Grand Canyon Education(LOPE) - 2025 Q2 - Quarterly Results

Financial Highlights GCE reported strong financial growth in Q2 and H1 2025, driven by a 10.3% increase in partner enrollments Second Quarter 2025 Performance (Three Months Ended June 30, 2025) In Q2 2025, GCE's service revenue increased by 8.8% year-over-year to $247.5 million, with operating income up 21.2% to $51.8 million and net income growing 19.1% to $41.5 million Q2 2025 Financial Performance | Financial Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Service Revenue | $247.5M | $227.5M | +8.8% | | Operating Income | $51.8M | $42.7M | +21.2% | | Net Income | $41.5M | $34.9M | +19.1% | | Diluted EPS | $1.48 | $1.19 | +24.4% | | Adjusted EBITDA | $67.4M | $58.5M | +15.2% | - The primary driver for revenue growth was a 10.3% increase in partner enrollments, reaching 117,283 students as of June 30, 2025[5] - GCU enrollments, the most significant partner, increased by 10.5% to 113,435, with enrollments at off-campus classroom and laboratory sites growing by 14.0%[5] - Operating margin improved to 20.9% from 18.8% year-over-year, positively impacted by contract modifications where GCE no longer reimburses partners for certain faculty costs[5] First Half 2025 Performance (Six Months Ended June 30, 2025) For the first six months of 2025, service revenue grew 6.9% to $536.8 million, operating income increased 9.9% to $139.8 million, and net income rose 10.0% to $113.2 million H1 2025 Financial Performance | Financial Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Service Revenue | $536.8M | $502.1M | +6.9% | | Operating Income | $139.8M | $127.2M | +9.9% | | Net Income | $113.2M | $102.9M | +10.0% | | Diluted EPS | $4.00 | $3.48 | +14.9% | | Adjusted EBITDA | $169.4M | $157.1M | +7.8% | - Revenue growth was driven by a 10.3% increase in partner enrollments, though revenue per student slightly decreased due to the 2024 leap year adding $1.5 million in revenue and certain contract modifications[4][6] - The effective tax rate decreased to 22.7% from 23.8% in the prior year, primarily due to an increase in excess tax benefits[8] Liquidity and Capital Resources GCE's liquidity strengthened in H1 2025, with cash and investments increasing by $49.3 million, driven by strong operating cash flow Liquidity Position | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Unrestricted Cash, Cash Equivalents, and Investments | $373.9M | $324.6M | +$49.3M | - The increase in liquidity is attributed to cash provided by operations exceeding outlays for share repurchases and capital expenditures during the first six months of 2025[7] 2025 Financial Outlook GCE projects full-year 2025 service revenue between $1,100.3M and $1,107.3M, with diluted EPS ranging from $8.75 to $8.90 2025 Financial Guidance | Guidance | Q3 2025 | Q4 2025 | Full Year 2025 | | :--- | :--- | :--- | :--- | | Service Revenue | $258.5M - $260.5M | $305.0M - $310.0M | $1,100.3M - $1,107.3M | | Operating Margin | 21.8% - 22.2% | 35.1% - 35.8% | 27.5% - 27.9% | | Diluted EPS | $1.69 - $1.74 | $3.07 - $3.18 | $8.75 - $8.90 | - Adjusted non-GAAP diluted EPS guidance is projected to be between $1.75 and $1.80 for Q3, $3.13 and $3.24 for Q4, and $8.98 and $9.14 for the full year 2025[9][10][11] Consolidated Financial Statements GCE's unaudited consolidated financial statements detail strong performance, stable assets, and operating cash flow used for investments and share repurchases Consolidated Income Statements For Q2 2025, service revenue grew to $247.5 million with net income of $41.5 million, while H1 revenue reached $536.8 million with net income of $113.2 million Consolidated Income Statement Summary | (In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Service revenue | $247,499 | $227,463 | $536,809 | $502,138 | | Operating income | $51,789 | $42,719 | $139,812 | $127,197 | | Net income | $41,546 | $34,878 | $113,164 | $102,888 | Consolidated Balance Sheets As of June 30, 2025, GCE's total assets were $1.021 billion, with cash and cash equivalents at $192.3 million and total stockholders' equity at $778.0 million Consolidated Balance Sheet Summary | (In thousands) | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $422,481 | $419,976 | | Total assets | $1,021,007 | $1,018,425 | | Total current liabilities | $118,990 | $110,966 | | Total liabilities | $243,031 | $234,572 | | Total stockholders' equity | $777,976 | $783,853 | Consolidated Statements of Cash Flows For H1 2025, GCE generated $191.6 million in operating cash flow, used $198.7 million in investing activities, and $125.2 million in financing activities Consolidated Cash Flow Summary | (In thousands) | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | | Net cash provided by operating activities | $191,639 | $183,526 | | Net cash used in investing activities | ($198,748) | ($19,989) | | Net cash used in financing activities | ($125,236) | ($68,695) | | Net (decrease) increase in cash | ($132,345) | $94,842 | Non-GAAP Financial Measures GCE provides non-GAAP measures, including Adjusted EBITDA, to offer a clearer view of core operating performance, with Q2 2025 Adjusted EBITDA up 15.2% to $67.4 million Reconciliation of Net Income to Adjusted EBITDA For Q2 2025, net income of $41.5 million was adjusted to an Adjusted EBITDA of $67.4 million, reflecting a 15.2% increase from Q2 2024 Adjusted EBITDA Reconciliation | (In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net income | $41,546 | $34,878 | $113,164 | $102,888 | | Adjusted EBITDA | $67,411 | $58,526 | $169,379 | $157,115 | - Management uses Adjusted EBITDA as a supplemental measure of operating performance for internal decision-making and believes it helps investors compare results with historical periods and other companies[31][32] Reconciliation of GAAP to Non-GAAP Net Income and EPS For Q2 2025, As Adjusted Non-GAAP Net Income was $43.2 million ($1.53 per share), compared to GAAP Net Income of $41.5 million ($1.48 per share) GAAP to Non-GAAP Reconciliation | (In thousands, except per share) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | GAAP Net income | $41,546 | $113,164 | | As Adjusted, Non-GAAP Net income | $43,182 | $116,478 | | GAAP Diluted income per share | $1.48 | $4.00 | | As Adjusted, Non-GAAP Diluted income per share | $1.53 | $4.12 | Other Information This section includes important disclosures, forward-looking statements outlining potential risks, and details for the Q2 2025 earnings conference call Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties, including legal actions, partner agreement terminations, and competition - The report includes forward-looking statements that are subject to risks and uncertainties and should not be read as a guarantee of future performance[12][13] - Important risk factors include: (i) legal and regulatory actions, (ii) termination of key university partner agreements, (iii) ability to comply with regulations, and (iv) competition from other education service companies[13][15] Conference Call Information GCE will host a conference call on August 6, 2025, at 4:30 p.m. ET to discuss Q2 2025 results and full-year outlook, with a live webcast available - A conference call to discuss Q2 2025 results is scheduled for August 6, 2025, at 4:30 p.m. ET[18] - A live webcast and replay of the event will be available online[20]