Dive Brief:

• Grand Canyon Education (GCE) executives shared more details on their plans to add new university partners during a call with analysts Tuesday to discuss their second-quarter earnings.
• GCE CEO Brian Mueller said the education services provider is looking for three or four college partners that want to grow to about 5,000 to 7,000 students in a five- to seven-year period. GCE expects those will be private colleges in the Midwest or Northeast, and it is eyeing a launch as early as fall 2020.
• GCE's existing partnerships, with Grand Canyon University and Orbis Educational Services, propelled a year-over-year 11.4% increase in overall enrollment (to 90,906 students) and an adjusted 23% gain in services revenue (to $174.8 million).

Dive Insight:

Mueller opened the call with comments intending to clarify GCE's strategy after the market reacted negatively to 2U's announcement last week that it would focus on a wider array of program offerings due to growing competition for online education.

GCE, Mueller said, is making its mark by redesigning traditional campus-based programming to meet the needs of working adult learners online. "This is the quickest and least expensive way to begin operating in this space," he said, calling out the size and scale of its online platform, range of services and ground-based GCU campus as differentiators. 

GCU and Orbis are "unique asset[s]," he said, with the latter helping GCE tap into current high demand for health care professionals. The company projects GCU's campus-based programs to surpass 30,000 in enrollment in the next five years.

GCE was expected to add more partners after it spun off GCU last summer, situating itself as a services provider rather than a college operator. The move to nonprofit status for GCU after a decade of shareholder ownership comes as other for-profit college operators look to shed the sector's tainted reputation and escape regulatory scrutiny. 

That tactic is being mirrored by Zovio (formerly Bridgepoint Education) as it spins off the for-profit Ashford University as a nonprofit institution and builds out a suite of program offerings through the acquisition of education services providers. Both will continue to work with those universities.

In December, GCE announced it would buy Orbis Education Services, which offers prelicensure health care education and had 19 programs under contract at the end of the quarter. Orbis is expected to have as many as 22 partners by the end of 2019, Mueller told analysts. 

Mueller cited the need for consensus-building with potential partners for why GCE has been slow to expand its university relationships. "We're not looking to pick off a program and prove we can do it well with 100 students or 200 students or 300 students," he said. "Making sure that we've got an entire institution versus just a couple of small programs is why it's taking a little longer."

Differentiation by brand, geography and program mix will also factor into partner selection, as will affordable tuition.

GCU continues to grow. It returned to nonprofit status last summer much larger than it was when it entered. In addition to increasing campus-based enrollment from 1,000 students in 2008 to more than 20,000 students in 2018, it also significantly expanded the university's online footprint.

As of the fall of 2018, online students accounted for more than three-fourths of GCU's enrollment. In April, it graduated 25,000 campus-based and online students, its largest class ever.

GCU also faces a handful of lawsuits, all from the same firm, including one pending class-action status that claims students were misled about the accreditation of their degree programs, The Arizona Republic reported. In a statement posted on its website last month, GCU called the lawsuits "baseless."

The university and its parent company have also caught flak for posting Mueller as the president of the nonprofit GCU and as the CEO, president and director of the for-profit GCE.