0001434588false00014345882023-08-032023-08-03

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 3, 2023

Grand Canyon Education, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

001-34211

    

20-3356009

(State or other Jurisdiction of

(Commission File Number)

(IRS Employer Identification No.)

Incorporation)

2600 W. Camelback Road

Phoenix, Arizona

85017

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (602) 247-4400

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

LOPE

Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Item 2.02. Results of Operations and Financial Condition.

On August 3, 2023, the Company reported its results for the second quarter of 2023.  The press release dated August 3, 2023 is furnished as Exhibit 99.1 to this report.

Item 9.01. Consolidated Financial Statements and Exhibits.

99.1       Press Release dated August 3, 2023

104Cover Page Interactive Date File (imbedded within the XBRL document)

EXHIBIT INDEX

Exhibit No.

    

Description

99.1

Press Release dated August 3, 2023

104

Cover Page Interactive Date File (imbedded within the XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRAND CANYON EDUCATION, INC.

Date: August 3, 2023

By:

/s/ Daniel E. Bachus

Daniel E. Bachus

Chief Financial Officer

(Principal Financial Officer)

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE

Investor Relations Contact:

Daniel E. Bachus

Chief Financial Officer

Grand Canyon Education, Inc.

602-639-6648

[email protected]

GRAND CANYON EDUCATION, INC. REPORTS

SECOND QUARTER 2023 RESULTS

PHOENIX, AZ., August 3, 2023Grand Canyon Education, Inc. (NASDAQ: LOPE), (“GCE” or the “Company”), is a publicly traded education services company that currently provides services to 25 university partners. GCE provides a full array of support services in the post-secondary education sector and has developed significant technological solutions, infrastructure and operational processes to provide superior services in these areas on a large scale. GCE today announced financial results for the quarter ended June 30, 2023.

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Grand Canyon Education, Inc. Reports Second Quarter 2023 Results

For the three months ended June 30, 2023:

Service revenue for the three months ended June 30, 2023 was $210.6 million, an increase of $10.8 million, or 5.4%, as compared to service revenue of $199.8 million for the three months ended June 30, 2022. The increase year over year in service revenue was primarily due to an increase in GCU enrollments of 4.1% over enrollments at June 30, 2022 and an increase in revenue per student year over year. The increase in revenue per student between years is primarily due to the service revenue impact of the increased room, board and other ancillary revenues at GCU in the second quarter of 2023 as compared to the prior year period. In addition, service revenue per student for Accelerated Bachelor of Science in Nursing (“ABSN”) students at 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 take more credits on average per semester. The increase in revenue per student in the three months ended June 30, 2023 was also positively impacted by the timing of the Spring semester for the ground traditional campus. The Spring semester started two days later in 2023 and extended four more days into April, which had the effect of shifting $4.5 million in service revenue from the first quarter of 2023 to the second quarter of 2023.
Partner enrollments totaled 99,526 at June 30, 2023 as compared to 96,029 at June 30, 2022. University partner enrollments at our off-campus classroom and laboratory sites were 3,904, a decrease of 5.2% over enrollments at June 30, 2022, which includes 350 and 324 GCU students at June 30, 2023 and 2022, respectively. We did open six new off-campus classroom and laboratory sites in the year ended December 31, 2022 and one site in the six months ended June 30, 2023 increasing the total number of these sites to 36 at June 30, 2023 and we anticipate opening three to four more in 2023. Enrollments at GCU increased to 95,972 at June 30, 2023, an increase of 4.1% over enrollments at June 30, 2022. Enrollments for GCU ground students were 7,327 at June 30, 2023 up from 7,101 at June 30, 2022 primarily due to a 3.7% increase in traditional ground students between years. GCU online enrollments were 88,645 at June 30, 2023, up from 85,132 at June 30, 2022. GCU enrollment declines between March 31 and June 30 of each year as ground enrollment at GCU at June 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.
Operating income for the three months ended June 30, 2023 was $35.4 million, an increase of $1.6 million as compared to $33.8 million for the same period in 2022. The operating margin for the three months ended June 30, 2023 was 16.8%, compared to 16.9% for the same period in 2022.

