SEC Filing | Grand Canyon Education

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Commission File Number: 001-34211

GRAND CANYON EDUCATION, INC.

(Exact name of registrant as specified in its charter)


Delaware		20-3356009
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

2600 W. Camelback Road

Phoenix, Arizona 85017

(Address, including zip code, of principal executive offices)

(602) 247-4400

(Registrant’s telephone number, including area code)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:


Large Accelerated Filer ☒		Accelerated Filer ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The total number of shares of common stock outstanding as of October 31, 2023, was 30,010,536.

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GRAND CANYON EDUCATION, INC.

FORM 10-Q

INDEX


	Page
PART I – FINANCIAL INFORMATION	3

Item 1 Financial Statements	3
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3 Quantitative and Qualitative Disclosures About Market Risk	30
Item 4 Controls and Procedures	30

PART II – OTHER INFORMATION	31

Item 1 Legal Proceedings	31
Item 1A Risk Factors	31
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3 Defaults Upon Senior Securities	32
Item 4 Mine Safety Disclosures	32
Item 5 Other Information	32
Item 6 Exhibits	32
SIGNATURES	34

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PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

GRAND CANYON EDUCATION, INC.

Consolidated Income Statements

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands, except per share data)	2023		2022		2023		2022
Service revenue	$	221,913	$	208,720	$	682,615	$	652,606
Costs and expenses:
Technology and academic services		39,174		37,641		115,643		112,136
Counseling services and support		73,824		67,235		219,565		200,773
Marketing and communication		53,097		50,651		156,797		151,237
General and administrative		12,175		15,576		32,838		35,323
Amortization of intangible assets		2,105		2,105		6,315		6,315
Total costs and expenses		180,375		173,208		531,158		505,784
Operating income		41,538		35,512		151,457		146,822
Interest expense		(1)		—		(27)		(5)
Investment interest and other		2,739		745		7,482		1,294
Income before income taxes		44,276		36,257		158,912		148,111
Income tax expense		8,537		6,249		34,636		34,463
Net income	$	35,739	$	30,008	$	124,276	$	113,648
Earnings per share:
Basic income per share	$	1.20	$	0.96	$	4.12	$	3.48
Diluted income per share	$	1.19	$	0.96	$	4.10	$	3.47
Basic weighted average shares outstanding		29,776		31,302		30,138		32,623
Diluted weighted average shares outstanding		29,912		31,387		30,277		32,709

The accompanying notes are an integral part of these consolidated financial statements.

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GRAND CANYON EDUCATION, INC.

Consolidated Balance Sheets


	September 30,		December 31,
(In thousands, except par value)	2023		2022
	(Unaudited)
ASSETS:
Current assets
Cash and cash equivalents	$	56,871	$	120,409
Investments		97,553		61,295
Accounts receivable, net		104,475		77,413
Income tax receivable		3,770		2,788
Other current assets		12,069		11,368
Total current assets		274,738		273,273
Property and equipment, net		164,638		147,504
Right-of-use assets		90,393		72,719
Amortizable intangible assets, net		170,485		176,800
Goodwill		160,766		160,766
Other assets		2,136		1,687
Total assets	$	863,156	$	832,749
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities
Accounts payable	$	23,696	$	20,006
Accrued compensation and benefits		25,446		36,412
Accrued liabilities		33,527		22,473
Income taxes payable		91		12,167
Deferred revenue		6,237		—
Current portion of lease liability		10,518		8,648
Total current liabilities		99,515		99,706
Deferred income taxes, noncurrent		26,694		26,195
Other long-term liability		416		436
Lease liability, less current portion		86,001		68,793
Total liabilities		212,626		195,130
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022		—		—
Common stock, $0.01 par value, 100,000 shares authorized; 53,970 and 53,830 shares issued and 30,092 and 31,058 shares outstanding at September 30, 2023 and December 31, 2022, respectively		540		538
Treasury stock, at cost, 23,878 and 22,772 shares of common stock at September 30, 2023 and December 31, 2022, respectively		(1,832,686)		(1,711,423)
Additional paid-in capital		319,266		309,310
Accumulated other comprehensive loss		(593)		(533)
Retained earnings		2,164,003		2,039,727
Total stockholders’ equity		650,530		637,619
Total liabilities and stockholders’ equity	$	863,156	$	832,749

The accompanying notes are an integral part of these consolidated financial statements.

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GRAND CANYON EDUCATION, INC.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2023		2022		2023		2022
Net income	$	35,739	$	30,008	$	124,276	$	113,648
Other comprehensive income, net of tax:
Unrealized gains (losses) on available-for-sale securities, net of taxes of $30 and $8 for the three months ended September 30, 2023 and 2022, respectively, and $19 and $131 for the nine months ended September 30, 2023 and 2022, respectively		97		(19)		(60)		(417)
Comprehensive income	$	35,836	$	29,989	$	124,216	$	113,231

The accompanying notes are an integral part of these consolidated financial statements.

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GRAND CANYON EDUCATION, INC.

Consolidated Statement of Stockholders’ Equity

(In thousands)

(Unaudited)


	Nine Months Ended September 30, 2023
									Accumulated
							Additional		Other
	Common Stock			Treasury Stock			Paid-in		Comprehensive		Retained
	Shares	Par Value		Shares	Cost		Capital		Loss		Earnings		Total
Balance at December 31, 2022	53,830	$	538	22,772	$	(1,711,423)	$	309,310	$	(533)	$	2,039,727	$	637,619
Comprehensive income	—		—	—		—		—		119		59,564		59,683
Common stock purchased for treasury	—		—	310		(35,090)		—		—		—		(35,090)
Restricted shares forfeited	—		—	5		—		—		—		—		—
Share-based compensation	136		2	56		(6,331)		3,367		—		—		(2,962)
Balance at March 31, 2023	53,966	$	540	23,143	$	(1,752,844)	$	312,677	$	(414)	$	2,099,291	$	659,250
Comprehensive income	—		—	—		—		—		(276)		28,973		28,697
Common stock purchased for treasury	—		—	419		(45,775)		—		—		—		(45,775)
Restricted shares forfeited	—		—	10		—		—		—		—		—
Share-based compensation	4		—	—		—		3,253		—		—		3,253
Balance at June 30, 2023	53,970	$	540	23,572	$	(1,798,619)	$	315,930	$	(690)	$	2,128,264	$	645,425
Comprehensive income	—		—	—		—		—		97		35,739		35,836
Common stock purchased for treasury	—		—	306		(34,067)		—		—		—		(34,067)
Restricted shares forfeited	—		—	—		—		—		—		—		—
Share-based compensation	—		—	—		—		3,336		—		—		3,336
Balance at September 30, 2023	53,970	$	540	23,878	$	(1,832,686)	$	319,266	$	(593)	$	2,164,003	$	650,530

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GRAND CANYON EDUCATION, INC.

Consolidated Statement of Stockholders’ Equity

(In thousands)

(Unaudited)


	Nine Months Ended September 30, 2022
									Accumulated
							Additional		Other
	Common Stock			Treasury Stock			Paid-in		Comprehensive		Retained
	Shares	Par Value		Shares	Cost		Capital		Loss		Earnings		Total
Balance at December 31, 2021	53,637	$	536	15,915	$	(1,107,211)	$	296,670	$	—	$	1,855,052	$	1,045,047
Comprehensive income	—		—	—		—		—		(323)		58,078		57,755
Common stock purchased for treasury	—		—	4,575		(394,930)		—		—		—		(394,930)
Restricted shares forfeited	—		—	6		—		—		—		—		—
Share-based compensation	189		2	52		(4,625)		3,188		—		—		(1,435)
Balance at March 31, 2022	53,826	$	538	20,548	$	(1,506,766)	$	299,858	$	(323)	$	1,913,130	$	706,437
Comprehensive income	—		—	—		—		—		(75)		25,562		25,487
Common stock purchased for treasury	—		—	1,319		(128,457)		—		—		—		(128,457)
Share-based compensation	4		—	—		—		3,171		—		—		3,171
Balance at June 30, 2022	53,830	$	538	21,867	$	(1,635,223)	$	303,029	$	(398)	$	1,938,692	$	606,638
Comprehensive income	—		—	—		—		—		(19)		30,008		29,989
Common stock purchased for treasury	—		—	582		(48,194)		—		—		—		(48,194)
Restricted shares forfeited	—		—	4		—		—		—		—		—
Share-based compensation	—		—	—		—		3,123		—		—		3,123
Balance at September 30, 2022	53,830	$	538	22,453	$	(1,683,417)	$	306,152	$	(417)	$	1,968,700	$	591,556

The accompanying notes are an integral part of these consolidated financial statements.

