0001558370-24-014620 | 10-Q | XBRL Viewer | Grand Canyon Education INC

Leases

9 Months Ended

Sep. 30, 2024

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 four months to 10 years and five 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 $12,350 and $9,695 for the nine-month periods ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the Company had $22,204 of non-cancelable operating lease commitments for four off-campus classroom and laboratory sites that had not yet commenced. The Company’s weighted-average remaining lease term relating to its operating leases is 7.72 years, with a weighted-average discount rate of 4.16%. The cash paid for operating lease liabilities was $11,054 and $8,339 for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company had no financing leases.

Future payment obligations with respect to the Company’s operating leases, which were existing at September 30, 2024, by year and in the aggregate, are as follows:


Year Ending December 31,	Amount
2024	$	3,840
2025		16,632
2026		16,799
2027		16,069
2028		15,872
Thereafter		57,204
Total lease payments	$	126,416
Less interest		19,444
Present value of lease liabilities	$	106,972

Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2024

Property and Equipment

Schedule of property and equipment


	September 30,		December 31,
	2024		2023
Land	$	5,098	$	5,098
Land improvements		2,242		2,242
Buildings		51,399		51,399
Buildings and leasehold improvements		36,377		34,210
Computer equipment		141,244		138,950
Furniture, fixtures and equipment		29,635		26,737
Internally developed software		87,044		71,204
Construction in progress		12,873		10,274
		365,912		340,114
Less accumulated depreciation and amortization		(189,678)		(170,415)
Property and equipment, net	$	176,234	$	169,699

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Consolidated Statements of Comprehensive Income
Realized gains (losses) on available for sale securities, taxes	$ 39		$ 17
Unrealized gains (losses) on available for sale securities, taxes		$ 30		$ 19

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Amortizable Intangible Assets - Net Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2019
Amortizable Intangible Assets
Gross Carrying Amount	$ 210,280
Accumulated Amortization	(48,214)
Net Carrying Amount	$ 162,066
Orbis Education
Amortizable Intangible Assets
Intangible assets		$ 210,280
University partner relationships
Amortizable Intangible Assets
Estimated average useful life	25 years
Gross Carrying Amount	$ 210,000
Accumulated Amortization	(47,934)
Net Carrying Amount	$ 162,066
University partner relationships \| Orbis Education
Amortizable Intangible Assets
Intangible assets		$ 210,000
Trade names
Amortizable Intangible Assets
Estimated average useful life	1 year
Gross Carrying Amount	$ 280
Accumulated Amortization	$ (280)

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

Treasury Stock

9 Months Ended

Sep. 30, 2024

Treasury Stock

Treasury Stock

10. Treasury Stock

The Board of Directors has authorized share repurchases of up to $2,045,000 since the initiation of the Company’s stock repurchase program. The expiration date on the current 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, 2024 the Company repurchased 726 shares of common stock, at an aggregate cost of $100,559. As of September 30, 2024, there remained $164,494 available under its current share repurchase authorization. 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 $815 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.

Treasury Stock (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Treasury Stock
Common stock acquired, cost	$ 39,703	$ 39,113	$ 22,558	$ 34,067	$ 45,775	$ 35,090
Excise tax on treasury stock repurchases							$ 815	$ 978
Common stock repurchase authorization
Treasury Stock
Common stock acquired, shares							726
Common stock acquired, cost							$ 100,559
Remaining authorized repurchase amount	164,494						164,494
Excise tax on treasury stock repurchases							815
Common stock repurchase authorization \| Maximum
Treasury Stock
Authorized amount for repurchase of common stock	$ 2,045,000						$ 2,045,000

Amortizable Intangible Assets

9 Months Ended

Sep. 30, 2024

Amortizable Intangible Assets

Amortizable Intangible Assets

6. Amortizable Intangible Assets

Identified intangible assets of $210,280 consisted primarily of university partner relationships that were valued at $210,000, which arose in connection with the 2019 acquisition of Orbis Education Services LLC (“Orbis Education”).

Amortizable intangible assets consist of the following as of:


	September 30, 2024
	Estimated	Gross				Net
	Average Useful	Carrying		Accumulated		Carrying
	Life (in years)	Amount		Amortization		Amount
University partner relationships	25	$	210,000	$	(47,934)	$	162,066
Trade names	1		280		(280)		—
Total amortizable intangible assets, net		$	210,280	$	(48,214)	$	162,066

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


2024	$	2,104
2025		8,419
2026		8,419
2027		8,419
2028		8,419
Thereafter		126,286
	$	162,066

Investments (Details) - USD ($) $ in Thousands	9 Months Ended
Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Investments
Investments - Available-for-sale	$ 0		$ 98,031
Available-for-sale investments
Net unrealized gain (loss) on available-for-sale debt securities		$ (60)
Net realized gain (loss) on available-for-sale debt securities	$ 57

Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2024

Share-Based Compensation

Schedule of activity related to restricted stock granted under company's incentive plan


		Weighted Average
	Total	Grant Date
	Shares	Fair Value per Share
Outstanding as of December 31, 2023	450	$	93.16
Granted	120	$	130.80
Vested	(151)	$	91.84
Forfeited, canceled or expired	(16)	$	100.08
Outstanding as of September 30, 2024	403	$	104.54

Schedule of share-based compensation expense


	2024		2023
Technology and academic services	$	1,925	$	1,814
Counseling services and support		5,402		5,155
Marketing and communication		168		143
General and administrative		3,360		2,846
Share-based compensation expense included in operating expenses		10,855		9,958
Tax effect of share-based compensation		(2,714)		(2,489)
Share-based compensation expense, net of tax	$	8,141	$	7,469

Nature of Business

9 Months Ended

Sep. 30, 2024

Nature of Business

Nature of Business

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 ten colleges both online, on ground at its campus in Phoenix, Arizona and at eight off-campus classroom and laboratory sites.