Income tax expense for the three months ended June 30, 2023 was $9.1 million, an increase of $0.5 million, as compared to income tax expense of $8.6 million for the three months ended June 30, 2022. This increase was the result of an increase in our taxable income, partially offset by a decrease in our effective tax rate between periods. Our effective tax rate was 23.8% during the second quarter of 2023 compared to 25.2% during the second quarter of 2022. In the second quarter of 2023 the effective tax rate was favorably impacted by income tax audits, while in the second quarter of 2022 the effective tax rate was unfavorably impacted by an increase in the state income tax rate.

Net income increased 13.3% to $29.0 million for the second quarter of 2023, compared to $25.6 million for the same period in 2022. As adjusted net income was $30.4 million and $27.1 million for the second quarters of 2023 and 2022, respectively.

Diluted net income per share was $0.96 and $0.80 for the second quarters of 2023 and 2022, respectively. As adjusted diluted net income per share was $1.01 and $0.85 for the second quarters of 2023 and 2022, respectively.

Adjusted EBITDA increased 4.7% to $47.7 million for the second quarter of 2023, compared to $45.6 million for the same period in 2022.

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For the six months ended June 30, 2023:

Service revenue for the six months ended June 30, 2023 was $460.7 million, an increase of $16.8 million, or 3.8%, as compared to service revenue of $443.9 million for the six months ended June 30, 2022. The increase year over year in service revenue was primarily due to an increase in GCU enrollments of 4.1% over enrollments at June 30, 2022 and an increase in revenue per student year over year. The increase in revenue per student between years is primarily due to the service revenue impact of the increased room, board and other ancillary revenues at GCU’s ground traditional campus between years primarily due to increased enrollment. In addition, service revenue per student for Accelerated Bachelor of Science in Nursing (“ABSN”) students at 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 take more credits on average per semester.
Operating income for the six months ended June 30, 2023 was $109.9 million, a decrease of $1.4 million as compared to $111.3 million for the same period in 2022. The operating margin for the six months ended June 30, 2023 was 23.9%, compared to 25.1% for the same period in 2022.

Income tax expense for the six months ended June 30, 2023 was $26.1 million, a decrease of $2.1 million, or 7.5%, as compared to income tax expense of $28.2 million for the six months ended June 30, 2022. This decrease was the result of a decrease in our effective tax rate between periods, partially offset by an increase in our taxable income. Our effective tax rate was 22.8% during the six months ended June 30, 2023 compared to 25.2% during the six months ended June 30, 2022. In the six months ended June 30, 2023, the effective tax rate was impacted by excess tax benefits of $0.9 million as compared to only $0.1 million in the six months ended June 30, 2022. In the six months ended June 30, 2023 the effective tax rate was favorably impacted by state income tax refunds and audits, while in the six months ended June 30, 2022 the effective tax rate was unfavorably impacted by an increase in the state income tax rate.

Net income increased 5.9% to $88.5 million for the six months ended June 30, 2023, compared to $83.6 million for the same period in 2022. As adjusted net income was $91.9 million and $87.3 million for the six months ended June 30, 2023 and 2022, respectively.

Diluted net income per share was $2.91 and $2.51 for the six months ended June 30, 2023 and 2022, respectively. As adjusted diluted net income per share was $3.02 and $2.61 for the six months ended June 30, 2023 and 2022, respectively.

Adjusted EBITDA decreased 1.2% to $134.4 million for the six months ended June 30, 2023, compared to $136.0 million for the same period in 2022.

Liquidity and Capital Resources

Our liquidity position, as measured by cash and cash equivalents and investments increased by $51.7 million between December 31, 2022 and June 30, 2023, which was largely attributable to cash flows from operations exceeding share repurchases and capital expenditures during the six months ended June 30, 2023. Our unrestricted cash and cash equivalents and investments were $233.4 million and $181.7 million at June 30, 2023 and December 31, 2022, respectively.

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Grand Canyon Education, Inc. Reports Second Quarter 2023 Results and Full Year Outlook 2023

2023 Outlook

Q3 2023:

Service revenue of between $218.5 million and $220.5 million;
Operating margin of between 16.0% and 16.7%;
Effective tax rate of 18.6%;
Diluted EPS of between $0.99 and $1.04; and
30.0 million diluted shares.

