Shares of Grand Canyon Education (NASDAQ:LOPE) have crushed the market over the last one, five, and 10 years. At our Motley Fool member event in Denver in October, Motley Fool Chief Investment Officer Andy Cross talked with Grand Canyon Education CEO Brian Mueller about the business of education, the price of college, and the wisdom of the antelope. Check out the video below to see the conversation. Or if you prefer, check out the transcript.
A full transcript follows the video.
This video was recorded on Oct. 1, 2018.
Andy Cross: I'm Motley Fool chief investment officer Andy Cross. At our recent member event in Denver, Colorado, I had an opportunity to speak with Brian Mueller, the CEO of Grand Canyon Education. Shares of Grand Canyon have crushed the market over the last one, five and 10 years since going public. Brian and I talked about the business of education, the price of college, and the wisdom of the antelope.
Cross: Grand Canyon is a $5.6 billion company with $300 million in cash, no debt. It has a beautiful campus in Phoenix. 90,000 students, 20,000 of those are in the University. The other ones are operated online. 230 academic programs that you offer. About 70% of your revenues are tied to Title IV funding.
Brian Mueller: A little bit less.
Cross: A little bit less than that. Let's talk a little bit about Grand Canyon Education. It's an extremely apropos time to talk about this company because of a very exciting development in your business where Grand Canyon Education and the Grand Canyon University, which was the for-profit university that was together as one, has separated. So, we have the Grand Canyon Education business and the Grand Canyon University. Shareholders own Grand Canyon Education, which is much more of a services business now. Brian, talk a little bit about that split, the evolution of that, and what it means going forward.
Mueller: The evolution is interesting. The question up there was very appropriate, I think. Depending upon who you believe, the cost of higher education has probably gone up four times the cost of living since the early '80s, and higher education has become unaffordable to many, many socioeconomic classes of Americans. Students are taking on $100,000, $150,000 worth of debt. They're not getting jobs appropriate to that amount of debt. Higher ed was ripe to be disrupted.
We went to Grand Canyon University in 2008, when it was a small private university with $20 million in debt and about to close. It had 900 students on its campus. We went there believing we could use getting access to the public markets and getting access to capital to invigorate a new financial model for higher ed. 2008 is when we went to Grand Canyon. We went there in June believing we needed money for the public markets to bail out our debt and give us money to invest. If I start giving you financial advice, you get up and run out of here. By November, the market was in a freefall. We really had no choice because we had no place to go to get money. So we went out, we hit 10 cities in four days. We broke one of the largest IPO droughts in the history of Wall Street. We got the stock out at $12. That gave us $254 million.
We brought it back to Phoenix, put $100 million dollars into technology, believing we could build the world's largest platform to deliver education online to working adult students, which we were good at. We had come from University of Phoenix. We did that. That's what we did the first three years. Then, we started to invest in the campus. We put $1 billion in our campus in the last eight years. We're going to put another $400 million into it in the next four years. We've grown from 900 students to almost 21,000 students on our campus. Those are kids who have graduated from high school and go to college. Average incoming GPA is almost 3.6, honors college with 2,000 kids, average incoming GPA is greater than 4.1. That's grown to 21,000 students. Our online campus is for working adults. It's grown to 70,000 students.
Those two large campuses, which represent two large markets within higher education, leveraging a common infrastructure, has created huge efficiencies. What we have now is the average dude on our campus paying $8,600 for tuition, $7,000 for room and board. 51% are graduating in three years. They're studying in very rigorous academic areas like electrical, mechanical and biomedical engineering, cybersecurity, computer science, as well as all the liberal arts programs. Our students graduate on average with less debt than the average state university student and with far less debt than the average private university student.
Our goal was to create a private university not dependent on public funds that would make higher education affordable and reasonable for all socioeconomic classes of Americans. We worked 10 years at that, and it worked really well. Not only do we have a large campus, a growing campus, with tremendous students and great academic programs, but we have a huge, diverse campus. Everybody's trying to solve the diversity problem. The stats are that as tuition goes up, diversity goes down. As tuition stays the same or tuition goes down, diversity goes up. So, we have a campus with 27% Hispanic students, 7% African American students, and 40% students of color.
