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Grand Canyon Education, Inc. (LOPE)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered an across-the-board beat: service revenue $247.5M (+8.8% YoY), GAAP diluted EPS $1.48, and non-GAAP diluted EPS $1.53 versus S&P consensus EPS $1.377* and revenue $240.9M; management highlighted the non-GAAP EPS beat of ~$0.16 versus consensus .*
  • Operating margin expanded to 20.9% (vs 18.8% YoY), aided by contract modifications that reduced reimbursed faculty costs and the absence of prior-year severance, partially offset by higher benefit costs .
  • Guidance raised: Q3/Q4 and full-year 2025 EPS and revenue ranges increased, with effective tax rate lowered (Q3: 20.6%, Q4: 22.8%, FY: 22.3%) due to July contributions in lieu of state taxes; share count guidance trimmed given accelerated buybacks .
  • Enrollment momentum is strong: GCU online enrollments +10.1% YoY; hybrid/ABSN enrollments +14.0% YoY (15.4% excluding sites in teach-out), with expanded site openings and new program launches (graduate nursing, OT, health sciences) .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP EPS and revenue beat: Q2 non-GAAP diluted EPS $1.53 vs ~$1.377* consensus; service revenue $247.5M vs ~$240.9M* consensus; CEO flagged ~$0.16 beat on EPS .*
  • Margin expansion: Operating margin improved to 20.9% YoY due to partner contract modifications reducing reimbursed faculty costs and lapping $1.1M prior-year severance .
  • Enrollment strength and program expansion: Online new starts mid-teens; hybrid enrollments up mid-teens; new sites in Boston and NYC; expanded graduate nursing and OT programs; AI-based tutoring initiative supporting prerequisites (24/7) .

What Went Wrong

  • Revenue per student mixed: Slight decline driven by reduced revenue share from contract modifications and mix shift to lower net-tuition online students; partially offset by higher ABSN revenue per student .
  • Elevated costs: Benefit costs significantly exceeded expectations; technology services also rising, pressuring margins and baked into H2 guidance .
  • Legal and regulatory cost overhang: Anticipated increase in legal fees in 2025 as certain cases move into discovery/trial; management provided detailed regulatory commentary and sees minimal impact from new legislation but risks persist .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Service Revenue ($USD Millions)$292.6 $289.3 $247.5
Operating Income ($USD Millions)$100.0 $88.0 $51.8
Operating Margin %34.2% 30.4% 20.9%
Net Income ($USD Millions)$81.9 $71.6 $41.5
Diluted EPS (GAAP) ($)$2.84 $2.52 $1.48
Diluted EPS (Non-GAAP) ($)$2.95 $2.57 $1.53
Effective Tax Rate %21.2% 21.6% 24.5%
Adjusted EBITDA ($USD Millions)$116.6 $102.0 $67.4
KPIQ4 2024Q1 2025Q2 2025
Partner Enrollments (period-end)127,155 127,779 117,283
GCU Enrollments (total)123,149 123,773 113,435
GCU Online Enrollments98,597 101,443 104,856
GCU Ground Enrollments24,552 22,330 8,579
Off-Campus Classroom/Lab Enrollments4,919 5,027 4,990
ABSN Sites (count)45 46 45
Consensus vs ActualQ4 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD Millions)*289.6287.2240.9
Revenue Actual ($USD Millions)292.6 289.3 247.5
Primary EPS Consensus Mean ($)*2.9372.5131.377
Primary EPS Actual ($)2.95 2.57 1.53
Primary EPS - # Estimates*333
Revenue - # Estimates*333
Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Service Revenue ($M)Q3 2025$250.5–$257.5 $258.5–$260.5 Raised
Operating Margin %Q3 202522.0–23.2 21.8–22.2 Narrowed/Lowered
Effective Tax Rate %Q3 202524.9 20.6 Lowered
Diluted EPS ($)Q3 2025$1.56–$1.68 $1.69–$1.74 Raised
Diluted Shares (MM)Q3 202528.0 27.9 Lowered
Service Revenue ($M)Q4 2025$301.0–$311.5 $305.0–$310.0 Narrowed/Higher Midpoint
Operating Margin %Q4 202535.5–36.3 35.1–35.8 Narrowed/Lowered
Effective Tax Rate %Q4 202524.1 22.8 Lowered
Diluted EPS ($)Q4 2025$3.00–$3.17 $3.07–$3.18 Raised Low End
Diluted Shares (MM)Q4 202527.8 27.7 Lowered
Service Revenue ($M)FY 2025$1,079.8–$1,099.8 $1,100.3–$1,107.3 Raised
Operating Margin %FY 202527.3–28.0 27.5–27.9 Narrowed
Effective Tax Rate %FY 202523.7 22.3 Lowered
Diluted EPS ($)FY 2025$8.36–$8.70 $8.75–$8.90 Raised
Diluted Shares (MM)FY 202528.1 28.0 Lowered

