Q4 2023 Grand Canyon Education Inc Earnings Call

February 13, 2024

After the speaker's presentation, there will be a question and answer session.

To ask a question. During this session you will need to press star one one on your telephone.

You will then hear an automated message advising your hands raised.

To withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Dan Bachus CFO. Please go ahead.

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.

These 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.

Yeah.

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 day, and thank you for standing by.

Welcome to the Grand Canyon, Education's fourth quarter 2023 conference call.

At this time all participants are in a listen only mode.

Good afternoon, and thank you for joining Grand Canyon, Education's fourth quarter fiscal year 2023 conference call GCE had another strong quarter exceeding.

After the Speakers' presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone.

Expectations by producing online new starts that were in the mid teens over prior year and also continuing to produce greater than expected retention numbers exceeding revenue guidance estimates at midpoint by $3 $3 million producing a <unk> <unk> beat in adjusted diluted earnings per share to consensus while continuing to invest heavily in initiatives for our university of <unk>.

Here, an automated message advising your hands raised.

To withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your speaker today, Dan Bachus.

CFO. Please go ahead.

Partners judged.

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.

Judging by these results and the current organic lead flow there has never been greater interest in what is happening at Grand Canyon education, and its 25 partner institutions.

There is a vast amount of untapped potential in the American Labor Force to date, there are still universities that chase after U S News and World report rankings. Unfortunately, the criteria for attaining those rankings have nothing to do with tapping into the unmet potential.

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 and GC and with that I'll turn the call over to Brian good.

For example, the fact that there are nursing and teacher shortages as a direct result of misplaced University priorities. Our success is the result of trying to understand the life situations of students and the nature of what it is they need to learn the combination of relevant programs and creative delivery models. It is is what is driving the interest in what we're doing.

Afternoon, and thank you for joining Grand Canyon, Education's fourth quarter fiscal year 2023 conference call GCE had another strong quarter exceeding enrollment expectations by producing online new starts that were in the mid teens over prior year and also continuing to produce greater than expected retention numbers exceeding revenue guidance estimates at midpoint by $3 three.

Gcu's traditional ground campus is designed around the needs of 18 year old High school graduates, who are able to spend three or four years on a college campus preparing for life and work as adults Theyre learning is primarily in physical brick and mortar classrooms in other on campus venues and in into insurance and in internships and organizations throughout the greater Phoenix area.

Million dollars producing a five cent beat in adjusted diluted earnings per share to consensus while continuing to invest heavily in initiatives for our University partners.

Second Gcu's online campus is designed for working adult students, who enter academic programs, whose content can be learned totally in an online environment.

Judging by these results and the current organic lead flow there has never been greater interest in what is happening at Grand Canyon education, and its 25 partner institutions.

<unk> platform is for students, who can't spend three or four years in a college campus, but what they are learning can't be done totally online. The 80 hybrid locations. We are building is for students entering programs, where some of the content can be learned online while a significant part must be learned.

Brick and mortar laboratory study.

Currently it is health care program, specifically nursing that are offered in those settings. The fourth platform is for students who want to access the rapidly expanding trade professions. These are shorter programs in a physical brick and mortar setting that combined real world work experience with classroom learning.

These students after gaining employment can finish their bachelors degree online.

We are developing at this platform for students who are 18 year old High school graduates, who want a three or four year college experience, but want to do it at a distance.

I spent some time on this 40000 foot view of what we are doing with our partners. Because there are people writing about why they think we are experiencing success in a troubled industry. The reality is higher education needs to move away.

Second Gcu's online campus is designed for working adult students, who enter academic programs, whose content can be learned totally in an online environment.

Needs to move way past, the simple dichotomy of either learning on our campus or doing it online.

There are a vast shortages in areas like teaching and nursing because we lack creative models of delivery that take into account the student's life situation and the nature of what it is they need to learn rather than pursuing outdated and irrelevant U S News and World report rankings, but.

Third platforms for students, who can't spend three or four years in a college campus, but what they are learning can't be done totally online that 80 hybrid locations. We are building is for students entering programs, where some of the content can be learned online while a significant part must be learned.

But to teach these programs at scale and in certain cases at a distance takes significant investment in people technology and process <unk>.

Brick and mortar laboratory study.

Currently it is healthcare program, specifically nursing that are offered in those settings. The fourth platform is for students who want to access the rapidly expanding trade professions. These are shorter programs in a physical brick and mortar setting that combined real world work experience with classroom learning.

<unk>, we have made and will continue to make with that I would like to review the results of the poor delivery platforms at Grand Canyon Education.

First the online campus at Grand Canyon University, New starts were up in the mid teens over the fourth quarter of the prior year and total enrollment growth significantly exceeded our expectations as it is up 10% over the prior year.

These students after gaining employment can finish their bachelors degree online.

We are developing at this platform for students who are 18 year old High school graduates, who want a three or four year college experience, but want to do it at a distance.

They are a main reason for this but I want to highlight for one we have stayed hyper focused on opportunities that exist in todays labor market and since the beginning of the pandemic GCU has rolled out 135, new programs emphases in certificates across the 10 colleges. These programs are tied directly to labor market opportunities for students and accounted for.

I spent some time on this 40000 foot view of what we're doing with our partners because there are people writing about why they think we are experiencing success in a troubled industry. The reality is higher education needs to move away.

Needs to move way past, the simple dichotomy of either learning on our campus or doing it online.

Six 7% of the new students who started in the fourth quarter.

One of the responses of universities to declining enrollments during the pandemic was to reduce the number of programs they offer.

Number two we continue to work with employers directly to address their workforce shortages. This effort is focused on the industries of education health care technology public safety in the military.

But to teach these programs at scale and in certain cases at a distance take significant investment in people technology and process <unk>.

In the fourth quarter New starts from this work increased 18, 6%.

Number three the retention of students in the fourth quarter went up 120 basis points, which we believe continues to improve because of the relevancy of the programs to students are entering and their direct tie to the students career aspirations.

<unk>, we have made and will continue to make with that I would like to review the results of the poor delivery platforms at Grand Canyon Education.

First the online campus of Grand Canyon University, New starts were up in the mid teens over the fourth quarter of the prior year and total enrollment growth significantly exceeded our expectations as it is up 10% over the prior year.

For GCU has resisted responding to the slower growth during the pandemic by raising tuition significantly which many institutions have done online net tuition increases since 2018 have averaged approximately 1% per year.

There are many reasons for this but I want to highlight for one we have stayed hyper focused on opportunities that exist in todays labor market and since the beginning of the pandemic GCU has rolled out 135, new programs emphases in certificates across the 10 colleges. These programs are tied directly to labor market opportunities for students and accounted for.

We anticipate new enrollments to be up year over year in 2024 in the mid to high single digits.

This deceleration from new enrollment growth in 2023 is not the result of a decrease in interest in GCU online as we anticipate new enrollments to be up significantly on an absolute basis is primarily due to re acceleration of online starts that took place in 2023.

Six 7% of the new students who started in the fourth quarter.

One of the responses of universities to the planning enrollments during the pandemic was to reduce the number of programs they offer.

Second the GCU ground campus for traditional students. We currently believe based on early indications that for fall of 2024 that gcu's traditional on campus enrollment will return to its normal growth trajectory based on discover GCU visits being up 43% year to date.

Number two we continue to work with employers directly to address their workforce shortages.

This effort is focused on the industries of education healthcare technology public safety in the military.

In the fourth quarter New starts from this work increased 18, 6%.

The number of traditional students desiring to attend online continues to significantly exceed prior years as well.

Because of GCU significant advantages, including the very low price point very low average debt levels percent of students completing in less than four years and the relevancy of GCU academic programs, we anticipate that <unk> will benefit from both trends, we will continue to focus on leading gcu's growth goals or traditional students attending <unk>.

GCU has resisted responding to the slower growth during the pandemic by raising tuition significantly which many institutions have done online.

Online net tuition increases since 2018 have averaged approximately 1% per year.

<unk> campus with Gcu's goal still being 50000 and also focus on traditional age students across the country, who want to do their academic work from home.

We anticipate new enrollments to be up year over year in 2024 in the mid to high single digits.

We are concerned about the department of educations fast the delays, but as is true with every other university, we're working around them. The best we can.

Third Grand Canyon, Education's hybrid campus had a decline in enrollment year over year of three 3% in the fourth quarter. However, we believe the hybrid campus has turned the corner.

Second the GCU ground campus for traditional students. We currently believe based on early indications for fall of 2024 that gcu's traditional on campus enrollment will return to its normal growth trajectory based on discover GCU visits being up 43% year to date, while the number of traditional students desire.

New fall enrollments were up in the high single digits year over year, and we expect the new enrollment growth rate in both the spring of 'twenty four and some are plenty for it to be up over 20% year over year.

There are two main reasons for this one almost all of our active ABS and partners have responded to the younger students interested in ABS and programs by admitting advanced standing students or are in the process of making that change.

To attend online continues to significantly exceed prior years as well.

Because of GCU significant advantages, including the very low price point very low average debt levels percent of students completed in less than four years and the relevancy of GCU academic programs, we anticipate that <unk> will benefit from both trends, we will continue to focus on leading gcu's growth goals for traditional students attending GCU.

Students with partially completed degrees haven't accumulated a great deal of debt and are very interested in nursing careers, but didn't have an efficient way to earn the prerequisite science coursework.

<unk> created the science courses in some other gen. Ed courses. So they could be delivered online in eight weeks students can access these courses from anywhere in the world. There are start opportunities almost every week. These courses have been made very affordable are taught by experienced faculty class sizes are low and there is a tremendous amount of academic support.

<unk> campus with Gcu's goal still be 50000.