We've been able to accomplish a lot of the things that are challenges to higher education using a publicly funded model. But we had an opportunity. About 90 days ago, Grand Canyon Education became a publicly traded service company by loaning about $1 billion to Grand Canyon University. Grand Canyon University used that money to buy significant assets -- the campus, the academic programs, and all of that. Now, the University is a not-for-profit university with all the benefits of being a not-for-profit university. We'll have a Major Development office, we'll be able to get into research. Our students and our faculty will have the same access to research grants, etc.
Grand Canyon Education will provide significant services to Grand Canyon University, which has 90,000 students. We'll instantly be the biggest player in what's called the online program management space. And now, we'll start to look for other partners. What universities are trying to do is form large student bodies in both markets. The traditional market is students leaving high school and going right to college, which is how you build your brand. But, the other market is actually larger -- working adult students going back to school at 34 years old, doing it in an online environment, earning additional degrees, credentials for either moving up in their current occupation or career transitioning.
Cross: Amazing. The stock came public at $12. It's now about $120. That's about a 10-bagger in about eight years. Well done. Tuition, on the other hand, has really been flat for, I think this is your 11th year now of flat tuition. How has Grand Canyon Education been able to do that in an environment when tuition prices on average are going up 2%-3% a year recently? How have you been able to maintain the discipline to not do that for your students?
Mueller: It goes back to the two large markets. Traditionally in higher ed, the traditional universities wanted to serve the 18-year-old students. That's how they built their brand. But this huge other market developed in the early '70s, especially because of the ending of the Vietnam War. Soldiers were coming back, and they really didn't have skills. They couldn't access college the way a traditional student does. That market, since the middle '70s, grew very large. But it was serviced only by the for-profit companies, University of Phoenix primarily.
In 2008, the recession changed everything. State universities saw their subsidies cut in half by the states. Private universities saw their endowments shrink. They had to find other sources of revenue, because they weren't going to change their basic business model. What they did is decided to get in the business of teaching working adult students and delivering online. They basically stole the business from the for-profits in the last 10 years, which we predicted would happen in 2008.
Fortunately, we were out in front of the game. We developed this hybrid campus with 21,000 traditional students on our campus. We used that campus to drive the strength of our brand. But the 70,000 working adult students that are going online, those two campuses, leveraging a common infrastructure, produces huge efficiencies. Not only have we not raised tuition in 10 years, but we've invested $1 billion in our campus. Classrooms, laboratories, new programs, athletic facilities, 24 restaurants. We're in Phoenix, so, five pools, five fitness areas. We were just ranked the seventh nicest campus in the country. Last year, we were eighth. We have a brand-new campus with state-of-the-art facilities in a destination, city, and state -- at least in the fall; not necessarily in the summer. And students are finding that they can graduate with very little debt. They can complete their degrees in three to four years. And those are the things that families are looking for.
Cross: I'll note your default rates on the borrowers is somewhere in the 8%-10% range, which is far below the average, especially for for-profit universities, which do have a problem on that. Quickly turning to, now that you are separate from the University, you mentioned the investment into the plant. You have about $300 million annually in operating cash flow you generate. The use of the capital now that you are separate, will you no longer need to be investing as heavily in things like plant and equipment? Will that allow you to focus more on things like technology and services? You're already extremely profitable, running operating profit margins north of 25%. Will that allow you to become even more profitable? And are you turning more into a software-as-a-service business?
Mueller: Yes. Since 2008, we've invested $200 million into technology -- learning platforms, other systems, including artificial intelligence to manage student progress and success, teacher effectiveness, all of those things. We think we have the world's largest platform to deliver education online to working adult students. That's the market traditional universities are trying to get into, but they don't have the resources or know how to do it. When we bring them to our campus, and we show them what we've done with Grand Canyon University, they become very excited about the potential of being our partners.
You mentioned the low default rates. We have high graduation rates. When students have high graduation rates and low amounts of loans, they pay their loans back. Since we've already made that $200 million investment, we can build on that. The company, GCE, will loan a little bit more money to GCU the next couple of years so that they can finish out building the campus. But going forward, you're right, we won't have that capital intensity of the campus. This campus will have its own dollars to build out to 30,000 students, and GCE will have the money to go out and form partnerships with other well branded universities in the country that want to get into the business of teaching online.
