Q4 2024 Grand Canyon Education Inc Earnings Call
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Speaker Change: Daniel Bachus, a former CIA agent and a former CIA agent's son-in-law, was killed in a car crash in the United States in 2013. Bachus, a former CIA agent and a former CIA agent's son-in-law, was killed in a car crash in the United States in 2013.
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Speaker Change: Good day and thank you for standing by welcome to the Q4 2024 Grand Canyon Education Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one.
Speaker Change: One on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.
Speaker Change: Be advised that today's conference is being recorded I would now like to turn the conference over to your speaker for today, Dan Bachus Finance excuse me Chief Financial Officer. Please go ahead.
Speaker Change: 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.
Speaker Change: 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 looking statements made.
Brian Mueller: During this call and we recommend that all investors review. These reports thoroughly before taking a financial position in D C and with that I'll turn over the call to Brian.
Brian Mueller: Good afternoon, and thank you for joining Grand Canyon, Education's fourth quarter 2024 conference call GCE had another solid quarter, producing online enrollment growth of seven 1% in hybrid growth, excluding the closed site and those in teach out of 14, 9%.
Brian Mueller: We also continue to produce strong retention rates, while at the same time investing heavily in initiatives for our University partners. The.
Brian Mueller: The investments GCE and its 22 partner institutions are making are based on our belief that there is a vast amount of untapped potential in today's workforce.
Brian Mueller: Many recent high school graduates did not go to college this year because of exorbitant tuition rates potentially exorbitant debt levels and difficulty managing the fastback website.
Brian Mueller: Working adults, who could benefit from higher education or not attending because of the lack of creative delivery models that do not take into account their life situations.
Brian Mueller: Jane Kinney education will continue to grow at our stated goals over the long run because we are addressing those challenges in ways that work for students and employers with that I would like to review the results of the four delivery platforms at Grand Canyon Education.
Brian Mueller: First the online campus at Grand Canyon University, New starts were up in mid single digits in the fourth quarter of 2024, and a difficult year over year comp and total enrollment growth was seven 1%, which was slightly at which slightly exceeds our long term objectives.
Brian Mueller: We anticipate starts for the first quarter to be up in the mid to high single digits. There are many reasons for this but I want to highlight for one we have stayed focused on opportunities that exist in todays labor market and since the beginning of the pandemic GCU has rolled out 148, new programs emphases in certificates across the 10 colleges east.
Brian Mueller: These programs are tied directly to labor market opportunities for students.
Speaker Change: One of the responses of universities to declining enrollments just to reduce the number of programs they offer.
Speaker Change: 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 and military.
Speaker Change: In the fourth quarter New starts from this work increased 12, 5% year over year.
Speaker Change: Number three the retention of students in the fourth quarter remained strong, which we believe continues because of the relevancy of the programs to students are entering and they are a direct tie to the students career aspirations.
Speaker Change: For GCU has resisted responding to the slower growth by raising tuition significantly, which many institutions have done online.
Speaker Change: Online that tuition increases since 2018 have averaged approximately 1% per year.
Speaker Change: We believe new start growth will remain in the mid to high single digit rates in the first quarter of 2025 and continue at that level during the rest of 2025.
Speaker Change: Second the GCU ground campus for traditional students.
As has been previously discussed new and total traditional campus enrollments were down slightly year over year in the fall of 2024 for the reasons discussed on previous calls.
Speaker Change: We believe GCU will reaccelerate growth on the ground campus because of its significant advantages, including a very low price point very low average debt levels percent of students completed in less than four years and the relevancy of Gcu's academic programs.
Speaker Change: GCU still plans to grow its traditional campus out to 50000 students.
Speaker Change: It is our understanding that the department of education continues to work on fixes to the fast the issues and that the initial results have been positive.
Speaker Change: We believe that this along with a number of strategy changes to address this specific challenge for 2025 26 that we have made will help us meet the university's new enrollment growth goals.
Speaker Change: Although the spring intake is much less in the fall we.
Speaker Change: We did see an increase in new students started at GCU in spring 2025, as compared to spring 2024.
Speaker Change: We also are ahead of last year and new student registrations for the fall of 2025.
Speaker Change: So although it is early in our recruitment cycle. The current trends are positive.
Speaker Change: Third Grand Canyon Education's hybrid campus had an increase in enrollment year over year of nine 8% in the fourth quarter.
Speaker Change: Excluding the closed sites and those that are on teach out enrollment increased by 14, 9% year over year.
Speaker Change: We expect the new enrollment growth rate to be up in the low to mid teens during spring 2025, and the rest of 2025.
Speaker Change: There are two main reasons for this continued growth one.