The diluted EPS guidance includes non-cash amortization of intangible assets net of taxes of $1.7 million, which equates to a $0.06 impact on diluted EPS. Thus, as adjusted, Non-GAAP diluted income per share of between $1.05 and $1.10.

Q4 2023:

Service revenue of between $269.5 million and $274.5 million;
Operating margin of between 34.1% and 35.3%;
Effective tax rate of 21.3%;
Diluted EPS of between $2.48 and $2.61; and
29.7 million diluted shares.

The diluted EPS guidance includes non-cash amortization of intangible assets net of taxes of $1.7 million, which equates to a $0.06 impact on diluted EPS. Thus, as adjusted, Non-GAAP diluted income per share of between $2.54 and $2.67.

Full Year 2023:

Service revenue of between $948.7 million and $955.7 million;
Operating margin of between 25.0% and 25.5%;
Effective tax rate of 21.6%;
Diluted EPS between $6.37 and $6.55; and
30.1 million diluted shares.

The diluted EPS guidance includes non-cash amortization of intangible assets net of taxes of $6.6 million and losses on fixed asset disposals net of taxes of $0.1 million, which equates to a $0.22 impact on diluted EPS. Thus, as adjusted, Non-GAAP diluted income per share of between $6.59 and $6.77.

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

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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, 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 Securities and Exchange Commission, including as set forth in Part I, Item 1A of our Annual Report on Form 10-K for period ended December 31, 2022, as updated in our subsequent reports filed with the Securities and Exchange Commission on Form 10Q or Form 8-K.

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.

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Grand Canyon Education, Inc. Reports Second Quarter 2023 Results

Conference Call

Grand Canyon Education, Inc. will discuss its second quarter 2023 results and full year 2023 outlook during a conference call scheduled for today, August 3, 2023 at 4:30 p.m. Eastern time (ET).

Live Conference Dial-In:

Those interested in participating in the question-and-answer session should follow the conference dial-in instructions below. Participants may register for the call here to receive the dial-in numbers and unique PIN to access the call seamlessly. Please dial in at least ten minutes prior to the start of the call.  Journalists are invited to listen only. 

Webcast and Replay:

Investors, journalists and the general public may access a live webcast of this event at: Q2 2023 Grand Canyon Education Inc. Earnings Conference CallA webcast replay will be available approximately two hours following the conclusion of the call at the same link.

About Grand Canyon Education, Inc.

Grand Canyon Education, Inc. (“GCE”), incorporated in 2008, is a publicly traded education services company that currently provides services to 25 university partners. GCE is uniquely positioned in the education services industry in that its leadership has over 30 years of proven expertise in providing a full array of support services in the post-secondary education sector and has developed significant technological solutions, infrastructure and operational processes to provide superior services in these areas on a large scale. GCE provides services that support students, faculty and staff of partner institutions such as marketing, strategic enrollment management, counseling services, financial services, technology, technical support, compliance, human resources, classroom operations, content development, faculty recruitment and training, among others. For more information about GCE visit the Company's website at www.gce.com.

Grand Canyon Education, Inc., 2600 W. Camelback Road, Phoenix, AZ 85017, www.gce.com.

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Grand Canyon Education, Inc. Reports Second Quarter 2023 Results

GRAND CANYON EDUCATION, INC.

Consolidated Income Statements

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

(In thousands, except per share data)

 

  

 

  

 

  

 

  

Service revenue

$

210,577

$

199,753

$

460,702

$

443,886

Costs and expenses:

Technology and academic services

 

38,957

 

38,189

 

76,469

 

74,495

Counseling services and support

 

72,392

 

66,025

 

145,741

 

133,538

Marketing and communication

 

50,806

 

49,735

 

103,700

 

100,586

General and administrative

 

10,875

 

9,854

 

20,663

 

19,747

Amortization of intangible assets

 

2,105

 

2,105

 

4,210

 

4,210

Total costs and expenses

 

175,135

 

165,908

 

350,783

 

332,576

Operating income

 

35,442

 

33,845

 

109,919

 

111,310

Interest expense

 

(7)

 

(5)

 

(26)

 

(5)

Investment interest and other

 

2,590

 

344

 

4,743

 

549

Income before income taxes

 

38,025

 

34,184

 

