Grand Canyon Education, Inc.

Good day, and thank you for standing by. Welcome to Q1, 2026 Grand Canyon Education Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sarah Collins, General Counsel. Please go ahead.

Joining me on today's call is our Chairman and CEO, Brian Mueller, and our CFO, Dan Backus. Please note that many of our comments today will contain forward-looking statements that involve risk and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. We undertake no obligation to provide updates with regard to the forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in GCE. With that, I'll turn the call over to Brian.

Good afternoon, and thank you for joining Grand Canyon Education's first quarter 2026 conference call. GCE had another strong quarter, producing online enrollment growth of 8.8% and hybrid growth excluding the closed sites and those that are in teach-out of 20.3%. Grand Canyon Education, Grand Canyon University, and now 19 additional partners have produced remarkably consistent positive results over the last 17 plus years in spite of significant change in the macro environments of education and the workplace. Most significantly, GCU has gone from the brink of bankruptcy to now being the largest private university in America. In addition to over 110,000 students studying online, GCU now has 25,000 students in an on-campus environment and has more students living in university-owned housing on its campus than any university in the country. Recently, GCE and its partners have built 47 hybrid campuses throughout the country to address severe shortages in the healthcare fields. More recently, GCE has assisted GCU in building a workforce development center to produce professionals in the rapidly growing construction and manufacturing fields where there are also severe shortages. The growth and success that has taken place is because GCE and its partners have built a model that is extremely flexible, is able to respond with great speed, and has used advanced technologies to produce tremendous scale. The current dissatisfaction with higher education is because faculty governance models are very inflexible, move very slowly, and can't scale to meet demands. Excellence in higher education is going to be defined in very different terms going forward. There's a lot of talk about how AI will produce winners and losers by industry types. The real discussion should be about winners and losers within industries. Higher education as an industry will continue to exist. Institutions that are flexible, fast, and that can scale will be able to use AI to flourish to even greater levels in the next 10 years. Higher education will be more important than ever if it can educate the next generation of workers to use AI in three important ways. One, to use AI to produce products to increase levels of human productivity. Two, to quickly allow workers whose jobs have been eliminated to re-career. And three, to educate a generation of workers for jobs that don't exist today but will exist in the future. It's important that universities don't just teach AI but are able to model it in the way it runs its business. GCE and GCU has dozens of AI products and products in development across 10 colleges, over 375 academic programs, emphases and certificates, and across every operational area. Students are learning with increasing levels of excellence and efficiency. Scores currently produced by GCU students in exit and licensure exams in the areas of healthcare, education, accounting, et cetera, are reaching all-time highs while scaling to huge numbers. This is especially important for GCU's important for GCU since it has rapidly expanded into academic areas requiring licensure. Programmatic areas like nursing, education, social work, counseling, et cetera, will benefit from AI implementation, but employment in those areas will always require formal higher education, the completion of degrees, and licensure. Project work produced by business, engineering, and technology students are at increasing levels of sophistication. GCU's Innovation Center is producing new student businesses that are thriving. To succeed in the future, universities must produce these real-world opportunities for students, and they must graduate in less time, for less money, and for lower debt levels. Our AI products are making curriculum more targeted, faculty more effective and efficient, and allowing operators to produce greater levels of student support. I believe AI will make our current advantages even greater, which makes me even more confident we will continue to meet or exceed our long-term objectives. With that, I would like to review the first quarter results. First, the online campus at Grand Canyon University. New starts were up in the high single digits in the first quarter of 2026, which was slightly above our expectations, and total enrollment growth was 8.8%, which significantly exceeds GCU's long-term objectives. In the past, I have highlighted four reasons for the growth. They include continuing to roll out 20-plus new programs on an annual basis, working with over 5,500 employers directly to address workforce shortages, strong retention levels, and holding the line on tuition to main GCU's competitive pricing position. Working with over 5,500 employers directly to address workforce shortages puts us in a very strong position with regard to online enrollment growth. We are now getting approximately 30% of our new starts by directly working with employers. The lead generation environment is definitely being impacted by the increasing numbers of people using artificial intelligence rather than an organization's website to gather information that they will use to make important purchases and life decisions. Our ability to respond to those changes is greater than the competition because of our unique ability to generate a high percentage of our students without using the typical lead generation strategies. The students we are generating by working directly with employers tend to be