Speaker Change: Almost all of our active a b S. N partners have responded to the younger students interested in eat a b S. N programs by admitting advanced standing students or are in the process of making that change.
Speaker Change: Students with partially completed degrees haven't accumulated a great deal of debt and are very interested in nursing careers, but didn't have enough efficient way.
Speaker Change: To earn the prerequisite science coursework.
Speaker Change: GCU created the science courses and some other gen. Ed courses, so they could be delivered online in eight weeks.
Speaker Change: Students can access those courses from anywhere in the world.
Speaker Change: Yeah, I'll start opportunities almost every week. These courses have been made very affordable are taught by experienced faculty class sizes are low and there's a tremendous amount of academic support including an artificial intelligence project, which provides students 24 seven access to tutoring.
Speaker Change: Since implementing these courses we have already enrolled approximately 12412 students.
Speaker Change: We have a waterfall report that allows us to know how students are progressing through their prerequisite courses.
Speaker Change: And when they will be eligible to start at one of our a b S N sites.
Speaker Change: The success rate of students, who successfully enter the a b S. N programs is in the high eighties.
Speaker Change: And the first time pass rate on the M. Flex exam is approximately 90%.
Speaker Change: We now have an extremely efficient way to get students academically eligible and prepare to enter the program.
Speaker Change: These positive results, we anticipate will continue.
Speaker Change: There has never been greater interest among potential students for entering the health care professions, and specifically nursing.
Speaker Change: 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 currently underemployed.
Speaker Change: Nearly all of our partners have responded positively to the change needed to serve the advanced Danny students.
Speaker Change: Our goal is still to have 80 locations with our partners with 40 of those locations being GCU locations.
Speaker Change: Fourth the centre for workforce development at Grand Canyon University.
Speaker Change: The 2022 23 school year, we started 80 students Gcu's electricians pre apprentice ship program in partnership with companies that are experiencing labor shortages in that area and they're excited about hiring gcu's graduates.
Speaker Change: The program consists of four four credit courses and runs one semester set.
Speaker Change: 74 students successfully completed the program in the first year is.
Speaker Change: This past year at school year, we started 233 students in the program.
Speaker Change: Hundred and 23 students completed this program in the fall and 82 in the spring of 2024.
Speaker Change: GCU at 164 students enrolled in this program in the fall of 2024, including twenty-three in Austin, Texas.
Speaker Change: A year ago GCU also started 19 students in a manufacturing certificate program and had 23 students in that program. This fall.
Speaker Change: <unk> is one of those small parts manufacturing business on campus. It is doing work for some of the major companies in Arizona.
Speaker Change: These students are attending school for 20 hours a week and then work in that facility as a paid employee for 20 hours at in the semester. They receive a manufacturing certificate become eligible for employment in Arizona as fast growing manufacturing industry.
Speaker Change: So you see us growing engineering College also has students assisting with this project.
Speaker Change: Once this concept has been successfully proved out we expect to work with GCU to scale. This program and then add others.
Speaker Change: I started out talking about the relevant programs and creative delivery models at GCE has implemented with its 22 partner institutions.
Speaker Change: In the six plus years since GCE has become a service provider has helped his partners accomplish the following.
Speaker Change: In that time GCE has helped Grand Canyon University graduate 183632 students.
Speaker Change: 50016 in education, including 24001st time teachers.
Speaker Change: At a time when teachers shortages have created a national crisis.
Speaker Change: 49320 in nursing and health care professions, including 20, 834 pre licensure nurses at a time when there was a huge shortage of nurses.
Speaker Change: 37119 in the college of Humanities, and social sciences, including thousands in counseling and social work, where there are also huge shortages.
Speaker Change: The college of business has become one of the largest business schools in America has produced 31986 graduates.
Speaker Change: The college of Science Engineering, and technology has grown by 216% and provided 4575 graduates.
Speaker Change: The doctoral College honors College and college of Theology also continued to grow.
Speaker Change: In addition, GCE has helped it's other partner institutions graduate 17644, pre licensure nurses and occupational therapists assistance.
Speaker Change: The numbers that I have just cited have all happened in the past six plus years since GCU GCE transaction and since GCE has become an education services provider.
Speaker Change: Service revenue was $292 6 million for the fourth quarter of 2024, an increase of $143 million or five 1% as compared to the $278 3 million for the fourth quarter of 2023 the.
Speaker Change: The increase year over year in service revenue is primarily due to an increase in GCU enrollments, a 5% increase in University partner enrollments at our off campus classroom and laboratory sites of nine 8% and an increase in revenue per student year over year.
