LOPE - Earnings call transcript Q3 2017 | Grand Canyon Education, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2017 Grand Canyon Education, Inc., Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time.

As a reminder, this call is being recorded. I would now like to turn the call over to Brian Roberts, General Counsel.

begin. may You

Brian M. Roberts

Thank you.

contain including filings, on Reports our on CFO, and Form regard that, over that in position These the financial obligation thoroughly factors Report SEC Dan our recommend expressed today statements our by XX-Q, X-K. Form is President CEO, many implied could Canyon. call involve or all I Grand we updates from comments will in and that turn and forward-looking provide are any that results factors our Chairman, Bachus. no reports Reports will before materially cause Mueller; Annual our today's made uncertainties. investors statements. to Quarterly our Brian taking discussed XX-K, Form on call, of to call risks actual these With during Speaking undertake and and a statements Brian. be Various with different forward-looking on Current such the to Please this results to note We review future

Brian E. Mueller

joining and XXXX, Canyon XX.X% you revenues by enrollments for XX.X%. quarter conference Grand the afternoon, Good XXXX grew University's third of by grew and call. In thank quarter third

high-single attending campus our quarter. New XX.X%. working adult students Operating grew digits in margins want thank online for our great staff another the to year-over-year. I at are faculty and

number. growth class add facility will growth, coming this minimum by quality the grow and an new club parking sports fields highest GPA and a average of will residence of year to of are for we athletics garage. per the two average a a X.X academic building incoming is continues a halls, Honors business in while the back body To year, major The in areas, club universities The programs. continue the areas freshman them. debate, are offerings are in students the has and lift dance, year. XX X% the a will are support will now goals total, theatre, increases, new increases positive great grow. continued a X% invest higher This educational year. from XX board university long-term basis on have through payments points ancillary students traditional continue and the of becoming revenues primarily per of now enrollments basis, expand traditional margins revenue up programs, Revenues brand enrollment drive annual and ground to campus rest and continue as X% be to Driving colleges, plan annual of per tuition basis accomplishments through the businesses. a XX points ground grow retention and emphases our certificates to nine campus. the grow to our to Operating know, the XXX of student you the X% As percentage will from and the room to experiences brand student at way GPA an of We we vibrancy of institution. this our a The to online classroom of X% the over X% priority. incoming campus an as by year's will without students cutting a X.X. come performance sports with result enrollments, to to and and big growth STEM-related X,XXX and Music, our building, College Many to the be

expand accommodate additional also we will pick eventually students. as acres We to property to XX,XXX up approximately XXX

a are also foot XXX,XXX-square continuing center. to We innovation invest in

anticipate number and programmatic initiatives focus on of offered continues be expanded more online increase graduate including our support that are warfare range security to The expansion, giving and cyber coding. to offerings computer manufacturing year. contemplating color advanced you next additional a continuing additive investing in campus student built the We these have half center of first education security to in and cyber growing We but options, in services offerings the science students. the

students exceeded out of students the XX% We from online online XX% have in students. programs come new are studying numbers our years. have in new enrolment program last primarily two because rolled of graduate programs new our of the the growth.

time education continue services, invest faculty, around classroom academic We research to in library one-on-one and full services, counseling online enhancements online support, pedagogy.

forward. effectiveness and going recent of at thought leader of Being Over faculty our recognized related learning. area an XXX articles important as plan increasing this presented time online part two-year scholarly period, in and our the to conferences, XX teaching have all written a most the is

Our two last an a office course, we've work and an a company promotions advertising adding company. complex, golf a hotel, are the businesses the community company, continues. in XX opened months, all These in In community. jobs the restaurants, a coffee

the tutoring We K-XX through this year of our Habitat efforts the to local next and renewed years with initiative renovate XX suppression the homes have our Phoenix. Humanity of We'll and within approximately schools crime City partnership expand with five goal XXX the in mentoring XXX area. for