And also focus on traditional age students across the country, who want to do their academic work from home.

We are concerned about the department of educations faster delays, but as is true with every other university, we're working around them. The best we can.

Including an artificial intelligence project that went live in October which provides students $24 seven access to tutoring.

Third Grand Canyon, Education's hybrid campus had a decline in enrollment year over year of three 3% in the fourth quarter. However, we believe the hybrid campus has turned the corner.

Since implementing these courses we have already enrolled approximately 6816 students we.

We have a waterfall report that allows us to know how students are progressing through their prerequisite courses and when they will be eligible to start at one of our ABS and sites.

The success rate of students, who successfully enter the ABS and programs is 90% in the first time pass rate on the <unk> exam is approximately 90% as well.

We now have an extremely efficient way to get students academically eligible and prepare to enter the program.

We saw positive results from the fall semester, and we believe it will get better from there.

There has never been greater interest among potential students for entering the health care professions, and specifically nursing.

<unk> created the science courses and some other gen. Ed courses. So they could be delivered online in eight weeks students can access these courses from anywhere in the world. There are start opportunities almost every week. These courses have been made very affordable are taught by experienced faculty class sizes are low and there is a tremendous amount of academic support.

Because of the low unemployment rate the interest has shifted to these younger students who haven't accumulated a great deal of debt completing a bachelor's degree in another area and are underemployed.

Nearly all our partners have responded positively to the change needed to serve the advanced standing students.

Including in artificial intelligence project that went live in October which provides students $24 seven access to tutoring.

Two institutional partners have not responded and we are discontinuing our partnership with them, resulting in two sites closing.

Since implementing these courses we have already enrolled approximately 6816 students we.

In addition, we along with another partner institutions have agreed to close one of their sites due to its small market size.

We will be teaching out the students at these two at two of these sites and thus there will continue to be revenue and expense for the next year or so but the losses will be less as a result of the closings and the loss revenue thereafter is small.

We have a waterfall report that allows us to know how students are progressing through their prerequisite courses and when they will be eligible to start at one of our ABS and sites.

The success rate of students, who successfully enter the ABS and programs is 90% in the first time pass rate on the <unk> exam is approximately 90% as well.

Related to the third site our partner recently notified us that they would like to be terminate the agreement due to the enrollment underperforming and they will begin teaching out to students on their campus beginning with the summer term.

We now have an extremely efficient way to get students academically eligible and prepare to enter the program.

This partner had not agreed to make the change to admit students without completed bachelors degrees, which is why we believe the enrollments at this site continued to underperform, both the partner expectations and ours.

We saw positive results from the fall semester, and we believe it will get better from there.

There has never been greater interest among potential students for entering the health care professions, and specifically nursing.

As a result revenue will be lower than what had been anticipated, but expense will as well as this site was expected to ship from profitability in prior years to a loss in 2024 due to the decline in enrollments.

These closings are not in any way a reflection of our excitement for this platform or of this platform of our business. Our goal is still to have 80 locations with approximately 25 partners with 40 of the locations being GCU locations.

Nearly all our partners have responded positively to the change needed to serve the advanced standing students to.

Two institutional partners have not responded and we are discontinuing our partnership with them, resulting in two sites closing.

In addition, we along with another partner institutions have agreed to close one of their sites due to its small market size we.

Fourth the centre for workforce development at Grand Canyon University in 2022, 23 School year. We started 80 students in Gcu's electricians pre apprenticeship program in partnership with companies that are experiencing labor shortages in that area and are excited about hiring GCU graduates. The program consists of four four credit courses and runs once you.

Related to the third site our partner recently notified us that they would like to be terminate the agreement due to the enrollments underperforming and they will begin teaching out to students on their campus beginning with the summer term.

Investor 74 students successfully completed the program. This upcoming school year, we will start 230 students in the program and expect the same results 119 students started this program in the fall and we expect approximately 110 in the spring of 2024.

<unk> also has plans to begin offering this program at one of our locations outside of Arizona in 2024.

As a result revenue will be lower than what had been anticipated a bit expense will as well as this site was expected to shift from profitability in prior years to a loss in 2024 due to the declining enrollments.

This past fall GCU also started 19 students in a manufacturing certificate program.

<unk> was running a small.

Small parts manufacturing business on campus that is doing work for some of the major companies in Arizona. These.

These closings are not in any way a reflection of our excitement for this platform.

These students are going to school for 20 hours a week and then work in the facility as a paid employee for 20 hours.

This platform of our business. Our goal is still to have 80 locations with approximately 25 partners with 40 of the locations being GCU locations.

At the end of the semester. They received a manufacturing certificate and became eligible for employment in Arizona as fast growing manufacturing industry.

Gcu's growing engineering College also has students assisting with this project. Once this concept has been successfully proved out we expect to work with GCU just scale. This program and then add others.

I started out talking about the relevant programs and creative delivery models. The GCE has implemented with this 25 partner institutions.

<unk>.

<unk> plus year 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 154318 students 42438 in education, including 19842 <unk>.

74 students could successfully completed the program. This upcoming school year, we will start 230 students in the program and expect the same results 119 students started this program in the fall and we expect approximately 110 in the spring of 2024.

<unk> also has plans to begin offering this program at one of our locations outside of Arizona. It in 2024.

First time teachers at Pineland teacher shortages have created a national crisis.

This past fall GCU also started 19 students in a manufacturing certificate program.

<unk> 42941 in nursing and health care professions, including 2267 pre licensure nurses at a time when there's a huge shortage of nurses.

<unk> was running a small.

Small parts manufacturing business on campus is doing work for some of the major companies in Arizona. These.

These students are going to school for 20 hours a week and then working the facility as a paid employee for 20 hours.

30115, and the college of Humanities, and social sciences, including thousands and counseling and social work, where there are also huge shortages the.

At the end of the semester. They received a manufacturing certificate and became eligible for employment in Arizona as fast growing manufacturing industry.

The college of business will become one of the largest business schools in America and has produced 26627 graduates the college of Science Engineering and technology has grown by 246% and provided 4874 graduates the.

I started out talking about the relevant programs and creative delivery models. The GCE has implemented with this 25 partner institutions.

The doctoral College honors College and college of Theology also continued to grow in.

Addition, GCE has helped it's other partners graduate 11848, pre licensure nurses and occupational therapist assistants.

<unk> plus years since GCE has become a service provider. It is helped its partners accomplish the following and.

In that time GCE has helped Grand Canyon University graduate 154318 students.

The numbers that I have just decided have all happened in the five plus years since the GCU GCE transaction and since GCE has become an education services provider.

42438 in education, including 19842 first time teachers at Pineland teacher shortages have created a national crisis.

Service revenue was $278 3 million for the fourth quarter of 2023, an increase of $19 6 million or seven 6% as compared to the $258 7 million for the fourth quarter of 2022.

42941 in nursing and health care professionals, including 2267 pre licensure nurses at a time when there is a huge shortage of nurses.

The increase year over year in service revenue was primarily due to an increase in GCU enrollments of 8% and an increase in revenue per student year over year.

<unk> thousand 115, and the college of Humanities, and social sciences, including thousands and counseling and social work, where there are also huge shortages.

Operating income for the three months ended December 31, 2023 was $97 8 million, an increase of $7 1 million as compared to $90 7 million for the same period in 2022.

The college of business to become one of the largest business schools in America and has produced 26627 graduates the college of Science Engineering and technology has grown by 246% and provided 4874 graduates the.

The operating margin for each of the three months ended December 31, 2023, and 2022 was 35, 1%.

The Doctor will College honors College and college of Theology also continue to grow.

Net income increased 13, 6% to $80 7 million for the fourth quarter of 2023 compared to $71 million for the same period in 2022.

Addition, GCE has helped it's other partners graduate 11848, pre licensure nurses and occupational therapist assistants.

GAAP diluted income per share for the three months ended December 31, 2023 is $2 71.

The numbers that I have just decided have all happened in the five plus years since the GCU GCE transaction and since GCE has become an education services provider.

As adjusted non-GAAP diluted income per share for the three months ended December 31, 2023 is $2 77.

Service revenue was $278 3 million for the fourth quarter of 2023, an increase of $19 6 million or seven 6% as compared to the $258 7 million for the fourth quarter of 2022.

With that I would like to turn it over to Dan <unk>, our CFO to give a little more color on our 2023 fourth quarter talk about changes in the income statement balance sheet and other items as well as to discuss the 2020 for guidance.

The increase year over year in service revenue is primarily due to an increase in GCU enrollments of 8% and an increase in revenue per student year over year.

Thanks, Brian included in 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 December 31, 2023, and 2022, the non-GAAP amounts exclude the tax affected amount of the amortization of intangible assets of $2 1 million in the fourth quarters of both 2020.

Operating income for the three months ended December 31, 2023 was $97 8 million, an increase of $7 1 million as compared to $90 7 million for the same period in 2022.

The operating margin for each of the three months ended December 31, 2023, and 2022 was 35, 1%.

Three in 'twenty, two and the tax affected amount of the losses on fixed asset disposals of zero point $2 million and 0.1 million for the three months ended December 31, 2023, and 2022, respectively. We believe that non-GAAP financial information allows investors to develop a more meaningful understanding of the company's performance over time.

Net income increased 13, 6% to $80 7 million for the fourth quarter of 2023 compared to $71 million for the same period in 2022.

As adjusted non-GAAP diluted income per share for the three months ended December 31, 2023, and 2022 is $2 77, and $2 36, respectively.

GAAP diluted income per share for the three months ended December 31, 2023 is $2 71.

As adjusted non-GAAP diluted income per share for the three months ended December 31, 2023 is $2 77.