Speaker Change: Operating income and operating margin for the three months ended December 31, 2024 was $100 million and 34, 2% respectively.
Speaker Change: As Dan will discuss in more detail in a moment, we booked 1.9 million in impairment and other charges in the fourth quarter.
Speaker Change: Excluding those charges operating income for the three months ended December 31, 2024 was $101.9 million, an increase of 4.1 million as compared to 97.8 million for the same period in 2023.
Speaker Change: The operating margin for the three months ended December 31, 2024, excluding those charges was 34.8%.
Speaker Change: As compared to 34 35, 1% for three months ended December 31 2023.
Speaker Change: Net income increased 1.4% to 81.9 million for the fourth quarter of 2024 compared to $80 7 million for the same period in 2023.
Speaker Change: GAAP diluted income per share for the three months ended December 31, 2024 is $2 84.
Speaker Change: As adjusted non-GAAP diluted income per share for the three months ended December 31, 2023 is $2.95, which is two cents above consensus consensus estimates.
Dan <unk>: With that I would like to turn it over to Dan <unk>, our CFO to give a little more color on our 2020 for fourth quarter.
Talk about changes in the income statements balance sheet and other items as well as to discuss the 2025 guidance. 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, 2024 and 2023.
Dan <unk>: non-GAAP amounts exclude the tax affected amount of the amortization of intangible assets of $2 1 million in the fourth quarters about 2024, and 2023, the tax affected amount of impairment and other of $1 9 million for the three months ended December 31, 2024, and the tax affected amount of the losses on fixed asset disposals.
Dan <unk>: <unk> of 0.2 million for the three months ended December 31 2023.
Dan <unk>: We believe the non-GAAP financial information allows investors to develop a more meaningful understanding of the company's performance over time.
Dan <unk>: As adjusted non-GAAP diluted income per share for the three months ended December 31, 2024, and 2023 is $2 95, and $2 77, respectively.
Dan <unk>: Service revenue was higher than our expectations in the fourth quarter of 2024, primarily due to higher than expected revenue per student and slightly higher than expected enrollments revenue per students continue to grow on a year over year basis, primarily due to the growth in hybrid a BSN students as these students generate a significantly higher revenue per student than we earn on the other students.
Dan <unk>: As these agreements generally provide us with a higher revenue share percentage the partners have higher tuition rates and the majority of their students take more credits on average per semester as there an accelerated programs.
Dan <unk>: We all work, we also recognize slightly higher than expected revenue due to one hybrid partner electing to convert its contract from a revenue share to a cost plus agreement as.
Dan <unk>: As a result, we will see minimal revenue from this partner in the future.
Dan <unk>: As was expected revenue per student was negatively impacted in the fourth quarter of 2024 due to the earlier start of the fall semester.
Dan <unk>: Fall semester started two days earlier in 2024, then in 2023, which had the effect of shifting $2 2 million in service revenue from the fourth quarter of 2024 to the third quarter of 2024. In addition contract modifications for some of our University partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing the.
Dan <unk>: Partner for certain faculty costs had the effect of reducing revenue per share as did the slight decline in ground traditional enrollments and continued mix shift to online programs that have lowered net tuition rates.
Dan <unk>: The fourth quarter operating margin was negatively impacted on a year over year basis due to the timing of the fall semester start contract modifications and impairment and other charges of $1 9 million the.
Dan <unk>: The impairment and other charges includes the write off of an internal use software project that we had been attempting to develop for our other University partners that has been terminated and costs related to off campus classroom and laboratory sites that had been closed.
Dan <unk>: Our operating margin in the fourth quarter of 2024 was slightly lower than our expectations, primarily due to additional spending for 2025 partners initiatives and the higher than expected benefit costs are.
Dan <unk>: Our effective tax rate for the fourth quarter of 2024 was 21, 2% compared to 19, 9% for the fourth quarter of 2023, and our guidance of 21, 2% the effective tax rate increased year over year due to higher state income taxes. We anticipate this trend of higher state income taxes will continue.
Dan <unk>: We repurchased 416497 shares of our common stock in the fourth quarter of 2024 at a cost of approximately $64 8 million and another 226258 shares were repurchased since December 31 2024.
Dan <unk>: We announced today that on January 29, 2025, the company's board of directors approved a $200 million increase under its existing stock repurchase program.
Dan <unk>: We have $260 7 million remaining as of today, which includes the increase in January 2025 under our share repurchase authorization.
Dan <unk>: The board and the company intend to continue using a significant portion of its cashless from operations to repurchase shares and we anticipate daily purchases to continue during 2025.
