Earnings Call Transcript - LOPE Q4 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Grand Canyon Education Earnings Conference Call. Please be advised that today's call is being recorded. I would now like to hand over to your speaker, Sarah Collins, General Counsel. Please go ahead.

Sarah Collins, General Counsel

Joining me on today's call is our Chairman and CEO, Brian Mueller; and our CFO, Dan Bachus. Please note that many of our comments today will contain forward-looking statements that involve risks 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.

Brian Mueller, CEO

Good afternoon, and thank you for joining Grand Canyon Education's Fourth Quarter 2025 Conference Call. GCE had another strong quarter, producing online enrollment growth of 8.7% and hybrid growth, excluding the closed sites and those in teach-out of 18.7%. Grand Canyon Education, Grand Canyon University and now 19 additional partners have produced remarkably consistent positive results over the last 17 years despite significant changes 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 107,000 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 other 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, 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 at many universities are very inflexible, move very slowly, and can't scale to meet demands. There's a lot of talk about how AI will produce winners and losers by industry type. 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 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 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 near future. It is important that universities don't just teach AI, but are able to model it in the way it runs its business. GCE and GCU have dozens of AI products and products in development across 10 colleges, over 350 academic programs, and across every operational area. Students are learning with increased levels of excellence and efficiency. Scores currently produced by students in exit and licensure exams in areas like healthcare, education, accounting, etc., are reaching all-time highs while scaling to huge numbers. This is especially important for GCU since it has rapidly expanded into academic areas requiring licensure. Programmatic areas like nursing, education, social work, counseling, etc., will benefit from AI implementation, but employment in those areas will always require higher education and licensure. Project work produced by business engineering and technology students is 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 those real-world opportunities for students, and they must graduate in less time for less money and lower debt levels. Our AI products are making the 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 fourth quarter results. First, the online campus at Grand Canyon University. New starts were up in the mid-single digits in the fourth quarter of 2025, which was in line with our expectations, and total enrollment growth was 8.7%, which significantly exceeds GCU's long-term objectives. In the past, I've highlighted four reasons for the growth. They include continuing to roll out over 20 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 maintain GCU's competitive pricing position. New start comps are extremely challenging in the first half of 2026 as new starts were up in the teens in the first and second quarters of 2025 compared to 2024 due primarily to the success of programs such as the prerequisite nursing and teacher education. Although we believe those programs have a lot of runway to continue growing, the year-over-year percentage growth is slowing due to the large numbers. But we are rolling out some new programs in the second quarter of this year that we are very excited about that we believe will allow us to continue to grow total enrollment at or slightly above our long-term objectives. Second, the GCU ground campus for traditional students. New traditional campus enrollments were up in the high single digits and total traditional campus enrollments were down slightly year-over-year in the fall of 2025, while total GCU ground enrollment was flat year-over-year. The slight decline year-over-year in total traditional enrollments was in line with our expectations given last year's decline in new enrollments caused primarily by the FAFSA site issues and the higher-than-expected summer graduations. Spring new and total enrollments were in line with our expectations. Spring new enrollments make up a small percentage of overall new enrollments as they are mostly made up of transfers or students that defer a semester, and total enrollment is impacted by the growing number of students graduating in less than four years. We believe GCU will continue to experience new student growth on the ground campus because of its significant advantages, including a very low price point, low average debt levels, the percentage of students completing in less than four years, the relevancy of GCU's academic programs to a fast-changing and modern economy, and having the 20th ranked campus in the country. As we move forward, three trends are impacting traditional college campuses throughout the country. First, the number of high school graduates on an annual basis continues to decline; second, the percentage of high school graduates that are choosing a four or five-year baccalaureate path continues to go down while the number of students choosing shorter certificate or trade programs is increasing; and third, the number of high school graduates choosing a baccalaureate path but doing it fully online continues to increase. We are in a very strong position given these trends. We have a high-quality, affordable offering on the GCU ground campus but have even greater program choices for students that want to go fully online or to move back and forth between ground and online. As we discussed on last year's earnings call, we have made some changes to our marketing and recruitment strategy for GCU's traditional campus, which accelerated some spending into 2025 in the first half of '26. Although it is still early in the cycle, those changes to date are producing positive results as registrations for fall 2026 remain significantly ahead of last year. Even with the macro trends I discussed earlier and the tougher year-over-year comps, we believe we can continue to grow new enrollments significantly year-over-year, which could