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GRAND CANYON EDUCATION, INC.

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended
	September 30,
(In thousands)	2023		2022
Cash flows provided by operating activities:
Net income	$	124,276	$	113,648
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation		9,958		9,484
Depreciation and amortization		16,994		17,023
Amortization of intangible assets		6,315		6,315
Deferred income taxes		517		368
Other, including fixed asset impairments		(134)		1,013
Changes in assets and liabilities:
Accounts receivable from university partners		(27,062)		(31,107)
Other assets		(1,154)		(1,288)
Right-of-use assets and lease liabilities		1,404		700
Accounts payable		3,894		(5,768)
Accrued liabilities		(910)		2,162
Income taxes receivable/payable		(13,058)		(8,172)
Deferred revenue		6,237		6,092
Net cash provided by operating activities		127,277		110,470
Cash flows used in investing activities:
Capital expenditures		(34,186)		(26,301)
Additions of amortizable content		(809)		(294)
Purchases of investments		(73,462)		(132,096)
Proceeds from sale or maturity of investments		37,927		63,373
Net cash used in investing activities		(70,530)		(95,318)
Cash flows used in financing activities:
Repurchase of common shares and shares withheld in lieu of income taxes		(120,285)		(576,206)
Net cash used in financing activities		(120,285)		(576,206)
Net decrease in cash and cash equivalents and restricted cash		(63,538)		(561,054)
Cash and cash equivalents and restricted cash, beginning of period		120,409		600,941
Cash and cash equivalents and restricted cash, end of period	$	56,871	$	39,887
Supplemental disclosure of cash flow information
Cash paid for interest	$	27	$	5
Cash paid for income taxes	$	47,654	$	41,118
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment included in accounts payable	$	927	$	1,827
ROU Asset and Liability recognition	$	17,674	$	17,434
Excise tax on treasury stock repurchases	$	978	$	—

The accompanying notes are an integral part of these consolidated financial statements.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

1. Nature of Business

Grand Canyon Education, Inc. (together with its subsidiaries, the “Company” or “GCE”) is a publicly traded education services company dedicated to serving colleges and universities. GCE has developed significant technological solutions, infrastructure and operational processes to provide services to these institutions on a large scale. GCE’s most significant university partner is Grand Canyon University (“GCU”), an Arizona non-profit corporation, a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across nine colleges both online, on ground at its campus in Phoenix, Arizona and at six off-campus classroom and laboratory sites.

In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly owned subsidiary, Orbis Education, which we acquired, by merger on January 22, 2019 (the “Acquisition”). Since the Acquisition, GCE, together with Orbis Education, has continued to add additional university partners. In the healthcare field, we work in partnership with a growing number of top universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry. In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs. As of September 30, 2023, GCE provides education services to 25 university partners across the United States.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles and pursuant to the rules and regulations of the United States Securities and Exchange Commission and the instructions to Form 10-Q and Article 10, consistent in all material respects with those applied in its financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that in the opinion of management are necessary for the fair presentation of the interim periods presented. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 from which the December 31, 2022 balance sheet information was derived.

Investments

As of September 30, 2023 and December 31, 2022, the Company considered its investments in corporate bonds, agency bonds and commercial paper as available-for-sale securities based on the Company’s intent for the respective securities. Available-for-sale securities are carried at fair value, determined using Level 1 and Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets, with unrealized gains and losses, net of tax, reported as a separate component of other comprehensive income. Unrealized losses considered to be other-than-temporary are recognized currently in earnings. Amortization of premiums, accretion of discounts, interest and dividend income and realized gains and losses are included in interest and other income.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Arrangements with GCU

On July 1, 2018, the Company consummated an Asset Purchase Agreement (the “Asset Purchase Agreement”) with GCU. In conjunction with the Asset Purchase Agreement, we received a secured note from GCU as consideration for the transferred assets in the initial principal amount of $870,097 (the “Secured Note”) which was repaid by GCU in the fourth quarter of 2021. In connection therewith, the Company and GCU entered into a long-term master services agreement (the “Master Services Agreement”) pursuant to which the Company provides identified technology and academic services, counseling services and support, marketing and communication services, and several back-office services to GCU in return for 60% of GCU’s tuition and fee revenue. Except for identified liabilities assumed by GCU, GCE retained responsibility for all liabilities of the business arising from pre-closing operations.

Internally Developed Software

The Company capitalizes certain costs related to internal-use software, primarily consisting of direct labor associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation or operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs of design, coding, integration, and testing of the software developed. Capitalization of costs requires judgment in determining when a project has reached the application development stage and the period over which we expect to benefit from the use of that software. Once the software is placed in service, these costs are amortized straight-line over the estimated useful life of the software, which is generally three years. These assets are a component of our property and equipment, net in our consolidated balance sheets.

Capitalized Content Development

The Company capitalizes certain costs to fulfill a contract related to the development and digital creation of content on a course-by-course basis for each university partner, many times in conjunction with faculty and subject matter experts. The Company is responsible for the conversion of instructional materials to an on-line format, including outlines, quizzes, lectures, and articles in accordance with the educational guidelines provided to us by our university partners, prior to the respective course commencing. We also capitalize the creation of learning objects which are digital assets such as online demonstrations, simulations, and case studies used to obtain learning objectives.

Costs that are capitalized include payroll and payroll-related costs for employees who are directly associated and spend time producing content and payments to faculty and subject matter experts involved in the process. The Company starts capitalizing content costs when it begins to develop or to convert a particular course, resources have been assigned and a timeline has been set. The content asset is placed in service when all work is complete, and the curriculum could be used for instruction. Capitalized content development assets are included in other assets in our consolidated balance sheets. The Company has concluded that the most appropriate method to amortize the deferred content assets is on a straight-line basis over the estimated life of the course, which is generally four years which corresponds with course’s review and major revision cycle. As of September 30, 2023 and December 31, 2022, $906 and $910, respectively, net of amortization, of deferred content assets are included in other assets, long-term in the Company’s consolidated balance sheets and amortization is included in technical and academic services where the costs originated.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

undiscounted future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Leases

The Company determines if an arrangement is a lease at inception and evaluates the lease agreement to determine whether the lease is a finance or operating lease. Right-of-use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement to determine the present value of lease payments over the lease term. At lease inception, the Company determines the lease term by assuming no exercises of renewal options, due to the Company’s constantly changing geographical needs for its university partners. Leases with an initial term of 12 months or less are not recorded in the consolidated balance sheets and are recognized as lease expense on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, and the non-lease components are accounted for separately and not included in our ROU assets and lease liabilities. Leases primarily consist of off-campus classroom and laboratory site locations and office space.

Business Combinations

The purchase price of an acquisition is allocated to the assets acquired, including tangible and intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. Transaction costs associated with business combinations are expensed as incurred. The determination of the fair value and useful lives of the intangible assets acquired involves certain judgments and estimates. These judgements can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital. The net assets and result of operations of an acquired entity are included in the Company’s consolidated financial statements from the acquisition date.