very purpose-driven and have high retention and graduation rates. Our marketing team continues to roll out AI strategies to showcase the strong brands and outcomes of our partners. We believe in the long term this will be very positive for us. Second, the GCU ground campus for traditional students. Total traditional campus enrollments were down slightly year over year in the spring of 2026 as expected. Spring total enrollments have historically been less than fall enrollments as spring new enrollments is a small percentage of overall traditional campus new enrollments as they are mostly made up of transfers for students that deferred a semester. And total enrollment is impacted by the growing number of students that are graduating in less than four years. We believe GCU will continue to experience annual new student growth on the ground campus each fall despite its increasing number of graduates because of its significant advantages, including the very low price point, very low average debt levels, percent of students completing in less than four years, the relevancy of GCU's academic programs to a fast-changing and moderate economy, and having the 20th ranked campus in the country. As we discussed on last quarter's earnings calls, we have made some changes to our marketing and recruitment strategy for GCU's traditional campus, which accelerated some spend into 2025 in the first half of 2026. those changes to date are producing positive results as registrations for fall 2026 remain ahead of last year even with the macro trends i discussed earlier in a tougher year-over-year comps we believe we can grow new enrollments significantly year-over-year which should get residential students back to growth two weeks ago gcu made a major announcement as part of its 25 000 student traditional campus GCU is one of the fastest growing honors colleges in the country. Mike Ingram, one of Arizona's most prolific land developers, has made a long-term commitment to the future of the college and has been named the Sheila and Mike Ingram Honors College. GCU expects to have over 3,000 students in the fall with average weighted incoming GPAs of over 4.1. This is one of the highest in the country. The students are coming from all 50 states and are studying across all 10 of GCU's colleges. Students are getting internships and eventually jobs at many of America's top companies, healthcare organizations, school districts, counseling centers, engineering firms, et cetera. GCU plans to more than double the student population, making it one of the largest and most impactful honors colleges in the country. Mr. Ingram is leading an effort to build a very prestigious honors college council, which will be comprised of highly successful professionals from the worlds of business, entertainment, politics, education, healthcare, and sports. A 55,000 square foot building is under construction to open in the fall that will be a state-of-the-art facility containing lecture halls, collaboration spaces, maker spaces, and gathering areas for many of America's best students. We believe the university's academic brand will continue to accelerate upwards as the Honors College grows, which is another reason we remain optimistic about the future growth of GCU's traditional campus. Third, Grand Canyon Education's hybrid campus had an increase in enrollment year over year of 18.3% in the first quarter. Excluding the closed sites and those that are in teach-out, enrollment increased 20.3% year over year. Hybrid campus new starts in the first quarter, excluding those in teach-outs, were up 20% over the prior year, which exceeded our expectations. There are two main reasons for this continued growth. One, almost all of our active ABSN partners have responded to the younger students interested in ABSN programs by admitting advanced standing students or in the process of making that change. Students with partially completed degrees haven't accumulated a great deal of debt and are very interested in nursing careers but didn't have an efficient way to earn their prerequisite science coursework. GCU created the science courses and some other gen ed courses so that they could be delivered online in eight weeks. Students can access these courses from anywhere in the world. There are start opportunities almost every week These courses have been made very affordable, are taught by experienced faculty, class sizes are low, and there's a tremendous amount of academic support, including an artificial intelligence project, which provides students 24-7 access to tutoring. Since implementing these courses, we have already enrolled 23,104 students. We have a waterfall report, which allows us to know how students are progressing through their prereq courses and when they will be eligible to start at one of our ABSN sites. Graduation rate of students who successfully enter the ABSN programs is in the mid 80s, and the first time pass rate on the NCLEX exam is approximately 90%. Nearly all our partners have responded positively to the change needed to serve the advanced standing students. Our goal is to still have 80 locations with our partners, with 40 of the locations being GCU locations. We opened five new sites in the year ended December 31st, 2025, closed two sites in which we stopped recruiting new students in 2024, and merged two sites that were located in the same market, bringing the total number of these sites to 47 as of December 31st, 2025. Three of the five new sites were GCUs, bringing their ABSN location total to 11. We plan to open one to two additional sites in the second half of 2026 while we mutually agreed with one partner to stop the recruiting of new students, and begin teach-out at three of its sites during the first quarter of 2026. A couple of sites that were planned to open in the fall of 2026 are more likely to open in early 2027, as we have previously discussed. We are being more selective on new site openings with a focus on the scalability of the market. We are also expanding our programmatic offerings with