Grand Canyon Education, Inc. Reports Second Quarter 2021 Results
For the three months ended
- Service revenue was
$201.5 million for the second quarter of 2021 compared to$185.8 million for the second quarter of 2020. The increase year over year in service revenue was primarily due to year over year increases in university partner enrollments and in revenue per student. The increase in revenue per student is primarily due to the service revenue impact of the increased room, board, fee and other ancillary revenues at GCU in the second quarter of 2021 as compared to the prior year period (see - Impact of COVID-19 below) and the growth in the enrollment for students at off-campus classroom and laboratory sites. These increases were partially offset by a one-day shift in timing for the Spring campus semester resulting in one day moving into the first quarter of 2021 from the second quarter of 2021. Service revenue per student for off-campus classroom and laboratory sites generates a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of their students are studying in the Accelerated Bachelor of Science in Nursing program and take more credits on average per semester. - Partner enrollments totaled 101,808 at
June 30, 2021 as compared to 98,326 atJune 30, 2020 , an increase of 3.5%. University partner enrollments at our off-campus classroom and laboratory sites were 4,210, an increase of 13.2% over enrollments atJune 30, 2020 , which includes 176 GCU students atJune 30, 2021 . Enrollments at GCU grew to 97,774 atJune 30, 2021 , an increase of 3.3% over enrollments atJune 30, 2020 . GCU enrollment declinesbetween March 31 and June 30 of each year as ground enrollment at GCU atJune 30 of each year only includes traditional-aged students taking Summer school classes, which is a small percentage of GCU's traditional-aged student body. The Spring semester for GCU's traditional-aged student body ends near the end of April each year. GCU also had a decline in the year over year growth rate of its online students betweenMarch 31, 2021 andJune 30, 2021 (see – Impact of COVID-19 below). - Operating income for the three months ended
June 30, 2021 was$50.2 million , an increase of$1.9 million as compared to$48.3 million for the same period in 2020. The operating margin for the three months endedJune 30, 2021 was 24.9%, compared to 26.0% for the same period in 2020. - The tax rate in the three months ended
June 30, 2021 was 23.3% compared to 24.6% in the same period in 2020. The lower effective tax rate was primarily due to favorable adjustments as a result of the completion of several state audits. - Net income increased 5.2% to
$49.5 million for the second quarter of 2021, compared to$47.0 million for the same period in 2020. As adjusted net income was$51.1 million and$48.6 million for the second quarters of 2021 and 2020, respectively. - Diluted net income per share was
$1.09 and$1.00 for the second quarters of 2021 and 2020, respectively. As adjusted diluted net income per share was$1.12 and$1.03 for the second quarters of 2021 and 2020, respectively. - Adjusted EBITDA increased 4.1% to
$61.1 million for the second quarter of 2021, compared to$58.7 million for the same period in 2020.
For the six months ended
- Service revenue was
$438.4 million for the six months endedJune 30, 2021 compared to$407.4 million for the same period in 2020. The increase year over year in service revenue was primarily due to year over year increases in university partner enrollments and in revenue per student. The increase in revenue per student is primarily due to the service revenue impact of the increased room, board, fee and other ancillary revenues at GCU in the six months endedJune 30, 2021 as compared to the six months endedJune 30 , Q2 2020 (see - Impact of COVID-19 below) and the growth in the enrollment for students at off-campus classroom and laboratory sites. Service revenue per student for off-campus classroom and laboratory sites generates a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of their students are studying in the Accelerated Bachelor of Science in Nursing program and take more credits on average per semester. - Operating income for the six months ended
June 30, 2021 was$134.5 million , an increase of$5.4 million as compared to$129.1 million for the same period in 2020. The operating margin for the six months endedJune 30, 2021 was 30.7%, compared to 31.7% for the same period in 2020. - The tax rate in the six months ended
June 30, 2021 was 21.5% compared to 24.4% in the same period in 2020. The 2021 effective tax rate was lower due to higher excess tax benefits in the first half of 2021 of$4.4 million , compared to$0.6 million for the same period in 2020 and due to favorable adjustments as a result of the completion of several state audits. - Net income increased 7.8% to
$127.6 million for the six months endedJune 30, 2021 , compared to$118.4 million for the same period in 2020. As adjusted net income was$130.9 million and$121.6 million for the six months endedJune 30, 2021 and 2020, respectively. - Diluted net income per share was
$2.78 and$2.49 for the six months endedJune 30, 2021 and 2020, respectively. As adjusted diluted net income per share was$2.85 and$2.56 for the six months endedJune 30, 2021 and 2020, respectively. - Adjusted EBITDA increased 4.8% to
$156.7 million for the six months endedJune 30, 2021 , compared to$149.6 million for the same period in 2020.
