we experienced the downturn in online students as well.
<unk> has worked with GCU on two main strategies to combat the downturn and we are now seeing positive growth again.
Number one we have invested in <unk> strategies that are well timed for the post COVID-19 period. This up.
Apply in demand at least in the short term for educated Labour has flipped.
The country has reopened we are working with over 24700 industry partners in K 12 Education Health care financial services, Social service agencies technology, and engineering companies military basis et cetera, developing custom strategic initiatives that are helping organizations grow their talent from insight.
The number of information meeting scheduled and the attendance at the meetings exceed where we were prior to the pandemic.
Number two GCE continues to work with GCU to rollout new and relevant programs.
Since the transition for years ago, GCU has rolled out 135, new programs emphases in certificates 13, 7% of new students enrolled in these programs in the latest quarter.
This has resulted in the third quarter, new online enrollments growing in the mid teens over the prior year and we are currently projecting new enrollment growth in the fourth quarter to be similar.
Based on these trends, we should return to totally online growth in the first half of 2023.
It is important to note that this return to positive growth has been accomplished with no loss of strength and the quality of Gcu's online student body and as a result, no degradation of the quality metrics, including good graduation rates low cohort default rates and continued low student debt levels.
Next I would like to discuss Gce's third pillar its health care partnerships short term Covid had a negative impact hospitals were extremely busy and preoccupied with COVID-19 patients and many clinical placement opportunities were canceled. Despite these very significant challenges many instructional assignments requiring one on one clinical interaction in the half.
Spittle were replaced by Stimulations, some of our University partners requested that we reduced 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 markets had been pushed back to 2023.
The growth in this pillar remains below what we had planned but positive signs are emerging.
We were only able to open four new locations between January 2021 in May 2022.
But we opened five new locations in the fall summer of 2022 and are currently planning to open six to eight new locations in 2023.
As a recent example, the state of Washington approved the University partner to open its first location in Seattle, just a few months ago and with very limited marketing, we were able to fill the entire cohort for this fall and the spring cohort as a waitlist.
One of the sites that we hope to open in the fall 2023 is with the new partner in New York City. It has asked us to assist them with their on campus cohort as well.
We are optimistic that our partner in southern California will be able to start its first cohort in the fall of 2023 and that aren't mature locations that have had declines in total enrollment year over year will be back to full capacity by the end of 2023.
I'm also pleased to announce that the GCU locations grew 47, 2% year over year from 286 students to 421 and it there first.
71 graduates pass the M Flex examination with a 100% first time pass rate.
This is extremely important because you would ultimately like 40 of our 80 locations to be GCU locations.
This relationship is good financially for GCU, but it is also good for GCE, given that Gcu's national footprint and brand recognition the excellence of our nursing program and its proven ability to scale.
As with Gcu's traditional campus. The long term environment is very positive for these GCE health care partnerships for the following reasons number one the country needs one 3 million additional nurses in the next five years.
Nursing programs are very expensive to operate and given the financial pressures facing many universities they will be unable to invest the dollars it will take to scale the programs.
Two GCE has the capital to invest in the continued build out to eventually 80 locations. Three in addition to the runway of 80 locations up from 35 locations currently our enrollment budget for this coming year is only 50% of the actual spots that exists today.
The 50% shortfall is partly due to the lack of efficient and highly support a prerequisite of course environments regulatory issues, creating slowdowns in opening plan locations and a lack of clinical placements due to COVID-19 issues.
<unk> is working hard and investing in new enrollment simulation and virtual reality in prerequisite strategies to win the future fill all the spots that are available.
This is a transitional year coming out of Covid for the health care partnerships. However, there is a 10 year runway. It is very promising it creates a winning scenario for students that want into a promising career health care providers desperately needing professional nurses and universities, who want a low risk way to help solve the nursing shortage, while at the same time, creating additional revenue streams.
Last as discussed on last quarter's call. We continue to work on a new pillar. We are extremely excited because it is desperately needed in higher Ed today.
In collaboration with our largest partner GCU, where development accelerated certificate programs.
Two of the certificate programs are for students, who want an efficient way to get into nursing school.
We believe there's a big opportunity here.
<unk> prepared academically to apply to nursing school can be a daunting and confusing process. The first pre nursing Certificate program allows recent high school graduates to stay home and take the first 60 credits of their baccalaureate degree completely online.
GCU has worked with GCE to designed state of the art science courses that prepare students to apply for a spot and eventually one of Gce's 80 locations.
These courses are 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 degree in another academic area or have a partially completed the great.
As students take mainly the science of course is necessary to apply to one of our partners in one of our 80 locations.