our hybrid partners by adding a graduate nursing program with seven specializations with Northeastern University, which started this past fall. A hybrid occupational therapy bridge to master's program to the already successful St. Kate's occupational therapy assistant hybrid program, which will begin in the fall of 2026. An online health science degree with Utica University and GCU launched a BS in occupational therapy assistance program and a speech language pathology program in 2025 at its Phoenix, West Valley location. GCU also plans to add a Bachelor of Science in Medical Lab Sciences program in 2026. Adding additional programs at our hybrid locations is an important component to our business plan. We anticipate this momentum will continue, although with the lower number of new site openings and more of our locations getting to capacity, hybrid enrollment growth will slow a bit while the profitability of this pillar will continue to improve. Fourth, the Center for Workforce Development at Grand Canyon University. GCU now has four programs in the Center for Workforce Development, including the Electrician's Pre-Apprenticeship Program, the CNC Machinist Pathway Program, the Manufacturing Specialist Intensive Pathway, and the Construction General Pathway, and we'll be rolling out a fifth program, the Manufacturing General Pathway, in the fall of 2026. These programs are all built in partnership with companies that are experiencing labor shortages in that area, and are excited about hiring GCU's graduates. These programs are either one semester or two semester programs. 116 students successfully completed the electrician pre-apprenticeship program in the fall of 2025 with five in the Austin, Texas hybrid location. 15 students completed the manufacturing CNC machinist pathway program in the fall of 2025 cohort, and 29 students completed the manufacturing specialist intensive program. These students attend school for 20 hours a week and then work in the facilities as a paid employee for 20 hours. At the end of the semester, they receive a manufacturing certificate and become eligible for employment in Arizona's fast-growing manufacturing industry. Students in GCU's growing engineering college are getting experience in this manufacturing facility, which is adding to their engineering education. I started out talking about the relevant programs and creative delivery models that GCU has implemented with its 20 partner institutions. In the seven-plus years since GCU has become a service provider, it has helped its partners accomplish the following. In that time, GCU has helped Grand Canyon University graduate 221,436 students, 59,659 in education, including 27,601 first-time teachers at a time when teacher shortages have created a national crisis. 57,412 in nursing and health care professions, including 3,723 pre-licensure nurses at a time when there is a huge shortage of nurses. 46,520 in the College of Humanities and Social Sciences, including thousands in counseling and social work, where there are also huge shortages. The College of Business has become one of the largest business schools in America and has produced 38,823 graduates. The College of Science, Engineering, and Technology has grown by 225% and provided 9,739 graduates. The Doctoral College, Honors College, and College of Theology also continue to grow. In addition, GCE has helped its partners graduate over, its other partners graduate over 15,000 pre-licensure nurses and occupational therapist assistants. The numbers that I've cited have all happened in the past seven years since the GCU-GCE transaction and since GCE has become an education services provider. This is a great example of a futuristic educational model that is flexible, moves fast, and is capable of great scale. All of this has occurred while GCE paid $627 million in federal and state taxes. While state universities and community colleges pull money out of the tax system, GCE has helped produce over 235,000 graduates while pouring millions of dollars into the system. Service revenues was $308.8 million for the first quarter of 2026, an increase of $19.5 million, or 6.7%, as compared to $289.3 million for the first quarter of 2025. The increase year-over-year in service revenue is primarily due to an increase in university partner enrollments of 71.1%, including an increase in GCU online enrollments of 8.8% and university partner enrollments at the off-campus classroom and laboratory sites of 18.3%, and one additional day of ground traditional revenue at GCU of $1 million in the quarter as a result of the shift of one day of revenue from the second quarter to the first quarter as compared to last year's spring start date, partially offset by a slight decrease in revenue per student year over year, primarily due to contract modifications with some of our university partners in which our revenue share percentage was reduced in exchange for us no longer reimbursing a partner for certain faculty costs, which had the effect of reducing revenue per student and a slight decline year-over-year in revenue per student for online students due to the continued mix shifts to students that have a slightly lower net tuition rate and a slight decline year-over-year in ground students, which generate a higher revenue per student than online students. Operating income and operating margin for the three months ended March 31st, 2026 was 95.5 million and 30.9% respectively as compared to 88 million and 30.4% respectively for the same period in 2025. Net income was 75.3 million for the first quarter of 2026. Gap diluted income per share for the three months ended March 31st, 2026 is $2.80. As adjusted, non-GAAP diluted income per share for the three months ended March 31, 2026 is $2.96, which is 8 cents above the consensus estimates. With that, I would like to turn it over to Dan Back as our CFO to give a little more color. 2026 first quarter, talk about changes in the income statements, balance sheets, and other items, as well as to discuss the 2026 guidance.