Dan <unk>: Turning to the balance sheet and cash flows total unrestricted cash and cash equivalents as of December 31, 2024 were 100 $324 6 million.
Dan <unk>: We see capex in the fourth quarter and full year 2024, including Capex for new off campus classroom and laboratory sites was approximately $9 7 million or three 3% of service revenue and $37 2 million or three 6% of service revenue respectively. We.
Dan <unk>: We anticipate Capex for 2025 will remain comparable with prior year at between 30% and $40 million.
Dan <unk>: 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 a components to adjust the GAAP amounts do non-GAAP as adjusted net income and non-GAAP as adjusted diluted income per share.
Dan <unk>: Consistent with prior years, we have provided ranges for revenue operating margin and earnings per share for each of the four quarters of 2025, we do this because our financial results are seasonal.
Speaker Change: As you probably noticed the midpoint of the guidance is slightly below consensus estimates. This is not due to any concern about current trends as Brian mentioned the current trends for all of our pillars are very positive. The high end of estimates would result in a high single digit revenue growth and an increase in full year margins, which is slightly better than our previously provided.
A commentary on our expectations for 2020 by.
Speaker Change: The low end of guidance assumes slightly lower than expected enrollment in each of our pillars, primarily in the back half of the year, where our current visibility is more limited and thus the midpoint takes those assumptions into account.
Speaker Change: We believe continuing to provide this range of outcomes is prudent.
Speaker Change: We anticipate that both new and total online enrollments will be up year over year in the mid to high single digits in each quarter during 2025, we.
Speaker Change: We do anticipate continuing to experience a decline in the growth rate of re entries students returning to school after break due to 2020 for retention rates and an increase year over year in graduate both of which will put pressure on the total enrollment growth rate.
Speaker Change: The high end of guidance assumes total online enrollment will end 2025 up in the high single digits year over year, which would be an acceleration in total online enrollments, whereas the low end assumes a mid single digit year over year growth rate and thus the midpoint of our range assumes a year over year growth rate that is near the high end of.
Speaker Change: Our stated long term objectives.
Speaker Change: The revenue range assumes that the GCU ground enrollment will be 23100, and the spring will range from 7800 to 8200 in the summer and be between 24000 and 526100 in the fall.
Speaker Change: The high end of the range assumes a mid teens, new start year over year growth rate for the ground campus, while the low end of the range assumes flat new start growth and a slight decline in total ground enrollment due to the continuing increase in the number of graduates year over year as a significant number of ground traditional students continue to graduate in under four years.
Speaker Change: The midpoint assumes a high single digit increase in new ground enrollments the.
Speaker Change: The reported ground number continues to include GCU hybrid, which continues to grow and professional study students which continues to shrink.
Speaker Change: As Brian discussed earlier, the new student and total enrollment growth rate in the hybrid pillar is predicted to grow on a year over year basis in the low to mid teens during each of the four quarters of 2025.
Speaker Change: As has been previously discussed the hybrid growth rate is being impacted by the fact that we have 10 locations that are at or near capacity and that's what we will have little to no growth year over year and total enrollments at those locations. We are hopeful that a lot of these locations will get local regulatory approval to grow in the future as they currently have weightless. We also continue to be negative.
Speaker Change: Impacted by the fact that a couple of partners are still not accepting students without completed Bachelor streets.
Speaker Change: But even with these headwinds the growth of this pillar should remain strong.
Speaker Change: As was discussed on last quarter's earnings call revenue is being negatively impacted in 2025 as compared to 2024 as leap year increased revenue in 2024 by an estimated $1 $5 million and we estimate that the contract modifications and site closings further lower revenue by $8 9 million and compare.
Chris: Chris into 2024.
Chris: This results in a slight expected decrease in revenue per student year over year.
Chris: Excluding these impacts we anticipate a slight increase in revenue per student year over year, primarily due the hybrid pillar growing at a faster rate than online or ground.
Chris: Online revenue per student will be flat to slightly down year over year due to the mix shift as programs have slightly lowered net tuition rates revenue per student is also negatively impacted in the first half of the year by the slight year over year decrease in ground traditional students.
Chris: On the expense side as you recall after pause on certain investments primarily in head count in the first nine months of 2024, we ramped up hiring and other spend in the fourth quarter of 2024 and anticipated and anticipate this continued investment in the first half of 2025 to meet the growth goals of our partners.
Chris: The additional hiring will have the biggest impact on counseling services and support but we also see increases in technology and academic service costs.
Chris: As I have discussed previously the online programs, primarily those that lead to licensure and which GCU is growing at an accelerated rate either cost us more to service than the traditional online programs or at or at lower net tuition rates with which is putting some pressure on our margins.
