Grand Canyon Education(LOPE) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Non-GAAP diluted income per share for Q2 2021 was $1.12, compared to $1.03 in Q2 2020, reflecting a year-over-year increase [47] - The effective tax rate for Q2 2021 was 23.3%, down from 24.6% in Q2 2020, primarily due to favorable adjustments from state audits [50] - Total unrestricted cash and short-term investments as of June 30, 2021, were $113.9 million, with capital expenditures (CapEx) of approximately $6.8 million in Q2 2021 [54] Business Line Data and Key Metrics Changes - Grand Canyon University Online had 91,572 students as of June 30, 2021, with a year-over-year growth of 4.1% [10] - Ground campus enrollment started with 22,363 students in fall 2020, with an increase of 11.5% in traditional students, excluding professional studies [20] - GCE/Orbis partner enrollments at off-campus sites were 4,210, a 13.2% increase year-over-year, with nursing enrollment up 19% [33] Market Data and Key Metrics Changes - The pandemic has caused significant enrollment and financial issues for many universities, impacting GCE's short-term growth [6] - GCU's traditional campus is near capacity, necessitating the construction of at least two new residence halls to meet demand [21] - The average incoming GPA for new students attending the ground campus is 3.6, with the honors college growing to over 2,800 students [22] Company Strategy and Development Direction - GCE aims to create educational models addressing rising costs, increasing debt levels, and inadequate support services in higher education [7] - The company is focused on expanding its three platforms: GCU Online, traditional campus, and GCE/Orbis, with significant investments planned [41][29] - GCE plans to invest an additional $500 million over the next four years to accommodate growth in traditional campus enrollment [29] Management's Comments on Operating Environment and Future Outlook - Management views current enrollment challenges as short-term, with confidence in returning to long-term growth once normal operations resume [17][18] - The company is optimistic about the upcoming fall semester, with strong demand for a fully open campus experience [76][79] - Management acknowledges increased competition but believes their direct engagement strategy will mitigate its impact [72][75] Other Important Information - GCE repurchased 981,431 shares at a cost of approximately $95.3 million in Q2 2021, with an additional $970 million authorized for share repurchase [51][53] - The company has a strong financial position post-split from GCE, with $307 million in cash as of June 30, 2021 [29] - GCE is expanding its off-campus classroom and laboratory sites, aiming for over 40 locations by the end of 2022 [36] Q&A Session Summary Question: Enrollment trends at Grand Canyon University online - Management acknowledged increased competition but emphasized their unique direct engagement strategy with schools and hospitals, which continues to yield results [72][75] Question: Impact of the Delta variant on ground students - Management reported no reluctance among students to return, with parents expressing a desire for a fully open campus [76][79] Question: Clarification on new enrollment sources - Management confirmed that two-thirds of new enrollments come from marketing channels outside direct counseling, which have not diminished [85][87] Question: Update on stock repurchase and refinancing - Management confirmed plans to repurchase at least $500 million of stock, with potential for more depending on the refinancing outcome [88][91] Question: Growth of Orbis and occupational therapy enrollment - Management noted a decline in occupational therapy enrollment due to COVID restrictions but highlighted a 19% increase in nursing programs [97][98]