million to Now from quarter were is Net primarily or or operations. number an period margin in $XXX million year third cost the grew the Also, turning increase benefit in of costs period. $XXX.X the XXXX. of million $XX.X results XXXX, XX.X% third and from increase to increasing million the third incurred an Operating QX the revenues compared $XX.X was million for an compared to same the the of margin compared XX.X% prior $XX.X XX.X% we faculty for increase the of years. XX.X%. and of in support students due $XXX.X was attending in of third million Instructional prior in of services quarter XXXX year income to quarter staff of the the number period. in to increased tax was university. the XX.X% in to XXXX. million million XXXX for in XXXX, between the in $XX.X increase $XX.X quarter to third After the the XX.X% Net period for XXXX of quarter same This

including support the an occupancy growing see as cost, to laboratory-intensive into result and ground cost to occupancy buildings service especially continue depreciation, us buildings, we number in of of additional STEM a traditional students. amortization, placing increase addition, In

third During XXXX, book a of needed by two of classroom fall replaced value that that of for remaining new be the will quarter XXXX. is we the building wrote-off the buildings

a disposals percent XX increase and over employee IC&S admissions increased XXXX quarter basis like across an XXXX items, provide of it from points turn expense quarter, a over compensation With I to to to year revenue, advisory base. As the amortization, percent of an our a in CFO, as prior XX.X%, changes a primarily third as talk XX.X%, over ability well XX.X% and as basis a the due decreased to occupancy give our more prior to to XX.X% primarily to as updated guidance. that, to growth in increasing sheet an net depreciation, in XX.X% on in our including revenue as traditional points Bachus, of revenue quarter our to related well income percentage about in Admissions little color other from and Advertising points of as personnel revenue increase three revenue due basis costs to primarily XXXX and for three decreased leverage to due XX balance would Dan XX XXXX. enrollment. expenses statement, the year, advisory expenses staffing ground in the the related as percentage

Daniel E. Bachus

XXXX, the additional in in our exceeded traditional cited the also of date. revenue year-over-year. Revenue in traditional Scholarships due earlier. of between per Brian. student third campus due fall ground quarter slight quarter to and day of of the growth XX.X% our as traditional of from XX.X% increase to to the the Thanks, Revenue and XXXX, in primarily days additional to student third in a six revenue campus revenue years, reasons start term XXXX, our primarily primarily compared revenue the favorable increased in one to online as compared expectations XXXX Online to XXXX, in scholarships XXXX, the slightly summer XXXX, as per was of Brian due increased quarter due of to shifts students. in third semester a from percentage year-over-year, residential timing up of

the scholarship students more debt there of ground Bad online of related as XXXX. XXXX, higher stayed of flat third quarter the compared than as percentage revenue in the are students. percentage expense are their much a ground a Although, is revenue of third at scholarships quarter for and rate down year-over-year, X.X%

for Our than to both contributions quarter effective quarters rates tax the rate rates income lower XX.X%, of The due XXXX of state was for quarter the the in compared were third effective school tax in of to organizations. made effective lieu taxes tax sponsoring annual our XXXX. XX.X% to third

to $X XXXX. from decreased QX contributions million $X Our million QX XXXX, in in

payments decrease year, in increase of of rate quarter the As is recall, over quarter were excess tax vested equity. quarters is rate, settled expenses the recorded recognition third compensation recorded in consolidated annual of the reduced of reflected you offset income tax be the that state lower XXXX the and lower the by adoption reflected the up awards standard as each taxes. administrative in effect from income a these rate prior true benefits these tax in in share-based in the dollar-for-dollar of in of to Three third they quarter share-based Previously tax in to the compensation the we or statement. remaining in directly effective had payments fourth our of lower the quarter. in our which the first contributions resulted XXXX, The and the might was general year and

had we any XX.X% discrete in which third primarily impact the tax of available quarter purchase to shares authorization rate the rate the XX.X% XX, XX,XXX items. shares at stock did of repurchase the third common We cost as tax before our than higher quarter but of effective of XXXX, approximately million for our $XXX,XXX. income end XXXX. $XX.X at of subsequent the our due projected of lowered not We quarter share Our September third the did under the to was a taxes, purchase higher

expiration purchase Our XXXX. has for date extended to Board our share Directors program XX, December of the

