Grand Canyon Education, Inc. (NASDAQ:LOPE) is a leading provider of education services, partnering with colleges and universities across the United States. The company has developed innovative technological solutions, infrastructure, and operational processes to serve these institutions on a large scale.

Business Overview

Founded in 1949, Grand Canyon Education has evolved into a diversified education services company, offering a range of delivery platforms to cater to the diverse needs of students. The company's most significant university partner is Grand Canyon University (GCU), a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases, and certificates both online and on-ground.

In addition to GCU, Grand Canyon Education provides education services to 22 other university partners across the country. The company's service offerings span a wide spectrum, including technology and academic services, counseling and support, marketing and communication, and various back-office functions. This comprehensive suite of services allows Grand Canyon Education's partners to focus on their core academic missions while leveraging the company's expertise and resources.

Financials

Grand Canyon Education's financial performance has been impressive, with the company reporting annual revenue of 960.9 million and net income of 204.9 million in its most recent fiscal year. The company's strong cash flow generation is also noteworthy, with annual operating cash flow of 243.7 million and free cash flow of 198.2 million.

In the first quarter of 2024, Grand Canyon Education continued to deliver robust results. The company reported service revenue of 274.7 million, up 9.8% year-over-year, driven by a 7.7% increase in GCU enrollments and higher revenue per student. Operating income for the quarter was 84.5 million, an increase of 10 million compared to the same period in 2023, with an operating margin of 30.8%. Net income for the quarter grew 14.2% to 68 million, translating to GAAP diluted earnings per share of 2.29 and non-GAAP diluted earnings per share of 2.35.

Diversified Delivery Platforms

The company's diversified delivery platforms have been a key driver of its success. Grand Canyon Education's online campus at GCU saw new starts increase in the high single digits year-over-year, with total online enrollment growth continuing to outpace the company's long-term objectives, up 9.2% compared to the prior year. This growth has been fueled by the introduction of 144 new programs, emphases, and certificates across GCU's 10 colleges, as well as the company's efforts to work directly with employers to address workforce shortages.

Grand Canyon Education's ground campus for traditional students at GCU is also expected to return to its normal growth trajectory, with early indications pointing to a nearly 50% year-to-date increase in discovered GCU visits. The company believes GCU will benefit from both the demand for on-campus experiences and the continued interest in online learning among traditional-aged students.

The company's hybrid campus, which offers a combination of online and in-person instruction, particularly in healthcare programs, has also seen strong performance. Enrollment in the hybrid campus increased by 4% year-over-year in the first quarter, with new spring enrollments up approximately 30% and expected new enrollment growth in the summer of 2024 to exceed 25%. This growth has been driven by the company's efforts to accommodate the increasing interest in nursing and other healthcare programs among students with partially completed degrees.

Grand Canyon Education's Center for Workforce Development at GCU has also been a notable contributor to the company's success. The electricians pre-apprenticeship program, which started with 80 students in the 2022-2023 school year and has since grown to 233 students, is one example of the company's initiatives to address workforce shortages in specific industries.

Outlook

Looking ahead, Grand Canyon Education has provided guidance for the full year 2024. The company expects new online enrollments to be up in the mid- to high single digits in each quarter, with total online enrollment growth continuing to be in the high single digits over the prior year. The company also anticipates seeing a deceleration in the growth rate of re-entries, as well as a significant year-over-year increase in graduates, which could put some pressure on the total enrollment growth rate.

Grand Canyon Education's hybrid campus is expected to continue losing money during the remainder of 2024, as some mature sites remain below pre-COVID student counts. However, the newer sites are generally back to historical margin profiles, and the company believes the mature sites that are now admitting advanced standing students will return to growth.

Conclusion

Overall, Grand Canyon Education's diversified business model, innovative delivery platforms, and strong partnerships with universities have positioned the company for continued success. The company's focus on addressing workforce needs, its ability to adapt to changing student preferences, and its robust financial performance make it an intriguing investment opportunity in the education services sector.