Balance Sheet and Cash Flow
Our unrestricted cash and cash equivalents and investments were
Arrangements with GCU
In conjunction with the Asset Purchase Agreement with GCU, we received a secured note (the "Secured Note") as consideration for the transferred assets. The Secured Note contains customary commercial credit terms, including affirmative and negative covenants applicable to GCU, and provides that the Secured Note bears interest at an annual rate of 6.0%, has a maturity date of
GCU has engaged a firm to assist it in refinancing the Secured Note. If GCU is successful in refinancing all or part of the Secured Note it would eliminate or reduce the interest income earned by us. It is currently our intention that the proceeds received on a refinancing would be used to repurchase our common stock, paydown our existing debt, or for other general corporate purposes. We can provide no assurance that GCU will be successful in refinancing the Secured Note in the near term.
GCU generally pays for the service fees and its interest due on the Secured Note for the month in arrears. However, GCU paid its
Stock Repurchase Plan
GCE announced today that in
Cash Flows
Net cash provided by operating activities for the six months ended
Net cash used in investing activities was
Net cash used in financing activities was
Impact of COVID-19
Since
GCE has a long-term master services agreement with GCU (the "Master Services Agreement") pursuant to which GCE provides education services to GCU in return for 60% of GCU's tuition and fee revenues, which includes fee revenues from room, board, and other ancillary businesses including a student-run golf course and hotel. GCU has four types of students: traditional ground university students, who attend class on its campus in
The COVID-19 outbreak, as well as measures taken to contain its spread, has impacted GCU's students and its business in a number of ways. Beginning in
- Traditional ground university students who elected to move off campus near the end of the Spring 2020 semester received partial refunds for dormitory and meal payments, which reduced GCU's revenue and thus the service revenues earned by GCE in the last nine days of
March 2020 and the month ofApril 2020 ; - Ancillary businesses operated by GCU such as its hotel and merchandise shops were closed in late
March 2020 . Most of these businesses re-opened with scaled back operations inmid-September 2020 , which reduced and will continue to reduce GCU's revenues and thus the service revenues earned by GCE until these businesses are fully reopened; - Limited residential students remained on campus during the Summer 2020 semester, which reduced GCU's dormitory and ancillary revenues and thus the service revenues earned by GCE in 2020. The number of residential students that remained on campus during the Summer 2021 semester, however, was higher than in the Summer of 2019;
- GCU's doctoral students are required to attend two residencies on the university's campus and at its hotel in
Phoenix, Arizona as part of their dissertation. On an annual basis approximately 3,000 learners attend the week-long residencies, most of whom have historically attended in the Summer. Most of the residencies which were scheduled for the last week ofMarch 2020 through the end ofJuly 2020 were cancelled, and the residencies scheduled forAugust 2020 throughDecember 2020 were held at another location with lower than normal attendance. This reduced GCU's revenues including at its hotel, and thus reduced service revenues earned by GCE until residencies returned to normal attendance. In the first quarter of 2021, doctoral residencies returned to the university's campus and its hotel, although at lower than normal attendance rates; attendance at doctoral residencies in the second quarter of 2021 returned to 2019 levels; - GCU shifted its start date for the Fall 2020 semester for its traditional ground students from
August 24, 2020 toSeptember 8, 2020 , which had the effect of shifting tuition revenue for all GCU traditional students and certain ancillary revenue for residential students, from the third quarter of 2020 to the fourth quarter of 2020. This later start date for the Fall semester has been retained in 2021 as the semester is scheduled to begin onSeptember 7, 2021 ; - GCU shifted its move-in date for its residential students in the Fall 2020 semester to the week of