Chris: We also continue to absorb significant increases in both benefit costs and technology services as it relates to the hybrid pillar, we will incur additional costs for the new hybrid locations that opened in the last six months or will open into 2024 and 25, but we are experiencing increased site level profitability due to the increasing enrollments.
Chris: Last we anticipate an increase in legal fees again in 2025 over 2024 as we have a couple of lawsuits filed in prior years, they're expected to go into the described discovery phase <unk> two trial during 2025 <unk>.
Chris: Estimated litigation fees and regularly Tory costs are included in our operating income guidance, but are excluded in our non-GAAP measure adjusted EBITDA.
Chris: So to summarize we should see a slight decline in margins in the first half of 2025 due to the investments and other items noted, but are optimistic that margins will expand in the second half, especially if revenue is in the top half of our revenue range due to leverage in our business model and that full year margins will be up year over year.
Chris: We are estimating net interest income will decline year over year and 2025 as we are assuming declining cash balances do you do more aggressive stock buybacks and a declining interest rate environment.
Chris: We believe the effective tax rate for the fourth quarters. The four quarters of 2025 will be 22, 2% 24, 9% 24, 9% and 24, 1% with a full year tax rate of 23, 8%, which is an increase over our 2020 for effective <unk>.
Chris: Right.
Chris: The effective tax rate continues to rise due to higher state taxes as we continue to add new sites in states outside of Arizona, which have higher state tax rates and other factors.
Chris: These estimates do not assume a contribution in lieu of state income taxes, but if one is made that will increase G&A expense in the third quarter and decrease the effective tax rate in the second half of the year.
Chris: Our weighted average shares guidance assumes increased spend to buy back shares although given the rise in the stock price, we anticipate purchasing a similar number of shares in 2025 as in 2020 for the.
Chris: The board continues to authorized the repurchase of shares as it believes the stock remains undervalued based on the metrics that used to evaluate including the ratio of enterprise value to adjusted EBITDA and the free cash flow yield rather than multiples of other education companies as although we can be viewed as being in the same sector. There are few if any appropriate comps.
Chris: I will now turn the call over the moderator so that we can answer questions.
Chris: Thank you as a reminder, if he would like to ask a question. Please press star one on your telephone.
Chris: We also ask that you wait for your name Assembly to be announced before you proceed with your question one moment. Please.
Speaker Change: And our first question is going to come from the line of Jeff Mueller of Baird. Your line is open.
Jeff Mueller: Yes. Thank you. Good afternoon, you commented on being ahead of last year on new student registrations for the fall.
Speaker Change: 25, our ground campus intake can you just brought it out that discussion since you have some pretty lofty growth goals are up against.
Jeff Mueller: Kind of a depressed level.
Jeff Mueller: Else you can say on demand inquiries discover GCU visit just conversion initiatives to give us confidence in those growth goals.
Jeff Mueller: Yeah.
Jeff Mueller: Great question, a couple of things one we did make an adjustment to our discover GCU process.
Jeff Mueller: We were pretty open with that last year in the number of discover GCU students went up significantly we really tightened that up we are asking students to get their transcript to us we want those transcripts evaluated.
And then we want to have a one on one meeting with them and their parents via zoom before we have.
Jeff Mueller: Have them visit campus and so the number of discover GCU visits as a result is down but the conversion rate is up.
Jeff Mueller: And so our registrations are are fairly significantly ahead of where they were at the same time last year.
Jeff Mueller: The second thing that's really important is that we have some work around strategies with regards to students that are pell eligible or we think will be pell eligible.
Jeff Mueller: And.
Jeff Mueller: Those work around strategies, we think are going really well we're.
Jeff Mueller: We're able to provide students with information that's important to them.
Jeff Mueller: And as a result there.
Jeff Mueller: Decisions to register a at the University, which includes a down payment and then also register for a room, if they're out of state students are and so.
Jeff Mueller: We.
Jeff Mueller: Set a very aggressive goal.
Jeff Mueller: <unk> was 15%.
Jeff Mueller: Increase over new students last year, but early indications are that that thing that's going very well and so will we.
Jeff Mueller: Obviously, it's early.
Jeff Mueller: And we got to keep working at this but we.
Jeff Mueller: At this point, we feel very good about it.
And then you gave us some metrics on kind of.
Absa in a hybrid.
Jeff Mueller: Outcomes was that for all a BSN students or was that specific to the advanced stemming students or can you comment on the academic outcomes, you're seeing for the advanced starting students who your partners are seeing I.
Jeff Mueller: I guess relative to the the heritage career changer Degreed model.
