Sign in
GC

Grand Canyon Education, Inc. (LOPE)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered steady growth and a clean beat: service revenue rose 5.3% year over year to $289.3M, Adjusted EPS reached $2.57 vs S&P Global consensus ~$2.51, and GAAP EPS was $2.52 ($0.05 spread from Adjusted) . EPS beat by ~$0.06 and revenue beat by ~$$2.1M on stronger-than-expected enrollments, particularly online and hybrid ABSN, despite modestly lower revenue per student due to leap-year and contract mix effects (consensus values marked with asterisk; S&P Global).
  • FY2025 outlook was raised: revenue to $1.080–$1.100B (from $1.074–$1.097B), GAAP EPS to $8.36–$8.70 (from $8.20–$8.59), and margins modestly higher; Q2 EPS, operating margin, and revenue ranges were also lifted, signaling confidence into midyear .
  • Management cited continued momentum in online enrollments (+7.9% YoY) and hybrid ABSN (+12.1% YoY; +16.5% ex-closures), plus expanding program launches and new sites (46 total), offset by higher benefit costs and slightly lower revenue per student from contracts and leap-year comp .
  • H2 margin expansion remains the narrative: management expects margins to trough in Q2 amid investment and benefit cost headwinds, then expand in the second half as enrollments grow and the mix benefits Q4 seasonality; ongoing buybacks (remaining authorization ~$209M as of the call) support per-share growth .

What Went Well and What Went Wrong

  • What Went Well

    • Strong enrollment-driven top-line: service revenue +5.3% YoY to $289.3M on partner enrollments +5.8% to 127,779; online enrollments +7.9% and hybrid ABSN +12.1% YoY (ex-closures +16.5%) .
    • EPS above expectations and improved tax rate: Adjusted EPS $2.57 (~$0.05 above consensus) with effective tax rate at 21.6% vs 22.9% last year, driven by higher excess tax benefits .
    • Strategic expansion progressing: 46 ABSN sites operating (+1 in Q1), with additional site openings planned and expanded program offerings across partners (e.g., Northeastern specializations, new East Coast locations) .

  • What Went Wrong

    • Margin pressure from costs: operating margin dipped to 30.4% (from 30.8% YoY), impacted by leap-year comp, incremental partner initiatives, and significantly higher-than-expected benefit costs .
    • Revenue per student modestly lower: leap-year in 2024 and contract modifications (lower revenue share in exchange for no faculty reimbursements) reduced revenue per student, partially offset by higher ABSN economics .
    • Continued legal and compliance cost overhang: management expects higher legal expenses in 2025 as certain cases move to discovery/trial; tax rate trending up in the remainder of the year due to state mix as sites expand outside AZ .

Financial Results

Q1 year-over-year comparison (YoY)

MetricQ1 2024Q1 2025
Service Revenue ($M)$274.68 $289.31
Operating Income ($M)$84.48 $88.02
Operating Margin (%)30.8% 30.4%
Net Income ($M)$68.01 $71.62
Diluted EPS (GAAP)$2.29 $2.52
Diluted EPS (Adjusted)$2.35 $2.57

Sequential comparison (last two quarters)

MetricQ3 2024Q4 2024Q1 2025
Service Revenue ($M)$238.29 $292.57 $289.31
Operating Income ($M)$48.18 $100.03 $88.02
Operating Margin (%)20.2% 34.2% 30.4%
Net Income ($M)$41.47 $81.88 $71.62
Diluted EPS (GAAP)$1.42 $2.84 $2.52
Diluted EPS (Adjusted)$1.48 $2.95 $2.57

Q1 2025: Actual vs S&P Global Consensus

MetricConsensusActual
Service Revenue ($M)287.18*289.31
EPS (Primary)2.51*2.57

Asterisk (*) indicates values retrieved from S&P Global.

KPIs: Enrollments and sites

KPIQ3 2024Q4 2024Q1 2025
Total Partner Enrollments127,977 127,155 127,779
GCU Enrollments123,002 123,149 123,773
Off‑Campus ABSN Enrollments5,888 4,919 5,027
GCU Online Enrollments98,345 98,597 101,443
GCU Ground Enrollments24,657 24,552 22,330
ABSN Sites (#)46 45 46

Non-GAAP and cash flow highlights

  • Adjusted EBITDA: $102.0M (+3.4% YoY) with reconciliation provided (adds back share-based comp, litigation/regulatory, minor fixed asset loss) .
  • Operating cash flow: $67.6M; CapEx $8.9M (~3.1% of revenue); net cash used for investing largely due to purchases of investments; buybacks $77.9M in Q1 .

Guidance Changes

MetricPeriodPrevious Guidance (Feb 19)Current Guidance (May 6)Change
Service RevenueQ2 2025$236.5–$240.5M $239.0–$241.5M Raised
Operating MarginQ2 202518.1–19.0% 18.8–19.4% Raised
Diluted EPS (GAAP)Q2 2025$1.22–$1.30 $1.28–$1.33 Raised
Diluted Shares (M)Q2 202528.4 28.2 Lower shares
Service RevenueQ3 2025$250.5–$257.5M $250.5–$257.5M Maintained
Diluted EPS (GAAP)Q3 2025$1.55–$1.68 $1.56–$1.68 Slight raise low end
Diluted Shares (M)Q3 202528.1 28.0 Lower shares
Service RevenueQ4 2025$301.0–$311.5M $301.0–$311.5M Maintained
Diluted EPS (GAAP)Q4 2025$2.99–$3.16 $3.00–$3.17 Slight raise
Diluted Shares (M)Q4 202527.9 27.8 Lower shares
Service RevenueFY 2025$1,074.5–$1,097.0M $1,079.8–$1,099.8M Raised
Operating MarginFY 202527.1–27.9% 27.3–28.0% Raised
Diluted EPS (GAAP)FY 2025$8.20–$8.59 $8.36–$8.70 Raised
Effective Tax RateFY 202523.8% 23.7% Slightly lower
Diluted Shares (M)FY 202528.3 28.1 Lower shares