We also provide education services to numerous university partners across the United States. In the healthcare field, we work in partnership with a number of top universities and healthcare networks, 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, 2024, GCE provides education services to 22 university partners across the United States.

Amortizable Intangible Assets - Amortization Expense for Developed Curricula and Student Relationships (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Amortization expense
2024	$ 2,104
2025	8,419
2026	8,419
2027	8,419
2028	8,419
Thereafter	126,286
Net Carrying Amount	$ 162,066

Subsequent Event (Details) - USD ($) $ in Thousands	Oct. 01, 2024	Sep. 30, 2024	Dec. 31, 2023
Subsequent Event
Cash and cash equivalents		$ 263,584	$ 146,475
Subsequent event \| Grand Canyon University
Subsequent Event
Aggregate Loans Amount	$ 500,000
Collateral amount	300,000
Subsequent event \| MidFirst Bank Loan \| Pledged As Collateral
Subsequent Event
Collateral amount	100,000
Subsequent event \| MidFirst Bank Loan \| Grand Canyon University
Subsequent Event
Aggregate Loans Amount	250,000
Subsequent event \| MidFirst Bank Loan \| Grand Canyon University \| Minimum
Subsequent Event
Loan amount	100,000
Subsequent event \| MidFirst Bank Loan \| Grand Canyon University \| Pledged As Collateral
Subsequent Event
Cash and cash equivalents	100,000
Subsequent event \| National Bank Of Arizona Loan \| Pledged As Collateral
Subsequent Event
Collateral amount	100,000
Subsequent event \| National Bank Of Arizona Loan \| Grand Canyon University
Subsequent Event
Aggregate Loans Amount	250,000
Subsequent event \| National Bank Of Arizona Loan \| Grand Canyon University \| Pledged As Collateral
Subsequent Event
Cash and cash equivalents	$ 100,000

Nature of Business (Details)	9 Months Ended
Nature of Business (Details)	Sep. 30, 2024 item
Nature Of Operations
Number of off-campus classroom and laboratory sites	4
Number of university partners	22
Grand Canyon University
Nature Of Operations
Number of colleges operated	10
Number of off-campus classroom and laboratory sites	8

Net Income Per Common Share

9 Months Ended

Sep. 30, 2024

Net Income Per Common Share

Net Income Per Common Share

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,
	2024	2023	2024	2023
Denominator:
Basic weighted average shares outstanding	29,003	29,776	29,248	30,138
Effect of dilutive stock options and restricted stock	161	136	157	139
Diluted weighted average shares outstanding	29,164	29,912	29,405	30,277

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, 2024 and 2023, approximately nil and 2, respectively, and for the nine-month periods ended September 30, 2024 and 2023, approximately 26 and 70, 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.

Net Income Per Common Share - Summary of Weighted Average Number of Common Shares Outstanding (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Denominator:
Basic weighted average shares outstanding	29,003	29,776	29,248	30,138
Effect of dilutive stock options and restricted stock	161	136	157	139
Diluted weighted average shares outstanding	29,164	29,912	29,405	30,277

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2024
Summary of Significant Accounting Policies
Principles of Consolidation	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	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, 2023. 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, 2023 from which the December 31, 2023 balance sheet information was derived.
Investments	Investments As of September 30, 2024 the Company had no investments. As of December 31, 2023, the Company considered its investments in corporate bonds, agency bonds, treasury bills 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. Unrealized investment gains and losses, net of tax, are 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.
Arrangements with GCU	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, the Company and GCU entered into a long-term 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	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	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, 2024 and December 31, 2023, $676 and $746, 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	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 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	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.
Goodwill and Amortizable Intangible Assets	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, 2024. 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, 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	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	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 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, 2024. 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. Given that the Fall semester ends on December 31 of each year unbilled revenue is low at year end (whereas a semester is ongoing at the end of each other fiscal quarter, and unbilled revenue is thus higher at the end of our first three quarters). Our unbilled revenue of $8,351 and $188 as of September 30, 2024 and December 31, 2023, 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	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 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.
Counseling Services and Support	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 Marketing and communication include 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 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	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	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, 2024 and December 31, 2023 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, 2024 and December 31, 2023, the Company had $262,584 and $145,474, 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, GCU, with 88.3% and 87.0% of total service revenue for the nine-month periods ended September 30, 2024 and 2023, 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	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	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 other than consolidated net income.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure,” effective for fiscal years beginning after December 15, 2023, with early adoption permitted. This ASU adds disclosure requirements for segment expense information and clarifies that single reportable segment entities are subject to Topic 280 in its entirety. The Company adopted this standard effective January 1, 2024 and the adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or statements of cash flows. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company does not expect the adoption of this guidance to have a material impact on the Company’s financial condition, results of operations or statements of cash flows. 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.

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets
Cash and cash equivalents	$ 263,584	$ 146,475
Investments	0	98,031
Accounts receivable, net	116,388	78,811
Income tax receivable	1,818	1,316
Other current assets	11,585	12,889
Total current assets	393,375	337,522
Property and equipment, net	176,234	169,699
Right-of-use assets	98,849	92,454
Amortizable intangible assets, net	162,066	168,381
Goodwill	160,766	160,766
Other assets	1,636	1,641
Total assets	992,926	930,463
Current liabilities
Accounts payable	28,081	17,676
Accrued compensation and benefits	26,143	31,358
Accrued liabilities	33,420	26,725
Income taxes payable	129	10,250
Deferred revenue	6,420
Current portion of lease liability	12,358	11,024
Total current liabilities	106,551	97,033
Deferred income taxes, noncurrent	26,132	26,749
Other long-term liability	1,492	410
Lease liability, less current portion	94,614	88,257
Total liabilities	228,789	212,449
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 100,000 shares authorized; 54,090 and 53,970 shares issued and 29,274 and 29,953 shares outstanding at September 30, 2024 and December 31, 2023, respectively	541	540
Treasury stock, at cost, 24,816 and 24,017 shares of common stock at September 30, 2024 and December 31, 2023, respectively	(1,958,837)	(1,849,693)
Additional paid-in capital	333,366	322,512
Accumulated other comprehensive loss		(57)
Retained earnings	2,389,067	2,244,712
Total stockholders' equity	764,137	718,014
Total liabilities and stockholders' equity	$ 992,926	$ 930,463