$XXX and CapEx Total and September unrestricted Turning of to XXXX investment XXXX, of receivable in which XXXX. million XX, cash the allowance sales $XX.X or compared campus. X.X cash to the been at might purchases have doubtful outstanding net net year development or offsite $XX.X $XXX.X of third million projects is X.X the of represents million quarter was XXXX-XXXX outstanding the balance $X.X short-term on school September building approximately or offsite budget. for completed quarter was sheet under our excluding Total at sales CapEx XX.X% XXXX, revenue. still The $XX.X year Accounts development and and days accounts end $XX is restricted made campus or the million that XX, to of million million. for at to (XX:XX) land third excluding the and between be for of flows. be the the the estimated million days still adjacent additional

We like available continue the on to to million fourth color provide $XXX for to on have line. Last, XXXX. borrow provided I'd guidance our of we quarter have

have to due and end XXXX of enrollment revenue of fourth quarter and third our expectations the our to We enrollment higher at guidance projected exceeding quarter online upped for the ending revenues. due us the ancillary

mid-single-digit start assumes fourth still quarter in guidance new enrollment XXXX. the growth Our

growth in Our in continued our to years. higher slight retention and graduate in The have increase continues of result percentage enrollment the increase seen gains, a exceed between to guidance shift year-over-year graduates significant assumes recent still total increases also retention in an a and in students rate. we graduates years,

continue XX,XXX to at to enrollment, study year-end. total traditional students We ground professional be our and estimate ground

prior the continues $X.X expectations. is with Our the a reflect ground in new previously the ground for of one tracking our for invest assume start day year million in campus, decrease and our Continue margin campus what revenue for increase continues The and to traditional the compared we provided fourth projects. as tuition in online estimated to consistent with the program no to expenses development to date campus. guidance are have shift quarter community various or line

timing lieu share-based the in thus QX XX.X% in and to option best compensation be estimate lower effective stock exercises. our of state estimated in time. differences and and includes rate the be taxes price our income of impacted this contribution tax effective at The will continues by in of rate fluctuations Our

assume turn call we that will can additional we Although, I the repurchase so not over these during might questions. do answer estimates now XXXX, the moderator, shares repurchases.

Operator

Our from Piper comes question Peter of Appert Jaffray. first

is Your line open.

Peter P. Appert

part the starts two that's any of of can facing. is growth in against online then you're particular? Thank And you. And The drivers Brian, strength, color in strength term wondering, impressive, these in particularly of the is in more pretty one. part I'm reason rethink online it if terms you your gives comps terms just to longer tough provide expectations you any

Brian E. Mueller

are ahead we do still we've We're telling to next been slowdown – quarter. what expect No. but we people, of this

of been we And get slowdown do our the saying that quarter, quarters but and building in to we've expectations the so, tougher. for We guidance do next more brand strong been. – comps of the did surprise our quarters expect to the the this a of meet some terms resonates couple has very to be that what number exceed now in are it brand. and drivers long-term country. our is more The The throughout extent

so economy been going, to for strategy programs and of people the effective. exceeding going run. we're And, where brand this parts the the that important play, is, one that we For I message that's very been are I most the goals help a that of talking those mainly where the reason our the from And to a jobs. to strong the are a our in country is getting recognize hard gain still we're develop name were people we're think They've and saying will have while it. but part getting very communicated Southwest I trying but short our that the the getting business about be and while, being other in for advertising important of this do and that's biggest is most big. part is numbers very strategies efficiently. new programs. students understand The jobs the think But very have thing the

that. caution we're So, people trying about to

Peter P. Appert

it. Got

Okay. teaser even Thank stepping like share process the you. not The almost plan? I repurchase it's toe the water, XX,XXX shares terms you of repurchased of a thought in think in up in terms maybe

Brian E. Mueller

later probably Well, somebody anyway. this question ask will

and and Kaplan, We, what's back consider the are is, Purdue and So, people about going with we'll answer it just obviously asking that now. question go answer whether yes. would on at we the

We decision have made we it, do would. to not yes, a but that, consider

to our And think company, so, public to be aggressively be in and well service balance would large for-profit a a as which if to execute more decide we not we we case pursue as on we positioned decided status want cash profit would possible. for traded we

some to and cash next number decisions be as builds you can up to as us aggressive in amount to cash so, but And we expect have as that make be want more the possible. that high months we big of

Peter P. Appert

of Understood. need to can you And like? potentially the second then just decision could what look on what what that for move a the are, Brian, see that you expand to forward, on sort structure criteria

Brian E. Mueller

they're rules, and to November, the establish the rules so going It's in criteria...