get residential students back to growth. Third, Grand Canyon Education's hybrid campus had an increase in enrollment year-over-year of 16.6% in the fourth quarter. Excluding the closed sites and those that are on teach-out, enrollment increased 18.7% year-over-year. There were no hybrid campus new starts in the fourth quarter, but we did have a higher-than-expected number of new students starting in the fall. There are two main reasons for this continued growth. First, almost all of our active ABSN partners have responded to the younger students interested in ABSN programs by admitting advanced standing students or are 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 the prerequisite science coursework. GCU created the science courses and some other general education courses that 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 is a tremendous amount of academic support, including an artificial intelligence project that provides students 24/7 access to tutoring. Since implementing these courses, we have already enrolled 20,536 students. In the summer 2025 term, 66% of all matriculated hybrid students at non-GCU sites took at least one of these courses and of these students, they took five courses on average. We have a waterfall report that allows us to know how students are progressing through their prerequisite courses and when they will be eligible to start at one of our ABSN sites. The graduation rate of students who successfully entered the ABSN programs is in the mid-80s, and the first-time pass rate on NCLEX exams is approximately 90%. Nearly all our partners have responded positively to the change needed to serve the advanced standing students. Our goal is still to have 80 locations with our partners with 40 locations being GCU locations. In 2025, we opened a total of five additional sites, including a second location in the Boston area in the fall, another site in New York City, and three GCU sites in 2025: one in Albuquerque, New Mexico, which was opened in the first quarter of 2025; one in Lake Mary, Florida near Orlando, which was opened in the second quarter of 2025; and one in Englewood, Colorado, south of Denver, which was opened in the third quarter. The addition of GCU's three new site openings brought its ABSN location total to 11. It is likely that we will only open one additional site in 2026 in the Miami, Florida area. 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 discussed previously, 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. Cate Occupational Therapy Assistant hybrid program 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 BS in medical laboratory sciences program in 2026. Adding additional programs at our hybrid locations is an important component of 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, Center for Workforce Development at Grand Canyon University. GCU now has four programs in the Center for Workforce Development, which include 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 fall 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 semesters. 212 students successfully completed the electrician's pre-apprenticeship program in 2024-'25, including 11 in the Austin, Texas hybrid location. 33 students completed the Manufacturing CNC Machinist pathway programs in the 2024-'25 fiscal year. These students attend school for 20 hours a week and then work in the facility as paid employees for another 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 gaining 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 GCE has implemented with its 20 partner institutions. In the seven-plus years since GCE has become a service provider, it has helped its partners accomplish the following: in that time, GCE has helped Grand Canyon University graduate 215,851 students, 58,497 in education, including 27,527 first-time teachers at a time when teacher shortages have created a national crisis; 55,963 in nursing and healthcare professions, including 3,723 in pre-licensure nurses at a time when there's a huge shortage of nurses; 44,976 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 37,834 graduates. The College of Science, Engineering and Technology has grown by 220% and provided 9,512 graduates. The Doctoral College, Honors College, and College of Theology also continue to grow. In addition, GCE has helped its other partner institutions graduate over 15,000 pre-licensure nurses and occupational therapist assistants. The numbers I have just 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 very fast, and is capable of great scale. All of this has occurred while GCE paid $619 million in federal and state taxes. While state universities and community colleges continue to pull money out of the tax system, GCE has helped produce over 230,000 graduates while pouring millions of dollars into the system. Service revenue was $308.1 million for the fourth quarter of 2025, an increase of $15.5 million or 5.3% compared to $292.6 million for the fourth quarter of 2024. The increase year-over-year in service revenue was primarily due to an increase in university partner enrollments of 7.1%, including an increase in GCU online enrollments of 8.7% and university partner enrollments at the off-campus classroom and laboratory sites of 16.6%, partially offset by one less day of ground traditional revenue at GCU of $0.9 million in the quarter as a result of the shift of one day of revenue from the fourth quarter to the third quarter compared to last year's fall start date, and a 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 the 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 shift to students that have a slightly lower net tuition rate. Operating income and operating margin for the three months ended December 31, 2025, was $108.1 million and 35.1%, respectively, compared to $100 million and 34.2%, respectively, for the same period in 2024. Net income was $86.7 million for the fourth quarter of 2025. GAAP diluted income per share for the three months ended December 31, 2025, is $3.14. As adjusted, non-GAAP diluted income per share for the three months ended December 31, 2025, is $3.21, which is $0.02 above consensus estimates. With that, I would like to turn it over to Dan Bachus, our CFO, to give a little more color on our 2025 fourth quarter, talk about changes in the income statements, balance sheet and other items as well as to discuss the 2026 guidance.

