Grand Canyon Education (NasdaqGS:LOPE) Q4 2025 Earnings call February 18, 2026 04:30 PM ET Speaker4Good day, and thank you for standing by. Welcome to the fourth quarter 2025 Grand Canyon Education earnings conference call. At this time, all participants are on listen only mode. After the speaker's presentation, we'll open up for questions. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To wit ...

Financial Data and Key Metrics Changes - The company's net revenues for Q3 FY 2026 were $770.2 million, representing a year-over-year increase of 27.0% in USD and 26.8% in RMB terms [10][14] - Non-GAAP income from operations was $104.0 million, compared to a non-GAAP loss from operations of $1.9 million in the same period last year [17] - Gross profit increased by 35.0% year-over-year to $431.8 million, with gross margin rising to 56.1% from 52.7% [15][16] Business Line Data and Key Metrics Changes - Peiyou Small Class Enrichment Programs showed stable operations with year-over-year revenue growth driven by increased enrollment [11] - Online enrichment learning programs maintained year-over-year growth, supported by technology-driven enhancements [12] - Learning devices reported year-over-year growth in both revenue and sales volume, with an average weekly active rate of approximately 80% [13] Market Data and Key Metrics Changes - The learning device market is evolving, influenced by advancements in hardware, software, and AI technologies [7] - The company is focusing on enhancing its devices with AI-enabled capabilities to improve user learning experiences [8] Company Strategy and Development Direction - The company aims to integrate technology with educational expertise to enhance product design and service delivery [20] - A disciplined approach to expanding the Peiyou Learning Center network is being maintained, balancing demand with operational capacity [6] - The company is exploring new product formats and enhancing AI functions to support personalized learning [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential variability in financial performance due to seasonal demand shifts and competitive pressures [5] - The company remains focused on long-term capabilities and sustainable development rather than short-term financial outcomes [21] Other Important Information - The company has authorized a new share repurchase program of up to $600 million over the next 12 months [18] - As of November 30, 2025, the company had $2,146.3 million in cash and cash equivalents [18] Q&A Session Summary Question: Update on the Learning Center network expansion and Peiyou revenue drivers - Management indicated that Peiyou's revenue growth was driven by increased enrollments and a disciplined approach to network expansion [25][27] Question: Reasons for slowed top-line growth momentum - Management explained that the moderation in growth was due to a deceleration in the learning device business and timing of product launches [32][34] Question: Q3 sales performance of learning devices and competitive landscape - Management reported year-over-year volume growth in learning devices, with a focus on AI integration to enhance learning experiences [41][42] Question: Drivers of operating margin performance and outlook - Management noted that improved operating margins were driven by lower selling and marketing expenses and disciplined cost management [49][50]

Core Viewpoint - The Guangxi region has made significant progress in education during the "14th Five-Year Plan" period, focusing on prioritizing education development and achieving key goals in educational planning [1] Group 1: Educational Development Achievements - The region has established a comprehensive ideological and political education system across 14 cities, promoting national unity and awareness [1] - By 2024, the gross enrollment rate for preschool education is expected to reach 93.7%, with a 96.9% retention rate for nine-year compulsory education and a 92.9% gross enrollment rate for high school [2] - The number of new basic education seats has increased by 660,000, and 17 new public university campuses have been established [2] Group 2: Quality of Education - The number of students enrolled in ordinary undergraduate and vocational colleges is projected to reach 1.515 million by 2025, a 27.9% increase from 2020 [3] - The number of full-time teachers has increased to 762,700, a 12.85% rise since 2020, with a notable increase in teachers holding bachelor's degrees [3] - The region has achieved full coverage of public kindergartens in towns and a 95.1% enrollment rate for children of migrant workers in public compulsory education schools [2] Group 3: Support and Service Capabilities - During the "14th Five-Year Plan," higher education institutions have trained 1.996 million talents, with vocational education supplying over 70% of new high-quality skilled workers [4] - Guangxi universities have established partnerships with nearly 200 institutions in ASEAN countries, contributing to the development of 17 China-ASEAN Modern Craftsman Colleges [4] - The region has optimized vocational education structures and established multiple industry-education integration communities [4]