Cross: That's really exciting. I want to talk a little bit more about that. Quickly, if you have a question for Brian, please use the app, put it in there. We'll try to get to them as much as we can. From a clarification point, it's around 60% of the tuitions that students pay Grand Canyon University, that is the big driver of your revenues for Grand Canyon Education, is that correct?
Mueller: Yes. When the split happened, $0.60 on every dollar goes to GCE. So, revenues are less, but a lot of the expenses went to the GCU side, so margins are higher. We were hoping to make the transition so that earnings would be neutral. And they were very neutral. Investors were very excited about us getting out of the for-profit university space, which, if there's a change in administration, could be problematic. We're now a non-profit university and have all the privileges of that. That's very exciting for GCU's future. But it's also very exciting from the GCE perspective. We had a big meeting yesterday with a very well branded institution that is very interested in being our partner. As we add partners to the already 90,000 students that GCE is serving through GCU, that will increase the revenues, and we are predicting that margins will go up on an annual basis.
Cross: Your largest client is Grand Canyon University. But you mentioned the excitement about being able to take your talents, services, experience to other partners. Talk a little bit about what that may look like over the next five or 10 years. I'll just mention that Grand Canyon is owned by The Motley Fool. We have more than $136,000 of Motley Fool capital invested into Grand Canyon, more than 1,000 shares, along with other shareholders here. Our perspective is, we're looking out for all of our investments for at least five years.
In that landscape, as you go out to expand beyond just Grand Canyon University, the opportunity. You mentioned one partner you were excited about. Talk a little bit about the ability to go out there and take your company's skills and talents to other clients.
Mueller: We're looking for partners that have presidents who don't want to do something small. We want to look for partners that have a president and a board that wants to do something disruptive. Higher ed needs to be disrupted. We talked about the rising tuition, the lack of changing the business model, the loan debt that students are taking out. We're looking for a president that wants to take their programs and use us to convert them, so they can be delivered online to working adult students all over the world and wants to build sizable student body populations, so they can fundamentally change the value proposition for families and for students.
We're very determined that, if you can make higher education affordable to all socioeconomic classes of Americans, you can build diverse student bodies, and you can provide opportunities for all kinds of students, but especially disadvantaged students. We are not looking to have 25 or 30 partners. We're looking to have a couple of partners that want to scale, that are in geographic areas that will not interfere with what we're doing at Grand Canyon -- we're still going to grow at 7%-8% per year at Grand Canyon, grow revenues 8%-9% per year. But we're looking to add on to that with partners that have presidents that want to do something disruptive, and they want to scale their programs.
Cross: Is there an international opportunity as well?
Mueller: Possibly, but we're not focused on that right now. We think there's a huge opportunity in this country. People are really changing their attitudes about higher education. When families come to our campus now, we find they ask three questions, and none of them have to do with U.S. News and World Report rankings, which are not helpful and productive to universities and families. They want to know, "Do you have programs that can help my son or daughter get a job?" For example, there are 300,000 jobs available today in cybersecurity that pay, on average, $92,000. Most high school guidance counselors and families don't know about that. Having cutting-edge programs that are going to help students get jobs, parents are very focused on that. Secondly, they want to know, "Can you help my son or daughter graduate with minimum debt?" And thirdly, "Is your campus safe? Is it going to be safe for my son or daughter?" If you can answer those three questions, they get very excited about the value proposition that you have. We're looking for partners that want to help us in that.
We also have the advantage, interestingly enough, of being located, Grand Canyon University, in an inner-city neighborhood that is full of immigrants. We started five years ago on what we call a five-point plan to bring middle class status to that neighborhood again. A lot of universities are interested in what we're doing, because we're producing real results. We're one of the fastest-growing employers in the Phoenix area. We've planted a fast-growing employer in an inner-city neighborhood. We've spun eight businesses off our current one, the university, which creates an additional 350 jobs in just two years. We have the world's largest Habitat for Humanity program going on in our neighborhood. Our goal is to rehab 800 homes in five years. We're finishing our 200th home this weekend. We'll get to 800.
We have a safety initiative. And we have a tutoring program, where 1,200 of our kids offer tutoring to inner-city kids from 80 different schools every day between 03:00 PMand 08:00 PM. A lot of people have become interested in us because of the outward reach that the university has made.