Goodwill and Amortizable Intangible Assets

Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the tangible and intangible assets acquired and liabilities assumed. Goodwill is assessed at least annually for impairment during the fourth quarter, or more frequently if circumstances indicate potential impairment. Goodwill is allocated to our reporting unit at the education services segment, which is the same as the entity as a whole (entity level reporting unit). The Company has concluded there is one operating segment and one reporting unit for goodwill impairment consideration. The Financial Accounting Standards Board has issued guidance that permits an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The Company reviews goodwill at least annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

Finite-lived intangible assets that are acquired in a business combination are recorded at fair value on their acquisition dates and are amortized using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or on a straight-line basis over the estimated useful life of the intangible asset if the pattern of economic benefit cannot be reliability determined. Finite-lived intangible assets consist of university partner relationships and trade names. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. There were no indicators that the carrying amount of the finite-lived intangible assets were impaired as of September 30, 2023. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such intangible assets are not recoverable,

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

a potential impairment loss is recognized to the extent the carrying amounts of the assets exceeds the fair value of the assets.

Share-Based Compensation

The Company measures and recognizes compensation expense for share-based payment awards made to employees and directors. The fair value of the Company’s restricted stock awards is based on the market price of its common stock on the date of grant. Stock-based compensation expense related to restricted stock grants is expensed over the vesting period using the straight-line method for Company employees and the Company’s board of directors. The Company recognizes forfeitures as they occur.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and benefits and accrued liabilities expenses approximate their fair value based on the liquidity or the short-term maturities of these instruments.

The fair value of investments was determined using Level 1 and Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets. The unit of account used for valuation is the individual underlying security. The basis for fair value measurements for each level is described below, with Level 1 having the highest priority.

-Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

-Level 2 – inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in non-active markets; and model-derived valuations whose inputs are observable or whose significant valuation drivers are observable.

-Level 3 – unobservable inputs that are not corroborated by market data.

Investments are comprised of corporate bonds, commercial paper and agency bonds.

Revenue Recognition

The Company generates all of its revenue through services agreements with its university partners (“Services Agreements”), pursuant to which the Company provides integrated technology and academic services, marketing and communication services, and back-office services to its university partners in return for a percentage of tuition and fee revenue.

The Company’s Services Agreements have initial terms ranging from 7-15 years, subject to renewal options, although certain agreements may give the university partners the right to terminate early if certain conditions are met. The Company’s Services Agreements have a single performance obligation, as the promises to provide the identified services are not distinct within the context of these agreements. The single performance obligation is delivered as our partners receive and consume benefits, which occurs ratably over a series of distinct service periods (daily or semester). Service revenue is recognized over time using the output method of measuring progress towards complete satisfaction of the single performance obligation. The output method provides a faithful depiction of the performance toward complete satisfaction of the performance obligation and can be tied to the time elapsed which is consumed evenly over the service period and is a direct measurement of the value provided to our partners. The service fees received from our partners over the term of the agreement are variable in nature in that they are dependent upon the number of students attending the university partner’s program and revenues generated from those students during the service period. Due to the

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

variable nature of the consideration over the life of the service arrangement, the Company considered forming an expectation of the variable consideration to be received over the service life of this one performance obligation. However, since the performance obligation represents a series of distinct services, the Company recognizes the variable consideration that becomes known and billable because these fees relate to the distinct service period in which the fees are earned. The Company meets the criteria in the standard and exercises the practical expedient to not disclose the aggregate amount of the transaction price allocated to the single performance obligation that is unsatisfied as of the end of the reporting period. The Company does not disclose the value of unsatisfied performance obligations because the directly allocable variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The service fees are calculated and settled per the terms of the Services Agreements and result in a settlement duration of less than one year for all partners. There are no refunds or return rights under the Services Agreements.

The Company’s receivables represent unconditional rights to consideration from our Services Agreements with our university partners. Accounts receivable, net is stated at net realizable value and contains billed and unbilled revenue. The Company utilizes the allowance method to provide for doubtful accounts based on its evaluation of the expected credit losses. There have been no amounts written off and no reserves established as of September 30, 2023. The Company will continue to review and revise its allowance methodology based on its collection experience with its partners.

For our partners with unbilled revenue, revenue recognition occurs in advance of billings. Billings for some university partners do not occur until after the service period has commenced and final enrollment information is available. Our unbilled revenue of $7,778 and $5,560 as of September 30, 2023 and December 31, 2022, respectively, are included in accounts receivable in our consolidated balance sheets. Deferred revenue represents the excess of amounts received as compared to amounts recognized in revenue on our consolidated statements of income as of the end of the reporting period, and such amounts are reflected as a current liability on our consolidated balance sheets. We generally receive payments for our services billed within 30 days of invoice. These payments are recorded as deferred revenue until the services are delivered and revenue is recognized.

Allowance for Credit Losses

The Company records its accounts receivable at the net amount expected to be collected. Our accounts receivable are derived through education services provided to university partners. The Company maintains an allowance for credit losses resulting from our university partners not making payments. The Company determines the adequacy of the allowance by periodically evaluating each university partners balance, considering their financial condition and credit history, and considering current and forecasted economic conditions. Bad debt expense is recorded as a technology and academic services expense in the consolidated income statements. The Company monitors the impact of other factors on expected credit losses.

Technology and Academic Services

Technology and academic services consist primarily of costs related to ongoing maintenance of educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems. This also includes costs to provide support for content development, faculty training, development and other faculty support, technology support, rent and occupancy costs for university partners’ off-campus classroom and laboratory sites, and assistance with state compliance. This expense category includes salaries, benefits and share-based compensation, information technology costs, amortization of content development costs and other costs associated with these support services. This category also includes an allocation of depreciation, amortization, and occupancy costs attributable to the provision of certain services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Counseling Services and Support

Counseling services and support consist primarily of costs including team-based counseling and other support to prospective and current students as well as financial aid processing. This expense category includes salaries, benefits and share-based compensation, and other costs such as dues, fees and subscriptions and travel costs. This category also includes an allocation of depreciation, amortization, lease expense, and occupancy costs attributable to the provision of certain services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations.

Marketing and Communication

Marketing and communication includes lead acquisition, digital communication strategies, brand identity advertising, media planning and strategy, video, data science and analysis, marketing to potential students and other promotional and communication services. This expense category includes salaries, benefits and share-based compensation for marketing and communication personnel, brand advertising, marketing leads and other promotional and communication expenses. This category also includes an allocation of depreciation, amortization, lease expense, and occupancy costs attributable to the provision of certain services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations. Advertising costs are expensed as incurred.

General and Administrative

General and administrative expenses include salaries, benefits and share-based compensation of employees engaged in corporate management, finance, human resources, compliance, and other corporate functions. This category also includes an allocation of depreciation, amortization, lease expense, and occupancy costs attributable to the provision of these services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations.

Commitments and Contingencies

The Company accrues for contingent obligations when it is probable that a liability has been incurred and the amount is reasonably estimable. When the Company becomes aware of a claim or potential claim, the likelihood of any loss exposure is assessed. If it is probable that a loss will result and the amount of the loss is estimable, the Company records a liability for the estimated loss. If the loss is not probable or the amount of the potential loss is not estimable, the Company will disclose the claim if the likelihood of a potential loss is reasonably possible and the amount of the potential loss could be material. Estimates that are particularly sensitive to future changes include tax, legal, and other regulatory matters, which are subject to change as events evolve, and as additional information becomes available during the administrative and litigation process. The Company expenses legal fees as incurred.

Concentration of Credit Risk

The Company believes the credit risk related to cash equivalents and investments is limited due to its adherence to an investment policy that requires investments to have a minimum BBB rating, depending on the type of security, by at least one major rating agency at the time of purchase. All of the Company’s cash equivalents and investments as of September 30, 2023 and December 31, 2022 consist of investments rated BBB or higher by at least one rating agency. Additionally, the Company utilizes at least one financial institution to conduct initial and ongoing credit analysis on its investment portfolio to monitor and lower the potential impact of market risk associated with its cash equivalents and investment portfolio. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances, which are primarily invested in money market funds or on deposit at high credit quality financial institutions in the U.S. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2023 and December 31, 2022, the Company had $56,119 and $119,639, respectively, in excess of the FDIC insured limit. The Company is also subject to credit risk for its accounts receivable balance. Our dependence on our most significant university partner, with 87.0% and 84.9% of total service revenue for

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

the nine-month periods ended September 30, 2023 and 2022, respectively, subjects us to the risk that declines in our customer’s operations would result in a sustained reduction in service revenue for the Company.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Segment Information

The Company operates as a single education services company using a core infrastructure that serves the curriculum and educational delivery needs of its university partners. The Company’s Chief Executive Officer manages the Company’s operations as a whole and no expense or operating income information is generated or evaluated on any component level.