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2024	Dec. 31, 2023
Consolidated Balance Sheets
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	54,090	53,970
Common stock, shares outstanding	29,274	29,953
Treasury stock, common shares	24,816	24,017

Net Income Per Common Share - Additional Information (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Restricted Stock Grants
Antidilutive securities excluded from computation of earnings per share
Stock awards outstanding excluded from the calculation of diluted earnings	0	2	26	70

Leases - Future Payment Obligations (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Leases
2024	$ 3,840
2025	16,632
2026	16,799
2027	16,069
2028	15,872
Thereafter	57,204
Total lease payments	126,416
Less interest	19,444
Present value of lease liabilities	$ 106,972

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2024	Nov. 04, 2024
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2024
Document Transition Report	false
Securities Act File Number	001-34211
Entity Registrant Name	GRAND CANYON EDUCATION, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-3356009
Entity Address, Address Line One	2600 W. Camelback Road
Entity Address, City or Town	Phoenix
Entity Address, State or Province	AZ
Entity Address, Postal Zip Code	85017
City Area Code	602
Local Phone Number	247-4400
Title of 12(b) Security	Common Stock
Trading Symbol	LOPE
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		29,145,781
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001434588
Amendment Flag	false

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ 41,467	$ 35,739	$ 144,355	$ 124,276

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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+ Details

Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies

Commitments and Contingencies

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.

Pending Litigation Matters

Shareholder Litigation. As previously disclosed, on May 12, 2020, a securities class action complaint was filed in the U.S. District Court for the District of Delaware alleging claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, against the Company, Brian E. Mueller, and Daniel E. Bachus, for allegedly making false and materially misleading statements regarding the circumstances surrounding the Company’s 2018 sale of Grand Canyon University (the “University”) to a non-profit entity and the subsequent decision of the U.S. Department of Education to continue to treat the University as a for-profit institution for education regulatory purposes. On March 28, 2023, the Defendants’ motion to dismiss was denied. On March 25, 2024, the parties executed a Stipulation and Agreement of Settlement to resolve the action. On August 22, 2024 the Court held a final fairness hearing and entered an order granting final approval of the settlement, and no appeals were taken. The Company’s insurance carriers have funded the entire settlement amount.

On December 22, 2023, the Company was named as a nominal defendant and certain of the Company’s current and former directors and officers were named as defendants in a shareholder derivative lawsuit filed in the Delaware Court of Chancery related to, among other things, the allegations in the aforementioned securities class action. The complaint asserted claims for breach of fiduciary duty and related claims. The defendants filed a motion to dismiss the complaint on April 15, 2024. On August 22, 2024, Plaintiff filed a motion requesting that the Court voluntarily dismiss the claims without prejudice. On September 5, 2024, the Court granted Plaintiff’s motion and issued an order dismissing the claims without prejudice.

False Claims Act Matter. In May 2020, we were served with a qui tam lawsuit that had been filed against us in 2019 in the U.S. District Court for the District of Massachusetts by a former employee on behalf of the federal government. All proceedings in the lawsuit had been under seal until February 2020, when the U.S. government decided to not intervene in the lawsuit, and the complaint was then unsealed by the court. The suit, United States ex rel Mackillop v. Grand Canyon Education, Inc., alleges that we violated the False Claims Act by improperly compensating certain of our enrollment counselors in violation of the Title IV law governing compensation of such employees (the “incentive compensation rule”), and as a result, improperly received Title IV program funds. In response to a second amended complaint filed in September 2020, we filed a motion to dismiss and a motion to transfer the matter to the U.S. District Court for the District of Arizona. In December 2020, the court granted our motion to dismiss as to one of three counts and granted the motion to transfer but only upon conclusion of pretrial proceedings. In September 2021, we filed a motion for summary judgment which the Massachusetts court denied in September 2022. Subsequently, the matter was transferred to the Arizona court and trial was scheduled for late April 2024. In the interim, we filed a motion for reconsideration of the summary judgment ruling in September 2023; that motion remains pending. Prior to trial commencing, we and the relator reached an agreement to stay trial while the parties attempt to finalize the terms upon which the litigation could be concluded. For any future settlement to be affected, all parties to the litigation will need to

agree on acceptable terms, both monetary and non-monetary. In this regard, because this matter involves claims under the False Claims Act, any such terms would also need to be approved by the applicable U.S. government agencies.

We believe that the compensation practices at issue in the complaint, which were developed with the guidance of outside regulatory counsel specifically to comply with Title IV and its regulations and relevant case law interpreting the incentive compensation rule, do not violate applicable law. If a future settlement is not finalized on terms acceptable to all parties in interest, the Company intends to defend itself vigorously in this legal proceeding. 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.

Matters Related to GCU Graduate Program Disclosures and Related Matters. The Company is a party to several matters alleging that, in the performance of its marketing services provided on behalf of GCU, it made false or misleading representations regarding the time to complete and the costs associated with and/or accreditation issues related to certain Grand Canyon University graduate programs, and (in the case of the FTC matter noted below) also made false or misleading representations regarding Grand Canyon University’s non-profit status and made telemarketing calls to phone numbers on do not call lists. These matters include:

●

Smith and Wang v. Grand Canyon Education, Inc. This putative class action was filed in June 2024 in the United States District Court for the District of Arizona and asserts claims under the federal RICO statute as well as various claims for violations of state law consumer protection statutes. On September 20, 2024, the plaintiffs amended their complaint, and on November 4, 2024, the Company moved to dismiss the case. The motion to dismiss is pending with the court. There is currently no trial date scheduled in this matter.