Service revenue was higher than our expectations in the fourth quarter of 2023 due to higher than expected enrollments at GCU and some of our other University partners revenue per student continues to grow on a year over year basis, primarily due to the service revenue impact of the growth in the GCU traditional campus enrollments between years, which has a higher revenue per student and the <unk>.

With that I would like to turn it over to Dan <unk>, our CFO to give a little more color on our 2023 fourth quarter talk about changes in the income statements balance sheet and other items as well as to discuss the 2020 for guidance.

Higher revenue per student at off campus classroom and laboratory sites service revenue per student for hybrid a BSN students generates a significantly higher revenue per student than we earn 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 as.

<unk>, two and the tax affected amount of the losses on fixed asset disposals of zero point $2 million and $0 1 million for the three months ended December 31, 2023, and 2022, respectively. We believe that non-GAAP financial information allows investors to develop a more meaningful understanding of the company's performance over time.

They're an accelerated programs the increase in revenue per student was negatively impacted in the fourth quarter of 2023 by year over year differences in the timing of the GCU traditional campus fall semester, such that $1 2 million shifted from the fourth quarter of 2023 to the third quarter in 2023 as compared to last year.

As adjusted non-GAAP diluted income per share for the three months ended December 31, 2023, and 2022 is $2 77, and $2 36, respectively.

Our operating margin was slightly lower than our expectations, primarily due to higher than expected investments, including higher discover visitors.

Increased head count and higher technology costs.

As I discussed on prior quarters earnings calls, we have been aggressively hiring and which head count had been mostly flat since March of 2020 to meet our partners' expected future growth, which is driving increased compensation costs, primarily in counseling services and support cost.

We also planned for and have incurred significant increases year over year in travel primarily related to the discovery well.

Per student at off campus classroom and laboratory sites.

We also planned and have incurred increased clinical costs at off campus classroom and laboratory sites due to the nursing shortage. We also continue to spend more in technology services, both in head count and licensing fees as a result of new technology request by our partners and we are incurring costs related to the new hybrid locations that have opened in the last six months or will open in 2000.

Service revenue per student for hybrid ABS and students generate significantly higher revenue per student than we earn 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 the increase in revenue per student was negative.

24.

<unk> impacted in the fourth quarter of 2023 by year over year differences in the timing of the GCU traditional campus fall semester, such that $1 2 million shifted from the fourth quarter of 2023 to the third quarter in 2023 as compared to last year.

And the shift of $1 2 million of revenue from the fourth quarter to the third quarter as compared to prior year negatively impacted the fourth quarter margin.

Our effective tax rate for the fourth quarter of 2023 was 19, 9% compared to 22, 8% in the fourth quarter of 2022, and our guidance of 23%.

Our operating margin was slightly lower than our expectations, primarily due to higher than expected investments, including higher discover visitors and increased.

The decrease in our effective tax rate between the periods was primarily driven by other discrete tax items recorded in the respective periods.

Increased head count and higher technology costs.

We repurchased 134747 shares of our common stock in the fourth quarter of 2023 at a cost of approximately $16 8 million and another 50703 shares were repurchased since December 31, 2023, we have $258 6 million remaining available as of today under our.

Share repurchase authorization the board and the company intends to continue using a significant portion of its cash flows from operations to repurchase shares.

Really related to discovery.

We also plan to and have incurred increased clinical costs at off campus classroom and laboratory sites due to the nursing shortage. We also continue to spend more on technology services, both in head count and licensing fees as a result of new technology request by our partners and we are incurring costs related to the new hybrid locations that have opened in the last six months or will open in 2000.

Turning to the balance sheet and cash flows total unrestricted cash and short term investments as of December 31, 2023, or $244 5 million.

GCE capex in the fourth quarter 2023, including Capex for new off campus classroom and laboratory sites was approximately $10 4 million or three 7% of service revenue.

24.

And the shift of $1 2 million of revenue from the fourth quarter to the third quarter as compared to prior year negatively impacted the fourth quarter margin.

We expect Capex for 2024 to be between $30 and $40 million.

Our effective tax rate for the fourth quarter of 2023 was 19, 9% compared to 22, 8% in the fourth quarter of 2022, and our guidance of 23%.

The slightly higher capex expectations is due to higher spend on the internal it projects and due to a couple of the new offsite locations incurring slightly higher than expected tenant improvement in equipment costs.

The decrease in our effective tax rate between periods was primarily driven by other discrete tax items recorded in the respective periods.

Lastly, I would like to provide color on the guidance. We have provided in our 8-K filed today as a reminder of the guidance that we've provided in the outlook section of our 8-K filed today as GAAP net income and diluted income per share with the components to adjust the GAAP amounts to non-GAAP as adjusted as adjusted net income and non-GAAP as adjusted diluted income per share.

We repurchased 134747 shares of our common stock in the fourth quarter of 2023 at a cost of approximately $16 8 million and another 50703 shares were repurchased since December 31, 2023, we have $258 $6 million remaining available as of today under our.

Consistent with the prior year, we have provided ranges for revenue operating margin and earnings per share for each of the four quarters of 2024.

Share repurchase authorization the board and the company intends to continue using a significant portion of its cash flows from operations to repurchase shares.

We do this because our financial results are seasonal.

The revenue range assumes the following <unk>.

Turning to the balance sheet and cash flows total unrestricted cash and short term investments as of December 31, 2023, or $244 5 million.

<unk> ground enrollment will grow to 22900 in the spring.

7800 in the summer and between 25000 827100 in the fall the.

GCE capex in the fourth quarter of 2023, including Capex for new off campus classroom and laboratory sites was approximately $10 4 million or three 7% of service revenue.

The ground number continues to include <unk> hybrid and professional study students.

<unk> students are projected to grow to 16000 in the spring and between 17000 518500 in the fall.

We expect Capex for 2024 to be between 30% and $40 million.

The slightly higher capex expectations is due to higher spend on internal it projects and due to a couple of the new site locations incurring slightly higher than expected tenant improvement in equipment cost.

Timing differences in the ball and.

Timing differences in the start and end of the traditional campus semester is pushing $2 1 million from Q2 2024 to Q1 2024 in comparison to 2023 0.2 million from Q3, 2024% of Q2, 2024, and $2 7 million from Q.

Last I would like to provide color on the guidance. We have provided in our 8-K filed today as a reminder of the guidance that we've provided in the outlook section of our 8-K filed today as GAAP net income and diluted income per share with the components to adjust the GAAP amounts to non-GAAP as adjusted as adjusted net income and non-GAAP as adjusted diluted income per share.

For 2024 to Q3 2024 in comparison to 2023.

We anticipate that new online enrollments will be up year over year in the mid to high single digits in each quarter during 2024 and that total online enrollment will continue to grow in the high single digits over the prior year throughout 2024 as.

Consistent with the prior year, we have provided ranges for revenue operating margin and earnings per share for each of the four quarters of 2024.

We do this because our financial results are seasonal.

The revenue range assumes the following <unk>.

As Brian has discussed the online enrollment results were outstanding in 2023, not only did new enrollment grow at a much higher rate than we expected and in the second half. These growth rates were coming off a very difficult year over year comp, but retention rates significantly improved over the prior year.

<unk> ground enrollment will grow to 22900 in the spring.

7800 in the summer and between 25000 827100 in the fall of.

The ground number continues to include GCU hybrid and professional study students.

These factors will impact the total enrollment growth rate in 2020 for the new enrollment growth is a deceleration from 2023 and growth rate, but not in the overall new students being added and the total online growth rates are expected to remain over our long term objectives of mid single digit growth throughout the year.

Residential students are projected to grow to 16000 in the spring and between 17000 518500 in the fall.

Timing differences in the fall.

Timing differences in the start and end of the traditional campus semester is pushing $2 1 million from Q2 2024 at the Q1 2024 in comparison to 2023 0.2 million from Q3, 2024% of Q2, 2024, and $2 7 million.

There could be some upside to these projections given the strong lead trends, but given the very difficult the very significant growth in 2023, and thus the difficult comps. We believe these estimates are appropriate.

We also anticipate seeing a decline in the growth rate of reentry students returning to school after break due to 2023 retention rates and a significant year over year increase in graduate both of which will put pressure on the total enrollment growth rate.

From Q4, 2024 to Q3 2024 in comparison to 2023.

We anticipate that new and online enrollments will be up year over year in the mid to high single digits in each quarter during 2024 and that total online enrollment will continue to grow in the high single digits over the prior year throughout 2024 as.

As Brian discussed earlier, the new student growth rate in the hybrid pillar is protected predicted to grow on a year over year basis greater than 20% in each of the next two start periods during 2024 and the total hybrid enrollment will return to growth in the first quarter, which is much sooner than we had previously predicted.

The revenue growth rate for the hybrid pillar as a result of the enrollment growth will be partially offset by changes made to the contracts for the University partners that are no longer being reimbursed for factory costs and the site closings discussed earlier, we estimate that this will lower revenue of approximately $6 1 million during 2024 on.

These factors will impact the total enrollment growth rate in 2024 <unk>.

Do enrollment growth is a deceleration from 2023 and growth rate, but not in the overall new students being added and the total online growth rates are expected to remain over our long term objectives of mid single digit growth throughout the year.

On the expense side as you'll recall, we made significant investments in the past few years, primarily in head count and travel expenses to meet the growth goals of our parks, our head count growth will slow in 2024, which will allow us to return to margin expansion, but there still expense categories that we anticipate will see year over year increases greater than revenue growth.

As Brian mentioned earlier, beginning this past fall and continuing in this spring we have seen a significant increase in the demand for gcu's traditional campus discover events and thus we anticipate a continued increase year over year and travel expenses.