Recent Accounting Pronouncements

The Company has determined that no other recent accounting pronouncements apply to its operations or could otherwise have a material impact on its consolidated financial statements.

3. Investments

As of September 30, 2023 and December 31, 2022, the Company had investments of $97,553 and $61,295, respectively, classified as available-for-sale securities.

As of September 30, 2023, the Company had available-for-sale investments comprised of the following:


	As of September 30, 2023
			Gross		Gross
	Adjusted		Unrealized		Unrealized		Estimated
	Cost		Gains		(Losses)		Fair Value
Corporate bonds	$	74,323	$	—	$	(742)	$	73,581
Commercial Paper		4,988		—		(1)		4,987
Agency bonds		19,020		—		(35)		18,985
Total investments	$	98,331	$	—	$	(778)	$	97,553

For the nine months ended September 30, 2023 and 2022, the net unrealized losses were $60 and $417, respectively, net of taxes. Available-for-sale debt securities are carried at fair value on the consolidated balance sheets. The Company estimates the lifetime expected credit losses for all available-for sale debt securities in an unrealized loss position. If our assessment indicates that an expected credit loss exists, we determine the portion of the unrealized loss attributable to credit deterioration and record a reserve for the expected credit loss in the allowance for credit losses in technology and academic services in our consolidated income statements. The Company has the ability and intent to hold these investments until recovery or maturity.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)


Available-for-sale securities maturing as of December 31:
2023	$	25,659
2024		39,002
2025		24,366
2026		5,844
2027		2,682
Total	$	97,553

4. Net Income Per Common Share

Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the assumed conversion of all potentially dilutive securities, consisting of restricted stock awards, for which the estimated fair value exceeds the exercise price, less shares which could have been purchased with the related proceeds, unless anti-dilutive. For employee equity awards, repurchased shares are also included for any unearned compensation adjusted for tax. The table below reflects the calculation of the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted earnings per common share.


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2023	2022	2023	2022
Denominator:
Basic weighted average shares outstanding	29,776	31,302	30,138	32,623
Effect of dilutive stock options and restricted stock	136	85	139	86
Diluted weighted average shares outstanding	29,912	31,387	30,277	32,709

Diluted weighted average shares outstanding excludes the incremental effect of unvested restricted stock in accordance with the treasury stock method. For the three-month periods ended September 30, 2023 and 2022, approximately 2 and 25, respectively, and for the nine-month periods ended September 30, 2023 and 2022, approximately 70 and 77, respectively, of the Company’s restricted stock awards outstanding were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive. These restricted stock awards could be dilutive in the future.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

5. Property and Equipment

Property and equipment consist of the following:


	September 30,		December 31,
	2023		2022
Land	$	5,098	$	5,098
Land improvements		2,242		2,242
Buildings		51,399		51,399
Buildings and leasehold improvements		30,389		21,911
Computer equipment		133,391		119,316
Furniture, fixtures and equipment		25,361		21,323
Internally developed software		67,626		58,904
Construction in progress		13,238		16,336
		328,744		296,529
Less accumulated depreciation and amortization		(164,106)		(149,025)
Property and equipment, net	$	164,638	$	147,504

6. Amortizable Intangible Assets

In January 2019, GCE completed the Acquisition. The Acquisition was accounted for in accordance with the acquisition method of accounting. Under this method the cost of the target is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Identified intangible assets of $210,280 consisted primarily of university partner relationships that were valued at $210,000. The fair value of university partner relationships was determined using the multiple-period excess earnings method.

Amortizable intangible assets consist of the following as of:


	September 30, 2023
	Estimated	Gross				Net
	Average Useful	Carrying		Accumulated		Carrying
	Life (in years)	Amount		Amortization		Amount
University partner relationships	25	$	210,000	$	(39,515)	$	170,485
Trade names	1		280		(280)		—
Total amortizable intangible assets, net		$	210,280	$	(39,795)	$	170,485

Amortization expense for university partner relationships and trade names for the years ending December 31:


2023	$	2,104
2024		8,419
2025		8,419
2026		8,419
2027		8,419
Thereafter		134,705
	$	170,485

7. Leases

The Company has operating leases for off-campus classroom and laboratory sites, office space, office equipment, and optical fiber communication lines. These leases have remaining lease terms that range from eight

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

months to 10 years and eight months. At lease inception, we determine the lease term by assuming no exercises of renewal options due to the Company’s constantly changing geographical needs for its university partners. Leases with an initial term of 12 months or less are not recorded in the consolidated balance sheets and we recognize lease expense for these leases on a straight-line basis over the lease term. The Company had operating lease costs of $3,525 and $2,789 for the three-month periods ended September 30, 2023 and 2022, respectively, and $9,695 and $7,596 for the nine-month periods ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, the Company had $24,077 of non-cancelable operating lease commitments for four off-campus classroom and laboratory sites and $192 for optical fiber communication lines that had not yet commenced. The Company’s weighted-average remaining lease term relating to its operating leases is 7.99 years, with a weighted-average discount rate of 3.78%. As of September 30, 2023, the Company had no financing leases.

Future payment obligations with respect to the Company’s operating leases, which were existing at September 30, 2023, by year and in the aggregate, are as follows:


Year Ending December 31,	Amount
2023	$	2,990
2024		14,102
2025		14,015
2026		13,992
2027		13,385
Thereafter		54,657
Total lease payments	$	113,141
Less interest		16,622
Present value of lease liabilities	$	96,519

8. Commitments and Contingencies

Legal Matters

From time to time, the Company is a party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business, some of which are covered by insurance. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company records a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible, and the amount involved could be material. With respect to the majority of pending litigation matters, the Company’s ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential losses related to those matters are not considered probable.

Upon resolution of any pending legal matters, the Company may incur charges in excess of presently established reserves. Management does not believe that any such charges would, individually or in the aggregate, have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Litigation

On May 12, 2020, a securities class action complaint was filed in the U.S. District Court for the District of Delaware by the City of Hialeah Employees’ Retirement System naming the Company, Brian E. Mueller and Daniel E. Bachus as defendants for allegedly making false and materially misleading statements regarding the circumstances surrounding the Company’s sale of Grand Canyon University (the “University”) to a non-profit entity on July 1, 2018 and the subsequent decision of the U.S. Department of Education to continue to treat the University as a for-profit

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

institution for education regulatory purposes (collectively, the “Conversion”). The complaint asserted a putative class period stemming from January 5, 2018, the date when the Company announced that it had applied to the University’s accreditor for approval of the Conversion, to January 27, 2020, the date prior to the publication of a short-seller report focused on the Conversion. A substantially similar complaint was filed in the same court by Grant Walsh on June 12, 2020 making similar allegations against the Company, Mr. Mueller and Mr. Bachus. Both complaints alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder and sought unspecified monetary relief, interest, and attorneys’ fees.

On August 13, 2020, the two cases were consolidated and the Fire and Police Association of Colorado, the Oakland County Employees’ Retirement System and the Oakland County Voluntary Employees’ Beneficiary Association Trust were appointed as lead plaintiffs. Thereafter, the plaintiffs filed a consolidated amended complaint on October 20, 2020 and the Company filed a motion to dismiss on December 21, 2020. On August 23, 2021, the Court granted the Company’s motion to dismiss in its entirety but permitted plaintiffs to file a further amended complaint to correct deficiencies in the initial complaint. The plaintiffs filed further amended complaints on September 28, 2021 and January 21, 2022, and the Company filed a further motion to dismiss on March 15, 2022. On March 28, 2023, the Company’s motion to dismiss was denied.

