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Presentation

Grand Canyon Education, Inc. beats earnings expectations. Reported EPS is $2.86, expectations were $2.78.

Operator: Good day, and thank you for standing by. Welcome to Q1 2026 Grand Canyon Education, Inc. earnings conference call. At this time, all participants are in a listen-only mode. 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Sarah Collins, General Counsel. Please go ahead.

Sarah Collins: Joining me on today’s call is our chairman and CEO, Brian E. Mueller, and our CFO, Daniel E. Bachus. Please note that many of our comments today will contain forward-looking statements that 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 Report on Form 10-Ks, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. We undertake no obligation to provide updates with regard to the forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in Grand Canyon Education, Inc. With that, I will turn the call over to Brian.

Brian E. Mueller: Good afternoon, and thank you for joining Grand Canyon Education, Inc.’s first quarter 2026 conference call. Grand Canyon Education, Inc. had another strong quarter, producing online enrollment growth of 8.8% and hybrid growth, excluding the closed sites and those that are in teach-out, of 20.3%. Grand Canyon Education, Grand Canyon University, and now 19 additional partners have produced remarkably consistent positive results over the last 17-plus years in spite of significant change in the macro environments of education and the workplace. Most significantly, GCU has gone from the brink of [inaudible] to now being the largest private university in America. In addition to over 110 thousand students studying online, GCU now has 25 thousand students in an on-campus environment and has more students living in university-owned housing on its campus than any university in the country.

Recently, Grand Canyon Education, Inc. and its partners have built 47 hybrid campuses throughout the country to address severe shortages in the health care fields. More recently, Grand Canyon Education, Inc. has assisted GCU in building a workforce development center to produce professionals in the rapidly growing construction and manufacturing fields where there are also severe shortages. The growth and success that has taken place is because Grand Canyon Education, Inc. and its partners have built a model that is extremely flexible, is able to respond with great speed, and has used advanced technologies to produce tremendous scale. The current dissatisfaction with higher education is because faculty governance models are very inflexible, move very slowly, and cannot scale to meet demands.

Excellence in higher education is going to be defined in very different terms going forward. There is a lot of talk about how AI will produce winners and losers by industry type. The real discussion should be about winners and losers within industries. Higher education as an industry will continue to exist. Institutions that are flexible, fast, and that can scale will be able to use AI to flourish to even greater levels in the next ten years. Higher education will be more important than ever if we can educate the generation of workers to use AI in three important ways. One, to use AI to produce products to increase levels of human productivity. Two, to quickly allow workers whose jobs have been eliminated to re-career. And three, to educate a generation of workers for jobs that do not exist today but will exist in the future.

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It is important that universities do not just teach AI, but are able to model it in the way they run their business. Grand Canyon Education, Inc. and GCU have dozens of AI products and products in development across 10 colleges, over 375 academic programs, emphases, and certificates, and across every operational area. Students are learning with increasing levels of excellence and efficiency. Scores currently produced by GCU students in exit and licensure exams in the areas of health care, education, accounting, etc., are reaching all-time highs while scaling to huge numbers. This is especially important for GCU since it has rapidly expanded into academic areas requiring licensure. Programmatic areas like nursing, education, social work, counseling, etc., will benefit from AI implementation, but employment in those areas will always require formal higher education, the completion of degrees, and licensure.

Project work produced by business, engineering, and technology students is at increasing levels of sophistication. GCU’s innovation center is producing new student businesses that are thriving. To succeed in the future, universities must produce these real-world opportunities for students, and they must graduate in less time, for less money, and for lower debt levels. Our AI products are making curriculum more targeted, faculty more effective and efficient, and allowing operators to produce greater levels of student support. I believe AI will make our current advantages even greater, which makes me even more confident we will continue to meet or exceed our long-term objectives. With that, I would like to review the first quarter results. First, the online campus at Grand Canyon University.

New starts were up in the high single digits in 2026, which was slightly above our expectations, and total enrollment growth was 8.8%, which significantly exceeds GCU’s long-term objectives. In the past, I have highlighted four reasons for the growth. They include continuing to roll out 20-plus new programs on an annual basis, working with over 5.5 thousand employers directly to address workforce shortages, strong retention levels, and holding the line on tuition to maintain GCU’s competitive pricing position. Working with over 5.5 thousand employers directly to address workforce shortages puts us in a very strong position with regard to online enrollment growth. We are now getting approximately 30% of our new starts by directly working with employers.