This is a significant expense, we believe we need to incur to meet gcu's desired traditional campus growth rate.

We also anticipate increases in technology and academic services costs as we spend more on technology services, both in head count and licenses fees as a result of new technology request by our partners and we will incur costs for the new hybrid locations that have opened in the last six months or will open in 2024 25.

The revenue growth rate for the hybrid pillar as a result of the enrollment growth will be partially offset by changes made to the contracts for the University partners that are no longer being reimbursed for faculty costs and the site closings discussed earlier, we estimate that this will lower revenue approximately $6 1 million during 2024 on.

We do anticipate that the hybrid pillar will continue to lose money in 2024, given that a number of mature sites remained significantly below pre COVID-19 student counts. The newer sites are generally back to historical margin profiles as they are back to growing at rates more similar to what we experienced pre COVID-19, but to get back to profitability the mature sites need to get back to pre code.

On the expense side as you'll recall, we made significant investments in the past few years, primarily in head count and travel expenses to meet the growth goals of our partners. Our head count growth will slow in 2024, which will allow us to return to margin expansion, but they are still expense categories that we anticipate we will see year over year increases greater than revenue growth.

But enrollment levels.

Those are now admitting advanced <unk> students are generally back to growth those that have not generally continue to see enrollment challenges. We're also continuing observe that our cost of service students in the licensure online programs at GCU is seeing significant growth in <unk> is higher than other programs. We anticipate that this will continue to put pressure on long term March.

<unk> as these programs continue to grow last we anticipate an increase in legal fees in 2024 over prior years as we have a couple of lawsuits filed in prior years that are expected to go into the discovery phase and or into trial during 2024.

This is a significant expense, we believe we need to incur to meet Gcu's desire traditional campus growth rate.

We also anticipate increases in technology and academic services costs as we spend more in technology services, both in head count and licenses fees as a result of new technology request by our partners and we will incur costs for the new hybrid locations that have opened in the last six months or will open in $2024 25.

Litigation fees and regulatory reserves are included as a component of our non-GAAP measure adjusted EBITDA.

With all that said, we anticipate returning to long term margin growth.

In estimating interest income for 2024, we assume similar cash balances to 2023 and a similar interest rate environment in the first half of 2024. So we projected similar interest income in the first half but are conservatively projecting a decline in interest rates in the second half of 2020 through 24, and Thats slightly lower interest income.

We do anticipate that the hybrid pillar, we will continue to lose money in 2024, given that a number of mature sites remains significantly below pre COVID-19 student counts. The newer sites are generally back to historical margin profiles as they are back to growing at rates more similar to what we experienced pre COVID-19, but to get back to profitability the mature sites need to get back to pre <unk>.

We believe the effective tax rate for the fourth quarters of 2024 will be 23, 4% 24, 9% 24, 9% and 22, 8% the effective tax rate will be higher in 2024, then 2023 because of the impact of state income taxes as revenues continue to grow it.

With enrollment levels.

Now admitting advanced <unk> students are generally back to growth those that have not generally continue to see enrollment challenges. We're also continuing is that our cost of service students in the licensure online programs at GCU is seeing significant growth and is higher than other programs. We anticipate that this will continue to put pressure on long term margins.

The offsite locations outside of Arizona, driving our tax rate increase and the and the first quarter effective tax rate is much higher than in 2023.

As these programs continue to grow.

Last we anticipate an increase in legal fees in 2024 over prior years as we have a couple of lawsuits filed in prior years that are expected to go into the discovery phase and or into trial. During 2020 for litigation fees and regulatory reserves are included as a component of our non-GAAP measure adjusted EBITDA.

In 2023, we received a large onetime Arizona state income tax refund.

These estimates do not assume a contribution in lieu of state income taxes.

One is made that will increased G&A expense in the third quarter and decreased the effective tax rate in the second half of the year.

With all that said, we anticipate returning to long term margin growth in.

Our weighted average shares guidance could.

Assumes that we purchased most of the remaining amount authorized by our board over the rest of the year, although given the rise in the stock price, we anticipate purchasing less stock in 2024, then in 2023.

In estimating interest income for 2024, we assume similar cash balances to 2023 and a similar interest rate environment in the first half of 2024. So we projected similar interest income in the first half but are conservatively projecting a decline in interest rates in the second half of 2000, 2024, and thats slightly lower interest income.

The board continues to authorized the repurchase of shares as it believes the stock remains undervalued based on the metrics that it uses to evaluate including the ratio of enterprise value to adjusted EBITDA and the free cash flow yield rather than multiples of other education companies.

We believe the effective tax rate for the fourth quarters of 2024 will be 23, 4% 24, 9% 24, 9% and 22, 8%.

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 11, eight which is less than the recent S&P average of 17, the average free cash flow yield for the S&P 500 is two 8%, whereas the company's free cash flow yield is approximately $5.

The effective tax rate will be higher in 2024, then 2023 because of the impact of state income taxes as revenues continue to grow at the Offsite locations outside of Arizona, driving our tax rate increase and the and the first quarter effective tax rate is much higher than in 2023.

7%.

I will now turn the call over to moderate moderator, so that we can answer questions.

In 2023, we received a large onetime Arizona state income tax refund.

Thank you.

Monitor to ask a question. Please press star one on your telephone.

These estimates do not assume a contribution in lieu of state income taxes.

One is made that will increase G&A expense in the third quarter and decreased the effective tax rate in the second half of the year.

Wait for your name to be announced.

Your question. Please press star one again.

Our weighted average shares guidance assumes.

Please standby, while we compile the Q&A roster.

<unk> assumes that we purchased most of the remaining amount.

Otherwise by our board over the rest of the year, although given the rise in the stock price, we anticipate purchasing less stock in 2024, then in 2023.

Okay.

And our first question comes from Jeff Silber with BMO capital markets. Your line is now open.

Hey, Good afternoon. This is Ryan on for Jeff just a question on some of the SaaS delays have you seen any impact there.

Orbis or GCU, and just anything related to call out there.

Okay.

We haven't we're going to see it is on the ground campus.

And that's where we'll see it more so than any place else.

And.

What we have to do is stay in touch with students who are interested.

7%.

And give them as much information as we can about our programs the cost of our programs invite them to campus to discover GCU.

I will now turn the call over the moderate moderator, so that we can answer questions.

Thank you.

<unk> to ask a question. Please press star one on your telephone.

And we believe that eventually the site will get fixed and we will be able to get them. The faster they will be able to get the fast the information that they need to make a decision and so.

For your name to be announced.

Your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Uh huh.

Our ability to stay with the students and keep keep them motivated as what's key here that's going to be true for every university.

Okay.

One of the things that we saw in the fall.

And our first question comes from Jeff Silber with BMO capital markets. Your line is now.

Again enrollments in four year institutions were down.

Enrollments the only place the enrollments were really up was in community colleges and that was that was that was significant given the reductions in community College enrollments during the pandemic.

Hey, Good afternoon. This is Ryan on for Jeff just a question on some of the SaaS delays have you seen any impact there.

<unk> or <unk>, and just anything related to call out there.

This is a reflection of we believe is that inflation is real.

Okay.

We haven't we're going to see it is on the ground campus.

<unk> Middle Class Americans and the whole idea of quest.

And that's where we'll see it more so than any place else.

Questioning the return on investment for higher Education continues in this country and if youre if youre questioning.

And.

What we have to do is stay in touch with students who are interested.

The return Youre going to get you're going to look for less expensive options.

And give them as much information as we can.

And so in the short run community colleges benefit from that.

Our programs the cost of our programs invite them to campus to discover GCU.

But we also eventually will benefit that from that we believe.

And we believe that eventually the site will get fixed and we will be able to get them. The faster they will be able to get the fast the information that they need to make a decision and so.

The reason we're over investing.

In visits to the campus this year and are running 43% ahead.

Is that as president of the University I still believe that we have an incredibly strong value proposition that is still relatively unknown for the majority of Americans and we are so.

Our.

<unk> to stay with the students and keep keep them motivated as what's key here, that's going to be true for every university.

One of the things that we saw in the fall.

Again enrollments in four year institutions were down.

Excited about what we have to offer here.

And what's happening with our graduates.

Enrolment is the only place the enrollments were really up wasn't community colleges and that was that was that was significant given the reductions in community College enrollments during the pandemic.

This campus that we're going to continue to over invest in that process.

Even with some of the challenges from a basketball perspective.

This is a reflection of we believe is that inflation is real.

And so.

There are challenges related to that but we believe that we are as we are better positioned than everybody else to respond to those challenges and we're looking forward to having a real successful fall semester here.

Middle Class Americans and the whole idea of.

Questioning the return on investment for higher Education continues in this country and if youre if youre questioning.

That's great and sorry, just one more clarifying one can you go over the $6 1 million you called out.

Questioning.

The return Youre going to get you're going to look for less expensive options.

So in the short run community colleges benefit from that.

And when is that expected to be phased out.

But we also eventually will benefit from that we believe.

That's just the two partners and the other one closing down.

Yes, the $6 1 million is the is the net impact of if you remember we changed the contract on.

The reason we're over investing.

In visits to the campus. This year and are running 43% ahead is that as president of the University.

On some of the part hybrid partners, where they now are paying their own factory costs were no longer reimbursing them. So that has the effect of reducing revenue and reducing our expenses and net netting to basically zero.

I still believe that we have an incredibly strong value proposition that still relatively unknown for the majority of Americans and we are so.

Excited about what we have to offer here.

And what's happening with our graduates.

No.

Big portion of that $6 1 million as that and some of that impact was off obviously in last year as well.

Office campus that we're going to continue to over invest in that process.

And then the rest of of it is the impact of the.