The Company believes that plaintiffs’ claims are without merit and it intends to defend itself in this legal proceeding vigorously. The outcome of this legal proceeding is uncertain at this point. At present, the Company cannot reasonably estimate a range of loss for this action based on the information available to the Company. Accordingly, the Company has not accrued any liability associated with this action.

Other Matters

In May 2022, we received a civil investigative demand (“CID”) from the Federal Trade Commission (“FTC”) related to the marketing services that we provide on behalf of GCU, and related activities. The CID requests the production of documents and answers to written questions. In January 2023, we received a further CID from the FTC requesting testimony on the same topic. We are cooperating with the FTC in connection with each of these CIDs.

9. Share-Based Compensation

Incentive Plan

The Company makes equity incentive grants pursuant to our 2017 Equity Incentive Plan (the “2017 Plan”) under which a maximum of 3,000 shares may be granted. As of September 30, 2023, 1,081 shares were available for grants under the 2017 Plan.

Restricted Stock

During the nine months ended September 30, 2023, the Company granted 136 shares of common stock with a service vesting condition to certain of its executives, officers and employees. The restricted shares have voting rights and vest in five annual installments of 20%, with the first installment vesting in March of the calendar year following the date of grant (the “first vesting date”) and subsequent installments vesting on each of the four anniversaries of the first vesting date. Upon vesting, shares will be withheld in lieu of taxes equivalent to the minimum statutory tax withholding required to be paid when the restricted stock vests. During the nine months ended September 30, 2023, the Company withheld 56 shares of common stock in lieu of taxes at a cost of $6,331 on the restricted stock vesting dates. In June 2023, following the annual stockholders meeting, the Company granted 4 shares of common stock to the non-employee members of the Company’s Board of Directors. The restricted shares granted to these directors have voting rights and vest on the earlier of (a) the one year anniversary of the date of grant or (b) immediately prior to the next annual stockholders meeting.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

A summary of the activity related to restricted stock granted under the Company’s Incentive Plan since December 31, 2022 is as follows:


		Weighted Average
	Total	Grant Date
	Shares	Fair Value per Share
Outstanding as of December 31, 2022	476	$	85.32
Granted	140	$	112.60
Vested	(147)	$	86.94
Forfeited, canceled or expired	(15)	$	85.90
Outstanding as of September 30, 2023	454	$	93.18

Share-based Compensation Expense

The table below outlines share-based compensation expense for the nine months ended September 30, 2023 and 2022 related to restricted stock granted:


	2023		2022
Technology and academic services	$	1,814	$	1,812
Counseling services and support		5,155		4,720
Marketing and communication		143		114
General and administrative		2,846		2,838
Share-based compensation expense included in operating expenses		9,958		9,484
Tax effect of share-based compensation		(2,489)		(2,371)
Share-based compensation expense, net of tax	$	7,469	$	7,113

10. Treasury Stock

On October 25, 2023, the Board of Directors increased the authorization under its existing stock repurchase program by $200,000 reflecting an aggregate authorization for share repurchases since the initiation of our program of $2,045,000. The expiration date on the repurchase authorization is March 1, 2025. Repurchases occur at the Company’s discretion. Repurchases may be made in the open market or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant.

During the nine months ended September 30, 2023 the Company repurchased 1,035 shares of common stock, at an aggregate cost of $113,954. As of September 30, 2023, there remained $81,892 available under its current share repurchase authorization (which authorization was increased to $281,892 in October 2023). Shares repurchased in lieu of taxes are not included in the repurchase plan totals as they were approved in conjunction with the restricted share awards. Excise taxes of $978 are not included in the repurchase plan totals but are included in the total cost of net share repurchases in the consolidated statement of stockholders’ equity.

11. Related Party Transactions

Related party transactions include transactions between the Company and certain of its affiliates. The following transactions were in the normal course of operations and were measured at the exchange amount, which was the amount of consideration established and agreed to by the parties.

As of and for the nine months ended September 30, 2023 and 2022, related party transactions consisted of the following:

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Affiliates

GCE Community Fund (“GCECF”) - GCECF was initially formed in 2014. GCECF makes grants for charitable, educational, literary, religious or scientific purposes within the meaning of Section 501(c ) (3) of the Internal Revenue Code (the “Code”), including for such purposes as the making of distributions to organizations that qualify as exempt organizations under Section 501 (c ) (3) of the Code. The Company’s Chief Executive Officer serves as the president of GCECF and GCECF’s board of directors is comprised entirely of Company executives. The Company is not the primary beneficiary of GCECF, and accordingly, the Company does not consolidate GCECF’s activities with its financial results. The Company made voluntary charitable contributions of $700 and $200 for each of the nine months ended September 30, 2023 and 2022, respectively, of which no amounts were owed as of September 30, 2023 and 2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes that appear elsewhere in this report.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain “forward-looking statements” within the meaning of Section 27A of Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, without limitation, statements regarding: proposed new programs; statements as to whether regulatory developments or other matters may or may not have a material adverse effect on our financial position, results of operations, or liquidity; statements concerning projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, and future economic performance; and statements of 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. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management.

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, or public health crises;

●

the occurrence of any event, change or other circumstance that could give rise to the termination of any of the 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 service 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;

●

regulatory actions taken against our university partners that impact their businesses and that directly or indirectly reduce the service revenue we can earn under our master services agreements;

●

the ability of our university partners’ students to obtain federal Title IV funds, state financial aid, and private financing;

●

potential damage to our reputation or other adverse effects as a result of negative publicity in the media, in the industry or in connection with governmental reports or investigations or otherwise, affecting us or other companies in the education services sector;

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●

risks associated with changes in applicable federal and state laws and regulations and accrediting commission standards, including pending rulemaking by the Department of Education applicable to us directly or indirectly through our university partners;

●

competition from other education service companies in our geographic region and market sector, including competition for students, qualified executives and other personnel;

●

our expected tax payments and tax rate;

●

our ability to hire and train new, and develop and train existing, employees;

●

the pace of growth of our university partners’ enrollment and its effect on the pace of our own growth;

●

fluctuations in our revenues due to seasonality;

●

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;

●

risks associated with the competitive environment for marketing the programs of our university partners;

●

failure on our part to keep up with advances in technology that could enhance the experience for our university partners’ students;

●

our ability to manage future growth effectively;

●

the impact of any natural disasters or public health emergencies; and

●

general adverse economic conditions or other developments that affect the job prospects of our university partners’ students.

Additional factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K (the “2022 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) for the fiscal year ended December 31, 2022, as updated in our subsequent reports filed with the SEC, including any updates found in Part II, Item 1A of this Quarterly Report on Form 10-Q or our other reports on Form 10-Q. You should not put undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date the statements are made and 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.

Explanatory Note

Grand Canyon Education, Inc. (together with its subsidiaries, the “Company” or “GCE”) is a publicly traded education services company dedicated to serving colleges and universities. GCE has developed significant technological solutions, infrastructure and operational processes to provide services to these institutions on a large scale. GCE’s most significant university partner is Grand Canyon University (“GCU”), a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across nine colleges both online and on ground at its campus in Phoenix, Arizona, and at six off-campus classroom and laboratory sites.

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In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly owned subsidiary, Orbis Education. GCE, together with Orbis Education, has continued to add additional university partners. In the healthcare field, we work in partnership with a growing number of top universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry. In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs. As of September 30, 2023, GCE provides education services to 25 university partners across the United States.

We plan to continue to add additional university partners and to introduce additional programs with both our existing partners and with new partners. We may engage with both new and existing university partners to offer healthcare programs, online only or hybrid programs, or, as is the case for our most significant partner, GCU, both healthcare and other programs. In addition, we have centralized a number of services that historically were provided separately to university partners of Orbis Education. Therefore, we refer to all university partners as “GCE partners” or “our partners”. We do disclose significant information for GCU, such as enrollments, due to its size in comparison to our other university partners.