Cross: I think you and Tom first met at a Conscious Capitalism conference, or somewhere around there? Maybe. I hope that's about right, Tom. Regardless, the concept of servant leadership seems to be a big part of what drives you. You had 20 years at Apollo before you came over to run Grand Canyon Education. Talk a little bit about what it means to be a leader, especially as you, your team, your professors and your teachers are educating more than 90,000 students, and you're looking to grow that student body pretty aggressively. Talk a little bit about leadership and servant leadership, particularly when you hear about some of the wonderful work that's going on inside the town of Phoenix, where around the University, crime rates are down, housing values are up, as well, too.
Mueller: In 2011, after we had been at the University for three years, our business model was starting to work. We knew we were going to have large amounts of capital to invest in this campus, actually $1.4 billion, $1 billion in the last seven years and another $4 billion in the next four years. The question was, do you put it where we were, or do you move it to Scottsdale or Paradise Valley or any place but our neighborhood? We got very excited about making the investment in our neighborhood because we wanted to get kids excited about what they could help us do, bring prosperity to a deteriorating neighborhood. And things are moving. Housing values are up 30%, crime is down 30%. We've got schools that were F schools that are now B schools. We're creating a neighborhood that people want to live in again. It's moving.
The next step in all that is to get our kids excited about using their talents as electrical, mechanical, biomedical engineers, computer scientists, information technologists, business entrepreneurs, toward solving the problems of disadvantaged populations. We are supporting a lot of kids with a project-based orientation in our classroom. We have a 440,000 square foot Innovation Center that we're building, giving our kids, while they're college students, a chance to think of a business that they could start that would help disadvantaged populations. A lot of kids are starting to choose Grand Canyon as a result of that. We think the next 10 years could create a tremendous amount of progress and be a model for other universities, because a lot of them are located in inner city neighborhoods. Rather than build a wall around the university, what we want to do is reach out into the neighborhood and support the populations, the schools, the hospitals, the businesses, and bring prosperity.
Cross: I want to pivot back to the investments you're making in technology and curriculum development, which you are handling for Grand Canyon University, and things like LoudCloud, to give you a chance to explain that. The development of curriculums and different styles of learning, what is Grand Canyon Education doing to innovate in that space?
Mueller: It's very important. I don't think there's ever been a time when the population in this country has been more open to how to educate our kids. That is true in preschool, it's true in K-12 education, and it's true in higher education. There's been an explosion of homeschooling in the K-12 world. There's an explosion of online learning in the university world. That's going to continue. Continuing to make investments in how we can create opportunities so that people can access education, especially higher education, in new and innovative ways is really important to us.
Right now, we have these two large markets, but there's another one emerging. The other one is 18-year-old students that graduate from high school and they're fine with staying at home. They're fine with keeping their part-time job. They want to access a higher-ed program from their local community. They want to complete it in three years. They want to complete it with minimum debt and they want to go to work. We're starting to move in that direction for those students.
We're also helping high schools. There's a lot of private high schools that, in their 20-square-mile vicinity, have a huge number of homeschoolers. Parents, once the kids get to high school, they're starting to get a little sheepish about, "Can I teach him biology and calculus and all those things?" And they'd love to access the local private high school for half the tuition rate but do it online.
We're just in the beginning stages, I think, of an explosion of ideas. From the kindergarten-through-grade 12 and into higher education and even at the graduate level, people are willing to consider a multitude of options. Universities should be on the front end of that, not on the back end of that.
Cross: A third of your student population is graduate students. A few questions that came in from the audience. Thank you very much, please keep going with those, submit them as you can. How does your business and strategy compare or contrast with the likes of someone like 2U? As you think about expanding your services business, you might be stepping a little bit on the toes of other competitors. How do you think about competition in general, and any specifics around 2U?
Mueller: The competition to teach online students, working adults attending online, is fierce. It's a very competitive market. The competition in the OPM market is really not. There's a lot of room. There are a lot of universities are who are thinking about how to get involved in this. They don't have the resources to invest and they don't have the know-how. The market is open. 2U has been doing a phenomenal job, and there are other companies that are doing a good job.
We are probably a little bit different. We don't need a lot of partners, we need a few partners who want to scale and who want to really change fundamentally the value proposition for families. We're looking for universities that would like to have 27,000 or 28,000 working adult students attending online. If you pair those students with the 10,000 students they have on their campus, you have a fundamental change in terms of the tuition rate they can offer families.