September 21, 2020 , which reduced housing revenue and certain ancillary revenue for residential students by three weeks. In addition, approximately 4,900 of GCU's traditional campus students elected to attend the Fall 2020 semester entirely in the online modality. Residential enrollment for the Fall 2020 semester was approximately 11,500 whereas residential bed capacity is approximately 14,500. This reduction in residential students caused a reduction in GCU's revenue and thus the service revenues earned by GCE. There are currently no plans to have a late move-in date for the Fall 2021 semester and the number of students currently scheduled to live on campus is at capacity; - The first week of the Spring 2021 semester was completed in an online modality for GCU's traditional students to provide greater flexibility for students returning to campus after the holidays. Face-to-face instruction for the semester commenced on
January 11, 2021 and endedApril 1, 2021 for approximately 80% of classes, followed by two weeks of online instruction. Approximately 3,500 traditional ground students elected to complete the Spring 2021 semester entirely in the online modality. These changes had the effect of reducing GCU's dormitory and ancillary revenues in the Spring of 2021 and thus the service revenues earned by GCE. - During the second quarter of 2020, GCU's online enrollment growth accelerated significantly into the high single digits. The increased level of online enrollment at that time resulted from a combination of factors including an acceleration of new students starting programs, a higher than expected number of students returning to the university that had taken a break from their program ("re-enters") and a lower than expected number of students deciding to drop out of or take a break from their program. We believe these trends were primarily caused by the shutdowns precipitated by the COVID-19 outbreak as greater numbers of working adults decided to return to school to finish undergraduate degree programs that they had previously started or to start new graduate degree programs during this time. These trends generally continued through the first quarter of 2021. Beginning in the second quarter of 2021, online enrollment growth rates as compared to the prior year period began to slow as both new enrollments and re-enters were down year over year, the numbers of students dropping out of school or taking periodic breaks in their program returned to historical levels and students completing their programs increased significantly on a year over year basis. We anticipate that some or all of these trends will continue through the rest of 2021 and thus the year over year online growth rate might continue to decline. We believe that as the year over year comparables return to historical levels and schools, hospitals and businesses fully reopen, our online enrollment growth rate will begin to re-accelerate.
- Professional studies students have declined significantly since the onset of the COVID-19 outbreak. Professional studies students at that time were converted to the online learning environment; since then, most have completed their programs while no new cohorts have been started until very recently. Now that the university has approved the recruitment of new professional studies cohorts, we anticipate that the number of these students will begin to grow.
The changes described above at GCU have impacted or will impact GCE's service revenue under the Master Services Agreement. In addition, due to the limited operating expenses that we incur to deliver those services, there has been or will be a direct reduction in our operating profit and operating margin.
GCE also has long-term services agreements with numerous other university partners across the United States. The majority of these other university partners' students are studying in the Accelerated Bachelor of Science in Nursing program which is offered in a 12-16 month format in three or four academic semesters. The Spring, Summer and Fall 2020 and Spring 2021 semesters were completed without interruption and each university partner has started its Summer 2021 semester. Some students who were scheduled to start their programs in the Summer 2020 semester delayed their start until the Fall 2020 semester, which resulted in lower enrollments and revenues in the Summer 2020 semester than was planned. In a number of locations, the demand to start in the Fall 2020 semester was greater than initially planned but a number of our university or healthcare partners chose not to increase the Fall 2020 cohort size to compensate for the Summer 2020 start shortfall due to concerns about clinical availability. The Fall 2020 enrollment was only slightly lower than our original expectations as the Summer 2020 new start shortfall was offset by higher retention rates and slightly higher than expected Fall 2020 new starts.