Note: Company also provided non-GAAP EPS guidance impacts for amortization (~$0.06/Q, ~$0.23 FY) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024, Q-1: Q4 2024)Current Period (Q1 2025)Trend
Online enrollment growthQ3: GCU online +5.8% YoY; Q4: +7.1% YoY Online enrollments +7.9%; demand aided by employer partnerships and program relevance Improving
Hybrid ABSN expansionQ3/Q4: ABSN sites 46→45; ABSN enrollments growth high single to low teens ABSN enrollments +12.1% YoY (ex-closures +16.5%); sites back to 46; more site/program launches planned Positive momentum
Revenue per student mixTiming effects (semester timing, leap-year) and contract changes reduced per-student rev in prior periods Lower per-student revenue vs LY due to leap-year comp and contract revenue share; ABSN mix offsets Neutral to slight headwind
Margins/benefit costsQ4 margin 34.2% with some one-time items Q1 margin 30.4%; Q2 to dip; H2 expansion expected; benefit costs above plan Near-term pressure, H2 expansion
Tax rate/state mixQ3/Q4: Higher state taxes drove higher ETR Q1 ETR 21.6% (excess tax benefits); remainder of 2025 projected higher (24.9%, 24.9%, 24.1%) on state mix Rising through year
Legal/regulatoryRoutine expense; no acute update in PRs Legal expenses expected to increase in 2025 as cases advance Headwind
Capital allocationBoard expanded buyback in Jan; cash/investments strong ~$68M repurchased in Q1; $209M authorization remaining; ongoing daily repurchases expected Ongoing support
Technology/AI initiativesNot highlighted in PRs“Digital intelligence” project cited within student experience/operations Emerging theme

Management Commentary

  • Strategy and demand drivers: “We have been focused on opportunities that exist in today’s labor market… GCU has rolled out 48 new programs… tied directly to labor market opportunities… We continue to work with employers directly… [and] retention increased” .
  • ABSN and hybrid rollout: “We will open a total of 5 additional [hybrid] sites in 2025… expand programmatic offerings… with Northeastern University… and other partners starting this summer” .
  • Beat vs consensus and mix impact: “Adjusted non-GAAP diluted income per share… $2.57, which is $0.05 above consensus estimates” and “revenue per student decreased slightly between years… leap year impact and contract modifications… partially offset by ABSN economics” .
  • H2 margin setup and cost pressures: “We continue to believe we will see a slight decline in margins in the second quarter… but are optimistic that margins will expand in the second half” while “benefit costs [were] significantly exceeding our expectations” .
  • Capital returns: “We repurchased… 395,426 shares… ~$68.4 million… another 125,780 shares [post-quarter]… The Board… believes the stock remains undervalued” .

Q&A Highlights

  • Enrollment upside drivers: Employer partnerships (school districts, hospitals, military) and breadth of program offerings are driving better-than-expected online enrollments .
  • Funding/Title IV sensitivity: Management does not expect proposed federal changes to reduce core student funding; not reliant on large federal research grants; no expected impact to Title IV programs .
  • Growth targets and mix: Long-term total enrollment growth target ~7%, with current trends slightly above; near-term outcomes hinge on ground campus intake, while online and hybrid pillars continue to outperform .
  • M&A and build/buy: Preference to build vs acquire; Orbis acquisition proved strategic but pipeline best served by internal builds and direct employer engagement .
  • ABSN prerequisites funnel: Large prerequisite student pool feeding ABSN; process designed to stage students efficiently into seat capacity over time (company emphasized growing conversion pipeline) .

Estimates Context

  • Q1 2025 vs S&P Global Wall Street consensus: Revenue $289.31M vs $287.18M*, EPS (Primary) $2.57 vs $2.51*; 3 estimates for both metrics. Implication: modest top- and bottom-line beats that should support upward estimate revisions for Q2 and FY2025 given raised guidance .
  • Management confirmed the beat on adjusted EPS on the call and increased Q2 and full-year outlook, suggesting positive estimate momentum near term .

Asterisk (*) indicates values retrieved from S&P Global.

Key Takeaways for Investors

  • Enrollment strength (online +7.9% YoY; hybrid ABSN +12.1% YoY) is translating to consistent revenue growth despite modest per-student revenue headwinds from contracts and leap-year comps .
  • FY2025 guidance raised across revenue, EPS, and operating margin; Q2 ranges also increased, reinforcing confidence into midyear .
  • Near-term margins face headwinds from benefit costs and investment, but management expects H2 expansion as seasonal mix and enrollment growth kick in .
  • ABSN and hybrid expansion (46 sites; more in 2025) plus new program launches across partners provide multi-year growth vectors beyond GCU .
  • Capital deployment remains shareholder-friendly with ongoing buybacks ($209M authorization remaining as of the call) and strong liquidity, supporting EPS accretion .
  • Tax rate tailwinds aided Q1, but rising state mix lifts ETR through the rest of 2025 (24.9%, 24.9%, 24.1% by quarter), a modeling consideration for EPS bridges .
  • Stock narrative catalyst: Raised FY25 guidance and confirmed H2 margin expansion path, with continued ABSN/site expansion and employer partnerships as durable differentiators .

References:

  • Q1 2025 earnings press release (and exhibit to 8‑K)
  • Q1 2025 earnings call transcript
  • Prior quarter press releases: Q4 2024 ; Q3 2024
  • Asterisk-marked values retrieved from S&P Global.