We're just getting started. We want to make sure that we are making the right choices and we fit in this industry in the right place. But we do think we've got the world's largest platform to deliver education online in a high-quality way. We just need to find now the right partners. I think you'll hear in the next six months that we will be identifying and signing contracts and moving in that direction.
Cross: Scale is hugely important. Talk about hiring a little bit. Is there a challenge now with hiring? Be it engineers, educators, both locally inside Phoenix, maybe elsewhere around the world, especially as you go and become a bigger player on the stage when it comes to services?
Mueller: From a faculty standpoint, no. I remember when, I was at University of Phoenix and was the CEO of University of Phoenix Online in the late 90s, when everybody was saying, "How dare you bastardize higher education by believing that you can deliver it effectively in an online environment?" I remember the interviews, I remember the criticisms. If you turn the radio on today, what do you hear? You hear ASU Online. You hear Penn State World Online. You hear University of Nebraska Worldwide Online. There are a thousand private and state universities doing it. But the first disruptor was us at Phoenix. And what people were mainly worried about is that faculty positions would go away.
The reality is, it's just the opposite. It's created thousands more faculty options. So, no. Grand Canyon fortunately is in a destination city, it's in a destination state. It's a great place to live. People love the community on our campus. They love what we're doing in the neighborhood. So, getting faculty members on our campus is not hard. We're selecting the ones we think are the best fit for the University. When you talk about faculty members who are teaching online, you have the world. Literally, they can be anywhere. Faculty is not a limiting factor in terms of growth.
Cross: How about engineering talent?
Mueller: Engineering faculty talent, there are so many people that have earned master's and doctoral degrees that are in the engineering world that would love to come to a university to finish out their career, so that's not hard. The challenge is the number of U.S. students that graduate from our high schools having earned an A in calculus. That's the challenge. Our programs are not easy. They're rigorous, they're difficult. We now have an expansive dual credit program with over 4,000 high schools where we're offering college courses in high school. Students can earn college credits while they're in high school, and then only have to be on our campus three years instead of four, so they save even more money.
We're really working hard trying to get math upgraded in our high schools. We just need more students coming out of the schools having earned an A in calculus so they're ready to hit the ground running. There is such a shortage of engineers. We're going to be a big player in fixing that shortage, but we need to work with high schools, so we get kids started at a younger level, embracing math, excelling at math, so when they hit the college campus, they're ready to go.
Cross: The for-profit education space does not have the best reputation and faces some scrutinies, and has over the last 10 years. Grand Canyon has been an exemplary difference in that spot. Does the separation of Grand Canyon Education and Grand Canyon University help distance you from a for-profit world that might be under more regulatory focus?
Mueller: I say to people all the time, in the Southwest, we compete against Baylor University, Texas Christian University, the private universities in California, as well as the state universities in Arizona, for students on our traditional campus. What I say to people is, would you rather have us be not-for-profit and charge $60,000 or $70,000 a year, or be for-profit and charge $15,000 a year? What would you rather have us do?" Most of them say, "We'd rather have you be not-for-profit and charge $60,000 or $70,000 a year." It's very difficult to overcome that negative stigma, no matter how high your graduation rate, the quality of your students, the quality of your graduates, the quality of your programs. So, yes, the University now being not-for-profit is a tremendous advantage. That stigma now is gone. We can recruit in high schools that would not let us in in the past. And all of the opportunities that are going to be afforded our faculty and students with regards to research are now opened up to us. We'll have a Major Development office. We're just 90 days into this, but we're experiencing, we believe, a tailwind already just because of how many students didn't pick up the phone because we were for-profit.
I always tell people, yes, there were some problems on the for-profit side. There were some bad players. But, man, there were some huge problems on the not-for-profit side. I just got back, I've been put on a NCAA panel. Our commissioners' group that is meeting on the problems within NCAA athletics, and making some advisory suggestions. You think about what's going on at a lot of universities right now, and some of the corruption. I won't mention names because there might be alumni out there from some of those schools, but there's problems on both sides. There's people who have done some crazy things to protect their very, very profitable not-for-profit football programs. There's been problems on both sides. But we're excited now that we're on the not-for-profit side because that just opens up the world in a lot of ways that was not open in the past.
Cross: Question: how do you plan to address the growing and more acceptable perception these days of the market for trade schools?