Financial Data and Key Metrics Changes - The company reported net revenues of RMB 21.7 million for Q1 2025, a 15% decrease from RMB 25.5 million in Q1 2024, primarily due to reduced revenues from district-level projects as resources were reallocated to school-based subscription models [7][14][17] - Gross margin for Q1 2025 was 36.2%, down from 38.4% in Q1 2024 [15] - The net loss on a GAAP basis for Q1 2025 was RMB 30.9 million, a significant decrease of 44.8% from RMB 56.1 million in Q1 2024 [15][19] - Adjusted net loss (non-GAAP) for Q1 2025 was RMB 22.4 million, down 47.5% from RMB 42.7 million in Q1 2024 [15][20] Business Line Data and Key Metrics Changes - The SaaS subscriptions business saw growth as more educational organizations adopted AI-powered solutions, leading to a strong retention rate and increased adoption of value-added offerings [7][10] - The district-level teaching and learning staff business remained steady, contributing significantly to revenue recognition [8][10] Market Data and Key Metrics Changes - The company experienced heightened demand for its offerings in partner schools, reflected in a higher retention rate, with over 90% of renewal customers opting to continue their subscriptions [11] Company Strategy and Development Direction - The company is focusing on AI-powered product upgrades to enhance teaching and learning efficiency, aiming to transform education services from knowledge transmission to competency development [7][10] - Strategic market penetration is prioritized through diversified distribution methods and collaborations, aligning product development with emerging educational trends [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term sustainability of the business, emphasizing the importance of operational efficiency and strategic decision-making [8] - The company aims to maintain growth momentum while enhancing operational efficiency and driving long-term stable development [24] Other Important Information - The company welcomed Mr. Rui Jia as an independent director and appointed Ms. Sushu Zhou as the acting Chief Financial Officer, highlighting their extensive experience in fintech and education sectors [21][22] - The company has cash reserves of RMB 333.3 million as of March 31, 2025, down from RMB 359.3 million as of December 31, 2024 [15][21] Q&A Session Summary - No questions were raised during the Q&A session, indicating a lack of immediate inquiries from participants [25]

Financial Data and Key Metrics Changes - Service revenue for Q4 2024 was $292.6 million, an increase of $14.3 million or 5.1% compared to $278.3 million in Q4 2023 [18] - Operating income for Q4 2024 was $100 million with an operating margin of 34.2%, while excluding impairment charges, operating income was $101.9 million, up $4.1 million from $97.8 million in Q4 2023 [19][24] - Net income increased by 1.4% to $81.9 million in Q4 2024 compared to $80.7 million in Q4 2023 [19] Business Line Data and Key Metrics Changes - Online enrollment growth was 7.1% in Q4 2024, with new starts expected to increase in the mid to high single digits for Q1 2025 [3][8] - Ground campus enrollments were slightly down year over year, but GCU plans to grow its traditional campus to 50,000 students [8][9] - Hybrid campus enrollment increased by 9.8% year over year in Q4 2024, with an expected growth rate in the low to mid teens for 2025 [10] Market Data and Key Metrics Changes - New starts from employer partnerships increased by 12.5% year over year in Q4 2024, focusing on industries like education and healthcare [6] - The company has rolled out 148 new programs since the pandemic, directly tied to labor market opportunities [5] Company Strategy and Development Direction - The company aims to address workforce challenges by providing relevant programs and creative delivery models [4] - GCE continues to invest in initiatives for university partners, believing in the untapped potential of the workforce [3] - The company is focused on maintaining low tuition increases, averaging about 1% per year since 2018 [7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about enrollment growth, citing positive trends in registrations and retention rates [41] - The company anticipates a slight decline in margins in the first half of 2025 due to increased investments but expects margins to expand in the second half [33] - Management highlighted the importance of producing strong outcomes in education to align with regulatory expectations and market needs [65] Other Important Information - The effective tax rate for Q4 2024 was 21.2%, an increase from 19.9% in Q4 2023, primarily due to higher state income taxes [25] - The company repurchased 416,497 shares at a cost of approximately $64.8 million in Q4 2024, with an additional 226,258 shares repurchased since [26] Q&A Session Summary Question: Can you discuss the demand and growth goals for the Grand Campus intake? - Management noted that adjustments to the Discover GCU process have led to a significant increase in conversion rates, with registrations ahead of last year [39][41] Question: What are the academic outcomes for ABSN students? - The outcomes reported are for all ABSN students, with high success rates for those entering the program [42][44] Question: What is the status of the GCU contract? - The GCU contract continues without expiration, with discussions about early extension due to positive outcomes [50][51] Question: How many hybrid locations are currently open? - There are currently 45 hybrid sites open, with plans to open 6 to 8 more per year [52] Question: What are the impacts of regulatory changes on the company? - Management indicated that the focus on outcomes in education aligns well with the company's model, which is producing strong results [56][65] Question: Any updates on the court ruling regarding nonprofit status? - The court ruled in favor of GCU, affirming its nonprofit status, and the case has been remanded back to the Department of Education [67][70] Question: Will the hybrid pillar return to profitability in 2025? - Management expects the hybrid pillar to cross back to profitability in 2025 based on current site margins [71]