Daniel Bachus, CFO

Thanks, Brian. Included in our Form 8-K filed with the SEC, we have included non-GAAP net income and non-GAAP diluted income per share for the three months ended December 31, 2025, and 2024. We believe the non-GAAP financial information allows investors to develop a more meaningful understanding of the company's performance over time. As adjusted, non-GAAP diluted income per share for the three months ended December 31, 2025, and 2024 is $3.21 and $2.95, respectively. Service revenue was higher than our expectations in the fourth quarter of 2025, primarily due to higher-than-expected enrollments and revenue per student, partially offset by the impact of the government shutdown. The fourth quarter operating margin was positively impacted on a year-over-year basis by the higher revenue and the contract modifications, partially offset by additional spend for 2026 partner initiatives. Our effective tax rate for the fourth quarter of 2025 was 22.4% compared to 21.2% in the fourth quarter of 2024 and our guidance of 22.8%. The lower-than-expected effective tax rate is primarily due to state income taxes. We repurchased 605,730 shares of our common stock in the fourth quarter of 2025 at a cost of approximately $100 million and another 352,051 shares were repurchased since December 31, 2025. We have $284.6 million remaining available as of today under our share repurchase authorization. The Board and the company intend to continue using a significant portion of its cash flow from operations to repurchase its shares. Turning to the balance sheet and cash flows. Total unrestricted cash and cash equivalents and investments as of December 31, 2025, were $300.1 million. GCE CapEx in the fourth quarter of 2025, including CapEx for new off-campus classroom and laboratory sites, was approximately $7.6 million or 2.5% of service revenue. We anticipate CapEx for 2026 will be between $30 million and $35 million. Last, I'd like to provide color on the guidance we have provided in our 8-K filed today. As a reminder, the guidance that we have provided in the outlook section of our 8-K filed today is GAAP net income and diluted income per share with the components to adjust the GAAP amounts to non-GAAP as adjusted net income and non-GAAP as adjusted diluted income per share. 2025's financial performance significantly exceeded our original estimates, beating the midpoint of the non-GAAP as adjusted diluted net income per share guidance we put out at this time last year by $0.46. In putting together our guidance for this year, I am amazed at how consistent our assumptions are with what we predicted at this time last year. Our comps are, no doubt, more challenging, but as Brian discussed, the trends remain strong in all three pillars. Consistent with prior years, we have provided ranges for revenue, operating margin, and earnings per share for each of the four quarters of 2026. We do this because our financial results are seasonal, and the start and end dates of our partners' semesters change year-over-year. As you have probably noticed, the midpoint of the EPS guidance is above consensus estimates, primarily due to a lower projected share count. The midpoint of the revenue and operating income guidance are generally in line with consensus estimates. Revenue will be slightly impacted in 2026 due to the modification of the contract for one university partner effective January 1, 2026, in which we will no longer be reimbursing the partner for their faculty costs and due to the teach-out of three partners' locations. As I will discuss in a minute, this slightly lowers revenue in 2026, but both of these changes are long-term positives for the company and will positively impact margins in 2026. The year-over-year changes in the start and end dates of the semesters for GCU's ground traditional campus will move $1 million in revenue from Q2 to the first quarter and $8.3 million in revenue from the third quarter to the fourth quarter in comparison to last year. The change between the third quarter and the fourth quarter is more significant this year than in past years as GCU's fall semester for its ground traditional campus begins and ends six days later this year than last year. We anticipate that new online enrollments will be up year-over-year in the mid- to high-single digits during 2026. As Brian discussed, new enrollment growth in the first two quarters of 2025 were up in the teens over the prior year and thus mid-single-digit growth in the first two quarters would be strong growth. We do anticipate total online enrollment growth continuing to be pressured by increasing graduations and a continued decline in re-entries, which is students returning to school after a break due to the high retention rates. The high end of guidance assumes total enrollment growth will end 2026 up in the high single digits year-over-year, whereas the low end assumes a mid-single-digit year-over-year growth rate. And thus, the midpoint of our range assumes a year-over-year growth rate that is near the high end of our stated long-term objective of 5% to 7% annual growth. The revenue range assumes that GCU ground enrollment will be 21,900 in the spring, will range from 8,500 to 8,800 in the summer, and be between 24,900 and 25,600 in the fall. The high end of the range assumes a low teens new start year-over-year growth rate for the ground campus, while the low end of the range assumes mid-single-digit new start growth. Thus, the midpoint assumes a high