114,636

 

111,854

Income tax expense

 

9,052

 

8,622

 

26,099

 

28,214

Net income

$

28,973

$

25,562

$

88,537

$

83,640

Earnings per share:

Basic income per share

$

0.96

$

0.80

$

2.92

$

2.51

Diluted income per share

$

0.96

$

0.80

$

2.91

$

2.51

Basic weighted average shares outstanding

 

30,183

 

31,800

 

30,321

 

33,295

Diluted weighted average shares outstanding

 

30,287

 

31,877

 

30,462

 

33,381

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Grand Canyon Education, Inc. Reports Second Quarter 2023 Results

GRAND CANYON EDUCATION, INC.

Consolidated Balance Sheets

As of June 30, 

As of December 31,

(In thousands, except par value)

    

2023

    

2022

ASSETS:

(Unaudited)

Current assets

 

  

 

  

Cash and cash equivalents

$

142,925

$

120,409

Investments

 

90,444

 

61,295

Accounts receivable, net

 

24,682

 

77,413

Income taxes receivable

 

9,037

 

2,788

Other current assets

 

12,461

 

11,368

Total current assets

 

279,549

 

273,273

Property and equipment, net

 

154,709

 

147,504

Right-of-use assets

 

76,446

 

72,719

Amortizable intangible assets, net

 

172,590

 

176,800

Goodwill

 

160,766

 

160,766

Other assets

 

2,157

 

1,687

Total assets

$

846,217

$

832,749

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

22,842

$

20,006

Accrued compensation and benefits

 

28,594

 

36,412

Accrued liabilities

 

30,485

 

22,473

Income taxes payable

 

75

 

12,167

Deferred revenue

 

9,110

 

Current portion of lease liability

 

9,339

 

8,648

Total current liabilities

 

100,445

 

99,706

Deferred income taxes, noncurrent

 

27,308

 

26,195

Other long-term liabilities

 

423

 

436

Lease liability, less current portion

72,616

68,793

Total liabilities

 

200,792

 

195,130

Commitments and contingencies

 

  

 

  

Stockholders’ equity

 

  

 

  

Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 31, 2022

 

 

Common stock, $0.01 par value, 100,000 shares authorized; 53,970 and 53,830 shares issued and 30,398 and 31,058 shares outstanding at June 30, 2023 and December 31, 2022, respectively

 

540

 

538

Treasury stock, at cost, 23,572 and 22,772 shares of common stock at June 30, 2023 and December 31, 2022, respectively

 

(1,798,619)

 

(1,711,423)

Additional paid-in capital

 

315,930

 

309,310

Accumulated other comprehensive loss

 

(690)

 

(533)

Retained earnings

 

2,128,264

 

2,039,727

Total stockholders’ equity

 

645,425

 

637,619

Total liabilities and stockholders’ equity

$

846,217

$

832,749

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Grand Canyon Education, Inc. Reports Second Quarter 2023 Results

GRAND CANYON EDUCATION, INC.

Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended

June 30, 

(In thousands)

2023

2022

Cash flows provided by operating activities:

Net income

    

$

88,537

    

$

83,640

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

Share-based compensation

 

6,622

 

6,361

Depreciation and amortization

 

10,939

 

11,352

Amortization of intangible assets

4,210

4,210

Deferred income taxes

 

1,160

 

732

Other, including fixed asset impairments

 

842

 

631

Changes in assets and liabilities:

 

 

  

Accounts receivable from university partners

 

52,731

 

44,336

Other assets

 

(1,332)

 

(3,171)

Right-of-use assets and lease liabilities

787

322

Accounts payable

 

2,323

 

(6,285)

Accrued liabilities

 

(460)

 

5,568

Income taxes receivable/payable

 

(18,341)

 

(13,555)

Deferred revenue

 

9,110

 

11,948

Net cash provided by operating activities

 

157,128

 

146,089

Cash flows used in investing activities:

 

  

 

  

Capital expenditures

 

(17,599)

 

(15,136)

Additions of amortizable content

(488)

(114)

Purchases of investments

 

(73,807)

 

(91,361)

Proceeds from sale or maturity of investments

 

43,837

 

26,994

Net cash used in investing activities

 

(48,057)

 

(79,617)