First certificate has a synchronous component while the second certificate is being taught completely asynchronous sleep.
Given that eventually GCE will have approximately 24000, a b S N slots to our partners across 80 locations, we will need more than 24000 students in certificate programs preparing for these opportunities.
421 students are taking these pre nursing courses currently.
The third certificate program began in September and it comes out of Gcu's newly formed Institute for workplace development.
This certificate is preparing students for a professional electricians apprenticeship program.
This is a 16 credit hour 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 completing the program is.
This partner needs a thousand electricians, where their business in Arizona alone. It's partial partner also indicate the country's short a minimum of 100000 electricians necessary to complete the building projects currently underway.
This fall 300 students apply for this program, we accepted 40 into the program and.
An additional 200 submitted applications for the spring semester, and we will accept another 40 in the spring once the concept is proven there is a potential to scale. This program in a significant way.
Service revenue was less $208 7 million for the third quarter of 2022, an increase of $1 9 million or 9% as compared to $206 8 million for the third quarter of 2021.
The increase year over year service revenue was primarily due to an increase in gcu's traditional campus enrollments of 8% and increases in revenue per student year over year, partially offset by a decrease in an online enrollments at GCU of four 7% and to a lesser extent students in a university partners occupational therapy assistance program.
Of 22, 7%.
Operating income for the three months ended September 30th 2022 was $35.5 million and a decrease of $9 8 million as compared to $45 3 million for the same period in 2021.
The operating margin for the three months ended September 32022 was 17% compared to 21, 9% for the same period in 2021.
The operating margin was negatively impact by the investments that are being made to grow our partner partners enrollments net.
Net income decreased 37% to 30 million for the third quarter of 2022 compared to 47 7 million for the same period in 2021.
Decline in net.
<unk> income was partially due to a significant reduction in interest income between years due to GCU paying off the secured note in the fourth quarter of 2021.
GAAP diluted income per share for the three months ended September 32022 is 96 cents.
As adjusted non-GAAP diluted income per share for the three months ended September 32021 is a dollar and two.
<unk> 15 cents over consensus estimates with that I would like to turn it over to Dan <unk>, our CFO to give a little more color on our 2022 third 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.
Have included non-GAAP net income and non-GAAP diluted income per share for the three months ended September 32022, and 2020 one the non-GAAP amounts exclude the tax affected amount of the amortization of intangible assets of $2 1 million in the third quarters of both 2022 and 'twenty, one and the tax affected amount of the law.
Loss on fixed asset disposal of zero point $5 million for the three months ended September 32022, we believe the non-GAAP financial information allows investors to develop a more meaningful understanding of the company's performance over time as Brian just mentioned the as adjusted non-GAAP diluted income per share for the three months ended September 32002.
22, and 2021 is $1, two and $1 11, respectively.
Service revenue was slightly higher than our expectations in the third quarter of 2022 as period end online enrollment exceeded our projections due to the higher than expected new start students starts in August and September partially offset by slightly lower revenue per student than expected due to mix hybrid revenues were in line with our expectations the hybrid enrollment.
Growth rate is being impacted on a year over year basis due to the timing of site openings at 22, 7% year over year decline in O T. A enrollments the closing of sites and a decline year over year and their enrollment at some of the mature sites due to the challenges previously discussed.
Excluding enrollments from closed sites, a BSN enrollments grew seven 5% year over year, which includes the campus enrollments for our New York City a partner.
Revenue per student continues to grow on a year over year basis, primarily due to increased room board and other ancillary revenues from Gcu's traditional ground students as compared to the prior year period and the growth in the enrollment for a b S N hybrid students.
Service revenue per student for hybrid a BSN students generates a significantly higher revenue per student than we earn on the on the other students as these agreements generally provide us with a higher revenue share percentage partners have higher tuition rates and the majority of their students take more credits on average per semester is there an accelerated programs.
Our operating margin was higher than our expectations as I discuss our prior quarter's earnings calls, we have restarted hiring and which head count had been mostly flat since March 2024, our expected future growth, which is driving increased compensation cost and technology and academic services and counseling services and support costs, but we remain below.
Our head Count plan, which is the primary reason that expenses were below expectations.
We also plan for a significant increase year over year in travel and employee benefits as those amounts were significantly 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. This spending is generally been in line with our expectations and the 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 we're in the second half is having a negative impact on both revenue and expense.
Included in both our 8-K and 10-Q filed today is a detailed explanation of the actual and anticipated impact of COVID-19 on all of our University partners.