single-digit increase in new ground enrollments year-over-year. As we're currently well ahead of last year in registrations, this estimate may prove to be conservative, but we believe it is prudent given where we are at in the recruitment cycle. The reported ground number continues to include GCU hybrid, which continues to grow, and professional study students, which we expect to be flat on a year-over-year basis. Total ground enrollment continues to be impacted by the lower fall 2024 new start and the growing number of graduates year-over-year as a significant number of ground traditional students continue to graduate in less than four years. The new and total enrollment growth rate for the hybrid pillar is predicted to grow on a year-over-year basis in the high single digits to mid-teens during each of the four quarters of 2026. As has been discussed previously, the hybrid growth rate is being impacted by the fact that we now have 14 locations that are at or near capacity, and thus, we will have little to no growth year-over-year in total enrollments at those locations. And from a new enrollment perspective, 22 locations will not have year-over-year growth in new enrollments on a year-over-year basis in the fall as, although eight locations are not at state authorized capacity, we started the maximum number of students allowed during the fall of 2025. We remain hopeful that some of these locations will get local regulatory approval to grow in the future as they currently have waitlists, and we still have a lot of opportunity at the other locations. We will be opening one new location in 2026, in fall 2026, but should be opening a number of locations in early 2027. Revenue growth rates for the hybrid pillar will be impacted by changes made to the contract of one university partner that beginning in January 2026 is no longer being reimbursed for faculty costs and both enrollments and revenue will be impacted by the teach-out of one partner's three locations in 2026. We estimate that these changes will reduce revenue by $4.2 million in 2026, but will positively impact operating income as the three locations that will be in teach-out were incurring significant losses. Excluding these impacts, we anticipate a slight increase in revenue per student year-over-year, primarily due to the hybrid pillar growing at a faster rate than online or ground. Online revenue per student will be flat to slightly down year-over-year due to the mix shift to programs that have slightly lower net tuition rates. Revenue per student is also negatively impacted in the first half of the year by the slight decline year-over-year in ground traditional students. On the expense side, we continue to make investments to support our university partners' growth goals, but do anticipate margin expansion in 2026. As previously discussed, the online programs primarily that lead to licensure in which GCU is growing at an accelerated rate either cost us more to service than the traditional online programs or at lower net tuition rates, which is putting some pressure on margins. We also continue to absorb significant increases in technology services and benefit costs. We will also have some pressure on margins in the first six months of the year as ground traditional enrollment is down year-over-year and in the third quarter as the GCU traditional campus start and end date moves back this year. As it relates to the hybrid pillar, we will incur additional costs for the new hybrid locations that have opened in the last year or will open in 2026 or early 2027, but we are experiencing increased site level profitability due to the increasing enrollments. To summarize, at midpoint, our revenue guidance would be slightly above consensus estimates, if not for the contract modification and teach-out, and we are hopeful given current registrations that ground enrollment exceeds the midpoint. We should see slightly lower margins in the first half of 2026, but are optimistic that margins will expand in the second half, especially if revenue is in the top half of our revenue range due to the leverage in our business model, and full year margins will be up year-over-year. We estimate that interest income will decline year-over-year in 2026 due to declining cash balances due to more aggressive stock buybacks and a declining interest rate environment. We believe the effective tax rate for the four quarters of 2026 will be 23.4%, 24.9%, 24.9%, and 24.3% with a full year tax rate of 24.3%. The effective tax rate continues to be impacted by higher state taxes as we continue to add sites in states outside of Arizona, which have higher state tax rates and other factors, including an estimated decrease year-over-year in the excess tax benefit deduction due to a decline in our stock price. These estimates do not assume a contribution in lieu of state income taxes, but if one is made, that will increase G&A expense in the third quarter and decrease the effective tax rate in the second half of the year. Our weighted average shares guidance takes into account the significant amount of stock we repurchased in the last few months. We anticipate continuing to use our excess cash to repurchase shares as the Board believes the stock is materially undervalued based on the metrics it uses to evaluate this, including the ratio of enterprise value to adjusted EBITDA and free cash flow yield in comparison to other S&P 500 companies. I will now turn the call over to the moderator so we can answer questions.