No changes are currently anticipated with our other university partners related to the Fall 2021 semester that would have a material impact on GCE's service revenue, operating profit and operating margins. However, if one of our university partners were to close an off-campus classroom and laboratory site prior to the end of the Fall 2021 semester, or take some other action that adversely impacted program enrollment, such an event would reduce the service revenues earned by GCE.
The COVID-19 outbreak also presents operational challenges to GCE as a large percentage of our workforce is currently working remotely and is expected to continue doing so for the foreseeable future. This degree of remote working could increase risks in the areas of internal control, cyber security and the use of remote technology, and thereby result in interruptions or disruptions in normal operational processes.
It is not possible for us to completely predict the duration or magnitude of the adverse results of the COVID-19 pandemic and its effects on our business, results of operations or financial condition at this time, but such effects may be material in future quarters.
2021 Outlook |
|
Q3 2021: |
Service revenue of between |
Q4 2021: |
Service revenue of between |
Full Year 2021: |
Service revenue of between |
Forward-Looking Statements
This news release contains "forward-looking statements" which include information relating to future events, future financial performance, strategies expectations, competitive environment, regulation, and availability of resources. These forward-looking statements include, without limitation, statements regarding: proposed new programs; whether regulatory, economic, or business developments or other matters may or may not have a material adverse effect on our financial position, results of operations, or liquidity; projections, predictions, expectations, estimates, and forecasts as to our business, financial and operating results, and future economic performance; and management's goals and objectives and other similar expressions concerning matters that are not historical facts. Words such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions, the negative of these expressions, as well as statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause our actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements include, but are not limited to: the harm to our business, results of operations, and financial condition, and harm to our university partners resulting from epidemics, pandemics, including the continuing, and potential future, adverse effects of the COVID-19 pandemic, or public health crises: the occurrence of any event, change or other circumstance that could give rise to the termination of any of our key university partner agreements; our ability to properly manage risks and challenges associated with strategic initiatives, including potential acquisitions or divestitures of, or investments in, new businesses, acquisitions of new properties and new university partners, and expansion of services provided to our existing university partners; our failure to comply with the extensive regulatory framework applicable to us either directly as a third party education services provider or indirectly through our university partners, including Title IV of the Higher Education Act and the regulations thereunder, state laws and regulatory requirements, and accrediting commission requirements; competition from other education services companies in our geographic region and market sector, including competition for students, qualified executives and other personnel; the pace of growth of our university partners' enrollment and its effect on the pace of our own growth; our ability to, on behalf of our university partners, convert prospective students to enrolled students and to retain active students to graduation; our success in updating and expanding the content of existing programs and developing new programs in a cost-effective manner or on a timely basis for our university partners; the impact of any natural disasters or public health emergencies; and other factors discussed in reports on file with the
Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
Conference Call
A replay of the call will be available approximately two hours following the conclusion of the call, at 855-859-2056 (domestic) or 404-537-3406 (international), passcode 8885759. It will also be archived at www.gce.com in the investor relations section for 60 days.