Jeff Mueller: No that's for all students, that's where all a BSN students.
And.
Jeff Mueller: Thats.
Jeff Mueller: We are so excited about where this thing is now going.
Jeff Mueller: For a number of reasons.
Number one we've identified the type of students who can best benefit.
Jeff Mueller: From becoming a nurse.
Jeff Mueller: And it's that students who has earned some college credit does not have a completed degree hasn't hasn't gone into a serious amount of debt the whole concept of.
Jeff Mueller: Going after students that were near the completion of their program had already incurred a lot of debt and then encourage them to take on more debt to do prerequisite courses and then eventually the BSN program just didn't make any sense.
Jeff Mueller: We've identified the right kind of student now for the program that we're offering.
Jeff Mueller: The second thing we did was we had to put in place.
Jeff Mueller: The science courses in a way that students could access them and complete them at high rates.
Jeff Mueller: And that thing has just exploded.
Jeff Mueller: So we've got students that are 30 or 40 college credits may be into their degree they haven't incurred a lot of debt.
Jeff Mueller: But david but they've shown that they can do college coursework theyre now converting to taking these online courses, which we priced very low so that they wouldn't have to take on debt to take them and theyre passing them at an 80% rate with a grade of b or better which allows them then to use those credits to get into our a BSN program.
Jeff Mueller: Once we get students to the door of our a b S. N program, whether it's through GCU or whether it's through one of our other partners. Our success rate is 88 or 89%.
Jeff Mueller: And then our first time pass rate on the AG types examination is about 90%.
Jeff Mueller: And so.
Jeff Mueller: The the Sky's the limit now as far as where we're going with this thing we anticipate.
Jeff Mueller: 80 locations and we anticipate at least 300 nursing students per location, which would bring its total to 24000 today, where we're a little over 6000.
Jeff Mueller: And so.
Jeff Mueller: The fact that there is this huge nursing shortage and the fact that we figured out a scalable way to produce these are with very high quality outcomes.
Jeff Mueller: <unk> is really exciting.
Dan: Excellent and then just one for you Dan if you what's the what are your current thoughts on the ongoing.
Speaker Change: Margin target financial model, if you exit 2025 at the targeted enrollment and revenue growth rates would you expect that you are back to a consistent.
Speaker Change: <unk> expansion from there or do we need to consider the the hybrid.
Speaker Change: I guess mix shifts.
Speaker Change: Yes, I think all of the above I think that.
Speaker Change: You always need to fill.
Speaker Change: Focus on the hybrid mix shift.
Speaker Change: For that part of our business.
Speaker Change: It will never have the margins that the GCU contract will have but you know.
Speaker Change: We believe that the long term margins.
Speaker Change: Could be 20% and again, we don't do segment reporting we don't look at financials that way, but to give you kind of a sense of.
Speaker Change: How we think about it.
Speaker Change: But I think that you have to factor that in.
Speaker Change: On the on the GCU contract you know I think there's as I mentioned earlier theres, a little bit of pressure.
Speaker Change: On margins the first half of the year because of the ground traditional campus of GCU being down slightly you know if we can get back to growth consistent growth for the GCU contract.
Speaker Change: I'm, sorry for the GCU ground traditional campus.
Speaker Change: We think we will see a continued slight margin expansion on the GCU contract like we historically had.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question.
Speaker Change: We will be coming from the line of Jeff Silber of B and all capital markets. Your line is open.
Speaker Change: Great. Thanks, so much.
Jeff Silber: Dave You mentioned, the GCU contract and if I remember correctly, the Master services agreement with GCU expires in July can we talk about what's going on in terms of re upping that and any color would be great.
Jeff Silber: It doesn't expire in July there was an early out that began it begins in July.
Jeff Silber: Which the University has not execute exercise. So it continues it's a 15 year contract were six and a half years or so into that.
Jeff Silber: So the expectation is.
Jeff Silber: For it to continue to go there has been some conversation between GC and GCU about extending the contract early given that it seems to be working out really well for both parties.
Jeff Silber: So that could be something that comes but we still have a number of years left under the contract.
Alright, my mistake I really appreciate you clarifying that maybe I can switch over to discussing the hybrid program can you remind us how many locations you have now what the ramp up is I know you've got a golf R. <unk>, but I'm just curious what the ramp up is going to be to get there.
Jeff Silber: Yes, we have 45 sites.
Jeff Silber: Sites open now.
Jeff Silber: And.
Jeff Silber: The goal is to get to 80, and we will probably going to be opening six to eight per year.
Jeff Silber: And so you can do the math in terms of how long it will take us to get to 80, but.
Jeff Silber: The things are going well.