Mueller: I don't know if we're going to get involved in that, but that's the right question. We just entertained a group of people from Germany, who many people think are on the cutting edge of vocational and technical education. In that culture, if you choose as an 18 year old or even earlier to go that route, that as respected as going the traditional university route. The reality is that today, there's a huge opportunity there because there are too many students who are selecting the university route when they would be far happier and far better served to pursue the high-end vocational technical route.
We have a university in our own backyard, UTI, University Technical Institute. It's a wonderful place. But the dad is the big problem. They prepare the people that work on BMWs and Mercedes and motorcycles, and they do a wonderful job of it. It's not a wrench job anymore. It's a high-end job. They do 80% of their work on computers. Johnny wants to go to school there. It's an 18-month program. They have a 95% placement rate. But Dad says, "Son, I'm sorry, but you're going to college." We need to change that culturally in our country. We need to get kids to feel very good about those options. If we do, those options will pop up and people will start building places where those kids can go. We need to do that. We need to make them affordable. There's a whole shortage of those high-end vocational technical workers in our country today, and it's hurting our economy.
Cross: Another great question: this conference is focused on the importance of leadership. I'm very pleased investing in Brian as a leader. How long does he plan to be CEO from here? And why should I remain excited when his tenure might end? I'll also add, you're CEO and chairman of Grand Canyon Education; you're also president of Grand Canyon University. Talk a little bit about navigating among your biggest client and making sure that there are no conflicts of interest there.
Mueller: We have two separate boards. The rules allow for, the GCE Board, Grand Canyon Education Board, can select the CEO of Grand Canyon Education; and our GCU Board of Trustees, University Board, can select the president. They can select two different people, or they can select the same person.
One of the big problems in higher education, in terms of its business model, is that universities tend to be very siloed, and departments tend not to work together, and colleges tend not to work together. As we made this transition, a big advantage we had is that we have nine colleges, we have nine deans, but they work together in a very, very cooperative fashion. We have lots of integrated programs. Our engineering program and our business school work together in a very close way to the benefit of students. We didn't want there to be any disruption to that unified model. So, as we made the transition, I was selected from a CEO perspective, also from a university perspective.
The boards are separate. They can hire me, and they can fire me, and there's no crossover on the boards. We've made sure that there's no chance for there to be any mismanagement there.
I don't know that I will do that forever. But, God willing -- somebody said it before, but we don't look at this as a job. This is our life. This is what we do. We believe in this thing like you can't believe. Our basketball team opens up this coming Tuesday. If you have a chance to see us, our head coach is Dan Majerle. We have 21 Division I athletic programs. [...] Angelo helps us tremendously with that program. If we can get our team in the tournament in one or two games, this thing is going to take off.
My point being, I'm at most of the theater events, the debate events, the athletic events. I live 10 minutes from campus, not on campus, but 10 minutes from campus. Many of us have been working together for over 25 years. So, when I left Apollo in 2008, about 40 of my closest friends came. This is not something that is a job for us. This is our life. It's what we do. I tell people all the time that there's been some tension between Grand Canyon and Arizona State University. We think the world of Arizona State, even though they've been a little challenged by our entering into the market there. I have four boys. The two oldest ones went to Arizona State, they got great educations, they're doing well. My two youngest boys, when I went to Grand Canyon, they came to Grand Canyon. They graduated, they're doing well. Now, I'm going to be honest, the two youngest ones will do better in the world than the two oldest ones.
Cross: [laughs] They have more Grand Canyon stock, maybe?
Mueller: But other than that, they're all doing well! [laughs]
Cross: You mentioned Dan Majerle. His nickname is Thunder Dan. The mascot for Grand Canyon University is the antelopes, hence the ticker symbol LOPE for Grand Canyon. We had our mascot here, a bear, come in and deliver little bears there.
I know you're very excited and very passionate about the academic programs as well as the athletic programs. Talk a little bit about the benefits, and also drawbacks and challenges, of having big-time athletic programs.
Mueller: First, I want to say that when I came to Grand Canyon in 2008, I didn't want to be an antelope. I said, "I don't understand you guys. We are the only university in the country that has a prey instead of a predator as a mascot." But I learned that the antelope is the second fastest species on the globe! We're working with some unique techniques to make it the fastest species on the globe. So, I learned to love the antelope, and that was our point of connection.