About
Consolidated Income Statements (Unaudited) |
||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||
|
|
|||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||
(In thousands, except per share data) |
||||||||||||
Service revenue |
$ |
201,487 |
$ |
185,768 |
$ |
438,421 |
$ |
407,423 |
||||
Costs and expenses: |
||||||||||||
Technology and academic services |
33,676 |
27,151 |
65,727 |
53,428 |
||||||||
Counseling services and support |
60,932 |
57,596 |
122,171 |
117,815 |
||||||||
Marketing and communication |
45,445 |
41,105 |
93,176 |
83,798 |
||||||||
General and administrative |
9,081 |
9,501 |
18,663 |
19,066 |
||||||||
Amortization of intangible assets |
2,105 |
2,105 |
4,210 |
4,210 |
||||||||
Total costs and expenses |
151,239 |
137,458 |
303,947 |
278,317 |
||||||||
Operating income |
50,248 |
48,310 |
134,474 |
129,106 |
||||||||
Interest income on Secured Note |
14,773 |
14,723 |
29,322 |
29,433 |
||||||||
Interest expense |
(763) |
(1,073) |
(1,562) |
(2,619) |
||||||||
Investment interest and other |
238 |
396 |
359 |
612 |
||||||||
Income before income taxes |
64,496 |
62,356 |
162,593 |
156,532 |
||||||||
Income tax expense |
15,035 |
15,346 |
35,020 |
38,137 |
||||||||
Net income |
$ |
49,461 |
$ |
47,010 |
$ |
127,573 |
$ |
118,395 |
||||
Earnings per share: |
||||||||||||
Basic income per share |
$ |
1.09 |
$ |
1.00 |
$ |
2.78 |
$ |
2.51 |
||||
Diluted income per share |
$ |
1.09 |
$ |
1.00 |
$ |
2.78 |
$ |
2.49 |
||||
Basic weighted average shares outstanding |
45,490 |
46,893 |
45,810 |
47,174 |
||||||||
Diluted weighted average shares outstanding |
45,582 |
47,151 |
45,964 |
47,457 |
Consolidated Balance Sheets |
||||||
As of |
As of |
|||||
(In thousands, except par value) |
2021 |
2020 |
||||
ASSETS: |
(Unaudited) |
|||||
Current assets |
||||||
Cash and cash equivalents |
$ |
69,448 |
$ |
245,769 |
||
Investments |
44,415 |
10,840 |
||||
Accounts receivable, net |
19,888 |
62,189 |
||||
Interest receivable on Secured Note |
— |
5,011 |
||||
Income taxes receivable |
1,330 |
1,294 |
||||
Other current assets |
11,989 |
8,639 |
||||
Total current assets |
147,070 |
333,742 |
||||
Property and equipment, net |
133,003 |
128,657 |
||||
Right-of-use assets |
59,303 |
61,020 |
||||
Secured Note receivable, net |
1,154,912 |
964,912 |
||||
Amortizable intangible assets, net |
189,428 |
193,638 |
||||
|
160,766 |
160,766 |
||||
Other assets |
2,485 |
1,844 |
||||
Total assets |
$ |
1,846,967 |
$ |
1,844,579 |
||
LIABILITIES AND STOCKHOLDERS' EQUITY: |
||||||
Current liabilities |
||||||
Accounts payable |
$ |
22,452 |
$ |
16,583 |
||
Accrued compensation and benefits |
36,210 |
34,248 |
||||
Accrued liabilities |
24,963 |
21,945 |
||||
Income taxes payable |
54 |
5,405 |
||||
Deferred revenue |
9,760 |
— |
||||
Current portion of lease liability |
7,423 |
7,393 |
||||
Current portion of notes payable |
68,145 |
33,144 |
||||
Total current liabilities |
169,007 |
118,718 |
||||
Deferred income taxes, noncurrent |
22,069 |
20,288 |
||||
Other noncurrent liabilities |
50 |
3 |
||||
Lease liability, less current portion |
55,101 |
56,611 |
||||
Notes payable, less current portion |
58,057 |
74,630 |
||||
Total liabilities |
304,284 |
270,250 |
||||
Commitments and contingencies |
||||||
Stockholders' equity |
||||||
Preferred stock, |
— |
— |
||||
Common stock, |
536 |
533 |
||||
|
(461,052) |
(303,379) |
||||
Additional paid-in capital |
281,103 |
282,467 |
||||
Accumulated other comprehensive loss |
(185) |
— |
||||
Retained earnings |
1,722,281 |
1,594,708 |
||||
Total stockholders' equity |
1,542,683 |
1,574,329 |
||||
Total liabilities and stockholders' equity |