Even with some of the challenges from a basketball perspective.

The closing of the sites that amount pretty minimal of the overall $6 1 million and most of that is in the second half of the year.

So.

Got it thank you.

That's great and sorry, just one more clarifying one can you go over the $6 1 million you called out.

Thank you one moment for our next question.

And when is that expected to be phased out.

Okay.

Our next question comes from Jeff Mueller with Baird. Your line is now open.

Assuming that's just the two partners and the other one closing down yes.

Yes, the $6 1 million is the is the net impact of if you remember we changed the contract.

Yes.

Yes. Thank you, it's Steven polygon on for Jeff.

Just on the DTC you discover strength, obviously at good numbers there but.

On some of the part.

Just maybe some more detail are you seeing that you are better reach or better conversion of students I guess, that's kind of.

Hybrid partners, where they now are paying their own factory costs were no longer reimbursing them. So that has the effect of reducing revenue and reducing our expenses and net netting to <unk>.

What are some of the driving forces behind some of those strong numbers.

The number of visitors like we said is strong.

Basically zero.

So a big portion of that $6 1 million as that and some of that impact was off obviously in last year as well.

Number of students that eventually applied to the institution is strong.

It's lagging behind a little bit is the number of students that are committing bye.

And then the rest of of it is the impact.

By putting a downpayment down.

The closing of the sites that amount pretty minimal of the overall $6 1 million and most of that is in the second half of the year.

Because many of them are waiting for.

Fast the information.

And so.

There is no question that were.

We are again I'll say this as president of the University I'm, So bullish on what we have here.

Got it thank you.

And I think it is so.

Thank you one moment for our next question.

The knowledge of what we have and the value proposition is still very under known in most of the country.

Okay.

Our next question comes.

We are becoming more well known I mean currently 25% of our ground students are from Arizona, 20% or so from California, but we're growing like crazy in the middle in the Midwest.

The northwest and the South East.

And so our ability to hang with the students and keep them as informed as we possibly can.

And then execute once they receive the fast the information that they are waiting for.

And we think we'll be in a better spot.

To convert those students than others that we're competing against.

And so obviously, we've got to prove that out.

But again.

Our goal is 50000 students on this campus.

And we're going to continue to push through that goal because.

We're so excited about what's going on in Arizona.

In the greater southwest from the standpoint of these students getting jobs.

We've got 25 advisory boards, we've got over 600 companies represented on those advisory boards and a lot of them are participating because they want access to our graduates.

And the difference our graduates are making.

The workforce is is really well understood by the hospitals the school districts engineering firms the technology firms and so we are overspending to get students to campus.

And we did go through the.

What happened last year with more students deciding to do it from home, but we really believe and I talk to these people almost on an everyday basis that are actually doing the work that we're one year now removed further removed from COVID-19.

And the lightning this of students to be okay moving from home.

Parents being okay with them moving from home, we think that being one more year removed from it puts us in a different place.

We're excited about this investment and the return it could it could provide in the fall so.

We know theres, a little bit of a risk involved there but we.

Are very bullish on what goes on here and its impact on students and families and the economy do you have any Brian I think he was asking do you have any thoughts on why discover visits are up so much as the University brand growing.

Yes, absolutely absolutely.

The the.

The value proposition that we have here is.

Is <unk>.

People are responding to that.

Given inflation.

And if youre doubting the return on investment we're going to college.

It's becoming really becoming more well known that you can get involved here graduate in three years graduate with less debt than the average state University students.

Our parent loan amounts are 50% of the parent loan amounts for in state are in state institutions, and so if you're at all questioning the value of going into a 100 or 150000 worth of dollars' worth of debt in order to go to college, you don't have to do that going here.

And the lightness of students to be okay moving from home.

Parents being okay with them moving from home, we think that being one more year removed from it puts us in a different place and.

So the interest that's what's primarily driving the interest and the willingness of people to take the time come here and visit.

We're excited about this investment and the return it could it could provide in the fall so.

We know theres, a little bit of a risk involved there but we.

No I appreciate the color.

And then Brian I think you said start.

Fifth pillar.

Some of the traditional age students.

Companion program online.

Yes.

Did I hear that correctly and then b.

Yes, absolutely absolutely.

How would that be different than your GCU online program.

The the.

The value proposition that we have here is.

Yes.

Right now the students that are 18 years old are 19 years old in one.

Is <unk>.

People are responding to that.

Earn a degree in business or earn a degree in education and they wanted to do it from home. They really start in the same program that our 35 year old startup our working adult students. There is not much difference in those things. We're working on is eventually a fifth platform that would take into consideration. The students are younger they have lesser work experience.

Given inflation.

And if youre doubting the return on investment we're going to college.

It's becoming really becoming more well known that you can get involved here graduate in three years graduate with less debt than the average state University students.

Our parent loan amounts are 50% of the parent loan amounts for in state are in state institutions, and so if you're at all questioning the value of going into a 100 or 150000 worth $1 worth of debt in order to go to college, you don't have to do that going here.

They bring less of the classroom in terms of that work experience and so over time, we might differentiate those two groups a little bit more than we do today.

Today, we basically put them in the same program that for example, a 32 year old would go into if they were to return to college and want to earn a degree in one of those areas. So there is not much different today, but.

And so the interest that's what's primarily driving the interest and the willingness of people to take the time come here and visit.

But the fact that we are able to do it in a way that we do it differentiates us.

No.

The color.

And then Brian I think you said start.

If you are living in wherever.

Fifth pillar.

Yes.

State in the country.

Some of the traditional age students.

And Youre thinking you know I wanted to go to college, but im Okay, staying home I've got a network of friends I have got a good part time job on making $20 an hour.

Companion program online.

Yes.

Did I hear that correctly and then b.

How would that be different than your GCU online program.

I can do this from home at least for a year or maybe longer.

Yes.

Right now the students that are 18 years old or 19 years old in one.

Not a lot of institutions that give you the ability to do that and so as we look at traditional eight students we want to grow our ground campus or 50000 students, but for those students that are that as you want to stay home.

Earn a degree in business or earn a degree in education and they wanted to do it from home. They really start in the same program that our 35 year old start yet our working adult students. There is not much difference in those things. We're working on is eventually a fifth platform that would take into consideration. The students are younger they have lesser work experience.

We have an opportunity to serve them as well, whereas most institutions don't so we will work on both of those things.

Thank you very much.

Thank you one moment for our next question.

They bring less of the classroom in terms of that work experience and so over time, we might differentiate those two groups a little bit more than we do today.

Today, we basically put them in the same program that for example, a 32 year old would go into if they were to return to college and want to earn a degree in one of those areas. So theres not much difference today, but.

Our next question comes from Alex Paris, with Barrington Research. Your line is now open.

Thank you.

Thank you for taking my question.

But the fact that we are able to do it in the way that we do it differentiates us.

I just had a.

Follow up on the hybrid campus a lot of information.

If you are living in wherever.

Trading has been good.

Alright, so so hybrid you had a three 3% decline in total enrollment.

Yes.

State in the country.

And Youre thinking I wanted to go to college, but I'm, Okay, staying home I've got a network of friends I've got a good part time job on making $20 an hour.

During the fourth quarter.

Fall New student was up in the high single digit you're expecting and I'm just trying to.

Some clarification, new student enrollment growth in the spring and the summer are expected to be up over 20% and.

I can do this from home at least for a year or maybe longer.

Not a lot of institutions that gives you the ability to do that and so as we look at traditional age students, we want to grow our ground campus or 50000 students, but for those students that are that as you want to stay home.

And you expect total student enrollment to inflect positive in the first quarter I'm looking at the hybrid campus.

You got it right Alex Alright.

Alright, thank you.

We have an opportunity to serve them as well, whereas most institutions don't so we will work on both of those things.

And then.

With regard to the site closures.

Yeah.

<unk> 24.

Thanks very much.

Partnerships.

Thank you one moment for our next question.

Only two have not responded to the advanced standing students proposition.

And that led to the closure of these two sites and the discontinuing of business with these two institutions.

Our next question comes from Alex Paris, with Barrington Research. Your line is now open.

Yes.

That's correct.

Yes.

Thank you.

And then you had one other that you were closing just because it was below expectations, which then led to.

Thank you for taking my question.

I just had a.

Follow up on the hybrid campus a lot of information.

You just because they're doing business with that so you've gone from 24 partners to 'twenty one partners within the hybrid pillar one point of clarification. The last one is as it is a universe is a partner that had multiple locations.

Righting itself.

<unk>.

Alright, so so hybrid you had a three 3% decline in total enrollment.

During the fourth quarter.

Fall New student was up in the high single digits, you're expecting and I'm just trying to.

And the decision was made this quarter to close one of their multiple locations. So.

Some clarification, new student enrollment growth in the spring and the summer are expected to be up over 20%.

We are only decreasing our partners number of partners by two.

And you expect total student enrollment to inflect positive in the first quarter and the hybrid campus.

Okay got it. Thank you for that now your goal is to have 80 site locations 40 of which will be GCE locations with 25 partners. So you expect to add it.

You got it right Alex.

Right. Thank you.

And then.

With regard to the site closures.

<unk> 24.

Based on that target three net new.

Partnerships.

The University partners in the hybrid pillar.

Only two have not responded to the advanced standing students proposition.

Pillar.

Yes.

That's an approximate number that there are areas of the country in states, where it's easier to operate with an existing institution in that state and for GCU to get in that state or for those space, We will add an additional partner.

And that led to the closure of these two sites and the discontinuing of business with these two institutions right.

That's correct.

Yes.

And then you had one other that you were closing just because it was below expectations, which then led to.

The difference is this time as we add additional partners it will be.