Drivers: lowered tax rates from July contributions in lieu of state taxes; share count down from buybacks; margins adjusted for higher benefits and tech spend; revenue raised on stronger enrollments .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesNot highlighted in prior press releases AI project providing 24/7 tutoring for prerequisite courses New initiative emphasized
Regulatory/legalStandard risk disclosures in PRs Detailed commentary on new legislation (workforce Pell, loan limits); legal fees expected to increase in 2025 Heightened focus; cost headwinds
Enrollment driversABSN and online growth cited; site count up to 45–46 Online new starts mid-teens; hybrid enrollments mid-teens; paraprofessional teacher ed and prereq science courses as catalysts Momentum sustained
Regional/site expansion45 sites at year-end 2024 New sites in Boston, NYC; three GCU sites (Albuquerque, Lake Mary, Inglewood) Expansion continues
Tax strategyContributions in lieu of state taxes referenced (2024) $5M contributions in July 2025; lowers Q3/Q4 effective tax rates Beneficial tax rate impact
Share repurchasesAuthorization increased in early 2025 259K shares repurchased in Q2; 157K since 6/30; $156.9M remaining authorization Accelerated buybacks

Management Commentary

  • “GCE had another strong quarter, producing online enrollment growth of 10.1% and hybrid growth… of 15.4%.”
  • “We now have an extremely efficient way to get students academically eligible… first time pass rate on the NCLEX exam is approximately ninety percent.”
  • “As adjusted, non GAAP diluted income per share… is $1.53 which is $0.16 above consensus estimates.”
  • “Benefit costs significantly exceed our expectations… and technology services [are] increasing; our revised guidance assumes these trends continue in the second half.”
  • “We have $156.9 million remaining… under our share repurchase authorization. The Board… intends to continue using a significant portion of its cash flows… to repurchase its shares.”

Q&A Highlights

  • Enrollment acceleration drivers: paraprofessional teacher pathways in teacher education, stronger prereq science course demand for health programs, and rising preference for fully online degrees among 18–25 year-olds .
  • Competitive environment: fewer “free” scholarship offers from public universities; GCE’s GPA-tied scholarships and ROI focus maintained; bachelor’s loan limits unchanged .
  • Upside potential: could come from exceeding aggressive internal new online start goals in H2 despite tough comps .

Estimates Context

  • Q2 2025 beats: non-GAAP EPS $1.53 vs $1.377* (+$0.15), revenue $247.5M vs ~$240.9M*; both exceeded consensus, supporting raised Q3/Q4/FY outlook .*
  • Prior quarters: Q1 2025 non-GAAP EPS $2.57 vs ~$2.513*, revenue $289.3M vs ~$287.2M*; Q4 2024 non-GAAP EPS $2.95 vs ~$2.937*, revenue $292.6M vs ~$289.6M* .*
  • Estimate revisions: Lower effective tax rate and higher revenue/EPS guidance likely drive upward EPS revisions and modest revenue raises; margin guidance modestly tightened due to benefit and tech cost headwinds . Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Results momentum: Three consecutive quarters of revenue and EPS beats vs consensus, with Q2 non-GAAP EPS $1.53 and revenue $247.5M exceeding expectations .*
  • Margin trajectory: Operating margin expanded YoY to 20.9% on contract changes and lapping severance; H2 margins reflect continued investment and higher benefits/tech costs, tempering upside .
  • Guidance quality: Raised EPS and revenue across Q3/Q4/FY with reduced tax rates and diluted shares, signaling confidence in enrollment and buyback tailwinds .
  • Enrollment engines: Online and hybrid/ABSN pillars remain robust; prerequisites and paraprofessional pathways, plus AI tutoring, enhance conversion and retention .
  • Capital allocation: Accelerated repurchases (>$47M in Q2; $156.9M remaining authorization) and strong liquidity ($373.9M cash/investments) support per-share value accretion .
  • Risk watch: Benefit cost inflation, technology services spend, and legal fee increases are embedded in outlook; regulatory environment monitored but expected minimal direct impact to partners .
  • Near-term trading implications: Catalyst stack includes continued beat-and-raise, lowered tax rate, and buybacks; monitor Q3 new online start cadence and hybrid site profitability ramp relative to guidance .