Good day, and thank you for standing by. Welcome to the Grand Canyon Education Third Quarter Earnings Conference Call. [Operator Instructions] 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 Counselor. Please go ahead.

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.

Good afternoon, and thank you for joining Grand Canyon Education's Third Quarter 2025 Conference Call. GCE had another strong quarter, producing online enrollment growth of 9.6% in hybrid growth, excluding the closed sites and those in teach-out of 19.3%. New ground traditional enrollment grew in the high single digits year-over-year. With that, I would like to review the results of the 4 delivery platforms at Grand Canyon Education. First, the online campus at Grand Canyon University. New starts were up in the mid-single digits in the third quarter of 2025, which was in line with our expectations and total enrollment growth was 9.6%, which significantly sees GCU's long-term objectives. The new online enrollment growth rate was an expected deceleration from the previous quarter's growth rates, but is a strong result given that the third quarter is the largest start quarter of the year, and thus, the prior year comp is large. In the past, I've highlighted 4 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 maintain GCU's competitive pricing position. A fifth reason and one growing in significance is the number of students between 18 and 25 years old, they're choosing to go to college online. There are very few universities that have 310 programs delivered fully online. The online campus growth is benefiting from the growing trend of recent high school graduates that are doing their total program online as well as students attending the campus that go back and forth between living on campus and using the flexibility of online to engage in other life experiences. Given the trends I just discussed, we believe the momentum that exists will…

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 3 months ended September 30, 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 3 months ended September 30, 2025 and 2024 is $1.78 and $1.48, respectively. Service revenue was higher than our expectations in the third quarter of 2025, primarily due to higher-than-expected hybrid enrollments. Traditional campus and online enrollments were in line with our expectations, although traditional campus revenue was slightly less than expected due to slightly lower revenue per student than anticipated and online revenue was slightly higher than expected due to slightly higher revenue per student than anticipated. The third 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, but also due to the continued impact of significantly higher-than-expected benefit costs as a result of higher claim costs. The higher-than-expected benefit costs had a $0.06 impact on EPS in the third quarter. We are currently anticipating this trend will continue in the fourth quarter. Our effective tax rate for the third quarter of 2025 was 24.9% compared to 20.8% in the third quarter of 2024 and our guidance of 20.6%. The higher-than-expected effective tax rate is primarily to the tax impact of the key TAM settlement. As we discussed in our last quarter's conference call, we did make $5 million in contributions in lieu of state income taxes in the third quarter of 2025, which had the effect of increasing general and administrative expenses in the third quarter by this…

[Operator Instructions] Our first question is from Jeff Silber of BMO Capital Markets.

Brian, really appreciate the color on what's going on in your nursing programs. Maybe we can just double-click on that. Can you just frame it for us in terms of how large your nursing programs are at GCU and how they differ between pre- and post-licensure programs and how each one of them have been growing.

Yes. When you think of everything related to health care, at GCU, probably about 30% of our students are in those areas, but that's pretty diversified. That's pre-licensure students on our campus that's ABSN students at our off-site campuses that is prerequisite students preparing for the ABSN. It's RN-to-BSN, it's MSN, it's Doctorate of Nursing. And so like -- unlike other institutions, yes, we are heavily vested in the health care industry. But then I should also include occupational therapy, the nurse practitioner program. And so health care is about 30% of our total enrollments, but even that is highly diversified across program levels and in different programs. And so I know that there has been a lot of concern about less diversified institutions with regards to health care. We're very different and not nearly impacted the way others would be because of how diversified and competitive we are in the programs that we offer. Does that help?

That's really helpful. It does. And of that 30%, and I know you may not have the numbers at your fingertips, but roughly, what percentage of the total of that 30% are specifically in post-licensure nursing programs.

In post-licensure nursing?

Yes. Well, roughly, as you know, 5,000 GC -- of the hybrid student. We have roughly 5,000 hybrid students. We have a couple of hundred GCU pre-licensure students. And then the rest is online nursing students as Brian said, which includes the prerequisite studies.

Got it. Okay. All right. That's really helpful. Let me shift gears and talk about your focus on younger students specifically with GCU online. You talked about some changes to campus marketing. I'm just curious, do you market to the students that will potentially go online, these younger students any differently? And if so, if we can talk about the different marketing channels.