Critical Accounting Policies and Use of Estimates

Our critical accounting policies are disclosed in the 2022 Form 10-K for the fiscal year ended December 31, 2022. During the nine months ended September 30, 2023, there were no significant changes in our critical accounting policies.

Results of Operations

The following table sets forth certain income statement data as a percentage of revenue for each of the periods indicated. Amortization of intangible assets has been excluded from the table below:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Costs and expenses
Technology and academic services	17.7	%	18.0	%	16.9	%	17.2	%
Counseling services and support	33.3		32.2		32.2		30.8
Marketing and communication	23.9		24.3		23.0		23.2
General and administrative	5.5		7.5		4.8		5.4

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Service revenue. Our service revenue for the three months ended September 30, 2023 was $221.9 million, an increase of $13.2 million, or 6.3%, as compared to service revenue of $208.7 million for the three months ended September 30, 2022. The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 118,227 at September 30, 2023, an increase of 6.6% over enrollments at September 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 third 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 September 30, 2023 was also positively impacted by the timing of the Fall semester for the ground traditional campus. The Fall semester started one day earlier in 2023 than in 2022, which had the effect of shifting $1.2 million in service revenue from the fourth quarter of 2023 to the third quarter of 2023 in comparison to the prior year. Partner enrollments totaled 123,165 at September 30, 2023 as compared to 116,202 at September 30, 2022. University partner enrollments at our off-campus classroom

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and laboratory sites were 5,448, a decrease of 4.3% over enrollments at September 30, 2022, which includes 510 and 421 GCU students at September 30, 2023 and 2022, respectively. None of our ABSN partners stopped admitting new students due to the clinical faculty challenges that began during the pandemic, however some locations that were scheduled to open were delayed and some existing partners have experienced reduced incoming cohort sizes which has slowed the growth. We believe the growth in the number of ABSN students is also being negatively impacted by the strong job market as these students have historically been individuals with already completed bachelor’s degrees choosing to re-career into one of these health professions. To address this challenge, we have been working with a number of our university partners to adjust their programs to allow students with the required education experience but without a complete bachelor’s degree to enter their programs. We did open six new off-campus classroom and laboratory sites in the year ended December 31, 2022 and five sites in the nine months ended September 30, 2023 increasing the total number of these sites to 40 at September 30, 2023. Enrollments for GCU ground students were 25,232 at September 30, 2023 up from 25,083 at September 30, 2022. GCU online enrollments were 92,995 at September 30, 2023, up from 85,845 at September 30, 2022, an increase of 8.3% between years.

Technology and academic services. Our technology and academic services expenses for the three months ended September 30, 2023 were $39.2 million, an increase of $1.6 million, or 4.1%, as compared to technology and academic services expenses of $37.6 million for the three months ended September 30, 2022. This increase was primarily due to increases in occupancy and depreciation and in other technology and academic costs of $1.2 million and $1.0 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation and benefit costs of $0.6 million. The increased occupancy and depreciation and other technology and academic costs were primarily due to the costs associated with the increased number of off-campus classroom and laboratory sites to support our 25 university partners, and their increased enrollment growth. The decrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to the decline in some of our other partners’ enrollments and changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs partially offset by increased headcount to support our 25 university partners, and their increased enrollment growth, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites year over year. Our technology and academic services expenses as a percentage of revenue decreased by 0.3% to 17.7% for the three months ended September 30, 2023, from 18.0% for the three months ended September 30, 2022. This decrease was primarily due to the decreased faculty reimbursements between years. We anticipate that technology and academic services expenses will increase in the future as we open more off-campus classroom and laboratory sites and our other partners’ enrollments grow.

Counseling services and support. Our counseling services and support expenses for the three months ended September 30, 2023 were $73.8 million, an increase of $6.6 million, or 9.8%, as compared to counseling services and support expenses of $67.2 million for the three months ended September 30, 2022. This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and in other counseling services and support expenses of $6.4 million and $0.2 million, respectively. The increases in employee compensation and related expenses were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites open year over year. The increase in other counseling services and support expenses is primarily the result of increased travel costs for our 25 university partners. Our counseling services and support expenses as a percentage of revenue increased by 1.1% to 33.3% for the three months ended September 30, 2023, from 32.2% for the three months ended September 30, 2022 primarily due to the significant increase year over year in headcount. We anticipate that counseling services and support expense will continue to be higher in 2023 than in 2022 as travel expenses will continue to be higher than in the prior year and we continue to grow our employee base and their compensation to meet our university partners’ growth expectations and retain our employees.

Marketing and communication. Our marketing and communication expenses for the three months ended September 30, 2023 were $53.1 million, an increase of $2.4 million, or 4.8%, as compared to marketing and communication expenses of $50.7 million for the three months ended September 30, 2022. This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $2.2 million, increased employee compensation, including share-based compensation of $0.1 million, and an increase in other marketing and communication expenses of $0.1 million. Our marketing and communication expenses as a percentage of revenue decreased by 0.4% to 23.9% for

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the three months ended September 30, 2023, from 24.3% for the three months ended September 30, 2022, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base, partially offset by the number of university partners and their growth expectations and increased off-campus classroom and laboratory sites opened and sites planned to open in the next 12 months.

General and administrative. Our general and administrative expenses for the three months ended September 30, 2023 were $12.2 million, a decrease of $3.4 million, or 21.8%, as compared to general and administrative expenses of $15.6 million for the three months ended September 30, 2022. This decrease was primarily attributable to a decrease in the contribution made in lieu of state income taxes, decreased professional fees, decreased other administrative expenses, and decreased employee compensation, including share-based expenses and benefits of $1.5 million, $1.2 million, $0.5 million and $0.2 million respectively. We decreased our contribution made in lieu of state income taxes from $5.0 million in 2022 to $3.5 million in 2023. Our professional fees declined between years primarily due to lower legal costs as we met our insurance retention cap on a litigation matter. Our general and administrative expenses as a percentage of revenue decreased by 2.0% to 5.5% for the three months ended September 30, 2023, from 7.5% for the three months ended September 30, 2022.

Amortization of intangible assets. Amortization of intangible assets for the three months ended September 30, 2023 and 2022 were $2.1 million for both periods. As a result of the acquisition of our wholly owned subsidiary, Orbis Education, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

Investment interest and other. Investment interest and other for the three months ended September 30, 2023 was $2.7 million, as compared to investment interest and other for the three months ended September 30, 2022 of $0.7 million due to higher investment balances and higher returns on those balances.

Income tax expense. Income tax expense for the three months ended September 30, 2023 was $8.5 million, an increase of $2.3 million, or 36.6%, as compared to income tax expense of $6.2 million for the three months ended September 30, 2022. Our effective tax rate was 19.3% during the third quarter of 2023 compared to 17.2% during the third quarter of 2022. The increase in our effective tax rate between periods was primarily driven by changes in the magnitude of contributions in lieu of state income taxes as compared to prior periods.

Net income. Our net income for the three months ended September 30, 2023 was $35.7 million, an increase of $5.7 million, or 19.1%, as compared to $30.0 million for the three months ended September 30, 2022, due to the factors discussed above.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Service revenue. Our service revenue for the nine months ended September 30, 2023 was $682.6 million, an increase of $30.0 million, or 4.6%, as compared to service revenue of $652.6 million for the nine months ended September 30, 2022. The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 118,227 at September 30, 2023, an increase of 6.6% over enrollments at September 30, 2022. Partner enrollments totaled 123,165 at September 30, 2023 as compared to 116,202 at September 30, 2022. University partner enrollments at our off-campus classroom and laboratory sites were 5,448, a decrease of 4.3% over enrollments at September 30, 2022, which includes 510 and 421 GCU students at September 30, 2023 and 2022, respectively. None of our ABSN partners stopped admitting new students due to the clinical faculty challenges that began during the pandemic, however some locations that were scheduled to open were delayed and some existing partners have experienced reduced incoming cohort sizes which has slowed the growth. We believe the growth in the number of ABSN students is also being negatively impacted by the strong job market as these students have historically been individuals with already completed bachelor’s degrees choosing to re-career into one of these health professions. To address this challenge, we have been working with a number of our university partners to adjust their programs to allow students with the required education experience but without a complete bachelor’s degree to enter their programs. We did open six new off-campus classroom and laboratory sites in the year ended December 31, 2022 and five sites in the nine months ended September 30, 2023 increasing the total number of these sites to 40 at September 30, 2023. Enrollments for GCU ground students were 25,232 at September 30, 2023 up from 25,083 at September 30, 2022. GCU

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online enrollments were 92,995 at September 30, 2023, up from 85,845 at September 30, 2022, an increase of 8.3% between years.