We believe in a very participative environment on our campus. People say, "Isn't this thing going the way of technology? Why are you building this campus out?" My response is, the 18 year old student needs that traditional university experience more than ever. It just has to be affordable. We have 11,000 kids involved in intermurals. We have the largest club sports program in the country. We have three debate teams that travel all over the country. They're the favorite every place they go. We have a huge theater program, music program, dance program. Those things are really important to us. If you line up 10 kids on our campus and say, "Why do you like the University? Why did you choose to come here?" They'll say, "It's the community. It's the closeness. It's the friendships. It's the experience that we have on campus. Everybody is welcome."
The Division I sports program is important to us. We went Division I six years ago. This will be our sixth year. We have 21 Division I sports. We have state-of-the-art facilities. We expect to be in the 25 eventually in everything that we do. We're not going to play football because of the inherent problems with financing a football program early on. But our Division 1 men's basketball program is very important to us. We have a student group called The Havocs, there are 3,000 of them. They have their own board. I meet with them every couple of weeks. It's the strongest student body. We have an arena that seats 7,500, and every single game is sold out. That all helps us create community. It brings positive attention to the University.
We're excited about what might happen this year. We're in the John Wooden Classic over Thanksgiving. We play three high profile universities, including Seton Hall, we play Texas. Last year, we missed going to the national tournament by 10 minutes. We played in the finals of our conference tournament and lost at the end. This year, we expect not to lose at the end. We expect to be in that tournament. You'll be very happy if you owned our stock if we get in that tournament -- no forward-looking comments here!
Cross: [laughs] I did want to ask a question. Grand Canyon has a very rich Christian heritage. You even have a doctrinal statement and ethical positioning statement. As you think about expanding out your client base away from just Grand Canyon University, eventually, does the heritage that you have around Christianity, around some of the issues that you have in your doctrinal statements, and in your position statements around marriage, and homosexuality, will that be a challenge for you going out forward?
Mueller: We are a Christian university. About 65-70% of the students come for that reason. They identify with our view of the world, and they want to be part of that. About 35% of our students come for a different reason. And we want them on our campus. We are not a church. We're a university. We want them to share their worldview in the classroom. We're a university of ideas. We're a very broad-based university of ideas. People are expecting us to take a political position because we're becoming a major player in the city of Phoenix and the state of Arizona. I say to them, "On the east side of town, all the Republicans think we're Republican because we're about the free markets and we're a Christian university. On the west side of town, all the Democrats think we're Democrats because we're about inner-city transformation and we're about immigration reform." I tell our students, "We've got them right where we want them. We're going to stay right there." We support people on both sides of the aisle, as long as they support policies that help disadvantaged populations. That's what we're about.
As we look for partners, we may have partners that are state institutions; we may have partners that are Jesuit institutions. If you as an institution want to grow your university by converting your curriculum so it can be delivered online to working adult students, we're happy to be your partner, regardless of what worldview you come from.
Cross: I have two young daughters, I'll end with this question. For anyone who has young kids, as we think over the next 10 years, and we're investing for education, what's your advice? You're an educator. You come from a family of educators, even though your parents weren't educators. Clearly, there's something in the water at the Mueller household many years ago that bred educators. What is your advice to me and to others about looking and thinking about college education over the next 10 years?
Mueller: Start early. Start when your sons or daughters are sophomores in high school. Start looking at institutions. Start looking at programs. One of the things we say is, we have to understand where the economy is going. We have to understand where the jobs are going to be. We have to build programs in conjunction with industry so that we're going to help our students get jobs. I think that's the most important thing. You're looking for a university that understands where the economy is going. We're adding 20 new programs on an annual basis. We want to add programs that are cutting-edge programs based on, are they going to help young people get access to the growing fields in the economy? I think that's really important.
Secondly, look for universities that are changing their business models so that they can make education affordable. You don't want your son or daughter going into $150,000 or $200,000 worth of debt, because many of them will never get out from under that. It has to be affordable. And the third thing is, look for universities who have or built communities that are safe, that are inclusive, and that you can feel good about dropping your son or daughter off at.
Cross: Brian, you certainly have a lot of shareholders in the room. Hopefully you've inspired others to be shareholders. Thank you so much for coming by today and talking to us more about Grand Canyon. We wish you all the best in your endeavors.
Mueller: Thank you! I appreciate it!