●

Federal Trade Commission v. Grand Canyon Education, Inc., et al. This suit was filed in late December 2023 in United States District Court for the District of Arizona and asserts claims under the FTC Act and Telemarketing Sales Rule. In February 2024, GCE filed a partial motion to dismiss, which was denied in August 2024. Discovery in this matter has commenced and is ongoing, with a fact and expert discovery scheduled to conclude in May 2025 and October 2025 respectively. There is currently no trial date scheduled in this matter.

●

Ogdon v. Grand Canyon Education, Inc., et al. This putative class action was filed in May 2020 in federal district court in California and later transferred to United States District Court for the District of Arizona and asserts claims for violations of California’s False Advertising Law, Unfair Competition Law, Consumer Legal Remedies Act; Unjust Enrichment; and purported violations of the federal RICO statute, including a conspiracy claim. The defendants include the Company along with our chief executive officer, chief operating officer and chief financial officer. On May 27, 2022, after significant motions practice, the Company filed an amended motion to dismiss and a motion to strike certain allegations in Plaintiff’s amended complaint. On August 8, 2023, the court presiding over the dispute entered two orders: (1) an order granting in part the Company’s motion to dismiss as to Ogdon’s RICO claim from the case and to dismiss the individual Defendants; and (2) an order granting in part the Company’s motion to strike scandalous and impertinent allegations in Ogdon’s complaint about our business. Shortly thereafter on August 22, 2023, Plaintiff moved the court to reconsider its dismissal of the RICO claim. Though discovery had commenced, and the Company substantially completed its discovery obligations on the state-law claims, discovery was stayed on March 18, 2024, pending mediation and the disposition of Ogdon’s motion for reconsideration. On March 29, 2024, the court issued an order reinstating Plaintiff’s RICO claim. On September 26, 2024, the court lifted the stay on discovery, and discovery resumed, with class certification briefing to conclude in September 2025. There is currently no trial date scheduled in this matter.

We believe that the Company’s representations made in marketing materials or by our employees regarding Grand Canyon University’s non-profit status and doctoral program requirements were at all times accurate and not false or misleading, and thus did not violate applicable law. In addition, to the extent the representations we made or actions we took that are at issue in these proceedings were done or taken after July 1, 2018 at the direction of GCU and/or based on written instructions, or advertising or web materials, provided to us for use by GCU, then we believe we have the right to be indemnified by GCU under the terms of the Master Services Agreement for all losses and expenses arising from these matters. With regard to the FTC’s claims under the Telemarketing Sales Rule, we only make telemarketing calls to individuals who have demonstrated interest in speaking to us about educational opportunities at Grand Canyon University, which are permitted by the rule. The Company intends to defend itself vigorously in each of these legal proceedings. The outcome of these legal proceedings is uncertain at this point. At present, the Company cannot estimate a range of loss for these actions based on the information available to the Company. Accordingly, the Company has not accrued any liability associated with these actions.

Net Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2024

Net Income Per Common Share

Schedule of weighted average number of common shares outstanding


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2024	2023	2024	2023
Denominator:
Basic weighted average shares outstanding	29,003	29,776	29,248	30,138
Effect of dilutive stock options and restricted stock	161	136	157	139
Diluted weighted average shares outstanding	29,164	29,912	29,405	30,277

Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Retained Earnings	Treasury stock, common	Total
Beginning Balance at Dec. 31, 2022	$ 538	$ 309,310	$ (533)	$ 2,039,727	$ (1,711,423)	$ 637,619
Beginning Balance (In Shares) at Dec. 31, 2022	53,830
Beginning Balance, treasury shares at Dec. 31, 2022					22,772
Comprehensive income			119	59,564		59,683
Common stock purchased for treasury					$ (35,090)	(35,090)
Common stock acquired, shares					310
Restricted shares forfeited, shares					5
Share-based compensation	$ 2	3,367			$ (6,331)	(2,962)
Share-based compensation, shares	136				56
Ending Balance at Mar. 31, 2023	$ 540	312,677	(414)	2,099,291	$ (1,752,844)	659,250
Ending Balance (In shares) at Mar. 31, 2023	53,966
Ending Balance, treasury shares at Mar. 31, 2023					23,143
Beginning Balance at Dec. 31, 2022	$ 538	309,310	(533)	2,039,727	$ (1,711,423)	637,619
Beginning Balance (In Shares) at Dec. 31, 2022	53,830
Beginning Balance, treasury shares at Dec. 31, 2022					22,772
Comprehensive income						124,216
Ending Balance at Sep. 30, 2023	$ 540	319,266	(593)	2,164,003	$ (1,832,686)	650,530
Ending Balance (In shares) at Sep. 30, 2023	53,970
Ending Balance, treasury shares at Sep. 30, 2023					23,878
Beginning Balance at Mar. 31, 2023	$ 540	312,677	(414)	2,099,291	$ (1,752,844)	659,250
Beginning Balance (In Shares) at Mar. 31, 2023	53,966
Beginning Balance, treasury shares at Mar. 31, 2023					23,143
Comprehensive income			(276)	28,973		28,697
Common stock purchased for treasury					$ (45,775)	(45,775)
Common stock acquired, shares					419
Restricted shares forfeited, shares					10
Share-based compensation		3,253				3,253
Share-based compensation, shares	4
Ending Balance at Jun. 30, 2023	$ 540	315,930	(690)	2,128,264	$ (1,798,619)	645,425
Ending Balance (In shares) at Jun. 30, 2023	53,970
Ending Balance, treasury shares at Jun. 30, 2023					23,572
Comprehensive income			97	35,739		35,836
Common stock purchased for treasury					$ (34,067)	(34,067)
Common stock acquired, shares					306
Share-based compensation		3,336				3,336
Ending Balance at Sep. 30, 2023	$ 540	319,266	(593)	2,164,003	$ (1,832,686)	650,530
Ending Balance (In shares) at Sep. 30, 2023	53,970
Ending Balance, treasury shares at Sep. 30, 2023					23,878
Beginning Balance at Dec. 31, 2023	$ 540	322,512	(57)	2,244,712	$ (1,849,693)	$ 718,014
Beginning Balance (In Shares) at Dec. 31, 2023	53,970
Beginning Balance, treasury shares at Dec. 31, 2023					24,017	24,017
Comprehensive income			(56)	68,010		$ 67,954
Common stock purchased for treasury					$ (22,558)	(22,558)
Common stock acquired, shares					172
Restricted shares forfeited, shares					4
Share-based compensation	$ 1	3,482			$ (7,446)	(3,963)
Share-based compensation, shares	117				55
Ending Balance at Mar. 31, 2024	$ 541	325,994	(113)	2,312,722	$ (1,879,697)	759,447
Ending Balance (In shares) at Mar. 31, 2024	54,087
Ending Balance, treasury shares at Mar. 31, 2024					24,248
Beginning Balance at Dec. 31, 2023	$ 540	322,512	(57)	2,244,712	$ (1,849,693)	$ 718,014
Beginning Balance (In Shares) at Dec. 31, 2023	53,970
Beginning Balance, treasury shares at Dec. 31, 2023					24,017	24,017
Comprehensive income						$ 144,412
Ending Balance at Sep. 30, 2024	$ 541	333,366		2,389,067	$ (1,958,837)	$ 764,137
Ending Balance (In shares) at Sep. 30, 2024	54,090
Ending Balance, treasury shares at Sep. 30, 2024					24,816	24,816
Beginning Balance at Mar. 31, 2024	$ 541	325,994	(113)	2,312,722	$ (1,879,697)	$ 759,447
Beginning Balance (In Shares) at Mar. 31, 2024	54,087
Beginning Balance, treasury shares at Mar. 31, 2024					24,248
Comprehensive income			(13)	34,878		34,865
Common stock purchased for treasury					$ (39,113)	(39,113)
Common stock acquired, shares					281
Restricted shares forfeited, shares					12
Share-based compensation		3,996				3,996
Share-based compensation, shares	3
Ending Balance at Jun. 30, 2024	$ 541	329,990	(126)	2,347,600	$ (1,918,810)	759,195
Ending Balance (In shares) at Jun. 30, 2024	54,090
Ending Balance, treasury shares at Jun. 30, 2024					24,541
Comprehensive income			$ 126	41,467		41,593
Common stock purchased for treasury					$ (39,703)	(39,703)
Common stock acquired, shares					273
Share-based compensation		3,376			$ (324)	3,052
Share-based compensation, shares					2
Ending Balance at Sep. 30, 2024	$ 541	$ 333,366		$ 2,389,067	$ (1,958,837)	$ 764,137
Ending Balance (In shares) at Sep. 30, 2024	54,090
Ending Balance, treasury shares at Sep. 30, 2024					24,816	24,816

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income, attributable to parent entity. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

Amount of equity (deficit) attributable to parent. Excludes temporary equity and equity attributable to noncontrolling interest.

+ References

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+ Details

Leases (Details) $ in Thousands	9 Months Ended
Leases (Details) $ in Thousands	Sep. 30, 2024 USD ($) item lease	Sep. 30, 2023 USD ($)
Leases
Option to renew operating leases	false
Operating lease costs	$ 12,350	$ 9,695
Number of off-campus classroom and laboratory sites \| item	4
Weighted-average remaining lease term	7 years 8 months 19 days
Weighted-average discount rate of operating leases	4.16%
Operating lease payments	$ 11,054	$ 8,339
Number of financing leases \| lease	0
Operating lease commitments not yet commenced
Leases
Non-cancelable operating lease commitments not yet commenced	$ 22,204
Minimum
Leases
Term of operating leases	4 months
Maximum
Leases
Term of operating leases	10 years 5 months

Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Property and Equipment
Property and equipment	$ 365,912	$ 340,114
Less accumulated depreciation and amortization	(189,678)	(170,415)
Property and equipment, net	176,234	169,699
Land
Property and Equipment
Property and equipment	5,098	5,098
Land Improvements
Property and Equipment
Property and equipment	2,242	2,242
Buildings
Property and Equipment
Property and equipment	51,399	51,399
Buildings and Leasehold Improvements
Property and Equipment
Property and equipment	36,377	34,210
Computer Equipment
Property and Equipment
Property and equipment	141,244	138,950
Furniture, Fixtures and Equipment
Property and Equipment
Property and equipment	29,635	26,737
Internally Developed Software
Property and Equipment
Property and equipment	87,044	71,204
Construction in Progress
Property and Equipment
Property and equipment	$ 12,873	$ 10,274

Consolidated Income Statements - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Consolidated Income Statements
Service revenue	$ 238,291	$ 221,913	$ 740,429	$ 682,615
Costs and expenses:
Technology and academic services	41,955	39,174	122,081	115,643
Counseling services and support	77,166	73,824	238,157	219,565
Marketing and communication	54,526	53,097	162,774	156,797
General and administrative	14,364	12,175	35,730	32,838
Amortization of intangible assets	2,105	2,105	6,315	6,315
Total costs and expenses	190,116	180,375	565,057	531,158
Operating income	48,175	41,538	175,372	151,457
Interest expense		(1)	(4)	(27)
Investment interest and other	4,154	2,739	11,995	7,482
Income before income taxes	52,329	44,276	187,363	158,912
Income tax expense	10,862	8,537	43,008	34,636
Net income	$ 41,467	$ 35,739	$ 144,355	$ 124,276
Earnings per share:
Basic income per share	$ 1.43	$ 1.20	$ 4.94	$ 4.12
Diluted income per share	$ 1.42	$ 1.19	$ 4.91	$ 4.10
Basic weighted average shares outstanding	29,003	29,776	29,248	30,138
Diluted weighted average shares outstanding	29,164	29,912	29,405	30,277