$ |
1,846,967 |
$ |
1,844,579 |
Consolidated Statements of Cash Flows (Unaudited) |
||||||
Six Months Ended |
||||||
|
||||||
(In thousands) |
2021 |
2020 |
||||
Cash flows provided by operating activities: |
||||||
Net income |
$ |
127,573 |
$ |
118,395 |
||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||
Share-based compensation |
5,959 |
5,334 |
||||
Depreciation and amortization |
10,821 |
10,300 |
||||
Amortization of intangible assets |
4,210 |
4,210 |
||||
Deferred income taxes |
1,837 |
1,466 |
||||
Other, including fixed asset impairments |
302 |
111 |
||||
Changes in assets and liabilities: |
||||||
Accounts receivable and interest receivable from university partners |
47,312 |
33,384 |
||||
Other assets |
(3,975) |
(5,234) |
||||
Right-of-use assets and lease liabilities |
237 |
1,079 |
||||
Accounts payable |
6,653 |
2,846 |
||||
Accrued liabilities |
5,027 |
9,266 |
||||
Income taxes receivable/payable |
(5,387) |
32,206 |
||||
Deferred rent |
9,760 |
7,689 |
||||
Net cash provided by operating activities |
210,329 |
221,052 |
||||
Cash flows used in investing activities: |
||||||
Capital expenditures |
(15,757) |
(12,229) |
||||
Additions of amortizable content |
(271) |
(147) |
||||
Funding to GCU |
(190,000) |
(75,000) |
||||
Purchases of investments |
(51,223) |
— |
||||
Proceeds from sale or maturity of investments |
17,166 |
6,799 |
||||
Net cash used in investing activities |
(240,085) |
(80,577) |
||||
Cash flows used in financing activities: |
||||||
Principal payments on notes payable |
(16,572) |
(16,572) |
||||
Net borrowings from revolving line of credit |
35,000 |
— |
||||
Repurchase of common shares including shares withheld in lieu of income taxes |
(167,673) |
(74,017) |
||||
Net proceeds from exercise of stock options |
2,680 |
74 |
||||
Net cash used in financing activities |
(146,565) |
(90,515) |
||||
Net (decrease) increase in cash and cash equivalents and restricted cash |
(176,321) |
49,960 |
||||
Cash and cash equivalents and restricted cash, beginning of period |
245,769 |
122,572 |
||||
Cash and cash equivalents and restricted cash, end of period |
$ |
69,448 |
$ |
172,532 |
||
Supplemental disclosure of cash flow information |
||||||
Cash paid for interest |
$ |
1,658 |
$ |
2,619 |
||
Cash paid for income taxes |
$ |
37,132 |
$ |
1,850 |
||
Supplemental disclosure of non-cash investing and financing activities |
||||||
Purchases of property and equipment included in accounts payable |
$ |
422 |
$ |
2,689 |
||
Allowance for credit losses of |
$ |
— |
$ |
3,832 |
||
ROU Asset and Liability recognition |
$ |
1,717 |
$ |
15,510 |
Adjusted EBITDA (Non-GAAP Financial Measure)
Adjusted EBITDA is defined as net income plus interest expense, less interest income and other gain (loss) recognized on investments, plus income tax expense, and plus depreciation and amortization (EBITDA), as adjusted for (i) contributions to private
We believe Adjusted EBITDA allows us to compare our current operating results with corresponding historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by variations in capital structures (affecting relative interest expense, including the impact of write-offs of deferred financing costs when companies refinance their indebtedness), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), the book amortization of intangibles (affecting relative amortization expense), and other items that we do not consider reflective of underlying operating performance. We also present Adjusted EBITDA because we believe it is frequently used by securities analysts, investors, and other interested parties as a measure of performance.