With the common understanding that the place we really need to focus on those.

1920, and 21 year old students who've earned 30 college credits they don't have a lot of debt accumulated from our previous degree program and so theyre very open.

To doing their prerequisite work online and there and then and then pay what they need to pay in order to earn the degree in nursing and so we won't sign another partner, who doesn't come with that understanding in that agreement that they will admit those students in and when you.

And the decision was made this quarter to close one of their multiple locations. So we.

We are only decreasing our partners number of partners by two.

Okay got it.

For that now your goal is to have 80 site.

Back to your 20% increase that seems dramatic given what we've done in the last year, but remember we started over 6000 students in these prereq courses.

<unk> 40 of which will be GCE locations with 25 partners. So you expect to add more.

And so the students being able to access salesforce is anywhere in the country and largely take them without the help of financial aid.

Based on that target three net new.

University partners in the hybrid.

Pillar.

Yep Yep.

Taking loans is another huge step in the right direction. If we can get 19, 2020 one year old students to understand that they can do the necessary academic work to prepare them without debt and they havent already accumulated debt from a previous baccalaureate program the investment in the ABF and program makes us.

The difference is this time as we add additional partners it will be with.

With the common understanding that the place we really need to focus on those.

<unk> amount of sense, a sense given the number of giving you the money they will make their career at a nurse in the shortages and all of that so we.

1920, and 21 year old students who've earned 30 college credits they don't have a lot of debt accumulated from our previous degree program and so theyre very open.

We think we've turned the corner from the standpoint of view hybrid.

Programs and we're very excited about where it's going in the future.

That's great.

And then obviously there is a lag between new student enrollment and total student enrollment, although we expect total student enrollment to be up in the first quarter, yet Dan I think you said that you expect the hybrid pillar to still lose money in 2024.

Back to your 20% increase that seems dramatic given what we've done in the last year, but remember we started over 6000 students in these prereq courses.

What level of revenue do we need or what level of enrollment that we need for it to breakeven and do you expect it to be breakeven or better in 2025.

And so the students being able to access those courses anywhere in the country and largely take them without the help of financial aid.

We're hopeful.

We expect a significant decrease in the loss between 'twenty, three and 'twenty four and we're hopeful it'll it'll get back to.

Taking loans.

Two.

Is another huge step in the right direction, if we can get 19, 2020 one year old students to understand that they can do the necessary academic work to prepare them without debt and they havent already accumulated debt from a previous baccalaureate program. The investment in the BSN program makes unbelievable amount of sense a sense given.

Profitability in 'twenty five.

Key.

As I mentioned earlier is to get these mature locations that we're at capacity pre COVID-19 and have seen significant declines in their enrollments back to or close to capacity and so we're obviously very focused on that working along with our University partners.

The number of giving me the money they will make their career as a nurse and the shortages and all of that so.

And the things that Brian talked about.

We're on our way, but we have work to do to get those mature locations back to capacity.

We think we've turned the corner from the standpoint of view hybrid.

Programs and we're very excited about where it's going in the future.

That's great.

Great and then last question unrelated.

Yes, Brian I think you said that the.

You're watching most closely for the ground campus why is it less of a concern.

For the online students or the hybrid systems.

What level of revenue do we need or what level of enrollment that we need for it to breakeven and do you expect it to be breakeven or better in 2025.

I guess I shouldn't say it's.

Of less concern.

We're hopeful.

We expect a significant decrease in loss between 'twenty, three and 'twenty four and we're hopeful it'll it'll get back to.

But.

It doesn't.

The.

Two.

The our ability to work with online students.

Profitability in 'twenty five.

Key.

Given the delays in fast food.

Is easier than it is with ground students who are first time students entering college coming from backgrounds, where.

The parents Havent gone to college understood College, and that kind of thing.

There's just a little bit of a greater amount of uncertainty with.

And the things that Brian talked about.

We're on our way, but we have work to do to get those mature locations back to capacity.

The traditional ground students versus online students.

And then in addition to that remember that.

Great and then last question unrelated.

50% of our online students are grad students and not eligible for.

Uh huh.

Yes, Brian I think you said that.

Pell Grant anyway.

You're watching most closely.

Got you that's helpful. And then does it also it is it also is here with online students because of the frequent starts. So if you missed the start.

For the ground campus.

Is it less of a concern for.

For the online students or the hybrid systems.

I guess I shouldn't say it's.

Have to wait an entire semester to enroll that student and risk losing that student in the interim.

Of less concern.

That's part of it too.

Barclays.

But.

Great well thanks for the color guys I appreciate it yeah. Thank you we've reached the end of our fourth quarter Conference call. We appreciate your time and interest in Grand Canyon Education. If you still questions. Please contact myself Dan Bachus. Thank you.

It doesn't.

The.

The our ability to work with online students.

Given the delays in fast food.

This concludes today's conference call. Thank you for participating you may now disconnect.

Is easier than it is with ground students who are first time students entering college coming from backgrounds, where.

The parents Havent gone to college understood College, and that kind of thing.

There's just a little bit of a greater amount of uncertainty with.

The traditional ground students versus online students.

And then in addition to that remember that.

50% of our online students are grad students and not eligible for.

Pell Grant anyway.

Got you that's helpful. And then does it also it is it also is here with online students because of the frequent starts. So if you missed the start.

Have to wait an entire semester to enroll that student and risk losing that student in the interim.

That's part of it too.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Okay.

[music].

Okay.

[music].

Yes.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

[music].

Sure.

[music].

Sure.

Okay.

[music].

Okay.

Thanks.

Okay.

[music].

Okay.

[music].

Okay.

[music].

Sure.

[music].

Okay.

[music].

Thanks.

Okay.

[music].

Okay.

[music].

Yes.

[music].

Okay.

Yes.

Okay.

Sure.

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Good day, and thank you for standing by.

Welcome to the Grand Canyon, Education's fourth quarter 2023 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 on your telephone.

We'll then hear an automated message advising your hands raised.

To withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Dan Bachus CFO. Please go ahead.

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 and GC and with that I'll turn the call over to Brian.

Good afternoon, and thank you for joining Grand Canyon, Education's fourth quarter fiscal year 2023 conference call.

<unk> had another strong quarter exceeding enrollment expectations by producing online new starts that were in the mid teens over prior year and also continuing to produce greater than expected retention numbers exceeding revenue guidance estimates at midpoint by $3 $3 million producing a five cent beat in adjusted diluted earnings per share to consensus while.

<unk> going to invest heavily in initiatives for our University partners judging.

Judging by these results and the current organic lead flow there has never been greater interest in what is happening at Grand Canyon education, and his 25 partner institutions.

Here's a vast amount of untapped potential in the American Labor Force to date, there are still universities that chase after U S News and World report rankings. Unfortunately, the criteria for attaining those rankings have nothing to do with tapping into the unmet potential for example, the fact that there are nursing and teacher shortages as a direct result of misplaced University priorities.

Our success is the result of trying to understand the life situations of students and the nature of what it is they need to learn the combination of relevant programs and creative delivery models. It is is what is driving the interest in what we are doing gcu's traditional ground campus is designed around the needs of 18 year old High school graduates who are able to spend.

Three or four years on a college campus preparing for life and work as adults Theyre learning is primarily in physical brick and mortar classrooms in other on campus venues and in into insurance and in internships and organizations throughout the greater Phoenix area.

Gcu's online campus is designed for working adult students, who enter academic programs, whose content can be learned totally in an online environment.

Third platform is for students, who can't spend three or four years in a college campus, but what they are learning can't be done totally online. The 80 hybrid locations. We are building is for students entering programs, where some of the content can be learned online while a significant part must be learned in there.

Brick and mortar laboratory study.

Currently it is healthcare program, specifically nursing that are offered in those settings. The fourth platform is for students who want to access the rapidly expanding trade professions. These are shorter programs in a physical brick and mortar setting that combined real world work experience with classroom learning.

These students after gaining employment can finish their bachelors degree online.

We are developing at this platform for students who are 18 year old High school graduates, who want a three or four year college experience, but want to do it at a distance.

I spent some time on this 40000 foot view of what we are doing with our partners. Because there are people writing about why they think we are experiencing success in a troubled industry <unk>.

The reality is higher education needs to move away needs to move way past the simple dichotomy of either learning on our campus or doing it online.

Our vas shortages in areas like teaching and nursing because we lack creative models of delivery that take into account the student's life situation and the nature of what it is they need to learn rather than pursuing outdated and irrelevant U S News and World report rankings, but.

But to teach these programs at scale and in certain cases at a distance take significant investment in people technology and process <unk>.

<unk>, we have made and will continue to make with that I would like to review the results of the poor delivery platforms at Grand Canyon Education.

First the online campus at Grand Canyon University, New starts were up in the mid teens over the fourth quarter of the prior year and total enrolment growth significantly exceeded our expectations as it is up 10% over the prior year.

So our main reason for this but I want to highlight for one we have stayed hyper focused on opportunities that exist in todays labor market insensitive beginning of the pandemic GCU has rolled out 135, new programs emphases in certificates across the 10 colleges. These programs are tied directly to labor market opportunities for students and accounted for.

Six 7% of the new students who started in the fourth quarter.

One of the responses of universities to declining enrollments during the pandemic was to reduce the number of programs they offer.

Number two we continue to work with employers directly to address their workforce shortages.

Effort is focused on the industries of education health care technology public safety in the military.

In the fourth quarter New starts from this work increased 18, 6%.

GCU has resisted responding to the slower growth during the pandemic by raising tuition significantly which many institutions have done online net tuition increases since 2018 have averaged approximately 1% per year.

We anticipate new enrollments to be up year over year in 2024 in the mid to high single digits.