Speaker Change: Okay, Great and then you had mentioned some of the headwinds that the programs are facing is there anything you can do from your end and mitigate those headwinds.
Jeff Silber: Well.
I mean, it's it's a regulatory thing so.
Jeff Silber: We just continue to produce good outcomes.
Jeff Silber: Through our partners and the hope is that they will eventually allow us to increase above the current capacity constraints they have an.
Jeff Silber: An example of that a recent example, and we're very hopeful is.
Jeff Silber: The West Phoenix location for GCU grew to that maximum 300 students very very quickly.
Jeff Silber: And they are currently having conversations with the state of Arizona about going above that 300, so for that location and so.
Jeff Silber: You produce good outcomes.
Jeff Silber: I think the state is and and and you can commit to delivering the clinical's I think that gives the state comfort that you should you could go above those amounts.
Can tell you the discussions we're having with some with some fairly large states are so positive.
Jeff Silber: Florida specifically.
Jeff Silber: <unk>.
Well, we have such a track record now of producing.
Jeff Silber: Really stellar outcomes.
Jeff Silber: In terms of completion rates and first time pass rates on the antiques examination.
Jeff Silber: Which which people were worried about because of our scale, but we consistently are producing those results until the conversations are just getting more and more positive because in every state there is a shortage of nurses.
Jeff Silber: And so the model is.
Jeff Silber: Outcome to the model are so strong.
Jeff Silber: That.
Jeff Silber: We think from a regulatory standpoint, this is just going to get easier and easier for us as we move forward.
Speaker Change: Alright, that's great to hear if I could just finish up with one and you mentioned regulatory.
Speaker Change: With all the noise coming out of Washington D. C has there been any impact.
Speaker Change: In terms of receiving funds.
Speaker Change: Program approvals anything else going on that we should be aware of.
Speaker Change: No not really other than you know.
Speaker Change: Yeah.
Speaker Change: The thing that we like the most is that there's such there's so much talk about outcomes, whether it's at the K 12 level or at the higher Ed level. There's so much talk about outcomes and what we're producing from the GCE perspective, with our 22 partners are stellar outcomes higher education.
Speaker Change: Has serious issues and I think this administration.
Speaker Change: Is showing signs that they recognize them and want to do something different tuitions are too high.
Speaker Change: Tax subsidies or the requirement from a state tax subsidies are too high.
Speaker Change: Debt levels are too high.
Speaker Change: Programs arent tied directly enough to where the new job opportunities in the labor market.
Speaker Change: Everytime tuition goes up diversity goes down and we accomplish in higher education, the exact opposite of what we're trying to accomplish.
Speaker Change: And so we believe that.
Speaker Change: This administration is going to be extremely excited about the model, we have and what we're accomplishing because.
Speaker Change: Helping solve problems.
Speaker Change: There's a tremendous teacher shortage and this model is producing.
Speaker Change: New teachers at an unbelievable rate theres, a tremendous nursing shortage, there's a tremendous shortage in the areas of counseling and social work and those are licensure programs that are very difficult to offer at a distance, but we're doing it and we're doing a successful without part successfully with our partner institutions and we're doing it without excessive debt levels.
Speaker Change: Without raising tuition in so.
Speaker Change: I think that this administration is going to be very excited about the outcome, we're producing because theyre. So in line with what they keep what they talk about in terms of.
Speaker Change: How they're thinking about the future of education in our country.
Speaker Change: Alright, it's great to hear thanks, so much.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question will be coming from the line of Alex Paris Barrington Research. Your line is open.
Alex Paris: Hi, guys. Thanks for taking my question.
Speaker Change: I just have a.
Speaker Change: Couple here at the end.
Speaker Change: First of all just kind of.
Speaker Change: Continuing the conversation about regulatory.
Speaker Change: Linda Mcmahon has been confirmed as the education Secretary Nicholas Count has been nominated as the Undersecretary.
Speaker Change: The thought is Linda Mcmahon is going to work her way out of a job in time.
Speaker Change: The elimination of the department of education, whether that's likely or not.
Speaker Change: I'd be interested in hearing your thoughts about the changes going on in the department of education, and how that could potentially affect.
Speaker Change: We're not.
Speaker Change: Canyon University in your other partner institutions.
Speaker Change: There's there's a.
Speaker Change: Let me just repeat a little bit of what I said in a previous answer.
Speaker Change: There is just a <unk>.
Speaker Change: All of the talk coming out of Washington D. C with regards to education, whether the K 12, love, where the higher Ed level.
Speaker Change: Is focused on outcomes.
Speaker Change: People are very very disappointed with the outcomes we're producing.