The lead generation environment is definitely being impacted by the increasing numbers of people using artificial intelligence rather than an organization’s website to gather information that they will use to make important purchases and life decisions. Our ability to respond to those changes is greater than before because of our unique ability to generate a high percentage of our students without using the typical lead generation strategies. The students we are generating by working directly with employers tend to be very purpose-driven and have high retention and graduation rates. Our marketing team continues to roll out AI strategies to showcase the strong brands and outcomes of our partners. We believe in the long term, this will be very positive for us.

Second, the GCU ground campus for traditional students. Total traditional campus enrollments were down slightly year over year in 2026 as expected. Spring total enrollments have historically been less than fall enrollments, as spring new enrollments are a small percentage of overall traditional campus new enrollments, as they are mostly made up of transfer students that defer a semester, and total enrollment is impacted by the growing number of students that are graduating in less than four years. We believe GCU will continue to experience annual new student growth on the ground campus each fall despite its increasing number of graduates because of its significant advantages, including the very low price point, very low average debt levels, the percent of students completing in less than four years, the relevancy of GCU’s academic programs to a fast-changing and modern economy, and having the twentieth-ranked campus in the country.

As we discussed on last quarter’s earnings call, we have made some changes to our marketing and recruitment strategy for GCU’s traditional campus which accelerated some spend into 2025 and 2026. Those changes to date are producing positive results, as registrations for fall 2026 remain ahead of last year. Even with the macro trends I discussed earlier, and the tougher year-over-year comps, we believe we can grow new enrollments significantly year over year, which should get residential students back to growth. Two weeks ago, GCU made a major announcement. As part of its 25 thousand-student traditional campus, GCU has one of the fastest-growing honors colleges in the country. Mike Ingram, one of Arizona’s most prolific land developers, has made a long-term commitment to the future of the college, and it has been named the Sheila and Mike Ingram Honors College.

GCU expects to have over 3 thousand students in the fall with average weighted incoming GPAs of over 4.1. This is one of the highest in the country. The students are coming from all 50 states and are studying across all 10 of GCU’s colleges. Students are getting internships and eventually jobs at many of America’s top companies, health care organizations, school districts, counseling centers, engineering firms, etc. GCU plans to more than double the student population, making it one of the largest and most impactful honors colleges in the country. Mr. Ingram is leading an effort to build a very prestigious Honors College Council which will be comprised of highly successful professionals from the worlds of business, entertainment, politics, education, health care, and sports.

A 55 thousand-square-foot building is under construction to open in the fall that will be a state-of-the-art facility containing lecture halls, collaboration spaces, maker spaces, and gathering areas for many of America’s best students. We believe the university’s academic brand will continue to accelerate upwards as the Honors College grows, which is another reason we remain optimistic about the future growth of GCU’s traditional campus. Third, Grand Canyon Education, Inc.’s hybrid campus had an increase in enrollment year over year of 18.3% in the first quarter. Excluding the closed sites and those that are in teach-out, enrollment increased 20.3% year over year. Hybrid campus new starts in the first quarter, excluding those in teach-outs, were up 20% over the prior year, which exceeded our expectations.

There are two main reasons for this continued growth. One, almost all of our active ABSN partners have responded to the younger students interested in ABSN programs by admitting advanced standing students or are in the process of making that change. Students with partially completed degrees have not accumulated a great deal of debt. They are very interested in nursing careers but did not have an efficient way to earn the prerequisite science coursework. GCU created the science courses and some other gen ed courses so that 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 the artificial intelligence project, which provides students 24/7 access to tutoring.

Since implementing these courses, we have already enrolled 23.104 thousand students. We have a waterfall report which allows us to know how students are progressing through prereq courses and when they will be eligible to start at one of our ABSN sites. Graduation rates of students who successfully enter the ABSN programs are in the mid-80s, and the first-time pass rate on the NCLEX exam is approximately 90%. Nearly all our partners have responded positively to the change needed to serve the advanced standing students. Our goal is to still have 80 locations with our partners, with 40 of the locations being GCU locations. We opened five new sites in the year ended 12/31/2025, closed two sites in which we stopped recruiting new students in 2024, and merged two sites that were located in the same market, bringing the total number of these sites to 47 as of 12/31/2025.