Technology and academic services. Our technology and academic services expenses for the nine months ended September 30, 2023 were $115.6 million, an increase of $3.5 million, or 3.1%, as compared to technology and academic services expenses of $112.1 million for the nine months ended September 30, 2022. This increase was primarily due to increases in occupancy and depreciation and other technology and academic costs of $3.2 million and $1.5 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation and benefit costs of $1.2 million. These increases in occupancy and depreciation and other technology and academic costs were primarily due to the costs associated with the increased number of off-campus classroom and laboratory sites. The decrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to the decline in some of our other partners’ enrollments and changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs partially offset by increased headcount to support our 25 university partners, and their increased enrollment growth, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites year over year. Our technology and academic services expenses as a percentage of revenue decreased by 0.3% to 16.9% for the nine months ended September 30, 2023, from 17.2% for the nine months ended September 30, 2022 due primarily to the decreased faculty reimbursements between years. We anticipate that technology and academic services expenses will increase in the future as we open more off-campus classroom and laboratory sites and as our other partners’ enrollment returns to growth.

Counseling services and support. Our counseling services and support expenses for the nine months ended September 30, 2023 were $219.6 million, an increase of $18.8 million, or 9.4%, as compared to counseling services and support expenses of $200.8 million for the nine months ended September 30, 2022. This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and in other counseling services and support expenses of $17.8 million and $1.8 million, respectively, partially offset by a decrease in occupancy and depreciation of $0.8 million. The increases in employee compensation and related expenses were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites open year over year. The increase in other counseling services and support expenses is primarily the result of increased travel costs for our 25 university partners. Our counseling services and support expenses as a percentage of revenue increased by 1.4% to 32.2% for the nine months ended September 30, 2023, from 30.8% for the nine months ended September 30, 2022 primarily due to the significant increase year over year in headcount and travel costs. We anticipate that counseling services and support expense will continue to be higher in 2023 than in 2022 as travel expenses will continue to be higher than in the prior year and we continue to grow our employee base and their compensation to meet our university partners’ growth expectations and retain our employees.

Marketing and communication. Our marketing and communication expenses for the nine months ended September 30, 2023 were $156.8 million, an increase of $5.6 million, or 3.7%, as compared to marketing and communication expenses of $151.2 million for the nine months ended September 30, 2022. This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $5.4 million and increased employee compensation, including share-based compensation of $0.6 million, partially offset by a decrease in other marketing and communication expenses of $0.4 million. Our marketing and communication expenses as a percentage of revenue decreased by 0.2% to 23.0% for the nine months ended September 30, 2023, from 23.2% for the nine months ended September 30, 2022, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base, partially offset by the number of university partners and their growth expectations and increased off-campus classroom and laboratory sites opened and sites planned to open in the next 12 months.

General and administrative. Our general and administrative expenses for the nine months ended September 30, 2023 were $32.8 million, a decrease of $2.5 million, or 7.0%, as compared to general and administrative expenses of $35.3 million for the nine months ended September 30, 2022. This decrease was primarily attributable to a decrease in the contribution made in lieu of state income taxes, decreased professional fees and a decrease in employee compensation, including share-based compensation and benefit expenses of $1.5 million, $0.7 million and $0.5 million, respectively, partially offset by a increase in other administrative expenses of $0.2 million. We decreased our

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contribution made in lieu of state income taxes from $5.0 million in 2022 to $3.5 million in 2023. Our professional fees declined between years primarily due to lower legal costs as we met our insurance retention cap on a litigation matter. Our general and administrative expenses as a percentage of revenue decreased by 0.6% to 4.8% for the nine months ended September 30, 2023, from 5.4% for the nine months ended September 30, 2022.

Amortization of intangible assets. Amortization of intangible assets for the nine months ended September 30, 2023 and 2022 were $6.3 million for both periods. As a result of the acquisition of our wholly owned subsidiary, Orbis Education, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

Investment interest and other. Investment interest and other for the nine months ended September 30, 2023 was $7.5 million, as compared to investment interest and other for the nine months ended September 30, 2022 of $1.3 million due to higher investment balances and higher returns on those balances.

Income tax expense. Income tax expense for the nine months ended September 30, 2023 was $34.6 million, an increase of $0.1 million, or 0.5%, as compared to income tax expense of $34.5 million for the nine months ended September 30, 2022. Our effective tax rate was 21.8% during the nine months ended September 30, 2023 compared to 23.3% during the nine months ended September 30, 2022. The slight decrease in our effective tax rate between periods is attributable to changes in the magnitude of contributions in lieu of state income taxes as well as a mix of other discrete tax items recorded in the respective periods.

Net income. Our net income for the nine months ended September 30, 2023 was $124.3 million, an increase of $10.7 million, or 9.4%, as compared to $113.6 million for the nine months ended September 30, 2022, due to the factors discussed above.

Seasonality

Our net revenue and operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in our university partners’ enrollment. Our partners’ enrollment varies as a result of new enrollments, graduations, and student attrition. Revenues in the summer months (May through August) are lower primarily due to the majority of GCU’s traditional ground university students not attending courses during the summer months, which affects our results for our second and third fiscal quarters. Since a significant amount of our costs are fixed, the lower revenue resulting from the decreased summer enrollment has historically contributed to lower operating margins during those periods. Partially offsetting this summer effect has been the sequential quarterly increase in enrollments that has occurred as a result of the traditional fall school start. This increase in enrollments also has occurred in the first quarter, corresponding to calendar year matriculation. Thus, we experience higher net revenue in the fourth quarter due to its overlap with the semester encompassing the traditional fall school start and in the first quarter due to its overlap with the first semester of the calendar year. A portion of our expenses do not vary proportionately with these fluctuations in service revenue, resulting in higher operating income in the first and fourth quarters relative to other quarters. We expect quarterly fluctuation in operating results to continue as a result of these seasonal patterns.

Liquidity and Capital Resources


	As of September 30,		As of December 31,
(In thousands)	2023		2022
Cash, cash equivalents and investments	$	154,424	$	181,704

Overview

Our liquidity position, as measured by cash and cash equivalents and investments decreased by $27.3 million between December 31, 2022 and September 30, 2023, which was largely attributable to share repurchases, investment

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purchases, net of proceeds and capital expenditures exceeding cash flows from operations during the nine months ended September 30, 2023.

Based on our current level of operations and anticipated growth, we believe that our cash flow from operations and other sources of liquidity, including cash and cash equivalents, will provide adequate funds for ongoing operations, planned capital expenditures, and working capital requirements for at least the next 24 months.

Cash Flows from Operating Activities


	Nine Months Ended September 30,
(In thousands)	2023		2022
Net cash provided by operating activities	$	127,277	$	110,470

The increase in cash generated from operating activities between the nine months ended September 30, 2022 and the nine months ended September 30, 2023 was primarily due to increased income and changes in working capital balances, primarily accounts payable, accrued liabilities and income tax payables. Accounts payable increased between December 31, 2022 and September 30, 2023 by $9.7 million more than it did between December 31, 2021 and September 30, 2022 due to the timing of check runs during those periods and accrued liabilities decreased by $3.0 million more than it did between December 31, 2021 and September 30, 2022 due to the timing of payroll disbursements. Income tax receivables/payables decreased by $4.9 million more than it did between December 31, 2021 and September 30, 2022 as the Company made a larger estimated tax payment in 2023 compared to 2022. We define working capital as the assets and liabilities, other than cash, generated through the Company’s primary operating activities. Changes in these balances are included in the changes in assets and liabilities presented in the consolidated statement of cash flows.