Speaker Change: In terms of student achievement in the K 12 World.
Speaker Change: And people are very disappointed about the outcomes that are being produced on college campuses.
There is a.
Speaker Change: Lower percentage of our there's fewer high school graduates in the last two years.
Speaker Change: But theres, a fewer lower percentage of them going to college, which is not good long term for the for the country and when we talk the reason we talk so much about graduates.
Speaker Change: Is that.
Speaker Change: Universities ability.
Speaker Change: To offer programs and delivery platforms that allow them to produce graduates, especially in license your areas that are very difficult to do.
Is going to be a very desired asset.
Speaker Change: And our model the GCE as a service provider that model is producing tremendous results for our partner institutions.
We did and one contract.
Speaker Change: But almost everybody else.
Speaker Change:
Speaker Change: GCU and all 21 other partners want to do more with us not less.
Speaker Change: I want to produce more not less.
And so the.
Speaker Change: The infrastructure that we have at GCE.
Speaker Change: The 300 billion dollar administrative system.
Speaker Change: The ability to do things at a distance.
Speaker Change: And to take into account that the person's lifestyle and with those.
Speaker Change: Those things are all things that I believe this administration is going to be very interested yet.
Speaker Change: There is a tremendous amount of untapped potential in the workforce today.
Speaker Change: There is a nursing shortage, which is ridiculous and it's only because we can't deliver creatively to people who want to become nurses and can become nurses. The same thing is true for teaching. The same thing is true for counseling and social work. The same thing is true in cyber security.
Speaker Change: And I could name other areas and so I think we'll do our best to.
Speaker Change: Become.
Speaker Change: A part of.
Speaker Change: What needs to be.
Speaker Change: Solution oriented.
Speaker Change: Strategies.
Speaker Change: We.
We think that this administration is going to be extremely excited about supporting the things that we're doing because we are producing results. We're producing the kind of outcomes I think they think are going to be exciting.
Speaker Change: Great. That's helpful. I appreciate that additional color.
Speaker Change: During the fourth quarter, you had a big win in the courts. The ninth circuit ruled resoundingly in favor of your appeal regarding the not for profit decision and.
Speaker Change: And remanded it back to the Department of Education I think this happened a couple of days. After your last conference call. I was wondering if theres any updates there in terms of expected timeline and so on for the educate the department of education to.
Speaker Change: Make some kind of.
Speaker Change: No I mean that was the <unk>.
GCU and.
Speaker Change: Obviously GCU is related.
Speaker Change: Because.
Speaker Change: It was made clear that we said all along with <unk> said, all along was true.
Speaker Change: Which is that.
It went through a completely legitimate process to regain its nonprofit status. It was approved by the IRS, who has the authority to make that approval they've got the expertise and the authority to do at GCU has been operating successfully as a nonprofit for six years.
Speaker Change: And so.
Speaker Change: For an objective court two volt unanimously that the department was outside their scope of authority and making that ruling was <unk>.
Speaker Change: Completely appropriate and it's now been remanded back to the Department, we don't know anything further.
Speaker Change: Other than.
Speaker Change: We're going to have a new secretary of education I think soon.
Soon.
Speaker Change: And.
Speaker Change: We will see how that impacts what the remand how that turns out but where we're very GCU was very helpful.
Speaker Change: This was a major milestone.
Speaker Change: In the hole.
Speaker Change: Attack.
Speaker Change: That has taken place in the last four years.
Speaker Change: Barry GCU I know is very hopeful that this will be behind it soon.
Speaker Change: But that was a major it was a major major important ruling from an objective.
Speaker Change: Court ruled unanimously and Gcu's favorite, which is a strict extremely positive.
Speaker Change: Result.
Speaker Change: Yes, that's great news and obviously long overdue.
Speaker Change: Last question and maybe this one's for Dan.
Speaker Change: Given your expectations, which are.
Speaker Change: In keeping with previous commentary on the hybrid pillar.
Speaker Change: Low to mid teens in the spring and for the rest of 2025 based on those expectations for enrollment.
Speaker Change: Is it still your expectation that hybrid as a.
Speaker Change: Taken together will crossover cross back to profitability in 2025.
Speaker Change: Yeah again, we don't really monitor that from a financial perspective anymore. We don't we've centralized so many services.
Speaker Change: At the GCE level that that we just don't look at it that way but.
Speaker Change: Given where the site I talked about this earlier, but where the site margins are for all of the locations I think that's an appropriate expectation.
Speaker Change: Great. Thank you very much.
We have 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 for your time.
Speaker Change: Thank you offline.
Sure.
Speaker Change: [music].