Peter P. Appert

(XX:XX).

Brian E. Mueller

yeah. Yes,

Peter P. Appert

Yeah, okay.

Brian E. Mueller

makes possibly is, see to going us to that that that to need Higher we what the is we Learning comes and if what do we rules wait forward, those out. Yes, but Commission want that language and sense until are, would for then move

Peter P. Appert

preliminary thoughts or again in last sounded the perhaps then that of up not? building terms like it. program on is next Dan, year, it Got CapEx correct steps one for And thing for

Daniel E. Bachus

It's we will This about year $XXX consistent saying, million want $XXX be, below the with little land excluding a bit we've the been to average million. purchases. a potentially year what

we But been continue million. we'll year, expect year million, so. maybe bit be to we that next $XXX average we've to and as period a saying, Next high about five-year it as $XXX the above little over $XXX believe the as million,

Peter P. Appert

Understood.

much. very Thanks Okay.

Brian E. Mueller

Thank you.

Operator

of Our next Markets. question comes BMO from Jeff Silber Capital

line Your open. is

Jeffrey Marc Silber

you so much. Thank

for you there the little did. and a I too curious I brand, but my little bit give forgive just was mentioned more pen, you spoke think, going bit rate if online Just mean, the strength back in to me, it can you the just that a the growth, quickly changes any spending of spend of more? just I'm you were us color with,

Brian E. Mueller

we fewer within much spending at the We're spending. more is No. efficient. It's higher advertising the regards more becoming We're them generate what rate. convert we It's And messaging a just to far much with and anticipated becoming effective. leads budget budget.

but And to effectiveness and strength efficiency the of we attribute that the brand. also so of the the messaging,

Jeffrey Marc Silber

so asked over it a in, going past coming my et few area, And it's quarter, Okay, know, competitors the this months, any new know, will everybody it perspective, competitive time. obviously a turn change cetera? be this out, great. I competitive From I any

Brian E. Mueller

every major And to not a in difference we Not couple really. meeting, in talk our no, weeks two we the have people any last significant and noticed months.

Jeffrey Marc Silber

so Okay. much. Fantastic. Thanks

Brian E. Mueller

Yeah.

Operator

Our next Alex question Research. Barrington Paris comes of from

open. is line Your

Chris Howe

Alex Chris for is This afternoon. Good in Paris. Howe sitting

was And of the strategy? lead the of they in how this of to that comments made use past, some did commentary some you were some it to on you third-party the relation by competitors in provide I as advertising some improvements Just thinking and Peter. previous general Could generation? your perhaps about do

Brian E. Mueller

messaging that Well, that's a out we've getting social major able television the be program. lot quality large extent media interested away there class those put of with big from to a and messaging and into We're higher a person been to we fewer We move change, the that campaigns and that's higher people in to campaigns, brand, your need is at high-quality shift. interested who a rate. drives builds a of them be

now. on that's and couple been going a So, for years

Chris Howe

and/or then And also year stock on expense? expectations next. had able about Would you compensation provide this you to be CapEx depreciation for any and commented commentary and Okay. amortization

Daniel E. Bachus

Yeah, sure.

percentage in huge years year we that. the of seen this have billings a significant and revenue, as amortization in because depreciation the So, a and the pretty to before prior year-over-year of increase year CapEx

and expect XX year-over-year. maybe Given up or to points basis that this year has XX be we ticked basis amortization points down, depreciation

Next to be flat points XX year points. to basis basis could XX up

stock-based a as basis percentage year-over-year a on slowing as be of will will that comp. So, revenue

could you as year-over-year. points won't those percentage basis a as or increases year-over-year XX of much comp in forward. up, as it see up could to be But going stock-based big points be XX revenue So, basis amounts flat

Chris Howe

I Okay. question one may. last And then if

success had from resonate success that new acceleration of these like geography? outside further you're hidden California. made the seeing previously even and enrollments into Midwest the in about Has You within perhaps some the from the message states areas, to started comments the and gems

Brian E. Mueller

of Yes, national exposure for Southwest and direction because moving have really we things a cable of a more other on university. of number national a being We play both of and then it. TV, years very were in a again, become sides

online I'm XX% an our – at so that's to that would were student one we From perspective from time, about from of down we And a based and were Arizona have, – so talking ground students XX% perspective. now. at

We expect be XX% as the significantly to under year grows. next that campus

And so the for students number California. expanding that. of and Arizona our we getting and was very a this excited country campus, on But – quality are very and high was into a primarily different it now of years parts ground are reach about

Chris Howe

Thank you for my taking questions.