Operator, Operator

Our first question will come from Alex Paris from Barrington Research.

Alexander Paris, Analyst

First question related to fourth quarter results. Revenue of $308.1 million was above our estimate and consensus, up 5.3% year-over-year. You had talked or kind of telegraphed some impact from the government shutdown on military tuition assistance of about $3 million. Is that where it landed? Was that the impact, about $3 million? Or is it different than that?

Daniel Bachus, CFO

I think it was a little bit lower than that, but that's still probably a fairly good estimate. It probably was in the $2.5 million to $3 million range.

Alexander Paris, Analyst

Got you. And then on operating income and operating margin in the fourth quarter, at the low end of the guided range, but still within the range. I just wonder what additional color you could provide there.

Daniel Bachus, CFO

Yes. Brian can provide more details, but we made some significant investments mainly related to the ground campus during the fourth quarter, which started towards the end of the third quarter and continued throughout the fourth quarter.

Brian Mueller, CEO

Yes, if you look at how we've expanded this ground campus from 900 students to 25,000 students, there has been a significant investment in personnel working in high schools across the country. This is a common practice for universities to recruit students for their campuses. We didn't allocate nearly as much budget to advertising, particularly in social media, as we have for online efforts. In the fall, during September and October, we tested a considerable spend and achieved impressive results. Students are engaging with our videos and completing them, showing their interest beyond the influence of their high schools. The conversion rate of these students into registrations has increased significantly compared to last year. We firmly believe that we are enhancing awareness of the value proposition offered by this ground campus. We intend to make another major investment that won’t significantly affect our financials, focusing on the growth of our Honors College. Our Honors College at the ground campus has really thrived, with enrollment now at 3,000 students. The average incoming GPAs are above 4.0 in a weighted context, exceeding those of most honors colleges in the nation. We are establishing a council, renovating a building, and making concerted efforts to attract top high school students from across the country to join our Honors College in Phoenix, Arizona. Many students will benefit from the booming economy in Arizona through internships in their sophomore year with prominent companies, many of which hire them afterward. We are promoting the institution’s brand and the excellence of the Honors College, working with our partners to grow our ground campus from 25,000 to 50,000 students. We believe there is value in this growth. We invested some additional money in January and February and expect similar returns. It’s a long wait until August to see the outcomes, but we are enthusiastic about the number and quality of registrations and the interest in housing. I may have shared more than you asked for, but I hope this provides some clarity.