Our effective tax rate for the third quarter of 2022 was 17, 2% compared to 23% in third quarter of 2021, and our guidance of 18, 4% in the third quarter of 2022, our effective tax rate was favorably impacted by the contributions in lieu of state income taxes made in July 2022, although the amount of the contributions.
The same in both years the impact was greater in 2022, and 2021 due to the lower pretax booking.
We repurchased 581421 shares of our common stock in the third quarter of 2022 at a cost of approximately $48 2 million and another 242000 and 747 shares in October we have $203 6 million remaining available as of today, which includes an increase of $200 million.
Which was authorized by the board in October of 22022, reflecting an aggregate of 184 5 billion under the approved share repurchase plan.
Board and the company intent the board and the company intends to continue using a significant portion of its cash flow from operations to repurchase shares, but your share repurchases in future years will be less than in 2021 and 2022 as we have utilized all of the proceeds from the repayment of the secured note during the past two years.
Turning to the balance sheet and cash flows total unrestricted cash and short term investments on September 32022 were $108 3 million.
GCE capex in the third quarter of 2022, including Capex for new off campus classroom and laboratory sites was approximately $11 2 million or five 3% of service revenue.
Continue to expect Capex for 2020 will be between 30 and $35 million.
Recently, the department of Education issued a dear colleague letter Gen 20, 207, written arrangements between title for eligible institutions and ineligible third party entities, providing a portion of an academic program.
We believe it's their colleagues letter does not impact our relationship with GCU is G. Suite provides all faculty for their courses pays them and receives little to no reimbursement from us or any other outside sources for the faculty cost.
We are still working with our other University partners to assess the impact of the Dear colleague letter if any and ensure our partners remain in compliance regarding the programs we partner with them on we will provide updates on this item if needed but it is important to note that any contractual changes made as a result would have an immaterial impact on revenues and operating profit.
Last I'd like to provide color on the updated guidance, we have provided in our 8-K filed today.
Since we have provided in previous quarters was non-GAAP as adjusted net income and non-GAAP as adjusted diluted income per share as we exclude amortization of acquired intangibles and fixed assets.
<unk> and our non-GAAP amounts.
And the outlet section outlook section of our 8-K filed today and going forward our guidance will provide GAAP net income and GAAP 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 income per share and we will continue to provide both GAAP net income.
Diluted income per share and a non-GAAP amounts with a reconciliation between the two when we report actual results.
So to ensure there's no confusion.
Fourth quarter and full year 2022, EPS guidance included in todays 8-K is GAAP is $2 18 to $2 19 and.
And for the full year $5 61 to $5 62, respectively, whereas the non-GAAP as adjusted diluted income per share for the fourth quarter of 2022 and full year 'twenty two is $2 23 to $2 24.
And $5 84 to $5 85.
For the full year, respectively.
We have raised our revenue operating income and earnings per share amounts for the fourth quarter and the full year 2022 due to the greater than expected new online enrollment growth during the third quarter and October of 2022.
We anticipate that ground revenue for the fourth quarter of 2022 will be in line with our expectations and hybrid relevant revenues will be in line with the midpoint of our previous expectations.
The relatively small range provided for the fourth quarter relates to slightly different online enrollment assumptions for November and December .
Our expected effective tax rate for the fourth quarter of 2022 has been increased to 23.0%.
Our weighted average share count for the fourth quarter of 'twenty 2022 has been lowered significantly as a board approved us buying back more stock during the last three months than was anticipated. Although the board recently approved an additional $200 million under our stock repurchase plan no additional stock purchases are assumed in this guidance as was discussed last quarter.
The primary reason the board has been so aggressive in our stock buyback activity is that it that it believes the stock is considerably undervalued a couple of the key metrics. The board looks to to make this stroke termination is the ratio of enterprise value to adjusted EBITDA and the free cash flow yield rather than the multiples of other education companies as although we can be view.
<unk> is being in the same tech sector. There are few if any appropriate comps on an enterprise value to adjusted EBITDA basis. The stock is currently trading at roughly $9, four which is significantly less than the recent S&P average of $16 five.
The average free cash flow yield for the S&P 500 is 2.2, whereas the company's free cash flow yield is approximately 7.1.
I will now turn the call over the moderator so that we can answer questions.
Thank you very much at this time, we will conduct a question and answer session. As a reminder to ask a question press Star one one Thats star one one on your telephone and wait for your name to be announced.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Jeffrey Silber with BMO capital markets. Jeffrey Your line is open now.
Thanks, so much.
Dan I've just got a quick question for you why the change in the format for the guidance for GAAP EPS versus adjusted diluted EPS.
We did get an SEC comment letter this last quarter it actually Fortunately for us, but not surprisingly I guess was there was only one comment.