In evaluating Adjusted EBITDA, investors should be aware that in the future we may incur expenses similar to the adjustments described above. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine, or non-recurring. Adjusted EBITDA has limitations as an analytical tool in that, among other things it does not reflect:
- cash expenditures for capital expenditures or contractual commitments;
- changes in, or cash requirements for, our working capital requirements;
- interest expense, or the cash required to replace assets that are being depreciated or amortized; and
- the impact on our reported results of earnings or charges resulting from the items for which we make adjustments to our EBITDA, as described above and set forth in the table below.
In addition, other companies, including other companies in our industry, may calculate these measures differently than we do, limiting the usefulness of Adjusted EBITDA as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered as a substitute for net income, operating income, or any other performance measure derived in accordance with and reported under GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity. We compensate for these limitations by relying primarily on our GAAP results and only use Adjusted EBITDA as a supplemental performance measure.
The following table provides a reconciliation of net income to Adjusted EBITDA, which is a non-GAAP measure for the periods indicated:
Three Months Ended |
Six Months Ended |
|||||||||||
|
|
|||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||
(Unaudited, in thousands) |
(Unaudited, in thousands) |
|||||||||||
Net income |
$ |
49,461 |
$ |
47,010 |
$ |
127,573 |
$ |
118,395 |
||||
Plus: interest expense |
763 |
1,073 |
1,562 |
2,619 |
||||||||
Less: interest income on Secured Note |
(14,773) |
(14,723) |
(29,322) |
(29,433) |
||||||||
Less: investment interest and other |
(238) |
(396) |
(359) |
(612) |
||||||||
Plus: income tax expense |
15,035 |
15,346 |
35,020 |
38,137 |
||||||||
Plus: amortization of intangible assets |
2,105 |
2,105 |
4,210 |
4,210 |
||||||||
Plus: depreciation and amortization |
5,396 |
5,311 |
10,821 |
10,300 |
||||||||
EBITDA |
57,749 |
55,726 |
149,505 |
143,616 |
||||||||
Plus: share-based compensation |
2,940 |
2,678 |
5,959 |
5,334 |
||||||||
Plus: estimated litigation and regulatory reserves |
432 |
304 |
1,246 |
609 |
||||||||
Adjusted EBITDA |
$ |
61,121 |
$ |
58,708 |
$ |
156,710 |
$ |
149,559 |
Non-GAAP Net Income and Non-GAAP Diluted Income Per Share
The Company believes the presentation of non-GAAP net income and non-GAAP diluted income per share information that excludes amortization of intangible assets allows investors to develop a more meaningful understanding of the Company's performance over time. Accordingly, for the three-months and six-months ended
Three Months Ended |
Six Months Ended |
|||||||||||
|
|
|||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||
(Unaudited, in thousands except per share data) |
||||||||||||
GAAP Net income |
$ |
49,461 |
$ |
47,010 |
$ |
127,573 |
$ |
118,395 |
||||
Amortization of intangible assets |
2,105 |
2,105 |
4,210 |
4,210 |
||||||||
Income tax effects of adjustments(1) |
(491) |
(518) |
(907) |
(1,027) |
||||||||
As Adjusted, Non-GAAP Net income |
$ |
51,075 |
$ |
48,597 |
$ |
130,876 |
$ |
121,578 |
||||
GAAP Diluted income per share |
$ |
1.09 |
$ |
1.00 |
$ |
2.78 |
$ |
2.49 |
||||
Amortization of intangible assets (2) |
$ |
0.03 |
$ |
0.03 |
$ |
0.07 |
$ |
0.07 |
||||
As Adjusted, Non-GAAP Diluted income per share |
$ |
1.12 |
$ |
1.03 |
$ |
2.85 |
$ |
2.56 |
(1) |
The income tax effects of adjustments are based on the effective income tax rate applicable to adjusted (non-GAAP) results. |
(2) |
The amortization of acquired intangible assets per diluted share is net of an income tax benefit of |
Investor Relations Contact:
Chief Financial Officer
602-639-6648
[email protected]
View original content to download multimedia:https://www.prnewswire.com/news-releases/grand-canyon-education-inc-reports-second-quarter-2021-results-301349742.html
SOURCE