Grand Canyon Education, Inc. (NASDAQ:LOPE) Q4 2018 Earnings Conference Call Transcript

Feb 20, 2019 • 04:30 pm ET

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Grand Canyon Education, Inc. (NASDAQ:LOPE) Q4 2018 Earnings Conference Call Transcript

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Q & A
Operator
Operator

(Operator Instructions) Our first question or comment comes from the line of Peter Appert from Piper Jaffray. Your line is open.

Analyst
Peter Appert

Thanks, good afternoon. So, Brian, based on your comments based on the guidance, it definitely feels like you're seeing a tailwind in terms of the enrollment growth numbers from the conversion. Do you have a new target in terms of what you think would be a reasonable growth rate going forward for the online business in particular?

Executive
Brian Mueller

Well, we knew that would be the first question. We still say it's 60% from an online standpoint. There definitely was a tailwind. We had a very strong fourth quarter especially in terms of new starts. We're off to a good start in the first quarter. The question is how long will that last. And so we're going to be conservative, like we always are. We'll try to under-promise and over-deliver.

So yes, low-teens new student online growth was more than we expected and I think is evidence that being out there now a million times a day saying we're nonprofit has had an impact. We've had our competitors tell us openly. We bullied you guys every single day for 10 years with the fact that you shouldn't go to a for-profit institution. We grew in spite of that and now we are benefiting from that non-profit status even though pollution (ph) levels haven't changed et cetera. But increasing our goals in the short run, we're not ready to do that yet.

Analyst
Peter Appert

Okay. Fair enough. And then on the Orbis business, the growth -- enrollment growth numbers, Dan, that you gave, that -- would that assume any new university clients? And then sort of related to this, you've mentioned breakeven from an EBIT perspective. Any thoughts in terms of the longer-term financial model for Orbis?

Executive
Daniel E. Bachus

Yeah. So that does include, as Brian said on the call, seven additional locations opening in 2019. Those partners have already been signed up, locations have already all been determined and they will open at different times over the course of the year. They obviously continue to work on additional partners and additional locations for 2020 and going forward, but a lot of those locations and partners have already been determined for 2020 and going forward.

Executive
Brian Mueller

So the new locations in 2019 do not need additional university partners. They're going to be done with the current partners.

Analyst
Peter Appert

Right, exactly. Okay. And then...

Executive
Daniel E. Bachus

And in terms of margin, you know, as we've talked about before, their EBIT is basically breakeven, which is actually slightly better than what we had thought going into the year, but as they've completed their budget process that's where they got to. The margin profile of the business as a whole is highly dependent on the number of new locations that are opened during the year in comparison to the number of existing or more mature locations. And so as the percentage of new locations as a percentage of the total number of locations decreases