And that comment was that they did not.
Like the format that were previously providing.
They wanted us to provide GAAP.
Even in the guidance section.
And so they are fine with the reconciliation process that we use but I thought doing a reconciliation within the guidance section was going to given the range that we provide and revenue and margin would just make it fairly messy. So instead, what we agreed with the SEC as we would provide gas.
<unk> numbers with the components necessary for you to reconcile it to as adjusted.
Okay I appreciate that that's the only thing they found it's actually pretty good.
Let's move on operations.
I know you talked about enrollment advisor hiring still below plan is it just.
The tight labor market is there anything else going on in the tight labor market are you finding it easier or a little bit.
A little bit, yes, and that is the only reason is the tight labor market.
And I think in the next four or five months, we'll get back to close to where we should be.
But we're not in a unbelievable rush to hire people who are really not qualified.
Things are going so well right now.
And the morale is so high.
We just went through those two years, where our outside people were essentially inside not able to do much.
And so our lead acquisition amounts were spread over almost double the number in.
And right now our lead purchases are applying to just those inside people and so they are doing extremely well and our outside people now had been back out for a year and we're just finding solutions.
Four.
School districts for example, I mean, we're just.
Doing contracts for a pair of professionals within school districts. So that they can become licensed teachers school districts are extremely happy we're doing similar things with nursing on military bases, we are assembling.
Assembly talent that can do masters and baccalaureate programs in cyber security because they can't get people.
Because it can't compete with outside salaries.
And so the combination of those things in addition to.
Really really importantly, we compete mainly against institutions that have a handful of programs.
And.
It's the rapid expansion of programs there.
That are current in terms of <unk>.
Developing and growing all of those things.
Has that just combined two.
We're really back on track now.
Our ground campuses.
Right now at this time last year, we had about 14000 applications. This year, we have 17000 applications for our ground campus and so that's gone tremendously well.
We had tremendous success.
<unk> in September and Thats continuing in October .
With our online campus and that allows us to.
Spend a little bit more time to get.
Our hybrid campus exactly where we need it but.
So we will eventually be where we need to be from a head count standpoint, but we're not going to hire a bunch of people that aren't really qualified to do this work.
Because things are going so well I want to say in addition.
That one of the things that people most worried about is faculty.
And we are having very few issues that way.
We have less than a 5% turnover rate with our factory, both full and part time.
We have a little bit I mean on our campus with engineering and a little bit in some of the hard sciences, we have a little bit of an issue.
But other than that.
Things are just going really well.
Okay, great I'll jump back in the queue. Thanks, so much.
Thank you.
Okay. As a reminder, if you have questions. Please press star one one on your telephone.
Our.
One moment.
Our next call comes from Jeffrey Mueller with Baird. Your line is open.
Yes. Thank you.
So I get the optimism on increasing enrollment advisor headcount over the next four to five months.
In terms of growing great right now so.
Curious as to like how close to a pressing issue is it just based upon.
Current enrollment adviser capacity and productivity.
How much runway is there to continue to deliver strong growth versus at what point does like.
At what point in the future would it become much more dependent upon needing to have the head count additions.
Yes, I think.
Things look very good going into the first half of next year.
Obviously total enrollment.
Rails behind new enrollments, but to new enrollment growth has been so significant.
We expect in the first half we will be back to positive total enrollment growth and then by that time, we need to make sure we're closer to full capacity from a.
From a hiring standpoint.
And that just that includes all areas all counseling areas faculty et cetera. So.
You're looking at eight months or so that we have to.
Not just the right number of people, but make sure we're hiring the right people and so we've got plenty of runway there we think.
Got it.
And then Brian I want to make sure Im understanding what's going on in terms of <unk>.
Addressing the prereq challenges for hybrid so are there two separate pathways that you are.
Standing out for solving for one is what you talked about on the call where you have 400 from students that are coming out of high school and going through the GCU.
I guess apprentice ship theater type programs for the first 60, and then they could potentially end up at a hybrid.
Campus, a GC or one of your other partners and then in addition to that program. You're also working on addressing the prereq challenges for the career changers that have an existing bachelors degree that could also feed into the various hybrid locations might correct. There's two different things going on and can you say anything further.
<unk> <unk>.
So on the second piece of that.
No I think I think you're real close there the one of the things. We're learning is that the demand to get in the nursing profession and the frustration.
Qualified students.
Not being given an opportunity has led to students being open to.
To be mobile.
And so yes first of all we bring students from all over the country into our pre nursing program here on our campus.
And those students go through two years in attempt to qualify to be in our nursing program on campus. If they can't get in there theres such an over <unk>.