Share-Based Compensation - Additional Information (Details) shares in Thousands, $ in Thousands		1 Months Ended			9 Months Ended
	Jun. 30, 2024 USD ($) shares	Jul. 31, 2024 USD ($) shares	Jun. 30, 2024 shares	Apr. 30, 2024	Sep. 30, 2024 USD ($) item shares	Sep. 30, 2023 USD ($)
Share-Based Compensation
Share-based compensation \| $					$ 10,855	$ 9,958
General and administrative
Share-Based Compensation
Share-based compensation \| $					$ 3,360	$ 2,846
2017 Plan
Share-Based Compensation
Shares available for grant					962
Maximum \| 2017 Plan
Share-Based Compensation
Shares available for grant					3,000
Restricted Stock Grants
Share-Based Compensation
Shares granted					120
Shares vested	5	5			151
Shares withheld for taxes		2			55
Common stock in lieu of taxes \| $		$ 324			$ 7,446
Restricted Stock Grants \| General and administrative
Share-Based Compensation
Share-based compensation \| $	$ 558
Restricted Stock Grants \| Share-based payment arrangement, nonemployee
Share-Based Compensation
Shares granted			3
Vesting period			1 year	1 year
Restricted Stock Grants \| 2008 Plan
Share-Based Compensation
Shares granted					117
Vesting period					5 years
Number of anniversaries of the vesting date following the date of grant \| item					4
Restricted Stock Grants \| Share-based Compensation Award, Tranche One \| 2008 Plan
Share-Based Compensation
Vesting right percentage					20.00%
Restricted Stock Grants \| Share-based Compensation Award, Tranche Two \| 2008 Plan
Share-Based Compensation
Vesting right percentage					20.00%
Restricted Stock Grants \| Share-based Compensation Award, Tranche Three \| 2008 Plan
Share-Based Compensation
Vesting right percentage					20.00%
Restricted Stock Grants \| Share-based Compensation Award Tranche Four \| 2008 Plan
Share-Based Compensation
Vesting right percentage					20.00%
Restricted Stock Grants \| Share-based Compensation Award Tranche Five \| 2008 Plan
Share-Based Compensation
Vesting right percentage					20.00%

Property and Equipment

9 Months Ended

Sep. 30, 2024

Property and Equipment

Property and Equipment

5. Property and Equipment

Property and equipment consist of the following:


	September 30,		December 31,
	2024		2023
Land	$	5,098	$	5,098
Land improvements		2,242		2,242
Buildings		51,399		51,399
Buildings and leasehold improvements		36,377		34,210
Computer equipment		141,244		138,950
Furniture, fixtures and equipment		29,635		26,737
Internally developed software		87,044		71,204
Construction in progress		12,873		10,274
		365,912		340,114
Less accumulated depreciation and amortization		(189,678)		(170,415)
Property and equipment, net	$	176,234	$	169,699

Leases (Tables)

9 Months Ended

Sep. 30, 2024

Leases

Schedule of future payment obligations with respect to operating leases


Year Ending December 31,	Amount
2024	$	3,840
2025		16,632
2026		16,799
2027		16,069
2028		15,872
Thereafter		57,204
Total lease payments	$	126,416
Less interest		19,444
Present value of lease liabilities	$	106,972

Share-Based Compensation - Summary of Activity Related to Restricted Stock Granted under Company's Incentive Plan (Details) - Restricted Stock Grants - $ / shares shares in Thousands		1 Months Ended	9 Months Ended
	Jun. 30, 2024	Jul. 31, 2024	Sep. 30, 2024
Total Shares
Total Shares, Outstanding, Beginning Balance			450
Total Shares, Granted			120
Total Shares, Vested	(5)	(5)	(151)
Total Shares, Forfeited, canceled or expired			(16)
Total Shares, Outstanding, Ending Balance			403
Weighted Average Grant Date
Weighted Average Grant Date Fair Value, Beginning Balance			$ 93.16
Weighted Average Grant Date Fair Value, Granted			130.80
Weighted Average Grant Date Fair Value, Vested			91.84
Weighted Average Grant Date Fair Value, Forfeited, canceled or expired			100.08
Weighted Average Grant Date Fair Value, Ending Balance			$ 104.54

Share-Based Compensation - Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Share-Based Compensation
Share-based compensation expense included in operating expenses	$ 10,855	$ 9,958
Tax effect of share-based compensation	(2,714)	(2,489)
Share-based compensation expense, net of tax	8,141	7,469
Technology and academic services
Share-Based Compensation
Share-based compensation expense included in operating expenses	1,925	1,814
Counseling services and support
Share-Based Compensation
Share-based compensation expense included in operating expenses	5,402	5,155
Marketing and communication
Share-Based Compensation
Share-based compensation expense included in operating expenses	168	143
General and administrative
Share-Based Compensation
Share-based compensation expense included in operating expenses	$ 3,360	$ 2,846