No, what I referred to in terms of the change -- a little bit of a change in strategy is, so much of the work that we've done for GCU traditional students has been work in high schools. We have a sizable staff that works in high schools throughout the country. We signed contracts with schools. We have over, I think, 8,000 partnership with high schools. And so that's been 95% of our work. But what we figured out is that we can contact through social media avenues students at a less expensive rate and to a far greater extent. And so we are starting to advertise more, especially in social media areas and the -- so we spent some money there where we typically haven't spent it, but the results have been tremendous. Our actual registrations at this time are significantly ahead of what they were last year at this time. And we're watching that carefully. In fact, we watch it every day. But part of our thinking is that, yes, there's fewer high school graduates and fewer as a percent are going to college. But the reasons that are -- that is true, we've answered in space. The value proposition that we have here is just, I think, under -- not understood by enough Americans right now, and we need to get that word out in a way that is more aggressive than just depending upon those people working in high schools. And so our initial results are really good. and we'll keep monitoring them. And if it continues in that vein, we'll spend even more money in January and February. So it's a slight change in terms of the balance really between what we're doing from an advertising standpoint and what we're paying in salaries for people working in high schools. We're moving a little bit out of the salary component. We're moving that into the advertising component. And initially, we're getting a broader reach. We're getting a broader reach, and we're getting very strong interest. So we're excited about that.

Our next question is from Steven Pawlak of Robert W. Baird.

You talked about the diversification beyond nursing programs. I know in the past you've talked about education being one of them. I guess, what other programs are you in that are sizable, that are growing at and above nursing program rate? And I guess, how would you just characterize the competitive landscape in those programs?

Yes. We're having a tremendous amount of success in education. The fact that there's a teacher shortage in this country is really the problem of universities. They're waiting for 17-year olds to decide to become a teacher, go through years -- 4 years of college and then step into a public school classroom. It is our belief that anybody between the ages of 18 and 50 years old may have a reason to re-career into teaching. And so we're signing contracts with major school districts all over the country, helping them take military veterans and people have retired from the police and fire department. People that work in public schools as paraprofessionals or as teachers' aids. And we're bringing education right into the school district, so that they can become baccalaureate prepared and they can -- school districts can license those people and put them in the classroom. That thing is growing tremendously. Our business programs continue to grow. We have one of the fastest-growing business programs in the country. We're really excited about the future of counseling and social work. Those are 2 areas where there's also a tremendous shortage of professionals. And like teacher education, counseling and social work, those are licensure areas. They're very difficult to operate at a distance because you have to do all of the work necessary, not just to teach the student in the classroom, but you've got to provide observation hours, you've got to provide internships, you've got to provide student teaching. Those things have to be viewed and evaluated. And we have a $300 million plus administrative system plus a field force that allows us to provide those opportunities. And so it's very uncompetitive in those -- it was a huge need, but it's not very competitive because those things are…

No, I appreciate all the color there. And then you've also talked about sort of the positive spread between -- or sort of the enrollment adviser efficiency as you have over the last few years. Are you still seeing the positive spread between enrollment gains and enrollment adviser growth? And I guess do you expect that to be sustainable for the next couple of years?

Yes. the we -- there's -- another way that we have become diversified and not subject to the vagaries of changes is that about 33% of our starts through GCU, come as a result of activity working directly inside companies and organizations all over the country. One of the things that people hear us say now frequently and people are responding to is that there are vast amounts of untapped potential in today's American workforce. And that's basically because only about 25% of students that want to access higher education can do it on a college campus and spend 4 or 5 years on that campus. We are really growing, working directly with companies and helping people working at lower levels in the organization move up through education. So whether it's military bases, school districts, hospitals, clinics, social work agencies, all of those areas. And that -- the percent of new starts that we're getting as a result of that work continues to go up, which puts less pressure on our need to generate leads, and it makes our lead purchase that much more effective. And so when you think about GCE and our capabilities as compared to our competitors, we're just more diverse in a whole variety of ways, which allows for the consistency of the performance that we've been able to have.

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

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.