Three of the five new sites were GCU’s, bringing their ABSN location total to 11. We plan to open one to two additional sites in 2026, while we mutually agreed with one partner to stop the recruiting of new students and begin teach-out at three of its sites during 2026. A couple of sites that were planned to open in 2026 are more likely to open in early 2027, as we have previously discussed. We are being more selective on new site openings with a focus on the scalability of the market. We are also expanding our programmatic offerings with our hybrid partners by adding a graduate nursing program with seven specializations with Northeastern University, which started this past fall; a hybrid occupational therapy bridge-to-master’s program to the already successful St. Kate’s occupational therapy assistant hybrid program, which will begin in 2026; and an online health science degree with Utica University, and GCU launched a BS in occupational therapy assistant program and a speech-language pathology program in 2025 at its Phoenix West Valley location.

GCU also plans to add a Bachelor of Science in Medical Lab Sciences program in 2026. Adding additional programs at our hybrid locations is an important component to our business plan. We anticipate this momentum will continue, although with the lower number of new site openings and more of our locations getting to capacity, hybrid enrollment growth will slow a bit; the profitability of this pillar will continue to improve. Fourth, the Center for Workforce Development at Grand Canyon University. GCU now has four programs in the Center for Workforce Development, including the electricians pre-apprenticeship program, the CNC machinist pathway program, the manufacturing specialist intensive pathway, and a construction general pathway, and we will be rolling out a fifth program, the manufacturing general pathway, in 2026.

Programs were all built in partnership with companies that are experiencing labor shortages in that area and are excited about hiring GCU’s graduates. These programs are either one-semester or two-semester programs. A total of 116 students successfully completed the electrician pre-apprenticeship program in fall 2025, with five in the Austin, Texas hybrid location. Fifteen students completed the manufacturing CNC machinist pathway program in the 2025 cohort, and 29 students completed the manufacturing specialist intensive program. These students attend 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 receive a manufacturing certificate and become eligible for employment in Arizona’s fast-growing manufacturing industry.

Students in GCU’s growing engineering college are getting experience in this manufacturing facility, which is adding to their engineering education. I started out talking about the relevant programs and creative delivery models that Grand Canyon Education, Inc. has implemented with 20 partner institutions. In the seven-plus years since Grand Canyon Education, Inc. became a service provider, it has helped its partners accomplish the following. In that time, Grand Canyon Education, Inc. has helped Grand Canyon University graduate 221.436 thousand students: 59.659 thousand in education, including 27.601 thousand first-time teachers, at a time when teacher shortages have created a national crisis; 57.412 thousand in nursing and health care professions, including 3.723 thousand prelicensure nurses, at a time when there is a huge shortage of nurses; 46.520 thousand in the College of Humanities and Social Sciences, including thousands in counseling and social work, where there are also huge shortages.

The College of Business has become one of the largest business schools in America and has produced 38.823 thousand graduates. The College of Science, Engineering, and Technology has grown by 225% and provided 9.739 thousand graduates. The doctoral college, Honors College, and College of Theology also continue to grow. In addition, Grand Canyon Education, Inc. has helped its other partners graduate over 15 thousand prelicensure nurses and occupational therapist assistants. The numbers that I have cited have all happened in the past seven years, since the GCU–Grand Canyon Education, Inc. transaction and since Grand Canyon Education, Inc. has become an education services provider. This is a great example of a futuristic educational model that is flexible, moves fast, and is capable of great scale.

All of this has occurred while Grand Canyon Education, Inc. paid 627 million in federal and state taxes, while state universities and community colleges pull money out of the tax system. Grand Canyon Education, Inc. has helped produce over 235 thousand graduates while pouring millions of dollars into the system. Service revenues were 308.8 million for 2026, an increase of 19.5 million, or 6.7%, as compared to 289.3 million for 2025. The increase year over year in service revenue is primarily due to an increase in university partner enrollment [inaudible], including an increase in GCU online enrollments of 8.8%, university partner enrollments at the off-campus classroom and laboratory sites of 18.3%, and one additional day of ground traditional revenue at GCU of 1 million in the quarter as a result of the shift of one day of revenue from the second quarter to the first quarter as compared to last year’s spring start date.

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