Cash flows used in financing activities:

 

  

 

  

Repurchase of common shares and shares withheld in lieu of income taxes

 

(86,555)

 

(528,012)

Net cash used in financing activities

 

(86,555)

 

(528,012)

Net increase (decrease) in cash and cash equivalents and restricted cash

 

22,516

 

(461,540)

Cash and cash equivalents and restricted cash, beginning of period

 

120,409

 

600,941

Cash and cash equivalents and restricted cash, end of period

$

142,925

$

139,401

Supplemental disclosure of cash flow information

 

  

 

  

Cash paid for interest

$

26

$

5

Cash paid for income taxes

$

42,460

$

38,841

Supplemental disclosure of non-cash investing and financing activities

 

  

 

  

Purchases of property and equipment included in accounts payable

$

1,644

$

1,654

ROU Asset and Liability recognition

$

3,727

$

503

Excise tax on treasury stock repurchases

$

641

$

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Grand Canyon Education, Inc. Reports Second Quarter 2023 Results

GRAND CANYON EDUCATION, INC.

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 Arizona school tuition organizations in lieu of the payment of state income taxes; (ii) share-based compensation, and (iii) unusual charges or gains, such as litigation and regulatory reserves, impairment charges and asset write-offs, and exit or lease termination costs. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our operating performance. We also make certain compensation decisions based, in part, on our operating performance, as measured by Adjusted EBITDA. All of the adjustments made in our calculation of Adjusted EBITDA are adjustments to items that management does not consider to be reflective of our core operating performance. Management considers our core operating performance to be that which can be affected by our managers in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period and does not consider the items for which we make adjustments (as listed above) to be reflective of our core performance.

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.

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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

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

 

(Unaudited, in thousands)

(Unaudited, in thousands)

Net income

$

28,973

$

25,562

$

88,537

$

83,640

Plus: interest expense

 

7

 

5

 

26

 

5

Less: investment interest and other

 

(2,590)

 

(344)

 

(4,743)

 

(549)

Plus: income tax expense

 

9,052

 

8,622

 

26,099

 

28,214

Plus: amortization of intangible assets

2,105

2,105

4,210

4,210

Plus: depreciation and amortization

 

5,402

 

5,628

 

10,939

 

11,352

EBITDA

 

42,949

 

41,578

 

125,068

 

126,872

Plus: loss on fixed asset disposal

54

3

135

664

Plus: litigation and regulatory reserves

1,474

857

2,547

2,128

Plus: share-based compensation

 

3,253

 

3,171

 

6,622

 

6,361

Adjusted EBITDA

$

47,730

$

45,609

$

134,372

$

136,025

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 and loss on disposal of fixed assets allows investors to develop a more meaningful understanding of the Company’s performance over time. Accordingly, for the three-months ended March 31, 2023 and 2022, the table below provides reconciliations of these non-GAAP items to GAAP net income and GAAP diluted income per share, respectively:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

2022

    

2023

2022

(Unaudited, in thousands except per share data)

GAAP Net income

$

28,793

$

25,562

$

88,537

$

83,640

Amortization of intangible assets

 

2,105

 

2,105

 

4,210

 

4,210

Loss on disposal of fixed assets

 

54

 

3

 

135

 

664

Income tax effects of adjustments(1)

 

(515)

 

(532)

 

(989)

 

(1,229)

As Adjusted, Non-GAAP Net income

$

30,437

$

27,138

$

91,893

$

87,285

GAAP Diluted income per share

$

0.96

$

0.80

$

2.91

$

2.51

Amortization of intangible assets (2)

0.05

0.05

0.11

0.09

Loss on disposal of fixed assets (3)

0.00

0.00

0.00

0.01

As Adjusted, Non-GAAP Diluted income per share

$

1.01

$

0.85

$

3.02

$

2.61


(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 $0.02 for each of the three months ended June 30, 2023 and 2022, and net of an income tax benefit of $0.03 for each of the six months ended June 30, 2023 and 2022.
(3)The loss on disposal of fixed assets per diluted share is net of an income tax benefit of nil for both the three months ended June 30, 2023 and 2022, and net of an income tax benefit of nil and $0.01 for the six months ended June 30, 2023 and 2022, respectively.

11