This deceleration from new enrollment growth in 2023 is not the result of a decrease in interest in GCU online as we anticipate new enrollments to be up significantly on an absolute basis is primarily due to reacceleration of online starts that took place in 2023.

The number of traditional students desiring to attend online continues to significantly exceed prior years as well.

<unk> campus with Gcu's goal still being 50000 and also focus on traditional eight students across the country, who want to do their academic work from home.

We are concerned about the department of educations faster delays, but as is true with every other university, we're working around them. The best we can.

Third Grand Canyon, Education's hybrid campus had a decline in enrollment year over year of three 3% in the fourth quarter.

However, we believe the hybrid campus has turned the corner.

There are two main reasons for this one almost all of our active ABS in partners have responded to the younger students interested in ABS and programs by admitting advanced standing students or are in the process of making that change students with partially completed degrees haven't accumulated a great deal of debt and are very interested in nerf.

Careers, but didn't have an efficient way to earn the prerequisite science coursework GCU.

<unk> created the science courses in some other gen. Ed courses. So they could be delivered online in eight weeks students can access these courses from anywhere in the world.

There are start opportunities almost every week. These courses have been made very affordable are taught by experienced faculty class sizes are low and there is a tremendous amount of academic support including in artificial intelligence project that went live in October which provides students $24 seven access to tutoring.

Since implementing these courses we have already enrolled approximately 6816 students.

We have a waterfall report that allows us to know how students are progressing through their prerequisite courses and when they will be eligible to start at one of our ABS and sites.

The success rate of students who successfully enter the ABS in programs is 90% in the first time pass rate on the <unk> exam is approximately 90% as well.

We now have an extremely efficient way to get students academically eligible and prepared to enter the program.

We saw positive results in the fall semester, and we believe it will get better from there.

Never been greater interest among potential students for entering the healthcare professions and specifically nursing.

Nearly all our partners have responded positively to the change needed to serve the advanced standing students to.

Two institutional partners have not responded and we are discontinuing our partnership with them, resulting in two sites closing.

In addition, we along with another partner institutions have agreed to close one of their sites due to its small market size.

Related to the third site our partner recently notified us that they would like to terminate the agreement due to the enrollment underperforming and they will begin teaching out to students on their campus beginning with the summer term.

As a result revenue will be lower than what had been anticipated a bit expense will as well as this site was expected to ship from profitability in prior years to a loss in 2024 due to the declining enrollments.

These closings are not in any way a reflection of our excitement for this platform or this platform of our business. Our goal is still to have 80 locations with approximately 25 partners with 40 of the locations been GCU locations.

Fourth the centre for workforce development at Grand Canyon University in the 2022 23 school year. We started 80 students in Gcu's electricians pre apprenticeship program in partnership with companies that are experiencing labor shortages in that area and are excited about hiring GCU graduates. The program consists of four four credit courses and runs once you.

<unk> 74 students successfully completed the program. This upcoming school year, we will start 230 students in the program and expect the same results 119 students started this program in the fall we expect approximately 110 in the spring of 2024.

<unk> also has plans to begin offering this program at one of our locations outside of Arizona in 2024.

This past fall GCU also started 19 students in a manufacturing certificate program.

<unk> is running a small.

<unk> manufacturing business on campus that is doing work for some of the major companies in Arizona. These.

These students are going to school for 20 hours a week and then work in the facility as a paid employee for 20 hours.

At the end of the semester. They received a manufacturing certificate it became eligible for employment in Arizona as fast growing manufacturing industry.

I started out talking about the relevant programs and creative delivery models. The GCE has implemented with just 25 partner institutions and the <unk>.

Five plus year since GCE has become a service provider. It is helped its partners accomplish the following and that time GCE has helped Grand Canyon University graduate 154318 students.

42438 in education, including 19842, first time teachers and a pilot teacher shortages have created a national crisis.

42941 in nursing and health care professionals, including 2267 pre licensure nurses at a time when there is a huge shortage of nurses.

30115, 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 will become one of the largest business schools in America and has produced 26627 graduates the college of Science Engineering and technology has grown by two.

246% and provided 4874 graduates.

The doctoral College honors College and college of Theology also continue to grow.

Addition, GCE has helped it's other partners graduate 11848, pre licensure nurses and occupational therapists assistance the.

The numbers that I have just decided have all happened in the five plus years since the GCU GCE transaction and since GCE has become an education services provider.

Service revenue was $278 3 million for the fourth quarter of 2023, an increase of $19 6 million or seven 6% as compared to the $258 7 million for the fourth quarter of 2020 to the.

The increase year over year in service revenue was primarily due to an increase in GCU enrollments of 8% and an increase in revenue per student year over year.

Operating income for the three months ended December 31, 2023 was $97 8 million, an increase of $7 1 million as compared to $90 7 million for the same period in 2020 to.

The operating margin for each of the three months ended December 31, 2023, and 2022 was 35, 1%.

Net income increased 13, 6% to $80 7 million for the fourth quarter of 2023 compared to 71 million for the same period in 2022.

GAAP diluted income per share for the three months ended December 31, 2023 is $2 71.

As adjusted non-GAAP diluted income per share for the three months ended December 31, 2023 is $2 77.

Three in 'twenty, two and the tax affected amount of the losses on fixed asset disposals.

Zero point $2 million and 0.1 million for the three months ended December 31, 2023, and 2022, respectively. We believe that 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 December 31, 2023, and 2022 is $2 77, and $2 36, respectively.

Revenue per student at off campus classroom and laboratory sites service revenue per student for hybrid a BSN students generate significantly higher revenue per student than we earn 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 as they are.

Accelerated progress.

Increase in revenue per student was negatively impacted in the fourth quarter of 2023 by year over year differences in the timing of the GCU traditional campus fall semester, such that $1 2 million shifted from the fourth quarter of 2023 to the third quarter in 2023 as compared to last year.

Our operating margin was slightly lower than our expectations, primarily due to higher than expected investments, including higher discover visitors increased.

Increased head count and higher technology costs.

We also planned for and have incurred significant increases year over year in travel primarily related to discovery we.

24.

And the shift of $1 2 million of revenue from the fourth quarter to the third quarter as compared to prior year negatively impacted the fourth quarter margin.

Our effective tax rate for the fourth quarter of 2023 was 19, 9% compared to 22, 8% in the fourth quarter of 2022, and our guidance of 23% <unk>.

The decrease in our effective tax rate between the periods was primarily driven by other discrete tax items recorded in the respective periods.

We repurchased 134747 shares of our common stock in the fourth quarter of 2023 at a cost of approximately $16 8 million and another 50703 shares were repurchased since December 31, 2020, we have $258 6 million remaining available as of today under our.

Share repurchase authorization the board and the company intends to continue using a significant portion of its cash flows from operations to repurchase shares.

Turning to the balance sheet and cash flows total unrestricted cash and short term investments added <unk> <unk> as of December 31, 2023, or $244 5 million.

GCE capex in the fourth quarter 2023, including Capex for new off campus classroom and laboratory sites was approximately $10 4 million or three 7% of service revenue.

We expect Capex for 2024 to be between $30 and $40 million.

The slightly higher capex expectations is due to higher spend on the internal it projects and due to a couple of the new offsite locations increased slightly higher than expected tenant improvement in equipment costs.

Lastly, I would like to provide color on the guidance. We have provided in our 8-K filed today as a reminder, the guidance that we've provided in the outlook section of our 8-K filed today as GAAP net income and diluted income per share with a component to adjust the GAAP amounts to non-GAAP as adjusted as adjusted net income and non-GAAP as adjusted diluted income per share.

Consistent with the prior year, we have provided ranges for revenue operating margin and earnings per share for each of the four quarters of 2024.

We do this because our financial results are seasonal the.

The revenue range assumes the following <unk>.

<unk> ground enrollment will grow to 22900 in the spring.

7800 in the summer and between 25000 827100 in the fall the.

The ground number continues to include <unk> hybrid and professional study students.

<unk> students are projected to grow to 16000 in the spring and between 17000 518500 in the fall.

Timing differences in the ball and.

For 2024 to Q3 2024 in comparison to 2023.

On the expense side as you'll recall, we made significant investments in the past few years, primarily in head count and travel expenses to meet the growth goals of our parks, our head count growth will slow in 2024, which will allow us to return to margin expansion, but they are still expense categories that we anticipate will see year over year increases greater than revenue growth.

This is a significant expense, we believe we need to incur to meet gcu's desired traditional campus growth rate.

But enrollment levels.

Litigation fees and regulatory reserves are included as a component of our non-GAAP measure adjusted EBITDA.

With all that said, we anticipate returning to long term margin growth.

In estimating interest income for 2024, we assume similar cash balances to 2023 and a similar interest rate environment in the first half of 2024. So we projected similar interest income in the first half but are conservatively projecting a decline in interest rates in the second half of 2000, 2024, and thats slightly lower interest income.

The offsite locations outside of Arizona, driving our tax rate increase and the and the first quarter effective tax rate is much higher than in 2023.

In 2023, we received a large onetime Arizona state income tax refund.

These estimates do not assume a contribution in lieu of state income taxes.

One is made that will increased G&A expense in the third quarter and decreased the effective tax rate in the second half of the year.

Our weighted average shares guidance.

On an enterprise value to adjusted EBITDA basis. The stock is currently trading at roughly 11, eight which is less than the recent S&P average of 17, the average free cash flow yield for the S&P 500 is two 8%, whereas the company's free cash flow yield is approximately five 7%.

I will now turn the call over to moderate moderator, so that we can answer questions.

Thank you.

<unk> to ask a question. Please press star one on your telephone.

For your name to be announced.

