Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grand Canyon Education Inc (LOPE, Financial) reported a strong quarter with online enrollment growth of 7.5% and hybrid growth of 12.1%.
- The company exceeded revenue guidance estimates at midpoint by $4.5 million, producing a $0.17 beat in adjusted diluted earnings per share.
- Service revenue increased by 8% year-over-year, reaching $227.5 million for Q2 2024.
- Operating income for Q2 2024 was $42.7 million, an increase of $7.3 million compared to the same period in 2023.
- Net income increased by 20.4% to $34.9 million for Q2 2024, compared to $29 million for the same period in 2023.
Negative Points
- The traditional ground campus enrollment is anticipated to be flat year-over-year, which is a disappointing result given the significant increase in discovery visits.
- FAFSA processing issues caused delays and errors, impacting enrollment figures and creating uncertainty for low and middle-income families.
- The hybrid pillar continues to lose money due to mature sites remaining significantly below pre-COVID student health.
- Contract modifications with university partners resulted in reduced revenue per student.
- The effective tax rate increased year-over-year to 25.5% from 23.8% in Q2 2023, impacting net income.
Q & A Highlights
Q: June online new enrolment was softer. Can you provide any color around that and the outlook for July?
A: We continue to do better than expected with online enrolments. Our lead flow is good, and outside activity is going very well. July was good, and we expect strong performance in the third and fourth quarters. June was softer due to one less Monday start, which we had predicted.
Q: How did the FAFSA delays impact enrolments, and what actions did you take to mitigate this?
A: The FAFSA delays required a lot of manual work and overtime, creating uncertainty for low and middle-income families. Many decided to stay home or attend junior college. Despite this, we maintained our enrolment levels, which is a significant achievement given the broader market trends. We expect the FAFSA issues to be resolved next year and anticipate a 15% increase in enrolments.
Q: Can you elaborate on the impact of the contractual changes with university partners?
A: We recently agreed to contractual changes with three university partners, where we will no longer reimburse them for faculty pay in exchange for a lower revenue share percentage. These changes have no material impact on the income we generate but reduce revenue and technology and academic services expenses.
Q: What are the reasons behind the strong performance in hybrid enrolments?
A: The strong performance in hybrid enrolments, up 12.1% year-over-year, is due to admitting advanced standing students and offering prerequisite science courses online. These courses are affordable, taught by experienced faculty, and provide significant academic support, including 24/7 AI tutoring.
Q: How is the Center for Workplace Development performing?
A: The Center for Workplace Development started 233 students in the electricians' pre-apprenticeship program this past school year, with a high completion rate. We also started a manufacturing certificate program, which combines classroom learning with real-world work experience. We plan to scale these programs and add more in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