Producing of high qualified students that we put an overflow of them into our GCU ABS and programs.
What we're also finding is that there are a lot of really good high school students who are willing to stay home.
And earn their first 60 credit hours, while at home saving money on transportation room Board et cetera, and.
They have lots of opportunities given that eventually we will have 80 locations to come out of those first two years.
With the necessary science courses and other Gen. Ed courses. So they can apply to one of our 80 sites.
But then we've got.
The 26 partners.
And <unk>.
Theres not a lot of good options for people that have earned degrees in other areas, who want a recurring to nursing.
Most of the options are community college options and while the community colleges do a good job in some areas.
Tell us students.
Go take a look at what they offer in the first semester and then think about what they offer and it can be a two or three year process, which as most people are not are way too impatient for that and so what we've created is online prereq courses.
You take one at a time for the most part some take two at a time, but their eight week courses and they cover all those science areas biology, chemistry anatomy physiology et cetera.
And.
We have.
Frequent starts basically every two weeks and so if you're a person out there who needs eight courses to get into a program rather than waiting for semesters to enter you can start almost immediately.
And you can finish those eight week courses and then be prepared relatively soon to be in one of our programs.
We have just such a great deal of experience in building that coursework hiring faculty, providing support services, we have a greater than 80% success rate in terms of students getting a bit better in qualifying two two.
Eventually being a nursing program and so it's that.
That.
Very efficient process to take a highly qualified and ambitious students and put them in a structure, where they can do that science coursework.
In very efficient time periods that we think is the b one of the big holes in this industry.
Eventually we're going to have 24000, ABS and slots with 80 locations in an average of 300 students and so to build up that cadre of people who are going through the prereq pop process to then be able to determine exactly what it is they're going to be completed where the openings are going to be and help them plan to go into one of those openings.
<unk> is the coordinated effort.
That is necessary to scale this thing.
Right now if you just look at the landscape.
<unk> and confusing to figure out how to.
To navigate it we want to simplify it so it's very simple so theyre highly qualified students that can do the work can get in a program and get on with it as soon as possible.
And Jeff one thing to clarify on the 421 students. That's a mixture of those two groups that Brian talked about they're not all in those are not all directly out of high school.
Got it.
Thanks for clarification, and then just last.
Are you seeing.
Differences in the employer behavior and employer conversation I hear you yes.
The electrician.
Ship program that you're standing up it sounds like the channels generally does better which makes sense coming out of COVID-19 in a tight labor market, but is there.
Our employers asking for more tailoring our programs our employers doing more in terms of financial contribution to the education, just anywhere that the conversation or behaviors change them.
It's both but it's more the first than the second I think the second is going to trail, but but the first.
Is really strong you know I mean traditionally in higher Ed people build.
Build a campus created programs and you had to come and do it their way or there was no other way to do it.
And where it's going in higher Ed is.
You bet.
<unk> has their own University now you'd be you better be able to in our opinion understand what the changing needs of the workforce in the economy are and be able to go to school districts hospitals businesses.
Technology firms and and number one understand what their human resource needs are going to be over the next five to 10 years, and then be able to respond to it in a way that they can grow their own talent.
Allen is just at such a.
Premium now.
Arizona is especially feeling because this place is going to explode in the next 10 years with all the companies that are moving from California, Illinois, and New York.
And so for us to be able to we have a giant.
Taiwanese chip factory being built here right now and that we talk to them once a week and they want every electrical engineer, we can produce but for every electrical engineer they hire they need 100 electricians.
School districts are especially.
Excited when we can come in and take their pair it professionals and move them from part time people to full time licensed teachers, because theres such a serious teacher shortage doing the same thing in nursing I think ive mentioned military basis.
They can't compete for cyber security specialists and so.
We've got over 400 people out there now that are offering tailored solutions.
To meet the.
Human resource needs Theyre going to have.
And they're out there.
Opening their doors to us in a way that's kind of unprecedented.
Because of the labor shortage that exists and so it's just a really really high quality way in my opinion for a university to operate.
Because what we're doing is taking people and asking them to invest time and money into an academic program, but but the guarantees of employment.
Our very significant they know exactly where they're going when they graduate and so that's been a big part of the.
Rejuvenating of this area for us.
Well, it's also a great validation of your big part of the solution.
Is it for me thanks.
Okay.
We have reached the end of our third quarter Conference call. We appreciate your time and interest in Grand Canyon Education. If you stop questions. Please contact myself Dan Bachus. Thank you.
Okay. Thank you for your participation. This concludes the program and you may now disconnect.
Yes.
Okay.
Yes.
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