Some company earnings reports are straightforward. Others require a little back-of-the-envelope math to figure everything out. Then there are those that make completing a Rubik's Cube seem like child's play. Grand Canyon Education (NASDAQ:LOPE) -- for now -- fits into that third group.

That's because the company used to be an ordinary for-profit university. Last year, however, the school -- Grand Canyon University (GCU) -- regained its not-for-profit status. Grand Canyon Education (GCE) is left as an education services company. That means it provides curriculum development, financial aid processing, technology, counseling, advertising, and a host of other nonacademic tools.

The company reported solid earnings Tuesday night, and teased a few major announcements in the quarters to come.

A man using a digital tablet, with education and online learning media icons floating above it

Image source: Getty Images.

Grand Canyon Education: The raw numbers

But before we get to those teasers, let's look at how the company performed on the headline numbers. Because GCE was technically operating GCU during last year's first quarter, it wouldn't make sense to compare the two quarters on an absolute basis. Instead, it makes more sense to view them on an adjusted basis -- as if the company only received the same service revenue in the year-ago quarter as it does today.

Here's how those adjusted numbers looked:

Metric Q1 2019 Q1 2018 Year-Over-Year Growth (Decline)
Revenue $197 million $165 million 19%
EPS $1.62 $1.52 7%
Operating income $78 million $68 million 15%
Free cash flow $72 million $84 million (15%)

Data source: Grand Canyon.

It should be noted that while non-GAAP earnings increased 7% to $1.62, $0.06 of that increase was due to a one-time tax benefit the company worked out with the state of Arizona.

In terms of operating expenses, the company's January acquisition of Orbis -- which is essentially an education services company like Grand Canyon Education, but with a focus on nursing -- increased expenses markedly.

Technology and academic services spending, for instance, increased 78% to $19 million for the quarter. Overall, however, operating expenses were still down 33%. That's what happens when you can go from spending $88 million on university-related costs to zero!

And GCE believes that after this school year, it also won't need to devote any capital expenditures toward campus improvements at GCU.

Gains in enrollment

Enrollment figures showed solid growth at both GCU and Orbis. GCE gets 60% of GCU's tuition and fee revenue.

School Q1 2019 Enrollment
Q1 2018 Enrollment
Year-Over-Year Growth
GCU 98,295 91,378 8%
Orbis 3,384 2,328 45%
Total 101,679 93,706 9%

Data source: Grand Canyon.

CEO Brian Mueller believes that GCU's campus enrollment can one day grow to 30,000 (today, it is near 20,000), and online enrollment can grow 6% to 7% over the foreseeable future. He also believes that -- thanks to agreements with partners like Marquette University, Xavier, and other institutions with nursing programs -- Orbis can grow enrollment 35% through 2020.

Partners on the horizon

But the most interesting tidbit comes from the fact that Grand Canyon is on the cusp of announcing partnerships with new schools. While we will have to wait for the details to come out, the idea is that Grand Canyon would provide services to new schools similar to what it offers to GCU.

The only real information we have now is that there are four potential partners, located primarily in the Midwest and Northeast. Mueller also said the company should -- conservatively -- announce the partnerships and details before the end of the calendar year.

Outlook

For the full year, revenue was forecast to be slightly higher than what the company thought at the beginning of the year. Here's what the outlook is now:

Time Frame Revenue Non-GAAP EPS
Q2  $173 million $0.94
Q3  $190 million $1.11
Q4 $215 million $1.56
Full year $776 million $5.23

Data source: Grand Canyon.

Mueller also mentioned that competition was fierce for new students, something that he hasn't noticed in the recent past. That comment doesn't necessarily jibe with forecasts remaining stable, so enrollment figures will be important to watch over the next few quarters.