Cash Flows from Investing Activities


	Nine Months Ended September 30,
(In thousands)	2023		2022
Net cash used in investing activities	$	(70,530)	$	(95,318)

Investing activities consumed $70.4 million of cash in the nine months ended September 30, 2023 compared to $95.3 million in the nine months ended September 30, 2022.

In the first nine months of 2023 and 2022 cash used in investing activities consisted of the purchase of available-for-sale securities, net of proceeds from the sale of investments of $35.5 million and $68.7 million, respectively.

In the first nine months of 2023 and 2022 cash used in investing activities also included capital expenditures totaling $34.2 million and $26.3 million, respectively. Capital expenditures for both periods primarily consisted of leasehold improvements and equipment for new off-campus classroom and laboratory sites, as well as purchases of computer equipment, internal use software projects and furniture and equipment to support our increasing employee headcount. The Company incurs upfront expenses and capital expenditures prior to an off-campus classroom and laboratory site being opened. The Company intends to continue to spend approximately $30.0 million to $35.0 million per year for capital expenditures although it is likely that we will spend $40.0 million in 2023 as we spent slightly more than we expected on internal use software this year.

Cash Flows from Financing Activities


	Nine Months Ended September 30,
(In thousands)	2023		2022
Net cash used in financing activities	$	(120,285)	$	(576,206)

Financing activities consumed $120.3 million of cash in the nine months ended September 30, 2023 compared to $576.2 million in the nine months ended September 30, 2022.

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During the nine months ended September 30, 2023 and 2022, $114.0 million and $571.6 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program. In 2023 and 2022, $6.3 million and $4.6 million, respectively, of cash was utilized to purchase common shares withheld in lieu of income taxes resulting from the vesting of restricted share awards. A significant amount of the share repurchases in 2022 were from the proceeds received on the repayment of the Secured Note. The Company intends to continue using a significant portion of its cash flows from operations to repurchase its shares but share repurchases in future years will be less than in 2022.

Share Repurchase Program

On October 25, 2023, our Board of Directors increased the authorization under its existing stock repurchase program by $200.0 million, reflecting an aggregate authorization for share repurchases since the initiation of the program of $2,045.0 million. The current expiration date on the repurchase authorization by our Board of Directors is March 1, 2025. Repurchases occur at the Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time.

Under our share repurchase authorization, we may purchase shares in the open market or in privately negotiated transactions, pursuant to the applicable SEC rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant.

We repurchased 1,034,649 shares of common stock in the nine months ended September 30, 2023. At September 30, 2023, there remains $81.9 million available under our share repurchase authorization (which authorization was increased to $281.9 million in October 2023).

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk. As of September 30, 2023, we have no derivative financial instruments or derivative commodity instruments. We invest cash in excess of current operating requirements in money market instruments and commercial paper at multiple financial institutions.

Interest rate risk. We manage interest rate risk by investing excess funds in cash equivalents, BBB or higher rated corporate bonds, commercial paper, agency bonds, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations bearing variable interest rates, which are tied to various market indices or individual bond coupon rates. Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities before their maturity date that have declined in market value due to changes in interest rates. At September 30, 2023, a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective, as of September 30, 2023, in ensuring that material information relating to us required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in

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reports it files or submits under the Exchange Act is accumulated and communicated to management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.

Based on an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (who is our principal executive officer) and our Chief Financial Officer (who is our principal financial officer), there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

The following additional risk factor should be read in conjunction with the risk factors previously disclosed in Part1, Item 1A, “Risk Factors,” of the 2022 Form 10-K, the information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements filed with the SEC. Except as described herein, there have been no material changes to the risk factors disclosed in the 2022 Form 10-K.

Our cash and cash equivalents are held at three financial institutions.

Approximately 75% of our cash and cash equivalents are held at a single financial institution and are in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”). This financial institution is among the largest in the United States, and we therefore believe that such funds are stable and at very low risk. The remaining approximately 25% of our cash and cash equivalents are held at two regional banks. We believe that both of these regional banks have strong balance sheets with high liquidity and low debt, and that their percentage of total uninsured deposits are similar or better than the nation’s largest banks. We believe that we have mitigated as much risk as possible by dispersing the operating funds between three banks. However, we may be subject to losses in excess of the FDIC insured limit in the event of a failure of any of these financial institutions and the subsequent lack of intervention by the federal government.

In the first quarter of 2023, we moved the majority of our operational banking services to one of the aforementioned regional banks; therefore, a larger portion of our cash and cash equivalents may be transferred to the same regional bank’s institutional sweep and depository accounts in the future. We will continually review all three institutions’ financial conditions to ensure that our assets are as safeguarded as possible.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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March 1, 2025. Repurchases occur at the Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time. Repurchases may be made in the open market or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant.

During the nine months ended September 30, 2023, 1,034,649 shares of common stock were repurchased by the Company. At September 30, 2023, there remains $81.9 million available under our share repurchase authorization (which authorization was increased to $281.9 million in October 2023).

The following table sets forth our share repurchases of common stock and our share repurchases in lieu of taxes, which are not included in the repurchase plan totals as they were approved in conjunction with the restricted share awards, during each period in the third quarter of fiscal 2023:


				Total Number of	Maximum Dollar
				Shares Purchased as	Value of Shares
		Average		Part of Publicly	That May Yet Be
	Total Number of	Price Paid		Announced	Purchased Under
Period	Shares Purchased	Per Share		Program	the Program
Share Repurchases
July 1, 2023 – July 31, 2023	118,835	$	105.97	118,835	$	103,000,000
August 1, 2023 – August 31, 2023	107,607	$	111.82	107,607	$	91,000,000
September 1, 2023 – September 30, 2023	79,797	$	114.10	79,797	$	81,900,000
Total	306,239	$	110.14	306,239	$	81,900,000
Tax Withholdings
July 1, 2023 – July 31, 2023	—	$	—	—	$	—
August 1, 2023 – August 31, 2023	—	$	—	—	$	—
September 1, 2023 – September 30, 2023	—	$	—	—	$	—
Total	—	$	—	—	$	—

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

(a) Exhibits

Number	Description	Method of Filing
3.1	Amended and Restated Certificate of Incorporation.	Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed with the SEC on February 20, 2019.

3.2	Third Amended and Restated Bylaws.	Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 29, 2014.

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4.1	Specimen of Stock Certificate.	Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008.

31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ††	Filed herewith.

32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ††	Filed herewith.

101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) Consolidated Income Statements, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements tagged as blocks of text and including detailed tags.	Filed herewith.

104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL (included as Exhibit 101).	Filed herewith.

†† This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350 and is not being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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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: November 2, 2023	By:	/s/ Daniel E. Bachus
	Daniel E. Bachus
	Chief Financial Officer
	(Principal Financial Officer)

Exhibit 31.1

CERTIFICATION PURSUANT TO RULES 13a-14(a) and 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 0F THE SARBANES-OXLEY ACT OF 2002

I, Brian E. Mueller, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ending September 30, 2023 of Grand Canyon Education, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 2, 2023		/s/ Brian E. Mueller
		Brian E. Mueller
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO RULES 13a-14(a) and 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 0F THE SARBANES-OXLEY ACT OF 2002

I, Daniel E. Bachus, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ending September 30, 2023 of Grand Canyon Education, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 2, 2023		/s/ Daniel E. Bachus
		Daniel E. Bachus
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Grand Canyon Education, Inc. (the “Company”) for the quarter ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian E. Mueller, Chief Executive Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o); and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 2, 2023

/s/ Brian E. Mueller
Brian E. Mueller
Chief Executive Officer (Principal Executive Officer)

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10Q of Grand Canyon Education, Inc. (the “Company”) for the quarter ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel E. Bachus, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o); and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 2, 2023

/s/ Daniel E. Bachus
Daniel E. Bachus
Chief Financial Officer (Principal Financial Officer)