Your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Okay.

And our first question comes from Jeff Silber with BMO capital markets. Your line is now open.

Hey, Good afternoon. This is Ryan on for Jeff just a question on some of the SaaS delays have you seen any impact there and orbis or GCU and just anything related to call out there.

Okay.

We haven't we're going to see is on the ground campus.

And that's where we'll see it more so than any place else.

And.

What we have to do is stay in touch with students who are interested.

And give them as much information as we can.

Our programs the cost of our programs invite them to campus to discover GCU.

And we believe that eventually the site will get fixed and we will be able to get them. The faster they will be able to get the past the information that they need to make a decision and so.

Our.

<unk> to stay with the students and keep keep them motivated is what's key here that's going to be true for every university.

One of the things that we saw in the fall was that again enrollments in four year institutions were down.

Enrolment is the only place the enrollments were really up was in community colleges and that was that was that was significant given the reductions in community College enrollments during the pandemic.

With that well this is a reflection of we believe is that inflation is real.

Middle Class Americans.

And the whole idea of quest.

Questioning the return on investment for higher Education continues in this country and if youre if youre questioning.

The return Youre going to get you're going to look for less expensive options.

And so in the short run community colleges benefit from that.

But we also eventually will benefit that from that we believe.

The reason we're over investing.

In visits to the campus this year and are running 43% ahead.

Is that as president of the University I still believe that we have an incredibly strong value proposition that is still relatively unknown for the majority of Americans and we are so.

Excited about what we have to offer here.

And what's happening with our graduates.

This campus that we're going to continue to over invest in that process.

Even with some of the challenges from a basketball perspective.

And so.

That's great and sorry, just one more clarifying one can you go over the $6 1 million you called out.

And when is that expected to be phased out.

That's just the two partners and the other one closing down.

Yes, the $6 1 million is the is the net impact of if you remember we changed the contract on.

No.

Big portion of that $6 1 million as that and some of that impact was obviously in last year as well.

And then the rest of it is the impact.

The closing of the sites that amount pretty minimal of the overall $6 1 million and most of that is in the second half of the year.

Got it thank you.

Thank you one moment for our next question.

Okay.

Yeah.

Our next question comes from Jeff Mueller with Baird. Your line is now open.

Yes. Thank you, it's Steven polygon on for Jeff.

Just on the DTC you discover strength, obviously at good numbers, there, but just.

Just maybe some more detail are you seeing that you are better reach or better conversion of students I guess, that's kind of.

What are some of the driving forces behind some of those strong numbers.

The number of visitors like we said is strong.

The number of students that eventually applied to the institution is strong.

What's lagging behind a little bit is the number of students that are committing.

By putting a downpayment down.

Because many of them are waiting for.

<unk> information.

And so.

There is no question that were.

We are again I'll say this as president of the University I'm, So bullish on what we have here.

And I think it is so.

The knowledge of what we have and the value proposition is still very under known in most of the country.

We are becoming more well known I mean currently 25% of our ground students are from Arizona, 20% Ourself from California, but we're growing like crazy in the middle in the Midwest.

The northwest and the South East.

And so our ability to hang with the students and keep them as informed as we possibly can.

And then execute once they receive the fast the information that they are waiting for.

And we think we'll be in a better spot.

To convert those students than others that we're competing against.

And so obviously, we've got to prove that out.

But again.

Our goal is 50000 students on this campus.

And we're going to continue to push through that goal because.

We're so excited about what's going on in Arizona and in the greater southwest from the standpoint of these students getting jobs.

We've got 25 advisory boards, we've got over 600 companies represented on those advisory boards and a lot of them are participating because they want access to our graduates.

And the difference our graduates are making.

The workforce is is really well understood by the hospitals the school districts engineering firms the technology firms and so we are overspending to get students to campus.

And we did go through the.

And the lightning this of students to be okay moving from home.

Parents being okay with them moving from home, we think that being one more year removed from it puts us in a different place and.

We're excited about this investment and the return it could it could provide in the fall so.

We know theres, a little bit of a risk involved there but we.

Yes, absolutely absolutely.

The the.

The value proposition that we have here is.

Is <unk>.

People are responding to that.

Given inflation.

And if youre doubting the return on investment we're going to college.

It's becoming really becoming more well known that you can get involved here graduate in three years graduate with less debt than the average state University students.

So the interest that's what's primarily driving the interest and the willingness of people to take the time come here and visit.

No.

The color.

And then Brian I think you said start.

Fifth pillar.

Some of the traditional eight students.

Companion program online.

Yes.

Did I hear that correctly and then b.

How would that be different than your GCU online program.

Yes.

Right now the students that are 18 years old are 19 years old in one.

They bring less of the classroom in terms of that work experience and so over time, we might differentiate those two groups a little bit more than we do today.

But the fact that we are able to do it in a way that we do it differentiates us.

If you are living in wherever.

Yes.

State in the country.

And Youre thinking I want to go to college, but im Okay, staying home I've got a network of friends I have got a good part time job on making $20 an hour.

I can do this from home at least for a year maybe longer.

Not a lot of institutions that give you the ability to do that and so as we look at traditional eight students we want to grow our ground campus to 50000 students, but for those students that are that as you want to stay home.

We have an opportunity to serve them as well, whereas most institutions don't so we will work on both of those things.

Thanks very much.

Thank you one moment for our next question.

Our next question comes from Alex Paris, with Barrington Research. Your line is now open.

Thank you.

Thank you for taking my question.

I just had a.

A follow up on the hybrid campus a lot of information.

Trading has been good.

Alright, so so hybrid you had a three 3% decline in total enrollment.

During the fourth quarter.

But fall new student was up in the high single digits, Youre expecting and I'm just trying to get.

Some clarification, new student enrollment growth in the spring and the summer are expected to be up over 20%.

And you expect total student enrollment to inflect positive in the first quarter of the hybrid campus.

You got it right Alex Alright.

Alright, thank you.

And then.

With regard to the site closures.

Yeah.

<unk> 24.

Partnerships.

Only two have not responded to the advanced standing students proposition.

And that led to the closure of these two sites and the discontinuing a business with these two institutions.

<unk>.

That's correct.

Yes.

And then you had one other that you were closing just because it was below expectations, which then led to.

And the decision was made.

This quarter to close one of their multiple locations. So we.

We are only decreasing our partners number of partners by tube.

Okay got it. Thank you for that now your goal is to have Katy site locations 40 of which will be GC locations.

With 25 partners. So you expect to add more.

Based on that target three.

Net new.

The University partners in the hybrid pillar.

Pillar.

Yes.

The difference is this time as we add additional partners it will be.

With the common understanding that the place we really need to focus is on those.

1920, and 21 year old students who've earned 30 college credits they don't have a lot of debt accumulated from our previous degree program and so theyre very open.

Youre doing there prerequisite work online and there.

And then and then pay what they need to pay in order to earn the degree in nursing and so we won't sign another partner, who doesn't come with that understanding in that agreement that they will admit those students and when you.

Back to your 20% increase that seems dramatic given what we've done in the last year, but remember we started over 6000 students in these prereq courses.

And so the students being able to access those courses anywhere in the country and largely take them without the help of financial aid.

Taking loans.

Is another huge step in the right direction, if we can get $19 $20 21 year old students to understand that they can do the necessary academic work to prepare them without debt and they havent already accumulated debt from a previous baccalaureate program. The investment in the ABF and program makes unbelievable amount of sense a sense given.

The number of giving you the money they will make their career as a nurse and the shortages and all of that so we.

We think we've turned the corner from the standpoint of view hybrid.

Programs and we're very excited about where it's going in the future.

That's great.

And then obviously, there's a lag between new student enrollment and total student enrollment, although we expect total student enrollment to be up in the first quarter, Yes, Dan I think you said that you expect the hybrid pillar to still lose money in 2024.

What level of revenue do we need or what level of enrollment that we need for it to breakeven and do you expect it to be breakeven or better in 2025.

We're hopeful.

We expect a significant decrease in the loss between 'twenty, three and 'twenty four and we're hopeful it'll it'll get back to.

<unk>.

Profitability in 'twenty five.

Key as I mentioned earlier is to get these mature locations that we're at capacity pre COVID-19 and have seen significant declines in their enrollments back to or close to capacity and so we're obviously very focused on that working along with our University partners.

And the things that Brian talked about.

We're on our way, but we have work to do to get those mature locations back to capacity.

Great and then last question unrelated FAFSA.

Brian I think you said that you're watching most closely for the ground campus.

Why is it less of a concern.

For the online students or the hybrid systems.

I guess I shouldn't say it's.

Of less concern.

But.

It doesn't.

The.

The our ability to work with online students.

Given the delays in faster.

Is easier than it is with ground students who are first time students entering college coming from backgrounds, where.

The parents Havent gone to college understood College, and that kind of thing.

Theres, just a little bit of a greater amount of uncertainty with.

The traditional ground students versus online students and.

And then in addition to that remember that <unk>.

50% of our online students, our grad students and not eligible for <unk>.

Pell Grant anyway.

Got you that's helpful and then.

It does it also it is it also easier with online students because of the frequent starts. So if you missed the start you don't have to wait an entire semester to enroll.

Risks, losing that student in the interim that's part of it too.

Yes.

Great well thanks for the color guys I appreciate it thank you.

We've reached the end of our fourth quarter Conference call. We appreciate your time and interest in Grand Canyon Education. If you still have questions. Please contact myself Dan bachus. Thank you.

This concludes today's conference call.

Thank you for participating you may now disconnect.

Q4 2023 Grand Canyon Education Inc Earnings Call

Request a DemoDemo

LOPE

Grand Canyon Education

Earnings