Grand Canyon Education, Inc. (NASDAQ:LOPE) Q2 2019 Earnings Conference Call Transcript

Aug 08, 2018 • 04:30 pm ET

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Grand Canyon Education, Inc. (NASDAQ:LOPE) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2018 Grand Canyon Education Earnings Conference Call. (Operator Instructions)

I would now like to turn the conference over to Dan Bachus, Chief Financial Officer.

Executive
Daniel Bachus

Thank you. Joining me on today's call is our Chairman and CEO, Brian Mueller.

(Forward-Looking Cautionary Statements)

And with that, I'll turn the call over to Brian.

Executive
Brian Mueller

Good afternoon and welcome to Grand Canyon Education's second quarter of fiscal year of 2018 conference call.

On July 1, 2018, GCE consummated an asset purchase agreement with Gazelle University. Prior to the transaction, GCE owned and operated Grand Canyon University. Upon the closing of the transaction, Gazelle University changed its name to Grand Canyon University or New GCU. As a result of the transaction, GCE transferred to a New GCU the real property and improvements comprising the GCU campus as well as tangible and intangible academic and related operations and assets related to GCU, and New GCU assumed liabilities related to the transferred assets. Accordingly, GCU is now owned and operated by New GCU.

In connection with the closing, GCE and New GCU entered into a long-term master services agreement. Pursuant to, which, GCE will provide identified technological counseling, marketing, financial aid processing and other support services to New GCU, in return for 60% of New GCU's tuition and other revenue. Accordingly, the results of operations discussed on this call reflect GCE's operations prior to July 1, 2018, which was made up exclusively of the operations of GCU. The results of operations in future periods will reflect the operations of GCE as a service technology provider, and it will be some updates as to the progress being made by GCU and its growing role in higher education.

As a result of this transaction, various aspects of GCE's operations have changed in important ways. These changes include, but are not limited to the following, GCE no longer owns and operates a regulated institution of higher education, but instead, provides a bundle of services in support of New GCU's operations. These services include technology, academic counseling services and support, and marketing for New GCU's ground traditional and online students.

Technology services include the ongoing improvement and maintenance of educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administration systems. Academic services include providing support for curriculum and new program development, providing support for faculty training and development, technical support and assistance with state compliance.

Counseling services and support include team-based counseling and other support to prospective and current students as well as financial aid processing. Marketing and communications includes brand advertising, marketing to potential students and other promotional and communication services. GCE will also provide, at least initially, back office services such as accounting, human resources and procurement services.

While GCE has never operated as a third-party service provider regulated by the Department of Education until now, all the services that it will provide to New GCU under the master services agreement