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows provided by operating activities:
Net income	$ 144,355	$ 124,276
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation	10,855	9,958
Depreciation and amortization	20,707	16,994
Amortization of intangible assets	6,315	6,315
Deferred income taxes	(560)	517
Other, including fixed asset disposals	(743)	(134)
Changes in assets and liabilities:
Accounts receivable from university partners	(37,577)	(27,062)
Other assets	1,239	(1,154)
Right-of-use assets and lease liabilities	1,296	1,404
Accounts payable	10,710	3,894
Accrued liabilities	1,747	(910)
Income taxes receivable/payable	(10,623)	(13,058)
Deferred revenue	6,420	6,237
Net cash provided by operating activities	154,141	127,277
Cash flows provided by (used in) investing activities:
Capital expenditures	(27,501)	(34,186)
Additions of amortizable content	(227)	(809)
Purchases of investments	(48,594)	(73,462)
Proceeds from sale or maturity of investments	147,619	37,927
Net cash provided by (used in) investing activities	71,297	(70,530)
Cash flows used in financing activities:
Repurchase of common shares and shares withheld in lieu of income taxes	(108,329)	(120,285)
Net cash used in financing activities	(108,329)	(120,285)
Net increase in cash and cash equivalents and restricted cash	117,109	(63,538)
Cash and cash equivalents and restricted cash, beginning of period	146,475	120,409
Cash and cash equivalents and restricted cash, end of period	263,584	56,871
Supplemental disclosure of cash flow information
Cash paid for interest	4	27
Cash paid for income taxes	51,420	47,654
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment included in accounts payable	1,604	927
ROU Asset and Liability recognition	6,395	17,674
Excise tax on treasury stock repurchases	$ 815	$ 978

Amortizable Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2024

Amortizable Intangible Assets

Summary of amortizable intangible assets


	September 30, 2024
	Estimated	Gross				Net
	Average Useful	Carrying		Accumulated		Carrying
	Life (in years)	Amount		Amortization		Amount
University partner relationships	25	$	210,000	$	(47,934)	$	162,066
Trade names	1		280		(280)		—
Total amortizable intangible assets, net		$	210,280	$	(48,214)	$	162,066

Schedule of amortization expense for university partner relationships and trade names


2024	$	2,104
2025		8,419
2026		8,419
2027		8,419
2028		8,419
Thereafter		126,286
	$	162,066

Subsequent Event

9 Months Ended

Sep. 30, 2024

Subsequent Event.

Subsequent Event

11. Subsequent Event

On October 1, 2024, GCU entered into certain loan agreements (the “Loan Agreements”) with MidFirst Bank, a federally chartered savings association (“MidFirst”), and Zions Bancorporation, N.A., dba National Bank of Arizona, (“NBAZ” and, together with MidFirst, the “Banks”), pursuant to which each Bank made loans to GCU in the original amount of $250.0 million ($500.0 million in the aggregate) (each, a “Loan” and, collectively, the “Loans”). The proceeds of the Loans were used by GCU to refinance outstanding bonds originally issued in 2021. The stated maturity date under the MidFirst Loan Agreement is October 1, 2026 and under the NBAZ Loan Agreement is April 1, 2025. The Loan Agreements provide for customary events of default and remedies.

As a condition to the making of the Loans, each Bank required GCU to provide cash collateral in an amount equal to the principal balance of the Loan it provided. At the time of the making of the Loans, GCU provided $300.0 million of its cash as collateral and the Company offered to use some of its cash to provide the remaining collateral

necessary for GCU to secure the Loans.

Accordingly, on October 1, 2024, the Company entered into (i) a Pledge and Security Agreement, by and between the Company and MidFirst, and (ii) a Security Agreement, by and between the Company and Zions (collectively, the “Pledge Agreements”), pursuant to which, among other things, the Company agreed to pledge to each of MidFirst and Zions $100.0 million of the Company’s available cash in order to partially secure the obligations of GCU under each Loan Agreement. The Pledge Agreements generally require that, so long as the time for payment of the indebtedness incurred by GCU under the Loan Agreements has not been stayed, enjoined or prevented for any reason, each Bank will exhaust its rights and remedies against GCU prior to exercising its rights against the Company’s collateral under the Pledge Agreements. The Pledge Agreements will terminate upon the earlier of (a) in the case of the MidFirst Loan, repayment by GCU of at least $100.0 million of the Loan or GCU’s pledge of $100.0 million in cash collateral in substitution of the Company’s cash collateral, and (b) in the case of NBAZ, payment in full of all indebtedness due and owing under Loan Agreement or GCU’s pledge of $100.0 million in cash collateral in substitution of the Company’s cash collateral. All income earned on the Company’s cash collateral under the Pledge Agreements will be for the benefit of the Company. GCU has agreed to indemnify the Company for any claims, losses, liabilities and expenses arising out of Pledge Agreements (including the value of any collateral against which MidFirst or NBAZ has exercised remedies, out of pocket expenses, costs and disbursements and reasonable and documented attorney’s fees), except to the extent the claims, liabilities or expenses are finally judicially determined by a court of competent jurisdiction to have resulted from the Company’s or any of its affiliates’ gross negligence or willful misconduct. In the event that the terms of any of the Loan Agreements or Pledge Agreements prevent GCU from making any indemnity payment required by the preceding sentence, GCU shall make such payment immediately upon the removal of such restriction.

The foregoing description of the Pledge Agreements does not purport to be complete and is qualified in its entirety by the full text of the Pledge Agreements, copies of which will be timely filed as an exhibit to the Company’s upcoming Annual Report on Form 10-K in accordance with applicable rules and regulations of the Securities and Exchange Commission.

Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands		3 Months Ended		9 Months Ended
	Jul. 01, 2018	Sep. 30, 2024 USD ($) item	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($) item segment	Sep. 30, 2023 USD ($)	Jun. 30, 2024 USD ($)	Mar. 31, 2024 USD ($)	Dec. 31, 2023 USD ($)	Jun. 30, 2023 USD ($)	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Summary Of Significant Accounting Policies
Investments		$ 0		$ 0				$ 98,031
Other assets		$ 1,636		$ 1,636				1,641
Number of operating segments \| segment				1
Number of reporting units \| segment				1
Number of university partners \| item		22		22
Goodwill		$ 160,766		$ 160,766				160,766
Unbilled revenue		8,351		8,351				188
Amounts written off				0
Allowance for doubtful accounts		0		0
Stockholders equity		764,137	$ 650,530	764,137	$ 650,530	$ 759,195	$ 759,447	718,014	$ 645,425	$ 659,250	$ 637,619
Income tax expense		10,862	$ 8,537	43,008	$ 34,636
Cash in excess of FDIC insured limits		$ 262,584		$ 262,584				145,474
Revenue Benchmark \| Customer Concentration Risk \| Grand Canyon University
Summary Of Significant Accounting Policies
Concentration risk percentage				88.30%	87.00%
Computer Software
Summary Of Significant Accounting Policies
Estimated average useful life		3 years		3 years
Capitalized Content Development
Summary Of Significant Accounting Policies
Estimated average useful life		4 years		4 years
Other assets		$ 676		$ 676				$ 746
University partner relationships
Summary Of Significant Accounting Policies
Estimated average useful life		25 years		25 years
Minimum
Summary Of Significant Accounting Policies
Initial contract terms of service agreements				7 years
Maximum
Summary Of Significant Accounting Policies
Initial contract terms of service agreements				15 years
Master Services Agreement \| Grand Canyon University
Summary Of Significant Accounting Policies
Percentage of tuition and fee revenue used for closing of purchase agreement	60.00%

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Consolidated Statements of Comprehensive Income
Net income	$ 41,467	$ 35,739	$ 144,355	$ 124,276
Other comprehensive income, net of tax:
Realized gains on available-for-sale securities, net of taxes of $39 for the three months ended September 30, 2024, and $17 for the nine months ended September 30, 2024	126		57
Unrealized gains (losses) on available-for-sale securities, net of taxes of $39 and $30 for the three months ended September 30, 2024 and 2023, respectively, and $17 and $19 for the nine months ended September 30, 2024 and 2023, respectively		97		(60)
Comprehensive income	$ 41,593	$ 35,836	$ 144,412	$ 124,216

- Definition

+ References + Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

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, 2023. 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, 2023 from which the December 31, 2023 balance sheet information was derived.

Investments

As of September 30, 2024 the Company had no investments. As of December 31, 2023, the Company considered its investments in corporate bonds, agency bonds, treasury bills 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. Unrealized investment gains and losses, net of tax, are 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.

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, the Company and GCU entered into a long-term 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, 2024 and December 31, 2023, $676 and $746, 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 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.

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, 2024. 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, 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 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, 2024. 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. Given that the Fall semester ends on December 31 of each year unbilled revenue is low at year end (whereas a semester is ongoing at the end of each other fiscal quarter, and unbilled revenue is thus higher at the end of our first three quarters). Our unbilled revenue of $8,351 and $188 as of September 30, 2024 and December 31, 2023, 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.

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 include 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, 2024 and December 31, 2023 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, 2024 and December 31, 2023, the Company had $262,584 and $145,474, 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, GCU, with 88.3% and 87.0% of total service revenue for the nine-month periods ended September 30, 2024 and 2023, 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 other than consolidated net income.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure,” effective for fiscal years beginning after December 15, 2023, with early adoption permitted. This ASU adds disclosure requirements for segment expense information and clarifies that single reportable segment entities are subject to Topic 280 in its entirety. The Company adopted this standard effective January 1, 2024 and the adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or statements of cash flows.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company does not expect the adoption of this guidance to have a material impact on the Company’s financial condition, results of operations or statements of cash flows.

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.

Share-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Compensation

Share-Based Compensation

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, 2024, 962 shares were available for grants under the 2017 Plan.

Restricted Stock

During the nine months ended September 30, 2024, the Company granted 117 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, 2024, the Company withheld 55 shares of common stock in lieu of taxes at a cost of $7,446 on the restricted stock vesting dates. In April 2024, a new non-employee director was appointed to the Company’s Board of Directors and was granted an initial award of shares pursuant to the Company’s compensation program. The initial award of shares that were granted to such newly appointed director have voting rights and vest on the one-year anniversary of the date of grant. In June 2024, following the annual stockholders meeting, the Company granted 3 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.

On June 30, 2024, a named executive officer resigned for “good reason” which, under the terms of his employment agreement, resulted in an acceleration of the vesting of the next tranche of five outstanding restricted stock awards that would have otherwise vested on March 1, 2025. As a result, the incremental share-based compensation expense from the modification on the five restricted stock awards for the accelerated vesting date was $558 and is included in the general and administrative expenses in the Company’s consolidated income statement. In July 2024, 5 shares vested and 2 shares were withheld in lieu of taxes at a cost of $324 on the accelerated vesting date.

A summary of the activity related to restricted stock granted under the 2017 Plan since December 31, 2023 is as follows:


		Weighted Average
	Total	Grant Date
	Shares	Fair Value per Share
Outstanding as of December 31, 2023	450	$	93.16
Granted	120	$	130.80
Vested	(151)	$	91.84
Forfeited, canceled or expired	(16)	$	100.08
Outstanding as of September 30, 2024	403	$	104.54

Share-based Compensation Expense

The table below outlines share-based compensation expense for the nine months ended September 30, 2024 and 2023 related to restricted stock granted:


	2024		2023
Technology and academic services	$	1,925	$	1,814
Counseling services and support		5,402		5,155
Marketing and communication		168		143
General and administrative		3,360		2,846
Share-based compensation expense included in operating expenses		10,855		9,958
Tax effect of share-based compensation		(2,714)		(2,489)
Share-based compensation expense, net of tax	$	8,141	$	7,469

Investments

9 Months Ended

Sep. 30, 2024

Investments

Investments

3. Investments

As of September 30, 2024 and December 31, 2023, the Company had investments of $0 and $98,031, respectively, classified as available-for-sale securities. The Company sold all its investments in the third quarter of 2024 and the proceeds were invested in cash and cash equivalents.

For the nine months ended September 30, 2024 and 2023, the net realized gains and unrealized losses were $57 and $60, 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.