Alexander Paris, Analyst

No, it helps a lot, and I appreciate you spending a lot of time on it. So you did talk about this in the third quarter, the experiment that you were conducting, you forecasted that you might spend more in January and February. Are you going to continue to spend more there? And then you also mentioned on the Q3 call that it's not a significant impact on the P&L because it's really just shifting dollars from salaries of high school reps to marketing.

Brian Mueller, CEO

Yes. It's interesting because we have another process that's very unique to us called Discover GCU. We will probably bring in over 13,000 to 14,000 very highly qualified high school graduates to GCU to visit. Connecting with students via social media with extremely engaging and informative videos, having them raise their hand, and then getting them qualified to visit the campus, is a process improvement that will move money from counselor salaries to this other area and could reinvigorate our ground campus. You have to remember that in terms of revenue per student, ground campus is large because of housing, board, and other fees associated with campus living.

Daniel Bachus, CFO

To answer the question about going forward, we will continue to spend. At some point, the spend will transition from fall of '26 to fall of '27. We are projecting that marketing as a percentage of revenue will be fairly flat year-over-year. So although we will continue to spend, we hope that our spending is very effective and thus, you will not see a significant increase in marketing costs as a percentage of revenue.

Brian Mueller, CEO

Interestingly, January and February spending is probably still 90% students who are seniors that haven't made a decision about where they will go to college. Students are increasingly putting off that decision because leverage has shifted; they know the supply and demand is different, and they can delay their decision more than they could in previous decades. This plays into our favor because January and February spending is likely to be primarily focused on fall 2026.

Alexander Paris, Analyst

Great. So what does that do to the high school enrollment counselor count? Where were you and where are you now given the...

Brian Mueller, CEO

We're probably down 10%. We're down 10% from a counselor standpoint compared to the previous year.

Alexander Paris, Analyst

Okay. Great. That's great color on the ground campus, and it sounds like those investments are paying off in terms of significantly higher applications for the fall...

Brian Mueller, CEO

Go ahead.

Alexander Paris, Analyst

Are there any offsets? Are we expecting an increasing number of graduates similar to what you have been experiencing overall?

Daniel Bachus, CFO

Yes. I mean that will continue.

Brian Mueller, CEO

It will continue as it is. At every graduation now for our ground campus, I ask how many of you have graduated in less than four years, and the majority of the hands go up. Then I ask how many parents in the audience are happy that their students are graduating in less than four years, and a roar goes up in the audience. We need to do a better job of making sure that people know that. The bet we're making is that we can grow to 50,000 students, partially because of that, and so we may be giving up a fourth year of revenue in some ways, but we believe we'll make up for it in increased enrollments at the front end.

Alexander Paris, Analyst

Great. My last question is about an update on corporate programs. I know you collaborate with 5,500 employers, and approximately one-third of GCU starts come from these partnerships. Can you explain how this works? What insights can you provide about the process of engaging with these corporations, adding new ones, and whether there are any discounts involved?

Brian Mueller, CEO

Yes, there's some discounting that goes on with that, and that's why you've seen revenue per student from an online standpoint decrease a bit. But that activity is far from reaching its pinnacle. We continue to sign agreements with school districts all over the country, and it continues on a daily basis. Schools are stuck with having a shortage of teachers, counselors, and social workers. In some states, we are producing more teachers than their in-state institutions are. This is continuing in a robust way as we apply that principle to healthcare areas, social work areas, and counseling areas. We're now just getting started in counseling and social work, and there's a huge shortage of those people in this country. Organizations are very interested in advancing their people who are operating at lower levels into programs to earn baccalaureate and master's degrees so they can operate at higher levels. The success we've had in education and nursing, we're now applying to counseling and social work, and we are developing strong relationships with companies involved in cybersecurity and others. We've developed programs with manufacturing companies; they want every electrical or mechanical engineer we can produce, but since they are growing fast, they need technicians. We've produced a program they are thrilled about, and we're seeing strong interest from students. We believe that a third of our starts can shift to 50% over the next five years because this is a high-quality way to provide higher education that is targeted to the needs of organizations. Helping people grow individually and helping organizations grow is our focus, and AI will enhance our potential in higher education.