Brian E. Mueller

Yeah.

Operator

comes Our Jeff next of from question Baird. Meuler

line Your open. is

Jeff P. Meuler

Brian, if will serviced Hey, the for-profit university Yeah. be what the you and with and service the or by do or dorm plan the the be university, Like, or dorms to not-for-profit decide ownership? for-profit that will strategy Thank not-for-profit will owned you. the pursue for service be co.?

Brian E. Mueller

doing If the you about university the two was to the we no what of profit ago, years been for go there's plan back acquire dorms that. to than and different talked years discussion something not-for- two

assume that forward, not-for-profit would I those be did would if dorms. it own would we So, move the

Jeff P. Meuler

tougher assumption you enrollment sustained QX, the growth mid-single-digit a into terms online of year-over-year on guidance digits in the just comp. meaningfully Okay. then And in high-single

terms I where QX occurring? seeing color call at extent you out, the the to in you are you assumption, deceleration to programs, point are can cetera and of on deceleration et So any geographies, this guess, maybe which the

Brian E. Mueller

just geography law terms the No. in of based It's slight Not upon really in of of really, a deceleration terms or really numbers. large not programs.

XX,XXX students We have now.

we that the be to down and that to we tried last expect a we've in very just rate. So, start saying to And, careful to couple become fairly years, expect this over it soon. slow eventually normalized

Daniel E. Bachus

the is, the there of beginning the the – a within year of did ago. of were assumption at beginning what the that We year budgets how or year for because the numbers that our

time of time. law in the in said, numbers large Brian – that's back-to-school a not period typical of as your Just a

that's this our so, still And point. expectation at

Jeff P. Meuler

you Okay. like more and starts in are the it But assumption? October seeing to guidance is flow it lead or

Brian E. Mueller

assumption. the Yeah,

Jeff P. Meuler

just the they students, these? what traditional Okay. cyber Are on of And facility? programs, – ground are types me on you warfare can offerings aged you kind – these security then what are – are envisioning they I of there? are help they are I online programs the degreed, programs,

Brian E. Mueller

the would we partnership in movement strengthen – – students. are national you Valley. Valley, of asked and and to a them and the around in people high-profile All right some cyber big upon jobs all we and have of with we believe, certificate to XXX,XXX what to for have around – have, and called warfare depending on in has East a in which now so warfare be very I organization positions, opportunity like we tremendous, part profile degree a us – available would we part And with formed And which so programs training. we everything in the high it we're range cyber who to you work ACTRA, and – the is have Arizona, that. security players think, a just said, that – came There – and security. programs to West we've pretty range on some that. into in for of bringing if completed – We'll now we They we a turn

Jeff P. Meuler

what's rough it? give not the what for run golf just margin sense the revenue the profile can them board, for the talking coffee were revenue and general and this And annual point and us and some those the in room more what's Okay. you is spirit all annual on thinking then rate things and I'm the at I'm of of so ancillary,

Brian E. Mueller

are million, core number, it's don't the thing, head, my million. less that take than less that of the sort $XX top margins the than $XXX margins for you food out Off and business. than remember I probably And on once our exact the but less it's of clearly

and XX% X% between margins. somewhere they're So,

Jeff P. Meuler

Okay. Thank you.

Brian E. Mueller

conference that end our in quarter call. your of We Education. reached we've With Grand third time Canyon and the interest appreciate

have Bob please much Thank either you contact Dan very Romantic. you questions If your for time. still Bachus or

Operator

and day. Ladies disconnect. all thank today's program does This you you participating Everyone the a have may gentlemen, and conference. for in conclude great

Grand Canyon Education (LOPE) 1 Nov 172017 Q3 Earnings call transcript