Grand Canyon Education to invest millions to grow hybrid educational programs, expand national reach

Phoenix-based Grand Canyon Education Inc. (Nasdaq: LOPE) is investing $240 million to build out its hybrid model to teach an additional 50,000 students nationwide.

The goal, according to Brian Mueller, GCE’s chairman and CEO, is to open 80 facilities across the country that will provide a hybrid education model, where students will take courses online and work in the facility labs for hands-on experience.

“Each location is about a 20,000-square-foot facility,” Mueller said. “Each location is about a $3 million investment. Right now, the goal is to have upward of 600 students per location.”

So far 44 have opened, with a goal of opening the remaining facilities within the next five to six years.

Currently, the majority of these facilities focus on nursing students to address the nursing shortage nationwide, he said. Occupational therapy was added, while plans call for additional programs, such as an electrician program in Austin, Texas, Mueller said.

Of the 80 facilities, half will be GCU locations, he said.

“We just opened in St. Louis with a GCU location and we’re opening in Kansas City,” he said. “We’re finishing the approval process in Florida for a GCU location to open in the spring. Boise, Idaho, is opening this next year.”

GCU — which has 120,000 students on campus and online — operates several other ABSN nursing sites in Chandler, Sun City, west Phoenix and Tucson.

These expansion efforts come at a time when the education services provider beat Wall Street analysts’ expectations.

GCE reported $34.88 million in net income on service revenue of $227.46 million for the second quarter that ended June 30, according to an Aug. 6 regulatory filing with the U.S. Securities and Exchange Commission. That’s up from $28.97 million in net income on revenue of $210.58 million during the same quarter in 2023.

GCE’s share price closed at $147.39 on Aug. 6, roughly even on the day. It opened at $149.25 per share on Aug. 7.

GCE plans more hiring to keep up with growth

At a time when some colleges and universities nationwide are laying off staff amid decreasing enrollment, GCE plans to hire 200 people by the end of the year to meet demand from partner universities experiencing enrollment increases.

About 80% will be in the Phoenix area, while the remainder will be at other partner universities across the country, Mueller said.

The Phoenix company provides services, including technology solutions, infrastructure and operational processes to 22 university partners.

Its biggest partner is Grand Canyon University, which was owned and operated by GCE until the university spun off as a nonprofit in July 2018.

However, the U.S. Department of Education refused to recognize GCU’s nonprofit status, prompting GCU to file a lawsuit against the education department. A U.S. district judge in December 2022 denied GCU’s motion for summary judgment and granted a cross-motion for summary judgment in favor of the Department of Education.

The judge found that the DoE has the authority to determine whether an institution qualifies as a nonprofit and that its decisions “were not arbitrary and capricious.” GCU has appealed that decision.

“The IRS has the written authority to rule on nonprofit status,” Mueller said. “The other group that has the authority to make that decision is the state. The state also ruled that we have the authority to operate as a nonprofit. It was an unprecedented move by the U.S. Department of Education to deny that. That’s never been done before.”

The U.S. Supreme Court recently overturned a landmark 1984 decision in Chevron v. Natural Resources Defense Council and in doing so cut back the power of federal agencies to interpret the laws they administer, leaving the courts to rely on their own interpretations of ambiguous laws.

It means judges don’t have to be beholden to a decision made by federal departments, Mueller said, giving him hope that judges will rule in GCU’s favor.

Education department officials could not be reached for comment.