Alexander Paris, Analyst

That's very, very helpful. Do you disclose what percentage of GCU total enrollment is employer-related?

Daniel Bachus, CFO

We don't. But as Brian said, we were talking about the fact that about one-third of our online enrollments come from that channel, and that's growing.

Operator, Operator

Our next question will come from the line of Jeff Silber from BMO Capital Markets.

Jeffrey Silber, Analyst

Alex really covered a lot of the operational questions. Maybe I can ask more big picture stuff. We get questions all the time about the regulatory environment. I know we've got some changes coming up this summer in terms of loan caps and then eventually the earnings premium accountability calculation. Can you give us some color on how that may or may not impact your company?

Daniel Bachus, CFO

Yes. I mean our expectation is it's going to have little to no impact. If you talk about loan caps, the tuition levels, the loan cap changes are primarily at the master's level and above. GCU's tuition rates are well below those loan caps. Could it potentially eat into some living expense money? Maybe. But I think the total cost of attendance generally at GCU is below the loan cap. So I think there'll be very little impact from that perspective. There are no material changes at the bachelor's level, which is where the majority of our programs are now, including the ABSN program. That is a bachelor's program, and it is not a professional program. It's never been a professional program. And so there are no changes really from the funding perspective at the bachelor's level or any material changes that we see. I think there'll be little to no change on that perspective. I know Brian can talk about this, but he's a proponent of these changes. We've historically seen overborrowing, especially at the master's level for living expenses. These changes are beneficial in helping universities guide students in managing their borrowing.

Brian Mueller, CEO

It's so different. The difference in how the administrations view this whole area is significant compared to what we've said for over a decade. The graduate students are different today. Several decades ago, students would graduate from college and then enter a master's or graduate degree program. Sometimes they were married, sometimes they had children, but most were pursuing a career in education in the academic world. They needed help with living expenses to do that. That's not the case today. Most people pursuing master's degrees are already in careers and want to enhance their capabilities. They want to do it while raising their family and building their career, not needing living expense money. But if it's available, they will take it. We had this process in place called responsible borrowing, where we would inform students of what their repayment implications would be based on borrowing levels. It was criticized by the previous administration, but we see it as a positive practice. Lowering maximum borrowing limits can help ensure loans can be paid back and on time, making the Title IV program viable.

Daniel Bachus, CFO

In terms of the second part of your question, Jeff, we're watching that very closely. In the preliminary data that was provided, I think you wrote a note about there being one category that failed for GCU: the Master's of Counseling category. Looking through the data for all other universities, it appears that that category failed for most, if not all, universities that provide that program for working adults. We are working with our partner and the administration to better understand why individuals with that master's degree make an amount that's equal to or, in some cases, less than those who do not have it, despite needing the degree for licensure. It appears to be an anomaly that needs further research. Other than that, all programs at all partners passed, and we've got time to work on that one program.

Brian Mueller, CEO

Many people enter graduate programs for lifestyle changes. Those who go into counseling often prefer to work part-time instead of full-time, earning less in exchange for that flexibility. They're getting exactly what they want from their degree. Not everything can be measured strictly in terms of dollars earned, particularly at the graduate level. I believe it's vital for mature students to make choices that best suit their lives, and we need to trust them to do that. I appreciate the need for oversight at the undergraduate level, but we should maintain a supportive environment for graduate students.

Daniel Bachus, CFO

We have reached the end of our fourth quarter conference call. We appreciate your time and interest in Grand Canyon Education. If you still have questions, please contact me, Dan Bachus. Thank you.

Operator, Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.